Indian Pharmaceuticals

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Indian Pharmaceuticals

Macquarie Equity Research Indian Pharmaceuticals

1Q to be a modest quarter

We expect 1QFY27 to be a relatively subdued quarter for the Indian pharmaceutical sector,

with earnings growth facing multiple headwinds despite a supportive currency environment.

Across our coverage universe, we forecast aggregate revenue growth of 13% YoY, supported

by continued momentum in domestic formulations, meaningful depreciation of the Indian

rupee against key global currencies, and acquisition-led contributions for select companies.

However, these positives are likely to be partially offset by weaker performance in the US

market, where the sector continues to lap an exceptionally strong base created by gRevlimid

and other shortage-driven opportunities.

On the profitability front, we expect a more challenging quarter. Aggregate EBITDA margins

are likely to contract by over 300bps YoY, primarily due to the absence of high-margin

gRevlimid revenues and the impact of elevated raw material costs. We believe most

companies have now exhausted lower-cost inventories of solvents and key starting materials

accumulated during the downturn in input prices, resulting in the full pass-through of cost

inflation to P&Ls during the quarter. While the depreciation of the Indian rupee against major

currencies should provide a meaningful cushion, it is unlikely to fully offset the pressure from

a weaker product mix and higher input costs. As a result, we expect aggregate net profit

across our coverage universe to decline 6% YoY, reflecting lower operating profitability as well

as higher depreciation, amortisation, interest expenses and tax-rate normalisation for select

companies.

Figure 2 - Indian healthcare 1QFY27E expectations and YoY comparison