A two-year zero-tariff runway offers breathing room, but 40-50% US revenue exposure at several large-caps keeps the risk on the table, according to a report
Indian pharmaceutical companies are unlikely to see an immediate earnings impact from proposed US tariffs on generic drug imports, according to a sector update from Mirae Asset Sharekhan, even as the brokerage flags a persistent stock overhang tied to unresolved policy details.
The reasoning: most large Indian pharma companies already have some manufacturing presence in the US, and a two-year window before any zero-tariff arrangement lapses gives companies room to adjust. However, the report cautions that risk hasn’t gone away – several major names still draw 40-50% of their revenue from the US market, and generic drug makers have limited room to pass on a tariff in the 100-200% range given how US drug pricing and reimbursement systems are structured. With formal rules yet to be finalised, the brokerage expects investor caution to continue, even though current valuations appear to already reflect this uncertainty.
Why the US Market Matters So Much
The United States remains India’s largest single export market for pharmaceuticals. India shipped an estimated $9-10.5 billion worth of drugs to the US in FY25 — accounting for roughly a third to 40% of India’s total pharma exports, and about 6% of all US pharmaceutical imports by value. The exposure is concentrated almost entirely in generic medicines rather than branded or patented drugs: India is estimated to supply around 35% of all generic medicines used in the US, where generics account for more than 90% of prescriptions filled nationwide.
Company-Level Exposure Is Uneven and Shrinking
Reliance on the US market varies significantly across companies, and the broader trend over the past five years has been toward reducing that dependence. Gland Pharma carries the highest exposure among peers, though its US revenue share has fallen from 67% in FY20 to 54% in FY25. Aurobindo Pharma, with a broad base of generic injectables and oral solids sold in the US, has seen a smaller decline, from 50% to 47%. Dr Reddy’s Labs has also trimmed exposure slightly, from 47% to 45%, while expanding into Europe and other emerging markets, though the US remains its single largest market.
The most dramatic shift has come from Torrent Pharma, which has cut its US revenue share nearly in half — from 19% to 10% — as India now accounts for roughly 55% of its total revenue. Cipla, meanwhile, has maintained relatively lower US dependence throughout, sitting around 25-27%, as its domestic Indian business has grown from 39% to 42% of revenue.
| Company | US Revenue Share, FY20 | US Revenue Share, FY25 |
|---|---|---|
| Gland Pharma | 67% | 54% |
| Aurobindo Pharma | 50% | 47% |
| Dr Reddy’s Labs | 47% | 45% |
| Torrent Pharma | 19% | 10% |
| Cipla | ~27% | ~25-27% |
Even with this moderation, earnings sensitivity to an eventual tariff remains material at several large-cap names, particularly if pricing flexibility or supply-chain workarounds turn out to be limited. Analysts expect the pace of diversification away from the US to continue over the next two years.
Key Questions Still Unanswered
Much of the current uncertainty stems from a lack of formal rule-making. Analysts say clarity is still awaited on several fronts:
- Whether tariffs would apply to companies that already have a manufacturing base within the US
- Whether tariffs would cover only finished drug formulations, or extend to active pharmaceutical ingredients (APIs) and intermediates — which would pull CDMO (contract development and manufacturing) companies into scope as well
- Whether having a US manufacturing presence could earn a company a tariff concession
- Whether any tariff would apply uniformly across all countries exporting generics to the US, or whether individual trade deals and exemptions could be negotiated
- Whether specific drugs or classes of generic medicines might be exempted altogether
With Q1 FY27 earnings season underway, analysts say they’ll also be watching management commentary from pharma companies for details on how firms plan to mitigate the tariff overhang going forward.
Based on a sector research note by Thomas V Abraham, Research Analyst, Mirae Asset Sharekhan Limited, dated July 23, 2026.
This article is based on third-party equity research and is intended for general informational purposes only. It does not constitute investment advice, an offer, or a solicitation to buy or sell any security. Past performance is not indicative of future results. Readers should consult a qualified financial advisor before making investment decisions.
