Equity Price Performance of the Pharmaceutical Industry-A Comparative Analysis of Select Global and Indian Companies Using Stock Market Indices

The purpose of this paper is to examine the equity price performance of selected Indian and multinational pharmaceutical companies operating in India.

A quantitative analysis procedure was undertaken using stock market results and revenues details for the years 2011–16 for three Indian owned and three multinational pharmaceutical enterprises. The study concentrated on the using bench mark Bombay Stock exchange price fluctuations of pharmaceutical companies to understand their equity price performance.

The results indicate that over the past five years Indian companies have performed with high rate of financial returns compared to the MNE based companies. The multinational pharmaceutical companies in India hardly have any debt on their books of accounts because they do not have big research and development centers in India. They largely sell patented drugs at high margin niche market. This business model has in built cap on their funds requirements. The Indian pharmaceutical companies have large scale manufacturing capacities for Indian and export market. The level of activities involved requires the big amounts of funds. As Indian companies will start investing more funds in research and development to sustain them in the market, the debt equity ratio is further expected to increase.

This paper analyses the three ratio to showcase the reason for better performance of share price of Indian pharmaceutical companies compared to multinational pharmaceutical companies.