Indian pharma to grow 7-9% in FY26, says ICRA

Indian pharmaceutical companies continue to remain resilient amid global uncertainties and tariff threats from its largest export market US, but with regulatory risks, tariff uncertainties, and evolving market conditions, the sector’s ability to sustain growth will be tested in the quarters ahead, says rating agency ICRA.

The revenues for ICRA’s sample set of pharmaceutical companies are projected to expand by 7-9% in FY2026, supported by 8-10% growth in the domestic market and 10-12% growth in Europe, the agency said in its latest review. However, the performance in the US market is expected to moderate, with year-on-year growth slowing to 3-5%, from nearly 10% in FY2025, it said.

“The domestic market continues to be a key growth driver for Indian pharma companies. Sales force expansion, improved productivity of medical representatives, deeper rural distribution, and new product launches are expected to support 8-10% revenue growth in FY2026 in the domestic market,” Kinjal Shah, Senior Vice President & Co-Group Head, ICRA, said. ”ICRA’s sample set companies continue to report a double-digit expansion (10.3% YoY growth in Q1 FY2026, following 11.6% growth in FY2025), driven by market share gains in chronic therapies, new product introductions, and regular price hikes—despite subdued volume growth for branded generics, partly due to rising genericisation,” Shah adds.

While recent government measures, including GST exemptions and rate reductions on select lifesaving and general medicines, and some medical supplies and equipment, are expected to enhance affordability and accessibility, ICRA’s US market outlook is more cautious. “After a strong FY2025, where revenues grew 9.9% over the previous year, growth is expected to slow down due to price erosion and declining sales of lenalidomide, a key revenue contributor in previous years. Regulatory scrutiny by the US Food and Drug Administration (USFDA) remains an ongoing risk factor, with warning letters and import alerts delaying product launches and triggering the imposition of failure-to-supply penalties. These issues also impose significant costs for remediation, including consultant fees and increased management bandwidth, which tend to weigh on margins. Adding to the uncertainty is the recent imposition of 50% tariffs by the US on Indian imports across multiple sectors, effective August 27, 2025. While pharmaceuticals have so far been exempt, the possibility of future inclusion remains a key monitorable. The US government’s proposal for a ‘most favoured nation’ (MFN) pricing policy to bridge global drug price disparities could further impact Indian exporters,” ICRA notes.

On the operating profit margins (OPM) of its sample entities, ICRA foresees a resilient 24-25% in FY2026, broadly in line with 24.6% in FY2025, aided by favourable raw material prices, improved operating leverage, and a rising share of specialty products.

ICRA maintains a Stable outlook on the pharmaceuticals sector, supported by sustained demand in both domestic and export markets. ICRA’s Stable outlook on the sector reflects its steady revenue growth and earnings trajectory, underpinned by healthy balance sheets, strong liquidity, and robust OPM.