Mumbai: Global brokerage firm Citi said on Tuesday there is a low likelihood of the US imposing tariffs on Indian pharmaceuticals, despite ongoing discussions around the issue.
The brokerage firm analysed the potential effects of a 10 per cent tariff on Indian pharmaceutical companies, particularly those with significant exposure to the US generics market.
Currently, India imposes a 10 per cent tariff on pharmaceutical imports from the US, while the US does not levy any tariff on pharmaceutical imports from India.
According to Citi’s analysis, some big companies could face a potential EBITDA (earnings before interest, taxes, depreciation, and amortisation) hit of 9-12 per cent.
However, if part of the tariff is passed on to US buyers, the impact could reduce to around 5-6 per cent, though passing the full cost on to buyers is seen as challenging.
Citi also noted that companies with less exposure to the US generics market would be the least affected by potential tariffs.
These companies have diversified portfolios and lower reliance on the US generics market, making them Citi’s preferred picks in the Indian pharmaceutical sector.
The report highlighted that in case of tariffs, there are factors like competition, industry fragmentation, and the influence of buying consortiums that might prevent the full pass-through of the tariff to US buyers.
Additionally, products facing competition from US manufacturers or those from non-tariff countries may not see any pass-through at all.
Despite these discussions, Citi believes that the probability of tariffs being imposed on Indian generics is low.
The firm pointed out that the US relies heavily on Indian generics due to the limited manufacturing of generics within the US itself.
Imposing tariffs could lead to drug shortages in the US if Indian suppliers were to exit the market. Citi’s report suggests that while the imposition of tariffs remains unlikely, the impact on Indian pharmaceutical companies would depend on their exposure to the US generics market.
Meanwhile, US President Donald Trump has also announced a 25 per cent tariff on auto imports into the US, to be effective from April 3.
(IANS)
