Indian Pharma Industry Set to Reach $57 Billion by FY25
According to a report released by CareEdge Ratings, the Indian pharmaceutical industry is expected to reach a value of $57 billion by fiscal year 2024-25. The industry is projected to grow at a rate ranging between 7 and 8 percent during this period. This positive growth forecast reflects the continued expansion and potential of the Indian pharmaceutical sector.
In the previous fiscal year ending March 2023, the industry demonstrated a growth rate of 5 percent, reaching a cumulative value of $49.78 billion. This growth can be attributed to various factors such as increased healthcare spending, a growing population, rising chronic diseases, and the demand for affordable medicines both domestically and internationally.
The Indian pharmaceutical industry has been recognized globally for its manufacturing capabilities and is a significant player in the global pharmaceutical market. With the ongoing focus on research and development, innovation, and the adoption of advanced technologies, the industry is well-positioned to maintain its growth trajectory and contribute to the healthcare needs of the country and beyond.
According to the research agency, the Indian pharmaceutical industry has shown significant growth over the years, increasing from $35.41 billion in FY18 to $49.78 billion in FY23. The agency further projects that the industry will continue to grow and reach a value of $57 billion by FY25.
The anticipated growth in FY25 will be driven by multiple factors. The industry is expected to experience a growth rate of 6-7 percent in terms of exports, indicating the continued demand for Indian pharmaceutical products in international markets. Additionally, there is expected to be an 8-9 percent surge in sales volume in the domestic market, highlighting the sustained demand for medicines within the country.
These growth projections indicate a positive outlook for the Indian pharmaceutical industry, both in terms of domestic consumption and export potential. The industry’s ability to meet the healthcare needs of the population, coupled with its competitive advantage in terms of cost-effective production, positions it favorably for continued growth and success.
According to CareEdge Ratings, the growth of exports in the Indian pharmaceutical industry was relatively lower in FY23, with only a 3 percent increase. This slower growth can be attributed to various factors, including the impact of the Russia-Ukraine war and the shortage of foreign currency in many African countries, which affected the sales of pharmaceutical products to emerging markets.
In contrast, the domestic pharmaceutical market experienced a growth rate of 7 percent during the same period. This indicates the sustained demand for pharmaceutical products within India, driven by factors such as population growth, increased healthcare awareness, and improved access to healthcare services.
Despite the challenges faced in the export market, the growth in the domestic market highlights the resilience and strength of the Indian pharmaceutical industry. As the industry continues to address global market dynamics and strengthen its position in international markets, the domestic market provides a stable foundation for growth and contributes to the overall positive outlook for the industry.
Operating Margin to rise
According to the report by CareEdge Ratings, the operating margin of the Indian pharmaceutical industry is expected to recover to pre-COVID-19 levels and show improvement in FY25 compared to FY23. Currently, the industry is facing challenges such as elevated input prices, rising freight costs, extended delivery timelines, and competitive pressures in the US generics market, which have impacted the operating margin.
However, the report highlights several positive signs for the industry going forward. It mentions that raw material prices are stabilizing, freight rates are normalizing, and pricing pressure in the US generics market is easing. These factors are expected to contribute to the recovery and improvement of the operating margin in the coming years.
The projected increase of 100-150 basis points in the operating margin indicates a positive outlook for the profitability of the Indian pharmaceutical industry. As the industry navigates through the challenges and adapts to changing market dynamics, it is anticipated to regain its strength and witness improved margins in the future.
According to CareEdge Ratings, the anticipated factors mentioned earlier are expected to result in an expansion of operating margins by approximately 100 to 150 basis points over FY24-FY25 compared to FY23. This improvement in operating margins is attributed to factors such as stabilizing raw material prices, normalizing freight rates, easing pricing pressure in the US generics market, and the industry’s focus on launching specialty and niche products in the US market.
The report also highlights that the credit profile of Indian pharmaceutical companies has remained stable. This stability is attributed to their strong profitability and lower reliance on debt. The report expects this trend to continue, indicating a positive outlook for the creditworthiness of the industry.
Overall, the projected expansion of operating margins and the stable credit profile of Indian pharmaceutical companies reflect positive prospects for the industry’s profitability and financial health. As the industry continues to navigate challenges and capitalize on growth opportunities, it is poised to maintain its stability and further strengthen its position in the market.
