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    Ajanta Pharma Limited

    AJANTPHARM
    Healthcare·28 Jul 2025
    Management Summary

    Ajanta Pharma reported a strong start to FY26 with 14% revenue growth, driven by robust performance in India and US Generics. Gross margins expanded, and financial ratios improved. However, profitability was impacted by higher operating expenses and a significant mark-to-market FOREX loss, leading to a modest 4% PAT growth. The Africa branded business saw a slight degrowth, while the cardiology segment faced increased competition.

    Highlights

    5

    • Revenue from operations grew by 14% to ₹1,303 crores (Q1 FY26 vs Q1 FY25).

    • Gross margin improved by 200 basis points to 79% due to better product mix and favorable API prices.

    • U.S. Generics business delivered a healthy growth of 36%, with sales at ₹310 crores, driven by 5 new launches in H2 FY25 and 1 new launch in Q1 FY26.

    • India business grew by 16% to ₹409 crores, outpacing the India Pharmaceutical Market (IPM) by 29% (Ajanta 10% vs IPM 8%).

    • Financial strength continued to improve with ROCE at 33% and return on net worth (RONW) at 26% at the end of June 2025.

    Concerns

    3

    • Africa branded business experienced a slight degrowth of 1% to ₹228 crores due to a high base in the previous year.

    • PAT growth was only 4% (₹255 crores vs ₹246 crores) primarily due to a 42% increase in other expenses and a mark-to-market FOREX loss of ₹25 crores.

    • EBITDA margin declined to 27% in Q1 FY26 from 29% in the previous year, despite strong revenue growth.

    What Changed3

    vs Q3 FY26

    Guidance items6 → 14 (+8)Risks discussed3 → 4 (+1)Q&A highlights3 → 7 (+4)

    Key financials

    Single quarter

    07 metrics
    1. 01Revenue from Operations₹1,303 Cr+14.0%YoY
    2. 02Gross Margin79%
    3. 03EBITDA Margin27%
    4. 04PAT₹255 Cr+4%YoY
    5. 05R&D Spend (% of Revenue)4%

    Segment breakdown

    • International Business - Branded Generic (Asia)₹304 Cr23.6%
    • International Business - Branded Generic (Africa)₹228 Cr17.7%
    • International Business - U.S. Generics₹310 Cr24.0%
    • International Business - Africa Institution₹38 Cr2.9%
    • India Business₹409 Cr31.7%
    Donut· Share of Revenue

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Capex

    ₹72 crores this quarter · ₹300 crores (FY26) planned

    Liquidity

    Liquidity disclosed

    Strong cash conversion ratio of 80% for cash flow from operations (₹282 crores) and 82% PAT conversion for free cash flow (₹209 crores).

    Guidance & targets

    13
    CategoryTargetPriority
    Margin
    Gross Margin
    78% plus/minus 1%
    		High
    R&D Spend
    R&D Spend (% of Revenue)
    5%
    		High
    Profitability
    EBITDA Margin
    27% (+/-1%)
    		High
    Tax
    Income Tax Rate
    23% range
    		High
    Capex
    Total Capex
    ₹300 crores
    		High
    Product Launches
    US Generics New Launches
    2 to 3 more launches
    		High
    Product Filings
    US Generics ANDA Filings
    around 10 (+/-1 or 2)
    		High
    Revenue Growth
    India Business Growth
    10% and above (20-25% higher than IPM)
    		High
    Revenue Growth
    Africa Branded Business Growth
    mid-single-digit
    		High
    Revenue Growth
    Asia Branded Business Growth
    mid-teens
    		High
    Revenue Growth
    Trade Generic Business Growth
    around 10%
    		High
    Headcount
    MR Additions (Emerging Markets)
    250 people
    		High
    Headcount
    MR Additions (India Business)
    150 people
    		High

    Cardiology Segment Growth Recovery

    within 2-3 quarters
    CurrentSoft, below IPM growth
    TargetNormal IPM growth

    Why it matters

    Indicates recovery in a key therapeutic segment and validates management's corrective actions.

    I think it is a small way of competition, which is increasing, but I think we already started working on it, and we should be able to certainly come back to our normal IPM growth. So, we will come back on that📌. It's just that it is a time lag, maybe in another 2, 3 quarters, you will start seeing the improvement.

    How to verify

    key_financials.segment_breakdown[name='India Business'].metrics[label='Cardiology Growth']

    Risks & concerns

    4
    RiskSeverity

    FOREX Volatility Impact on PAT

    A mark-to-market FOREX loss of ₹25 crores significantly impacted Q1 FY26 PAT, reducing growth to 4%. — Management acknowledged

    medium

    Africa Branded Business Moderation

    The Africa branded business experienced a 1% degrowth in Q1 FY26 due to a high base in the previous year and expected moderate market growth for the current year. — Management acknowledged

    medium

    Africa Institution Business Unpredictability

    The Africa Institution business remains unpredictable due to its dependence on procurement agencies, leading to an 8% degrowth in Q1 FY26. — Management acknowledged

    low

    Cardiology Segment Underperformance

    The cardiology therapeutic segment has been softer than the IPM due to increased competition, though management expects recovery in 2-3 quarters. — Analyst acknowledged

    medium

    Q&A highlights

    7

    “So, I think I have mentioned it already, and I will repeat the same thing, that the product mix, of course, the revenue mix which you are talking about, the Branded Generics and U.S. Generics that is something which has changed this time. But there is definitely an improvement in terms of the products which are giving the higher margin as compared to the normal margin. So, that is something which is definitely there. And another aspect in this particular quarter is that we do the provisioning for the returns and the expiries. Now that is something which this quarter, I got a one-off here. So, that has added me almost about 1% the improvement in the gross margin.”

    Clarified the drivers behind the 200 bps gross margin expansion, attributing it to product mix and a one-off provisioning adjustment.

    asked by Tushar Manudhane

    2 min read6 chapters

    Detailed Narrative

    01

    Q1 FY26 Performance Overview

    Ajanta Pharma commenced FY26 on a strong note, reporting a 14% year-on-year growth in revenue from operations, reaching ₹1,303 crores. Despite higher expenses, margins remained resilient, with a gross margin of 79%, an improvement of 200 basis points over the previous year. However, PAT growth was limited to 4% at ₹255 crores, primarily due to a 42% increase in other expenses and a ₹25 crores mark-to-market FOREX loss. The company maintained strong financial health with ROCE at 33% and RONW at 26%.

    02

    International Business Segment Performance

    The International Business, contributing 68% to total revenue, showed mixed results. Asia's branded generic business grew by 10% to ₹304 crores, with 10 new product launches. U.S. Generics delivered excellent growth of 36%, reaching ₹310 crores, driven by recent launches. Conversely, the Africa branded generic business saw a slight 1% degrowth to ₹228 crores due to a high base, while Africa Institution business declined by 8% to ₹38 crores, remaining unpredictable due to procurement agency dependence.

    03

    India Business Segment Performance

    India business contributed 32% to the company's total revenue, growing by a healthy 16% to ₹409 crores in Q1 FY26. This performance outpaced the India Pharmaceutical Market (IPM) by 29%, with Ajanta growing at 10% compared to IPM's 8%. The growth was supported by 8 new product launches, including one first-time launch in the country. Volume growth was 73% higher than IPM, and new launches exceeded IPM by 46%.

    04

    Financial Highlights and Margins

    Gross margin improved to 79% in Q1 FY26, a 200 basis points increase, attributed to a better product mix and favorable API prices, with a 1% one-off📎 benefit from provisioning adjustments. EBITDA stood at ₹351 crores, growing 6%, but the margin decreased to 27% from 29% in the prior year. Excluding the ₹25 crores mark-to-market FOREX loss, EBITDA would have been ₹376 crores (14% growth) with a 29% margin, and PAT growth would have been 12% with a 21% margin. Personnel costs increased by 7% to ₹303 crores, and other expenses rose by 42% to ₹373 crores, including the FOREX loss.

    05

    Capital Allocation and R&D Focus

    The company incurred a CapEx of ₹72 crores in Q1 FY26, in line with the full-year guidance of ₹300 crores. This CapEx includes normal maintenance (₹150-200 crores) and capacity expansion, such as the liquid plant in Pithampur. R&D spend was 4% of total revenue in Q1, with an expectation to reach 5% for the full year. Management emphasized that R&D investments are yielding results, as evidenced by continuous new product launches across therapeutic segments.

    06

    Strategic Growth Areas and Outlook

    Ajanta Pharma continues to invest in new therapies like gynecology and nephrology, which are taking good shape and are expected to contribute meaningfully. The company plans to add 250 MRs in emerging markets (150 in India) for FY26. Management expressed confidence in sustaining growth momentum, targeting mid-teens growth for Asia, mid-single-digit for Africa (with double-digit expected next year), and 10% and above for India business, outpacing IPM.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.