IOL Chem and Pharma Q1 FY26 earnings call

Where management's figures differ from the filing

• EBITDA: said ₹69.5 cr (+19.5% YoY), margin 12.4%, including other income; filed ₹62.14 cr (+21.6% YoY, margin 11.3%), excluding other income of ₹7.37 cr. Management's EBITDA figure includes other income (₹7.37 cr), explaining the difference vs filed figure.
• PAT growth: said +14.4% YoY to ₹34 cr (base ₹29.7 cr); filed +13.2% YoY to ₹33.93 cr. Management used ₹29.7 cr as prior-year base vs filed implied base of ₹29.97 cr.

What moved the numbers, as management explained it

• EBITDA margin expanded 102 bps to 12.4% on better product mix, cost optimization, and improved capacity utilization.
• Revenue growth of 9.8% YoY supported by newly commissioned 10,800 MTPA automated, backward-integrated Paracetamol plant exporting to Europe.
• Non-Ibuprofen APIs (Metformin, Clopidogrel, Pantoprazole, Fenofibrate) seeing strong demand; Metformin utilization >90%, Clopidogrel/Pantoprazole 70-80%.
• Cash PAT of ₹55 cr (+16% YoY) materially above reported PAT of ₹34 cr reflects non-cash depreciation and other accounting adjustments. (accounting)
• Chemical segment pricing subdued due to cautious downstream procurement and soft market sentiment; Ethyl Acetate pricing bottomed out.

The numbers management led with

• Revenue from operations: Rs 552 cr, +9.8% YoY (vs Rs 502 cr in Q1 FY25)
• EBITDA: Rs 69.5 cr, +19.5% YoY; margin 12.4%, +102 bps YoY
• New Paracetamol plant capacity: 10,800 MTPA fully backward-integrated automated plant commenced exports to Europe
• Capex guidance: Rs 150-200 cr annually for FY26 (in line with prior years)
• Non-Ibuprofen API revenue target: Grow from ~Rs 500 cr to Rs 800-1,000 cr in 2-3 years; combined Ibuprofen + non-Ibuprofen target Rs 2,000 cr in 2 years

Guidance on this call

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.

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

• Balance sheet remains debt-free with no leverage, providing headroom for growth investments.
• FY26 CAPEX plan of ₹150-200 cr for growth, infrastructure, land, new software and automation.
• Strong cash generation: Cash PAT ₹55 cr in Q1 FY26, +16% YoY.
• 100-acre land near Chandigarh-Bhatinda highway: environment clearance in progress; planned for chemicals and APIs.
• Metformin capacity to expand by 4,000 MTPA once Paracetamol plant absorbs old Metformin facility.
• Working capital: finished goods inventory increased by ₹12 cr vs Q1 FY25.

The industry, as management sees it

API market entered FY26 with steady demand across most therapeutic categories; some product prices have bottomed out but pricing pressures persist in pockets. Chemical segment marked by steady demand but subdued pricing due to cautious downstream procurement. Demand traction is robust in non-Ibuprofen APIs (Metformin, Paracetamol, Clopidogrel, Pantoprazole, Fenofibrate) which are operating at optimum utilization levels.

Risks management named

• Subdued API pricing across key products; some products bottomed out but pricing pressures persist
• Soft chemical segment pricing due to cautious downstream procurement
• USFDA inspection timeline still uncertain — recent queries received on DMFs but no confirmed physical inspection date

Not answered directly

• Exact timeline for USFDA physical inspection
• Concrete timeline for achieving 15%+ blended EBITDA margin (referred to as 'guidelines' only)

Asked for a number, answered without one

• Paracetamol and Acetic Anhydride price recovery timing: Said Paracetamol prices at low level, demand 3-4% above pre-COVID; Acetic Anhydride prices also down; cost advantage may help; no clear timeline.
• USFDA inspection timeline: Said USFDA does not need to physically inspect; products approved via DMF review (Fenofibrate, Levetiracetam); other regulators' audits also considered.
• Impact of US 50% tariff announcement: Said API not impacted so far; no tariff announced on API; uncertain about next announcement.
• Minoxidil peak revenue timeline: Said peak revenue of ₹50-60 cr from Minoxidil in addition to intermediates but did not specify achievement timeline.

Every question, with its answer

1. 1. Paracetamol & Acetic Anhydride outlook

   AB Rafe, Wealth Catalyst

   Question. Paracetamol has seen weak demand over recent quarters leading to substitute demand drag on Acetic Anhydride. What is the current outlook for both segments? Any signs of recovery and strong rebound?

   Answer, Rakesh Mahajan, Advisor. Paracetamol prices are at a very low level but demand is already above pre-COVID levels with ~3-4% growth. Acetic Anhydride prices are also down but IOL's cost of production is better than peers via the new 10,800 MTPA automated backward-integrated plant. The new Paracetamol plant is expected to operate at 55-60% utilization in FY'26 and at optimum levels next year.

   Follow-up. With a major Ethyl Acetate plant in the Middle East recently shut down, are volumes/prices rising? How is Europe demand for both pharma and chemicals?

   Answer. Middle East Ethyl Acetate shutdown has not produced any encouraging pricing change as Ethyl Acetate pricing is fully bottomed out; exports in line with prior trends. Europe API demand is good — most products have CEP and demand is gradually increasing as customer approvals progress.

2. 2. API demand and pricing

   Priti Agarwal, SK Associates

   Question. How is the demand environment evolving for Ibuprofen and Paracetamol post-COVID normalization, and what are current price realizations across key markets?

   Answer, Kushal Kumar Rana, Director Works. No hefty demand increase but a gradual rise visible in Paracetamol plant utilization ramp; Ibuprofen demand similar to prior quarters. Pricing: Ibuprofen USD 9-10/kg, Metformin USD 2.5-3/kg, Paracetamol USD 3-3.5/kg.

3. 3. Ibuprofen market mix & Minoxidil peak revenue

   Surabhi, NV Alpha

   Question. How much of Ibuprofen is in regulated vs non-regulated markets? What is the peak revenue potential from newer APIs like Minoxidil?

   Answer, Rakesh Mahajan, Advisor. Around 70% of Ibuprofen exports go to regulated markets (Europe and LATAM) with 25-30% to non-regulated. Minoxidil capacity of ~120 tonnes targeted to deliver peak revenue of Rs 50-60 cr plus intermediate sales.

   Follow-up. Does IOL sell Ibuprofen in North America? What is peak revenue potential from non-Ibuprofen APIs?

   Answer. Ibuprofen is primarily sold in Europe and LATAM only. Non-Ibuprofen APIs currently at ~Rs 500 cr, targeting Rs 800-900 cr to Rs 1,000 cr in 2-3 years to achieve the 50-50 portfolio split.

4. 4. Captive vs merchant chemicals & export mix

   Devanshi Shah, SDA Finance

   Question. How much of chemical production is consumed internally for backward integration vs sold externally as merchant? What is the current domestic vs export revenue split and how is IOL transitioning to a global regulated supplier?

   Answer, Rakesh Mahajan, Advisor. Captive consumption varies by product: Isobutyl Benzene 75-80% captive for Ibuprofen; Ethyl Acetate 100% merchant; Acetic Anhydride ~40% captive (used in MCA, Acetyl and Paracetamol plants). Captive use will rise as Paracetamol scales. Domestic/export split currently 75%/25% with 40% export target in 2 years, achieved by converting Clopidogrel, Pantoprazole and Fenofibrate to regulated markets.

5. 5. Export guidance scope & non-Ibuprofen share

   Maulik Varia, B&K Securities

   Question. Is the 40% export guidance for chemicals plus pharma combined, or pharma APIs only? Also, was non-Ibuprofen share 34% in Q1?

   Answer, Pardeep Kumar Khanna, Chief Financial Officer. The 40% export guidance is for the company as a whole — chemicals plus pharma combined. Non-Ibuprofen share was 34% in Q1, confirmed.

6. 6. Paracetamol pricing, margin guidance, Metformin expansion

   Maulik Varia, B&K Securities

   Question. Is the USD 3-3.5 Paracetamol price the domestic price and what is export realization? Are we maintaining 15% margin guidance (including other income) for FY26? What is current Metformin utilization vs 7,600 MTPA, any expansion plans, and will DCDA imports from China continue?

   Answer, Rakesh Mahajan, Advisor. Paracetamol USD 3-3.5 is a blended realization; export prices are typically 10-20% higher than domestic. 15% margin guidance is maintained. Metformin utilization is over 90%; +4,000 MTPA expansion planned by repurposing the older Paracetamol plant. DCDA is not available domestically and will continue to be imported from China.

7. 7. Minoxidil expansion & non-Ibuprofen strategy

   Raj Patel, RK Securities

   Question. Details on Minoxidil expansion and Unit 9B's role in non-Ibuprofen portfolio, including contribution post-December 2025 commissioning? What is the broader non-Ibuprofen strategy and product pipeline?

   Answer, Kushal Kumar Rana, Director Works. Unit 9B is a dedicated Minoxidil facility carved out of an earlier Gabapentin plant — selected due to existing customer demand and pre-completed validation. Initially intermediates will be sold alongside API until full API capacity is used. Strategy is to convert non-Ibuprofen products (Clopidogrel, Pantoprazole, Fenofibrate) from Indian markets to regulated markets. Metformin utilization 90%+; Clopidogrel and Pantoprazole 70-80%+; regulated market conversion is the key margin lever.

8. 8. 100-acre land, capex FY26 & Paracetamol ramp

   Dhiraj Shah, RJ Investments

   Question. What are planned developments for the newly acquired 100-acre land near Chandigarh-Bhatinda highway once approvals are secured? What is projected capex for FY26 and which factors are driving strong topline/bottomline growth? Current Paracetamol capacity utilization and ramp plan?

   Answer, Pardeep Kumar Khanna, Chief Financial Officer. On the 100-acre land, environmental clearance process initiated, public hearing complete and ministry meeting happened July 29 — clearance imminent; site will host chemicals and APIs. FY26 capex is planned at Rs 150-200 cr (in line with prior years) for growth, infra, land, software and automation. Performance drivers are capacity utilization, efficiency focus and backward integration. Paracetamol utilization is 34% in Q1, targeted to reach 60% by Q3 FY26 — fully automated and backward-integrated, positioning IOL as cost-competitive.

9. 9. SMS Pharma competition & patent portfolio

   Shaik Mohammad Riaz, Individual Investor

   Question. SMS Pharma has started a new plant — is their facility more advanced than ours and what competition do we face? On patents, three were mentioned including Sitagliptin — what is the third?

   Answer, Kushal Kumar Rana, Director Works. SMS Pharma's plant is not new — running for over two years. They use a different process route for Ibuprofen; IOL has its own competency and prefers not to comment further. On patents: Valsartan, Sitagliptin, and Losartan (Abhay Raj Singh later noted a third patent has been filed but not yet received).

   Follow-up. USFDA inspection timeline, US exports and impact of Trump 50% tariff announcement? Also, raw material expenses rose ~Rs 50 cr — what's the reason?

   Answer. US is not directly impacted by tariffs since APIs are not included; IOL is USFDA approved and approvals continue even without physical inspection (Metformin, Fenofibrate, Levetiracetam). Recent USFDA queries received on DMFs but process ongoing. On raw materials, change in finished goods inventory of ~Rs 12 cr explains the gap.

10. 10. Margin timeline, Rs 600 cr top line, AA pricing

    Shaik Mohammad Riaz, Individual Investor

    Question. EBITDA margins of 15-20% have been discussed for a long time — when will they actually be achieved? Will IOL cross the Rs 600 cr quarterly revenue mark in the next 2-3 quarters? What is the price difference between Acetic Anhydride in regulated vs India markets?

    Answer, Pardeep Kumar Khanna, Chief Financial Officer. Last year FY25 EBITDA margin was 10-11%, currently near 13% — 14-15% targeted shortly. Rs 600 cr quarterly mark is achievable within FY26 if not touched exactly. Acetic Anhydride price difference between regulated and Indian markets is minor — 5-10% depending on country.

    Partly answered.

11. 11. FY26 margin and revenue guidance confirmation

    Maulik Varia, B&K Securities

    Question. Are we sticking to the FY26 guidance of achieving 15% EBITDA margin? What EBITDA margin is expected from the Chemical segment for FY26? Are we confident of achieving ~10-15% blended revenue growth?

    Answer, Abhay Raj Singh, Senior Vice President and Company Secretary. No prior commitment to cross 15% — current trajectory is from 12% last year to 13% now with target of 14-15%. Chemical segment EBITDA margin guided at 5-6% for FY26. Revenue growth of 10% YoY is targeted for FY26.

12. 12. Peak revenue potential & Acetic Anhydride REACH

    Priti Agarwal, SK Associates

    Question. What is the estimated peak revenue potential for both Ibuprofen and non-Ibuprofen segments over the next few years? How will the REACH certification for Acetic Anhydride be capitalized for EU expansion with specific volume/revenue targets?

    Answer, Pardeep Kumar Khanna, Chief Financial Officer. Combined Ibuprofen + non-Ibuprofen revenue target is Rs 2,000 cr in 2 years. On Acetic Anhydride, captive consumption is increasing with Paracetamol capacity ramp to 60% by Q3 — only surplus quantities will be sold, focused on higher-realization markets like Europe where REACH certification was just obtained.

Topic by topic, in the order it was spoken

In their words