The agency said the outlook also continues to be of a strong product pipeline of Indian companies and favourable foreign exchange environment.
    
"As growth in the Indian market was muted in first half of the year due to inventory cuts by trade channels, the impact of the new pricing policy is expected average price cut of 17-20 per cent for drugs under NLEM, but it is expected to recover gradually", ICRA said in its latest update on Indian pharmaceutical industry.
    
As far as emerging markets are concerned, while the long- term growth prospects remain intact, certain regulatory developments in some of the markets have hindered the growth momentum for a few quarters.
    
Notably, the delays in product approvals and pricing pressure in Brazil, and efforts to encourage domestic companies in Russia are some of the key challenges that Indian pharma companies face at present, it said.
    
Overall, the performance of individual companies would continue to vary depending on the quality of product pipeline in regulated markets, especially US, geographic diversification, and inorganic investment driven strategies, ICRA said.
    
Companies with growing portfolio comprising niche or complex products in regulated markets and strong & established brands in branded generic markets are likely to be better positioned to manage industry challenges, the agency said.
    
According to ICRA study on 22 leading pharma companies, much of the growth has been driven by strong US generic business where Indian pharma continues to leverage on limited competition launches, scale-up in product portfolio and market share gains.
    
These companies have reported a steady growth of 14 per cent in revenues and stable EBITDA margins in the 23.5-24 per cent range during H1 2013-14 despite headwinds building up in the domestic as well as emerging markets.
    
According to ICRA analysis, companies' strong product pipeline in the US, their well-diversified presence across emerging markets and strong chronic focus in India, have continued to perform better.
    
These factors, along with favourable growth prospects for generic drug launches in the US and other developed markets, will continue to support earnings of Indian companies.
    
ICRA also expects the foreign exchange environment is likely to be positive for companies that do not have significant US dollar denominated liabilities in their balance sheets or limited revenue hedges.
    
However, companies with significant forex borrowings or derivative contracts (not covered adequately by export receivables) could see MTM losses during periods of rupee depreciation, ICRA said.

(Agencies)

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