Weak global eco conditions may hit pharma exporters: Ind-Ra

"Weak economic and political conditions in Africa and currency volatility in Latin America (LATAM) are likely to weigh on the consumption of pharmaceutical formulations and pressure medium term growth prospects for India's exporters," rating agency India Ratings and Research said in a report here.

In FY17, India's exports of pharmaceutical formulations or finished products to the semi-regulated markets grew at the weakest pace of 0.7 per cent in the last seven years, after exhibiting robust growth till FY14.

The under-performance in FY17 was attributed to a 7 per cent y-o-y and 5.1 per cent y-o-y decline in exports to Africa and Latin America, respectively, while exports to Commonwealth of Independent States (CIS) countries recovered slightly by 2.9 per cent y-o-y.

Exports to the African markets declined due to ongoing economic and political instability which weakened local currencies, according to the report.

Exports to Middle East rebounded at 33.4 per cent y-o-y in FY17 on the back of improving economic conditions, political stability in non-Gulf Cooperation Council (GCC) Middle Eastern countries and increasing mandatory insurance in GCC countries.

The agency expects weak macros to protract export slump in Africa and LATAM, a weak recovery in CIS countries and moderate growth in exports to Asia and the Middle East for the near to medium term.

Most Indian exporters are rationalising presence among semi-regulated markets, avoiding markets where risks outweigh opportunities. Exports to Venezuela have been restricted after the sharp devaluation of Venezuelan bolivar by 32.2 per cent since March 2014.

Exporters maintained a cautious approach towards Russia, following a sharp depreciation in the Russian rouble in FY15, with a weak recovery in exports despite currency gains in FY17.

Despite the export underperformance in FY17, the long-term underlying fundamentals of the semi-regulated markets remain intact.

In the underdeveloped Africa, LATAM and Asia economies, the latent demand for the treatment of chronic diseases will boost generics uptake due to limited budgets and high out-of-pocket expenditure.

Increasing drive for universal healthcare insurance in developing Asian markets and GCC countries is also likely to boost generics uptake and benefit generics players over the medium to long term.

Indian exporters are exploring new therapeutic opportunities in Asia, Latin America and the Middle East to deepen presence, build scale and maintain growth momentum, Ind-Ra said.