The pharma sector is expected to grow 10 per cent in FY 25 due to better exports in the regulated markets, recovery of exports in the semi-regulated markets and a steady in domestic demand according to a report by CRISIL. The revenue in FY25 is also expected to grow 8 to 10 per cent more than the previous fiscal year.
The India pharmaceutical sector is the 3rd largest by volume of production and plays a significant role globally. The annual turnover for the past 5 years has been growing at a healthy growth of 10 per cent approximately.
Profit Margins to increase in Indian Pharmaceuticals
The overall operational margins are expected to improve by 70-80 basis points on the back of an increase in margins by 100 bps last fiscal. It means to reach 22.5 per cent profit in this fiscal expecting a 0.7 to 0.8 per cent increase. It is because of less pressure in the US generics medicine market to reduce the price.
Aditya Jhaver, Director, CRISIL Ratings said, “With strong cash flows and healthy balance sheets, players are increasingly focusing on inorganic growth opportunities in the API6 and the formulation space, to either diversify the product portfolios by acquiring the brands/businesses and/or to consolidate market share in the targeted therapeutic areas.”
Factors of growth in Pharma companies
The domestic revenue of the pharma companies would rise with volume growth due to launch of new products and a growth of 7 to 9 per cent in this fiscal primarily driven by pricing. The price growth will be majorly driven by the portfolio of non-NLEM (National List of Essential medicines) because the NLEM portfolio is not going to show changes as there is no change in the Wholesale Price Index (WPI).
The report mentions that the chronic segment of long term diseases due to lifestyle such as diabetes, high blood pressure and lipid lowering is going to be the key contributor in the revenue. The cash flow will remain strong due to consistent growth in revenues, healthy operating profits and stable working capital of 50 days.
Financial profile and revenue distribution of pharma sector
According to a study of 190 drug makers, that account for about half of the 4.1 lakh crore market in the last fiscal. The continued generation of cash annually and not taking on too much debt is helping pharma players to maintain a stable credit profiles.The financial health of pharma companies is to remain strong despite looking to acquire companies in different other medical areas.
The revenue of pharmaceutical sector is equally distributed between domestic sales and exports. The domestic part usually constitutes of revenue from chronic and acute therapeutic segments. The pharma exports has 80 per cent from formulations and 20 per cent of drugs, in which formulations exports is divided in 58 and 42 per cent to regulated and semi-regulated market respectively.
Aniket Dani, Director, CRISIL Market Intelligence & Analytics said, “Formulation exports are expected to grow 12-14% in rupee terms this fiscal. The regulated markets of the US and Europe will witness growth of 13-15%, driven by continued drug shortages.”
