Emcure Pharmaceuticals Limited — Q3 FY25 earnings call

Call held 6 Feb 2025

Management summary

Emcure Pharmaceuticals reported strong Q3 FY25 results with robust revenue and adjusted PAT growth, primarily driven by its international business. The domestic segment saw some impact from restructuring and FCM issues, but management expects improvement. Strategic focus areas include Derma, Ophthalmology, and biologics, with significant progress on Semaglutide and Liposomal Amphotericin B.

Highlights

  • Revenue from operations grew 18% YoY to INR 1,963 crores.

  • Adjusted PAT increased 43% YoY to INR 171 crores.

  • EBITDA (without other income) rose 23% YoY to INR 362 crores, with margins at 18.4%.

  • Domestic business grew 12% YoY to INR 888 crores.

  • International markets expanded 23% to INR 1,075 crores, driven by Canada (34% growth) and Emerging Markets (40% growth).

  • Net debt reduced to INR 600 crores from INR 705 crores in Q2.

  • Company aims for 300-400 basis points margin improvement over the next 3-4 years.

Key financials

  1. Revenue from Operations ₹1,963 Cr +18%YoY
  2. Adjusted PAT ₹171 Cr +43%YoY
  3. Reported PAT ₹156 Cr
  4. EBITDA (ex-other income) ₹362 Cr +23%YoY
  5. EBITDA Margin 18.4%
  6. Gross Margins 60.1%
  7. Depreciation & Amortization ₹97 Cr
  8. Interest Cost ₹32 Cr
  9. Effective Tax Rate (reported) 32%
  10. Effective Tax Rate (ex-one-time) 26%

What they filed

Q1 FY27: revenue up 32.3%, net profit up 62.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,105 1,029 1,278 1,097 1,261 +14%1,418 +38%1,468 +15%1,451 +32%
EBITDA158 124 245 228 225 +42%300 +142%372 +52%340 +49%
Net profit87 50 140 123 118 +36%259 +418%234 +67%200 +63%
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
₹3,038 Cr Total
  • International Markets ₹1,075 Cr 35.4%
  • Domestic Business ₹888 Cr 29.2%
  • Emerging Markets ₹365 Cr 12.0%
  • Europe ₹358 Cr 11.8%
  • Canada ₹352 Cr 11.6%

Capital allocation

high confidence
  • Debt Gross ₹800 Cr · Net ₹600 Cr
    Debt is close to INR 600 crores today, net debt. Gross is 800 and 200 is cash and net debt is 600.
  • M&A Mantra (Canada) Acquisition · Integrated

    Acquired last year in November, now fully integrated and doing exceedingly well.

    In our Canada business, Mantra which we acquired last year in the month of November, is now fully integrated and doing exceedingly well as shown in the results of North America.
  • M&A Sanofi products Acquisition · Integrated

    Restructured cardio-diabetos portfolio by cross-pollinating Emcure's and Sanofi's products, with over 240 Sanofi team members joining.

    Sanofi business is at lower margins and had some impact on current quarter sales due to restructuring.

    During the quarter, we restructured our cardio-diabetos portfolio by cross-pollinating our and Sanofi products. This is very important because one of the things that has happened is that we have got the Sanofi team more than 240 people joined us and they come with strong backgrounds and great connections with cardio-diabetos. So to that extent, our initial goal and strategy was to ensure that they get assimilated with the Emcure culture and eventually, we would like to make use of this highly talented and respected field force to promote our high margin products. We saw some restructuring and cross-pollination in the current quarter and this will obviously have some impact because as you know when the products are transferred from one division to another, it takes some time to get the traction. So we are going through that particular phase.
  • Liquidity Cash ₹200 Cr
    Debt is close to INR 600 crores today, net debt. Gross is 800 and 200 is cash and net debt is 600.

Guidance & targets

Revenue

  • FY25 Revenue Growth Revenue · FY25 · Medium confidence 18%-19%
    Given domestic has been a bit slower, I think on the top line side we'll be probably closer to 18%-19%.

    — Piyush Nahar

Margin

  • FY25 EBITDA Margin (ex-other income) Margin · FY25 · Medium confidence 18.5%-19%
    I think what we'll end up at without the other income is closer to 18.5%-19%.

    — Piyush Nahar

  • Long-term Margin Improvement Margin · next 3-4 years · Medium confidence 300-400 basis points
    we should definitely be getting about a 300 to 400 basis points improvement in the margin profile over that time horizon.

    — Vikas Thapar

Product Launch

  • Semaglutide Launch in India Product Launch · March 2026 (loss of exclusivity) · High confidence first wave of entrants
    So as you are aware, Semaglutide's loss of exclusivity is in March 2026 for India. We expect there would be quite a few approvals and we will be one among them. That is the endeavour that we are making. So it is not that we will be first to market, we will be in the first wave of entrants that will be able to enter at the loss of exclusivity.

    — Samit Mehta

Growth

  • Europe Growth Growth · FY26 · High confidence high single-digit growth
    Should we expect a pickup in FY26, towards the high single digit growth mark? Yes, that is correct. Alok, as we mentioned, the key products for which we are expecting approvals, those are more backended. And so those we're expecting, start of the fiscal year '26 and that should drive the growth going forward.

    — Piyush Nahar

  • Emerging Markets (non-ARV) Growth Growth · ongoing · Medium confidence 20% growth profile
    And then for the emerging market outside of the ARV segment, we think that will obviously be relatively flattish, the non-ARVs will continue to grow fairly well for us. I think it should be in the ballpark of about aiming for 20% sort of growth profile of that business.

    — Vikas Thapar

  • Canada (base business) Growth Growth · ongoing · Medium confidence mid-teens growth profile
    a mid-teens sort of growth profile is what we're targeting for the Canadian market.

    — Vikas Thapar

Operational

  • Kadu Plant Break-even Operational · by fiscal year end · High confidence break-even levels
    In terms of Kadu, that is now getting closer to break even. I think by the end of the fiscal year that should be at break-even levels.

    — Piyush Nahar

  • Mehsana Injectables Optimal Utilisation Operational · 12-18 months · Medium confidence optimal utilisation
    Injectables will probably take another 12-18 months before we get to optimal utilisation.

    — Piyush Nahar

R&D Spend

  • R&D Spend as % of Revenue R&D Spend · ongoing · High confidence 4%-5%
    So our R&D spend is around 4%-5%. And I think even going forward that is what we look at.

    — Piyush Nahar

What to watch in Q4 FY25

Domestic Cardiac Segment Growth

Q4 FY25 onwards
Current Slowed due to restructuring
Target Improvement and upper trajectory

Why it matters

Indicates successful integration of Sanofi portfolio and recovery of a key domestic segment.

I think we should start seeing some improvement from fourth quarter onwards. So it may not be fully getting normalized, but it should improve from what we have seen this current quarter. We should see an upper trajectory.

Risks & concerns

  • Muted growth in acute segment

    medium

    The acute segment continues to have muted growth for the industry, impacting Emcure's domestic performance.

    Management acknowledged

  • Impact of restructuring on cardio-diabetos portfolio

    medium

    Restructuring and cross-pollination of Emcure's and Sanofi's cardio-diabetos products has temporarily impacted sales traction.

    Management acknowledged

  • FCM issues impacting domestic growth

    medium

    FCM (presumably 'Fixed Cost Management' or similar internal issue) has impacted reported domestic growth by approximately 3%.

    Management acknowledged

  • Price erosion for Semaglutide due to generic entry

    medium

    Analyst concern about potential steep price erosion for Semaglutide once generic entries occur, given high market interest.

    Analyst acknowledged

  • Lower margins from Sanofi business

    low

    The acquired Sanofi business operates at lower margins, contributing to a slight decline in overall gross margins.

    Management acknowledged

  • Side effects from off-label Bevacizumab use

    low

    Off-label use of non-ophthalmic grade Bevacizumab has led to serious side effects, which Emcure aims to mitigate with its on-label, IP-protected product.

    Management acknowledged

Q&A highlights

7 direct
Semaglutide launch and competitive positioning Direct
So as you are aware, Semaglutide's loss of exclusivity is in March 2026 for India. We expect there would be quite a few approvals and we will be one among them. That is the endeavour that we are making. So it is not that we will be first to market, we will be in the first wave of entrants that will be able to enter at the loss of exclusivity.

Clarifies Emcure's strategy for Semaglutide, positioning itself as a 'first wave' entrant rather than 'first to market' amidst competition.

Asked by Bharat Shah

Long-term margin trajectory and current underwhelming margins Direct
we should definitely be getting about a 300 to 400 basis points improvement in the margin profile over that time horizon. That will be the endeavour.

Addresses analyst concern about current modest margins and provides a specific long-term target for margin improvement.

Asked by Bharat Shah

Domestic organic growth excluding Sanofi and FCM impact Direct
So if I look at the organic ex-FCM, we have grown at about 4%. And FCM would have impacted the reported growth by about 3% odd.

Provides clarity on the underlying organic growth of the domestic business, isolating the impact of specific issues.

Asked by Kunal Randeria

Bevacizumab for ophthalmology in India and off-label use Direct
No. So globally, Bevacizumab for wet AMD is already approved in UK. And it is globally used off-label rampantly for wet AMD. In fact, in a few countries, it is already been, you know, added in the essential list for the Ophthalmology indication. What we are doing in India through this clinical trial is, get it on-label, but also through our patent delivery and device system, create some IP around it, which will have much better patient compliance as well as ease of use for healthcare practitioners.

Explains the regulatory and market context for Bevacizumab in India, highlighting Emcure's strategy to pursue on-label approval with proprietary delivery.

Asked by Kunal Randeria

Slowdown in cardiac segment growth despite Sanofi portfolio integration Direct
Now, as you can imagine, moving around products across divisions, there was a bit of impact that we had on the sales for the current quarter. That is why you are seeing an impact on the secondary sales. I think there we are quite positive as now the products are stabilized in their new divisions. You will see a lot of cross-sales, co-prescriptions coming through and that should see an uptick going forward.

Management attributes the muted cardiac growth to internal restructuring and product transfers, expecting an uptick in future quarters.

Asked by Alankar Garude

Key therapeutic areas for in-licensing and IRR thresholds Partial
As far as the therapeutic areas are concerned, oncology, nephrology and metabolic are the three areas, and obviously derma and ophthalmology in which we are making some foray. So these are the areas we are looking at. If you recollect, Alankar, last time also I told you that as far as I am concerned, I have grown because of the support of multinationals.

Management outlines strategic focus areas for in-licensing but avoids discussing specific IRR thresholds, emphasizing strategic fit and differentiation.

Asked by Alankar Garude

Semaglutide market unfolding in India, considering price erosion and innovator pre-emption Direct
So that's one area where we are vertically integrated including the API injectables and tablets that we will be making. And as Samit rightly mentioned, it will be in the hands of highly competent trained people. So that's the reason we are very bullish about it. The market is huge, so I think there is good scope going forward.

Management highlights vertical integration and a trained field force as key competitive advantages for Semaglutide amidst potential price erosion and innovator strategies.

Asked by Alok Dalal

Timeline to become debt-free Direct
So outside of any sort of M&A, we think that probably within the next couple of quarters, there should be enough free cash flow generation to pare down debt in next two to three quarters max.

Provides a clear timeline for debt reduction, contingent on no major M&A activity.

Asked by Bharat Shah

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Detailed narrative

Q3 FY25 Performance Overview

Emcure Pharmaceuticals reported a robust Q3 FY25, with revenue from operations growing 18% year-on-year to INR 1,963 crores. Adjusted PAT saw a significant increase of 43% year-on-year, reaching INR 171 crores. EBITDA, excluding other income, grew 23% year-on-year to INR 362 crores, maintaining a healthy margin of 18.4%. Gross margins for the quarter stood at 60.1%, a slight decline from 62.7% in Q3 FY24, attributed to business mix including lower-margin Sanofi products.

Domestic Business Dynamics and Restructuring Impact

The domestic business grew 12% year-on-year to INR 888 crores. However, organic growth excluding FCM (Fixed Cost Management) issues was around 4%, with FCM impacting reported growth by approximately 3%. The company restructured its cardio-diabetos portfolio by integrating Sanofi products and personnel, which temporarily impacted sales traction in the current quarter. Management expects to see improvement in domestic cardiac segment growth from Q4 FY25 onwards as products stabilize in new divisions.

International Business Growth Drivers

International markets demonstrated strong growth, increasing 23% to INR 1,075 crores. This was primarily driven by Canada, which grew 34% to INR 352 crores, benefiting from the full integration of the Mantra acquisition. Emerging markets also saw significant growth of 40% to INR 365 crores, led by non-ARV segments. Europe, however, experienced muted growth at 2% to INR 358 crores, but is expected to return to high single-digit growth in FY26.

Strategic Expansion into Derma and Ophthalmology

Emcure is actively expanding into new therapeutic areas. The Derma subsidiary, Emcutix, is now fully operational with a team of over 200, planning new in-house and partner product launches from FY26, targeting prescription Derma, cosmeceuticals, and eventually OTC. In Ophthalmology, the company is pursuing on-label approval for Bevacizumab for wet AMD in India, leveraging its patented device and sterile product expertise to ensure better patient compliance and ease of use, differentiating from existing off-label uses.

Product Pipeline and Innovation Focus

The company is making significant strides in its product pipeline, particularly with Liposomal Amphotericin B, which is seeing approvals flow through in target markets. Emcure is also on the verge of getting recombinant Asparaginase cleared and is confident about being in the first wave of Semaglutide launches in India by March 2026. The strategy for Semaglutide emphasizes vertical integration, including API and formulation, and leveraging its trained field force for scientific detailing.

Margin Outlook and Capital Structure

Emcure aims for a 300-400 basis points improvement in its margin profile over the next 3-4 years, driven by operating leverage and better productivity from new facilities. The company's net debt reduced to INR 600 crores at quarter-end from INR 705 crores in Q2, with gross debt at INR 800 crores and cash at INR 200 crores. Management anticipates becoming debt-free within the next two to three quarters through internal cash flow generation, barring any major M&A activities.

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