Ladies and gentlemen, good day and welcome to the Ipca Lab Q1 FY26 Earnings Conference Call hosted by DAM Capital . 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 completes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Nitin Agarwal from DAM Capital. Thank you and over to you.
Thank you. Hi, good afternoon everyone, and a very warm welcome to Ipca Lab Q1 FY26 Earnings Call hosted by DAM Capital Advisors Limited. On the call today, we have representing Ipca Lab Management, Mr. Ajit Jain, Managing Director, and Mr. Harish Sharma, Corporate Counsel and Company Secretary. I will hand over the call to Mr. Jain for the opening comments, and then we'll open the floor for questions. Please go ahead, sir.
Thanks, Nitin, and DAM Capital for organizing this call. Today's hearing calls and discussions and answers given may include some forward-looking statements based on our current business expectations. This must be viewed in conjunction with the rest of the pharmaceutical business sector. Our actual and future financial performance may differ from what is projected or foreseen. You may take your own judgments on information given during the call. Our domestic business index, the first quarter of the current financial year, has grown by around 10%. Ipca Laboratories Ltd has, from June 2025, maintained its rank as 16th as per IQVIA. Overall, Ipca Laboratories Ltd continues to improve its market share compared to the first quarter last financial year. June 2024, there is around a 7 bps increase in the overall market share from 2.01% to 2.08% in June 2025.
Its brand of Ipca continues to remain in the around top 30 brands in the country. Both in acute and chronic segments, we have delivered better growth compared to the market in June 2025 as per IQVIA. Overall, for the export business, our branded formulations business has grown by 10% in this particular quarter to around INR 124 crore from around INR 113 crore in last financial year in the first quarter. Generic formulations business in that quarter has delivered around 15% growth. Generic formulations business has around INR 326 crore against INR 283 crore in last financial year. Active pharmaceutical ingredients (API) business has delivered around 12% growth. There is some decline in the domestic business, but export business, more particularly from Europe and Latin America, has done well, and that has resulted in around 12% kind of growth.
On margin fronts, Q1 FY2026, standalone, Ipca Laboratories Ltd has improved its margin from 23.68% to 23.82% as against 22.22% in Q1 F20Y25. However, the consolidated EBITDA margin is at around 18.39% in Q1 FY2026 as against 18.52% in Q1 FY2025. There is a marginal decline in that, and overall, our standalone net profit is up by around 26% to around INR 262 crore, and consolidated net profit is up by 18% to around INR 234 crore. Even given the broad numbers, now I'll request participants to ask questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star then one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star then two. Participants are requested to use answers well after asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sayyad Mukherjee from Nomura. Please go ahead.
Yeah, thank you for taking my question. Sir, on Unichem, we have seen a decline in gross margin in this quarter. Also, the overhead expenses, you know, for the consolidated business has gone up, which seem to have impacted the overall EBITDA margins. If you can explain the dynamics which is impacting the margins and in the backdrop of this quarter's results, how are you seeing for the full year? What will be your guidance with respect to consolidated EBITDA margins?
Okay. As far as Unichem is concerned, the Unichem U.S. business has grown by around 12%, and overall, the Unichem business has grown by around, the consolidated number is around 9% growth. Some businesses declined in their Asia and African markets, more particularly Asia markets because of issues ongoing in Myanmar. From INR 23 crore, the business has come down to around INR 8 crore because certain import licenses are not received, and the shipments could not happen during this particular period. The Brazil business is also down from INR 21 crore to around INR 14 crore. These are the two numbers where some decline is there. Asia business has good margins, but that business has declined in the quarter. Overall, European business has done well. That has grown by around 37% from INR 26 crore to around INR 36 crore. As far as the U.S.
is concerned, on four major products, they have lost the market share in this quarter where the profitability was better, and on other products, they have gained the market share again. Overall, number-wise, the overall business growth is appearing to be 12%, but overall, margin-wise, there is a decline because some of the profitable products, the market share are low, and that is one of the reasons that overall margins have declined, and also Asia business declined, and Brazil business some declined. That has resulted in the overall lower margins for the quarter. In addition to that, in Unichem accounts, there is an additional provision of around INR 12 crore because of currency fluctuation, because of this European Competition Commission's provision, which is made last financial year, in March last financial year.
Since because of the adverse movement of euro compared to the cross-currency level has gone up, as a result of that, around INR 12 crore additional provisions are made. There are almost around INR 10 crore additional expenditure debited to the P&L account because of closure announced at the facility which they have in Ireland. Around INR 10 crore was the provision made in the books of account. That has resulted in the overall lower profits as far as Unichem is concerned. Overall, if you look at the whole of the financial year, our guidance for the consolidated number was around 9% - 10% overall growth, and the overall margin increased by around 1% EBITDA margin. More or less, I think the top line would remain in the similar kind of range, but EBITDA margin may not improve by 1%. It may be around 0.75% or so.
That will be a slight change in the overall margin guidelines for the currency.
Okay, sir. My second question on the India business, there is a 10% growth, which is still better than the market, but seems to be a little slower than what we have seen in the past. Anything you would like to call out as far as India business and demand environment is concerned?
Let's say in India business, most therapies we have done well, except the cardiovascular therapy, because in this therapy, we have done the reorganization of business. We have added two more marketing divisions in this therapy, and because of the disturbance of product to people and shifting of people to and the products to various new divisions, it took some time to recruit the manpower, all the additional manpower. That has resulted in cardiovascular business in this quarter has not grown to our expectation. The growth has come down to around 8% in this particular quarter, but there is a faster recovery happening, and we are hopeful that we will do much better than we were doing earlier as far as cardiovascular therapies are concerned.
Okay, sir. Thank you.
Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Okay, thanks for the opportunity. Just again on Ipca's formulation, if you could also share how the chronic and the acute growth has been for the quarter compared to IPM?
If you look at the overall, IPM has grown by around 8%, and our growth is tracked by IQVIA as 11.6%. Acute growth was 6.8%. We have recorded a growth of 9.8%, and chronic IQVIA growth is around 9.9%, and IQVIA has recorded our growth as around 15.1%.
15.1% for Ipca and 9.9% for industries, correct?
No, I said 9.9% for industrial. Ipca is 15.1%.
Yeah.
Chronic.
Yeah, chronic.
Yeah, chronic. Yeah. Our internal growth is low because of the overall, in case of cardiovascular therapy, there are two more divisions added in the current years, and that has resulted in this, that the lesser business in the home. Overall, at the secondary level, prescription-wise, that has not impacted much. That is what I'm aware of.
Sure. How much manpower are we adding in this division, and then overall MR addition?
Almost around 400 people are added in the cardiovascular market.
Okay. Any other therapy, any more MRs to be added in this year just to complete that?
Broadly, that entire expansion exercise is over. Yeah.
Just one more from Michael on Unichem. While products have impacted the current performance, where are we in terms of having the synergy in place, and subsequently what would be the overall U.S. sales for Ipca including Unichem for the quarter?
Let's say overall, as far as Unichem is also concerned, we are hopeful that there will be recovery. Even on the products there in the first quarter, we have lost some kind of market share, but we expect those kind of recoveries to happen in the coming quarters.
Sir, the business from the Ipca side, when do we see that scaling up?
Let's say we have started shipping the products and the overall items, whatever current deal gives, which has happened so far, I think that could translate around $15 million, $16 million kind of business. We are in first quarter, so business will further move up.
When do we, lastly on this, when do we start filing or let's say improve the pace of filing from our side or as an Ipca side?
We have already initiated the filings. I think one filing has happened in this quarter, and almost around 15, 16 products are under various stages of development.
Got it. That's fine.
Thank you. A reminder to the participants, please press star then one to ask a question. The next question is from the line of Surya Narayan Patra from Philips Capital. Please go ahead.
Yeah, thanks for this opportunity, sir.
Sorry to interrupt you, Mr. Surya Narayan. Actually, there is a lot of disturbance from your line, from your background.
Yes, am I audible?
Yes, you are.
Yeah, you're audible.
Thank you, sir. Basically, about the U.S. business, we had seen in the previous quarter around INR 2,022 crore kind of incremental business for Ipca. How is the trend moving from that level? Are we seeing any kind of incremental kind of visibility from our interaction? What will you be having with the bulk buyers in the U.S. market? In fact, I'm seeing there is a relatively stronger generic growth. If you can go for the quarter's connecting, if you can give some clarity to those aspects.
I already indicated that whatever deal gives, which has happened so far, that indicates that almost around the annual turnover could be almost around $16 million as far as Ipca is concerned. The more number of products are being shipped there, and there is almost around three quarters more are there. We will win definitely more number of deals, and hopefully, the business will move up further according to the price set.
Sorry to interrupt you, sir. The participant line has been dropped. I'll take the next question. The next question is from the line of Chirag from BSP Mutual Fund. Please go ahead.
Thank you for the opportunity. Just to clarification, what you're broadly indicating is that the 10% India formulations growth that we saw in the first quarter feels like an aberration, and then we saw the accelerate as we go along. Is that understanding correctly?
Because our other therapies are growing faster, and our main therapy, let's say, even with the pain management in this quarter, we have recorded a growth of around 13%.
Understood. Sir, any sense on how the UK business has done for us for both the Ipca business as well as the Unichem business? Is there any change that is happening post the FTA that has declined? I guess, how do you look at this development positively and negatively? Just how are you thinking about this one?
As far as FTA is concerned, that doesn't impact pharmaceuticals because there is hardly any change as far as the business environment is concerned. As far as the UK business is concerned, it's very fastly competitive, and I think this quarter was not good for us also because there was excess inventory in the market, and some of the players were offloading the short-dated expires, and with that, the most product prices were coming down. We have seen in the market that some of the products were even selling below cost. What has been shipped from India, the sales prices in the UK were lower than that. Overall, it was a very tough kind of market scenario out there in the UK as far as the first quarter is concerned. As far as Unichem is concerned, in the first quarter, some of their products had a shortage in that market.
They had a good business overall in the UK in the first quarter of the current year. Therefore, the European business has moved up.
Understood. Okay, thank you.
Thank you. A reminder to the participants, please press star then one to ask a question. Participants, to ask a question, please press star then one. The next question is from the line of Rashmmi from Dolat Capital. Please go ahead.
Yeah, thanks for the opportunity. Sir, can you just revisit your guidance for each segment? You have already given EBITDA margin guidance for full year, but for all your domestic business and breakup of your export business and Unichem, you know, numbers for this full year?
Rashmi, as far as the top line guidance is concerned, there is no change. This quarter also the business has grown, and hopefully, by the end of the year, we should be somewhere between 9% - 10% top line.
And you.
Only in terms of consolidated EBITDA margin, that would be a little bit lower than what the guidance was given. Instead of 100 bps increase, it will be about 75 bps.
Yeah, that is.
We are not changing any guidance. Yeah.
Understood. That is only because of, you know, basically lower margin from the Unichem. So ends to.
If you see our standalone business, the EBITDA margin is better than what we guided. Only because of lower Unichem EBITDA margin, we are reducing guidance by about 25 bps.
Okay. If we consider Unichem numbers, in Unichem also, whatever you had guided earlier that, you know, we would be crossing around INR 300 crore of EBITDA this year, that still remains intact in the subsequent quarter?
I don't think, looking at the first quarter, what has happened, it won't be possible this year.
Understood.
Going forward in the next three quarters, they should do better than what they have done in the first quarter.
Got it. Thank you. That's it from my side.
Thank you. The next question is from the line of Saion Mukherjee from Nomura. Please go ahead.
Yeah, thanks for the follow-up, sir. One clarification on Unichem. You know, you called out INR 12 crore currency fluctuation and INR 10 crore additional impact because of the Europe provision. This INR 20-odd crore that you mentioned, this is as part of other expenses. Also, is there any one-time like shelf stock assessment, etc., because of the company's?
That is part of the other expenses. On that one, there was a €14 million penalty for which we provided in the last financial year, €14 million. The penalty demand has not come so far. In the intervening period between last year and current year, the euro has appreciated. That is the reason we have to make additional provision of another INR 12 crore.
Right.
You know, penalty was already provided in the books.
Yeah, yeah.
Demand has not come. Unless there is a demand, we can't pay. That liability was open, and because we were appreciated, we were forced to make additional provision.
Right, right. That is clear, sir.
In Ireland, we are closing down that facility. The amount INR 8 crore-INR 10 crore is on redundancy amount, which we have to pay to employees who are going out.
Okay. Sir, I was also asking about because you had some competitive pressure in the U.S. Was there any sort of shelf stock adjustment or any sort of additional provisions that came in the quarter?
No, nothing like that, Saion. What happened, two, three products where they were having very good market share and their own API and good margin, they lost business to some competition. They are gaining market share in other products, but that business has to come.
Okay. Okay. Okay, sir. Thank you.
Yeah.
Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Yeah, just on UCSI's growth, what do we see in terms of rising trends now? Are they stable or are they further still on the downtrend? Subsequently, what is happening on the domestic market?
They are relatively stable. It is not a downtrend, and demand is gradually improving in export markets.
Okay. On the many addition of products that can come up for us, or we would be largely existing portfolio is probably dry growth?
Every year, two to three new products come into the market.
Understood. Thank you, sir. That's it from me.
Yeah, thanks, Sushal.
Thank you. Participants, to ask questions, please press star then one. The next question is from the line of Surya Narayan Patra from Phillip Capital. Please go ahead.
Thank you for the opportunity, sir. Sir, if you can just elaborate about the subsidiary performance, how are they really doing? Is there any kind of impact that you are seeing there, or that is things are normal?
Only one subsidiary, which was always doing better, Onyx Scientific. This year, they have not done that well because all these not necessary expenses are being reduced by all multinational companies. Their whatever businesses were coming for projects and all, it has reduced. They were making consistent profits during the last one decade. This year, the situation is difficult. Other than that, Ipca Laboratories Ltd continues to be incurring losses, but in line with what it was incurring last year. The India Cable project is ongoing and should get commercially ready by the second half of this financial year. Post that, only some improvement can be seen in the Ipca Laboratories Ltd financials.
Okay. The institutional sales, sir, seems that it is.
It is stagnant. Same as last year, first quarter.
Okay. This is a seasonality factor, sir?
No, mostly due to funding.
Okay. Yeah, okay.
This year, we don't see any growth in the institutional business. What we did last year, we did this year. Going forward also, we believe we should be able to do, but there won't be any growth.
Okay. Regarding the recently expanded capacity, sir, if you just can give an update that, okay, let's say they were for the kind of the upgraded plants of Ramday, how those facilities are really.
No, no. All new facilities, what we told, will get commercialized in the current financial year. Nothing recently got commercialized. Yeah, Devas is an old facility that now commercialized three years back.
No, in fact, the regulatory inspection and all that you're thinking about.
Regulatory inspections, one agency came and inspected. Others are expected. We have started filing those years from Devas, and export business to some market has also already commenced.
Okay, sure. Yes, thank you, sir.
Yeah.
Thank you. The next question is from the line of Kunal Randeria from Axis Capital. Please go ahead.
Hello, sir. Thanks for the opportunity. Sir, your standalone gross margins are very strong, around 74%. It was something similar last quarter also. I'm just wondering, what's driving this margin expansion? You used to be in mid-60s earlier. Is there any more headroom to it, or you see some downside in the short term?
No, this quarter, whatever improvement is there is mostly because of the product needs. There is no fundamental change otherwise.
It’s very good.
In the first quarter season, products which were not having better margins, the sales were less. If you see therapeutic growth also, where margins are better, those therapies have grown better than what it was last year. That is the only reason. Nothing beyond that. There is no other fundamental change, either in the guideline price or selling price.
Right, sir. You did also mention India business should kind of, you know, pick up growth. We should be able to actually maintain these margins also.
I would say our guidance was also to increase overall standalone margin by almost around 1.5%. That has happened in the first quarter, and that trend will continue overall in the current financial year. In the first quarter of the current year, we did better business in a lot of markets like Canada. For Australia, New Zealand, there was a significant shipment, maybe exceeding 100% of their growth, and there the margins were better. Overall, material costs have really come down.
All right. Maybe the second question is on sales force. I think there were just over 7,000 people. What are your plans for expansion for the next two to three years, maybe 200, 300 people annually, or do you think this is enough now for the next few years?
Maybe around 3% - 4% sales additions will keep on happening every year.
Right. Would it be across your therapies or anything in particular that we should be?
More towards the specialty segments, not towards the generalistic segment. More towards the specialty, yeah.
Right.
Derma, we would like to add more people. Urology, we would like to add more people. CNS, we would like to add more people in time to come. Cardiac, we have recently added, so there might not be much of addition there.
Sure. Some of these smaller therapies, which are actually growing very fast, we are adopting them.
Yeah.
You touched upon some of the subsidiaries' performance now. They have been a big drag on your finances. Taking a slightly longer-term view, when should we expect these subsidiaries to contribute meaningfully to the bottom line? In this quarter, they have kind of a negative contribution. Maybe one year, two years, three years, how many years will it take for them to contribute?
Actually, these are two, these subsidiaries are mainly to overall, say, increase our international business. Like, say, Europe, UK, we have started subsidiaries. Current year, first quarter, it has given loss, but there is a long way to go with business, and we definitely expect much greater, maybe around more than INR 300 crore business in the UK in time to come with all the products in pipeline, which is getting matured and having registration in those markets. It's the beginning. For some quarters, some kind of losses may happen. Last year, UK has given good profit, but current year, yes, the market conditions were bad, and they have resulted in lower profit. As far as Onyx Scientific is concerned, again, Harish has already told that this company was always giving us 25%- 27% kind of EBITDA margins.
By and large, they are serving to the innovative companies or the large pharma companies in terms of initial, let's say, new chemical entities, initial all these holistic chemistry and developing the manufacturing processes for them and all that. That kind of services they are doing. They are not in the generic kind of therapies and all that. That company was doing well, but in the first quarter of current year, they have also reported a loss of almost around INR 300,000 selling points as a loss. Largely because new product initiations or the new project initiation by all these, let's say, either by these pharma or by the virtual pharma companies are very, very less. Funding availability because of all these disturbed markets and uncertainties are creating that kind of market scenario. That trend we are seeing in the last six months that is happening.
Still, we are not seeing any kind of change. Probably this year is going to be a difficult year as far as Onyx Scientific is concerned. Now, as far as Unichem is concerned, Unichem, after our takeover, things were working better, and we are hoping that, yes, things would be far better in time to come. We have yet to do a lot of things there, and business expectations of expanding their businesses in other markets and all that, that's all work in progress. Overall, I think, in a shorter period, yes, there could be some quarters here and there, these kind of things could happen, but long-term, the visibility and all that would be very good. We look that, yes, kind of Ipca business model is there.
A similar kind of business model we should assure domestic market, they will not be there, but all our other markets, we are looking to expand their businesses and all. In the future, they should also do better. As far as your Ipca is concerned, one facility is under installation there. It may take some more time, around five, six months, six months more. Once they commercialize, yes, initial period, they may also incur some kind of losses because it will take time to build the businesses there. That will also result. I think two, three years period is a good, two, two years period is a good number to see that we scale up all these kind of subsidies. We are also setting up another subsidy in Germany and initiating the registration of the company.
For some time, that company also may incur losses, but we see that now we will aggressively participate in the German markets and register our products and start. It's a journey, maybe one or two years journey may happen of initial losses and then building up the business. That's bound to happen when we are scaling up our businesses in various markets.
All right, sir. That's very helpful. Thank you, sir.
Thank you. The next question is from the line of Nikhil Mathur from HQSC Mutual Fund. Please go ahead.
Yeah. Hello, sir. Good evening. Sir, I just wanted to revisit the overall guidance that you have given. Did I hear it right that you are expecting 9%, 10% growth in FY2026 and consolidated margin to improve by 75 basis points versus 1% of points that was earlier guidance?
Yeah, that is correct. Yeah.
Got it. But sir, you are at 18% in 1Q. The incremental improvement that the margins will see, will it be majorly from the domestic business or from Unichem? To which all parts of the businesses do you expect margin expansion in nine months of the remainder of the year?
Nikhil, the Q2 business in the domestic market is always highest. You will see some improvement in Q2 itself. Historically, Q2 business gives the maximum quarter business in the domestic market. Plus, as we told you, the operation and financial performance of Unichem also should improve going forward.
Okay. Understood. Sir, on a domestic profitability front, can you give some directional sense as to where the domestic margins are today versus the consolidation level? Do you foresee margin expansion in domestic business every year going forward, or there can be some years such as this next year could be a build-up year, and then again, there could be some declines? How does one think about the domestic profitability over a two, three-year period from now?
If you don't add too many people, margins will definitely keep on expanding because your productivity keeps on building up. In the last two years, we have added a lot of people. Once they start adding to the overall business, margins keep on improving. In the current financial year, also in the first quarter, if you look from 22.25% in last year's first quarter, we have reported a standalone margin of 23.82%. There is more than 1.5% increase in overall margin in the first quarter itself. That trend would continue.
You are in the middle of margin expansion in the domestic business as well, and that should continue.
Yeah.
Understood. Sir, one final question on the Unichem side. I understand the moving parts there, what you called out for 1Q. I just wanted to check on both FY2026 and beyond FY2026. Do we expect any sort of EBITDA growth in FY2026? What's your take on FY2027 and FY2028? I know a lot of synergy benefits are yet to play out. When do they start kicking in, and when do we see that hawkish kind of improvement in Unichem numbers going forward?
I think synergy business will still take around one year time. That is what we are hoping because we have started now filing the products in various markets. Once registration starts coming in, then we will initiate the marketing and all that kind of thing. In the current financial year, in the first quarter, it's all because of production exchanges and some kind of deal loss in the U.S. market for some of the products. That has resulted in the overall lower margin and also some one-time provisions in the balance sheet. That has also resulted in some kind of debits to the P&L account. We are hopeful for the next nine months of the current financial year.
Can Unichem see their EBITDA growth in FY2026 on a full-year basis?
No, growth, I don't think it is possible because of Q1, what has happened.
Okay. Got it. Got it, sir. If I may, one final question. On the Ipca standalone U.S. business, can you call out the margin drag that is there? Secondly, any large-sized launches can one be expected in the next 12 months, 15 months? I mean, large-sized launches can be a few tens of millions of dollars. Anything of that sort, are you expecting in the Ipca standalone U.S. business?
We have already launched four products of Ipca in the U.S. market. Those products, Mr. Jain said, have a visibility of about $15 - $16 million business in the current financial year. Another four to five products also should get launched during the current financial year. Immediately after launch, you get market share, then business actually starts. There will be some gap. Going forward, every year, five to six Ipca products will go on getting launched in the U.S. market.
Okay. Sir, how do you account it in the standalone books, the US business?
Whatever transfer price from Ipca to Unichem, we book in the standalone. The actual sale, what is happening in the US, we book in consolidated.
Any ballpark thumb rule number that, let's say, if X million dollars is the revenue from a product, this much is booked in standalone and this much in Unichem?
Because our business with Unichem is on profit sharing. Earlier, our business with other partners was also on the same footing. Whatever U.S. sales is there, a certain percentage will go to them as selling and distribution cost. Whatever profit is remaining, that's with the share between Ipca and Unichem. That is the same model we were following in the earlier version, and we were there in the U.S. market. For doing this U.S. Ipca business, they are not going to add any people. The same people will be handling also Ipca business. Whatever selling and distribution, whatever margin they get, the share of profit is their margin.
Got it. Thank you so much and all the best.
Yeah.
Thank you. Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments.
Thank you. Since all the questions are asked and there are no more further questions, we will close this call. Thank you all for participating in our phone call. Thank you.
Thank you. Ladies and gentlemen, on behalf of DAM Capital Advisors and Ipca Lab , that concludes this conference. Thank you for joining us, and you may now disconnect your line.
Thank you.