India's Domestic Pharmaceutical Sector is Expected to Reach $57 billion by FY25

According to CareEdge Ratings, the domestic pharmaceutical business is predicted to reach $57 billion by FY25, with operating margins increasing by 100-150 basis points (bps). From FY18 to FY23, the Indian pharmaceutical business grew at a 6-8% annual rate, mostly due to an 8% increase in exports and a 6% increase in the domestic market. The Indian pharmaceutical market increased by about 5% year on year in FY23, reaching $49.78 billion. While exports expanded by only 3% year on year, the domestic market increased by 7%.

Emerging markets remained largely steady among export markets in FY23, while established markets increased by 8%. The Russia-Ukraine crisis, a lack of foreign currency in numerous African countries, and severe devaluation of local currencies all hampered exports to emerging markets. Despite pricing challenges in the US generics market, formulation businesses maintained profits of roughly 22% in FY23. This was primarily due to their emphasis on difficult and specialist products. API/bulk drug businesses' operating margins, on the other hand, shrank by roughly 170 basis points year on year, reaching around 18% in FY23. CareEdge ratings expect 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 stabilization of raw material prices, freight rates, and easing of pricing pressure in the US generics market along with a focus on complex and specialty 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 aging 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.