Hikal Ltd Management Discussions

Economic Review

Global Economic Review

The world economy exhibited immense potential for high growth rates in 2023-24; however, it was disrupted by the outbreak of the Russia-Ukraine conflict.

The war in Ukraine has not shown definitive signs of immediate resolution, despite diplomatic efforts and ceasefire agreements in some regions, reducing the intensity of conflicts in the shortterm. Additionally, rapidly rising tensions in the Middle East due to the Israel-Gaza war and new commodity price spikes from geopolitical shocks, including Red Sea Crisis and supply disruptions or more persistent underlying inflation could prolong tight monetary conditions.

The International Monetary Fund anticipates, global inflation rates have peaked in many countries and are showing signs of gradual decline, from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, with advanced economies returning to their inflation targets sooner than emerging, thanks to factors like central bank monetary tightening through interest rate hikes, moderating energy prices, and easing supply chain disruptions. However, inflation remains at elevated levels compared to prepandemic norms, and central banks are cautious about declaring victory too soon.

Europes Recovery is on Track

Europes recovery, supported by domestic demand, is progressing steadily. The latest GDP data for the Euro area show growth slightly above expectations, as all major economies have performed slightly better than expected in April 2024. The recovery is fuelled by increasing confidence among consumers and businesses. Household incomes are maintained by strong labour markets, contributing to the rise in incomes during this recovery phase.

Outlook

According to the April 2024 report by the IMF, the baseline forecast is for the world economy to continue growing at 3.2% during 2024 and 2025, at the same pace as in 2023. Conversely, upside factors include the potential for a short-term fiscal stimulus in light of numerous countries holding elections in 2024, expedited monetary policy accommodation, and productivity enhancements facilitated by advancements in technologies such as artificial intelligence. In contrast, the World Banks ‘Global Economic Prospects report released in January 2024 adopts a more conservative stance, estimating global Real GDP growth at 2.6% for 2023, with growth forecasts of 2.4% and 2.7% for 2024 and 2025, respectively.

Global Growth Forecast (%)

Particulars	2023	2024 (P)	2025 (P)
World Output	3.2	3.2	3.2
Advanced Economies	1.6	1.7	1.8
US	2.5	2.7	1.9
Eurozone	0.4	0.8	1.5
Japan	1.9	0.9	1.0
UK	0.1	0.5	1.5
Other Advanced Economies	1.8	2.0	2.4
Emerging Market and Developing Economies	4.3	4.2	4.2
China	5.2	4.6	4.1
India	7.8	6.8	6.5
Emerging Market and Middle-Income Economies	4.4	4.1	4.1
Low-Income Developing Countries	4.0	4.7	5.2

Source: World Economic Outlook, IMF, April 2023 Note:

1 P stands for projections

2 For India, data and forecasts are presented on fiscal year basis, with FY24 (starting in April 2023) shown in the 2023 column. Indias growth projections are 6.9% in 2024 and 6.5% in 2025 based on the calendar year.

Indian Economic Review

The Economic Review for March highlighted that Indias economy has maintained its strength despite facing global challenges and geopolitical tensions. Factors like robust domestic demand, increased rural demand, strong investment, and sustained momentum in manufacturing have all played a role in Indias resilience.

Indias retail inflation in 2023-24 witnessed a notable decline, reaching its lowest point since the Covid-19 pandemic. The Monetary Policy Committee (MPC) of India opted to maintain the current policy rates, pointing to the ongoing transmission of monetary policy. The aim is to bring inflation into alignment with the target rate of 4% while also continuing to support economic growth. The RBI has projected CPI inflation for 2024-25 at 4.5% taking into consideration the potential challenges like geopolitical tensions and domestic weather- related disruptions. Additionally, the governments proactive measures, such as reducing prices of petrol, diesel, and LPG, have also contributed to inflation control efforts. Crude oil prices have a direct bearing on the rise of retail and wholesale inflation in India. Currently, crude oil and related products have a weight of 4.4% in retail (CPI) inflation and 10.3% in wholesale (WPI) inflation. Changes in crude oil prices tend to get directly reflected in the CPI and WPI readings, as well as indirectly through the pass-through to other components over time

March 2024 witnessed several indicators of robust economic performance, including record- levels of the stock market indexes, remarkable Goods and Services Tax (GST) collections, and substantial growth in both the manufacturing and services sectors.

Outlook

The National Statistical Office (NSO) estimates Indias GDP growth at 7.6% for 2023-24, up from 70% in 2022-23. Consumption, comprising 56% of GDP, grew by 3.0%, exports by 1.5%, and imports surged by 10.9% in 2023-24. Government capex initiatives spurred private investment, leading to a 10.2% growth in Gross Fixed Capital Formation, accounting for 34% of GDP. Agriculture grew by 0.7%, manufacturing by 8.5%, construction by 10.7%, and services by 75%. ‘Trade, hotels, transport, communication, and broadcasting services within the service sector grew by 6.5%. (Source: NSO estimates, February 2024)

The joint efforts of the government and the RBI to tackle inflation, involving adjustments in policy rates, bolstering food reserves, and easing imports, have led to successful management of inflation. Consequently, retail inflation in 2024-25 witnessed a significant decline, reaching its lowest level since the COVID-19 pandemic, with core inflation dropping to 3.3% in March 2024.

Further, the forecast of an above-normal monsoon in 2024 suggests favourable conditions for a strong harvest, alleviating worries about inflation.

Indias trade deficit is expected to decline in the coming years as the PLI scheme deepens its coverage and extends to other sectors. India has established itself as the worlds third largest fintech economy, ranking just behind the US and the UK.

Overall, amid uncertain global conditions, Indias economy continues to demonstrate resilience, supported by robust growth, strong economic indicators, stable prices, and consistent performance in the external sector. Despite global uncertainties, India remains the fastest-growing major economy, with both international organisations and the Reserve Bank of India expressing optimism about its growth prospects for the current fiscal year.

Indias Growth Forecast (%)

2022-23	2023-24 (E)	2024-25 (P)
7.0	7.6	7.0

Source: CSO/RBI

Industry and Business Review: Pharmaceutical

Global Pharmaceutical Industry*

In 2023, the global pharmaceutical sector experienced significant changes in medicine consumption and expenditure worldwide, laying the groundwork for robust expansion in the foreseeable future. Despite downward adjustments in spending on vaccinations and Covid-related treatments due to decreased usage, the industry displayed remarkable resilience and adaptability by embracing innovative therapies and increasing overall medicine utilisation. While global medicine usage reached a plateau in 2023, projections by SP Industries suggest a steady growth trajectory at an average rate of 2.3% until 2028. Biotechnology continues to be a key driver of medicine growth over the next five years, alongside specialised medications addressing chronic and rare ailments. Furthermore, advancements in neurology, mental health treatments, and the emergence of next generation

biotherapeutics are poised to reshape patterns of medicine expenditure and consumption.

With the shift of the pandemic from an acute crisis to an ongoing endemic situation, the forecast for medicine expenditure until 2028 saw an upward revision, indicating faster growth rates and an expected Compound Annual Growth Rate (CAGR) ranging from 5-8%. This surge is anticipated to result in a total expenditure of USD 2.3 Trillion.

Global Pharmaceutical Industry Growth: 2018-2028*

Historical and projected use of medicine by region, 2018-2028, Defined Daily Doses (DDD) in Billions

Global Pharmaceutical Market

Regions	2019-2023 CAGR	2023	2024-2028 CAGR	2028
Developed Markets	7.2%	1,275.5	5-8%	1,775-1,805
Pharmerging Markets	7.8%	303.7	10-13%	400-430
Other Markets	5.6%	27.6	3-6%	33-37
Global Pharmaceutical Market	7.3%	1,606.8	6-9%	2,225-2,255

Global Pharmaceutical Market - Share by Product Type

Region	Original Brands (%)		Non-original Brands (%)		Unbranded Generics (%)		OTC, Vaccines and Others (%)		Total (USD in Billion)
Year	2023	2028	2023	2028	2023	2028	2023	2028	2023	2028
Developed Markets	76	78-79	10	9-10	9	7-8	5	4-5	1,275.5	1,775-1,805
Pharmerging Markets	27	28-30	35	33-35	14	13-17	24	21-24	303.7	400-430
Other Markets	32	27-35	49	45-51	6	5-7	13	11-12	27.6	33-37
Global Markets	66	68-69	15	14-15	10	8-9	9	7-8	1,606.8	2,225-2,255

Developed Markets

By 2025, spending on medicine in developed markets is projected to reach USD 1.775 to USD 1.805 Trillion annually. This growth is driven by innovative therapeutics, despite challenges from generics and biosimilars. Immunology treatments will see steady use, though biosimilar competition may offset some gains. The spending increase will be fueled by new products and existing branded medicines.

Developed Markets - Pharmaceutical Spending and Growth (usd n Billon)

Region/Country	2019-2023 CAGR	2023	2024-2028 CAGR	2028
Top 10 Developed Markets	7.0%	1,081.6	5-8%	1,505-1,535
Other Developed Markets	8.5%	193.9	5-8%	255-285
Total Developed Markets	7.2%	1,275.5	5-8%	1,775-1,805

Growth by Region

Global use of medicines grew by 14% over the past five years and a further 12% increase is expected through 2028, bringing annual use to 3.8 Trillion defined daily doses according to IQVIA. The global use of medicines increased by 414 Billion defined daily doses over the past five years and is expected to grow another 400 Billion by 2028. Pharmaceutical spending in the United States will likely increase steadily, with forecasts indicating a 2% to 5% annual rise until 2028. Over the next five years, the top five European pharmaceutical markets are expected to witness a notable increase in consumer spending.

The highest volume growth over the next five years is expected in China, India, and Asia-Pacific, all exceeding 3% compound annual growth. Lower volume growth in higher income regions such as North America, Western Europe and Japan are linked to more established health systems and existing access to medicine.

Regions around the world are growing following diverging trends, with some more volume driven while others have a greater contribution from adoption of innovation. Countries in North America, Eastern and Western Europe, Latin America, and Africa and Middle East are expected to increase spending growth by more than 30%, indicating both population-driven volume growth and a shift in the mix of products to more expensive products. China, the worlds second largest country by pharmaceutical spending, will increase volume by 20% in aggregate over five years, while spending will increase 21%, a more modest rate than in the prior years and still embedding a focus on expanding access to novel drugs via the National Reimbursement Drug List (NRDL).

Megatrends

Personalised Medicine and Genomics

The availability of genomic data has made personalised medicine possible. Pharmaceutical companies are now using genetic information to develop customised therapies tailored to the individual needs of each patient. This approach promises not only more effective treatments but also a reduction in unwanted side effects.

Advances in Biotechnology

Biotechnology will continue to play a central role in drug development. New biological therapies, such as gene therapies or cell therapies, could offer breakthrough treatment options for diseases that have been difficult to treat to date.

Digital Health and Telemedicine

Through the use of digital technologies and telemedicine, patients can now receive medical advice and treatment from the comfort of their own homes. Pharmaceutical companies are increasingly investing in digital health solutions that improve patient care and increase adherence to treatment. This leads to better healthcare, especially in rural areas.

FDA Drug Approvals

The FDAs Centre for Drug Evaluation and Research (CDER) oversees the regulation of both prescription and over-the-counter drugs, including biological therapeutics and generic drugs. The CDER, a division of the US Food and Drug Administration (FDA), recently published a comprehensive report detailing the centres approval of 55 new drug innovations in 2023. Additionally, the report highlights significant developments such as the expansion of treatment applications and patient populations for previously approved therapies, as well as the approval of drugs in new dosage forms and formulations. Over the past decade, from 2014 to 2023, the CDER has consistently averaged around 46 new drugs in its portfolio.

New Drug Launches

The number of new drugs approved by CDER last year was notably higher than 2022, which saw 37 approvals, and the highest year for novel approvals since 2018, which saw 59 approvals. Oncology, neurology, and immunology have had rising shares of new launches in the past five years, with 204 of the 362 launches (56%) compared to 105 of 246 (43%) from 2014 to 2018.

Infectious diseases, including antibacterial, anti-viral, anti-fungal and anti-parasitic treatments, have included novel treatments for HIV, Ebola, and more recently smallpox, and are 11% of NAS launches over the last decade, with some year- to-year variability.

Particularly, CDER approved five biosimilars last year, including three biosimilars for reference therapies that did not previously have a corresponding biosimilar. In addition, 20 of the 55 novel drugs approved, or 36 %, in 2023 were deemed first-in-class, meaning they contain a mechanism of action different from existing therapies.

Pharmaceutical R&D

According to Statista, in 2022, global pharmaceutical R&D spending reached USD 244 Billion, up from USD 137 Billion in 2012. This encompasses all stages from disease research to clinical trials, with regulatory oversight primarily by the FDA in the US. Pharmaceutical companies face significant pressure to innovate due to limited patent protection and competition from generics and biosimilars, driving high R&D investment and a focus on specialty drugs. Recent trends include outsourcing R&D to reduce costs and leveraging big data for predictive modeling, enhancing drug safety and efficiency. Real-world Evidence (RWE) is increasingly important, necessitating partnerships with tech companies and using diverse data sources, including social media.

Indian Pharmaceutical Industry

India has become a cornerstone of global healthcare, emerging as the worlds largest supplier of generic drugs and a leading force in affordable vaccines and medications. This thriving sector, currently ranked third globally in pharmaceutical production by volume, has exhibited remarkable growth with a CAGR of 9.43% over the past nine years. With medicine spending expected to reach USD 3,842 Billion by 2028, reflecting a CAGR of 7-10% between 2024 and 2028, Indias pharmaceutical market is likely to grow.

Encompassing a diverse range of segments - from generic drugs and over-the-counter medications to cutting-edge biosimilars and biologics - the Indian pharmaceutical industry is a powerhouse of innovation and affordability. This dynamic landscape plays a critical role in ensuring access to essential medicines and fostering advancements in global healthcare.

Indian pharmaceutical sector supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK. The domestic pharmaceutical industry includes a network of 3,000 drug companies and 10,500 (Approx) manufacturing units. India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers with the potential to steer the industry ahead to greater heights.

Importance of the Indian Pharmaceutical Sector among Foreign Investors

The Indian pharmaceutical industry has become a magnet for foreign investment, solidifying its position as one of the top ten most attractive sectors in India. This is no accident, as the government allows for 100% automatic FDI in greenfield ventures, streamlining the investment process. Even established players can benefit, with up to 74% automatic FDI available, followed by a smooth government approval route. This openness, coupled with the industrys robust growth, makes India an incredibly attractive proposition for foreign investors.

According to a recent EY FICCI report, there has been a growing consensus over providing new innovative therapies to patients. Indian pharmaceutical market is estimated to touch USD 130 Billion in value by the end of 2030. Meanwhile, the global market size of pharmaceutical products was estimated to cross over the USD 1 Trillion mark in 2023.

Indian Pharmaceutical Market Size

Global Active Pharmaceutical Ingredients (API) Industry

The Active Pharmaceutical Ingredients (API) market size is estimated to grow by USD 86.47 Billion at a CAGR of 6.73% between 2023 and 2028.

The market is currently witnessing an upward trend of intent to outsource APIs by leading players in the pharmaceutical industry. For emerging biopharmaceutical and virtual pharmaceutical companies, most of the API and intermediate manufacturing is done by outsourcing providers. This trend is also observed in generic drug manufacturing, where orchestration is done by the generic drug manufacturer to have the API manufacturing outsourced by a large portion. In addition, active pharmaceutical ingredient manufacturers are known to obtain a cost advantage through economies of scale and the availability of low-cost labour and land.

Megatrends

Increasing Focus on Digital health and AI Integration

AI is being used for drug discovery, predicting patient outcomes, and personalising treatment plans. Machine learning algorithms analyse vast datasets to identify potential drug candidates and optimise clinical trial design.

Geopolitical Uncertainty and Supply Chain Resilience

Recent global events have highlighted the vulnerabilities of global supply chains. Pharmaceutical companies are increasingly looking to diversify their manufacturing footprint and invest in domestic production capabilities. This trend could benefit companies with a strong presence in emerging markets like India.

Focus on affordability

There is a large population with limited access to healthcare. The pharmaceutical industry is therefore under pressure to develop and deliver affordable medicines. This is leading to a focus on biosimilars, Contract Research and Manufacturing Services (CRAMS), and value-based pricing.

Indian Active Pharmaceutical Ingredients (API) Industry

According to Mordor Intelligence, the Indian Active Pharmaceutical Ingredients Market size is estimated at USD 13.64 Billion in 2024, and is expected to reach USD 20.32 Billion by 2029, growing at a CAGR of 8.31% during the forecast period (2024-2029). Indias drugs and pharmaceuticals exports stood at USD 22.51 Billion in 2023-24. (April-January) recording a strong year-on-year growth of 8.12% during the period. Exports of drugs and pharmaceuticals were estimated to be at USD 2.13 Billion in January 2024, accounting for 5.8% of the total exports in the month. The Indian government has implemented the Production Linked Incentive (PLI) initiative for the pharmaceutical industry, which incorporates a programme specifically designed to encourage the domestic production of crucial KSMs and APIs.

India Active Pharmaceutical Ingredients (API) Market

Market Size in USD Billion

Factors Driving Growth

Government Initiatives:

The Indian Government has introduced various initiatives to support the pharmaceutical industry, such as ‘Pharma Vision 2020, which aims to make India a global leader in end-to-end drug manufacture.

Aging Population: The growing elderly population in India is leading to an increased prevalence of chronic diseases, which in turn drives demand for pharmaceuticals.

Shifting competitiveness of Chinese firms: The growing stringency of environmental regulations and increasing labour expenses have escalated operational costs for Chinese companies, particularly impacting those in the Agro and API sectors, resulting in the closure of some businesses. Consequently, Indian firms have found themselves in a more competitive position.

Fragmentation: Despite significant deal activity, the API and CDMO sector in India remains notably fragmented, boasting over 2,500 manufacturers of APIs and intermediate products.

Global Contract Development and Manufacturing Organisation (CDMO) Industry2

The global Contract Development and Manufacturing Organisation (CDMO) market is poised for a period of sustained expansion, with a projected Compound Annual Growth Rate (CAGR) of 72% throughout the forecast period of 2021-2026. This growth is attributed to a confluence of compelling factors. One key driver is the burgeoning demand for specialised treatments, as the pharmaceutical landscape increasingly focuses on targeted therapies for complex medical conditions. Additionally, the flourishing biopharmaceutical industry is fostering a need for specialised manufacturing expertise, propelling the CDMO market forward. Furthermore, the growing need for advanced manufacturing technologies is playing a significant role. As the development of novel drugs necessitates cutting-edge production processes, CDMOs with these capabilities are becoming increasingly sought-after.

The market itself is segmented into two distinct categories: service type and end-user. By service type, the market encompasses contract development and contract manufacturing services. Contract development refers to the outsourcing of activities related to drug discovery and pre-clinical development, while contract manufacturing focuses on the large-scale production of drugs. In terms of end-user, the market primarily caters to pharmaceutical and biotechnology companies. These companies leverage CDMOs to streamline their drug development processes, reduce costs, and gain access to specialised expertise.

Growth by Region

The U.S. CDMO market is expected to rise from USD 54.21 Billion in 2023 to USD 68.32 Billion by 2028 (CAGR of 4.74%). Chinas market, valued at USD 2712 Billion in 2023, is projected to reach USD 42.94 Billion by 2028 (CAGR of 9.63%).

Geographically, North America currently holds the dominant position within the global CDMO market. This is due to the presence of a well-established pharmaceutical and biotechnology industry, coupled with a robust infrastructure for clinical trials. However, the Asia-Pacific region is projected to witness the most significant growth during the forecast period. This surge can be attributed to factors such as a growing domestic pharmaceutical market, a skilled and cost-effective workforce, and government initiatives aimed at promoting the development of the CDMO sector.

Indian Contract Development and Manufacturing Organisation (CDMO)

Industry

The Indian Contract Development and Manufacturing Organisation (CDMO) industry is rapidly growing due to increasing demand for outsourcing pharmaceutical manufacturing and development services. India is poised to overtake China in the global CDMO market, projected to grow from USD 238.47 Billion in 2024 to USD 330.36 Billion by 2028.

Indias CDMO market is anticipated to grow from USD 19.63 Billion in 2023 to USD 44.63 Billion by 2029 (CAGR of 14.67%), driven by opportunities in API production and contract research, especially as many new molecules go off patent.

The Indian government has launched several initiatives to promote the growth of the CDMO industry, including the PLI (Production Linked Incentive) scheme, which provides incentives to pharmaceutical companies for manufacturing high-value products in India.

Major Trends

Increasing Demand for High-Value Services

The demand for specialised services such as drug discovery and development are rising. Consequently, CDMOs are investing in R&D capabilities and forming partnerships with academic institutions and biotech companies to provide comprehensive drug development solutions.

Focus on Technology and Innovation

CDMOs are adopting advanced technologies like continuous manufacturing, automation, and artificial intelligence to optimise production processes, reduce costs, and enhance quality control.

Offering Integrated Services

CDMOs now provide a range of services including drug discovery, preclinical and clinical development, and commercial manufacturing. This shift towards end-to-end solutions enables CDMOs to offer more comprehensive services and establish longterm client partnerships.

Hikal - Business Review of the Pharmaceutical Division

Hikals pharmaceutical division has seen positive improvements in margins, attributed to changes in the product mix and business excellence initiatives. The Company has experienced significant traction in its own products segment, particularly from customers in Japan, Latin America, and the Middle East, showcasing a promising outlook for its newer product portfolio.

Despite challenges, the pharmaceutical sector is showing signs of improvement with a stabilised demand profile and

raw material prices. Hikal remains strategically focused on acquiring new customers, enhancing operational efficiencies, and optimising costs through various business excellence initiatives.

This strategic approach has led to an enhanced margin profile and volume growth in the pharmaceutical business, reflecting the positive outcomes of its efforts in recent years.

Regulatory approvals from multiple customers and authorities have strengthened Hikals customer base across key

geographies, including Japan, Latin America, and the Middle East, especially within the API segment. The pharmaceutical divisions performance has enhanced, with EBIT at 8.5% compared to 5.8% in the previous year. Pharmaceutical revenue stood at INR 11,002 Million and EBIT stood at INR 935 Million up by 44% over last year, Hikal has demonstrated resilience amidst challenges and is poised to sustainably drive growth in the future, leveraging its strong market presence and continued focus on operational excellence.

Pharmaceuticals Performance Trajectory

Revenue

(INR in Million)

API

Hikals API division has been pivotal to the Companys growth. This growth is attributed to new product launches and expanded sales volumes, supported by robust global contracts with major pharmaceutical firms. The divisions focus on developing complex APIs and ongoing investments in R&D underscores its commitment to innovation and product enhancement.

Investments in manufacturing infrastructure have been significant, with a state-of-the-art facility in India meeting top-tier quality standards. Embracing green technology, Hikal has started purchasing renewable power at Jigani, aligning with sustainability objectives.

Expanding its market reach, the API division has secured new clients in Latin America and the Middle East, particularly in the generics segment. A robust pipeline of new products is poised for imminent launch, while ongoing business excellence initiatives focus on enhancing throughput, productivity, and cost efficiencies.

Hikal envisions leadership in critical APIs, prioritising innovation, and operational optimisation.

Its unwavering commitment to regulatory compliance and quality assurance is reflected in its global service delivery. Looking ahead, Hikal aims to bolster API sales by increasing customer engagement, exploring new markets, and consolidating its position in key API segments, leveraging strengths in backward integration, scalability, and technology advancement.

CDMO

Hikal Limiteds Contract Development and Manufacturing Organisation (CDMO) division has been integral to its success, renowned for delivering intricate projects while upholding stringent quality standards. Long-term collaborations with global pharmaceutical giants underscore its commitment to compliance and regulatory excellence. Continual investments in capacity expansion and technological advancements keep Hikal at the forefront of the industry.

To fuel its growth trajectory, the Company is ramping up capacity, enhancing technology toolbox and bolstering manufacturing capabilities. Efforts to diversify raw material sources aim to reduce reliance on China, aligning with evolving industry trends favouring outsourcing. Indias rising prominence as an outsourcing hub, coupled with shifting geopolitical dynamics, presents favourable opportunities for expansion.

Hikal remains optimistic about expanding its CDMO business, backed by a robust project pipeline and an expanding client base. Emphasising customer satisfaction, quality, and compliance, the divisions growth strategy remains steadfast.

With ongoing discussions with global innovators and a relentless focus on quality and innovation, Hikals CDMO division is poised for sustained growth, capitalising on the burgeoning outsourcing landscape in the pharmaceutical sector.

Global Animal Health Industry

As per Grand View Research, the global Animal Health market was valued at USD 62.40 Billion in 2023 and is expected to grow at a CAGR of 9.0% from 2024 to 2030. Factors propelling market growth include increased animal health spending, disease prevalence, concerns about zoonotic diseases, company initiatives, pet insurance adoption, and pet humanisation. According to Skyquest, The Animal Health Market, valued at USD 54.01 Billion in 2019, is projected to reach USD 112.36 Billion by 2031, growing at a CAGR of 8.8% from 2024 to 2031.

Animal healthcare involves treating medical conditions in animals using drugs, vaccines, medicated feeds, and diagnostics. Animals play crucial roles in human life, providing food, protection, and companionship. Additionally, they are utilised in biological research fields like genetics and drug testing. Increasing awareness of animal diseases, stricter regulations, and a focus on disease prevention are driving demand for animal healthcare products, leading to rapid market expansion globally.

Growth by Regional Market Segment

The global animal health market is segmented into several regions, including North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.

According to Grand View Research, North America dominated the market in 2023, holding a 32% share, attributed to robust government measures and animal welfare efforts. The Asia Pacific region is poised to grow rapidly at over 10%, driven by investments in animal healthcare and competitive pricing strategies. Europe also boasts a significant market share due to rising disease prevalence and increased spending on veterinary care.

Indian Animal Health Industry

According to IMARC, the Indian animal health market size is valued at INR 80.0 Billion in 2023 is poised to reach INR 160.5 Billion by 2032, exhibiting a CAGR of 78% during 2024-2032. Indias animal health industry represents 2.5% of the global industry. This growth is propelled by factors such as rise in zoonotic diseases, increased government investment in animal healthcare, and extensive R&D efforts by key players are key drivers of the markets growth.

The current industry can be segmented based on products, such as medicines, parasiticides and disinfectants, vaccines, medical devices, and nutritional supplements. Animal vaccines alone make up 17% of the animal healthcare industry which amounts to USD 170 Million. Currently, vaccines and pharmaceuticals dominate the market, particularly in companion animal healthcare segment including the livestock health segment. Dogs account for a high market share in the companion animal healthcare market, due to the growing dog population and ownership rate, the rising prevalence of zoonotic diseases and other skin allergies in dogs and rising canine healthcare costs.

However, theres a noticeable shift towards natural and organic products in the pet segment. The poultry segment accounts for 33% of the market share and has been experiencing good growth, despite challenges such as high input costs. The Indian government has rolled out various policies and initiatives, including the National Livestock Mission, the National Programme for Bovine Breeding and Dairy Development, and the Rashtriya Krishi Vikas Yojana, to foster the growth of the animal health industry. These endeavours aim to enhance animal health, boost livestock productivity, and promote sustainable agriculture.

Major Trends

Government Support and Initiatives

The Indian government has implemented initiatives like the National Livestock Mission and the Livestock Health and Disease Control scheme to bolster the growth of the animal health industry.

Zoonotic Diseases and Market Growth

Zoonotic diseases, transmitted from animals to humans, pose health risks. Recent outbreaks like avian influenza and COVID-19 highlight the need for proactive measures. Demand for animal vaccines and diagnostics surges, driving market growth. Investments in infrastructure and policies further boost expansion.

Technological Advancements Driving Growth

Emerging tech reshapes animal healthcare, offering innovative solutions. Advanced diagnostics ensure rapid disease detection, aiding treatment decisions. Telemedicine and remote monitoring enable real-time health tracking.

Data analytics and AI optimise disease management. Biotech innovations promise novel therapies, fueling market growth.

Hikal - Business Review of the Animal Health Division

We are dedicated to developing and manufacturing high-quality veterinary products for both domestic and international markets. Our strong regulatory track record and manufacturing capabilities have fostered lasting partnerships with leading animal health companies. Recently, we have expanded our global presence, particularly in Europe and Latin America, with a strong focus on quality.

To sustain growth, our Animal Health business aims to diversify our product portfolio, in the Antiparasiticide segment and beyond. We commissioned a new animal health facility in Q3 FY24. We have completed validation for four products and several others are underway. Over the next few quarters, these validation batches will act as a first step towards registration and then towards commercialisation of the products. We will explore new geographical markets to capitalise on emerging opportunities. Investing in R&T is crucial for creating innovative products that address unmet needs in the animal health industry. With increasing global demand for veterinary products, Hikal is well-positioned to seize opportunities and solidify its market position.

Animal Health Multi-Purpose cGMP facility at Panoli, Gujarat

We have attained significant certifications demonstrating our commitment to global excellence and regulatory compliance. This site has achieved a Zero 483s inspection from the US FDA in May 2023 for stringent quality standards. It has secured PMDA certification from Japan in June 2019 to bolster our presence in Asia, and obtaining GMP certification from the Local FDA in December 2023, highlighting our adherence to superior manufacturing practices. In November 2013, we were audited by FAMHP in Belgium, reinforcing our compliance with European regulatory standards. Additionally, our Integrated Management System (IMS) certifications—ISO 9001:2015, ISO 14001:2015, valid till May 2026, and ISO 45001:2018, valid till November 2026—underscore our commitment to quality management, environmental responsibility, and occupational health and safety globally.