Informist, Wednesday, Sept. 24, 2025

MUMBAI – The revenue growth of the Indian pharmaceutical sector is expected to moderate to 7-9% in the ongoing fiscal year from 10% in 2024-25 (Apr-Mar), according to a report by global rating agency Crisil. The agency attributed this decline to a high base effect from advance purchases made in FY25, particularly in regulated markets like the US. Meanwhile, shipments to semi-regulated markets and sales at home are expected to remain steady, it said.

Aniket Dani, director of Crisil Intelligence, expects formulation exports to regulated markets to grow 9-11% in FY26, slower than the 14% growth seen in the past two years. This is largely on account of a high base, he said. Overall, launch of new products and drug shortage in the US will support exports. "For semi-regulated markets, sharp currency depreciation in some countries and recurring quality concerns remain key constraints, which will result in exports growing a relatively slow 5-7%," Dani said.

According to Crisil, the 7-9% growth of the domestic pharmaceutical market will be driven by higher realisations helped by price hikes and increased volumes supported by new product launches. The chronic segment is likely to continue to be a key revenue contributor, it said. The Centre's recent decision to exempt life-saving and cancer medicines from Goods and Services Tax and reduced GST on other essential medicines to 5% from 12% will make these therapies more affordable, as per Crisil. This move is also likely to benefit organised players.

The US Commerce Department's review of tariffs on the pharmaceutical sector under Section 232 of the Trade Expansion Act of 1962 is a key monitorable, Crisil said. While Indian generics have a strong presence in the US market, with over 40% of generic prescriptions being fulfilled by Indian companies, significantly high levies could impact demand dynamics. However, Crisil said that the non-discretionary nature of pharmaceuticals underpins Indian exporters' ability to achieve meaningful pass-through if the US imposes tariffs.

To protect against potential tariff shocks, Indian pharmaceutical companies are diversifying their geographical footprint and focusing on specialty products with greater pricing flexibility and lower competition. Efficiency improvements and productivity gains will also be crucial in maintaining profitability.

Despite potential challenges, the financial risk profiles of the entities rated by Crisil are expected to remain healthy, with a debt-to-earnings before interest, tax, depreciation, and amortisation ratio projected at 0.9 times and interest coverage ratio at over 13 times for FY26.

"All said, possible US tariffs on exports, sizeable debt-funded acquisitions and their integration, delays in resolving regulatory issues, and unfavourable fluctuations in input costs will remain monitorable for the sector," the rating agency said. End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by P. Madhu Kumar

Edited by Avishek Dutta

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