As the market share of organised players is increasing in India, the retail pharmacy sector is expected to expand. The pharmaceutical analysts have indicated that the sector's growth outlook remains positive, attributed to the expansion of store networks and the rising popularity of private labels.

For instance, Recently, Apollo HealthCo (APHS) has merged its offline and online pharmacy operations, leveraging Apollo 24/7's digital platform to enhance its healthcare service offerings. These enhanced capabilities are expected to support the company’s margin improvements, forecasting a sales growth of 20% for offline pharmacies and growth in the online business, said analysts.

“Advent International is investing $2.7 billion in India's largest pharmacy chain, which also includes a diagnostics business. The management aims to increase revenue to Rs 25,000 crores in three years, up from the current Rs 7,734 crores, with an EBITDA of 7-8%. This growth is expected to come from supply chain efficiencies and the expansion of the private label business,” said Poornima Vardhan and Taponeel Mukherjee, Principals at AltG, a business development company.

“The Indian pharmacy and diagnostics industry is growing at a CAGR of around 10%. However, achieving a 100% year-on-year growth for the next three years is ambitious, even for established players like Apollo,” they added.

India's retail market, valued at Rs 7,60,660 crore in 2023, is expected to grow at a 10% Compound Annual Growth Rate (CAGR) to Rs 11,33,990 crore by 2027. Within this, the retail pharmacy and wellness sector constituted 3% at Rs 22,720 crore in 2023 and is projected to grow at a 12% CAGR to Rs 35,750 crore by 2027, according to HDFC Securities.

Organised retail, including both brick-and-mortar (B&M) and e-commerce, has shown significant growth. The share has increased from 9% in 2018 to 18% in 2023 and is anticipated to reach 23% by 2027, according to HDFC Securities.

“MedPlus has established itself as the second-largest organised retail pharmacy with a significant presence in southern India. The company plans to add 600-700 stores annually, focusing on deeper market penetration and expanding into new states. MedPlus is also increasing its private-label share and scaling up its diagnostics business,” said Sheth.Analyst Mehul Sheth from HDFC Securities has initiated coverage with a BUY rating for Apollo Pharmacy with a target price of Rs 7,030, and MedPlus Health with a target price of Rs 850.

Why Indian retail pharmacy sector is on a growth trajectory