IPCA Laboratories Q1 FY27 earnings call

Ipca Laboratories reported a strong Q1 FY27, with consolidated business growing 20.74% YoY to INR2,788 crores from INR2,309 crores in Q1 FY26. This growth was achieved despite uncertainties like material price fluctuations, shipment delays, and increased logistics costs. The company also saw a significant improvement in consolidated EBITDA margins, which expanded by 4.49% to 22.88% in Q1 FY27 from 18.39% in Q1 FY26, with absolute EBITDA reaching INR638 crores.

The domestic formulation business delivered a 12.59% growth in Q1 FY27, reaching INR1,082 crores compared to INR961 crores in Q1 FY26. Ipca maintained its IQVIA rank around 16, with market share marginally improving to 2.08%. The chronic segment grew 17.2% and the acute segment grew 8.9%, both outperforming the IPM. However, the antimalarial segment saw a decline of approximately 24% and now represents only about 1% of the overall business.

The overall export business demonstrated robust growth of 34% in Q1 FY27, reaching INR603 crores. Promotional branded markets in ROW grew 15.32% to INR143 crores. The generic business, excluding tender, grew 26.86% to INR340 crores. Institutional generic business experienced an exceptional 92.67% growth to INR111.75 crores, partly attributed to INR40 crores worth of shipments that were delayed from March to April. The API business also grew 17.12% to INR424 crores.

Unichem's US business, particularly the Ipca portfolio sold by Unichem, grew approximately 27%, contributing to an overall 37% growth for the combined US operations. Unichem's own portfolio grew 9%, while its Europe portfolio saw 3% growth. Brazil business showed strong traction with 52% growth, and the Acacia business (ROW market) doubled from INR8 crores to INR17 crores. Unichem's API business also improved significantly by 73% to INR58 crores, contributing to overall good growth for the subsidiary.

Ipca plans a total capital expenditure of INR700-800 crores in the current financial year. This includes capacity expansion for European and US markets, particularly for controlled and extended-release formulations at Pithampur. Significant investments are also directed towards biotech, with an additional INR100 crores allocated this year for piloting facilities and R&D. The company is also building new API plants at Dewas and Wardha and converting existing intermediates to continuous processes.

Material costs have fluctuated, with July and August seeing increases. While material cost to sales was down ~2% in the last financial year, Q1 FY27 saw material costs rise in line with turnover. Logistics costs, particularly freight rates, have increased significantly (e.g., South America freight rates jumped from INR3,000 to INR9,000-10,000). Despite these challenges, management expects no margin pressure, attributing overall EBITDA improvement to better operating leverage from higher turnover and reduced personnel and manufacturing costs.

Ipca Laboratories has significantly reduced its debt, having repaid approximately USD50 million in dollar loans before March of the last financial year. The company currently has around INR193 crores in long-term debt and no short-term borrowings. Management expects to have only about INR70 crores of term loan outstanding by year-end, which will be repaid in the next financial year. This strong debt reduction means interest costs are expected to be minimal going forward^⏳.

The company is heavily investing in biotech, with approximately 7 candidates in the pipeline and R&D capacity to develop 3-4 products annually. Validations and formulation development are ongoing, with initial stability results expected by mid-next year. Clinical trials for biosimilars, which have reduced requirements due to waivers of Phase III from EU/US authorities, are anticipated to commence from the next financial year. Revenues from these biosimilars, primarily targeting patent-expired products, are projected to start flowing by FY29-FY30.