IOL Chemicals and Pharmaceuticals Limited — Q2 FY26 earnings call

Call held 13 Nov 2025

Management summary

IOL Chemicals delivered a solid Q2 FY26, with revenue growing 7.9% YoY to INR567.5 crores and EBITDA up 33.3% to INR64 crores, driven by volume recovery and cost efficiencies. PAT increased 56.7% to INR30 crores. The company experienced a temporary dip in sequential profitability due to elevated fuel costs, but expects normalization in Q3. Strategic focus remains on non-Ibuprofen APIs, paracetamol facility ramp-up, and diversification into regulated markets, with positive regulatory updates.

Highlights

  • Revenue from operations grew 7.9% YoY to INR567.5 crores.

  • EBITDA increased 33.3% to INR64 crores, with margins expanding 212 bps to 11.1%.

  • Profit after tax (PAT) grew 56.7% YoY to INR30 crores, with PAT margin improving to 5.2%.

  • Post-tax cash profit grew 31.1% YoY to INR51.5 crores.

  • EU GMP inspection concluded with no major observations, only recommendations.

Concerns

  • Sequential dip in profitability due to INR7-8 crores impact from elevated fuel costs following Punjab floods.

  • Subdued pricing in the Chemicals segment despite volume recovery.

  • High market competitiveness for Sitagliptin, hindering commercial production despite EDQM approval.

Key financials

  1. Revenue from Operations ₹567.5 Cr +7.9%YoY
  2. EBITDA ₹64 Cr +33.3%YoY
  3. EBITDA Margin 11.1%
  4. PAT ₹30 Cr +56.7%YoY
  5. PAT Margin 5.2%
  6. Post-tax Cash Profit ₹51.5 Cr +31.1%YoY

What they filed

Q1 FY27: revenue up 37.0%, net profit up 88.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue526 523 528 552 568 +8%580 +11%619 +17%756 +37%
EBITDA42 47 63 62 57 +36%57 +21%93 +48%104 +68%
Net profit19 21 32 34 30 +58%21 +0%53 +66%64 +88%
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

  • Pharma
    59% Share of Total Revenue (H1 FY26)
  • Chemical
    41% Share of Total Revenue (H1 FY26)

Capital allocation

medium confidence
  • Capex ₹150 Cr
    • Growth capex (infra, land, new software, automation)
    • Maintenance and infra capex
    The capex plan for the current year is INR150 crores to INR200 crores... Maintenance and infra capex is generally 40% and growth capex is 60%.
  • Debt Debt disclosed
    Our balance sheet remains strong with minimum leverage and healthy liquidity, giving us the flexibility to pursue growth initiatives without compromising financial stability.
  • Liquidity Liquidity disclosed Healthy liquidity mentioned qualitatively.
    Our balance sheet remains strong with minimum leverage and healthy liquidity, giving us the flexibility to pursue growth initiatives without compromising financial stability.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · H2 FY26 · High confidence 13-14%
    So having said all these things, we expect to achieve EBITDA level of something around 13% to 14%, which we discussed in the last quarter as well. So we are keeping that expectations alive for the next or the remaining H1 -- H2, sorry.

    — Abhay Raj Singh

  • Annual EBITDA Margin Increase Profitability · every year · High confidence 1-2% increase
    EBITDA margin 13% to 14%. It will definitely, 1% to 2% increase every year we are expecting.

    — Pardeep Khanna

  • EBITDA Margin Profitability · FY27 · High confidence 13-15%
    we are hopefully in the next current year for the '27, we are targeting INR2,600 to INR2,700 revenue and EBITDA margin is 13% to 15%.

    — Pardeep Khanna

Product Mix

  • Pharma Product Mix (Ibuprofen vs. Other APIs) Product Mix · coming years · Medium confidence 50% Ibuprofen and 50% other pharma products
    We expect in the coming years. We expect in pharma, we are supposing to reach 50% Ibuprofen and 50% other pharma products.

    — Pardeep Khanna

Cost Efficiency

  • Reduction in power and fuel costs Cost Efficiency · current quarter (Q3 FY26) · High confidence INR5-6 crores reduction
    So we hope in this current quarter, we will achieve to power costs near to normal, and it will be reduced by INR5 crores to INR6 crores.

    — Pardeep Khanna

Capacity Utilization

  • Paracetamol facility utilization Capacity Utilization · by March end (FY26 end) · High confidence 65%

    From 55-60% today

    And by the end of this year means by March end, we expect to reach about 65% capacity utilization.

    — Abhay Raj Singh

Regulatory

  • Land parcel regulatory approvals Regulatory · within 2 quarters · High confidence all approvals obtained
    So we expect within 2 quarters, we will able to get all the regulatory approvals.

    — Rajesh Mahajan

Revenue

  • H2 FY26 Revenue Growth Revenue · H2 FY26 · Medium confidence 10-12%

    From 9% in H1 today

    for H2, we are hopeful that we will be achieving 10%, 12% from now, maybe a little bit short as compared to the whole year, but we are we will be reaching very close to that.

    — Abhay Raj Singh

  • Annual Revenue Growth Revenue · every year · High confidence 10-15%
    Actually, in regard to the revenue, we are expecting 10% to 15% growth in every year. And hopefully, we will achieve this in the current year also.

    — Pardeep Khanna

  • Revenue Revenue · FY27 · High confidence INR2,600-2,700 crores
    we are hopefully in the next current year for the '27, we are targeting INR2,600 to INR2,700 revenue and EBITDA margin is 13% to 15%.

    — Pardeep Khanna

Sales

  • Non-Ibuprofen export sales Sales · this quarter and next quarter (Q3 & Q4 FY26) · High confidence definitely increasing
    So we are very hopeful and optimistic that for non-Ibuprofen, export sale will definitely be increasing this quarter and the next quarter.

    — Abhay Raj Singh

What to watch in Q3 FY26

Fuel cost normalization

Q3 FY26
Current INR7-8 crores impact in Q2 FY26
Target Reduced by INR5-6 crores

Why it matters

Direct impact on EBITDA margins; normalization is expected to improve profitability in the current quarter.

in this current quarter, we will achieve to power costs near to normal, and it will be reduced by INR5 crores to INR6 crores.

Risks & concerns

  • Elevated power and fuel costs due to Punjab floods

    medium

    Impacted Q2 profitability by INR7-8 crores, expected to normalize in Q3 FY26.

    Management acknowledged

  • Subdued pricing in Chemicals segment

    medium

    Pricing remains under pressure, though volume recovery and cost optimization help offset.

    Management acknowledged

  • High market competitiveness for new products like Sitagliptin

    medium

    Despite EDQM approval, commercial production is not being pushed due to price war and low profitability.

    Management acknowledged

  • Pricing pressure in non-Ibuprofen APIs

    medium

    Ongoing for the last 3-4 quarters, but volume growth and diversification help mitigate.

    Management acknowledged

Q&A highlights

8 direct
Revenue mix among non-Ibuprofen APIs and overall segment split Direct
No, no, no. Actually, 62% is our ratio of Ibuprofen within pharma. And total pharma ratio is 59% and Chemical is 41%. 59% and 41%.

Clarifies the company's revenue composition, detailing the contribution of Ibuprofen within Pharma and the overall Pharma vs. Chemical split, which is crucial for understanding revenue drivers and diversification efforts.

Asked by Riya Jain

Impact of elevated fuel costs on Q2 margins and expected normalization Direct
Actually, power and fuel cost during the quarter has been increased. It is increased by impact of heavy rains and floods and amount is affected is INR7 crores to INR8 crores during the quarter... margin is effected by around 1%... in this current quarter, we will achieve to power costs near to normal, and it will be reduced by INR5 crores to INR6 crores.

Quantifies a temporary negative impact on Q2 profitability due to external factors and provides a clear expectation for its normalization and improvement in the subsequent quarter.

Asked by Vignesh Iyer

Utilization of the new paracetamol facility and future targets Direct
For this quarter, we reached to 55% capacity utilization for the paracetamol from the new plant, which was commenced in March this year. And by the end of this year means by March end, we expect to reach about 65% capacity utilization.

Provides an update on the ramp-up progress of a key new manufacturing asset and its expected contribution to future capacity and revenue.

Asked by Vignesh Iyer

Drivers for the improvement in Chemicals segment EBIT margin Direct
It may be like our buying negotiation and may b we have some inventory accumulation with the lower prices earlier with us. So in addition to efficiency, there may be some inventory gain also.

Explains the specific factors, including procurement strategies and inventory management, that contributed to margin expansion in the Chemicals segment.

Asked by Maulik

Contribution of non-Ibuprofen APIs to pharma growth Direct
paracetamol is the one product. And apart from the paracetamol, Clopidogrel is also a good products of our portfolio in the non-API. That also did well for this quarter, coupled with the Pantaprazole and few other non-API products. So put together, all these bring the growth within the non-Ibuprofen portfolio.

Highlights the specific products driving growth in the diversified non-Ibuprofen API portfolio, indicating successful product development and market traction.

Asked by Maulik

Regulatory progress for Fenofibrate and Levetiracetam DMFs and EU GMP audit status Direct
So first, your question was with respect to Levetiracetam and Fenofibrate DMF. So already, we got some observations from FDA and the queries are responded well in time. So we are waiting for the means, next step... our EU GMP inspection concluded last Saturday. It was for 6 days and we don't have any major observation, only recommendations were there.

Provides crucial updates on regulatory filings and inspections, which are vital for market access and expansion in key international markets.

Asked by Richa Shah

Commercial strategy for Sitagliptin Phosphate Monohydrate despite EDQM approval Direct
As of now, we are not doing this because of the price war in the market because whatever the price is there in the market, that is not even the cost of production. So right now, we are not pushing that molecule very fast.

Reveals a strategic decision to hold back on commercializing an approved product due to intense market price competition, impacting its immediate revenue contribution.

Asked by Richa Shah

Impact of employee benefit expenses on Q2 financials and future quarters Direct
employees are not more. It's the same, but because of some year-end variable payments, incentives related payments that comes upfront in 1 quarter, that was the reason you've seen it into the financials. It's about INR6 crores impact therein. That will not be in the Q3 and the Q4.

Clarifies a one-time expense that impacted Q2 profitability, assuring investors that this particular cost will not recur in the subsequent quarters.

Asked by Shaikh Mohamed

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Detailed narrative

Q2 FY26 Financial Performance Overview

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.

Q2 Profitability Impact & Outlook

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.

Segmental Performance and Product Mix

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.

Paracetamol Capacity Expansion and Utilization

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.

Strategic Growth and Diversification

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.

Capex Plans and Regulatory Updates

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.

Long-term Financial Targets

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.

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