The Indian Pharma Market (IPM) is a secularly growing segment with extremely high RoE due to the brands owned by pharma companies. We expect the market to continue to grow at 8%-10% in sales and mid to high teens in profits
US generic market has gone through earnings down cycle over the past 4 years and has seen signs of earnings recovery. Better pricing and gain in volumes as competition may get crowded out would lead to better RoE of the business in coming years
A ‘valuation-gap’ exists today in many companies where the poor RoE of US business is suppressing the overall RoE and valuation multiples. We expect this to reverse as US generic profitability Improves
We believe the consolidated valuation as of now lends a negative valuation to the capital guzzler (US generics) implying that this business may never turn positive and losses in the business may compound over time. This is highly unlikely and also unreasonable.