Ind-Ra expects the sector's exports to reach INR1.1trn by FYE16 (FY14: INR910bn), although the exports growth rate will moderate to 10%-12% yoy in FY16 from around 14% yoy in FY14 on fewer patents expiring. The pharmaceutical industry continues to benefit from lower cost of research and production which aids them in manufacturing for exports.
Large pharmaceutical manufacturers will continue to look for in-organic growth opportunities in India and abroad while also expanding organically in FY16. Top-line growth and steady margins will support the capital expansion ensuring the maintenance of comfortable credit metrics.
Large, export-focused manufacturers will continue to emphasise on better compliance with regulatory norms of importing countries leading to fewer regulatory hurdles and continuous growth. These manufacturers will grow faster than the overall industry.
The ratings of most Ind-Ra rated pharmaceutical companies will remain unchanged as growth and margin stability have already been factored into the ratings.
What Could Change The Outlook?
Regulatory Hurdles: Widespread regulatory actions by overseas regulators could affect exports. Any further sweeping National Pharmaceutical Pricing Authority actions including imposing substantial penalties will impact bottom-lines and credit profiles of domestic market players. Highly leveraged acquisitions could stress credit profiles.
Marketing Exclusivities: Success in acquiring marketing exclusivities (Para IV or first to file opportunities in the US) in the regulated markets and/or successfully commercialising bio-generic molecules can provide an upward thrust to the sector's earnings and, if used to reduce debt, could benefit individual companies.
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