IOL Chemicals

IOL Chemicals reported a robust Q2 FY26, with revenue from operations reaching INR567.5 crores, marking a 7.9% year-on-year growth. EBITDA increased significantly by 33.3% to INR64 crores, with margins expanding by 212 basis points to 11.1%. Profit after tax (PAT) also saw substantial growth of 56.7% to INR30 crores, improving the PAT margin to 5.2% from 3.6%. Post-tax cash profit grew 31.1% year-on-year to INR51.5 crores, highlighting strong operational cash generation.

The company experienced a slight sequential dip in profitability during Q2, primarily due to elevated power and fuel costs. This was attributed to heavy rains and floods in Punjab, which rendered basic raw materials like rice husk unusable, necessitating the use of costlier alternatives and electricity from the grid. This impact amounted to INR7-8 crores, affecting margins by approximately 1%. Management expects this effect to normalize in Q3 FY26, with power costs reducing by INR5-6 crores.

The company's performance was driven by consistent execution across both its Pharmaceutical and Chemicals segments. In H1 FY26, Pharma constituted 59% of total revenue, with Ibuprofen accounting for 62% within Pharma and other APIs for 38%. Chemicals made up 41% of total revenue. The Pharmaceutical segment saw strong traction in non-Ibuprofen APIs like Clopidogrel and Pantoprazole. The Chemicals segment experienced steady volume recovery, though pricing remained subdued, with management focusing on cost optimization and product mix.

The new paracetamol facility, which commenced operations in March 2025, is ramping up well. In Q2 FY26, the facility achieved 55-60% capacity utilization. Management targets to increase this utilization to approximately 65% by March end (FY26 end). This expansion from an earlier capacity of 3,600 metric tons to 11,800 metric tons is expected to contribute meaningfully to margin expansion as pricing trends improve and demand for IOL's paracetamol products gains traction.

IOL Chemicals is actively pursuing a strategy of diversification and shifting towards regulated markets to improve price realization and ensure stable demand. The company aims to achieve a 50% Ibuprofen and 50% other pharma products mix within its pharmaceutical portfolio in the coming years. Export sales for non-Ibuprofen APIs are expected to increase significantly in the upcoming quarters. The company's focus on R&D, innovation, and accelerated regulatory filings across Europe and other regulated markets supports this growth trajectory.

The company has a capex plan of INR150-200 crores for both FY26 and FY27. In H1 FY26, approximately INR60 crores has already been utilized, with another INR100 crores planned for H2 FY26. This capex is allocated with 60% for growth (infra, land, new software, automation) and 40% for maintenance. Regulatory updates include a successful EU GMP inspection with only recommendations, and ongoing processes for Fenofibrate and Levetiracetam DMFs with FDA, awaiting further communication. The company also expects to secure all regulatory approvals for its acquired land parcel within two quarters.

IOL Chemicals is targeting an annual revenue growth of 10-15% and aims to achieve an EBITDA margin of 13-14% for H2 FY26, with an expected 1-2% increase in EBITDA margin annually. For FY27, the company projects revenue between INR2,600-2,700 crores and an EBITDA margin of 13-15%. These targets are underpinned by continued volume growth, cost efficiencies, and a strategic shift towards a diversified, export-driven portfolio in regulated markets.