Indian Pharma Poised for Steady FY27 Growth
The Indian pharmaceutical sector is expected to keep a consistent growth path through the first quarter of FY 27, driven largely by domestic demand and a rebound in the contract development and manufacturing organization (CDMO) and active pharmaceutical ingredient (API) segments, according to a recent market analysis.
Domestic market fuels 12.7% revenue rise
Revenue from the home market is projected to climb 12.7% year‑on‑year to roughly ₹272 billion. The lift comes from a mix of factors: expanding GLP‑1 therapy sales, new product launches, a shift toward more complex generics, and higher pricing on in‑licensed brands. Improved productivity among medical representatives also adds a modest boost.
GLP‑1 drugs, which have gained attention for treating diabetes and obesity, remain the main growth driver. However, a quality issue flagged by Dr Reddy’s Laboratories — the suspension of its generic semaglutide injection after an API‑related deviation — has introduced short‑term uncertainty. The problem involved certain batches falling out of specification during scale‑up, and the analysis notes that resuming production will be closely watched.
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CDMO and API segments keep expanding
The CDMO/API side of the industry is set to deliver solid 9.9% year‑on‑year growth, reaching about ₹89 billion. The outlook rests on rising requests for quotations and proposals from global pharmaceutical players, as well as a strong order book. Indian CDMO firms are also benefitting from a strong capital‑expenditure cycle, with investments aimed at differentiated capabilities such as peptide synthesis, antibody‑drug conjugates (ADCs) and highly potent APIs.
Analysts see this segment as a major growth driver, noting that the demand for contract services is unlikely to wane. The report adds that US‑focused companies may begin to recover gradually as the business environment stabilises, although the US market itself is projected to decline 9.3% due to a high base from previous Revlimid‑related sales.
EBITDA margins are expected to tighten, slipping 125 basis points to 24.6% as higher freight, power and input costs press on profitability. The margin contraction reflects ongoing input‑cost pressures, which could linger if global supply‑chain strains persist.
Employment stability is expected.
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From a practical standpoint, the modest growth forecast suggests that Indian manufacturers will likely continue to prioritize domestic launches and CDMO contracts over aggressive overseas expansion, at least in the near term. This could mean more stable employment for workers in production facilities, while also keeping drug prices relatively predictable for Indian patients.
Long‑term outlook and merger activity
Looking beyond FY 27, the analysis points to improved macro‑economic conditions and rising merger and acquisition activity as pillars supporting sector recovery. While the US business faces a near‑term dip, the broader global appetite for outsourced development and manufacturing services may offset some of the headwinds.
Overall, the sector’s trajectory appears balanced: domestic demand and CDMO/API growth provide a cushion against external pressures, even as input‑cost risks and specific product setbacks add complexity to the picture.
