CRISIL predicts an 8-10% revenue growth for Indian pharma industry in current fiscal year

According to a report, the Indian pharmaceutical industry is expected to achieve 8 to 10 per cent revenue growth in the current fiscal year. This growth will be driven by expansion in the domestic market and increased exports to regulated markets. However, semi-regulated markets may encounter challenges, the report said.

A study conducted on 186 pharmaceutical companies, which collectively contributed to approximately half of the sector’s annual revenue of Rs.3.7 trillion in the last fiscal year, supports these findings, as reported by CRISIL on Monday, 11 September 2023.

CRISIL research director Aniket Dani noted that, similar to the previous fiscal year, domestic growth in fiscal year 2024 will primarily stem from a 5-6 per cent increase in realizations. This increase will be partially due to substantial price hikes allowed by the National Pharmaceutical Pricing Authority (NPPA) for drugs under price regulation. And sales of existing drugs and new product launches are expected to drive a 3-4 per cent growth in volume.

The industry’s operating profitability is also expected to improve by 50-100 basis points (bps) to reach 21 per cent this fiscal year. This improvement will be supported by reduced input and logistics costs, as well as a decrease in pricing pressure in the US generics market, compared to the challenging conditions experienced in the past two years.

CRISIL pointed out that the previous years saw margin contraction due to high pricing pressure in the US and a sharp increase in input costs caused by supply chain disruptions during the Covid pandemic.

The credit profiles of pharmaceutical companies are expected to remain stable, thanks to their low-leveraged balance sheets and moderate capital expenditure plans.

In the ongoing fiscal year, domestic sales are projected to grow by 8–10 per cent, with the chronic segment expected to be the primary contributor to revenues. This is attributed to the ongoing rise in lifestyle-related diseases and a continued focus on health awareness following the pandemic.

Formulation exports are anticipated to increase by 7-9 per cent in rupee terms in the current fiscal year, driven by higher volumes resulting from new product launches and a reduction in price pressure in the US generics market. However, increased claw-back of taxes in select European markets may lead to slower growth in exports to Europe.

CRISIL also said that exports to Asia are expected to improve this fiscal year, following modest growth in the previous year. Meanwhile, exports to Africa are likely to remain sluggish due to low foreign exchange reserves impacting purchasing power and high currency volatility.

The industry is also expected to see reduced inventories and smaller incremental working capital debt this fiscal year, thanks to lower input prices and the normalization of supply chains compared to the pandemic-affected period.