24 - 09 - 2026

Pharma to see stronger dose of revenue growth at 11-13% this fiscal

India’s pharmaceutical sector is poised for stronger growth this fiscal, with revenue set to rise 11-13 per cent compared with 8 per cent last fiscal, driven by accelerating exports and firmer domestic demand.

Yet, this growth spurt is unlikely to flow through fully to earnings, as inflation in raw material, energy and freight costs is expected to compress operating margins by 150-200 basis points (BPS). Nevertheless, strong cash generation, liquidity and healthy balance sheets should keep the sector’s credit profiles resilient, according to a report by Crisil Ratings, which analysed data of 190 pharmaceutical firms.

Dominated by generics, the sector derives almost equal revenue from domestic and export markets. Formulations account for about 83 per cent of exports, and of these, around 57 per cent are shipped to regulated markets and the remainder to semi-regulated markets. This diversified geographic footprint is becoming a key growth lever.

“Export growth is broadening beyond the US. Complex generics and biosimilars are expected to deepen the sector’s presence in Europe, while branded generics and new launches will accelerate growth across Asia, Africa and Latin America. In the US, differentiated product launches and inventory normalisation should partly offset continuing pricing pressure. This broader market and product mix will be the principal driver of export growth, which is projected at 14-16 per cent in rupee terms this fiscal,” Sehul Bhatt, Director, Crisil Intelligence, said.

Alongside the export upswing, the domestic market is expected to provide a solid second engine of growth, expanding 9-11 per cent this fiscal. Chronic therapies will remain the key growth driver, supported by the rising prevalence of lifestyle-related ailments. The market will also benefit from annual price revisions of 5-6 per cent and a recovery in volume growth to 4-5 per cent, compared with around 2 per cent in each of the past two fiscals.

The improvement in volumes will be driven by new product launches, stronger prescription demand, improving field-force productivity and deeper penetration into Tier-II and III markets.

“The sector’s growth momentum is strengthening, but earnings will face a cost test this fiscal, with operating margins expected to moderate by 150-200 basis points to 21-21.5 per cent. Higher energy, freight and feedstock costs amid geopolitical volatility in West Asia will outweigh near-term gains from rising operating leverage and a richer product mix. Nevertheless, robust balance sheets and sizeable liquidity buffers give companies the headroom to absorb this margin moderation without weakening credit profiles,” Aditya Jhaver, Director, Crisil Ratings, said.

That financial cushion is reflected in healthy credit metrics. Debt-to-EBITDA for Crisil-rated companies is expected to remain around 1.2 times, while interest coverage should stay close to 10 times this fiscal despite margin moderation, the report added.

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