The call was hosted by management, including Mr. Erez Israeli (Chief Executive Officer), Mr. M. V. Narasimham (Chief Financial Officer), and Ms. Aishwarya Sitharam (Head – Investor Relations).

Financial Performance for Q1 FY27

  • Consolidated Revenues stood at ₹8,071 crores (US$853 million), a decline of 5.6% year-on-year (YoY) and growth of 7.4% sequentially. The decline was attributed to lower sales of lenalidomide, which contributed to the prior-year period. The underlying base business, excluding lenalidomide, delivered double-digit growth.
  • Gross Profit Margin was 46.5%, a decrease of 1,039 basis points YoY and an increase of 169 basis points sequentially. The YoY decline was largely due to lower lenalidomide sales, a provision of ₹240 crores for inventory and other costs related to semaglutide API challenges, and higher solvent costs from the Middle East conflict.
  • Excluding the semaglutide provision, the overall gross margin was 49.4%.
  • The reported gross margin for Global Generics was 51.6% and for PSAI was 4.5%. Excluding the provision, these were 53.8% and 12.9%, respectively.
  • SG&A Spend was ₹2,882 crores, an increase of 12% YoY and 4% sequentially, accounting for 36% of revenues. The increase was driven by higher personnel costs (annual increments), adverse forex movement, investments in branded businesses, and elevated freight costs from Middle East disruptions.
  • R&D Spend was ₹577 crores, declining 8% YoY and increasing 6% sequentially, accounting for 7.1% of revenues. The decrease reflected lower biosimilars development expenditure.
  • Underlying EBITDA was ₹1,009 crores (US$107 million), yielding a margin of 12.5%. Excluding the semaglutide provision, the margin was 15.4%.
  • Profit Before Tax (PBT) was ₹553 crores (US$58 million), a margin of 6.8%. Excluding the provision, the PBT margin was 9.8%.
  • Effective Tax Rate (ETR) for the quarter was 21.3%, lower than 26% YoY due to a reversal of previously recognized tax provisions from a resolved prior-year assessment and a favourable jurisdictional mix.
  • Profit After Tax (PAT) attributable to equity holders was ₹443 crores (US$47 million), a margin of 5.5%.
  • Diluted EPS for the quarter was ₹5.32.
  • Operating Working Capital as of June 30, 2026, was ₹14,353 crores (US$1.52 billion), a decrease of ₹81 crores from March 31, 2026.
  • Capex Cash Outflow for the quarter was ₹307 crores (US$32 million). Full-year CAPEX guidance is approximately ₹1,800 crores.
  • Cash Flow before acquisition-related payout was negative ₹216 crores (negative US$23 million).
  • Net Cash Surplus as of June 30, 2026, was ₹3,057 crores (US$323 million).
  • Foreign Currency Hedges: US$354 million was hedged at rates between ₹92.34 and ₹94.63, maturing by March 2027. RUB 2.8 billion was hedged at ₹1.26/RUB, maturing within three months.

Key Business Highlights and Strategic Outlook

  • The company remains focused on strategic priorities: strengthening base businesses and building future growth engines in peptides, biosimilars, consumer health, and innovation.
  • Semaglutide Update: A provision of ₹240 crores was taken for inventory and costs related to API challenges. The company sold 180,000 pens before halting supplies. The root cause has been identified, and the company is targeting to resume commercial supplies by November 2026, aiming to supply 6-7 million pens between November and March. There is no risk to patient safety.
  • Product Launches: Key complex generic launches included bosutinib (anti-cancer, first-to-market with 180-day exclusivity for 400mg strength) and nintedanib (lung disease) in the US. Semaglutide was launched in Canada (first approval) and India.
  • Partnerships & Innovation: Progress was noted with toripalimab (nasopharyngeal carcinoma), which crossed ₹100 crores in sales in India. Partnerships were formed for XACDURO® (hospital-acquired pneumonia) and zoliflodacin (gonorrhoea, approved in Thailand).
  • Regulatory: The US FDA completed a Pre-License Inspection (PLI) at the Bachupally biologics facility in June 2026 and issued a Form 483 with seven observations. The company has submitted its response.

Geographic Segment Performance (Local Currency)

  • North America Generics: Revenue of US$236 million (27% of overall), declined 41% YoY (due to lenalidomide) but grew 19% sequentially. The underlying base business grew double-digit. Six new products were launched.
  • Emerging Markets: Revenue of ₹1,833 crores (23% of overall), grew 31% YoY and 2% QoQ, driven by new launches and favourable forex. Forty-three new products were introduced.
  • India: Revenue of ₹1,718 crores (21% of overall), grew 17% YoY and 10% QoQ, driven by innovation, new launches, price increases, and volume growth. Seven new brands were launched. IQVIA data showed outperformance vs. the Indian Pharmaceutical Market (IPM).
  • Europe (incl. NRT): Revenue of €131 million (18% of overall), was flat YoY and declined 3% QoQ due to price erosion and a change in the NRT operating model (now recognizing rebates net of revenue, profit-neutral change). Twenty-four new generic products were launched.
  • PSAI (Pharmaceutical Services & Active Ingredients): Revenue of US$91 million (11% of overall), declined 5% YoY and 10% QoQ due to lower API volume uptake. Thirty-eight Drug Master Files were filed globally.

Q&A Session Key Points

  • Margins: Management stated the adjusted EBITDA margin (excluding semaglutide and Middle East impacts) was around 18% for the quarter and expects to be "in the neighbourhood of 20%" for the year, including Q2 without semaglutide.
  • US Business: The sequential decline in US sales was attributed to timing of product procurement, not underlying issues. Double-digit growth ex-lenalidomide is maintained.
  • Abatacept: The BLA is filed only from the company's Bachupally facility. The PDUFA goal date is December 2026. The seven FDA observations are considered addressable, and no additional BLA queries have been received yet.
  • Productivity: SG&A growth is largely attributed to forex and freight costs. The company aims for sales growth to outpace associated cost growth.
  • Tariffs: Management views recent US tariff announcements on generics as an opening for discussion, not an immediate practical concern, noting a two-year window and existing US CMO manufacturing for 25-30% of revenues.
  • R&D & Tax: Normalized tax rate guidance is 24-25%. R&D spend is expected to be 7-8% of revenue, focused on products for post-2034.
  • Biosimilars: Rituximab is expected to be interchangeable. The denosumab BLA is with a partner who is addressing facility issues; the company is in discussions on the path forward.