Hikal

Hikal reported a significant strengthening in Q4 FY26, with revenue reaching INR 519 crores and EBITDA margins improving to 20.3% over the previous quarter. For the full fiscal year 2026, revenue stood at INR 1,713 crores with EBITDA margins at 12.9%. However, the company recorded a negative PBT of INR 79.3 crores for FY26, primarily due to exceptional item^📎s totaling INR 85 crores, including an impairment charge of INR 47 crores for a manufacturing plant and new labour code costs. Adjusted PBT from operations for FY26 was INR 7 crores.

The Pharma business witnessed improved demand trends in Q4 FY26, with revenue of INR 292 crores and an EBIT margin of 12%. For the full year, Pharma revenue was INR 1,021 crores with an EBIT of INR 58 crores, resulting in an EBIT margin of 5.7%. The division is strengthening its portfolio in complex and niche therapeutic segments like oncology and antidiabetics, targeting 5 to 6 DMF filings annually, up from 2 to 3 historically. Capacity utilization across pharma facilities improved to 80-85% during the year, despite a slowdown caused by FDA compliance checks at the Bangalore site.

The Crop Protection business delivered a recovery in Q4 FY26, with revenue of INR 228 crores and an EBIT of INR 39 crores, leading to an EBIT margin of 17.1%. For the full year, revenue was INR 692 crores with an EBIT of INR 58 crores and an EBIT margin of 8.4%. Management believes the industry has largely moved beyond the worst phase of inventory correction and pricing pressures, with volumes improving and better product mix contributing to operating leverage. The company is also pursuing deep contract manufacturing engagements and long-term supply agreements.

The Animal Health business continues to strengthen, driven by increasing outsourcing activity and customer engagement in the API CDMO segment. Hikal has completed validation for all products from its global multinational contract and is progressing into the commercial phase. The company aims to build this segment to an INR 500 crores plus top-line business within the next 4 to 5 years, focusing on higher-value, innovation-driven opportunities. Management confirmed no indications of degrowth from customers for current products.

Hikal is actively addressing a US FDA warning letter at its Bangalore facility, which has led to a temporary slowdown in production and muted new NCE CDMO growth. The company has made significant investments in upgrading quality systems and expects to resolve the FDA matter by the end of 2026, with a typical resolution timeline of 18 to 24 months. To derisk operations, Hikal has commercialized a new pilot plant in Panoli, with new filings now being done from this FDA-approved site, which currently has no warning issues.

The company incurred capital expenditure of INR 149 crores in FY26 for debottlenecking, regulatory upgrades, and CDMO capacity expansion. Over the last four years, Hikal invested approximately INR 900 crores in capex, with INR 600 crores for growth and INR 300 crores for infra/regulatory. The debt-to-equity ratio improved from 0.59 to 0.56 as of March 31, 2026. Management expressed confidence in returning to sustainable growth in FY27 and beyond, driven by CDMO, Animal Health, and Specialty Chemicals, despite acknowledging delays in plans due to recent aberrations.