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India’s pharma industry to reach $57 billion by FY25: Report

The pharma industry, as per the report, is projected to grow between 7 and 8% during this period.

• By Pooja Chaturvedi Sah
• New Delhi
• Jul 11, 2023

News

The Indian pharmaceutical industry is expected to hit the value of $57 billion by fiscal year 2024-25, according to a report released by CareEdge Ratings. The pharma industry, as per the report, is projected to grow between 7 and 8% during this period. 

According to the CareEdge’s analysis, the domestic pharmaceutical segment, During FY18 to FY23, charted a compound annual growth rate (CAGR) of 6-8%, with 8% growth in exports and 6% growth in the domestic market during the same period.

In the previous fiscal ending March 2023, the industry grew by 5% on a year-to-year basis to $49.78 billion. However, the exports grew at a modest 3%. The domestic pharmaceutical market, on the other hand, grew by 7% during the same period, the report added.

This slower growth of exports can be attributed to various factors, including the impact of the Russia-Ukraine war and the shortage of foreign currency in many African countries, which affected the sales of pharmaceutical products to emerging markets, CareEdge Ratings pointed out.

However, India’s prospects in the developed market remained positive with the US alone making up for 30-35% of the total formulation exports, despite facing pricing pressures in the US generics market. 

In FY23, formulation exports to the US recorded a growth rate of 5.9%, primarily supported by sales volume growth of around 16 per cent, as reported by CareEdge. On the other hand, operating margins of APIs/bulk drugs companies contracted nearly 170 bps year-on-year, reaching approximately 18% in FY23.

“With the stabilisation of raw material prices, freight rates, and easing of pricing pressure in US generics market along with a focus on complex and speciality products, CareEdge Ratings expects the operating margin of industry players to improve by 100-150 bps over FY24-FY25 compared to FY23," the report added. 

Going forward, $188 billion worth of drugs are set to go off patent worldwide between 2023-26, which present a great opportunity for the Indian industry to expand its market share. “The industry’s focus on launching specialty and niche products may also aid growth in the US”, the report added.

According to CareEdge, the operating margin of the Indian pharmaceutical industry is expected to recover to pre-COVID-19 levels and show improvement in FY25 compared to FY23.

“The Indian pharma sector is expected to grow at a steady pace in the medium term due to structural factors such as ageing of the population, rising lifestyle or chronic diseases, healthcare awareness and insurance penetration apart from increasing government spending under various schemes. Further, changing world demography along with complex and specialty generic products are expected to drive the export growth of Indian pharma companies. The export growth would also be supported by patent expiry in regulated markets", said Krunal Modi, associate director at CareEdge Ratings.

Adding that the credit profile of Indian pharmaceuticals companies in general has remained stable due to their strong profitability and lower reliance on debt, Modi said that CareEdge Ratings expect higher export growth rates for emerging markets compared to growth rates of developed markets.

“Going forward, The Indian pharma industry is expected to see a growth of around 7% to 8% over FY24-FY25 while the operating profitability of formulation companies to improve to around 23-23.5% and that of APIs/ bulk drug companies to improve to around 19-20% during the same period," said Modi.