Ipca Laboratories Limited (IPCALAB) Earnings Call Transcript
August 12, 2025
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to the Ipca Labs Q1 FY '26 Earnings Conference Call hosted by Dam Capital. [Operator Instructions] 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's Q1 FY '26 Earnings Call hosted by Dam Capital Advisors Limited. On the call today, we have representing Ipca Labs management, Mr. A.K. Jain, Managing Director; and Mr. Harish Kamath, 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 answer given may include some forward-looking statements based on our current business expectations. This must be viewed in conjunction with risks that pharmaceutical business faces. Our actual and future financial performance may differ from what is projected or perceived. You may take your own judgment on information given during the call. Our domestic business in the first quarter of the current financial year has grown by around 10%. Ipca has on mid-June 2025 maintained has its rank as 16th as per IQVIA. Overall, Ipca continued to improve its market share. Compared to the first quarter last financial year MAT June '24, there is around 7 bps increase in the overall market share from 2.01% to 2.08% in MAT June 2025. Six brands of Ipca continue to remain around top 30 brands in the country. Both in acute chronic segments, we have delivered better growth compared to the market in MAT June 2025 as per IQVIA. Overall, for the export business, our branded formulation business has grown by 10% in this particular quarter to around INR 124 crores from around INR 113 crore in last financial year in the first quarter. Generic business in the quarter has delivered around 15% growth. Generic business has around INR 326 crore as against INR 283 crores in last financial year. 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 front, Q1 FY '26 stand-alone Ipca has improved its margin from 23.68% -- to 23.82% as against 22.22% in Q1 FY '25. However, the consolidated EBITDA margins are at around 18.39% in Q1 '26 as against 18.52% in Q1 '25. There is a marginal decline in that. And overall, our stand-alone net profit is up by around 26% to around INR 262 crores, and consolidated net profit is up by 18% to around INR 234 crores. Even given the broad numbers, now I will request participants to ask questions.
[Operator Instructions] The first question is from the line of Saion Mukherjee from Nomura.
Sir, on Unichem, we have seen a decline in gross margin in this quarter. Also, the overhead expenses for the consolidated business has gone up, which seem to have impacted the overall EBITDA margin. So if you can explain the dynamics which is impacting the margin. And in the backdrop of this quarter 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 -- consolidated number is around 9% growth. Some businesses declined in their Asia and African market, more particularly Asia market because of issue ongoing in the Myanmar. From INR 23 crores, the business has come down to around INR 8 crores 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 crores to around INR 14 crores. So these are the 2 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. So that has grown by around 37%, from INR 26 crores to around INR 36 crores. So -- but as far as U.S. is concerned, on 4 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 -- market again. So 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 lost. 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 overall lower margin for the quarter. In addition to that, in Unichem's accounts, there is an additional provision of around INR 12 crores because of currency fluctuation because of this European Competition Commission's provision, which is made last financial year, in March last financial year. And since -- because of adverse movement of euro compared to the -- so cross-currency level has gone up. And as a result of that, around INR 12 crore additional provisions are made. And 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. And so around INR 10 crores provision was made in the books of account. So that has resulted in the overall lower profit as far as Unichem is concerned. And overall, if you look at the whole of the financial year, our guidance for the consolidated number was around 9% to 10% overall growth, and 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 the EBITDA margin may not improve by 1%. It may be around [ 0.75% ] or so. So that will be a slight change in the overall margin guidelines for the current fiscal.
Okay, sir. And my second question, on the India business, there is a 10% growth, which is still better than the market, but seem to be a little slower than what we had 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 the India business, let's say, most therapies, we have done well except cardiovascular therapy because in this therapy, we have done the reorganization of business. We have added 2 more marketing divisions in this therapy and because of the disturbance of product to people and shifting of people to -- and products to various new divisions and all. And it took some time to recruit the manpower, all the manpower -- additional manpower. So that has resulted in cardiovascular business in this quarter has not grown to our expectations. The growth has come down to around 8% in this particular quarter. But there is a faster recovery is happening, and we are hopeful that we will do much better than we were doing earlier as far as cardiovascular therapies are concerned.
The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
So just again on domestic 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 almost -- 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%.
So 15.1% for Ipca and 9.9% for industry, correct?
No. I said 9.9% for industry and Ipca is 15.1%, chronic.
Yes. Yes, chronic.
Yes. Chronic, yes. But our internal growth is low because of the overall -- in case of cardiovascular therapy, there is 2 more divisions are added in current year, and that has resulted in a little bit lesser business in the -- overall, at the secondary level, prescription-wise that has not impacted much. That is a....
Sure, sir, got that. How much manpower are we adding in this division and then overall MR addition?
Almost around 400 people are added in cardiovascular market.
Okay. And any other therapy any more MRs to be added in this year, just to complete that?
Broadly, the entire expansion exercise is over here.
Just one more from my side. On Unichem, while products had impacted the current performance, but 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 they are 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.
And sir, the business from the Ipca side, when do we see that scaling up?
Let's say, we have started shipping the products. Overall, I think whatever current deal wins which has happened so far, I think that could translate around $15 million, $16 million kind of business. And still there is a -- we are in first quarter, so business will further move up.
And sir, lastly on this, when do we start filing or let's say, increase the pace of filing from our side, as in Ipca side?
We have already initiated the filings. I think 1 filing has happened in this quarter. And almost around 15, 16 products are under various phases of development here.
[Operator Instructions] The next question is from the line of Surya Narayan Patra from PhillipCapital. Sorry to interrupt you, Mr. Surya Narayan. Actually, there is a lot of disturbance from your line, from your background.
Yes. Is it -- am I audible?
Yes, you're audible.
Yes. Okay. So basically about the U.S. business, so we had seen in the previous quarter, around INR 20 crores, INR 22 odd crores kind of incremental business for Ipca. So how is the trend moving from that level? And are we seeing any kind of incremental kind of visibility from our interaction, what we would be having with the bulk buyers in the U.S. market, sir? See, in fact, I'm seeing there is a relatively stronger generic growth. So if you can go -- both the point I was connecting, so if you can give some clarity to those specs.
Let's say, I have already indicated that whatever deal wins which has happened so far, that indicate that around -- almost around -- the annual turnover could be almost around $16 million as far as Ipca is concerned. And more number of products are being shipped there and there is almost around 3 quarters more are there. So we will win definitely more number of deals. And hopefully, the business will move further up for as far as Ipca is concerned.
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 DSP Mutual Fund.
Just a clarification. What you're broadly indicating is that the 10% India formulations growth that we saw in the first quarter is -- seems like an aberration, and then this would accelerate as we go along. Is that understanding correct, sir?
Because our other therapies are growing faster. And our main therapy, like say, even with the pain management in this quarter, we have recorded a growth of around 13%.
Understood, sir. And sir, any sense on how the U.K. business has done for us for both the Ipca business as well as the Unichem business? And is there any change that is happening post the FDA that has been signed? Just how do you look at this development, positively, negatively, just how are you thinking about this one?
As far as the FDA is concerned, that doesn't impact pharmaceuticals because there is hardly any change as far as the business environment is concerned. And as far as the U.K. 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 expiries. And with that, most product prices were coming down. So -- and 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 U.K. was lower than that. So overall, it was a very tough kind of market scenario out there in U.K. as far as the first quarter is concerned. As far as Unichem is concerned, in first quarter, some of their product had a shortage in that market. So they had a good business overall in U.K. in the first quarter of the current year. And therefore, their European business has moved up.
[Operator Instructions] The next question is from Rashmi from Dolat Capital.
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 as well each of your export business and Unichem numbers for this full year?
Rashmi, as far as the top line guidance is concerned, there is no change. So this quarter also, the business has grown. And hopefully, by end of the year also, we should be somewhere between 9% to 10% top line growth. Only in case of consolidated EBITDA margin there would be a little bit lower than what the guidance was given. Instead of 100 bps increase, it will be about 75 bps. But that means we are not changing any guidance, yes.
Understood. And that is only because of basically lower margin from the Unichem. So any change...
That is right. If you see our stand-alone 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. And so if we consider Unichem numbers, so in Unichem also, whatever you had guided earlier, that we would be crossing around INR 300 crores of EBITDA this year, that still remains intact in the subsequent quarter...
No. I don't think looking at the first quarter, what has happened, it won't be possible this year, yes. But hopefully, going forward, in the next 3 quarters, they should do better than what they have done in the first quarter.
The next question is from the line of Saion Mukherjee from Nomura.
Sir, one clarification on Unichem. You called out INR 12 crore currency fluctuation and INR 10 crore additional impact because of the euro provision. So this INR 20-odd crores that you mentioned, this is as part of other expenses? And also, is there any onetime like shelf-stock adjustment, et cetera, because of the...
It is part of the other expenses. What happened, there was a EUR 14 million EU penalty for which we provided in the last financial year, EUR 14 million. But the penalty demand has not come so far. In the intervening period between last year and current year, the euro has appreciated. So that is the reason we have to make additional provision of another INR 12 crore. Penalty was already provided in the books. So then also demand has not come, earlier there is a demand we can't pay. And that liability was open. And because euro appreciated, we were forced to make additional provision.
Right, right. That is clear, sir...
And Ireland, we are closing down that facility. So the amount, INR 8 crores to INR 10 crores, is all 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 such additional provisions that came in the quarter?
No, no, nothing like that, Saion. What happened, 2, 3 products where they were having very good market share and their own API and good margin, they lost business to some competition. So they have gained market share in other products, but that business has yet to come.
The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
Sir, just on the API side, where do we -- what do we see in terms of pricing trends now? Are they stable? Or are they further still on the downtrend? And subsequently, what is happening on the domestic side?
It is positively stable. It is not down trend. And demand is gradually improving in export market.
Okay. And then any addition of product that can come up for us? Or you would be largely -- existing portfolio is what will drive growth?
Every year, 2 to 3 new product that comes into the market.
[Operator Instructions] The next question is from the line of Surya Narayan Patra from PhillipCapital.
So 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 it 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. So there, whatever businesses were coming for projects and all, it has reduced. So they were making consistent profit during the last 1 decade. But this year, the situation is difficult. Other than that, Pisgah continue to be incurring losses, but in line with what it was incurring last year. The injectable project is ongoing and should get commercially ready by second half of this financial year. Post that, only some improvement can be seen in the Pisgah financials.
Okay. And the institutional sales, sir, see, in fact...
It is stagnant, same as last year first quarter.
Okay. This is a seasonality factor, sir?
No, mostly due to funding. But this year we don't see any growth in the institutional business. First quarter, it is 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. And regards to the recently expanded capacity, sir, if you just can give an update that, okay, let's say, Dewas or the kind of the upgraded plant of Ramdev, how are those facilities are really...
No, no. All new facilities, what we told will get commercialized in the current financial year. Nothing recently got commercialized. And Dewas is an old facility, now commercialized 3 years back.
No. In fact, the regulatory inspection and all that, that you are thinking about?
Regulatory inspections, one agency came and inspected, others are expected. So we have started filing dossiers from Dewas. And export business to some markets have also already started -- commenced.
The next question is from the line of Kunal Randeria from Axis Capital.
Sir, your stand-alone gross margins are very strong, around 74%. It was something similar last quarter also. So I'm just wondering, what's driving this margin expansion? It used to be in mid-60s earlier. And is there any more headroom to it? Or you see some downside in the short-term?
No, this whatever improvement is there mostly because of the product mix. There is no fundamental change otherwise. So this year in the first quarter season, products which were not having better margins, the sales were less. So 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 procurement price or selling price.
Right, sir. But you did also mention India business should kind of pick up growth. So you should be able to at least maintain these margins, right?
Don't say our guidance was also to increase overall stand-alone margin by almost around 1.5%. So that has happened in first quarter and that trend will continue in the overall in the current financial year. And then first quarter current year, we did better business in a lot of markets like Canada. Australia and New Zealand, there was a significant shipment, maybe exceeding 100% of their growth. And there, the margins are better, so overall material cost has little come down.
All right. Sir, just maybe second question is on sales force. I think you have just over 7,000 people. What are your plans for expansion for the next 2 to 3 years? Maybe 200 or 300 people annually? Or do you think this is enough now for the next 2 years?
Maybe around 3% to 4% additions will keep on happening every year.
Right, sir. And would it be across your therapies or anything in particular that we should be looking for?
More towards specialty segment, not towards the generalistic segment, more towards specialty. That said, derma, we will like to add more people. Urology, we'd like to add more people. CNS, we would like to add more people in time to come. Cardiac, we have recently added, so there has not been much of addition.
Sure. So basically in some of the smaller therapies, these are actually growing very fast. We are doubling down those, got it, sir.
Yes.
And just sir, one more. You touched upon some subsidiaries performance now. These have been a big drag on your financials. So taking a slightly longer-term view, when should we expect these subsidiaries to kind of contribute meaningfully to the bottom line? In this quarter, they have kind of a negative contribution. So maybe 1 year, 2 years, 3 years, how many years will it take for them to contribute?
These are to -- these subsidiaries are mainly to overall, say, increase our international business. Like, say, Europe, U.K., we have started subsidiaries. Current year first quarter, it has given loss, but there's a long way to go with our business, and we definitely expect much greater, maybe around more than INR 300 crores business in U.K. in time to come with all the products in pipeline, which is getting matured and having registration in those markets. So it's the beginning. So for some quarters, some kind of losses may happen. Last year, Europe, U.K. has given good profit. But current year, yes, the market conditions was bad and they have resulted in lower profit. As far as Onyx is concerned, again, Harish has already told that this company was always giving us 25% to 27% kind of EBITDA margins. And by and large, they are serving to the innovator companies on -- or the large pharma companies in terms of initial, let's say, new chemical entities, initial all these solid-state 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. So that company was doing well. But in the first quarter current year, they have also reported a loss of almost around GBP 300,000 as a loss. And largely because that new product initiations or the new project initiation by all these, let's say, either by big pharma or by the virtual pharma companies are very, very less. And funding availability because of all these disturbed market and uncertainties are creating that kind of market scenario. So that trend we are seeing in the last 6 months, that is happening. Still, we are not seeing any kind of change. So probably this year is going to be a difficult year as far as Onyx concerned now. As far as Unichem is concerned, Unichem, after our takeover, things were working better. And we are hoping that 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, and that's all work in progress. So overall, I think in shorter period, yes, there could be some quarters here and there, these kind of things could happen. But long-term visibility and all that would be very good. We looked at -- yes, kind of Ipca business model is there, a similar kind of business model we should -- except domestic market, they will not be there. But all other markets, we are looking to expand their businesses and all. So in future, they should also do better. And as far as Pisgah is concerned, one facility is under installation there. It may take some more time another 5, 6 months -- 6 months more. And once they commercialize, yes, initial period, they may also incur some kind of losses because it will take time to build the businesses there. But that will also result. So I think 2, 3 years period is a good -- 2 years period is a good number to see that we scale up all these kind of subsidiaries. We are also setting up another subsidiary in Germany and initiating the registration of the company. So for some time, that company also may incur losses. But we see that now we will aggressively participate in the German market and register our products and start. So it's a journey. Maybe 1 or 2 years' journey may happen of initial losses and then building up the businesses. So that's bound to happen when we are scaling up our business in various markets.
The next question is from the line of Nikhil Mathur from HDFC Mutual Fund.
Sir, I just wanted to revisit the overall guidance that you have given. So did I hear it right that you were expecting 9%, 10% growth in FY '26 and consol EBITDA margin to improve by 75 basis points versus 1 percentage points, that was the earlier guidance?
Yes, that is correct. Yes.
Got it. But sir, you are at 18% in 1Q. So the incremental improvement that the margins will see, it will be majorly from the domestic business or from Unichem? So which all parts of the businesses do you expect margin expansion in 9 months of the remainder of the year?
Nikhil, the Q2 business in the domestic market is always the highest. So 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 the domestic profitability front, can you give some directional sense as to where the domestic margins are today versus the consol level? And do you foresee margin expansion in domestic business every year going forward? Or there can be some years, let's say, this next year could be a buildup here? And then again, there could be some decline. So how does one think about the domestic profitability over a 2-, 3-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. And in the last 2 years, we have added a lot of people. And once they start adding to the overall business, then margins keeps on improving. And in the current financial year, it's also in the first quarter, if you look from 22.25% in last year first quarter, we have reported stand-alone margin of 23.82%. So there is more than 1.5% increase in overall margin in the first quarter itself. And that trend would continue.
Okay. So you are in the middle of margin expansion in the domestic business as well, and that should continue?
Yes.
Understood. And sir, one final question on the Unichem side. I understand the moving parts here, what you called out for 1Q. Just wanted to check on both FY '26 and beyond FY '26. So do we expect any sort of EBITDA growth in FY '26? And what's your take on FY '27 and '28? I know a lot of synergy benefits are yet to play out. When do they start kicking in? And when do we see that hockey stick kind of improvement in Unichem numbers going forward?
So I think synergy business will still take around 1 year time. So that is what we are hoping because we have started now filing the products in various markets. Once registration start coming and the then we'll initiate the marketing and all that kind of thing. And in current financial year, in first quarter, it's all because of product mix changes and some kind of deal lost in the U.S. market for some of the products, that has resulted in overall lower margin. And also some onetime provisions in the balance sheet, that has also resulted in some kind of debits to the P&L account. But we are hopeful for the next 9 months of the current financial year.
So Unichem can see, sir, EBITDA growth in FY '26 on a full year basis?
No, no. Growth, I don't think it is possible because of Q1, what has happened.
Okay. Got it. Got it, sir. And sir, if I may, one final question. On the Ipca standalone U.S. business, can you call out the margin drag that is there? And secondly, any large-sized launches can one -- can we expect in the next 12, 15 months? I mean, large size launches can be a few tens of millions of dollars. Anything of that sort are you expecting in the Ipca standalone U.S. business?
See, we have already launched 4 products of Ipca in the U.S. market. Those products, Mr. Jain said, has a visibility of about $15 million to $16 million business in the current financial year. Another 4 to 5 products also should get launched during the current financial year. But immediately after launch, you get market share, then business actually start, there will be some gap. But going forward, every year, 5 to 6 Ipca products will go on getting launched in the U.S. market.
Okay. And sir, how do you account it in the stand-alone books, the U.S. business? Do you use...
Whatever transfer price from Ipca to Unichem, we book in the stand-alone. And actual sale, what is happening in the U.S., 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 stand-alone and this much in Unichem? Just to make...
Actually, our business with Unichem is on profit sharing. Earlier, our business with other partners are also on the same footing. So whatever U.S. sales is there, certain percentage will go to them as selling and distribution costs. And whatever profit is remaining that will be shared between Ipca and Unichem. So that is the same model what we were following in the earlier version when we were there in the U.S. market. And for doing this U.S. Ipca business, they are not going to add any people. Same people will be handling also Ipca business. So whatever selling and distribution, whatever margin they get, plus share of profit is their margin.
Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments.
Yes. Thank you. Since all the questions are asked and there is no more further questions, we will close this call. Thank you all for participating in our con call. Thank you.
Thank you. Ladies and gentlemen, on behalf of Dam Capital Advisors and Ipca Labs, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.
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