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Business News/ Industry / Indian pharma industry to hit $57 billion by FY25
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Indian pharma industry to hit $57 billion by FY25

CareEdge Ratings expect higher export growth rates for emerging markets compared to growth rates of developed markets

Indian pharma industry to hit $57 billion by FY25. (File Photo: Bloomberg)Premium
Indian pharma industry to hit $57 billion by FY25. (File Photo: Bloomberg)

New Delhi: Domestic pharmaceutical industry will likely hit $57 billion by FY25, along with expansion in operating margins by 100-150 basis points (bps), according to a report by CareEdge Ratings.

During FY18 to FY23, the Indian pharmaceutical industry has logged a a compound annual growth rate (CAGR) of 6-8%, primarily driven by an 8% increase in exports and a 6% rise in the domestic market.

In FY23, the Indian pharma market saw a year-on-year growth of nearly 5%, reaching $49.78 billion. While exports grew a modest 3%, the domestic market increased 7% year-on-year.

Among export markets, emerging markets remained relatively flat, while developed markets recorded an 8% growth in FY23. Exports to emerging markets were affected by the Russia-Ukraine conflict, scarcity of foreign currency in several African countries, and significant depreciation of local currencies.

Despite facing pricing pressures in the US generics market, formulation companies managed to maintain their margins at around 22% in FY23. This was largely because of their focus on complex and specialty products. On the other hand, operating margins of APIs/bulk drugs companies contracted nearly 170 bps year-on-year, reaching approximately 18% in FY23.

CareEdge ratings expects the pharmaceutical industry to grow at 7-8% in FY24-FY25, supported by a 6-7% growth in exports and an 8-9% growth in the domestic market during the same period.

“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," it added.

“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.

“Going forward, CareEdge Ratings expect higher export growth rates for emerging markets compared to growth rates of developed markets. 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," he added.

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Published: 10 Jul 2023, 02:20 PM IST
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