Indian pharmaceutical companies are set to experience 9-11 per cent revenue growth in FY25, driven by strong performances in key markets such as the United States, Europe, and emerging regions, according to a recent report by credit rating agency Icra. However, this growth represents a moderation from the 13-14 per cent year-on-year (Y-o-Y) increase recorded in FY24, which was driven by higher demand and new product launches.
The US market is expected to remain the biggest contributor to revenue growth. This comes after FY24, where Indian pharma companies saw an 18.3 per cent rise in revenue from the US. Factors like new product launches, faster approvals, and pricing benefits due to supply chain disruptions have fuelled this growth. However, Icra cautions that the sustainability of these factors in FY25 remains to be seen.
The domestic market is expected to see a positive turnaround, with Icra projecting revenue growth of 7-9 per cent for its sample set of companies in FY25. This is an improvement from the 6.4 per cent growth recorded in FY24. The change in the National List of Essential Medicines (NLEM) and an uneven monsoon impacted growth in the previous year. However, better sales force strategies, wider distribution in rural areas, and new product launches are expected to drive growth in FY25, despite minimal price hikes under the new NLEM.
The European market is also expected to contribute to overall growth, with Icra projecting a 7-9 per cent increase in revenue for its sample set. This follows strong 15.3 per cent growth in FY24. However, the high base effect from the previous year is expected to moderate growth for FY25. Emerging markets are also expected to see healthy growth of 11-13 per cent in FY25, building on the momentum from the previous year.
Icra maintains a stable outlook for the Indian pharmaceutical industry. This outlook is supported by steady demand in both export and domestic markets, combined with the healthy credit profile of key players. Debt metrics are expected to remain comfortable, even with planned capital expenditure for capacity expansion. Additionally, strong internal accruals and significant cash reserves will ensure liquidity remains strong for the industry.
Pharmaceutical companies are expected to continue investing in research and development (R&D), with spending projected to remain at 6.5-7 per cent of revenue. However, the focus will shift towards complex molecules and specialty products rather than generics. Leading companies have also been making strategic acquisitions to expand market share in specific geographies and therapeutic areas. These acquisitions are expected to contribute to revenue growth and diversification in the coming years.
