Indian pharma industry likely to grow at 10-13 per cent in FY21: Icra

According to the rating agency ICRA, Indian pharmaceutical industry is expected to grow at 10-13 per cent in 2020-21 irrespective of the challenges in the industry.

This expected growth in the next financial year is on the back of increase in demand from the domestic market because of increase in spending on healthcare along with improving access, according to Icra.

It further added that the growth in 2020-21 is also supported by the decrease in pricing pressure for the US market, new launches and market share gains for existing products and consolidation benefits, it added.

"The Indian pharmaceutical industry's growth remained stable at 12.2 per cent during H1FY2020 led by rebound in domestic growth in Q2 FY2020 to 14.2 per cent supported by seasonal factors and stable growth in chronic therapies," said Mr Gaurav Jain, ICRA Vice President & Co-Head.

He added that there were many diseases outbreak in the country during Q2FY2020, leading to the growth of the anti-infective segment.

ICRA further said that though, the margins remain healthy, pricing pressures for the US base generics business (albeit moderating), lack of limited competition products and manufacturing quality issues will continue to put margin pressure.

The margins are provided a little relief by the higher share of domestic business and operational efficiencies, it added.

The major sensitivities effecting the growth and profitability of the Indian pharma industry will be regulatory interventions such as price controls and compulsory genericisation for domestic market and continued regulatory overhang with respect to manufacturing quality deficiencies during USFDA audits, the statement said.

"The US market growth at 13.6 per cent in H1FY2020 was impacted by regulatory overhang in the form of warning letters, one-offs such as delayed shipments, voluntary recall, though few limited competition products, lower pricing pressure, volume expansion for existing and new product launches supported growth," Mr Jain said.

The statement also added that, in present, many Indian pharma companies are focusing on optimising their R&D spend, while in the past, these companies have increased their R&D spend targeting pipeline of specialty drugs, niche molecules and complex therapies.

"The credit metrics of leading pharma companies are expected to remain stable in view of future growth prospects in regulated markets and relatively strong balance sheets," Mr Jain added.

The capital structure and coverage indicators are expected to remain strong irrespective of the pressure on profitability and marginal rise in debt levels given inorganic investments, he added.

"The key sensitivity to ICRA's view remains productivity of R&D expenditure, increasing competition in the US generics space and operational risk related to increased level of due diligence by regulatory agencies," Mr Jain said.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.