IGI Logo

CRISIL Ratings in its latest report has said that the Indian pharmaceuticals sector is likely to log a revenue growth of 8-10% this fiscal (FY25), after around 10% growth last year, supported by healthy exports to regulated markets, recovery in exports to semi-regulated markets and steady domestic demand. The resultant improvement in operating leverage along with easing pricing pressure in the US generics market will improve operating margins by 70-80 basis points (bps) to around 22.5% this fiscal. This will be on the back of an increase in margins by 100 bps last fiscal. Continued strong annual cash generation and low financial leverage, will support ‘stable’ credit profiles of players even as companies continue to pursue acquisitions in targeted therapeutic areas.

A CRISIL study of 190 drug makers, accounting for about half of the Rs 4.1 lakh crore market last fiscal, indicates as much. The pharmaceutical sector revenue pie is split almost equally between domestic sales and exports. Domestic formulation revenue comes equally from chronic and acute therapeutic segments. As for exports, formulations and bulk drugs contribute around 80% and around 20%, respectively. For formulations, 58% of exports is to the regulated markets and 42% of exports is to the semi-regulated markets. 

According to the report, domestic revenue is likely to see growth of 7-9% this fiscal, primarily price-driven, with volume growth to be backed by new product launches. Price growth will be led by the non-NLEM (National List of Essential Medicines) portfolio, as price growth for NLEM portfolio shall remain muted, due to minimal change in Wholesale Price Index (WPI) last fiscal. CRISIL is anticipating that the chronic segment to be the key revenue contributor amid increasing lifestyle-related diseases and continued emphasis on health awareness since the pandemic. Steady growth in revenues, healthy operating profits and stable working capital cycle at around 50 days will keep cash flows strong. The financial risk profile of the CRISIL-rated players remains comfortable, with debt to earnings before interest, tax, depreciation and amortisation ratio at 0.9 time and the interest coverage at over 12 times in fiscal 2025.