India's CDMO Sector Set for 13-15% Revenue Growth by FY26 Despite US Tariff Challenges, Reports Crisil

India’s contract research, development, and manufacturing organization (CRDMO) sector is on an optimistic trajectory, anticipating a revenue increase of 13-15% for the current fiscal year. This comes on the heels of a strong 11% growth recorded in FY25, according to insights from Crisil Ratings. The CRDMO sector plays a vital role in the development and manufacturing of small molecules, essential components in the pharmaceutical landscape.

Sustained Profitability and Cash Flow

Crisil’s analysis indicates that the CRDMO sector can maintain robust operating margins between 26-28%. This impressive profitability will empower Indian CRDMOs to continue their capital expenditure initiatives with minimal reliance on debt, thereby preserving their strong credit standings.

Key Highlights:
- Expected revenue growth: 13-15%
- Projected operating margins: 26-28%
- Limited debt reliance enhances credit profiles

Resilience Amid Trade Challenges

Despite potential challenges from looming tariffs in the U.S., the sector possesses inherent strengths. Factors such as the critical role of healthcare in the U.S. and increasing reliance on CRDMOs for complex manufacturing processes position the sector to weather these challenges effectively.

In-Depth Market Analysis

Crisil’s report evaluated 19 leading Indian CRDMOs, which collectively represent about 50% of the sector’s estimated revenue, pegged at ₹70,000 crore last fiscal year. Currently, India holds less than 5% of the global CRDMO market, which is predominantly led by the U.S., Europe, and China.

Market Composition:
- Contract Development and Manufacturing Operations (CDMOs): 55% of revenue, focusing on drug development and commercial manufacturing.
- Contract Research Organizations (CROs): 45% of revenue, specializing in drug research and discovery.

Competitive Advantages

Aditya Jhaver, Director at Crisil Ratings, noted that the Indian CRDMO sector is poised to surpass the high single-digit growth rates observed globally. As U.S. and European pharmaceutical companies seek alternatives to China, India’s expertise in small molecule chemistry, along with its FDA-approved manufacturing facilities, enhances its competitive position.

Projected Growth in Segments

For the current fiscal year, the CDMO segment anticipates a 14-16% revenue increase, up from an estimated 13% in FY25. This growth trajectory is driven by new orders and heightened interest in the capabilities of Indian manufacturers. Meanwhile, the domestic CRO sector is expected to expand by 11-13%, compared to an estimated 9% growth last fiscal year, although this is contingent on venture capital funding amidst geopolitical uncertainties.

Strong Financial Foundations

According to the Crisil report, the combination of double-digit revenue growth and a focus on high-margin products will bolster operating margins and capital expenditure plans. Joanne Gonsalves, Associate Director at Crisil Ratings, emphasized that the Indian CRDMO sector is set to expand its manufacturing capabilities while minimizing debt reliance. Strong cash flow and support from private equity will ensure healthy financial ratios, with a debt-to-EBITDA ratio of 1.3-1.4 times and an interest coverage ratio of 9-10 times for the fiscal year.

In summary, the Indian CRDMO sector is not only poised for significant growth but also demonstrates resilience and adaptability in the face of both domestic and international challenges. For more insights on the pharmaceutical market dynamics, check out Nielsen’s report on FMCG growth.