New Delhi, November 20


he bulk drugs segment of the Indian pharmaceutical sector is expected to see revenue grow at 6-8 per cent this fiscal year, helped by higher sales volume stemming from a stable growth outlook, according to a Crisil Ratings report.

The bulk drug segment posted 8-10 per cent revenue growth last fiscal, mainly because of better price realisations and a sharp depreciation in the rupee, which lifted exports. A relative weakness in the rupee helps exporters in getting more revenue as the bills are largely settled in US dollars.

This fiscal, the realisations in the sector are seen as largely range-bound, the rating agency noted in the report.

Credit profiles of bulk drug manufacturers are seen to remain 'stable', supported by healthy annual cash generation and adequate balance sheets, despite some uptick in debt-funded capital expenditure (capex).

"Domestic bulk drug consumption is expected to grow 5-7 per cent this fiscal, given the increasing prevalence of chronic diseases and continued emphasis on health awareness. Exports are seen rising 7-9 per cent in rupee terms, driven by volume from new launches, customised synthesis, growing demand for complex drugs and abating price pressure in the US," said Aditya Jhaver, Director, CRISIL Ratings.

This will translate to an overall 6-8 per cent growth in revenues for bulk drug makers.

India imports almost a third of its active pharmaceutical ingredient (API) requirements. API imports were upwards of Rs 35,000 crore in fiscal 2023, two-thirds of which were from China, a key supplier.

After supply-chain disruptions last fiscal, China's supplies of APIs are gradually normalising this fiscal and prices are moderating, which could lead to higher imports and pose some risk to revenue growth for domestic bulk drug makers.

The rating agency noted that the good part structurally is that import dependence is expected to somewhat reduce over the medium term, as domestic production increases gradually because of capital spending under the Production Linked Incentive (PLI) scheme.

Of the originally envisaged capex commitment of Rs 6,500 crore under the PLI scheme for bulk drugs, domestic companies have already committed Rs 4,100 crore, the rating agency report noted.

"A large portion of the upcoming capacity is for two key APIs: para-amino-phenol and penicillin, which, once commissioned and ramped up, will be sufficient to almost entirely replace imports for these products," Aniket Dani, Director-Research, CRISIL Market Intelligence and Analytics.

Coming to the operating profitability for bulk drug/API manufacturers, it is seen up by 100 basis points (or 1 percentage point) to 18-19 per cent this fiscal, with an easing of supply issues globally leading to lower prices of some key input materials.

Going ahead, significant fluctuations in the prices of raw materials imported from China and progress of projects under the PLI scheme will bear watching, it added.

Rising volume to lift bulk Indian drug makers' revenue 6-8% this fiscal: Crisil

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