The agency attributed headwinds in export sales in the regulated markets and the high-base effect in the domestic formulations business as the major reason for moderate revenue growth.
As per the estimates, the operating profitability will shrink another 200-250 basis points (bps). Earlier, 130 bps decline was reported in the last fiscal. The shrink is expected due to continued pricing pressure in the US generics market and high input and freight costs which offset moderate revenue growth.
The growth is led by a 6-8 per cent average price increase which was allowed by the National Pharmaceutical Pricing Authority in March 2022 and on the back of new product launches.
Lifestyle-related chronic portfolio drugs and a few acute portfolio drugs are expected to drive demand this fiscal.
“The growth in US generics market will moderate given continued pricing pressure,” CRISIL Research Director Aniket Dani said.
“The rupee’s depreciation saves some blushes, though. Exports to other regulated markets could grow faster as global companies diversify geographically,” he added.
The rating agency’s estimates are based on a study of 184 drug makers that account for 55 per cent of the Rs 3.4 lakh crore-a-year sector revenue.