Industry Odisha Bureau, Sep 24: Crisil Ratings sees pharma revenue rising 11–13 per cent in FY27. Exports and firmer domestic demand lead the charge. Rising input costs, however, may trim operating margins by up to 200 basis points.
India’s pharma sector is set for sharper revenue growth in FY27, according to Crisil Ratings. The agency forecasts 11-13 per cent growth, against about 8 per cent last fiscal. Two forces are behind the acceleration: faster export growth and firmer domestic demand.
The outlook is based on nearly 190 Crisil-rated drugmakers. Together, they generated roughly half of sector revenue in the previous fiscal year. Stronger sales, however, may not produce matching earnings growth.
Export growth widens beyond the US
Crisil expects pharma exports to grow 14–16 per cent in rupee terms. That makes exports the primary revenue engine for FY27.
Formulations, or finished medicines, make up about 83 per cent of shipments. Around 57 per cent of formulation exports go to regulated markets. Semi-regulated markets absorb the rest.
According to Crisil Intelligence, export growth is becoming less reliant on the US. Complex generics and biosimilars could deepen Indian companies’ footprint in Europe. Branded generics and new launches may lift sales across Asia, Africa and Latin America.
In the US, differentiated launches and inventory normalisation should provide partial support. Persistent pricing pressure there, however, is expected to continue. A wider spread of markets reduces the sector’s exposure to any single geography.
Domestic demand becomes the second engine
At home, Crisil projects 9–11 per cent growth in the domestic pharma market. Chronic therapies, which treat long-term conditions, remain a key support. Annual price revisions of 5-6 per cent will also add to revenue.
The bigger change lies in volumes. Volume growth is expected to recover to 4-5 per cent in FY27. It had stalled at roughly 2 per cent in each of the previous two years.
Volume growth shows more medicines being sold, not merely higher prices. New launches, rising prescriptions and deeper reach into tier-2 and tier-3 markets underpin the recovery.
Costs set to squeeze margins
Revenue growth and earnings growth are likely to diverge this fiscal. Crisil expects operating margins to fall 150–200 basis points to 21–21.5 per cent. Put simply, a 200 bps fall means two paise less operating profit per rupee.
Higher costs for raw materials, feedstock, energy and freight are the main pressures. Geopolitical volatility in West Asia has added to these supply-chain strains.
Crisil Ratings said these costs will outweigh near-term gains from operating leverage. Operating leverage refers to margins improving as fixed costs spread over higher sales. Even so, the decline trims profitability rather than threatening it.
Balance sheets offer a cushion
Crisil expects credit profiles to stay resilient despite thinner margins. Strong cash generation and healthy liquidity underpin that view.
Debt-to-EBITDA for rated companies is projected at around 1.2 times. This means debt equals roughly 1.2 years of operating earnings. Interest coverage is expected to stay close to 10 times. In other words, operating earnings cover interest costs about tenfold.
FY27 may therefore bring faster pharma revenue growth, but a tougher earnings test.
