Hikal Limited — Q3 FY26 earnings call

Call held 11 Feb 2026

Management summary

Hikal reported a resilient Q3 FY26 with consolidated revenue of INR494 crores and EBITDA of INR83 crores, marking a positive turning point after navigating regulatory challenges. The Pharmaceutical segment showed strong recovery, though overall pharma growth for FY26 is now expected to be less than double-digit due to FDA-related delays. The Crop Protection segment continued to face margin pressure from overcapacity and pricing, while the company is strategically diversifying into Animal Health and Personal Care, with significant capex investments made in R&D and manufacturing facilities.

Highlights

  • Consolidated revenue for Q3 FY26 stood at INR494 crores, demonstrating a clear return to operational profitability.

  • EBITDA for Q3 FY26 was INR83 crores, with a margin of 16.8%, indicating sequential improvement in demand visibility and utilization.

  • Pharmaceutical division revenue was INR337 crores with an EBIT margin of 12.3%, signalling a return to normalized trade cycles.

  • Interim dividend of INR0.2 per share, representing 10% of the face value, was approved by the Board.

  • Debt-equity ratio maintained at 0.58 as on December 31, 2025, and finance cost reduced by 17% YoY to INR48 crores.

Concerns

  • Exceptional item of INR38 crores was provided for new labor code charges, resulting in a reported loss for the quarter.

  • Crop Protection segment revenue stood at INR157 crores with a low EBIT margin of 3%, due to persistent pricing pressures and structural overcapacity.

  • The US FDA audit remediation process, while progressing, has delayed anticipated double-digit growth in the Pharma segment to next year.

Key financials

2 periods

Headline

  • Consolidated Revenue
    ₹494 Cr
  • Consolidated EBITDA
    ₹83 Cr
  • Consolidated EBITDA Margin
    16.8%
  • Finance Cost
    ₹48 Cr
    YoY -17%
  • Exceptional Item
    ₹38 Cr
  • Profit Before Tax (Adjusted)
    ₹29 Cr
    YoY +21%

9M FY26

  • Consolidated Revenue
    ₹1,193 Cr
  • Consolidated EBITDA
    ₹115 Cr
  • Consolidated EBITDA Margin
    9.6%

What they filed

Q1 FY27: revenue up 5.9%, net profit up 67.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue453 448 552 380 319 −30%494 +10%519 −6%403 +6%
EBITDA75 72 123 25 7 −90%83 +15%105 −15%37 +47%
Net profit18 17 50 -22 -35 −291%-6 −134%14 −71%-7 +67%
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
₹494 Cr Total
  • Pharmaceutical ₹337 Cr 68.2%
  • Crop Protection ₹157 Cr 31.8%

Capital allocation

high confidence
  • Capex ₹150 Cr Cut — conservative approach this year
    • Debottlenecking, regulatory upgrades, and expanding CDMO capacities
    • High-potency laboratory and R&D centre in Pune
    • New pilot plant in FDA-approved manufacturing site in Panoli
    • HPAPI lab investment (Phase I) ₹10 Cr

    Previously planned ₹200 Cr

    Capital expenditure during the 9 months period stood at INR100 crores, focused on debottlenecking, regulatory upgrades, and expanding CDMO capacities. Our capital allocation remains highly targeted, prioritizing high ROI projects that align with our long-term growth objectives. ... So capex, in the beginning of the year, we said we will do a capex of about INR200 crores, but I think we've been very conservative this year, and we've cut it down to INR150 crores overall capex compared to INR200 crores is what we had guided at the beginning of the year. So this year, we'll end the year at about INR150 crores. We already spent INR100 crores in the first 9 months, another INR40 crores to INR50 crores will be spent in the quarter 4 to end the year at within INR150 crores for this year. ... So currently, we only invested in a laboratory. So it's only about INR10 crores, INR11 crores of investment. So this is the investment for the Phase I. Then in FY '28, we will be building up a commercial scale plant. But as of now, it's only a laboratory investment, yes.
  • Debt Debt disclosed
    Finance cost for the quarter 3 FY '26 was at INR48 crores, which is a reduction of 17% on a year-on-year basis on account of lower debt and lower interest rates. ... We have maintained our debt equity ratio to 0.58 as on 31st December 2025. ... See, working capital already come down by almost INR50 crores in the 9 months of December '25 versus March ' 25, already down by close to INR50 crores from a total debt perspective, despite having a very challenging first 9 months, which you are aware of. So we've had a very strict control on working capital and long-term debt. And our debt as the business grows and our cash flows become stronger, we have reinvest that into capex and the repayments are happening and they will also start tapering off post FY '28.
  • Dividend ₹0.2/share (interim)
    The Board of Directors at the Board meeting concluded just recently today, have approved an interim dividend of INR0.2 per share, which is 10% of the face value.

Guidance & targets

Revenue

  • Pharma Business Growth Revenue · FY26 · Medium confidence some growth, not double-digit

    Previously double-digit growth → some growth, not double-digit

    The Pharma has got delayed by a quarter or so because of the U.S. FDA impact. What we anticipated to happen towards the end of H1 only started in Q3. And so we are off by about a quarter. We will have some growth, but we don't expect the double-digit growth in pharma. It will start from next year. It's got delayed to next year, early part of next year.

    — Sameer Hiremath

  • Crop Protection Business Growth Revenue · FY26 · High confidence flattish

    From flat year-on-year today

    Crop is flattish compared to last year. That guidance is unchanged.

    — Sameer Hiremath

  • Animal Health Business Size Revenue · next 4 to 5 years · Medium confidence INR500 crores plus
    So we do have a and we've talked about this in the past that we have a master plan to build this into a INR500 crores plus business in the next 4 to 5 years, right?

    — Anish Swadi

Profitability

  • Animal Health Gross Margins Profitability · High confidence 45-50%
    But I would say that, look, the gross margins are in line with that of the company, anywhere between 45% and 50%.

    — Anish Swadi

  • EBITDA for New Businesses Profitability · Medium confidence far in excess of current average
    We will see a growth in EBITDA for the new business, which will be far in excess of the current average EBITDA of the company.

    — Sameer Hiremath

Capex

  • Total Capex Capex · FY26 · High confidence INR150 crores

    Previously INR200 crores → INR150 crores

    So capex, in the beginning of the year, we said we will do a capex of about INR200 crores, but I think we've been very conservative this year, and we've cut it down to INR150 crores overall capex compared to INR200 crores is what we had guided at the beginning of the year. So this year, we'll end the year at about INR150 crores.

    — Sameer Hiremath

Product Launch

  • Milvexian KSM Launch Product Launch · FY27 · High confidence next year
    We launched next year, yes. ... So we'll be launching the Milvexian KSM next year in FY '27?

    — Sameer Hiremath

  • NCE Launch Velocity Product Launch · High confidence 2 to 3 new products annually
    We are maintaining our launch velocity of 2 to 3 new products annually, in strict alignment with the medium-term strategic road map.

    — Manoj Mehrotra

  • Commercial Launch of Key Starting Materials (Phase III) Product Launch · FY28 · High confidence scheduled
    Crucially, our key starting materials for global innovators have progressed into Phase III clinical trials with commercial launch scheduled for FY '28.

    — Manoj Mehrotra

Production

  • Peak Output for 2 Custom Products Production · FY27 · High confidence achieve peak output
    achieve peak output in FY '27 for 2 of our custom products, supported by a robust portfolio expansion to be commercialized in the next 2-3 years.

    — Manoj Mehrotra

Utilization

  • Animal Health Facility Utilization Utilization · FY27 · Medium confidence increase
    So in FY '27, the utilization will certainly increase. I wouldn't say substantially increase, but it would increase.

    — Anish Swadi

Plant Repurposing

  • Agri Plant Repurposing (Phase I) Plant Repurposing · next 6 months · High confidence implemented
    So the part occupied section, the Phase I will be implemented in the next 6 months. And then Phase II will be implemented in the next 12 months after that. So the next 6 to 18 months, we will repurpose the entire plant.

    — Sameer Hiremath

  • Agri Plant Repurposing (Phase II) Plant Repurposing · next 12 months (after Phase I) · High confidence implemented

    — Sameer Hiremath

Debt

  • Overall Debt Reduction Debt · FY29 onwards · High confidence start seeing a reduction
    That's right. From FY '29 onwards, we should start seeing a reduction in overall debt, which is already reducing compared to where we were.

    — Sameer Hiremath

Performance

  • Q4 FY26 Performance Performance · Q4 FY26 · High confidence better than Q3
    I think from Q3, so Q4 will be better than Q3.

    — Sameer Hiremath

Market context

  • Pharma Volume Growth Volume · next year · Medium confidence double-digit
    Volumes for pharma, if you look at it, for this quarter, pharma volumes have grown by about 4%. There has been a volume degrowth this year for the 9 months because of the impact of the first 6 months, but we expect double-digit volume growth to return in this business.

    — Sameer Hiremath

What to watch in Q4 FY26

US FDA Remediation Plan Outcome

within next 2 weeks (from Feb 11, 2026)
Current Remediation plan submitted, last update Feb 9, 2026
Target Hearing back from FDA on satisfaction with progress, potential reinspection

Why it matters

Resolution of the FDA warning letter is crucial for the Pharmaceutical segment's full recovery and growth trajectory.

Now after completion of the warning letter, which will be of 6 months, which will just get over in the next 2 weeks, we should be hearing back from them, and then we'll get to know whether they are satisfied with the progress of our remediation plan.

Risks & concerns

  • Structural overcapacity and pricing pressure in Global Crop Protection

    high

    Particularly from China, continues to exhibit pressure on pricing and availability of products, leading to low EBIT margin of 3% in Q3 FY26.

    Management acknowledged

  • Regulatory scrutiny and US FDA audit impact

    high

    Temporarily impacted Pharmaceutical segment performance and delayed double-digit growth expectations for FY26.

    Management acknowledged

  • Global macroeconomic effects

    medium

    Operating environment remains dynamic due to global macroeconomic effects.

    Management acknowledged

  • Evolving trade policies

    medium

    Introducing a degree of volatility into procurement decisions and supply chain dynamics.

    Management acknowledged

  • Gestation period and high capex for ADCs

    medium

    ADCs require OEB 5 certification, 2-3 years gestation, and 3x normal plant capex, which is a complex and capital-intensive area.

    Analyst acknowledged

  • Patent expiry and competition in Animal Health products

    medium

    Products like Afoxolaner and Fluralaner face significant competition and price erosion post-patent expiry, shifting focus to CDMO.

    Analyst acknowledged

Q&A highlights

8 direct
US FDA Remediation Plan and Reinspection Direct
So we have given our remediation plan to U.S. FDA. We don't give them a monthly update, but we are giving an update once in 6 weeks. The last 2 updates were given on December 16 and as recent as this Monday, which is February 9. Now after completion of the warning letter, which will be of 6 months, which will just get over in the next 2 weeks, we should be hearing back from them, and then we'll get to know whether they are satisfied with the progress of our remediation plan.

Provides a clear timeline and status update on the critical FDA remediation process, indicating an expected response within two weeks.

Asked by Henil

Impact of Chinese Government Policies (Fluorspar, Export Incentives) Direct
So we are continuously in touch with our supplier. As of now, we do not see much impact on the products, what we import from China. But we are carefully watching this. ... And we don't buy much fluorinated products out of China. It's a very small part of our procurement.

Addresses potential supply chain risks from China, with management indicating minimal near-term impact due to limited exposure to affected products.

Asked by Henil

HPAPI Lab Investment and ADC Strategy Direct
So currently, we only invested in a laboratory. So it's only about INR10 crores, INR11 crores of investment. So this is the investment for the Phase I. Then in FY '28, we will be building up a commercial scale plant. But as of now, it's only a laboratory investment, yes. ... Yes, we have started offering ADC services at lab scale. But once we build the plant, it will be common for HP APIs as well as ADCs.

Clarifies the current stage and scale of investment in HPAPI/ADC capabilities, indicating a phased approach with commercial scale plant in FY28, managing capex intensity.

Asked by Henil

SGL2 Inhibitors Development Status Direct
No. ... Okay, We have not even developed any of the products?

Corrects a potential misunderstanding about the company's pipeline, confirming that SGL2 inhibitors are not yet under development, which is important for future growth expectations in the anti-diabetes portfolio.

Asked by Henil

INR80 Crores Rollback/Adjustment from Q2 to Q3 Direct
Well, the INR80 crores has already been adjusted in Q3. So no further adjustments are expected. ... Yes, it's just about some checking and strengthening of some systems and processes, which is an ongoing exercise, and that's the review being happening. And it's been checked on an ongoing basis. That's about it. ... No, we do not. It's systems and processes. it's nothing to do with the numbers.

Provides clarity on a significant financial adjustment from the previous quarter, confirming it's fully accounted for in Q3 and that ongoing reviews are process-related, not financial.

Asked by Ankit

Animal Health Business Outlook and Margins Direct
So we do have a and we've talked about this in the past that we have a master plan to build this into a INR500 crores plus business in the next 4 to 5 years, right? ... But I would say that, look, the gross margins are in line with that of the company, anywhere between 45% and 50%.

Offers specific long-term revenue targets and margin expectations for the Animal Health segment, a key diversification area.

Asked by Aman Vora

NCE Business and Commercialization Direct
Yes. We've been in NCE business for a few years now. It's been quite recent. We have a couple of products which are already commercialized on the NCE space. But the bigger ones are in the final stages in Phase III and in close to launch in the next 1 or 2 years.

Clarifies the company's involvement in NCEs, indicating existing commercialized products and a strong pipeline of larger NCEs nearing launch, validating R&D efforts.

Asked by Gautam Gupta

Overall Business Outlook and Debt Reduction Direct
I think somebody else one of the speakers asked me earlier, is the worst behind us over the last 2, 3 years of the challenges? I think that's already now. We see all the things being sorted out, and we are moving ahead into FY '27 with a very positive outlook and with a lot of confidence in the business. ... That's right. From FY '29 onwards, we should start seeing a reduction in overall debt, which is already reducing compared to where we were.

Management expresses strong confidence that the worst is behind them and provides a timeline for significant debt reduction, signaling improved financial health and future growth.

Asked by Manoj

3 min read 6 chapters

Detailed narrative

Q3 FY26 Performance Overview and Recovery

Hikal reported consolidated revenue of INR494 crores and EBITDA of INR83 crores for Q3 FY26, translating to an EBITDA margin of 16.8%. This marks a clear return to operational profitability, supported by improved demand visibility and utilization. For the nine months ended December 31, 2025, consolidated revenue stood at INR1,193 crores with an EBITDA of INR115 crores (9.6% margin). The company anticipates a strong recovery in H2 FY26, with Q4 expected to outperform Q3.

Pharmaceutical Segment Performance and Regulatory Progress

The Pharmaceutical division delivered INR337 crores in revenue for Q3 FY26, achieving an EBIT margin of 12.3%. This performance signals a return to normalized trade cycles after previous headwinds. Remedial actions concerning the US FDA audit are progressing well, with the remediation plan submitted and an update provided on February 9. The company expects to hear back from the FDA within two weeks, and double-digit volume growth in pharma is anticipated to return next year, delayed by approximately one quarter due to the FDA impact.

Crop Protection Segment Challenges and Diversification

The Crop Protection segment recorded revenues of INR157 crores with a low EBIT margin of 3% in Q3 FY26. This segment continues to face persistent pricing pressures and structural overcapacity, particularly from China. In response, Hikal is accelerating its portfolio diversification strategy, focusing on specialty chemicals, especially the Personal Care segment. The company expects meaningful revenue from this new segment to commence in the next fiscal year, with 2 products already commercialized in Q3.

Strategic Investments and R&D Pipeline

Hikal has made strategic investments over the last 12-15 months, including a state-of-the-art high-potency laboratory and R&D centre in Pune (INR10-11 crores for Phase I) and a new pilot plant in Panoli. These facilities enhance its CDMO capabilities in high-technology segments. The R&D pipeline is robust, with 8-9 molecules in advanced stages, and the company aims for a launch velocity of 2-3 new products annually. Key starting materials for global innovators are in Phase III clinical trials, with commercial launch scheduled for FY28.

Capital Allocation and Debt Management

The Board approved an interim dividend of INR0.2 per share (10% of face value). Capital expenditure for the first nine months of FY26 stood at INR100 crores, focused on debottlenecking and capacity expansion. The full-year FY26 capex guidance has been revised downwards from INR200 crores to INR150 crores. Finance costs reduced by 17% YoY to INR48 crores, and the debt-equity ratio was maintained at 0.58 as of December 31, 2025. The company also reduced working capital by INR50 crores in 9M FY26 compared to March 2025, and anticipates overall debt reduction from FY29 onwards.

Animal Health Business Growth and Outlook

The Animal Health business continues to see sustained momentum, driven by outsourcing trends and a steady pipeline of new development projects. Hikal has a master plan to build this into an INR500 crores plus business within the next 4-5 years, with gross margins expected to be in the 45-50% range. While volumes are not yet tremendously large, they are growing, and utilization of Animal Health facilities is expected to increase in FY27 as global approvals come through for customer products.

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