Granules India Q2 FY26 earnings call
In brief
Q2 revenue up 34% YoY to ₹12,970 mn on formulations; GLS Genome Valley gets first FDA approval; Gagillapur FDA meeting set for Jan 2026.
- Management's tone
- Confident
- What was said
- Leaned positive
- Guidance
- Guidance held
- Analyst pushback
- Medium
- Stock, next session
- +2.55% (Nifty 50 +0.01%)
- Q2 revenue rose 34% YoY to ₹12,970 mn (7% sequentially) driven by formulations in North America and Europe.
- GLS Genome Valley received its first US FDA approval after the July 28–Aug 1 PAI, unlocking 10 billion doses of incremental formulation capacity.
- Gagillapur remediation entered final stages; FDA granted a re-inspection meeting in January 2026 after the company requested engagement.
- Gross margin expanded 368 bps YoY to 65.7%; EBITDA margin rose 106 bps QoQ to 21.5% despite an Ascelis peptides EBITDA loss of Rs 200 mn.
- Ascelis Peptides expected to turn PAT-profitable in Q4 FY26, with FY27 targeted as the first fully synergized and profitable year.
An AI read of the company's transcript · the filing
The numbers
The quarter, Q2 FY26
| This quarter | A year ago | Last quarter | Margin | |
|---|---|---|---|---|
| Revenue | ₹1,297 cr | +34.2% | +7.2% | |
| EBITDA (excl. other income) | ₹278 cr | +36.8% | +26.0% | 21.5% (21% a year ago) |
| Net profit | ₹131 cr | +34.3% | +18.3% | 10.1% (10.1% a year ago) |
| EPS (₹) | ₹5.38 | +34.2% | +15.9% |
From the company's filed results for the quarter ended 30 Sept 2025 (consolidated), not from the call. EBITDA here excludes other income, so it can differ from the figure management quotes.
What moved the numbers, as management explained it
- Formulation growth in North America and Europe drove 34% YoY revenue rise; existing products continuing to gain market share 2-3 years post-launch.
- Product mix improvement and operational efficiency (yields, packing leverage) drove 368 bps YoY gross margin expansion to 65.7%.
- Ascelis peptides EBITDA loss of Rs 200 mn (Rs 20 cr) was a drag; underlying EBITDA margin of 21.5% would have been higher without it. (one-off)
- Favourable base effect: Q2 FY25 saw voluntary production pause at Gagillapur post-FDA observations, making the year-on-year comparison easier. (one-off)
- FDA consultancy expenses continued at about $2 mn in Q2 (~$4 mn in H1 FY26); management expects a sharp drop in Q3-Q4 FY26 and near nil in FY27.
The numbers management led with
- Q2 capex spend: Rs 2,112 million in Q2 FY26 vs Rs 1,137 million in Q1 FY26
- Genome Valley incremental capacity: 10 billion additional formulation doses; 40% increase over Gagillapur's 26 billion dose capacity
- US FDA consultancy expense: ~$2 million per quarter in Q2 FY26; ~$4 million in H1 FY26
- Gagillapur remediation progress: FDA meeting granted January 2026; cross-contamination tests on 3,000+ samples passed
Guidance
Guidance on this call
| What | For | What management said |
|---|---|---|
| Gagillapur FDA re-inspection meeting (Gagillapur facility) | Q4 FY26 | FDA granted a re-inspection meeting at Gagillapur in January 2026. |
| Ascelis Peptides PAT profitability (Ascelis Peptides (Senn Chemicals)) | Q4 FY26 | Targeted to turn PAT-profitable in Q4 of FY26. |
| Ascelis Peptides first fully synergized and profitable year (Ascelis Peptides (Senn Chemicals)) | FY27 | FY27 targeted as the first fully synergized and profitable year for Ascelis. |
| Gagillapur-to-GLS product transfers (Gagillapur / GLS Genome Valley) | — | About 4 to 5 products will be transferred from Gagillapur with quick approval expected. |
| FDA consultancy expense run-rate (Gagillapur remediation) | FY27 | FDA consultancy expenses expected to come down drastically in Q3-Q4 FY26 and to close to nil in FY27. |
| CNS-ADHD approvals (GPI US (controlled substances)) | — | Possibly one to two approvals over the next 2-3 years; tentative approvals expected within the next quarter. |
| Peptide R&D Centre operational (Ascelis Peptides) | Q3 FY26 | Peptide R&D Centre of Excellence at IIT Hyderabad to become operational this month (November 2025). |
What changed since the Tue 12 Aug 2025 call
| What | On the Tue 12 Aug 2025 call | On this call |
|---|---|---|
| GLS Genome Valley FDA status (achieved) | Cleared FDA pre-approval inspection with single observation, unlocking 10 billion dose capacity (40% increase over Gagillapur). | Received first US FDA approval following July 28–Aug 1 PAI; monograph supplies to US commenced, prescription supplies to follow. |
| Gagillapur FDA re-inspection timeline (delayed) | Re-inspection targeted by year-end (calendar 2025); clearance to drive FY27 growth. | Eligibility for re-inspection meeting achieved; FDA granted meeting in January 2026 (Q4 FY26). |
| Ascelis / Senn profitability timing (restated) | Senn Chemicals expected to match parent return metrics within 12-18 months. | Targeted PAT profitability in Q4 FY26, with FY27 as first fully synergized and profitable year. |
| Gagillapur FDA consultancy cost trajectory (restated) | Cumulative remediation cost Rs 80 cr OPEX + Rs 50 cr CAPEX; no forward run-rate stated. | About $2 mn in Q2 (~$4 mn in H1 FY26); expenses to come down drastically in Q3-Q4 FY26 and close to nil in FY27. |
| European market access infrastructure (achieved) | Targeted 15-20% of total revenue from Europe; 10 pending approvals (6 launchable upon approval). | German subsidiary incorporated for stocking and selling; EU growth back on track after a slow Q1. |
| CNS-ADHD / controlled substances pipeline (restated) | Scale CNS ADHD franchise from GPI US facility with first-to-file and 505(b)(2) filings. | Products filed until 2035; one to two approvals expected in 2-3 years; tentative approvals expected within the next quarter. |
| Gagillapur-to-GLS product transfers (achieved) | CBE-30 site transfers ongoing; one large-volume molecule to take 35-40% of GLS capacity once approved. | Applications already filed; about 4-5 products to be transferred from Gagillapur with quick approval expected. |
Guided on earlier calls, and what was filed
| What | For | Guided | Filed |
|---|---|---|---|
| EBITDA margin | FY25 | 22–23% (on the Q4 FY24 call) | 21.8%, below the range |
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.
The business
By business
Formulations (North America, Europe, Rest of World)
Q2 revenue growth of 34% YoY was driven by formulations in North America and Europe (US manufacturing, GLS monograph supplies, controlled substances). Q2 FY25 base was depressed by Gagillapur voluntary production pause.
Q2 revenue ₹12,970 mn · YoY growth 34% · QoQ growth 7% · Gagillapur capacity 26 bn doses · GLS additional capacity 10 bn doses
Outlook: Management expects return to growth trajectory as Gagillapur remediation concludes and new product approvals come through; GLS to ramp up prescription supplies.
API & PFI
API Unit 1 Bonthapally received EIR and VAI classification from US FDA after the June 2025 inspection. PFI growth resumed in LATAM as capacity constraints eased post-remediation.
Outlook: LATAM PFI growth expected to continue with available capacity.
Peptide CDMO (Ascelis / Senn Chemicals)
Integration phase; Peptide R&D Centre of Excellence at IIT Hyderabad operational from November 2025. Incurred Rs 200 mn EBITDA loss on Rs 28-29 cr revenue in Q2; first full quarter of consolidation.
EBITDA loss Rs 200 mn · Revenue Rs 28-29 cr · Acquisition base ~CHF 20 mn
Outlook: Targets PAT profitability in Q4 FY26 and first fully synergized profitable year in FY27; growth expected to be a multiple, not incremental, of the base.
Balance sheet, capex and funding
- Net debt Rs 10,241 mn vs Rs 9,480 mn in Q1 FY26; rise attributed to higher capex.
- Capex spend in Q2 FY26: Rs 2,112 mn (vs Rs 1,137 mn in Q1 FY26).
- Cash flow from operations Rs 1,937 mn in Q2 (vs Rs 2,806 mn in Q1 FY26).
- Cash-to-cash cycle 204 days vs 205 days in Q1 FY26.
- ROCE 16.2% in Q2 vs 16% in Q1 FY26.
- R&D spend Rs 705 mn in Q2 (5.4% of sales); management expects similar levels to support long-term growth.
The industry, as management sees it
Management flagged growing interest in the global peptide CDMO space from innovator pharma, biotech and cosmetic peptide customers, citing strong engagement at CPHI Frankfurt and TIDES Europe. The broader EU market is on track after a Q1 slowdown, and US manufacturing momentum is expected to accelerate as Genome Valley ramps up.
Risks management named
- FDA inspection timeline post-January 2026 meeting remains uncertain
- Peptide CDMO inquiries are long-lead-time discussions not yet converted into orders
- Revenue loss from Gagillapur operating below full capacity until remediation concludes
- Ascelis Peptides EBITDA loss of Rs 20 crores in Q2 weighing on consolidated margins
Q&A
Q&A spanned seven analysts across roughly nine substantive exchanges, with discussion clustering around three themes: Gagillapur remediation timing (pushback from Sowilo on the December 2025 timeline), Ascelis Peptides commercial trajectory and revenue granularity (Sapphire Capital probing for breakeven numbers, repeatedly deflected), and the cost/investment outlook (One Up Financial confirming ~$4M consultancy spend in H1 with FY27 normalisation). Management pushed back cleanly on the FDA timeline question but held the line on not giving peptide revenue guidance; no analyst concerns turned adversarial. The CMD visibly closed several items by deferring granular figures to upcoming quarters, while staying confident on directional growth from FY27 onwards.
Not answered directly
- Ascelis Peptides quarterly revenue trajectory and breakeven revenue figure
- Annual revenue range for Ascelis commercial projects
- Granular split of Ascelis India vs Senn Chemicals revenue
Asked for a number, answered without one
- Ascelis / Senn revenue trajectory and growth multiple: Said the base at acquisition was just under CHF 20 mn and growth will be a multiple of the base, but declined to give quarter-to-quarter guidance.
- Ascelis asset turn over the next two years: Said CDMO business has different asset turn and margin profile, generally not giving sales guidance.
- Revenue level at which Ascelis turns positive: Said cannot give the exact detail; Q4 numbers will give a better idea on breakeven number for both EBITDA and PAT.
- Annual revenue from Ascelis commercial projects: Said cannot divulge more detail on more granularity into the business at this point in time.
- FY27 topline growth quantum: CMD agreed there will be a breakout and return to growth track but did not give a specific number.
Every question, with its answer
1. Base business one-offs
Tarang, Old Bridge Asset Management
Question. What is the health of the organic base business ex-Senn? Any positive or negative one-offs in this quarter?
Answer, Mukesh Surana, Chief Financial Officer. Other than ongoing US FDA consultancy expenses, base business is more or less similar to prior trend. Ascelis Peptides now carries a full quarter of integration loss in the P&L.
Follow-up. With the first quarter of Ascelis integrated, are all fixed costs baked into the P&L or could there be further escalation in cost structure?
Answer. In terms of fixed cost, full quarter expenses have been considered, similar going forward, with possibly some incremental headcount spend in India. Revenue and profitability visibility expected to improve from here (per Sanjay Kumar).
2. Ascelis/Senn revenue and capital base
Ritwik Sheth, One Up Financial
Question. Does Ascelis include Senn Chemicals, and is the Rs 20 crores EBITDA loss entirely Senn Chemicals? What is the revenue trajectory and base for Q2?
Answer, Dr. Krishna Prasad Chigurupati / Mukesh Surana / Sanjay Kumar, CMD / CFO / CSO. Yes, Ascelis includes Senn Chemicals; the EBITDA loss is largely Senn Chemicals only with Ascelis India just starting R&D infrastructure. Capital employed is Rs 450 crore acquisition debt plus equity, plus an additional Rs 100 crore scaling capex. Management declined to give a quarterly revenue trajectory but confirmed base under 5 crore (~$0.6M-equivalent base) is not reflective of intended build-out; growth will be a multiple of the base.
Follow-up. What asset turn should we expect once fully integrated over the next two years, and what is the internal timeline to scale up?
Answer. CMD compares it to a CDMO business with very different asset turn and margin profile vs normal business; Sanjay Kumar explained the goal is PAT profitability by Q4 FY26 with build-out over a 6-to-18-month window converting inquiries into real business, scaling as a multiplier rather than incrementally.
Partly answered.
3. German subsidiary and US/EU growth drivers
Tarang, Old Bridge Asset Management
Question. What's the thought process behind incorporating a German subsidiary, and has the strong US/Europe traction this quarter got anything to do with Paracetamol coming back?
Answer, Dr. Krishna Prasad Chigurupati, Chairman and Managing Director. German subsidiary set up to support stocking and selling as Granules focuses on EU growth; will not be a big affair initially. EU growth on track after a slower Q1. US growth driven by US manufacturing, with GPI as a standalone unit picking up meaningfully and contributing materially this quarter. Paracetamol contributed a little but not entirely.
4. EBITDA drivers and Ascelis loss impact
Priti Agarwal, SK Associates
Question. What were the key drivers behind the increase in EBITDA, and how did the Rs 20 crore Ascelis EBITDA loss affect overall profitability?
Answer, Mukesh Surana, Chief Financial Officer. Key drivers were operational efficiency (yield improvement, packing-side leverage) and improved product mix. EBITDA margin would have been higher if not for the Ascelis Peptides loss of Rs 20 crores on near-flat revenue of Rs 28-29 crores in the quarter.
5. Ascelis profitability profile
Maitri Shah, Sapphire Capital
Question. Will Ascelis turn PAT profitable or EBITDA profitable by Q4 FY26, and what sort of revenue is needed for breakeven?
Answer, Sanjay Kumar, Chief Strategy Officer. Q4 FY26 should be PAT profitable on visibility from existing commercial supplies commitments. Q4 numbers will give a better sense of the breakeven revenue threshold. Visibility comes from phased commercial supply contracts out of previous Senn projects; cannot divulge granularity on annual revenue range.
Follow-up. Are these contracts entered before incorporation, and will the commercial projects continue through FY27?
Answer. Yes, these are commercial products from earlier projects that have moved to commercial stage with phased supply commitments; they will continue through FY27 and beyond.
Partly answered.
6. Gagillapur FDA re-inspection timeline
Aditya, Sowilo Investment Managers
Question. Is the Gagillapur timeline still on track for December 2025 FDA re-inspection, and is there revenue loss being compensated from other facilities?
Answer, Dr. Krishna Prasad Chigurupati, Chairman and Managing Director. Not December 2025. FDA has only given a January 2026 meeting; re-inspection duration is unknown. Granules is ready. There was definite revenue loss from operating below full capacity at Gagillapur; US manufacturing compensated materially and OTC products from GLS also helped. With GLS approval, RX products will also compensate, and Gagillapur's pending approvals will add incremental growth post-warning letter closure.
Follow-up. Is the growth just spreading existing volumes or is there scope for incremental revenue growth once Gagillapur comes back?
Answer. CMD confirmed there is scope for growth not just from GLS but also Gagillapur, once remediation completes and pending approvals come through.
7. FDA consultancy cost trajectory
Ritwik Sheth, One Up Financial
Question. Can you share the US FDA consultancy expense figure for Q2 and H1 FY26, and outlook for FY27?
Answer, Mukesh Surana / Dr. Krishna Prasad Chigurupati, CFO / CMD. Q2 FY26 US FDA consultancy spend was approximately $2 million; H1 FY26 total about $4 million with Q1 of similar magnitude. CMD expects the run-rate to drop drastically in Q3 and Q4 FY26 and approach zero in FY27.
Follow-up. Are you looking to do product transfers from Gagillapur to Genome Valley, and what are the timelines?
Answer. Applications already filed for some products with more being filed now under CB-30 mechanism; expect quick approval. About 4 to 5 products will be transferred from Gagillapur to free up capacity.
8. Controlled substances pipeline
Ritwik Sheth, One Up Financial
Question. Can you throw colour on the controlled substance growth for H1 FY26 and how it will pan out over the next 2-3 years?
Answer, Priyanka Chigurupati, Executive Director. Controlled substances were stable in the first two quarters. Over the next 2-3 years, expect 1-2 approvals from the site, but most products are 2-3 years out given patent-protected and first-to-file status. Tentative approvals expected in the next quarter. Significant growth anticipated over 3-10 years given products filed until 2035.
Partly answered.
9. Formulation growth drivers
Vivek Gupta, Star Investment
Question. What factors contributed to revenue growth in formulation markets in North America and Europe, and how did API/PFI sales in RoW impact growth?
Answer, Mukesh Surana / Priyanka Chigurupati, CFO / Executive Director. Growth driven by productivity improvement at Gagillapur, monograph products from Genome Valley, low base effect from Q2 FY25 voluntary Gagillapur pause, and controlled substances. Granules continues to gain market share on products approved 2-3 years ago per IMS data. API/PFI growth was strong in LATAM after Q1 capacity constraints eased.
Follow-up. Why did the company voluntarily pause production at Gagillapur in Q2 FY25?
Answer. CMD explained Granules voluntarily paused to assess risk and prove to itself and the FDA there was no cross-contamination; FDA actually said no pause was needed, but the move built compliance credibility.
What was said
Topic by topic, in the order it was spoken
Welcome and Disclaimer · Irfan Raeen (Moderator, MUFG)
- Introduced the management team: CMD, Executive Director, CFO, CTO, CSO
- Standard forward-looking statements disclaimer issued
- Opened floor for management remarks ahead of Q&A
Gagillapur FDA Remediation Update · Dr. Krishna Prasad Chigurupati (CMD)
- Final stages of remediation following 24 August 2025 inspection and subsequent warning letter
- Formal FDA meeting granted for January 2026 (Q4 FY26); eligible for re-inspection request
- Monthly progress reports submitted; latest on 31 October 2025; FDA raised no concerns on adequacy or pace
- Cross-contamination testing on 3,000+ retrospective and concurrent samples showed no failures
- German authorities issued GMP certificate post-February 2025 inspection; Denmark granted EU GMP in July 2025
- Site completed 8 customer audits with no critical observations and received UL certificate
Network-Wide Regulatory Milestones · Dr. Krishna Prasad Chigurupati (CMD)
- GPI Chantilly, Virginia received EIR for unannounced pre-approval inspection in June 2025 for first-to-file controlled substance ANDA
- API Unit 1 Bonthapally received EIR and classified VAI by FDA post-June 2025 inspection
- Genome Valley GLS received first US FDA approval following July 28 to August 1, 2025 PAI
- European Authority inspection of Genome Valley GLS scheduled in coming quarters
Capacity Expansion and Growth Pillars · Dr. Krishna Prasad Chigurupati (CMD)
- Genome Valley GLS approval unlocks 10 billion additional formulation doses, a 40% increase over Gagillapur's 26 billion dose capacity
- Establishes second-source US supply of finished dosage and PFIs from India
- Monograph supplies to US already commenced; prescription product ramp to follow
- Growth to be driven by CNS-ADHD from GPI, large-volume US/Europe products, value-chain move in Europe, and Vizag Unit 5 oncology capacity
- Confident of returning to growth trajectory free from delivery constraints post remediation
Peptide CDMO Platform (Ascelis/Senn) · Sanjay Kumar (Chief Strategy Officer)
- Ascelis Peptides operates as separately managed subsidiary with arm's-length relationship to Granules India
- Senn Chemicals site in Switzerland functions as global R&D and CDMO hub with full IP protection
- Ascelis India being developed as scalable manufacturing and R&D backbone; IIT Hyderabad Peptide R&D Centre of Excellence ready to operationalise
- Targeting PAT profitability by Q4 FY26; FY27 targeted as first fully synergized profitable year
- Strong customer traction at CPHI Frankfurt and TIDES Europe from innovator pharma, biotech, and cosmetic peptide customers
- LPPS hybrid chemistry and Senn's TFA-free cosmetic peptide offering cited as differentiators
Q2 FY26 Financial Performance · Mukesh Surana (CFO)
- Q2 revenue Rs 12,970M vs Rs 9,666M in Q2 FY25, up 34% YoY; sequential growth 7% over Q1 FY26
- Gross margin 65.7%, up 368 bps YoY and 82 bps QoQ on operational efficiency and product mix
- EBITDA Rs 2,782M (21.5% margin), up 42 bps YoY despite Rs 20 crores Ascelis EBITDA loss; sequential improvement of 106 bps
- R&D spend Rs 705M (5.4% of sales), in line with prior periods; will sustain similar level for strategic initiatives
- Net debt Rs 10,241M vs Rs 9,480M in Q1 FY26 on higher capex; cash-to-cash cycle stable at 204 days
- Q2 capex Rs 2,112M vs Rs 1,137M in Q1 FY26; cash flow from operations Rs 1,937M vs Rs 2,806M
- ROCE improved to 16.2% from 16.0% in Q1 FY26
In their words
we have been granted a meeting with the FDA in January 2026, which is Q4, and remain on track with all the required remediation measures in preparation of this interaction.
In Q4 we should be PAT profitable.
We took a pause to assess the exact situation and to prove to ourselves and to the FDA that there is no risk, the product is good, there's no cross-contamination in the product... We wanted to hear from the FDA rather than doing it ourselves. And that has gone a long way in convincing the FDA that we are a very compliant company.
To check next time
What management committed to on this call, or the dates they gave.
- Outcome of FDA re-inspection meeting at Gagillapur in January 2026 and timing of re-inspection.
- Ramp-up of prescription product supplies from GLS Genome Valley following first FDA approval.
- Ascelis Peptides move to PAT profitability in Q4 FY26 and update on FY27 build-out.
- Trajectory of FDA consultancy expenses in Q3-Q4 FY26 (expected to drop sharply).
- 4-5 Gagillapur-to-GLS product transfers under CBE-30; tentative CNS-ADHD approvals expected within the next quarter.
Transcript
We have not transcribed this call's recording. Read the company's transcript (PDF).
The stock after the call
| After the call | Close | Stock | Nifty 50 |
|---|---|---|---|
| Next session Thu 13 Nov 2025 | ₹556.30 | +2.55% | +0.01% |
| 5 sessions Wed 19 Nov 2025 | ₹553.95 | +2.12% | +0.68% |
| 20 sessions Wed 10 Dec 2025 | ₹554.85 | +2.29% | −0.46% |
From the close of Wed 12 Nov 2025, ₹542.45: the close before the call day (the call's time is not on file). Adjusted daily closes; the move includes everything else that happened in those sessions.