Granules India Q1 FY27 earnings call

Where management's figures differ from the filing

• Period mismatch: said Q4 FY22 revenue ₹1,030 cr; FY22 revenue ₹3,765 cr; filed Q1 FY27 revenue ₹1,476.77 cr (+22.0% YoY). Filed results reference Q1 FY27 (quarter ended 30-Jun-2026); transcript discusses Q4 FY22 / FY22 results — different periods.

What moved the numbers, as management explained it

• Raw material cost inflation: ~60% YoY increase contributing to FY22 gross margin contraction of 7.7%.
• Solvent cost inflation: 40-70% YoY increase largely unrecovered across the portfolio.
• Freight cost inflation: ~70% increase at US ports; unrecovered in fixed B2C contracts.
• PAP short supply: at least ₹65 cr gross margin loss in FY22 on lost Paracetamol API business — one-off supply event. (one-off)
• US price erosion in high double digits YoY, the largest in 10 years per management.
• Cost pass-through achieved in B2B business; B2C fixed-price contracts could not pass through increases.

The numbers management led with

• FY22 revenue growth: Rs 3,765 crore vs Rs 3,237 crore in FY21 (+16.3%)
• FY22 EBITDA margin contraction: 723 bps YoY
• Capex guidance (two-year): ~Rs 600 crore over FY23-FY24
• FY23 R&D guidance: Rs 160-165 crore
• FY23 US launch pipeline: 12 launches with ~$3.6 billion addressable value

Guidance on this call

What changed since the Wed 29 Apr 2026 call

By business

Balance sheet, capex and funding

• Net debt FY22 ₹697 cr vs ₹575 cr prior year on higher inventory and receivables
• Cash to cash cycle at 138 days in FY22 vs 117 days in FY21 (+21 days)
• FY22 operational cash flow ₹332 cr vs ₹432 cr in FY21
• FY22 capex ₹397 cr vs ₹271 cr prior year; ~₹220 cr for MUPS block
• Capex guided at ~₹600 cr for the next two years (FY23-FY24)
• R&D spend ₹146 cr in FY22 vs ₹100 cr prior year; guided ₹160-165 cr for FY23

The industry, as management sees it

US pharmaceutical market experienced the highest deflation in over a decade in FY22 due to competitor inventory over-stocking and elevated freight costs; management expects inventory rationalisation and modest price stabilisation over coming quarters but no dramatic improvement in input cost inflation. Global API supply chain remains under pressure from raw material and solvent inflation (40-120%) with continued logistics elevation.

Risks management named

• US formulation price erosion at high double digits, described as worst in 10 years
• Raw material cost increases of ~60%, solvents up 40-120% and freight up ~70% YoY
• B2C contracts have fixed-price structure delaying cost pass-through to end of Q1/early Q2 FY23
• Cash-to-cash cycle stretched to 138 days from 117 days on inventory and receivables build-up
• Net debt rose to Rs 697 crore from Rs 575 crore due to working capital absorption
• Heavy China dependence for PAP (~15-20% of raw materials post-supply normalisation)

Not answered directly

• FY23 revenue and EBITDA margin guidance
• MUPS and Oncology block annualised operational cost
• Backward integration completion timeline for PAP and Metformin
• Net debt trajectory for FY23

Asked for a number, answered without one

• FY23 revenue and EBITDA margin guidance: Management declined, citing uncertainties in raw material, freight and other costs; said qualitatively positive on revenue and EBITDA in coming quarters.
• MUPS and Oncology block annual operational cost: Management said stabilized expenditure expected only later; tied to revenue from these blocks; will share details by end of Q2.
• 5-year revenue and EBITDA margin trajectory from MUPS and Oncology: Management described MUPS capacity fill-up by year-end and Oncology launches in next couple of quarters but did not quantify revenue or EBITDA contribution.
• FY23 ending net debt: CFO said will try to maintain at same level; 'there could be a little bit of increase in the debt position' depending on inventory and growth.
• MUPS product margin profile vs company average: Priyanka said 'we do not want to necessarily comment on specific category-wise gross margin' but overall margin expected to improve over next couple of quarters.

Every question, with its answer

1. 1. Raw materials and cost pass-through

   Tushar Manjani, Motilal Oswal Financial Services20:55

   Question. Other than PAP, has there been any disruption on prices or supply side of other core raw materials, or is it pretty smooth? And will we be able to pass on cost increases in terms of higher finished goods prices?

   Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. Raw material supplies other than PAP are smooth and the company has been able to get product supplies to market. Prices of other raw materials have either gone up or held at previous quarter levels. B2B business has been able to pass on price increases over the last couple of quarters; B2C pass-through expected by end of Q1 FY23 or beginning of Q2 FY23 given contract structures.

   Follow-up. Understood. Just to understand — now that MUPS and Oncology blocks are coming online, how much of operational costs on an annual basis will these blocks carry?

   Answer. Annual operational cost for MUPS and Oncology blocks is a work in progress; clarity expected by end of Q2 FY23 once capacity occupancy patterns emerge. Dr. Ram Rao noted that cost is also linked to revenue generated from these blocks.

   Partly answered.

2. 2. Net debt outlook

   Tushar Manjani, Motilal Oswal Financial Services24:00

   Question. Where do you think net debt will be at end of FY23?

   Answer, Sandeep Neogi, Chief Financial Officer. Management will try to maintain net debt at the same level, but any further strategic inventory build or business growth could push debt slightly higher.

   Partly answered.

3. 3. Drawback accounting and capex split

   Ranveer Singh, Sunidhi Securities25:10

   Question. Footnotes mention Rs 17.25 crore recognised due to drawback claim — which line item is this sitting in? Also how much capex in FY22 was attributable to MUPS versus the rest of Vizag block?

   Answer, Sandeep Neogi, Chief Financial Officer. Rs 17.25 crore drawback sits in other operating income, affecting gross margin. FY22 capex on MUPS block was in the range of Rs 220 crore; balance ~Rs 130 crore was routine capex and other spends.

4. 4. MUPS pipeline and formulation growth

   Ranveer Singh, Sunidhi Securities28:32

   Question. How many MUPS products filed, approvals received so far, and the launch timeline? Is the increment in formulation revenue QoQ from North America or across geographies?

   Answer, Ms. Priyanka, Executive Director, GPI. Two MUPS approvals received, six products filed so far. Both approved products already launched at small scale from other modules; scale-up and market-share ramp expected over next couple of quarters. Formulation improvement is across regions, with majority coming from North America due to recent launches; significant growth outside finished dosages from Europe and LatAm. Currently 24 Rx and 10 OTC products on sale in US (total ~34).

5. 5. US price erosion dynamics

   Tarang Agarwal, Oldebridge Capital31:36

   Question. Price erosion over FY22 — was this driven more by channel destocking after FY21 stocking, or by heightened competition from new supplies? How should we see pricing evolve from Q1 FY23?

   Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. Dr. Ram Rao broke price erosion into three parts: API inputs (raw materials up 60%+, solvents 40-120%), freight (70%+ increase), and US formulations. Ms. Priyanka added that US competitors over-stocked on inventory due to logistics issues, causing the largest deflation in over a decade; inventory rationalisation and price stability expected over the next couple of quarters. B2C price increases for some major molecules already committed in prior calls and will flow into actual invoices now that contract protection periods have lapsed.

   Follow-up. These competitors over-stocking owing to freight — are they of Indian or Chinese origin? One would presume their cost structures are similar or slightly higher.

   Answer. Ms. Priyanka: Very product-specific, mix between all regions. Strongest players will come out stronger; we have given up business in some cases only to receive re-queries within a month, and market share for our largest products has actually grown over the last couple of months.

   Partly answered.

6. 6. China sourcing and backward integration

   Rashmi Sanjivi, Dollar Capital37:10

   Question. Post-PAP restart in China, how much of total raw material requirement will be sourced from China vs India/other geographies, and what is the backward integration timeline for PAP and Metformin?

   Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. Post normalisation, China share expected at 15-20% of raw materials; balance from non-China sources (de-risking strategy). Backward integration programmes for PAP and Metformin already kicked off in the organisation; company will share further timelines as they progress.

   Partly answered.

7. 7. Gross margin trajectory and US growth

   Rashmi Sanjivi, Dollar Capital1:06:35

   Question. How do you see gross margin moving from current levels in FY23 given raw material and solvent pressure? And the slowdown in North America growth to ~12% vs 25%+ earlier — is it pricing pressure on base products, and what is the FY23 launch pipeline?

   Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. No dramatic improvements expected in input pricing or freight; organisation is reasonably positive on internal actions and visibility on positive trajectory in Q1 or post-Q1 FY23. On US growth, Ms. Priyanka clarified absolute growth was 13-14% YoY; five launches in FY22 launched at soft scale (full effect in FY23). FY23 plan: 12 US launches with ~$3.6 billion addressable value; US price erosion in high double digits, worst in 10 years. Europe and LatAm growth driven by PFI mix and partnership model.

   Partly answered.

8. 8. PFI/API growth drivers in Europe and LatAm

   Rashmi Sanjivi, Dollar Capital

   Question. More details on PFIs and APIs in Europe and LatAm — are we adding new customers or repeat orders, and which molecules are driving the higher contract wins?

   Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. Three-pronged approach for Europe and LatAm growth: increase market share with existing customers, add new customers, and expand geography footprint within Europe. On PFI product portfolio, expanding beyond existing molecules to new molecules and new approvals; combination of all factors driving growth.

9. 9. FY23 guidance and 5-year outlook

   Mohit Mundana, Fidelity Investments1:06:16

   Question. Any guidance on FY23 revenue growth and EBITDA margins? Long-term, what are the contributions expected from MUPS and the new Oncology/complex API block over next 5 years, and what does that imply for revenue and EBITDA margin trajectory?

   Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. No quantitative guidance given given uncertainties on raw material, freight and pricing; qualitatively management is positive on both revenue and EBITDA in coming quarters and working towards sustained positivity across four quarters. On long term: MUPS positioned as specialised manufacturing excellence with approvals landing; aim is to be among the largest MUPS suppliers globally on chosen approved molecules launching in US and Europe. Oncology block has positive customer interest in oral solid formulations; visibility on capacity utilisation expected in next couple of quarters once regulatory approvals land.

   Not answered directly.

10. 10. Margin trajectory and MUPS economics

    Rahul Veera, Abacus1:06:16

    Question. How do you see the trajectory from here on between revenue impact, deflation, logistics and commodity impact on margins over next four quarters? And is the MUPS margin profile better than company average?

    Answer, Sandeep Neogi, Chief Financial Officer. Sandeep: Difficult to give guidance on gross margin trajectory until supply and cost (linked to crude) stabilise. Endeavour is always to maximise top line and bottom line via portfolio optimisation. Dr. Ram Rao added that cost optimisation programme is a key focus along with high-volume new product launches; outcome should be positive. Ms. Priyanka declined to comment on category-wise gross margins but said overall margin will improve over next couple of quarters.

    Follow-up. Confidence on margin is coming from the new contracts that we signed recently? How many Oncology launches should we expect this year?

    Answer. Dr. Ram Rao: Margin confidence is from portfolio optimisation across geographies, internal cost optimisation programmes and new launches — not a single source. On Oncology, Dr. Ram Rao said at least two launches expected from the Oncology block this year. Ms. Priyanka clarified the Oncology block is primarily for CDMO/CMO businesses, not finished dosages.

    Partly answered.

11. 11. R&D spend and launch pipeline

    Ranveer Singh, Sunidhi Securities

    Question. What level of R&D expenses should we expect in FY23? How many new ANDA filings and launches planned?

    Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. FY23 R&D expenditure anticipated at Rs 160-165 crore versus Rs 146 crore in FY22. Ms. Priyanka: 25 dossiers currently in pipeline; ~17 finished-dosage launches planned over next 16-18 months across US, Europe and Canada; mix of geographies. PFI growth in LatAm/Europe driven by combination of customer base expansion and pass-through of cost increases to new customers.

12. 12. PAP supply strategy and backward integration scope

    Ranveer Singh, Sunidhi Securities

    Question. On the PAP side, what is the strategy for regular PAP supply? Is backward integration only on PAP or on other raw materials too?

    Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. Several alternate PAP suppliers developed; largest China supplier has just started production and stabilising; in coming weeks/months situation should normalise assuming China stays under control. Backward integration programme on PAP already going on; also covers other identified key raw materials in the portfolio.

    Partly answered.

13. 13. Guidance rationale and PFI growth breakdown

    Ranveer Singh, Sunidhi Securities1:07:46

    Question. Why no guidance even on the revenue side — is the Q4 revenue run rate sustainable? What's driving the strong PFI growth, especially in LatAm — new contracts, new launches or higher orders from same clients?

    Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. Three to four factors driving confidence prevent pinning specific numbers, but management thinking is positive on top line and bottom line across coming quarters. On PFI: combination of market-share gains with existing customers and acquisition of new customers; Ms. Priyanka confirmed unit realisation steady while both customer base and price increases to customers have contributed.

    Not answered directly.

14. 14. Therapy strategy and portfolio approach

    Kishor Bora, MK Ventures

    Question. With the new CEO and strategic thinking, could you detail strategies for specific segments like CNS — what therapies or new areas are being evaluated?

    Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. Therapy-agnostic approach — looking at innovative opportunities that contribute through science and technology. First wave of important product launches being planned; will adopt backward integration across chemical intermediates to finished products. Will strengthen current commercial products across the chosen portfolio end-to-end — supply availability, sustainability and cost competitiveness.

15. 15. Multi-year growth and margin direction

    Kishor Bora, MK Ventures1:08:11

    Question. Directionally, should we assume that margin improvement will accompany the revenue growth over next 2-3 years?

    Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. Yes — two elements. First: US growth via pipeline launches (some high-volume) plus market-share defence on core molecules. Second: geography expansion into Europe and LatAm via new product launches, new customer acquisition and share gains at existing customers. All three elements (top line, bottom line and cash) will be focused in totality.

16. 16. Dosage form expansion and CRAMS

    Kishor Bora, MK Ventures1:08:40

    Question. Are we evaluating going beyond oral solids — e.g., injectables? And on CRAMS — could you share more detail on the plan and horizon for execution?

    Answer, Dr. KVS Ram Rao, Joint Managing Director and CEO. Currently focused on strengthening competitive strength in oral solids — focus is important; not averse to other dosage forms but not on the table right now. On CRAMS — first effort is the Oncology block (development + manufacturing + tech transfer), already started in a smaller way. CRAMS will become an important business element once technology strategies kick in but execution piece is some time away.

17. 17. Other expenses and block-level costs

    Kishor Bora, MK Ventures1:09:58

    Question. Other expenses rose meaningfully this quarter — any one-offs? How much cost attributable this quarter to MUPS and Oncology blocks?

    Answer, Sandeep Neogi, Chief Financial Officer. MUPS and Oncology cost for the current quarter not significant as capitalisation happened late in the year. Increase in other expenses mainly attributable to freight — up north of 70% to US ports, and freight is a very significant component given the low-value high-volume product mix.

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In their words