Alkem Lab — Q4 FY25 earnings call

Call held 29 May 2025

Management summary

Alkem Laboratories delivered a strong Q4 and FY25, driven by robust India sales and significant EBITDA margin expansion. Strategic investments in biosimilar CDMO and MedTech are progressing, though they are expected to incur initial operating losses in FY26. The company provided clear guidance on FY26 margins, R&D, and tax rates, while acknowledging challenges in Q4 gross margins and the domestic market due to NLEM.

Highlights

  • Total revenue from operations for Q4 FY25 was Rs. 3,143.8 crores, marking a 7.1% YoY growth.

  • India sales in Q4 FY25 grew by 8.1% YoY to Rs. 2,135.5 crores, reinforcing confidence in long-term growth strategy.

  • FY25 EBITDA increased by 11.9% YoY to Rs. 2,512.2 crores, leading to an EBITDA margin expansion from 17.7% in FY24 to 19.4%.

  • FY25 Net Profit grew by 20.6% YoY to Rs. 2,165.5 crores, demonstrating strong profitability.

  • The biosimilar CDMO plant is running on track and expected to be operational by Q2 FY26, with Rs. 400 crores capex spent in FY25.

Concerns

  • Q4 FY25 Net Profit growth was 4.2% YoY (Rs. 305.9 crores), lower than revenue growth.

  • Q4 gross margins were 'a bit lower' compared to the prior year due to lower production, absence of a prior year settlement fee, and higher expiry in some markets.

  • The new biosimilar CDMO and MedTech businesses are expected to incur combined operating losses of Rs. 100-125 crores in FY26.

Key financials

2 periods

Q4

  • Total Revenue from Operations
    ₹3,143.8 Cr
    YoY +7.1%
  • India Sales
    ₹2,135.5 Cr
    YoY +8.1%
  • International Business Sales
    ₹974.7 Cr
    YoY +7.2%
  • Net Profit
    ₹305.9 Cr
    YoY +4.2%
  • R&D Expenses
    ₹158.5 Cr

FY25

  • Total Revenue from Operations
    ₹12,964.5 Cr
    YoY +2.3%
  • EBITDA
    ₹2,512.2 Cr
    YoY +11.9%
  • EBITDA Margin
    19.4%
  • Net Profit
    ₹2,165.5 Cr
    YoY +20.6%
  • R&D Expenses
    ₹562 Cr

What they filed

Q1 FY27: revenue up 10.9%, net profit down 22.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,415 3,374 3,144 3,371 4,001 +17%3,737 +11%3,603 +15%3,740 +11%
EBITDA753 759 391 739 921 +22%828 +9%517 +32%766 +4%
Net profit702 641 322 668 779 +11%653 +2%251 −22%521 −22%
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.

Capital allocation

high confidence
  • Capex ₹700 Cr
    • Biosimilar CDMO plant (Enzene) ₹400 Cr
    • Total Capex FY25 ₹788 Cr
    • Enzene project in US (FY26 estimate) ₹200 Cr
    • Routine CAPEX (FY26 estimate) ₹150 Cr
    • MedTech investment (Exactech balance) ₹70 Cr
    • New domestic business plant
    Nitin Agrawal: "We have spent around Rs. 700 crores in FY'25 and it will be in the same range for next year also because there is some amount of CAPEX which we still need to do complete our Enzene project in US." ; "The total amount of capex is Rs. 788 crores for FY'25. Next year estimate is to be around Rs. 700 crores to Rs. 750 crores of CAPEX." ; "Around Rs. 200 crores will be Enzene." ; "Some will be routine CAPEX, say Rs. 150 crores will be routine, then there will be some amount on R&D, plus we are also looking to build a new plant for our domestic business. So that will also require some amount of CAPEX." ; "Plus, there is a MedTech investment. So, as we have shared last year that we are buying a technology and brand licensing from Exactech for our hip and knee replacement business in the orthopaedic segment. So that outgo will also happen. We have paid less than half of the amount last year, and the balance of around Rs. 70 crores will be paid in the current year."
  • M&A Bombay Ortho Acquisition · Integrated

    Acquisition of manufacturing facility for hip and knee replacements, part of MedTech investment.

    Targeting Rs. 22-25 crores revenue in current year, and Rs. 200 crores over next 5 years (including Exactech business).

    Nitin Agrawal: "Bombay Ortho will gradually build up because this is a manufacturing facility which we have acquired, and they have the capabilities to build and manufacture hip and knee replacements. So this year we are targeting around Rs. 22 crores- Rs. 25 crores of revenue because we have just taken over that business, and we have to build it from scratch in terms of sales. Over the next 5 years, we see this business of hip and knee, including the Exactech business, to cross around Rs. 200 crores."
  • M&A Adroit Biomed Acquisition · Integrated

    Acquisition of a Derma focused company with good brands and growth potential, leveraging Alkem's geographical presence.

    Current turnover close to Rs. 50 crores, intent to scale up brands.

    Dr. Vikas Gupta: "Okay, so Adroit is, you like I mentioned, is a Derma focused company. And, you know, they have a turnover of close to Rs. 50 crores, and now we intend to scale up those brands. It has some good brands where we saw a lot of potential, and that's why derma chronic overall is a key focus area for us. That's why we went ahead and made investment in that company. So we are pretty bullish about the growth potential of that."
  • Liquidity Cash ₹4,620 Cr
    Dr. Vikas Gupta: "The cash in balance at the end of 31st March 2025 is 46.2 billion."

Guidance & targets

Profitability

  • EBITDA Margins Profitability · FY26 · High confidence 19.5%
    So we expect the EBITDA margins to remain similar as far as this financial year is concerned. Though we will get operating leverage on our basis, the growth that we will have record in the coming financial year. But we are making certain investments in R&D for certain markets where we want to expand. So that is the reason overall our EBITDA guidance in terms of percentage would be stable at 19.5 for this financial year. That is what we are looking at.

    — Dr. Vikas Gupta

  • Operating Losses (CDMO & MedTech) Profitability · FY26 · High confidence Rs. 100 crores to Rs. 125 crores
    So altogether, we see there will be a loss of both businesses together. There will be around Rs. 100 crores to Rs. 125 crores of operating losses, which we will incur for these two businesses combined.

    — Nitin Agrawal

  • Gross Margins Profitability · FY26 · Medium confidence around 63% or a bit maybe 25 basis point better
    We will be on similar lines. It will be around 63 or a bit maybe 25 basis point better than what we are.

    — Nitin Agrawal

R&D

  • R&D Expenses as % of Revenue R&D · FY26 · High confidence 5%
    Rashmi, we expected to be within the range of 5%. So that is what we are expecting because there are some filings that we will be doing in certain markets, certain non-US markets as well and for the US, we also plan to file 8 to 9 products. I think we will be around 5%.

    — Dr. Vikas Gupta

Growth

  • India Business Growth vs Market Growth · FY26 · High confidence 100 basis points higher
    As compared to the overall growth, I would say domestic, we will be say in line with the market growth of 100 basis points, surpassing the market growth. Actually, that is what we are looking at. And I think we are very close to that in this financial year going forward. We see our growth estimates to be at least 100 basis points higher than how the market grows.

    — Dr. Vikas Gupta

  • India Market Growth Growth · FY26 · Medium confidence 7% to 8%
    I think my sense is with the better seasonality that we are expecting in the coming year, we should be within the range of 7% to 8% at least. That has been the trend that the market has seen.

    — Dr. Vikas Gupta

  • US Business Growth Growth · FY26 · Medium confidence mid-single-digit
    But overall, on an annualised basis, our expectation is it could be around a mid-single-digit kind of growth business for us.

    — Dr. Vikas Gupta

  • Trade Generic Growth Growth · FY25 · Medium confidence 6% to 7%
    So, trade generic saw mid-single-digit kind of growth, within the range of around 6% to 7%. So that is how it was.

    — Dr. Vikas Gupta

Tax

  • Tax Rate Tax · FY26 · High confidence 13% to 15%
    FY'26 will be in the range of 13% to 15%.

    — Nitin Agrawal

  • Tax Rate Tax · FY27 · High confidence 35% to 38%
    So that's how it will be post FY'27. So there is no change in that. ... in the range of 35% to say 37%-38%.

    — Nitin Agrawal

  • Tax Rate (Post MAT credit utilization) Tax · Post MAT credit utilization · High confidence 25%
    Once we utilize the MAT credit completely, then we will move to a lower tax rate of 25%.

    — Nitin Agrawal

Revenue

  • Revenue (CDMO business) Revenue · FY26 · High confidence Rs. 100 crores
    So gradually, see, this year our projection is to earn around Rs. 100 crores from CDMO business.

    — Nitin Agrawal

  • Sales from full capacity utilization (CDMO business) Revenue · next three years · High confidence Rs. 450 crores to Rs. 500 crores
    So over the next three years, we plan to receive around Rs. 450 crores to Rs. 500 crores of sales from the CDMO business at full capacity utilization.

    — Nitin Agrawal

Product Launches

  • US Product Launches Product Launches · FY26 · High confidence 5 to 6 new products
    We look forward to launching at least 5 to 6 new products this year.

    — Dr. Vikas Gupta

Working Capital

  • Working Capital Days Working Capital · FY26 · High confidence stable
    So it will be more or less stable at these levels?

    — Nitin Agrawal

What to watch in Q1 FY26

Biosimilar CDMO plant operational status and revenue contribution

Q2 FY26
Current Project running on track, completed latest by Q2 FY26
Target Operational by Q2 FY26, starting to see revenue

Why it matters

This is a key strategic growth area, expected to contribute revenue and impact overall profitability (due to initial losses).

So the project is running on track. We expect the project to get completed latest by Q2, to become operational by Q2. So I think the required CAPEX that we had planned for the year last year, we have done almost Rs. 500 crores close to that. And I think the project is on track. So we should be able to start seeing some revenue within this year.

Risks & concerns

  • Q4 gross margin compression

    medium

    Q4 gross margins were lower due to reduced production, absence of a prior year settlement fee (nimodipine), and higher product expiry in some markets.

    Analyst acknowledged

  • Operating losses from new strategic businesses (CDMO, MedTech)

    medium

    The new biosimilar CDMO and MedTech businesses are expected to incur combined operating losses of Rs. 100-125 crores in FY26 as they scale up.

    Analyst acknowledged

  • US market uncertainty and price erosion

    medium

    Geopolitical scenarios and ongoing price erosion continue to pose challenges in the US generics market, though the company is focusing on a differentiated portfolio.

    Both acknowledged

  • Domestic market slowdown due to NLEM and price control

    medium

    The domestic market growth is structurally impacted by the NLEM portfolio, where over 20% of products are under price control, limiting price growth.

    Both acknowledged

Q&A highlights

7 direct
India business growth in Q4 FY25 compared to IPM growth Partial
I would say overall, if you see our India business performance for Q4 has been very strong. We have registered good growths overall in the India business and that is expected to continue now.

Analyst questioned specific segment underperformance in Q4, but management emphasized overall strong Q4 and annual performance, maintaining confidence in future growth.

Asked by Damayanti Kerai (HSBC)

Biosimilar CDMO plant investment, completion, and revenue timeline Direct
So the project is running on track. We expect the project to get completed latest by Q2, to become operational by Q2. So I think the required CAPEX that we had planned for the year last year, we have done almost Rs. 500 crores close to that. And I think the project is on track. So we should be able to start seeing some revenue within this year.

Provides specific timelines for operationalization (Q2 FY26) and initial revenue contribution for a key strategic growth project.

Asked by Damayanti Kerai (HSBC)

Reasons for Q4 FY25 gross margin decline and future outlook Direct
So, Q4, our margin, gross margin was a bit lower as compared to the corresponding quarter of last year. So, there were 2-3 reasons. One was our production was lower because we were suffering on inventory till last year. So, in the first 9 months of current year, we have built good quantity of inventory for our international business. So we slowed down our production in quarter four and that impacted the gross margin because as per the accounting standard, a few of your overhead get loaded over to inventory and if your production is lower, your inventory change amount reduces which impact your gross margin.

Management provided detailed reasons for the Q4 gross margin compression and offered guidance for FY26 gross margins.

Asked by Neha Manpuria (Bank of America)

Expected operating losses from new CDMO and MedTech businesses in FY26 Direct
So altogether, we see there will be a loss of both businesses together. There will be around Rs. 100 crores to Rs. 125 crores of operating losses, which we will incur for these two businesses combined.

Quantifies the near-term financial impact (operating losses) of strategic investments in new growth areas.

Asked by Rahul Jeewani (IIFL Securities)

Tax rate guidance for FY26 and FY27, and cash tax implications Direct
FY'26 will be in the range of 13% to 15%. ... No, because we have already MAT in the credit, so it will have to be higher than that. ... in the range of 35% to say 37%-38%.

Provides clear tax rate expectations for the next two fiscal years, highlighting the impact of MAT credit utilization on the effective tax rate.

Asked by Rashmi Shetty (Dolat Capital) & Saion Mukherjee (Nomura Securities)

US market uncertainty, price erosion, and strategy for complex products Direct
So we will be cautious and it's all subject to the way market shapes up. But we will have to start and continue working on certain opportunities. ... I think the US will still need a generic portfolio. We have seen the tariff the situation has been more even on the innovator portfolio side.

Management acknowledged external risks in the US market but reiterated its long-term strategic focus on building a differentiated portfolio to navigate these challenges.

Asked by Saion Mukherjee (Nomura Securities)

Domestic market growth rate slowdown and impact of NLEM portfolio Direct
I think it's about a large part of the portfolio is the NLEM portfolio, even on the market side. About 20+ per cent of the portfolio is under price control. And the inflation scenario is such that the price growth allowed on that portfolio is actually nothing.

Management explained the structural reasons for the domestic market slowdown, specifically the significant impact of the NLEM portfolio and price controls on growth.

Asked by Saion Mukherjee (Nomura Securities)

Semaglutide clinical trial status, API sourcing, and market entry timeline Direct
We will be among the first wave of launches as far as Sema is concerned. Our clinical trials is going on... API, we are sourcing from outside. And I think we expect the market to open up early FY'27, which is when we will be there in the market.

Provides an update on a high-value product, including the market entry timeline (early FY27) and the strategy for API sourcing.

Asked by Akash Dobhada (Investec Capital Services)

3 min read 7 chapters

Detailed narrative

Strong Q4 and FY25 Performance Driven by India Business

Alkem Laboratories reported a robust Q4 FY25 with total revenue from operations at Rs. 3,143.8 crores, marking a 7.1% YoY growth. India sales were a significant contributor, growing 8.1% YoY to Rs. 2,135.5 crores. For the full FY25, total revenue reached Rs. 12,964.5 crores, an increase of 2.3% YoY, while net profit surged 20.6% YoY to Rs. 2,165.5 crores, demonstrating strong execution.

EBITDA Margin Expansion and Future Outlook

The company achieved an EBITDA of Rs. 2,512.2 crores in FY25, representing an 11.9% YoY increase, leading to an EBITDA margin expansion from 17.7% in FY24 to 19.4%. Management guided for stable EBITDA margins of 19.5% for FY26, anticipating operating leverage from growth but also factoring in increased R&D investments. Gross margins for Q4 were lower due to specific factors like reduced production and absence of prior year settlement fees, but are expected to be around 63% or slightly better in FY26.

Strategic Investments in Biosimilar CDMO and MedTech

Alkem is actively investing in new growth avenues, with a biosimilar CDMO plant expected to be operational by Q2 FY26, having incurred Rs. 400 crores in capex in FY25. The company projects Rs. 100 crores in revenue from this CDMO business in FY26, with a potential to reach Rs. 450-500 crores over the next three years from full capacity utilization. However, these new ventures, including MedTech, are anticipated to result in combined operating losses of Rs. 100-125 crores in FY26 as they scale up.

Domestic Market Dynamics and Growth Strategy

While the India business showed strong Q4 growth, management acknowledged that certain segments like anti-infectives faced challenges, and the overall domestic market growth is influenced by the NLEM portfolio, where over 20% of products are under price control. Despite this, Alkem aims to outperform the market by at least 100 basis points, targeting an overall India market growth of 7-8% in FY26, driven by strong execution and targeted initiatives.

US and International Business Outlook

The US business is expected to achieve mid-single-digit growth in FY26, with plans to launch 5-6 new products. The company is closely monitoring litigation for high-value products like Entresto, with a potential launch as early as July (Q2 FY26). International business (excluding Americas) showed a 7.2% YoY growth in Q4 FY25, contributing Rs. 974.7 crores to revenue, with good traction in several key markets.

R&D and Tax Rate Guidance

R&D expenses for FY25 were Rs. 562 crores, or 4.3% of total revenue, and are guided to be around 5% for FY26 due to increased filings in non-US markets and a focus on complex oral solids and injectables for the US. The tax rate is guided at 13-15% for FY26, but is expected to rise to 35-38% in FY27 due to the utilization of MAT credit, before eventually settling at 25% post-utilization.

Acquisitions and Portfolio Expansion

Alkem completed acquisitions in MedTech (Bombay Ortho) and Dermatology (Adroit Biomed). Bombay Ortho is projected to generate Rs. 22-25 crores in revenue this year and Rs. 200 crores over five years, while Adroit Biomed, with a current turnover of Rs. 50 crores, is targeted for significant brand scaling, leveraging Alkem's geographical presence and focus on derma chronic segment.

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