India Ratings and Research (Ind-Ra) has retained a neutral outlook on India’s pharmaceutical sector for FY27, projecting revenue growth of around 10 percent year on year. The growth is expected to be driven by sustained domestic demand and rising momentum in the contract development and manufacturing organisation segment.

The agency expects the Indian pharmaceuticals market to expand by about 9 percent year on year in FY27, supported primarily by drug price increases of 4 percent to 5 percent and continued product launches, although overall volume growth may remain moderate. Additional upside is anticipated from the launch of GLP-1 therapies in India, which are expected to contribute meaningfully to domestic sales.

Ind-Ra noted that India will continue to benefit from zero import duty on pharmaceutical exports to the United States under the interim trade arrangement. The US market remains heavily dependent on Indian generic manufacturers due to limited domestic production capacity, reinforcing export opportunities for Indian companies.

The contract development and manufacturing organisation business is emerging as a long-term growth engine for the sector. Companies are increasing capital expenditure to tap into rising global outsourcing demand and onshoring initiatives. Indian CDMO players are seen as strong beneficiaries of the China plus one strategy, given their regulatory compliance standards, scalable facilities, and cost competitiveness.

From a credit perspective, Ind-Ra has maintained a stable outlook for about 70 percent of its rated pharmaceutical companies in FY26, citing low leverage and adequate liquidity buffers. Since April 2025, approximately 18 percent of the covered companies have received rating upgrades, reflecting stronger operating performance, improved cash flows, and deleveraging.

The US generics market remains the second-largest revenue contributor for companies rated by the agency. Between FY23 and FY25, the coverage universe recorded average annual growth of 10.7 percent, compared with muted 1 percent average growth during FY18 to FY22. This rebound was driven by specialty launches, key generic opportunities such as Revlimid and mirabegron, temporary drug shortages in the US market, and easing pricing pressure.

Looking ahead to FY27, rating movements are expected to depend on company-specific factors including regulatory developments, EBITDA performance, and revenue visibility. The agency does not foresee significant liquidity stress for the sector despite upcoming debt maturities in FY27 and FY28. Most large pharmaceutical companies maintain healthy cash reserves, diversified funding sources, and comfortable covenant headroom. Interest coverage ratios are also expected to strengthen further, supported by sustained operating margins.