IOL Chemicals

IOL Chemicals reported a robust Q3 FY26, with revenue from operations growing 10.9% year-on-year to INR 580 crores. EBITDA for the quarter increased by 22.8% to INR 62.6 crores, leading to an EBITDA margin expansion to 10.7% from 9.7% in the prior year. For the nine months ended December 2025, revenue stood at INR 1,699.6 crores, a 9.6% growth, while EBITDA reached INR 196.1 crores, up 24.8%, with the margin improving to 11.4% from 10%.

The company's strategy to diversify beyond ibuprofen is showing success, with non-ibuprofen molecules gaining market share and validation from regulated markets. In Q3 FY26, the pharma segment contributed 61% (INR 356 crores) of total revenue, with ibuprofen accounting for INR 228 crores and non-ibuprofen for INR 128 crores. The long-term vision aims for a 75% API and 25% chemical revenue mix, with the API segment further split into 25% ibuprofen and 75% non-ibuprofen over the next 4-5 years.

Operational discipline and optimal capacity utilization were key drivers for performance. The ibuprofen plant maintained a high utilization rate of 90-95%, indicating strong demand. The chemicals division, particularly the ethyl acetate plant, operated at nearly 100% capacity, which was a primary factor behind the doubling of Chemicals EBIT in the first nine months of FY26. These efficiencies contributed to sustained margin expansion across the periods.

For FY26, the company's total capex is expected to be around INR 130-135 crores, with 60% allocated for growth initiatives and 40% for infrastructure development and automation. A similar capex level of INR 150-200 crores is planned for FY27. These investments are aimed at expanding the company's footprint in regulated markets, increasing the share of high-value non-ibuprofen APIs, and strengthening R&D capabilities.

IOL Chemicals recently secured the Certificate of Suitability (CEP) for Minoxidil. Currently, the company supplies minoxidil intermediate as a merchant sale. The initial strategy is to commercialize the final API minoxidil in international regulated markets, with plans to commence by Q1 FY27. This move is expected to enhance the non-ibuprofen API portfolio and contribute to the company's diversification strategy.

The company faced challenges from an unexpected rise in fuel costs, particularly for rice husk, which remained high in Q3, preventing the achievement of earlier EBITDA margin targets. Pharma EBIT margins saw a sequential reduction from 10.5% to 9.7% in Q3, primarily due to stable paracetamol prices and the underutilization of para capacity, which was running at approximately 60%. Additionally, a non-recurring^📎 exceptional item^📎 of INR 11.2 crores was recorded due to new labor law provisions.

The R&D team is actively engaged in developing new products for both the chemical and API segments, with product finalization currently under implementation. While the company holds patents for products like sitagliptin, vildagliptin, and losartan, these are not yet commercialized due to commercial equations and impurity-related issues. The focus remains on creating an edge for new molecules entering the market.