Pharmaceutical market growth was slower in Q4
The domestic pharmaceutical market grew by 8.8% in the March quarter, with growth slowing down from the 10.5% seen in the December quarter, according to data from market researcher AIOCD Awacs.
Growth in the fourth quarter (Q4) was pulled down in February, as sales grew by 6.9%, compared to 9.6% in the month of March.
Sales growth continues to be driven by volume growth in existing products and new launches, with a negligible contribution from price increases.
Lost sales due to the ban on fixed dose combinations and price cuts in drugs under price control also contributed to a slowdown in overall growth.
Banks lag in recognizing power sector bad loans
The Supreme Court decision to disallow Adani Power Ltd and Tata Power Co. Ltd to recover cost overruns because of changes in rules in Indonesia has brought the issue of power sector bad loans to the fore.
The verdict is estimated to impact the debt servicing capability of Adani Power as its balance sheet is already stretched. According to Nomura, banks are slow in recognizing bad loans from the power sector.
An estimated 35-40% of loans given to the power sector are stressed. Against this, banks under Nomura’s coverage have recognized only 7-8% of the loans as non-performing assets (NPAs). “While power NPAs…indicate low recognition, the addition of power stress in restructured/5:25/watchlists adds up to 40-45% stress levels in the power sector for our covered banks, indicating that power stress is well discounted by the Street though recognition still lags,” added Nomura.
Weakening state finances dampen rating upgrades
Although the central government may have kept its purse strings tighter, states have seen a deterioration in their fiscal position over the past five years.
The widening state fiscal deficits amid stagnating revenue could continue to keep the combined fiscal deficit high and thereby prevent global rating agencies to look favourably at India for an upgrade, DBS Bank Ltd said in a note.
The bank expects expenditure of the states to outpace that of the centre in the current fiscal year as well.
“The aggregate states’ fiscal deficit widened from 2% of GSDP (Gross State Domestic Product) in FY12 to more than 3% in FY17. These deficits are likely to stay wide this year (FY18), keeping borrowings high and delaying consolidation plans,” said the note.