Granules India Q4 FY26 earnings call

Where management's figures differ from the filing

• Q4 EBITDA: said ₹3,521 mn / 23.9% margin (+40% YoY); filed ₹368.02 cr / 25.0% margin (+30.0% YoY). Stated figure is ~4% lower and margin ~1.1pp lower than filed; management did not articulate the difference, but filed is defined as EBITDA excluding other income, suggesting management may also exclude additional items such as FX or other non-recurring charges.

What moved the numbers, as management explained it

• Sequential gross margin expansion in Q4 to 65.7% (+233 bps YoY, +186 bps QoQ), driven primarily by the peptide CDMO business scaling from ₹33 cr to ₹70 cr in revenue with higher value-add.
• FY26 gross margin expanded 355 bps YoY to 65% on a sustained shift to complex generics and higher contribution from value-added formulations.
• FY26 EBITDA margin of 22.1% (+100 bps) was delivered despite an Ascelis peptide CDMO loss of ₹445 mn included in the EBITDA. (one-off)
• API Q4 growth of 33% was attributable to new APIs launched and APIs developed for integrated formulation also sold externally, not price increases.
• Q4 PAT of ₹201.6 cr (+33% YoY) is stated post exceptional items, with PBT before exceptional items growing 48% YoY. (accounting)
• Raw material, freight and packaging costs have risen amid West Asia situation, with current inventories expected to absorb the impact for one to two quarters before price pass-through.

The numbers management led with

• Net debt: Reduced to INR4,021 million from INR7,061 million in FY25; Net debt/EBITDA improved to 0.34x from 0.75x
• Equity infusion: INR6,656 million during FY26 (promoter + QIP)
• Cumulative remediation spend (FY26): ~INR50+ crore in FY26; substantially lower from FY27 onwards
• US generic ranking: 27th among all U.S. generic companies by sales value per IQVIA in FY26 (vs 74th in FY21)

Guidance on this 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 reduced to ₹402 cr from ₹706 cr; net debt/EBITDA improved to 0.34x (from 0.75x).
• FY26 capex ₹555 cr (Q4 capex ₹100 cr); FY27 capex guided at ~₹600 cr plus ₹200 cr for U.S. distribution centre.
• ₹666 cr equity infusion during FY26 supported deleveraging and growth capex.
• Working capital held at 33% of sales (in line with FY25); management targeting 33% range in FY27 despite higher working capital needs.
• FY26 cash flow from operations ₹793 cr (vs ₹867 cr in FY25), moderated by planned working-capital buildup for growth.
• ROCE improved to 17.6% (from 16.6% in FY25).

The industry, as management sees it

U.S. generic pharmaceutical market is competitive but Granules is gaining share (27th rank per IQVIA vs 74th four years ago). Controlled substances/ADHD market has a $41 billion TAM. Management sees a strong tailwind from the shift toward complex generics and CDMO outsourcing. Raw material and freight cost inflation from the West Asia situation is creating near-term headwinds with a lead-lag in price pass-through.

Risks management named

• Input cost inflation: raw material and packing material prices rising due to West Asia situation; price pass-through has a lead-lag of 1-2 quarters
• Gagillapur FDA re-inspection: timing entirely at FDA's discretion; more than a year since warning letter with no reinspection scheduled yet
• Remediation costs: ~INR50+ crore incurred in FY26; ongoing costs weigh on near-term profitability
• Regulatory execution risk: reducing regulatory timelines is the single biggest constraint to scaling

Not answered directly

• Gagillapur FDA reinspection timeline — management confirmed readiness but declined to estimate when FDA will schedule the visit
• Senn Chemicals order book — explicitly declined to disclose
• Lisdexamfetamine DEA quota details — declined to share specific quota figures
• Revenue breakdown between R&D and commercial manufacturing stages at Senn — declined to provide split
• Specific product names for new controlled substance launches — declined, citing ongoing litigation
• Senn Chemicals medium-term growth percentages — declined to quantify

Asked for a number, answered without one

• Peptide CDMO revenue split between R&D-stage and commercial projects: We would rather not get into that exact split, but I think it's sufficient that this is a project-initiated pipeline.
• Senn Chemicals medium-term growth and margin profile: we cannot comment on the growth -- I mean, percentages of growth. But all I can tell you is, that's a key pillar for our growth.
• DEA quota allocation for lisdexamfetamine: we obviously cannot share the quota details, but we got everything that we wanted.
• Senn / Ascelis order book: We can't disclose those kind of information.
• FY27 EBITDA margin guidance: we are taking a step back and not committing to anything, but we remain confident and positive.
• Names of upcoming controlled-substance launches: I don't -- again, I can't give you names of any products.

Every question, with its answer

1. 1. API pricing environment

   Harith Ahamed, Avendus Spark

   Question. Pricing environment for paracetamol and metformin? Any price increases following West Asia situation? Was the 33% API segment growth this quarter driven by better pricing?

   Answer, Dr. K.P. Chigurupati, Chairman and Managing Director. No price increases were realized — raw material prices have gone up and are still increasing. There is some uncertainty but management expects to get price increases to compensate. API growth was driven by new APIs launched, including those developed for integrated formulation development and sold externally.

   Follow-up. On Ascelis Peptides — is the Q4 EBITDA breakeven sustainable into coming quarters?

   Answer. Sanjay Kumar (CSO): Direction is firmly towards annual EBITDA and PAT positivity from FY27. Individual quarters may vary based on customer milestones and shipment timing; the platform is now execution-led and operationally aligned.

2. 2. Senn Chemicals business mix

   Harith Ahamed, Avendus Spark

   Question. Business mix in Senn Chemicals — pharmaceuticals vs cosmetics? Within pharma, are you supplying peptide building blocks, fragments, or APIs?

   Answer, Mr. Sanjay Kumar, Chief Strategy Officer. Business is a mix of pharma and cosmetics, both important. Pharma customers span big innovators, virtual biotechs/start-up ecosystem, and collaborative partners across the peptide value chain. Cosmetics is a strong pillar — TFA-free cosmetic peptides gaining traction. Growth opportunity is immense given the low base; described as a 'complete blue ocean'.

   Follow-up. DCDA project at Vizag — progress on scale-up, capex plans, and timeline?

   Answer. K.P. Chigurupati (CMD): It was and remains a 'dream project' being the only DCDA manufacturer outside China. Chinese competition has drastically reduced prices; Granules has been improving processes. Pilot stage expected to wrap up in 2-2.5 months, followed by commercial plant equipment ordering. Project cost estimated at ~INR200 crores.

3. 3. Gross margin outlook

   Shashank Krishnakumar, Emkay Global Financial Services

   Question. What drove the sharp Q-o-Q gross margin expansion given higher API sales this quarter? How should we think about gross margins going into FY27 given input cost inflation?

   Answer, Mr. Mukesh Surana, Chief Financial Officer. Sequential gross margin improvement primarily from CDMO business growing from INR33 crores to INR70 crores with significantly higher value-add gross margin percentage. On FY27 margins: current war situation and cost escalation create uncertainty; management is trying to pass through raw material cost increases but cannot give margin percentage clarity at this time.

   Follow-up. Capex plan for FY27-28 — overall figure and areas of incremental investment?

   Answer. Mr. Mukesh Surana (CFO): Capex in similar range of INR600-odd crores in FY27, broad-based across new API facility, IT investments, and US distribution center (INR200+ crores for distribution center per CMD).

4. 4. Remediation spend

   Shashank Krishnakumar, Emkay Global Financial Services

   Question. What is the cumulative remediation spend for FY26? What remediation spend should we expect from Q1 FY27 onwards?

   Answer, Mr. Mukesh Surana, Chief Financial Officer. FY27 onwards, remediation expenses should be substantially lower (already came down in Q3 and Q4). Cumulative remediation expenses in FY26 were close to INR50-plus crores. H1 expenses were very high; H2 saw meaningful reduction.

5. 5. Input cost inflation and inventory

   Tushar Manudhane, Motilal Oswal

   Question. Will freight cost increases from West Asia reflect immediately in coming quarters? Will passing on raw material price increases have a lead-lag? How much inventory buffer exists?

   Answer, Dr. K.P. Chigurupati, Chairman and Managing Director. Inventories exist and can cover a while. Price increases will not happen overnight — there will be a lead-lag. Current inventories will take care of the near term. Overall, while confident of being fine over the year, quarter-on-quarter variations may occur and the company must work through uncertainty.

   Follow-up. Revenue breakdown in Senn Chemicals between R&D and commercial manufacturing stages?

   Answer. Sanjay Kumar (CSO): Management declined to provide exact split, stating it is a project-initiated pipeline. Whatever is at commercial stage is a result of past development work. Several exciting projects underway; at least one project has graduated to stable commercial supply starting this financial year. Growth will be both project-driven and commercial manufacturing increase as pipeline matures.

   Partly answered.

6. 6. Net debt guidance

   Tushar Manudhane, Motilal Oswal

   Question. What kind of net debt should we build for FY27 given capex plans, working capital requirements, and potential cost escalation prolongation?

   Answer, Mr. Mukesh Surana, Chief Financial Officer. Net debt expected to be flattish or see a very small increase. Working capital investment will also be higher in the current uncertain period due to cost escalation. Small net debt increase possible depending on timing of capex and growth investments.

7. 7. CDMO capacity utilization

   Sajal Kapoor, Antifragile Thinking

   Question. What proportion of CDMO capacity is tied to committed or late-stage customer programs? What utilization would they fall to if top 2-3 projects were delayed or canceled?

   Answer, Mr. Sanjay Kumar, Chief Strategy Officer. Capex approach is always demand-linked, not speculative. Q4 utilization was at healthy levels. Capacity being built in Zurich and India (intermediates) will come online in H2; visibility is for quick utilization within the year. Customers are given optionality across 2 continents and various timelines. No capacity built ahead of customer commitments.

   Follow-up. What is the level of customer concentration in the CDMO business? Are you seeing broad-based participation despite the low base?

   Answer. Customer base is not overly concentrated. Working on multiple projects spread across double-digit customers at initial stages across big pharma, start-up biotech, and cosmetics. Senn's legacy gives access to high-quality customers; the acquisition brought proof of concept and validation of access. Execution ability on the 2-continent model is the key differentiator going forward.

8. 8. Key business constraints

   Sajal Kapoor, Antifragile Thinking

   Question. What is the single biggest constraint to scaling the business over the next 2-3 years? What are you doing to counter it?

   Answer, Dr. K.P. Chigurupati, Chairman and Managing Director. Single biggest constraint is regulatory timelines and execution quality. Regulatory timelines depend on project execution quality and filing quality. Management believes they have 'almost got it right' and are fairly confident of reducing regulatory timelines. Gagillapur remediation and FDA acceptance is the other key constraint — site is ready and waiting for FDA to schedule re-inspection.

   Follow-up. If Gagillapur returns to action with outstanding filings, and gross margins stay at 64-65% despite input cost headwinds, is it fair to expect 24-25% EBITDA margins going forward?

   Answer. K.P. Chigurupati (CMD): Raw material and packing material prices and freight costs have gone up. While previously very confident about gross margins, management is now 'taking a step back and not committing to anything' due to market uncertainty until price increases are realized. Remains confident and positive but cannot give specific margin guidance.

   Partly answered.

9. 9. India peptide manufacturing roadmap

   Tarun Krishna, ithoughtPMS

   Question. Large-scale peptide manufacturing in India — which products exactly will be manufactured? Will GLP, peptide drug conjugates, and oligonucleotides all come online simultaneously?

   Answer, Mr. Sanjay Kumar, Chief Strategy Officer. Sequence: peptide API capacity at Zurich at certain scale, then brownfield manufacturing facility for intermediates in India, then India peptide API facility (at least a year after intermediates). Peptide drug conjugate is being assessed but at planning phase. Current focus is entirely on peptides value chain with investments sequentially aligned with customer demand. Dr. P.V. Srinivas confirmed: focusing on peptides for now; ADCs and oligonucleotides are at selection/portfolio assessment phase.

   Follow-up. Which specific products will be manufactured at the India intermediates facility?

   Answer. Sanjay Kumar (CSO): India facility will manufacture intermediates and protected amino acid derivatives — essentially backward integration and common elements across multiple projects. These can be used internally for own programs and also supplied externally to other players for their peptide APIs.

10. 10. Gagillapur FDA reinspection timing

    Krisha Kansara, Molecule Ventures

    Question. Gagillapur FDA reinspection — why is it taking so long (more than a year since warning letter)? How confident are you of clearing the re-inspection? What is the estimated timeline?

    Answer, Ms. Priyanka Chigurupati. Correspondence with FDA ongoing for 2 years since original observations. Post-warning letter updates continue; activities were completed on time by end of March. Site is ready for an 'anytime audit'. Management cannot estimate when FDA will visit — no communication received on timeline. Confident of clearing because 108 customer audits and 13 regulatory audits happened in FY26 with nothing critical emerging from any of them.

    Follow-up. Has the ANVISA GMP certificate for Gagillapur prepared you in any way for the US FDA re-inspection?

    Answer. Priyanka Chigurupati (ED): Not just ANVISA — all 108 customer audits and 13 regulatory audits in FY26 prepare the team for the FDA. Yes, ANVISA audit and others all contribute to being audit-ready when FDA walks in. Confirmed it is 'wait and watch' on timing.

11. 11. Lisdexamfetamine DEA quota

    Preet Jain, Niveshaay

    Question. DEA quota for Lisdexamfetamine — what quota was assigned for CY25? What is the quota for CY26 and CY27? Will the quota support sales?

    Answer, Ms. Priyanka Chigurupati, Executive Director. Quota details cannot be shared. Company received everything it wanted and demonstrated ability to supply customers on time and in full (a precursor to quota allocation). Quota situation for FY27 is expected to be as budgeted.

    Follow-up. You plan to add 1-2 new controlled substance products annually for the next 2-3 years — which products and what is the addressable market?

    Answer. Priyanka Chigurupati (ED): Cannot name specific products. Two products are already in public domain with tentative approvals received. Next steps depend on ongoing litigation which cannot be discussed. Also 1-2 additional generic products and 1-2 potential first-to-file products outside of tentative approvals in the pipeline.

    Partly answered.

12. 12. Senn Chemicals order book

    Preet Jain, Niveshaay

    Question. What is the current order book in Senn Chemicals CDMO business?

    Answer, Mr. Sanjay Kumar, Chief Strategy Officer. Cannot disclose order book or similar information.

    Not answered directly.

13. 13. Equity proceeds deployment

    Ritwik Sheth, One Up Financial

    Question. Plans for deploying the INR6,656 million equity raised from promoter and QIP a few months ago?

    Answer, Mr. Mukesh Surana, Chief Financial Officer. As clarified at EGM and previous earnings call: to strengthen the balance sheet and invest in organic and inorganic growth. Organic growth = capex, working capital, and R&D. Inorganic: continuously exploring good opportunities. The money is available based on strengthened balance sheet.

    Follow-up. How should we look at Senn Chemicals in a 3-4 year medium-to-long-term view — growth, margins, and how it compares to company-level margins?

    Answer. K.P. Chigurupati (CMD): Cannot comment on growth percentages but Senn Chemicals is a 'key pillar for growth' that will drive a good percentage of the company's overall growth. 'Very, very important' and 'great future' — no specifics disclosed.

    Partly answered.

14. 14. Controlled substance ex-US launches

    Ritwik Sheth, One Up Financial

    Question. Timeline for launching controlled substances outside the US market (EU and ROW)? What infrastructure readiness exists?

    Answer, Ms. Priyanka Chigurupati, Executive Director. One of the two globally prevalent ADHD medications has already been tech transferred and filings have started across the globe. Finished dosage revenue expected within 2 years; API numbers expected sooner. Not just EU — filing in multiple countries simultaneously.

15. 15. Controlled substances performance

    Shreya Chatterjee, Ageless Capital

    Question. Total revenue from controlled substances given the 4th position ranking? How is Vyvanse/lisdexamfetamine dimesylate performing given competitor recalls? Current market share?

    Answer, Dr. K.P. Chigurupati / Ms. Priyanka Chigurupati, Chairman and Managing Director / Executive Director. K.P. Chigurupati: Product recalls are not a constraint for Granules. Lisdex is a good product but the company has equally good products in its portfolio with more in the pipeline — it is not a one-product story. Product-level revenue details not disclosed. Priyanka: The name of the game is consistent growth across all products in ADHD/controlled space to maintain the 4th position. Portfolio quality is improving with more complex products and controlled substances/oncology filings.

    Follow-up. Pipeline for controlled substances and oncology over the next 3-5 years — how big is the opportunity?

    Answer. Priyanka Chigurupati (ED): TAM of $41 billion mentioned in investor presentation (combination of brand and generics). Filings quality is improving — moving toward complex products, controlled space, and oncology (2 big drivers). Several first-to-files targeted, many NCE-1s targeted; company plans to be there on Day 1 with a strong value proposition.

16. 16. Working capital guidance

    Shreya Chatterjee, Ageless Capital

    Question. Working capital guidance for FY27 given cost volatilities?

    Answer, Mr. Mukesh Surana, Chief Financial Officer. Cost escalations are ongoing — whether they continue for a few months or quarters is uncertain. Management wants to maintain the working capital to sales ratio of approximately 33% range.

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