Robust sales growth at Indian pharma companies expected in current FY on pandemic recovery, says Fitch

Drug categories impacted by travel restrictions expected to see higher sales levels in FY22

Indian pharmaceutical companies should experience robust sales growth in the current financial year ending March 2022 as sales of drugs that were negatively affected last year by the COVID-19 pandemic continue to recover, according to research by Fitch Ratings.

Fitch said most Indian pharma companies reported resilient operating performance in the financial year ending March 2021, benefitting from gradual stabilisation after 1QFY21, geographical diversification and sales of pandemic-related drugs.

The company said it expects sales of drugs used to treat acute medical conditions and elective procedures – some of which are still 10% below pre-pandemic levels -- to continue to recover in FY22.

“Sales in these categories fell in FY21 as travel restrictions reduced doctor visits and hospitals prioritised COVID-19 treatment over elective procedures,” Fitch said.

Fitch said it expected sales in the near term to be boosted by demand for COVID-19 related drugs, particularly in India, citing some companies’ intention to expand production capacities in active pharma ingredients (API) and injectable products to take advantage of government incentives and increased demand.

The company said healthy growth in domestic market and API sales helped Indian firms, Glenmark Pharmaceuticals and Sun Pharmaceutical Industries to offset declines in the US, and supported low single-digit growth in revenue in FY21.

“Similarly, growth in India and API helped Lupin Limited to limit the overall decline in sales to 1% in rupee terms for FY21, despite a 5% drop in North America, its largest market,” Fitch said.

Fitch said it expected costs to rise to normal levels in FY22 as Indian pharma companies step up marketing and R&D activities. “Nonetheless, higher sales will cushion the impact on margins,” it added.