Higher domestic demand, exports to put pharma SMEs in pink of health

Robust domestic demand and exports to regulated markets will likely provide a booster dose to pharmaceutical sector revenue this fiscal despite tepid export demand from semi-regulated markets on account of currency volatility, low forex reserves and geopolitical risks.

This augurs well for small and medium enterprises (SMEs), which have a 35-40 per cent share in industry revenue.

Typically, these SMEs manufacture and market formulations based on less complex molecules, given their higher exposure to generic products. They benefit from their presence across the value chain and also as contract manufacturers for large players.

Last financial year, these entities had logged 7-9 per cent growth. The exports tonic helped the Ahmedabad and Mumbai SME clusters record healthy growth, while higher domestic demand propped up the Indore and Chennai clusters. 

 

This fiscal, these entities are expected to grow 9-11 per cent, led by domestic demand. Exports, accounting for 50 per cent in industry revenue, will also likely recover.
 

The domestic pharmaceuticals market grew a moderate 2.9 per cent on-year in November on a high base and a slower increase in price and new launches. Select key therapies — analgesics, anti-infectives and respiratory therapies — provided support.

Over the medium term, the Production Linked Incentive scheme for the pharmaceutical sector is expected to boost domestic manufacturing while reducing import dependency for bulk drugs. Hence, the scheme could help some SMEs diversify their portfolios and improve export growth.