Granules India Q1 FY26 earnings call

Where management's figures differ from the filing

• EBITDA: said Rs 2,467 mn (Rs 246.7 cr), margin 20.4% of sales; filed Rs 220.80 cr ex other income, margin 18.2%. Management EBITDA appears to include other income (Rs 16.34 cr) and possibly other adjustments; filed note explicitly defines EBITDA as excluding other income.
• EBITDA margin: said 20.4% of sales; filed 18.2%. Same definition gap as above; management's EBITDA includes other income while filed results exclude it.

What moved the numbers, as management explained it

• Senn Chemicals consolidation added Rs 29.1 cr to revenue and lifted gross margin by 593 bps YoY (+148 bps QoQ) to 64.9%.
• Higher professional/consultancy and air freight costs for FDA Gagillapur remediation compressed EBITDA margin by 159 bps YoY to 20.4%. (one-off)
• Higher manpower costs from Senn consolidation also weighed on EBITDA margin (down 69 bps QoQ); ~Rs 80 cr remediation OPEX booked over last three quarters.
• Gagillapur PFI supply backlog capped RoW sales and limited overall revenue growth to +3% YoY despite North America YoY growth and Europe sequential uptick.
• Paracetamol PFIs and APIs starting to recover, modestly supporting formulations volumes.

The numbers management led with

• Senn Chemicals enterprise value (acquisition): Rs.450 crores (equity plus debt)
• Genome Valley GLS capacity addition: 10 billion dose formulations capacity (40% increase over 26 billion at Gagillapur)
• Gagillapur remediation cost (cumulative): Rs.80 crores OPEX + Rs.50 crores CAPEX (with another Rs.50 crores CAPEX pending) over last 3 quarters
• Peptide CDMO existing book of business: CHF15-20 million on an annualized basis

Guidance on this call

What changed since the Wed 28 May 2025 call

Guided on earlier calls, and what was filed

Filed figures are summed from the company's own quarterly results for the whole period (EBITDA excludes other income); where one sits against what was guided is arithmetic, not a judgement.

By business

Balance sheet, capex and funding

• Net debt Rs 948 cr post-Senn vs Rs 706 cr QoQ, driven by Senn Chemicals acquisition.
• CAPEX spent in Q1 FY26 Rs 113.7 cr vs Rs 159.8 cr in Q4 FY25.
• Cash flow from operations Rs 280.6 cr vs Rs 318.3 cr in Q4 FY25.
• Cash-to-cash cycle 205 days vs 202 days in Q4 FY25.
• ROCE 16% in Q1 FY26 vs 16.6% in Q4 FY25 (post-Senn capital employed).
• FDA remediation: ~Rs 80 cr OPEX over last 3 quarters plus ~Rs 50 cr CAPEX on improvements and IT/MES infrastructure.

The industry, as management sees it

Global peptide market (driven by GLP-1 receptor agonists) currently at US$78 billion run rate, projected to surpass US$130 billion by 2030; industry is rapidly moving from solid-phase to liquid-phase peptide synthesis, where Senn Chemicals has recognized expertise.

Risks management named

• FDA re-inspection timing could push Gagillapur clearance beyond December 2025
• Senn Chemicals CDMO is long gestation; 12-18 months needed to match parent return metrics
• Gagillapur production constraints currently limiting PFI supplies to ROW geography
• Elevated manpower costs from Senn consolidation will persist at current run rate

Not answered directly

• CDMO project pipeline breakdown by clinical phase
• Peptide CDMO revenue contribution by fiscal year end

Asked for a number, answered without one

• FY26 revenue growth and EBITDA margin: Management said FDA meeting next month, re-audit could take till end-December; FY27 will be a very good growth year, starting from last quarter of FY26. No FY26 numbers given.
• Peptide CDMO project pipeline by phase: Bound by confidentiality on these assets; not at freedom to disclose. Said these are in clinical early stages.
• API segment growth rate: Qualitative only: API has never been a focus, most APIs in-house use; Paracetamol slowly picking up, some growth in APIs expected. No specific number given.

Every question, with its answer

1. 1. FY26 outlook, peptide capex, Europe growth

   Tushar Manudhane, Motilal Oswal Financial Services

   Question. Now that remediation measures are more or less done and we have got ramp up of Genome Valley as well, what kind of revenue growth and EBITDA margin can one think of for FY26? Separately, what kind of investment should one think of for the peptide segment in FY26 and overall, and what is the growth prospect for the Europe business given the recent uptick?

   Answer, Dr. Krishna Prasad Chigurupati, Chairman and Managing Director. Remediation: We are meeting the FDA next month, and by the time they come and re-audit and clear, it could take up to end of December. For the new GLS site, approval expected in another 35-40 days. After that, the real growth would start, with new approvals pending at Gagillapur also getting cleared. FY27 will be a very good growth year, starting from the last quarter of this year. On peptide investment (CFO): Senn Chemicals was acquired at equity plus debt enterprise value of about Rs.450 crores; FY26 additional investment of ~Rs.100 crores in Switzerland and Rs.20-30 crores for the India R&D lab/backend. On Europe (ED): The uptick is because of freed capacity plus new product launches this quarter; going forward Europe will get to about 15-20% of revenue.

2. 2. CDMO contribution, API recovery

   Maitri Sheth, Choice Institutional Equities

   Question. What is the expected CDMO/peptide revenue contribution by this fiscal end? On the API segment, which has been a drag for several quarters, can we see low- to mid-single-digit growth by fiscal end?

   Answer, Sanjay Kumar, Chief Strategy Officer. On API (CMD): API has never been a focus — we are always trying to move up the value chain, converting API to PFI to tablets. Most of our formulations growth has come from our own APIs. Paracetamol PFIs and APIs have started picking up; we see some growth happening in APIs, but most APIs made in-house will be for internal use. On peptides (CSO): The current book of business on an annualized basis is in the range of CHF15-20 million. Earlier Senn was not able to take certain opportunities because it lacked the India-based supply infrastructure and scale-up capability beyond 32 L — both constraints are being addressed now through the Ascelis platform.

   Not answered directly.

3. 3. Peptide CDMO pipeline and timeline

   Madhav, Fidelity

   Question. Peptide CDMO has a long gestation period. Where are we in the journey in terms of client relationships or projects in the pipeline? How much time before molecules commercialise and scale up? And is there a project pipeline breakdown by phase (Phase 1, 2, 3)?

   Answer, Sanjay Kumar, Chief Strategy Officer. You are right that CDMO is long gestation by nature. However, Senn Chemicals already has a book of business and ongoing projects at various levels (small scale) that give revenue visibility right away. We are seeing enquiries and demand from both innovator companies and other CDMO supply chain players serving innovators. With Senn's legacy customer connect and the India-based backbone infrastructure we are creating, the story is gaining traction. On project phase breakdown: we are bound by confidentiality on these assets and not at the freedom to disclose them, but these are in clinical early stages.

   Follow-up. Any projects in Phase 3 today or are we doing more Phase 1/Phase 2 work?

   Answer. Madhav, we are bound by confidentiality on these assets, and we are not at the freedom to disclose those. But yes, these are in clinical early stages.

   Not answered directly.

4. 4. Peptide roadmap, Europe recovery drivers

   Devanshi Shah, SDA Finance

   Question. With the new peptide R&D facility and Senn Chemicals integration, what is the roadmap for scaling peptide APIs and CDMO services, and how do you see this contributing to differentiated growth in regulated markets? Also, what drove the Europe revenue recovery sequentially — volume growth, customer additions, or improved supply dynamics?

   Answer, Sanjay Kumar, Chief Strategy Officer. On peptides (CSO): In addition to existing CDMO projects and ongoing RFPs, some enquiries are from big innovator companies checking our capabilities as they ramp up pipelines, and some are for amino acid derivatives and small peptide fragments — players are looking for a reliable and cost-efficient source outside of China, which Senn/Ascelis is well-suited to serve. On Europe (ED): The recovery is driven by increased supply capability (capacity being freed up) plus new product launches — one product launched this quarter with sequential ramp ahead. About 10 approvals are pending within this year and next, of which 6 are launchable upon approval (others constrained by patent situation). Europe revenues will continue to grow sequentially.

5. 5. Gagillapur remediation cost and timeline

   Krisha Kansara, Molecule Ventures

   Question. On the Gagillapur facility remediation: how much have we spent so far, and can you reconfirm the timeline — meeting the FDA this month and re-inspection by December with one-to-two months for final outcome?

   Answer, Mukesh Surana, Chief Financial Officer. On the timeline (CMD): You are correct. We are not supposed to go back to the FDA for six months from the date of the warning letter; that six months will be over next month, and we plan to engage at that time. On the cost (CFO): Over the last three quarters, we have spent about Rs.80 crores on the OPEX side (remediation plus air freight costs). On the CAPEX side, we have incurred close to Rs.50-odd crores (including improvement, IT infrastructure, and MES); we have not fully spent the CAPEX side which is estimated at another Rs.50 crores.

6. 6. Manpower, ROCE recovery, Gagillapur readiness

   Devanshi Shah, SDA Finance

   Question. Will manpower costs (which have risen post-Senn) stabilise or remain elevated? ROCE has dipped to 16% — what is the plan to improve return metrics and the timeline for synergies? Lastly, progress on Gagillapur remediation and impact on operational readiness and supply continuity?

   Answer, Dr. Krishna Prasad Chigurupati, Chairman and Managing Director. On manpower (CFO): The increase is primarily from consolidation of Senn Chemicals and will remain at these levels going forward. On ROCE (CFO + CSO): The dip is primarily because of Senn acquisition; quarter-on-quarter we may not see significant improvement because it is a long gestation project. We are working to quickly turn this around to a profitable business and believe within 12-18 months it will match the parent organisation's return metrics. On Gagillapur (CMD): We are close to remediation and expect a pre-audit sometime in December with clearance a few weeks after. Impact: ability to produce more (currently supply-constrained), new approvals coming through, and ramp-up of new launches. Next fiscal will be a good year back to growth trajectory.

7. 7. GLS ramp-up, R&D focus, leadership, Senn capability

   Harith Ahmed, Avendus Spark

   Question. How should we think about ramp-up and utilization at the new GLS facility? On R&D spend stepping up to ~Rs.300 crores annualized, can you provide colour on the focus areas and number of filings targeted? Can you comment on the leadership transition post Dr. K.V.S. Ram Rao's resignation? Finally, on Senn's peptide capabilities and the competitive landscape — are we late given peers are well advanced?

   Answer, Dr. Krishna Prasad Chigurupati, Chairman and Managing Director. On GLS (CMD): We have been producing some monograph products for the US in small quantities; one large-volume molecule has been site-transferred to GLS and will take up 35-40% of GLS capacity once approved. Other site transfers are CBE-30s and won't take long; fully ramped by Q1 next year. On R&D (ED + CMD): Focus is on ADHD and oncology — both are higher-spend areas; we are therapy-agnostic but concentrating on first-to-file and possibly 505(b)(2); oncology products will start launching in global markets in 3-4 years as they go off-patent. On leadership (CMD): "I am fully back in the seat, and I am very excited. I will be able to make a positive difference. Family is getting involved more and more." On Senn (CTO + CMD): Senn has experienced peptide chemists with strong liquid-phase synthesis pedigree (also solid-phase) and capability up to kilogram scale; backing this with India R&D facilities for synthesis and characterisation. The industry is moving from solid-phase to liquid-phase synthesis, and Senn's liquid-phase expertise is recognised by innovator companies — this gives a differentiated advantage. The future is liquid-phase synthesis for peptides.

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In their words