September 8, 2023
Domestic growth in the fiscal year 2024 is expected to be primarily fueled by a 5-6% increase in realisations
The sale of existing drugs and the introduction of new products are projected to contribute to 3-4% volume growth
An improvement in operating profitability by 50-100 basis points is expected in FY24
The credit profiles of pharmaceutical companies are expected to remain stable due to their low-leverage balance sheets and moderate capital expenditure plans
The Indian pharmaceutical industry is poised to achieve revenue growth of 8-10% in FY24, according to a report by CRISIL. This growth is anticipated to be driven by consistent domestic expansion and increased exports to regulated markets, although semi-regulated markets may encounter challenges.
A study conducted by Crisil involving 186 pharmaceutical companies, collectively representing about half of the sector’s annual revenue of INR 3.7 trillion in the previous fiscal year, supports this outlook.
Experts mentioned that similar to FY23, domestic growth in the fiscal year 2024 is expected to be primarily fueled by a 5-6% increase in realizations. This will be partially supported by substantial price hikes allowed by the National Pharmaceutical Pricing Authority (NPPA) for drugs under price regulation. Additionally, selling existing drugs and introducing new products are projected to contribute to 3-4% volume growth.
The report also anticipates an improvement in operating profitability by 50-100 basis points (bps) to reach 21% in FY24. This improvement is expected to be supported by decreased input and logistics costs and reduced pricing pressure in the US generics market. This comes after two consecutive years of margin contraction, primarily due to intense pricing pressure in the US and a sharp increase in input costs resulting from supply chain disruptions during the COVID-19 pandemic.
The credit profiles of pharmaceutical companies are expected to remain stable due to their low-leverage balance sheets and moderate capital expenditure plans.
Formulation exports are expected to increase by 7-9% in rupee terms during this fiscal year. This growth will be primarily driven by higher volumes resulting from new product launches and a reduction in price pressure in the US generics market.
The report also predicts an improvement in exports to Asian markets and sluggish growth in exports to Africa, mainly due to low foreign exchange reserves affecting purchasing power and high currency volatility.