Domestic API Sector Expected To Grow 7-8% Annually By 2029: ICRA

The revenue of domestic active pharmaceutical ingredient producers is projected to rise by 7-8% by 2029, according to ICRA. The rating agency anticipates that the revenues of its sample companies will grow at a compound annual growth rate of 7-8% from 2023 to 2029, up from an estimated $13-14 billion in 2023.

In fiscal 2023-24, India imported APIs and bulk drugs worth Rs 37,700 crore, meeting 35% of its total API needs, with imports from China constituting 70%, ICRA stated.

The expected revenue growth is attributed to a steady increase in the pharmaceutical formulations sector, driven by factors such as an aging population, higher rates of chronic diseases, and rising demand for contract manufacturing. Global customers are diversifying their supply chains and focusing more on domestic sourcing.

ICRA also forecasts a mild improvement in the operating profit margins of its sample companies for fiscal 2024-25. The domestic API industry faced significant earnings volatility during fiscal 2020-21 and fiscal 2022-23 due to rising raw material costs, including elevated crude oil prices and pandemic-related disruptions in China that led to global shortages of key materials and APIs.

Given the easing of these challenges, ICRA expects revenues to grow by 7-8% in fiscal 2024-25, following a 3-5% increase in fiscal 2023-24. However, ongoing concerns such as subdued demand from key export markets like Europe and supply chain disruptions in the Red Sea will continue to be monitored, according to ICRA Vice President & Sector Head – Corporate Ratings Deepak Jotwani.

(With inputs from PTI)