Akums Drugs — Q2 FY26 earnings call

Call held 17 Nov 2025

Management summary

Akums Drugs reported a challenging Q2 FY26 with revenue and EBITDA declines primarily due to API price downtrends and ramp-up costs for new facilities. Despite this, the domestic branded formulations segment showed robust growth, and the company made significant strides in international expansion with a new JV in Zambia and progress on a European CDMO contract. Management remains focused on long-term value creation and margin improvement initiatives.

Highlights

  • Domestic Branded Formulations revenue grew 5.3% YoY to INR 122 crores and EBITDA increased 28.2% YoY to INR 26 crores.

  • International branded business EBITDA increased 52% YoY to INR 5.5 crores despite revenue decline.

  • New joint venture in Zambia (51% stake) for a US$45 million manufacturing plant, expected to supply US$50 million over two years.

  • European CDMO contract progressing, with GMP audit completed and approval expected in Q4 FY26.

  • Healthy balance sheet with a cash surplus of INR 1,649 crores and no interest expenses.

Concerns

  • Overall revenue declined 1.5% YoY and 0.6% QoQ to INR 1,018 crores.

  • EBITDA declined 22% YoY and 27% QoQ to INR 94 crores, with EBITDA margin compressing to 9.3% from 11.7% in Q2 FY25.

  • API business reported negative EBITDA of INR 14 crores in Q2 FY26, with gross margins at 9.3% down from 12.8% in FY25.

  • International branded business revenue declined 14% YoY and 36% QoQ to INR 22 crores due to seasonal factors.

  • Trade Generics segment continued to post negative EBITDA.

Key financials

  1. Revenue ₹1,018 Cr -1.5%YoY
  2. EBITDA ₹94 Cr -22%YoY
  3. EBITDA Margin 9.3%
  4. PAT ₹43 Cr -35.8%YoY

What they filed

Q1 FY27: revenue up 18.1%, net profit up 0.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue328 337 329 332 309 −6%369 +9%338 +3%392 +18%
EBITDA43 34 18 44 17 −60%25 −26%12 −33%49 +11%
Net profit50 41 28 45 23 −54%28 −32%15 −46%45 +0%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹1,016 Cr Total
  • CDMO ₹804 Cr 79.1%
  • Domestic Branded Formulations ₹122 Cr 12.0%
  • API Business ₹44 Cr 4.3%
  • Trade Generics ₹24 Cr 2.4%
  • International Branded Business ₹22 Cr 2.2%

Order book

high confidence

Total value

$50 Mn

as of 2025-09-30 quantified

Execution

over the next two years (CY 2026-2027)

Composition

  • Zambia (from India facilities) (geography) $50 Mn 100%

Pipeline

other

Zambia JV facility potential to serve $200-250 million of medicines; European contract for oral liquid segment (six-year commercial supply).

The company has secured initial supply contracts for the Zambia JV and has a six-year commercial supply contract for a European CDMO project, with further long-term potential from the Zambian facility.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹200 Cr
    • Akums' share in Zambia JV project $23.06 Mn
    • R&D and European contract
    • New facilities and capacity expansion
    The total project cost will be approximately US$45 million, where Akums will invest in the form of both capital and product technology as well. ... our capex is close to INR107 crores. We would probably, depending on the future requirement, foresee just a similar or slightly lower capex in the next six months.
  • Debt Debt disclosed
    Our robust cash flow during H1 has further augmented our net cash position to over INR 1,600 crores. ... Our balance sheet continues to be healthy with a cash surplus of INR 1,649 crores. ... We do not have any interest expenses.
  • M&A Zambian government (JV) Joint venture · Announced · Consideration ₹[object Object] (mixed)

    Set up a manufacturing plant in Zambia to drive long-term growth and improve accessibility of essential medicines.

    Akums will hold 51% in the JV, total project cost approximately US$45 million, Akums' investment in capital and product technology.

    We entered into a joint venture with the Zambian government to set up a manufacturing plant in Zambia. Akums will hold 51% in the JV. The total project cost will be approximately US$45 million, where Akums will invest in the form of both capital and product technology as well.
  • Liquidity Cash ₹1,649 Cr Net cash position augmented to over INR 1,600 crores, with a cash surplus of INR 1,649 crores.
    Our robust cash flow during H1 has further augmented our net cash position to over INR 1,600 crores. ... Our balance sheet continues to be healthy with a cash surplus of INR 1,649 crores.

Guidance & targets

Regulatory Approval

  • European GMP approval for Plant 2 Regulatory Approval · Q4 FY26 · High confidence Approval
    We underwent a European GMP audit for our plant 2 in October and are expected to get the approval in Q4 of this year.

    — Sandeep Jain

Product Launch

  • Rivaroxaban tablet supply to Europe Product Launch · Q3 FY26 · High confidence Expected
    Rivaroxaban tablet supply to Europe is also expected during Q3.

    — Sandeep Jain

Production Commencement

  • Zambia JV manufacturing plant production Production Commencement · CY 2028 · High confidence Commence production
    The facility will be located in the capital city of Lusaka and is expected to commence production in CY 2028.

    — Sandeep Jain

Revenue

  • Zambia JV initial supply from India Revenue · CY 2026-2027 · High confidence US$50 million
    We envisage supplying medicines of aggregate value of US$50 million from our Indian facilities to Zambia over the next two years.

    — Sandeep Jain

  • Zambia JV + European initial supply annual revenue Revenue · 2027 · Medium confidence INR 300+ crores
    Like '27, we'll have both the Zambian contract as well as the European initial supply, which we envisage should approximately be INR300-plus crores for the annual revenue.

    — Sahil Maheshwari

  • Zambian facility annual revenue contribution Revenue · 2029 · Medium confidence US$40-50 million
    So then we go into 2029, maybe starting January, we'll have, let's say, $40 million, $50 million coming from the Zambian facility itself once it gets fully operationalized.

    — Sahil Maheshwari

Profitability

  • API business full-year losses Profitability · FY26 · Medium confidence Lower than last year
    But this has been something that by the year-end, we should be better based on our cost optimization, and we expect the full-year losses to be lower than last year.

    — Sumeet Sood

Commercial Supplies

  • CDMO Europe commercial supplies Commercial Supplies · March/April 2027 · High confidence Start
    we are on track to start the commercial supplies in the -- around March and April of 2027, right.

    — Sahil Maheshwari

Margin

  • CDMO H2 FY26 margins Margin · H2 FY26 · Medium confidence Largely mimic H1
    I think the rest of -- given that the Q1 was good, the Q2 was underperforming, I think blended rates, I think H2 should largely be similar as H1 as an overall year, given obviously the current market dynamics, while it remains for the Q3 as well, we are seeing a decent volume growth, some pockets, as I said, of APIs have started stabilizing, which looks in control, I think. But once we see the rest of the year, I think the H2 should largely mimic the H1.

    — Sahil Maheshwari

Capex

  • FY26 Capex Capex · FY26 · Medium confidence INR 200-220 crores
    Till now, for the first six months, our capex is close to INR107 crores. We would probably, depending on the future requirement, foresee just a similar or slightly lower capex in the next six months.

    — Sumeet Sood

Market context

  • API business month-on-month positive Profitability · within 6-7 months · Low confidence Positive
    but really saying when we'll be month-on-month positive, I think we are still six, seven months away.

    — Sahil Maheshwari

What to watch in Q3 FY26

European GMP Approval for Plant 2

Q4 FY26
Current Audit completed in October
Target Approval received

Why it matters

Crucial for commencing commercial supplies for the European CDMO contract, a key growth driver.

We underwent a European GMP audit for our plant 2 in October and are expected to get the approval in Q4 of this year.

Risks & concerns

  • API price downward trend

    medium

    Continued downward trend in API prices impacted margins, especially in the API business, leading to negative EBITDA.

    Management acknowledged

  • Slower-than-expected ramp-up of new facilities and higher overheads

    medium

    New facilities operationalized in H1 FY26 had an EBITDA impact of INR 17 crores due to higher overheads during ramp-up.

    Management acknowledged

  • Trade generics segment losses

    medium

    The trade generics segment continues to incur losses, with efforts being made to reduce them through consolidation.

    Management acknowledged

  • Near-term earnings apprehensions

    medium

    Current financial results may raise apprehensions about near-term earnings, though management reassures business strength.

    Management acknowledged

  • Regulatory hurdles dampening sentiment

    medium

    Analyst noted that the regulatory front has been dampening sentiment, which management acknowledged to take into notice.

    Analyst acknowledged

  • Seasonal factors impacting international branded business

    low

    International branded business was impacted by seasonal factors in Q2, but expected to have a strong H2.

    Management acknowledged

Q&A highlights

7 direct
API Business Growth and Margins in Europe Direct
So, as you rightly mentioned, we have filed two CEPs, proxetil and axetil, in the cephalosporins space for which we should get an approval in the next six months, right? So we'll start seeding formulations in those markets. And subsequently, we expect this business to be of higher gross margins in Europe.

Clarifies the strategy and timeline for API business expansion in Europe and addresses the margin impact from current API price trends.

Asked by Abdulkader Puranwala

EBITDA Margin Drop in Q2 Direct
So, as I said, so API prices, so usually in our cost sheet, API prices are 50% of our input transfer prices, right? So if the prices go down by 8%, it's a direct 4% impact on my top line and an equal impact on my EBITDA margins because these are simple erosion. So that is one that is driving it. The second point, as you also mentioned, is the fixed overheads. If I look at my three recent plants, which got operationalized, right, on an H1 basis, they had an EBITDA impact of almost INR17 crores.

Provides a detailed breakdown of the factors contributing to the significant EBITDA margin compression in Q2, including API price impact and new facility ramp-up costs.

Asked by Ankit Minocha

Capacity Utilization and Rationale for New Capex Direct
So while you rightly said we do at 40%, I think given the changeovers, the large number of SKUs, the maintenance, preventive maintenance, the overall equipment so this is an extra spare capacity that we currently hold. The front-end efforts are largely seen in the volume growth that we do with an expansion in the gross margins as well.

Explains why the company continues to invest in capex despite current utilization levels, highlighting the nature of pharmaceutical manufacturing and strategic growth drivers.

Asked by Ankit Minocha

Timeline for Company to Enter Growth Phase Direct
So, as you said, each contract has a timeline, right? So if we really look at it, in 2026, we'll start seeing an additional INR200-odd crores from the Zambian supplies from India. Like '27, we'll have both the Zambian contract as well as the European initial supply, which we envisage should approximately be INR300-plus crores for the annual revenue. So then we go into 2029, maybe starting January, we'll have, let's say, $40 million, $50 million coming from the Zambian facility itself once it gets fully operationalized.

Provides a clear, phased timeline for when new international projects are expected to contribute significantly to revenue, outlining the company's future growth trajectory.

Asked by Jay Modi

API Pricing Negotiation and Markup Partial
So that is something we do every two to three years, Jay, right? But specifically for this, because this is -- these are cycles of the business, if you understand it. So when the API prices go up, then also usually the margins remain at similar levels. When they are stable, then also when they are lower. So while we track it on a per-sheet basis, if something is excessively low, we ask for that specific product. But in general, moving up the margins usually takes longer. And that's a work in progress, right?

Addresses how the company manages API pricing volatility and its impact on margins, indicating that margin improvements from price changes are a longer-term process.

Asked by Jay Modi

FY26 Capex Plan Direct
Till now, for the first six months, our capex is close to INR107 crores. We would probably, depending on the future requirement, foresee just a similar or slightly lower capex in the next six months.

Provides a clear estimate for the full-year capital expenditure, which is crucial for assessing future growth and financial health.

Asked by Jay Modi

Regulatory Hurdles Impact on Sentiment Direct
Okay. And last thing, as a duty for being a retail investor, the regulatory front for this year has been dampening in terms of negative news. So if the company could avoid the kind of regulatory hurdles, probably this would improve the sentiment for remaining invested for the long term. ... Sure, We'll take that into notice.

Highlights an external factor (regulatory environment) impacting investor sentiment and management's acknowledgment of this concern.

Asked by Pankaj Agrawal

Plan for Cash on Books / Inorganic Acquisitions Direct
Yes, Jay. So we are continuously looking at -- obviously, one thing that we keep is that it should be a profit-making business with decent margins acquired at a decent value, right? So this is what our hook remains. The areas that we focus on are two: one, either it should give me a dosage form capability or it should give me an export market capability.

Outlines the company's strategic criteria for potential inorganic growth opportunities, focusing on profitability, decent margins, and capability/market expansion.

Asked by Jay Modi

3 min read 7 chapters

Detailed narrative

Q2 FY26 Financial Performance Overview

Akums Drugs reported a revenue of INR 1,018 crores for Q2 FY26, marking a 1.5% year-on-year decline and a 0.6% quarter-on-quarter decrease. EBITDA stood at INR 94 crores, a significant 22% YoY and 27% QoQ decline, resulting in an EBITDA margin of 9.3%, down from 11.7% in Q2 FY25. Net profit after tax was INR 43 crores, lower than INR 67 crores YoY and INR 65 crores QoQ, reflecting the challenging quarter.

CDMO and Domestic Formulations Resilience

The CDMO segment, despite API price headwinds, achieved INR 804 crores in revenue with a modest 0.7% YoY growth, though EBITDA declined by 31.3% YoY to INR 84 crores. Domestic Branded Formulations showed strong growth, with revenue increasing 5.3% YoY to INR 122 crores and EBITDA rising 28.2% YoY to INR 26 crores, driven by improved coverage and portfolio. This segment's margins were robust at 21.6%.

API Business Challenges and Turnaround Efforts

The API business continued to face headwinds, with revenue at INR 44 crores (down 25.4% YoY) and reporting a negative EBITDA of INR 14 crores in Q2 FY26. Gross margins for API dipped to 9.3% from 12.8% in FY25 due to continued price downtrend. Management is aggressively working on cost optimization and expects full-year losses to be lower than last year, aiming for month-on-month positive results within 6-7 months.

Strategic International Expansion Initiatives

Akums announced a new joint venture in Zambia with a 51% stake, investing US$45 million to set up a manufacturing plant by CY 2028, targeting US$50 million in supplies from India over the next two years. On the European front, a European GMP audit for Plant 2 was completed in October, with approval expected in Q4 FY26, enabling commercial supplies for a six-year CDMO contract by March/April 2027.

EBITDA Margin Compression Factors

The significant drop in overall EBITDA margins to 9.3% was primarily attributed to two factors: a direct 4% impact on the top line and EBITDA from an 8% API price drop (due to the cost-plus model), and an INR 17 crores EBITDA impact from the operationalization of three new facilities in H1 FY26. These new facilities are currently ramping up, incurring higher overheads.

Capacity Utilization and Capex Strategy

The company clarified that its current capacity utilization is 40% against a peak of 55%, with the remaining capacity serving as buffer for changeovers, SKUs, and maintenance. Capex for H1 FY26 was INR 107 crores, with a similar or slightly lower amount planned for H2, totaling approximately INR 200-220 crores for FY26. New capex is strategically directed towards dosage forms that are either fully utilized or represent new market opportunities, also considering potential shifts due to Schedule M enforcement.

Healthy Balance Sheet and Future Outlook

Akums maintains a healthy balance sheet with a net cash position of over INR 1,600 crores and a cash surplus of INR 1,649 crores, with no interest expenses. Management expressed confidence in long-term growth, driven by strategic initiatives in CDMO, domestic and export branded businesses, and curtailing losses in API and trade generics, expecting H2 performance to improve and overall business to turn the corner into a growth phase from 2026 onwards.

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