Revenues to increase by 9-11 % for Indian pharma companies in FY2025: ICRA

ICRA expects the revenues of its sample set of companies to expand by a healthy 9-11 per cent in FY2025, albeit a moderation from the YoY increase of 13-14 per cent recorded in FY2024. This will be driven by 9-11 per cent revenue growth from the US market, 7-9 per cent each from the European and domestic markets, and 11-13 per cent from the emerging markets. ICRA’s Stable outlook on the industry reflects the steady growth expectations across key markets and the healthy credit profile of pharma players.

Commenting on the near-term expectations of the industry’s operating profit margin (OPM), Kinjal Shah, Senior VP and Co-Group Head – Corporate Ratings, ICRA, said: “ICRA expects the operating margins of its sample set of companies to remain stable at 23-24 per cent in FY2025, supported by an increase in revenues, higher contribution of complex generics/speciality molecules and soft prices of raw materials.”

ICRA expects the revenue growth from the domestic market for its sample set of companies to improve to 7-9 per cent in FY2025 against 6.4 per cent in FY2024. Growth in the previous fiscal was impacted to an extent by the change in the composition of the National List of Essential Medicines (NLEM), which resulted in a decline in realisations for certain drugs, in addition to an uneven monsoon, which affected acute therapy sales. In contrast, in Q1 FY2025, ICRA’s sample set of companies witnessed a YoY increase of 11.7 per cent in revenues as some of the players gained market share in chronic therapies and enjoyed continued benefits from the introduction of new products. The overall growth for ICRA’s sample set of companies is expected to be supported by sales force expansion and improvement in productivity of medical representatives (MR), widening distribution in rural areas, and new product launches, even though the price hike granted under NLEM for FY2025 is minimal.

Regarding the US market, ICRA expects its sample set of pharma companies to continue to report a healthy performance in FY2025. While revenue growth from this market is expected to moderate to 9-11 per cent in FY2025 due to the high base of the previous fiscal, it will still remain much higher than the recent years.

“Performance of Indian pharmaceutical companies in the US market was significantly better in FY2024. ICRA’s sample set of companies witnessed an 18.3 per cent increase in revenues on a YoY basis. This was supported by new product launches with faster ANDA approvals by the USFDA, continued good performance of FTF products (lenalidomide, darunavir, etc.) for some companies and pricing benefits from product shortage for certain chronic therapies, stemming from disruption in the local supply chain. Indian pharmaceutical companies also benefited from the easing of pricing pressure in the US in FY2024 and YTD FY2025 due to supply-side constraints in the market, providing volume growth and better pricing opportunities. However, the sustainability of the same remains to be seen in the current fiscal. Additionally, regulatory risks pertaining to this market remain a key monitorable, given the heightened scrutiny by USFDA ”, added Shah.

In the European market, ICRA’s sample set of companies is expected to witness revenue growth of 7-9 per cent in FY2025, moderating from the previous year, due to the base effect. In FY2024, ICRA’s sample set of pharma companies grew by 15.3 per cent, supported by an uptick in the base business (both branded and generics segments), new product launches (especially injectables and respiratory) and incremental revenues from new tender wins (in countries such as Germany). While revenue growth has been healthy over the last few quarters, some impact of macroeconomic headwinds (such as disturbances in the Red Sea) will be a key monitorable.

ICRA has maintained its Stable outlook for the Indian pharmaceutical industry, led by steady demand in the export and domestic markets and the comfortable credit profile of key industry participants. The debt metrics of ICRA’s sample set of companies[1] are expected to remain comfortable, with Total Debt/OPBDITA of 0.8-0.9 times as on March 31, 2025, despite significant capital expenditure (capex) of ~Rs. 20,000 crore planned in FY2025 towards capacity expansion, maintenance, and upgradation, supported by the generation of healthy internal accruals. The liquidity profiles of the companies remain strong with sizeable free cash and bank balances and liquid investments.

The research and development (R&D) expenses for its sample set of companies are estimated to remain at 6.5-7 per cent of their revenues as they optimise their spending, focusing more on complex molecules and speciality products, against generics. Leading Indian pharmaceutical companies have made sizeable acquisitions in the recent past to enhance market share in select geographies/ therapeutic areas. This is likely to provide diversification benefits and support revenue growth for these companies, going forward. It also hints at the increasing risk appetite of the industry.