Higher tariffs may significantly dent profits of pharma majors

After the exemption, came the jolt for the pharma sector as US President Donald Trump talked about imposing tariffs that "haven't been seen before."

- RAM PRASAD SAHU

A threat of unprecedented tariffs sent Nifty Pharma lower by 4 percent at close. It was the second biggest loser among the Nifty sectoral indices.

Among the Nifty Pharma constituents, four stocks — Laurus Laboratories, Ipca Labs, Aurobindo Pharma and Granules India — shed between 6 and 7 per cent each on Friday.

Among the largest listed players by market capitalisation — Sun Pharmaceutical Industries, Aurobindo Pharma, Zydus Lifesciences, Dr Reddy's Laboratories and Lupin — have the highest exposures to the US market with their shares ranging from 30 percent to 50 percent.

Brokerages believe that if the 26 percent tariff is imposed, the impact on operating profit will be the highest for Aurobindo Pharma in the formulations space and Biocon in the biosimilar segment. The US accounts for about 45-50 percent of their operating profit.

If Indian drug majors absorb the cost of a 26 percent tariff, Mehul Sheth and Divyaxa Agnihotri of HDFC Securities believe that the impact on their FY27 operating profit will be 3-45 per cent.