Indian pharmaceutical companies are expected to report muted performance for the March quarter (Q4FY26), weighed down by a decline in sales in the US market, while the domestic market is expected to have remained robust.
The end of exclusivity for the high-margin Revlimid in the US in January has led to significant price revisions and lower volumes, impacting companies that depend on the product, despite some support from rupee depreciation.
An ICICI Securities report projects companies in its coverage to post revenue growth of about 7% year-on-year, lower than about 10% in the first nine months of FY26. While domestic sales growth is expected to be strong at 13.6%, US revenue in dollar terms is projected to drop by about 7%, partly compensated by the rupee’s fall. Ebitda is projected to decline by 2.4%, with price erosion leading to lower gross margin. Additionally, higher freight costs in March, triggered by the West Asia war, would also impact profitability. Ebitda is short for earnings before interest, taxes, depreciation and amortization.
Among the most affected by the US sales decline are Cipla Ltd, Dr Reddy’s Laboratories Ltd, and Zydus Lifesciences Ltd, which derived 27%, 16%, and 10% of their US revenue from Revlimid over the trailing three months to January, according to Nomura Global Market Research. These companies are expected to see Ebitda decline of 28-33%, on-year.
Among the outperformers are Lupin Ltd and Sun Pharmaceutical Industries Ltd, with expected Ebitda growth of 39% and 19%, benefiting from the expansion of their product portfolios and robust sales from niche products.
The US market is also going through some uncertainty due to the imposition of 100% tariff on imports of patented pharmaceutical products last week. However, companies that have agreed to set up domestic facilities, and from certain countries, will be subject to a tariff of 10-20% only. While the Indian companies, largely selling generic drugs, are currently not impacted, the market conditions will be reviewed within a year to determine if tariff action is needed on imports of generic drugs also.
JM Financial Institutional Securities projects pharma companies to report a similar Ebitda decline of 3% on-year, with revenue growing by 6%. India-focused companies are expected to post 12% and 17% growth in revenue and Ebitda, helped by improving acute demand and continued traction in chronic therapies. The contract development and manufacturing organisation (CDMO) segment is expected to post 9% Ebitda growth, supported by healthy order inflows and currency tailwinds. The broking firm projects US generics-focussed companies to see 8% decline in Ebitda, despite revenue growth of about 5%.
Meanwhile, the Nifty Pharma Index is down about 3.5% since the onset of the West Asia war, slightly better than the 4.6% decline for the Nifty 50 Index. To be sure, margin erosion from loss of exclusivity for key products in the US market, besides adverse regulatory developments, remains a key risk for the sector. Having said that, the domestic market should continue to drive growth, getting a boost with the launch of generic semaglutide in March, which can boost growth in FY27 as well.