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After two consecutive years of single-digit expansion, big Indian drug firms are expected to return to double-digit growth in the current fiscal aided by recovery in US sales, weakening of the rupee and revival of domestic demand, ratings agency Crisil said.
The return to double-digit growth would help the homegrown pharma companies, with turnover of Rs 10 billion or more, to weather a sharp rise in input costs.
As per Crisil, green shoots are already visible in the first quarter for 20 of these listed drug-makers, which account for three-fourths of the pharma industry revenue.
The US and the domestic markets contribute on average 30 per cent and 35 per cent of their revenues, respectively.
"The US market is witnessing an upturn after de-growth in five of the past eight quarters through June 2018," Crisil Ratings Senior Director Anuj Sethi said.
Revenue from US grew 7 per cent in the first quarter of this fiscal compared to a muted show in the same quarter of 2017-18, he added.
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"We expect 6-7 per cent growth this fiscal, backed by lower intensity of regulatory issues, faster product approvals and improving share of complex products. This will also help offset pricing pressure faced in existing products," Sethi said.
Better domestic demand will complement the recovery in US sales, he added.
"Domestic revenues of big pharma companies is expected to grow 12-13 per cent this fiscal, given better access to healthcare and deeper penetration of health insurance," Sethi noted.
The recovery is already reflected in the first quarter with the domestic segment growing 25 per cent year-on-year, albeit on a low base, as the first quarter of the previous year was severely impacted by retailers destocking ahead of the goods and services tax implementation, he added.
