Indian pharma sector set for steady growth in FY27 on domestic demand: Report

The Indian pharmaceutical sector is expected to maintain a healthy growth trajectory in the coming quarters, supported by sustained domestic demand, a recovery in Contract Development and Manufacturing Organization/ Active Pharmaceutical Ingredient segment activity and expanding opportunities in GLP-1 therapies, even as the US business remains under pressure and input-cost risks persist, according to a report by 360 ONE Capital.

The brokerage expects the sector to deliver 10 per cent year-on-year revenue growth in Q1 FY27, with domestic and Contract Development and Manufacturing Organization/ Active Pharmaceutical Ingredient segments growing 12.7 per cent and 9.9 per cent, respectively.

However, the US business is projected to decline 9.3 per cent due to the high base created by Revlimid-related sales. EBITDA margins are expected to contract by 125 basis points to 24.6 per cent, as higher freight, power and input costs weigh on profitability.

"Healthy 12.7 per cent y-o-y growth to ₹272 bn" is expected in the domestic market, driven by the expanding GLP-1 segment, new product launches, a shift towards complex generics, improved medical representative productivity, price hikes and in-licensing of brands, the report said.

The CDMO/API segment is likely to remain a key growth engine, with the report projecting "solid 9.9 per cent y-o-y growth to ₹89 bn" on the back of increasing requests for quotations and proposals from global players and a healthy order book. It added that Indian CDMO players are also benefiting from a strong structural capex cycle and investments in differentiated capabilities such as peptides, ADCs and highly potent APIs.

Dr Reddy's Laboratories' discontinuation of commercial supplies of its generic semaglutide injection after detecting an API-related quality issue has also affected multiple companies linked to the rapidly expanding GLP-1 opportunity, increasing near-term uncertainty around product launches and manufacturing timelines.

The report said the issue involved certain batches falling out of specification during commercial scale-up, while the resumption of semaglutide manufacturing remains a key monitorable.

"CRAMS/API players are poised to grow structurally," the report said, adding that US-focused companies are also expected to recover gradually as the business environment stabilises. Over the longer term, improved macroeconomic conditions, stronger growth prospects and rising merger and acquisition activity are expected to support the sector's recovery.