The Indian pharmaceutical industry is anticipated to achieve a revenue growth rate of 8-10% in the current fiscal year, supported by consistent domestic expansion and increased exports to regulated markets. This positive outlook comes despite facing challenges in semi-regulated markets, as reported in a study. Analyzing 186 pharmaceutical companies, which collectively accounted for about half of the sector's annual revenue of Rs 3.7 lakh crore in the previous fiscal year, Crisil disclosed these findings on Monday.

Crisil Research Director Aniket Dani stated that similar to the previous fiscal year, the growth in the domestic market for fiscal year 2024 will be primarily driven by a 5-6% increase in realized prices, partly due to significant price adjustments permitted by the National Pharmaceutical Pricing Authority (NPPA) for regulated drugs. Furthermore, the sales of existing medications and the introduction of new drugs are expected to contribute to a 3-4% increase in sales volume.

The report also suggests that operating profitability is likely to improve by 50-100 basis points (bps), reaching 21% in this fiscal year. This improvement can be attributed to decreased input and logistics costs and a reduction in pricing pressures within the US generics market, following two consecutive years of margin contraction due to pricing pressure and increased input costs during the COVID-19 pandemic and its subsequent supply chain disruptions.

Crisil noted that credit profiles will remain stable due to the pharmaceutical companies' low-leverage balance sheets and moderate capital expenditure plans.

In the current fiscal year, domestic sales are projected to grow by 8-10%, with the chronic disease segment being a significant contributor to revenues. This growth is driven by the rising prevalence of lifestyle-related diseases and increased health consciousness following the pandemic.

Formulation exports are expected to increase by 7-9% in rupee terms, primarily due to higher volumes resulting from new product launches and a decrease in price pressure within the US generics market. However, higher claw-back taxes in specific European markets may lead to reduced export growth to Europe this fiscal year.

Crisil also anticipates improved export growth to Asia after a modest increase in the previous fiscal year, while exports to Africa are expected to remain sluggish due to low foreign exchange reserves affecting purchasing power and high currency volatility. The normalization of supply chains and lower input prices should help reduce inventories to pre-pandemic levels, resulting in less incremental working capital debt in this fiscal year.