Healthcare Sector in India Set to Record 11% Rise in Revenue and EBITDA in Q1 FY26
India’s pharmaceutical industry is expected to deliver strong financial results in the first quarter of FY26, with both revenue and EBITDA projected to rise by approximately 11% year-on-year (YoY), according to a recent report. This projection is largely driven by sustained export momentum, recovery in hospital footfalls, and improving margins in diagnostic services.
As one of the most resilient sectors in the Indian economy, pharmaceuticals have consistently demonstrated strong earnings potential despite external uncertainties such as inflationary pressures, geopolitical risks, and supply chain challenges. The latest forecast highlights a continued uptrend in operational performance, with various sub-segments, particularly hospitals and diagnostics, outperforming the industry average.
Key Growth Drivers
The report attributes the projected 11% growth in Q1 FY26 to a combination of favorable domestic and international factors. Export growth continues to be a key engine, as Indian pharmaceutical companies have strengthened their global presence, especially in the U.S. and emerging markets. This has been aided by increased demand for generics, active pharmaceutical ingredients (APIs), and specialty drugs.
In the domestic market, hospitals and diagnostic chains are witnessing a notable recovery. The report anticipates a 17% YoY increase in revenue and EBITDA for the hospital segment, fueled by a rise in patient volumes, enhanced bed utilization, and increased pricing power. Diagnostic companies are projected to post a 14% YoY growth in revenue, supported by a better test mix, higher realization per test, and consolidation benefits from recent mergers and acquisitions.
Moderation in Domestic Pharma Demand
While the overall outlook remains positive, Kotak’s analysts have flagged some softness in the domestic pharma market. Slower demand in March and April 2025, possibly due to seasonality and reduced prescription volumes, is expected to weigh slightly on revenue growth from branded formulations. However, this temporary dip is likely to be offset by the strong performance of export-oriented businesses and healthcare service providers.
The Indian pharmaceutical industry has a dual advantage: a large domestic base and a thriving export market. The domestic market alone is valued at over ₹1.5 lakh crore, while exports contribute more than USD 26 billion annually. Together, they make India the third-largest pharmaceutical producer by volume globally.
Policy Support and Sectoral Reforms
The government’s push toward self-reliance in pharmaceuticals, particularly through the Production Linked Incentive (PLI) scheme and support for API manufacturing, has helped the industry reduce dependence on imports and improve cost structures. These initiatives are also encouraging new investments in drug development and infrastructure, further strengthening long-term growth prospects.
Additionally, the National Policy on Research and Development in the pharma and medtech sector is aimed at building a robust innovation ecosystem, with particular focus on biotech, biosimilars, and indigenous drug discovery. These reforms are expected to boost research-driven companies and support margin expansion in the coming quarters.
Financial Highlights and Segmental Performance
According to Kotak’s Q1 FY26 preview:
Pharmaceutical companies are expected to register around 11% year-on-year growth in both revenue and EBITDA, primarily driven by robust performance in the U.S. market.. generics and API sales.
Hospitals: Likely to report 17% growth in revenue and earnings, backed by improved operational efficiency and rising demand for elective and specialty procedures.
Diagnostics: Expected to post 14% revenue growth, with profitability driven by volume expansion and better pricing.
This strong performance comes at a time when global economic uncertainties are influencing investor sentiment. Despite macro challenges, the Indian pharma sector remains a defensive bet, offering steady earnings, healthy margins, and long-term structural growth.
Outlook for FY26
The positive outlook for Q1 FY26 sets a strong tone for the rest of the fiscal year. Analysts expect further improvement in earnings momentum as the domestic demand stabilizes and export markets remain supportive. Rising investments in research and development, digital transformation in healthcare delivery, and increased public-private partnerships are likely to act as additional tailwinds.
However, challenges such as regulatory scrutiny in overseas markets, price erosion in generics, and cost inflation in raw materials may pose intermittent risks. Companies with diversified portfolios, efficient cost structures, and strong compliance records are expected to outperform peers in this environment.
Conclusion
India’s pharmaceutical and healthcare industry is set for a solid start to FY26, with 11% growth in sales and EBITDA projected in Q1. While minor softness in domestic demand has been observed, the export strength and strong showings from hospitals and diagnostics more than make up for it. With supportive government policies, consistent global demand, and evolving healthcare needs, the Indian pharma sector is well-positioned for continued expansion in the months ahead.
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