ERIS Lifescience

Eris Lifesciences reported a strong Q4 and full year FY26. Domestic Formulations Business (DBF) revenue grew 12% in Q4 to INR 671 crores and 11% for the full year to INR 2,778 crores. DBF EBITDA for Q4 was INR 246 crores (10% growth) with a 37% margin, while full year DBF EBITDA reached INR 1,026 crores (12% growth) with a 37% margin, up from 36.5% in FY25. Consolidated revenue for FY26 was INR 3,129 crores, an 8% growth, and consolidated EBITDA was INR 1,120 crores, growing 10%. PAT from continuing operations for FY26 saw a significant 34% YoY growth to INR 498 crores, leading to an EPS of INR 36.

The Domestic Formulations business saw strong performance in the Insulin and Derma segments. Insulin market share in RHI cartridges increased from 13% to 24%, and overall Insulin segment share grew from 12% to 16%, with Eris's growth of 32% outpacing the covered market by nearly five-fold. The Derma segment also outperformed, growing 14.2% against a market growth of 8.6%. However, the company faced challenges, including a revenue loss of INR 55-60 crores from delayed new launches (gSaxenda, Aspart, Esaxerenone) and a INR 50 crore sale loss in the Insulin segment due to delayed in-sourcing. The OAD segment's minimal growth (2-4%) also acted as a drag.

Eris's Semaglutide brand, Sundae, had a robust start following its launch. In April '26, Eris ranked #1 in Injectable Semaglutide by sale volume and #2 by sale value. The company achieved a 22% prescription market share in May for Injectable SEMA. Sundae Vials were launched in March, followed by Sundae Pen 2mg in mid-April and 4mg in early May. The product is priced competitively at INR 1,290 per unit for Vials and INR 3,200 per unit for Pens, which is 30% lower than most competitors. Management expects tailwinds from Q2 FY27 as insourced manufacturing of Sundae Pens with a 5 million units per annum capacity comes online, promising eased supply and margin improvement.

The International business faced headwinds in Q4, with revenue reaching INR 86 crores against a plan of INR 115 crores, primarily due to INR 30 crores of finished goods being unshipped due to supply chain disruptions. For the full year, international revenue grew 7% to INR 348 crores, with an EBITDA margin of 32%. The company received noncompliance observations from a recent EU GMP inspection, which were largely procedural. While remediation is a priority and underway, this has postponed INR 120-140 crores of EU CDMO revenue from FY27. Management guides for 18-20% revenue growth in FY27 for the existing international business, with similar EBITDA margins.

Eris's capital expenditure for FY26 was close to INR 300 crores, primarily directed towards Biologics and Sterile Injectables, including INR 150-180 crores for DS capacity and INR 250 crores for the Bhopal fill and finish site. The closing net debt for FY26 was INR 2,255 crores, representing 2x EBITDA, and finance costs were down 17% YoY. The OCF to EBITDA ratio improved significantly to 50% for FY26 from 105% in the prior year. Management expects the return on capital employed (ROCE) to improve from 15% to 23-25% over the next three years (FY26-FY28) as these strategic investments begin to yield returns.

The company observed an increase in inventory and receivables during the year. Inventory buildup was attributed to strategic stock-up of key APIs due to price volatility and unshipped finished goods in the international business due to Q4 disruptions. Receivables also increased, with management targeting to bring debtor days down to around 60 days within the next two quarters. Despite these temporary increases, management expressed confidence in normalizing working capital metrics and stated there is no risk of bad debt.