IOL Chemicals and Pharmaceuticals Limited — Q3 FY26 earnings call

Call held 12 Feb 2026

Management summary

IOL Chemicals reported a resilient Q3 FY26 with strong revenue and EBITDA growth, driven by diversified business model and disciplined execution. Non-ibuprofen molecules and the chemicals segment showed robust performance, contributing to margin expansion. Despite global headwinds and higher fuel costs impacting margin targets, the company declared an interim dividend and remains focused on strategic growth initiatives, including minoxidil commercialization and R&D pipeline development.

Highlights

  • Q3 FY26 Revenue from operations increased 10.9% YoY to INR 580 crores, driven by strong operational momentum.

  • EBITDA margin expanded to 10.7% in Q3 FY26 and 11.4% for 9M FY26, reflecting improved operating leverage and cost optimization.

  • Non-ibuprofen molecules are gaining share, reinforcing the success of the diversification strategy and contributing to broader market penetration.

  • Chemicals business delivered stable performance with optimal capacity utilization, contributing to strong EBIT growth.

  • The Board declared an interim dividend of 50% per equity share for FY26, reflecting confidence in performance and outlook.

Concerns

  • An exceptional item of INR 11.2 crores was reported in Q3 FY26, pertaining to a provision related to new labor laws, which is non-recurring.

  • EBITDA margin targets for H2 were not met due to an unexpected rise in fuel costs, which remained high in Q3.

  • Pharma EBIT margins reduced sequentially from 10.5% to 9.7% due to stable paracetamol prices and underutilization of para capacity (around 60%).

Key financials

2 periods

Q3 FY26

  • Revenue from Operations
    ₹580 Cr
    YoY +10.9%
  • EBITDA
    ₹62.6 Cr
    YoY +22.8%
  • EBITDA Margin
    10.7%
  • PBT before exceptional items
    ₹38.8 Cr
    YoY +39.3%

9M FY26

  • Revenue from Operations
    ₹1,699.6 Cr
    YoY +9.6%
  • EBITDA
    ₹196.1 Cr
    YoY +24.8%
  • EBITDA Margin
    11.4%
  • PBT before exceptional items
    ₹124.8 Cr
    YoY +34.2%

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

Share of Revenue
₹936 Cr Total
  • Pharma (Q3 FY26) ₹356 Cr 38.0%
  • Ibuprofen (Q3 FY26) ₹228 Cr 24.4%
  • Chemical (Q3 FY26) ₹224 Cr 23.9%
  • Non-Ibuprofen (Q3 FY26) ₹128 Cr 13.7%

Capital allocation

high confidence
  • Capex ₹130 Cr Cut — last quarter of FY, may go for a little bit less than budgeted
    • Growth initiatives 0.6 % of total capex
    • Infra development and automation 0.4 % of total capex

    Previously planned ₹150 Cr

    Capex is -- total capex for FY '26 is something around INR150 crores. we are into the last quarter, so maybe a little less to that INR150 crores we budgeted. But I think we are in the last quarter. So we may go for a little bit less to the INR150 crores, maybe INR130 crores to INR135 crores. Out of this, 60% is against the growth. Rest 40% for infra development and automation. Jainam-ji, as considering the last con call also, the capex regularly we are doing is approximately INR150 crores to INR200 crores. So I think for FY '27, we will also be doing the same level of the capex, for that, we have a plan.
  • Dividend %50/share (interim)
    Reflecting confidence in the company's performance and outlook, the Board of Directors had declared an interim dividend of 50% per equity share for financial year '25-26.

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY27 · High confidence 10-15%
    So in the coming year, we expect minimum 10% to 15% growth in the top line and 15% to 20% in the bottom line.

    — Pardeep Kumar Khanna

  • Revenue Revenue · Q4 FY26 · High confidence INR 600 crores
    Yes, yes, sure. We expect INR600 crores revenue in the fourth quarter. And margin will also be increased.

    — Pardeep Kumar Khanna

Profitability

  • Bottom Line Growth Profitability · FY27 · High confidence 15-20%
    So in the coming year, we expect minimum 10% to 15% growth in the top line and 15% to 20% in the bottom line.

    — Pardeep Kumar Khanna

EBITDA Margin

  • EBITDA Margin Improvement EBITDA Margin · Coming Quarter (Q4 FY26) · Medium confidence 1-2%
    And EBITDA margin will improve by better efficiencies we are marketing. But we hope we will increase, I guess, the EBITDA margin increased by 1% to 2% in the coming quarter.

    — Pardeep Kumar Khanna

  • EBITDA Margin EBITDA Margin · FY27 · Medium confidence 11-12%

    Previously 13-15% → 11-12%

    Initially we said that we will try to reach to around 14% to 15%, after that we said we will be reaching to around 13%. But I think now we are just understanding that we will be reaching something 11% to 12%.

    — Abhay Raj Singh

Revenue Mix

  • API vs Chemical Revenue Mix Revenue Mix · Next 2 years · High confidence 60% API, 40% Chemical
    So next few years, the ideal for us will be the 60% will be coming from API business and 40% will be coming from the chemical business. This is in near-term. However, the ideal we are thinking is 25% and 75%. So 25% from the chemical and 75% from the API. And this 60-40, I'm talking about achievable in next 2 years.

    — Abhay Raj Singh

  • API vs Chemical Revenue Mix Revenue Mix · Long-term · Medium confidence 75% API, 25% Chemical
    However, the ideal we are thinking is 25% and 75%. So 25% from the chemical and 75% from the API.

    — Abhay Raj Singh

API Mix

  • Ibuprofen vs Non-Ibuprofen Mix API Mix · Near-term · High confidence 50% Ibuprofen, 50% Non-Ibuprofen
    And between these APIs, the near-term objective of ours is to divide it into the 50-50. Later on, 50% from ibuprofen and 50% from non-ibu.

    — Abhay Raj Singh

  • Ibuprofen vs Non-Ibuprofen Mix API Mix · 4-5 years · Medium confidence 25% Ibuprofen, 75% Non-Ibuprofen
    But we are trying to further improve this, 25% from the ibuprofen and 75% from non-ibuprofen API. This is, I'm talking about for 4 to 5 years.

    — Abhay Raj Singh

  • Ibuprofen vs Non-Ibuprofen Mix API Mix · FY27 · Medium confidence 50-50 ratio
    So we are targeting to further have 50-50 ratio for the '27 from ibuprofen and non-ibuprofen.

    — Abhay Raj Singh

Total Revenue

  • Total Revenue Total Revenue · FY27 · Medium confidence INR 2,700 crores
    So we have already discussed on this for the '26 and '27. we think that during -- by the '27, we might have something. We've already given that we will be reaching to INR2,700 crores from overall the business, including the chemical and the ibuprofen -- sorry, API.

    — Abhay Raj Singh

API Revenue

  • API Revenue API Revenue · FY27 · Medium confidence INR 1,800 crores
    I think that around INR1,800 crores comes from the API business and INR900 crores will come from the chemical business.

    — Abhay Raj Singh

Chemical Revenue

  • Chemical Revenue Chemical Revenue · FY27 · Medium confidence INR 900 crores
    I think that around INR1,800 crores comes from the API business and INR900 crores will come from the chemical business.

    — Abhay Raj Singh

What to watch in Q4 FY26

Q4 FY26 EBITDA Margin Improvement

Q4 FY26
Current 10.7% (Q3 FY26)
Target 1-2% improvement (11.7% - 12.7%)

Why it matters

Management expects margin improvement after missing H2 targets due to fuel costs, indicating a recovery in profitability.

And EBITDA margin will improve by better efficiencies we are marketing. But we hope we will increase, I guess, the EBITDA margin increased by 1% to 2% in the coming quarter.

Risks & concerns

  • Fuel Price Volatility

    medium

    Unexpected rise in fuel costs (rice husk) prevented achievement of EBITDA margin targets for H2 FY26.

    Management acknowledged

  • Paracetamol Pricing and Capacity Utilization

    medium

    Pharma EBIT margins reduced sequentially due to stable paracetamol prices and underutilization of para capacity (around 60%).

    Management acknowledged

  • Commercialization of Patented Products

    medium

    Three patented products (sitagliptin, vildagliptin, losartan) are not currently commercialized due to commercial equations and impurity issues.

    Management acknowledged

  • Impact of New Labor Laws

    low

    A one-time exceptional item of INR 11.2 crores was incurred in Q3 FY26 due to provisions related to new labor laws.

    Management acknowledged

Q&A highlights

7 direct
EBITDA Margin Expansion Drivers Direct
The primary increase in the - Inaudible 9:40 increase in capacity utilization of various products.

Analyst sought detailed drivers for margin expansion; management attributed it to capacity utilization and other factors.

Asked by Jay from Star Investments

Ibuprofen API Pricing Environment Direct
No, our ibuprofen plant is running around 90% to 95% capacity utilization, and we are not facing any problem which you have mentioned that any surplus, but our capacity utilization is continuing above 90% to 95%.

Analyst inquired about potential margin pressure from oversupply; management confirmed stable utilization and no issues.

Asked by Jay from Star Investments

Chemicals EBIT Growth Drivers Direct
Our capacity utilization for Chemicals division is almost 100% capacity we are running for our ethyl acetate plant. And the increase in EBIT is primarily to the full utilization of capacity utilization.

Analyst asked about the doubling of Chemicals EBIT; management attributed it to full capacity utilization of the ethyl acetate plant.

Asked by Jay from Star Investments

Power Cost in Q3 FY26 Direct
Rightly said, the power cost in the second quarter has increased due to floods in Punjab. But non-reduction of fuel prices in the third quarter, it could not happen. The power and fuel costs remain same as in the second quarter.

Analyst followed up on power costs after Q2 floods; management confirmed costs remained high due to fuel prices.

Asked by Jainam Ghelani from Svan Investments

EBITDA Margin Target Revision Direct
In respect to EBITDA margin, we are not able to achieve the target because of unexpected rise in the fuel cost. So now we hope we will do better in the coming quarter. And EBITDA margin will improve by better efficiencies we are marketing. But we hope we will increase, I guess, the EBITDA margin increased by 1% to 2% in the coming quarter.

Analyst questioned the H2 margin target; management acknowledged missing it due to fuel costs and provided a revised outlook for the coming quarter.

Asked by Jainam Ghelani from Svan Investments

Forward Integration Strategy Partial
We are planning to have it, but not the formulations, but CMO model. CMO for API only.

Analyst sought clarification on forward integration; management specified it's a CMO model for API, not formulations.

Asked by Surabhi from NV Alpha

Minoxidil CEP and Market Strategy Direct
Varun-ji, we just recently got CEP. And earlier, we announced that by the end of the December, we will be commercializing minoxidil plant, which has been --- I mean, a part of our other existing unit, unit number 9. So as of now, minoxidil intermediate, we are supplying as a merchant sale to the market. And as initial strategy, we are going for final API minoxidil in international market, regulated markets.

Analyst inquired about a new product; management provided an update on Minoxidil's regulatory status and market entry strategy, highlighting diversification.

Asked by Varun Mishra from Bawa

Exceptional Loss Explanation Direct
So the central government regulated all labor laws and unified the 29 laws into 4 laws. Out of these laws, the wage structure / definitions has been redefined. because of it the difference of the past services of all the employees, works out to be INR11.21 crores. This is against the gratuity calculations as well as the earned leave calculations, if any.

Analyst asked for clarification on a significant exceptional loss; management explained it was a one-time provision due to new labor laws.

Asked by Shaikh Mohammad Ayaz, an Individual Investor

3 min read 7 chapters

Detailed narrative

Q3 & 9M FY26 Financial Performance Overview

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%.

Diversification and Product Mix Strategy

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 Efficiency and Capacity Utilization

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.

Capex Plans and Growth Initiatives

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.

Minoxidil Strategy and Commercialization

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.

Challenges: Fuel Costs and Margin Pressures

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.

R&D and Product Pipeline

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.

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