Granules India Q1 FY27 earnings call

What moved the numbers, as management explained it

• Gross margin expanded ~15pp to 65% over 4 years on complex generics mix shift; EBITDA margin up 3pp to 22% over same period (CFO Mukesh Surana).
• R&D investment rose from ~3% of revenue to 6% in Q1 FY27, weighing on EBITDA translation but supporting future differentiated growth.
• One-off expenses of ~₹60 cr on USFDA remediation plus ~₹40 cr on failure-to-supply, air freighting and related indirect costs (~₹100 cr total) suppressed margins. (one-off)
• Controlled substance franchise scaled rapidly: market share gains (Adderall XR 5% to 29%) and 3rd largest US position by value.
• Peptide CDMO currently in EBITDA loss as recently invested; Genome Valley assets also underutilized pending ramp-up.

The numbers management led with

• Organic capex commitment: ₹2,000 crore over 3-4 years
• US controlled substance market position: 3rd largest in US by value (was 8th in July 2025); 10 fastest growing generics company in US by absolute dollars in 2025 for 2nd year
• Peptide CDMO revenue run rate targets: ~$50M in 3 years and $100M in 5 years; profitability targeted FY27
• Complex generics mix shift: 1% of revenue in FY20 to 33% in FY26; ~45-50% of finished dosages in FY26

Guidance on this call

What changed since the Wed 22 Jul 2026 call

By business

Balance sheet, capex and funding

• Consolidated net cash position achieved after warrant proceeds received September 2026 (CFO Mukesh Surana).
• Plan to invest ~₹2,000 cr in organic capex over next 3-4 years, broad-based across complex generics, oncology, peptide CDMO, US operations and infrastructure.
• Cash flow from operations averaged ~73% of EBITDA over last 4 years; consistent positive free cash flow funded growth and reduced debt.
• Capital efficiency: ROCE at 18% in Q1 FY27, up ~1pp YoY and ~2pp vs Q1 FY26 (CFO).
• Capital deployment follows disciplined milestone-based approach tied to development progress, regulatory milestones and customer commitments.

The industry, as management sees it

Management sees the US generics market — particularly controlled substances — continuing to consolidate around a handful of reliable, vertically integrated, DEA-compliant suppliers as wholesalers and API vendors seek security of supply post the quota-system change. The peptide CDMO and oligo/ADC adjacencies are framed as attractive, capacity-constrained growth opportunities where Indian scale combined with Swiss scientific depth can win.

Risks management named

• Gagillapur USFDA re-inspection pending; remediation CAPAs completed, awaiting visit
• Near-term raw material cost pressure and pricing lag in legacy base business
• Peptide CDMO ramp currently in EBITDA loss zone; profitability targeted only for FY27
• Clinical program failures on innovator side may impact peptide CDMO commercial upside

Not answered directly

• Capex allocation breakdown across growth engines (specific numbers not provided)
• ROCE guidance by business bucket
• FTF launch timelines for litigation-based products (sodium oxybate, etc.)

Asked for a number, answered without one

• Capex split by bucket: It's a broad-based plan; significant portion to peptide CDMO, complex generics and oncology, but no specific allocation disclosed
• ROCE target number: Won't give exact guidance; expects percentage point improvement to continue as recently invested assets ramp up
• Peptide CDMO molecule pipeline count: Cannot explicitly give the number of projects; described revenue mix as 1/3 development, 1/3 commercial, 1/3 partnerships
• Fixed vs variable cost split: Significant portion is fixed (above 50%) but couldn't give exact number; described costs as semi-variable
• Controlled substance product launch timelines: Products under litigation, not appropriate to name launch timelines; every product is unique

Every question, with its answer

1. 1. Inorganic opportunities

   Ahmed Madha, Unknown

   Question. With the warrant exercise strengthening the balance sheet and solid internal accruals, is it fair to assume Granules is looking at inorganic opportunities in peptides or vertical integration in the near term?

   Answer, Dr. Krishna Prasad Chigurupati, Chairman & Managing Director. Yes, we are always looking at inorganic opportunities and have been very disciplined about it — not jumping into whatever comes our way — and we are very actively looking at it.

2. 2. Legacy base business — pricing and RM pressure

   Ahmed Madha, Unknown

   Question. On the legacy base business, there have been disruptions like ibuprofen shortages in developed markets and raw material cost pressure. How do you see risks and opportunities, including ability to pass on price increases and any places without full backward integration where KSM/API costs could be pressured?

   Answer, Mukesh Surana, Chief Financial Officer. You are right, near-term challenges are there, but we are proactively working with all our customers to see how we have a pricing mechanism to pass on. Some could be with a lag, but medium to long term, whatever growth trajectory we have set out, we will be in a consistent growth mode with an improvement in quality of earnings as well.

   Partly answered.

3. 3. Peptide CDMO therapeutic mix and $50M build

   Ahmed Madha, Unknown

   Question. On the peptide side, what therapeutic end-uses are you predominantly targeting — is the focus on GLP-1 / weight loss or other areas? And second, does the $50M annual run rate target assume a large commercialisation molecule or is it based on development-stage products?

   Answer, Sanjay Kumar, CEO, Senn Tides India Private Limited. These are customer partner programs — we don't make those choices, but to give flavour, it is wide, beyond GLP-1 as well; we are talking about innovator partner business on their portfolio, not something we are proactively developing to sell to other customers. On the $50M, a part is based on commercial successes, but a large part will still be development and early supply, especially at the 3-year stage.

4. 4. Capex allocation across growth engines

   Adi, Unknown

   Question. Can you break down the ₹2,000 crore capex across complex generics, oncology, peptide CDMO, US operations and infrastructure — which bucket gets the most?

   Answer, Mukesh Surana, Chief Financial Officer. It is a broad-based plan over the next 3-4 years, allocated across all buckets. A good portion of capex will be growth capex with better quality of return. Some digitalisation/manufacturing excellence capex may not have tangible return but ensures sustainable growth. Significant portion will go into three buckets largely — peptide CDMO, complex generics and oncology — and the rest.

   Follow-up. Adi pushed for specific numbers on the capex split between peptide CDMO, complex generics and oncology.

   Answer. Mukesh repeated that the plan is broad-based and significant portion goes into peptide CDMO, complex generics and oncology, but declined to provide specific allocation numbers.

   Not answered directly.

5. 5. Peptide milestones and ROCE target

   Adi, Unknown

   Question. What specific milestones or selection criteria would make you pause or cut spending on peptides? And what kind of targeted ROCE do you expect on each bucket or on a broad basis?

   Answer, Sanjay Kumar / Mukesh Surana, CEO, Senn Tides India / CFO. On milestones: depends on clinical success of the innovator side; we ride with them through stages 1 to 3, with development fees, clinical supply fees and co-writing into commercial supply. On ROCE: management will not give exact guidance; in the last 1 year, ROCE improved by 1pp; Q1 vs Q1 last year already up 2pp; some recently invested assets are not yet generating expected returns, so the percentage point improvement will be healthy over the next few years.

   Not answered directly.

6. 6. Oligo/ADC right-to-win

   Chat question (read by Naman Bagrecha), IIFL Capital Services Limited

   Question. On the CDMO business, what is your right-to-win in oligos given others already have established capabilities? Similarly for ADCs, how do you see ADCs as a real opportunity over the next 3-5 years?

   Answer, Sanjay Kumar, CEO, Senn Tides India Private Limited. We are building this as a CDMO platform; oligo is a small step we have taken, building capability with scientists joining us with prior experience. Some customers have been looking for support and we have capability on the scientific front in Switzerland with scientists accustomed to oligos. Customer inquiries we have not been able to take because of capacity constraints have prompted this small bet with R&D first in India. ADCs are under planning stage; we will share more information as we get closer.

7. 7. Controlled substance outlook and DEA quota

   Sameer Baisiwala, Unknown

   Question. On controlled substances, what's the outlook going forward, and how did the recent quota allocation (typically July/August) go for Granules?

   Answer, Vijay Ramanavarapu, President, Granules Pharmaceuticals, Inc.. Granules was satisfied with the quota received. Quota is step one from the DEA; the next part is getting the API and converting in a timely manner to generate more sales and earn further quota. Quota allocation increases every year on a molecule-wise basis due to growing track record and DEA compliance. We had two launches last year (Lisdexamfetamine); more product launches over the next several months in amphetamine and methylphenidate spaces.

8. 8. FTF launch timelines (sodium oxybate, etc.)

   Sameer Baisiwala, Unknown

   Question. On sodium oxybate (Lumryz) and the other key products, can you give a rough launch timeline — calendar 27-28? Any guidance would be very helpful.

   Answer, Vijay Ramanavarapu, President, Granules Pharmaceuticals, Inc.. Several of the products are under litigation so it is not appropriate right now to name launch timelines. This will happen over a certain timeframe — every product is unique.

   Not answered directly.

9. 9. Gagillapur USFDA re-inspection status

   Sameer Baisiwala, Unknown

   Question. How do things stand with respect to the Gagillapur USFDA re-inspection?

   Answer, Priyanka Chigurupati, Executive Director. We have finished everything that we committed to the FDA; taken over 100 CAPAs and completed all activities related to the CAPAs. We have been in continuous correspondence with the FDA and we expect them to come anytime now.

10. 10. Peptide CDMO pipeline and commercial capacity

    Dhara Ganatra, Unknown

    Question. On the peptide CDMO acquisition (Senn Tides), can you help understand how many molecules and at what stage are under development, and does Senn have any commercial capability or capacity?

    Answer, Sanjay Kumar, CEO, Senn Tides India Private Limited. Cannot explicitly give the number of projects or pipeline. A third of revenue (~$20M as of last year) is from development projects (pharma + non-pharma); a third is at commercial level; and a third is work with other large CDMO players in the value chain. We are seeing a resurrection of that business after 1.5 years and engagement with the largest CDMO players has restarted. Focus remains on getting more development accounts from pharma and a bit on theragnostic.

    Partly answered.

11. 11. FTF selection criteria and oncology differentiation

    Chat question (read by Naman Bagrecha), IIFL Capital Services Limited

    Question. First question: many generic formulation companies are seeing fewer sole FTF or shared opportunities; what makes a relatively new entrant like Granules confident of getting sole FTFs? Second question: on oncology, with many companies (Shilpa, Sakar, Beta Drugs) targeting the segment, what differentiation does Granules have to outsmart competition?

    Answer, Priyanka Chigurupati, Executive Director. On FTFs: we pick about 10-20% of products as sole FTF and the rest across several segments; some products have been open for a long time but nobody has filed because of complexity — we are very close to filing two such products in the next couple of quarters. We have 2 already filed, waiting to hear on one, and 4-5 more. Not every product will be FTF but getting as many as we can is the goal. On oncology: complexity from identification to API and finished dosage development is critical; we have done a good job with the products filed so far; being able to take them to the right markets at the right time is key.

12. 12. DEA compliance and risk controls

    Aejas Lakhani, Unknown

    Question. DEA regulations are very stringent and any lapses could have high adverse impact on the CS segment. How do you think about this and what checks and balances have you put in place to mitigate this?

    Answer, Vijay Ramanavarapu, President, Granules Pharmaceuticals, Inc.. We have had several DEA inspections including recently last month; in many instances we go above and beyond what DEA requires. Our team has strong regulatory compliance in DEA and our formulations head has come from companies that have historically made controlled substance products. We are upgrading compliance tools and everything is digitalised. The DEA looks at site compliance, paperwork, and customer base; we focus on reputable customers and large wholesalers. We actively flag orders and turn away suspicious opportunities. Track record: essentially flawless DEA audits with no observations over 9-10 years.

    Follow-up. Is this a self-fueling mechanism where, as the DEA gets more comfortable, the quota system keeps opening up for Granules?

    Answer. Vijay confirmed it is reinforcing: two drivers are customer base and overall compliance; if you sell to quality customers, DEA gives more quota every year. API vendors are also choosing to give Granules a disproportionate amount because they know we sell through, which helps them get their quota. The major customers are consolidating wallet share with a few reliable suppliers and the same is happening on the API front.

13. 13. Gross-to-EBITDA margin translation

    Sameer Baisiwala, Unknown

    Question. Gross margin has improved by 1500 bps over the last 4 years but that has not translated into EBITDA margin expansion. What held this back and what's the outlook?

    Answer, Mukesh Surana, Chief Financial Officer. R&D investment moved from 3% to 6%, and with more fully integrated API to formulation we are adding manufacturing cost. As gross margin improves, operating expense also improves, so we have not fully gotten the 15% translation to EBITDA — but there will be some translation going forward. Last 3-4 years EBITDA improved 3pp; once Genome Valley and peptide CDMO (currently generating EBITDA loss) start yielding returns without major investments, operational leverage will be much better — you can do your own mathematics. We don't give guidance.

    Partly answered.

14. 14. Oncology ANDA pipeline

    Sameer Baisiwala, Unknown

    Question. On the oncology side, how many ANDAs have you filed so far and how many would you do in a year or two?

    Answer, Priyanka Chigurupati, Executive Director. Total ANDAs filed: north of 95; run rate currently 6-10 per year; going forward we are looking to increase to 10-15 US filings per year. For oncology specifically: 2 products filed; one of them has been extended to about 15 countries so far. About 6 in pipeline to be filed this year and early next year.

15. 15. Controlled substance pipeline and pain management

    Sameer Baisiwala, Unknown

    Question. On controlled substances, beyond the 4-5 products with market share potential, are there more approvals awaiting? What's the pipeline for pain management within controls?

    Answer, Vijay Ramanavarapu, President, Granules Pharmaceuticals, Inc.. There is room to grow within existing products and we will continue steadily increasing share. We have another 3 products launching over the next 12 months or so; growth requires additional quota over time. There are several FTF opportunities in controlled substance space being chased. Within pain management, focus is on 2 opioid APAP combination products; we have 2 approved opioid ANDAs (oxycodone APAP and hydrocodone APAP) and are starting to gain meaningful traction. A few more opioid ANDAs to be filed in the short term.

16. 16. Fixed vs variable cost split and one-off costs

    Naman Bagrecha, IIFL Capital Services Limited

    Question. Gross margin hasn't translated to EBITDA margins because of investments. Above-EBITDA expenses were closer to ₹4,100-4,200 crore in FY26 — how much would be fixed and how much variable?

    Answer, Mukesh Surana, Chief Financial Officer. Difficult to break because power and fuel are semi-variables (cannot reduce to zero even if plant is shut). But a significant portion is fixed, so operating leverage can be far better. One-off expenses over the last few years (higher remediation, failure to supply related costs including air freight because of USFDA inspection) will go off. Peptide currently generating EBITDA loss will also move into positive zone. Overall earnings profile will improve. On quantification: last full year USFDA remediation consultancy cost was close to ₹60 crore; failure to supply + indirect remediation + air freight put together takes the total abnormal expense to close to ₹100 crore.

    Follow-up. Naman pressed: fair to assume more than 50% of above-EBITDA expenses are fixed? Could it be higher than 75%?

    Answer. Mukesh: fairly higher than 50% but cannot give a specific number; as we add more businesses, fixed expenses will go up but operating leverage will be much better.

17. 17. DEA schedule participation and competitive intensity

    Aejas Lakhani, Unknown

    Question. Trying to understand across the 5 DEA schedules, where do you participate and where do you see incremental opportunities? Also, what is the competitive intensity in Schedule II and Schedule III?

    Answer, Vijay Ramanavarapu, President, Granules Pharmaceuticals, Inc.. We participate in several schedules but primary focus is Schedule II (ADHD and opioid drugs). Even within Schedule II, we focus on complex products — extended-release or with tough bioequivalence requirements. Schedule II products require API and finished dosage in the US, which is a barrier. Schedule III (e.g., Butalbital APAP caffeine) can be imported; we offer it for customer consolidation but it's not primary focus. On competition in C2: there are several players but most offer only a handful; market has consolidated around one player that's been there for decades; Granules is the newest entrant in top 10. Many got ANDA approvals but couldn't scale consistently, leading to loss of customer confidence and reduced DEA quota — only a handful of strong manufacturers in the space.

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