Ladies and gentlemen, good day and welcome to the Ajanta Pharma Q2 FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Yogesh Agrawal, Managing Director of Ajanta Pharma Limited. Thank you, and over to you, sir.
Thank you. Good afternoon and welcome to all of you. With me, I have Mr. Rajesh Agrawal, our Joint Managing Director, Mr. Arvind Agrawal, our CFO, and Mr. Rajeev Agarwal, our VP Finance and Investor Relations. I hope the results are already with you. I am pleased to inform you that the Board of Directors have approved the first interim dividend of INR 28 per share for the face value of INR 2 per share, totaling to INR 350 crore. We will now take you through business-wise performance for our current quarter and half-year, along with the comparison of previous year for the same period. We have completed second quarter and first half of the current year on a strong note, with revenue from operations growing by 14% and margins remaining resilient despite higher expenses. We remain confident to continue this growth journey with all our business shaping up as planned.
This is also reflected in our financial strength, which continued to be strong, with Return on Capital Employed at 33% and Return on Net Worth reaching 25% as at end of September 2025, reaffirming our position among the best in the industry. Let me now take you to the business details. Let me first take up the international business, and I will first start with the branded generics business in Asia and Africa, which contributed 40% to the total revenue. Our continued investment in both people and products in these regions reflects our strategic intent to scale this business meaningfully. This expansion reinforces our position for sustained growth in current year and beyond. Let's now first see the Asia. Ajanta's Asia business remains focused on the Middle East, Southeast Asia , and Central Asia.
In current quarter, the region delivered sales of INR 310 crore, up 5% from INR 296 crore, and in half-year, the sales stood at INR 614 crore, up 7% from INR 572 crore of previous year. Few orders got pushed to the second half of the year, thus affecting the growth in the first half of the year. We are confident to achieve low teens growth for the current year. We are pleased to report the launch of three new products during the quarter, taking the total tally to 13 in the first half of the year. The new launches were mostly in chronic therapies, which further strengthens our position in the high-potential markets. Let's move to Africa. Our Africa business is focused on West and East Africa.
In current quarter, sales stood at INR 221 crore, a growth of 4% compared to INR 213 crore, and in the first half of the year, sales were at INR 449 crore, a growth of 1% compared to INR 443 crore in the same period last year. Africa pharma market is expected to see moderated growth in the current year, as also for Ajanta, with impact of high base of previous year. However, against our guidance of mid-single-digit growth, we are now confident to achieve a double-digit growth for the entire year. Despite these short-term headwinds, we continue to strengthen our presence in the region with the launch of four new products during the quarter, taking the total tally to six in the first half of the year. We remain confident in the long-term growth potential and strategic relevance of our Africa business.
Let us talk about our other two verticals of the international business now. U.S. Generics. U.S. Generics business contributed 26% in total revenue in the quarter. As guided, the business performance has been excellent, with current quarter sales at INR 343 crore against INR 233 crore, posting an excellent growth of 48%, and in the first half of the year, sales stood at INR 653 crore against INR 460 crore, posting a growth of 42%. This growth is attributed to full benefit of five launches made in the second half of the previous year, three new launches in the first half of the current year, and gain in market share in few existing products. We remain as a preferred partner of choice for the distributors and customers due to our superior and committed execution. Let's now see Africa Institutional business.
The contribution from anti-malarial business further went down to 2% from 3% in previous year. With a revenue of INR 32 crore in the current quarter and INR 71 crore in the first half, it is a degrowth of 17% for the half-year. As we have mentioned earlier, this business remained unpredictable as it is dependent on the procurement by aid agencies, and we maintain a cautious outlook on this business segment. Now, I invite Mr. Rajesh Agrawal, our Joint Managing Director. Thank you, and over to you.
Thank you, and good afternoon to all of you. I will now take you through the India business performance. We have completed current quarter and half-year on a strong note for our India business. We are already seeing the positive signs from our new initiatives taken in the previous year, which has also contributed to the growth in current year. Coming to the performance, we continue to outpace the Indian pharmaceutical market by 32% as per IQVIA MAT September 2025, with Ajanta delivering an impressive growth of 10% compared to IPM's 8%. We continue to exceed volume growth by two times to IPM and new launches by 39%. This positive trend is evident across most therapeutic segments in which we operate, where our growth has consistently outpaced segment growth. We remain confident of sustaining this momentum in the coming year.
In current year, India business contributed 32% to the company's total revenue, supported by the launch of 10 new products, including one first-time in the country. During current quarter, sales stood at INR 432 crore compared to INR 386 crore in the same quarter of the previous year, registering a growth of 12%. In first half of year, sales stood at INR 841 crore compared to INR 739 crore in previous year, registering a healthy growth of 14%. Our India business also includes revenue from trade generics segment, which contributed INR 53 crore in Q2 against INR 46 crore, a growth of 14%, and in first half, INR 92 crore against INR 87 crore, a growth of 5%. In the covered market, we are fifth largest in IPM and amongst top 10 in all our therapeutic segments as per IQVIA MAT September 2025.
Cardiology contributed 37%, followed by ophthalmology 30%, dermatology 23%, and remaining 10% coming from pain in India branded sales. The new therapies of gynecology and nephrology are taking good shape and are expected to contribute meaningfully to the revenue in the coming years. I now invite Arvind Agrawal, CFO, to take you through the financial performance. Thank you, and over to you, Arvind.
Thank you, and good afternoon to all. On this call, our discussion includes certain forward-looking statements, which are projections or estimates about future events. These estimates reflect management's current expectations about future performance of the company. These estimates involve a number of risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Ajanta does not undertake any obligation to publicly update any forward-looking statements, whether because of new confirmation, future events, or otherwise. We will look at the consolidated financials and provide year-on-year comparisons. The key financial highlights for second quarter and first half of current year are as follows. Total revenue in second quarter stood at INR 1,354 crore against INR 1,187 crore, and in half-year, revenue stood at INR 2,656 crore against INR 2,332 crore, posting a healthy growth of 14% in both current quarter and first half of the year.
Our gross margin stood at 77% for the quarter and 78% for the half-year. Full year 2026 margin is expected to be around 78% plus minus 1%. Personnel cost was at INR 317 crore against INR 261 crore, an increase of 21% in the quarter, and INR 620 crore against INR 545 crore, an increase of 14% in the first half over the previous year. Higher increase is mainly on for MR addition in the second half of the previous year. Other expenses for the current quarter stood at INR 392 crore compared to INR 353 crore in the corresponding quarter of the previous year, reflecting an increase of 11%. For the first half of the current financial year, other expenses were INR 765 crore against INR 616 crore in the same period last year, an increase of 24%.
We continue to make strategic investment in our products and people across our branded generic portfolio, and we expect our other expenses to remain in line with the trends seen in the first half of the year. Our R&D spend, which is part of personnel and other expenses, was at 5% of total revenue and is expected to be at similar levels. In current quarter, expenses were at INR 63 crore against INR 57 crore, and in half-year, expenses were INR 119 crore against INR 108 crore. EBITDA for the current quarter stood at INR 328 crore compared to INR 311 crore in the corresponding quarter last year, reflecting a growth of 5%. For the first half of the year, EBITDA was INR 679 crore against INR 642 crore in the same period last year, registering a growth of 6%. EBITDA margins for the quarter were 24% and 26% for the first half.
Excluding the impact of mark-to-market foreign exchange losses, EBITDA margins were in line with our guidance of 27% plus minus 1% for both the quarter and the first half. Mark-to-market forex loss in other expenses stood at INR 41 crore in current quarter and INR 66 crore in half-year, whereas there was forex gain in other income of INR 40 crore in current quarter and INR 49 crore in half-year. Hence, excluding forex loss impact, EBITDA margin in the third quarter stood at 27% in the first half. It was at 28%. We remain confident of a sustained EBITDA margin of 27% plus minus 1% for the rest of the two quarters. During the quarter, PAT was at INR 260 crore against INR 216 crore, a growth of 20%, and in half-year, PAT was INR 516 crore against INR 462 crore, a growth of 12%. In current quarter and half-year, our PAT margin stood at 19%.
Income tax stood at 23% for the first half of the current year and is expected to remain in the range during the year. We incurred Capex of INR 145 crore in the first half of the current year and is expected to be in line with our guidance of INR 300 crore for the whole year. Trade receivables increased to 101 days from 94 days, primarily due to the discontinuation of factoring and the adoption of working capital loans to benefit from lower interest costs. This change remained neutral to the P&L as we hold matching investments for a similar amount, giving similar return to the interest outgo. On the other hand, inventory levels showed a significant improvement, standing at 56 days compared to 72 days in the previous year, reflecting the results of our sustained effort to enhance the efficiency of our working capital cycle.
With these highlights, I open the floor for the question and answer. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.
Sir, thanks a lot for the opportunity. So just on domestic formulation side, the number of new-to-market launches has been less for the first half of FY26. So if you could just share your comments for the remaining second half as well as FY27?
I think they have been very selective and strategic in nature. We have fulfilled the gaps wherever we have felt that there is a need for a new product launch. And this trend will continue even for the second half of the year. I don't expect to cross it or to launch brands where we are not very confident of the future growth potential of those segments or those brands. So we are quite happy with the number of launches we have done.
Got it. Sir, on the U.S. side, we have been pretty strong for the first half, probably might sustain for FY26. If you could just further sort of extend the thought process for FY27, 28, considering the R&D spend which we are doing now.
No, as you have seen, beginning of the year also, we had given the guidance that the U.S. will see a healthy growth, and that is what is playing out. And I also shared the reasons for that because we had launched five new products in the previous year, second half, and three new products got launched in the first half. So we were able to get a good market share for all these products and able to do a good execution of that. So I think the current quarter performance is what you can take it as we are going forward for the next two quarters also. We should be able to sustain this kind of run rate for the current quarter. I think FY 2027 and 2028, probably let's talk a little later in the year. But we believe that U.S. going forward also should perform well.
We should go maybe in high teens growth for sure next year.
Got it, sir. Thanks. That's it from my side.
Thank you. Our next question comes from the line of Bino Pathiparampil from Elara Capital. Please go ahead.
Hi, good afternoon. Just wanted some understanding of the nature of the forex loss. You mentioned that it's a translation loss. Where does that arise from?
See, we do hedging of our outstanding or export sales, so that hedging, because the euro moved very sharply during this first half, so because of that, the mark-to-market losses have been booked there, but on the other side, we also have gains because of the outstanding which we have from the export debt, so practically, it is nullifying. Only the thing is that because of the accounting norm, the loss is booked in the expenses, whereas the income goes into other income. Because of that, that classification of EBITDA is there. Otherwise, we are absolutely protected.
Understood. And for the full year, do you maintain the earlier margin guidance adjusted for the forex losses?
Yes, please. Absolutely.
Okay. Thank you.
Ladies and gentlemen, a reminder to everyone in the conference to ask a question. You may press star and one on your touch-tone phone. And if you wish to remove yourself from the question queue, you may press star and two. The next question comes from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead.
Yeah, hi sir. Thank you for the opportunity and congratulations on a good set of numbers. I just wanted to understand first on your EBITDA margin guidance while we are maintaining status quo. But as compared to, say, the first half where we have seen 28% kind of an EBITDA margin, and the outlook for all the segments, at least from a top-line growth, is robust. So I just wanted to understand why is there a cautious view on margins when the top-line growth is going to improve ahead as well?
See, what is happening is that the top-line growth is very robust, as you rightly said. Very true. But we are also simultaneously investing on people and products. That is something which is very, very important. And I think we are still talking about 27% plus minus 1%. So we are very confident that in spite of all the expenses or investment which we are doing in the market, in branded generic markets, etc., we are still going to get the same EBITDA margin which we are getting now.
Got it, sir. And so just one more on the working capital increase. So if I go through your cash flow, then the first half, the cash flows from operations have been a little weaker as compared to where we were historically. So just wanted to have a recall on the trade receivable commentary, what you made on your opening remarks. Can you please elaborate on that? How is that impacting your overall cycle, please?
Yes. Yeah, I'll tell you. See, last year, we did factoring for our receivables in the U.S. This factoring was done in Q3 at that time. Somehow, we found that the interest cost for working capital is much better. We will get the advantage. So we switched over from factoring to working capital. So you will see the borrowing in the balance sheet now, and you will also see the receivables increase. So it is just the effect of factoring going out and coming in back. So that's where the trade receivables have gone up.
Understood, sir. All right, sir. Thank you so much, and I'll turn back the queue.
Thank you.
Thank you. Our next question comes from the line of Bharat Celly from Equirus. Please go ahead.
Hi, sir. Good afternoon. And thank you for the opportunity. So I just wanted to understand on the expense part. We have been investing in new products as well as the building of the MR team for the new divisions. So how do you see that impact as well as how long it will take for us to start seeing benefit on the EBITDA side as well as margin side when these new MRs will start contributing positively?
I think, let's say, about one, one and a half to two years because to optimize the productivity of the new teams, especially in the new segments, it will take some time. But the MRs that we have added in the existing segments and the divisions that we have launched in the Cardiology last year and Dermatology, we are quite confident that they will start to yield results faster because we already have a good presence in those segments. So it's very hard to pinpoint and say exactly by which quarter and which year. But the efforts are on with full throttle to get them up to the productivity level that we are already at a corporate level.
When we talk from the margins perspective, so is it possible for us to go back to the margins like 30% probably next two years or largely that the investment will remain around 27%, 28% from the long-term perspective?
I think probably if you compare Ajanta's margins or margins with the rest of the pharma companies, we probably are one of the top three or top five companies who have this kind of margins. So I think the correct way to look at would be to see what is the growth we are posting on the top line and the bottom line. That would be the correct measure instead of focusing purely on the expansion of the margin. Because there is always the forward-looking expenses which comes in. So the margin expansion will keep continuing in some shape or form, in some quantity. There will always be some forward-looking expenses which will come in. So I think guiding towards that kind of expansion of 30% or plus probably will not be the right metrics to look.
I think the correct metrics will be to see what is the growth we are posting year over year on the top line and the bottom line.
Sorry, sir. Just I was wondering whether our expectation is to go towards higher margin or we will be more investing towards the growth. So that's what I was trying to understand.
No, we are of course driving for the growth, and that's how we have seen we've added people in the field, whether it was India or international markets, and that is reflecting in our P&L. Currently, our employee expenses have grown by 21%, so there is an addition of the people all around. Even our other expenses have gone up, so the growth does remain of the and increasing in the market share remains a very prime importance, and that will always continue to be there. At the same time, we are also looking at what is the growth we are putting on the bottom line as well, so both put together, I think we are comfortable and we are happy with the growth which we are posting.
Sure. And how many MRs or the persons we are looking to add in the next 18-24 months? Is there any ballpark which we can refer to?
In the domestic, we don't have any particular ballpark or number set. We will decide as we go along based on the need and the growth in the existing divisions. But however, we can, I mean, broadly going by the past trend, maybe we can look at about a couple of hundred in the next one and a half to two years. And for the export side, for the whole year, yeah, we are looking at about 10%-12% increase in the field size for the current year. And next year, it should be in the range of about 7%-8%.
Surely, sir. That's very helpful. Thanks a lot.
Thank you. Ladies and gentlemen, a reminder to the participants to press star and one on their touch-tone phone to join the question queue. And if you wish to remove yourself from the question queue, you may press star and two. The next question comes from the line of Abhishek Jain from AlfAccurate Advisors. Please go ahead.
Thanks for the opportunity and congrats for this insight of number. Sir, as you mentioned that other expenses have gone up because of the addition of the MRs in India. Just wanted to understand how much number of MRs in India and plus Asia and Africa at this point of time due to FY20 expense?
We now currently have total 5,680 people, both India and Indian markets put together as of today.
Okay. And how is the bifurcation? India versus Africa, Asia and Africa.
Yeah. India is 3,600 people, and Asia, Africa, it is 2,080 people.
Okay, sir. Got it. And sir, what was the INR versus Euro and INR versus USD in this quarter realization?
I didn't get your point.
Sir, what was the realization INR versus euro and INR versus USD in this quarter?
I think euro was somewhere around 102 because.
Realization.
Realization. Our realization including these forward booking which we have done. Okay. For dollar, it is 86. And for euro, it is 98.
And how much is the current hedging in the overall forex?
Almost 50%.
50%. Okay. Got it. And sir, my last question on this, if you can throw some more light on the segment-wise EBITDA, a ballpark number on the different geographies or segments like U.S. generics and Africa and branded and Asia branded and USD?
No, we don't give geographical EBITDA margin. Sorry for that.
So in this quarter, U.S. Generics has shown a very impressive number. So just, is there any margin improvement over there?
I think.
Sorry, I didn't get you.
You're saying because U.S. is very strong, whether it has also contributed in improving the margin?
Yeah, naturally. Of course. The EBITDA margins in the branded generic business is higher as compared to the U.S. market. So naturally, the U.S. business which has done well, it has also given a contribution to the gross margin and the PAT also. Yeah.
Okay. Thank you, sir. That's all from my side.
Yeah.
Thank you. Our next follow-up question comes from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.
Sir, just this clarification. Firstly, on this number of MRs that to be added in India on 3,600 base, say in second half or next 12 months?
No. Maybe total MR for India is 3,600. And for EM, it is around 2,000. So for India, we are talking about 100 people maximum in the next one year. Whereas in the emerging market, we are talking about 10% this year and 7%-8% next year.
Got it.
In India, we said 200 over the period of two years. Because the question then was one and a half to two years. So this is an estimate. This is not a fixed number. There are no definitions. But going by the past trend, this is what I estimate. Yeah.
Got it, sir. And sir, secondly, on this switching from factoring model, any particular reason you would like to call out or highlight? And is this something which now we are going to sort of continue in the foreseeable future if you could throw some light on this aspect?
Yes. I think we will continue this structure now because this is little advantageous in terms of the interest rate. So we are getting a benefit of at least 2%-3% compared to factoring. So that is why we have switched over. And this is very beneficial for the company.
You're seeing other companies also sort of trying to put such kind of structure as far as the U.S. market goes?
Honestly, don't know what is happening there. But at least for us, this has really worked out very well. So we thought it is better to really, and as I mentioned in my commentary also, it is neutral to P&L because a similar amount of investment is being made here with the same interest rate. So practically, P&L is absolutely neutral.
Got it. And sir, if you could at least throw a few insights into the inventory level reduction in terms of how differently we have worked on to manage the working capital as far as inventory is concerned.
I think it is the continuous effort we are doing for the last three years now. We are consistently working on that particular area, both on the receivable and on the inventory. And now it is coming, those results are coming to us. In fact, it is an effort which is ongoing. And we will continue to work on it.
I think what you are saying in the first half is slightly on the lower side. I think going forward, it may inch up a little more from here. I think this is not sustainable.
Exactly.
So, it will probably go in the range of right now we're at 56 days. So, we are expecting it should go about 65 days or so. I think the 70-day record is the realistic figure. Probably we should operate below that.
Understood, sir. This is helpful. Thank you.
Thank you. A reminder to the participants. You may press star and one to join the question queue, and in case you want to remove yourself from the question queue, you may press star and two. The next question comes from the line of Alok Dalal from Jefferies India Private Limited. Please go ahead.
Yeah. Good afternoon. Yogesh, you mentioned about better growth in Africa region for FY26 versus the previous guidance. So what is giving confidence of better growth here?
No. Generally, the way we are seeing the trends, I think we feel for the next two quarters, our growth should be better than what we had guided earlier. So, also, the next two quarters' base for the previous year was slightly lower. If you see, currently, we are trending at about 230 to 230 CR per quarter, last two quarters. Q3 and Q4 of the previous year, they were on an average 150 CR all the quarters. So, based on that, if we continue our current trend, even if we're not able to sustain the current trend rate, even slightly lower, still we'll be able to post the good growth.
Okay. And for next year also, can we assume double-digit growth to sustain?
For which market?
For the Africa market only.
Yeah, yeah. Yeah, Africa, we are looking at a double-digit growth for the next year. Yeah.
Okay. And Rajesh, there is this for the cardiology division in India. We are seeing sustained underperformance versus the IPM. So what are the reasons for that? And what are the steps being taken to reverse that?
So there is a huge anomaly that is there in the IQVIA reporting of Ajanta growth rates versus what we have recorded internally. Now, if you look at the covered market or the cardiac market, growth rate is 12%. And Ajanta growth rate being reported is 6%. Whereas our internal actual growth rate on the sales side is matching with the IPM growth rate of the cardiac segment. So there is no underperformance there itself. We are in talks with IQVIA to see how this anomaly can be taken out and what could be the reasons why there is such a big gap. It usually doesn't happen. So we've had a couple of rounds of discussions, and the talks are on to find out where which brand and why this gap is existing. I'm not too worried, as I said, and why also is what I expressed.
Having said that, of course, there is always room and scope for us to grow faster. And the effort is on. And hopefully, this anomaly should come out or iron out in itself in the next couple of quarters. I hope that answers your question.
Yes, sir. So it's basically a reporting issue from IQVIA perspective. The company reported numbers are tracking well.
Precisely. Yes.
Yes. Okay. Okay. Thank you, sir. Thank you for taking my question.
Thank you very much.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on their touch-tone telephone.
There are no questions.
There are no further questions. I would now like to hand the conference over to Mr. Yogesh Agrawal for closing comments.
Thank you, everyone, for joining this call. In case if there are any further questions that remain unanswered today, please reach out to our investor relations team. Thank you so much.
Thank you, everybody, for joining the call.
Thank you.
On behalf of Ajanta Pharma, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.