NewsEarningsIndian Pharma Sector Expected to Report Steady Revenue Growth in Q3FY26 Despite Earnings PressureIndian Pharma Sector Expected to Report Steady Revenue Growth in Q3FY26 Despite Earnings Pressure
Indian pharmaceutical companies are expected to report 8-9% revenue growth in Q3FY26, supported by domestic formulations and stable demand in India. However, EBITDA growth remains muted due to US generics competition, price erosion, and rising costs including Labour Code implementation. While Lupin is positioned to outperform with strong chronic therapy positioning, Dr Reddy's and Cipla may face declining US sales. Ajanta Pharma and Eris Lifesciences are expected to lead with double-digit growth.
*this image is generated using AI for illustrative purposes only.
Indian pharmaceutical companies are expected to report steady revenue growth in the October-December quarter of 2025 (Q3FY26), driven primarily by domestic formulations despite ongoing challenges in international markets. Sector analysts project revenue growth of approximately 8-9% year-on-year, supported by stable demand in India and improving performance in select specialty portfolios. However, earnings growth is anticipated to remain muted as companies grapple with intense competition and cost pressures.
Revenue Growth Drivers and Market Dynamics
The domestic pharmaceutical market continues to demonstrate resilience, with strong performance in chronic therapies and specialty portfolios driving growth. Companies are benefiting from stable demand patterns in India, while some players are experiencing improved product mix in the domestic market. The US generics market has remained largely stable, with the flu season providing some volume support during the quarter.
Earnings Pressure from Multiple Fronts
Despite steady revenue growth, earnings before interest, taxes, depreciation and amortisation (EBITDA) growth is expected to remain constrained. Price erosion in the US market and regulatory-linked costs continue to weigh on profitability across the sector. Additionally, margins may face pressure from the implementation of the Labour Code and rising operating costs, which could temper earnings growth despite stable revenue performance.
Company-Specific Performance Expectations
Market analysts anticipate varied performance across individual companies in Q3FY26:
| Company Category: | Expected Growth | Key Drivers |
|---|---|---|
| Ajanta Pharma, Eris Lifesciences: | Double-digit growth | Strong domestic execution, portfolio expansion |
| Glenmark Pharmaceuticals, Alkem Laboratories: | Mid-to-high single-digit | CDMO space traction |
| Divi's Laboratories, Laurus Labs: | Around 15% growth | Export demand recovery, new contracts |
| Dr Reddy's Laboratories, Cipla: | Declining US sales expected | High base effect, competitive pressure |
Lupin is expected to outperform peers, driven by traction in key products and relatively limited competitive intensity in some of its molecules. The company's strong positioning in chronic therapies in India is anticipated to provide additional earnings support. Analysts also expect Piramal Pharma's margins to improve sequentially after a weak phase.
US Market Challenges and Opportunities
The US generics market presents mixed signals for Indian pharmaceutical companies. While the market has remained stable with flu season support, a high base for certain blockbuster oncology drugs is expected to cap growth this quarter. This dynamic is limiting upside potential from US business for several players, with market analysts factoring in declining US sales for companies such as Dr Reddy's Laboratories and Cipla.
Kunal Dhamesha, Pharma & Healthcare Research Analyst at Macquarie Capital, commented on Dr Reddy's outlook: "It's definitely going to be lower sales in the US on a sequential basis. Though I still believe that there'll be some tail-end revenue coming from lenalidomide in this quarter." He noted that strength in other segments should provide support, stating: "The domestic business remains strong, double-digit growth that we are expecting in quarter three."
Key Sector Monitorables
Investors will closely track several key developments during the quarter, including progress on obesity and GLP-1 drug opportunities, continued US pricing pressure, and onshoring of manufacturing in the US. The impact of the Biosecure Act and progress on key product launches will also remain important factors for sector performance. In valuation terms, most pharma stocks including Sun Pharma, Dr Reddy's and Cipla are trading close to levels from six months to a year ago, reflecting cautious investor sentiment amid mixed earnings visibility and structural shifts in the global pharmaceutical landscape.
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