Pharma exports to overtake domestic sales in FY15: Ind Ratings

It expects the credit profiles of these companies to continue to strengthen in FY15 on the back of increasing revenue and improving margins on increased exports

India Ratings & Research has revised its outlook on the pharmaceuticals sector for next fiscal to positive from stable on the back of increased exports.

The domestic pharmaceutical market is likely to see high single-digit revenue growth. Profit margins are likely to improve on improved utilisation of manufacturing facilities, the rating agency said in its '2014 Outlook: Pharmaceuticals' report here.

The outlook for most Ind-Ra rated pharmaceutical companies is stable as almost all of the positive factors have already been factored into the existing ratings.

Ind-Ra expects the credit profiles of these companies to continue to strengthen in FY15 on the back of increasing revenue and improving margins on increased exports, it said.

Ind-Ra believes the strong export growth recorded over 2007-08 - 2012-13 (CAGR of 22%) will continue in the medium term.

This growth will be backed by $92 billion of drugs going off patent in the next three years, increasing traction for generic drugs globally and new generic drug approvals for Indian pharmaceutical companies in different jurisdictions.

However, the domestic market revenue growth (CAGR of 10.4% over FY08-FY13) will continue to be moderate.

The rating agency said exports to the US will continue to grow in the medium term backed by the largest number of United States Food & Drug Administration (USFDA) approved facilities outside the US as well as the largest share of drug approvals over the last few years.

Approvals from the World Health Organisation and European regulators are also strong providing added visibility for exports. Although 2013 saw high regulatory actions against Indian pharmaceutical manufacturers, Ind-Ra believes they do not weaken the industry's prospects.