Indian API Industry To See 7-8% CAGR Between CY2023 And 2029

Supported by steady growth in the pharmaceutical formulations industry and increasing demand for contract manufacturing with companies across the globe, the Indian active pharmaceutical ingredients (API) industry is likely to witness a compounded annual growth rate (CAGR) of 7 to 8 per cent between calendar year 2023 and 2029, according to a report by Icra. The credit profiles of the companies in the segment are expected to remain stable, as per the report.

The CAGR of the API industry was eight per cent between CY2017 and CY2023. As companies across the globe now seeking to diversify their supply chain along with an enhanced focus on domestic sourcing, the Indian API industry is set to benefit from this opportunity, the report stated.

Talking about the imports of APIs, India imports about 35 per cent of its ingredients, of which China alone accounts for 65 to 70 per cent. The imports of APIs for certain essential medicines mainly come from China, at 80 to 100 per cent. The report stated that even when India manufactures the APIs, the key starting materials (KSMs) are sourced from China.

Icra expects the revenue of its sample set of companies to grow by 7 to 8 per cent in the current year, up from an estimated 3 to 5 per cent increase in FY24. Icra noted that the Centre’s production-linked incentive scheme is seeing some resistance as the capex till April 2024 was Rs 3,715 crore, against the total committed capex of Rs 6,500 crore.

The API industry went through several hardships between FY2021 and FY2023. According to Icra, these included rising raw material costs, crude oil prices, inflationary pressures, increased energy costs in Europe along with the increased volatility in foreign exchange rates. However, the headwinds are in remission and the credit profiles of the companies in the segment are expected to remain stable, Icra noted.