Indoco Remedies Q1 FY27 earnings call

Indoco Remedies reported a consolidated revenue of INR4,662 million for Q1 FY27, marking an 8.2% year-on-year growth and 2.3% quarter-on-quarter growth. Standalone operational revenue grew by 5.8% to INR4,081 million. Standalone EBITDA expanded to INR422 million, achieving a 10.3% margin, while consolidated EBITDA stood at INR410 million with an 8.8% margin. This performance reflects strong execution across domestic formulations, regulated international markets, and the API platform.

The company achieved significant regulatory milestones this quarter. Its Baddi Unit I successfully completed the Malta Medicines Authority audit, and the Goa Plant I also cleared the same audit. Furthermore, the Indoco Stability Center (IAS) in Chhatrapati Sambhajinagar, Aurangabad, successfully completed a pre-approval inspection by the USFDA with zero observations. These achievements confirm the facilities' compliance with EU-GMP and USFDA standards, bolstering confidence in their manufacturing capabilities.

Domestic formulations recorded revenues of INR2,040 million in Q1 FY27, a slight increase from INR2,028 million in the prior year. Indoco maintains its 33rd rank in the Indian pharma market and 20th rank in prescription volume. The top 5 flagship brands contribute 42% to the domestic portfolio, with Cyclopam achieving 44% absolute growth since 2022 to reach INR196 crores. Acute products like Febrex Plus have stabilized at INR118 crores, while midsized brands such as SM Fibro, Rexidin-M, Oxipod CV, and Dropizin showed an aggregate growth of 86%, with Dropizin delivering a 3x breakout to INR14 crores. Management expects higher single-digit to double-digit growth in India going forward^⏳.

International formulations contributed 35% of the Q1 FY27 revenue, reaching INR1,451 million, a 2.8% YoY growth. Regulated markets grew by 19.3% to INR1,133 million, with the US business surging 62.2% to INR459 million. Europe business saw a 2.5% growth to INR650 million, while emerging markets declined to INR317 million. The API business delivered a stellar performance, growing 42.4% YoY to INR521 million, providing critical backward integration. AnaCipher CRO and Indoco Analytical Solutions also grew by 36.2% to INR69 million.

The company has made significant strides in cost optimization and operational efficiency. Through initiatives like the Master Manufacturing Plan, Indoco increased plant efficiency, optimized batch sizes, and reorganized product mix. This led to a 26% reduction in the number of batches for equivalent sales and a reduction of approximately 900 employees. The divestment of the Ophthalmic Division further contributed to cost savings, with 200 people engaged in that activity no longer incurring costs. These structural changes are expected to drive consistent margin improvement.

Indoco reduced its overall debt by approximately INR30 crores this quarter, bringing the total debt to around INR930 crores as of June end. The long-term debt stands at INR600 crores, and short-term debt at INR325 crores. The average cost of debt is around 9%. The company plans to repay INR110 crores this year and another INR150 crores next year, totaling INR260 crores within 7-18 months. For FY27, the company anticipates a maintenance capex of no more than INR40-50 crores, funded primarily through internal accruals and proceeds from asset sales.

The Warren plant's API side has been audited by several top Indian companies, and its Certificate of Suitability (CEP) has been logged. Management expects USFDA audit for this facility in 6-7 months. The plant is intended to provide Key Starting Materials (KSMs) for Patalganga and finished APIs for regulated market formulations. While the oral care business from Warren (OTC sales) incurred a marginal EBITDA loss of INR6 crores this quarter, management is confident in its long-term potential with consistent support and investment in consumer awareness and digital marketing.