Indian pharma sector likely to grow three to five per cent in FY21: Ind-Ra

Credit rating agency, India Ratings and Research (Ind-Ra) released a report stating that India's pharma sector is projected to grow three to five per cent YoY in the current financial year regardless of the lockdown brought about by the COVID-19 situation. It is anticipating improvements in monthly revenues of drug firms from June and believes that the seasonality aspect of Indian domestic businesses will support their recovery. It also mentioned that the continuing upswing in the number of Coronavirus cases in the country will lead to further volume growth in related therapies.

The agency is of the opinion that large cash balances, diversified funding sources as well as sufficient headroom under debt covenants of the pharma companies will alleviate effects of the ongoing lockdown. It noted that the COVID-19 impact on the pharmaceutical sector has been less prominent than that observed in various other sectors, as it qualifies in the essential service category and was not subjected to the restrictions during the nationwide lockdown. Additionally, the report mentioned that manufacturing volumes that had declined to 50-60 per cent in April given the strict lockdown, have significantly improved to 60-80 per cent of the original capacities during the May-June period so far.

Nonetheless, Ind-Ra said the companies have abstained from new launches during the lockdown period owing to dearth of effective marketing campaigns. Further, it stated that companies may be subject to price hikes on non-drug price control order (DPCO) products up to 8 per cent unlike the previous average price hike of 5 per cent (maximum limit of 10 per cent) due to a rise in cost of raw material and the supplementary cost incurred towards raw materials, manpower and logistics.