The Indian pharmaceutical sector is expected to achieve 7-9 per cent revenue growth in FY 2026, driven by strong domestic and European demand, despite a significant slowdown in its US market, a report said on Thursday. Ratings agency ICRA, in a report, said that global headwinds and regulatory uncertainties cast a shadow over its largest export market in the US, but 8-10 per cent growth is expected in the domestic market, with 10-12 per cent growth in Europe.
The operating profit margins of the companies are expected to remain resilient at 24-25 per cent in FY26, broadly in line with 24.6 per cent in FY25, aided by favourable raw material prices, improved operating leverage, and a rising share of specialty products.
US revenues are anticipated to moderate with YoY growth slowing 3-5 per cent from nearly 10 per cent in FY 2025, the report said.
“ICRA’s sample set companies recorded 10.3 per cent YoY growth in Q1 FY26, driven by market share gains in chronic therapies, new product introductions, and regular price hikes — despite subdued volume growth for branded generics, partly due to rising genericisation,” said Kinjal Shah, Senior Vice President & Co-Group Head, ICRA.
ICRA maintained a ‘stable’ outlook on the sector due to its steady revenue growth and earnings trajectory, underpinned by healthy balance sheets, strong liquidity, and robust operating profit margins (OPM).
The ratings agency said that domestic drug sales are boosted by sales force expansion, improved productivity of medical representatives, deeper rural distribution, new product launches, and recent GST exemptions on lifesaving drugs.
Research and development (R&D) spending is projected to remain steady at 6-7 per cent of revenues, with companies increasingly focusing on complex molecules and specialty products over generics.
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