“Similar to last fiscal, domestic growth in fiscal 2024, will be led by 5-6 per cent increase in realisations, supported partly by high price hikes allowed by the National Pharmaceutical Pricing Authority (NPPA) for drugs under price regulation,” Crisil Research Director Aniket Dani said.
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In addition, sale of existing drugs and new launches will drive 3-4 per cent volume growth, he added.
Operating profitability is also seen improving 50-100 basis points (bps) to 21 per cent this fiscal, supported by moderation in input and logistics costs, and abating pricing pressure in the US generics market, it said.
This follows two consecutive years of margin contraction due to high pricing pressure in the US and a sharp rise in input costs caused by supply chain disruption during the Covid pandemic, and thereafter, Crisil noted. Credit profiles will remain stable owing to low-leverage balance sheets and moderate capex plans, it stated. In the ongoing fiscal, domestic sales are expected to witness 8-10 per cent growth with the chronic segment expected to be the key contributor to revenues, because of the steady increase in lifestyle-related diseases and continued emphasis on health awareness, post the pandemic, Crisil said. Formulation exports are seen up 7-9 per cent in rupee terms this fiscal, more driven by volumes, from new product launches, and abating price pressure in the US generics markets, it said.
On the other hand, increase in claw-back taxes in select European markets could lead to lower growth in exports to Europe this fiscal, it added.
“Growth in exports to Asia will improve this fiscal, after clocking a modest growth last fiscal, while exports to Africa will continue to remain sluggish on account of low forex reserves (impacting the purchasing power) and high currency volatility,” Crisil said.
Lower input prices and normalisation of supply chains should cull inventories to pre-pandemic levels, resulting in smaller incremental working capital debt this fiscal, it added.