Domestic API Firms Revenue to Grow 7-8% by 2029: Icra

New Delhi, Aug 12 (PTI) Revenue of domestic active pharmaceutical ingredients producing firms is expected to see a 7-8 per cent rise by 2029, rating agency Icra said on Monday.

The rating agency expects the revenues of its sample set of companies to expand at a CAGR of 7-8 per cent between 2023 and 2029, from an estimated size of USD 13-14 billion in 2023.

"This will be driven by a steady ramp-up in the pharmaceutical formulations industry, which in turn, will be aided by an increasing geriatric population, higher prevalence of chronic diseases, and rising demand for contract manufacturing with global customers looking to diversify their supply chain along with greater focus on domestic sourcing," Icra said in a statement.

It also forecasts the operating profit margin (OPM) of its sample set of companies to improve mildly in FY2025, it added.

Domestic API industry players faced considerable volatility in earnings over FY2021-FY2023 on account of multiple headwinds such as rising raw material costs.

The production cost went up due to elevated crude oil prices and pandemic-induced lockdowns in China, resulting in a shortage of key starting materials (KSMs) and APIs globally among others, Icra said.

"Given the subsequent remission in many of these headwinds, ICRA expects revenues of its sample set of companies to grow by 7-8 per cent in FY2025, post an estimated increase of 3-5 per cent in FY2024," Icra Vice President & Sector Head – Corporate Ratings Deepak Jotwani said.

However, the impact of subdued demand from some key export markets such as Europe and tensions in the Red Sea impacting supply chain and freight costs will continue to be monitored, he added.

India imported APIs and bulk drugs worth Rs 37,700 crore in FY2024, accounting for 35 per cent of its total API requirement. Imports from China accounted for 70 per cent, Icra stated.