The Indian pharmaceutical sector is projected to see revenue growth of 8-10% this financial year, driven by strong exports to regulated markets such as the US and Europe, a recovery in semi-regulated markets including Africa and Asia, and consistent domestic demand, according to a CRISIL Ratings report. This forecast follows a successful previous year with approximately 10% growth.
The positive outlook is supported by reduced pricing pressure in the US generics market and improved operating leverage, which is expected to boost operating margins by 70-80 basis points to around 22.5%. Steady cash flows and low financial leverage further reinforce the sector's stability, enabling companies to maintain stable credit profiles while pursuing acquisitions in niche therapeutic areas.
The report highlights that formulation exports are anticipated to grow by 12-14% in rupee terms, with regulated markets experiencing a 13-15% increase due to drug shortages, new product launches, and a shift towards specialty products and niche molecules.
Exports to semi-regulated markets are forecasted to rise 8-10%, supported by improving foreign exchange reserves and stabilizing currencies in African and Latin American countries. Domestically, revenue is expected to grow by 7-9%, driven by price increases in non-NLEM products. At the same time, growth in the NLEM portfolio is likely to remain subdued.
The chronic segment, driven by rising lifestyle-related diseases and increased health awareness post-pandemic, is expected to contribute significantly to domestic revenue growth. Despite these positive trends, CRISIL warns that large-scale debt-funded acquisitions, regulatory challenges, potential price caps on raw materials, and litigation costs from US antitrust suits could pose risks to the sector.
