Hikal

Hikal reported a consolidated revenue of ₹319 crores for Q2 FY26, with an EBITDA of ₹8 crores, translating to a margin of 2.6%. For the first half of FY26, revenue stood at ₹699 crores and EBITDA at ₹32 crores (4.6% margin). The quarter's financials were significantly impacted by a short-term deferral of approximately ₹80 crores in pharmaceutical sales, which were subsequently booked in October 2025. Finance costs for Q2 FY26 reduced by 13-20% year-on-year to ₹15 crores, and H1 FY26 capital expenditure was ₹65 crores, with a full-year guidance of ₹200 crores.

The pharmaceutical segment recorded ₹190 crores in revenue for Q2 FY26, with an EBIT margin of negative 9.2%. This performance was primarily due to the US FDA's Official Action Indicated (OAI) status and a subsequent warning letter in August 2025 for the Bangalore facility. This led to a temporary delay in off-take across both generics and CDMO businesses as customers conducted internal risk assessments. Management confirmed that all orders remain intact, and deliveries resumed in October 2025. The remediation plan, developed with global CGMP consultants, is on track for completion by December 2025, with a re-inspection by the US FDA anticipated in March-May 2026.

The Crop Protection segment's revenue for Q2 FY26 was ₹129 crores, with an EBIT of negative ₹10 crores. Margins in this segment remained under pressure due to ongoing pricing challenges stemming from global oversupply. However, management noted that volumes have started to recover. The company is also focusing on joint development projects with customers in the crop protection space, anticipating increased R&D outsourcing in this segment, similar to trends in pharma.

Hikal's CDMO business, currently contributing about 50% of total revenue, is in ramp-up mode with eight to nine projects in various development stages expected to drive revenue and margin uptick in the next two to three years. The company is also expanding into specialty chemicals, particularly the personal care division, with plans to commercialize two to three products in H2 FY26 and ramp up volumes next financial year. A new High-Potency laboratory has been inaugurated to enhance capabilities in high-potency molecule development, including anti-cancer drugs and peptides, with commercialization expected in two to three years.

The animal health business is showing continued progress, with most molecules under long-term supply agreements now being delivered at small commercial volumes as registrations come through. Hikal has secured new development contracts for two molecules from global innovators and submitted proposals for two new RFPs. The company aims to diversify its offerings in animal health by leveraging its HP API capabilities and expanding into Tier-2 innovators and biotech customers.

Hikal is undertaking a repurposement project for a large asset, converting it entirely to pharma use. Phase 1 is expected to complete by the end of the current financial year, and Phase 2 by the end of the calendar year, with major revenue contributions anticipated from FY28 onwards. The company expects FY27 to be a 'transition year' and anticipates growth to return in FY28. Management is also focusing on optimizing manpower costs, with initiatives underway to show benefits by the end of the year.