IPCA Laboratories Limited — Q2 FY26 earnings call

Call held 13 Nov 2025

Management summary

Ipca Laboratories reported a strong Q2 FY26, driven by robust domestic formulation growth and significant margin expansion across both standalone and consolidated entities. The API business also performed exceptionally well. While export formulations saw a Q2 decline, H1 remained flat. The company is actively integrating Unichem, focusing on market expansion and R&D, and expects continued margin improvement in the second half of the fiscal year.

Highlights

  • Domestic formulation business for Q2 FY26 grew around 8%, outpacing the IPM's 7.8% growth with Ipca growing 11.6%.

  • Ipca's market share improved from 2.3% to 2.8% in MAT September 2025, maintaining rank 16.

  • Standalone EBITDA margin improved to 25.46% in Q2 FY26 from 22.89% in Q2 FY25, an improvement of 2.57%.

  • Consolidated EBITDA margin improved to 21.68% in Q2 FY26 from 19.1% in Q2 FY25, an improvement of 2.58%.

  • API business delivered a strong growth of around 28% in Q2 FY26, from INR319 crores to INR408 crores.

Concerns

  • Domestic business in Q2 FY26 was impacted by GST rate rationalizations and rate structure correction in September 2025.

  • Export formulation business declined by almost 9% in Q2 FY26 to INR493 crores from INR541 crores in the last financial year.

  • Unichem's Q1 performance was largely impacted by European restructuring and a provision of INR10-12 crores due to adverse Euro movement.

  • Unichem lost market share in some products due to increased competition and lower pricing, impacting its gross margin.

Key financials

2 periods

Headline

  • Domestic Formulation Growth
    8%
  • Ipca Q2 Growth
    11.6%
  • Standalone EBITDA Margin
    25.5%
  • Consolidated EBITDA Margin
    21.7%
  • R&D Spend (% of Turnover)
    3.9%

Q2

  • Export Formulation Revenue
    ₹493 Cr
    YoY -9%
  • API Business Revenue
    ₹408 Cr
    YoY +28%

What they filed

Q1 FY27: revenue up 21.3%, net profit up 42.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,811 1,663 1,638 1,747 1,930 +7%1,845 +11%1,814 +11%2,119 +21%
EBITDA402 411 359 407 465 +16%477 +16%431 +20%578 +42%
Net profit244 268 -65 262 305 +25%303 +13%262 +503%373 +42%
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

  • Pain
    10% Growth (Q2)11% Growth (H1 FY26)
  • Cardiovascular
    11% Growth (Q2)10% Growth (H1)
  • Antimalarials
    8% Decline (Q2)2% Decline (H1 FY26)
  • Antibacterial
    4% Growth (Q2)5% Growth (H1)
  • CNS
    18% Growth (Q2)14% Growth (H1)
  • Cough and Cold
    17% Growth (Q2)18% Growth (H1)
  • Derma
    11% Growth (Q2)
  • Urology
    11% Growth (Q2)

Capital allocation

high confidence
  • M&A Unichem Laboratories Limited Acquisition · Integrated

    Synergy realization and market expansion for Unichem products through Ipca's network.

    Unichem's Q1 FY26 was impacted by EUR3.5-4 million expenditure for European restructuring and facility closure, which is now cut. Q2 EBITDA margin was ~11%.

    As far as Unichem margins are concerned, first quarter was largely impacted because of some restructuring, which has happened in Europe because one of their facility manufacturing facilities which was there in Europe, there we had handshake with people, and we were closing that facility... So overall, they were incurring around EUR3.5 million to EUR4 million every year, the expenditure. So that expenditure will be cut now... They had a good business growth in U.S. around 12%, and their European business has also done well. And therefore, I think over INR60 crores kind of EBITDA margins they have, which is around 11% or so of the second quarter.
  • M&A Jogeshwari land (Unichem) Divestment · Closed

    To generate surplus cash for Unichem.

    Proceeds from the sale will be reflected in Q3 FY26 financials.

    And I think overall proceeds of that after, I think this overall -- this payment also will leave some surplus with Unichem. And after payment of tax also, there will be surplus... Transaction happened in the month of October. So it will get reflected in the third quarter.
  • Liquidity Liquidity disclosed Unichem has surplus cash and is generating cash from its business, not requiring cash infusion.
    No, Unichem doesn't require cash. In fact, they have surplus right now also. And current quarter also, they have generated cash from business, and they will continue to do that.

Guidance & targets

Volume

  • Generic Formulations Growth Volume · H2 '26 · High confidence 8-9%
    we are expecting a business growth of around almost around 8% to 9% on generic formulations in H2 '26.

    — A.K. Jain

  • Overall API Business Growth Volume · current financial year · High confidence 14-15%
    Overall API business of current financial year is expected to grow around 14% to 15%.

    — A.K. Jain

  • Overall India Growth Volume · FY26 · High confidence 10-11%
    overall, our guidance was around 10% to 11%. And broadly, we will be in that line.

    — A.K. Jain

  • Unichem US Business Growth (Stand-alone) Volume · each year · High confidence 8-10%
    their U.S. business should grow on a stand-alone basis about 8% to 10%.

    — Management

  • Branded Export Formulation Growth Volume · full financial year · High confidence 9-10%
    That business also will have around 9% to 10% kind of growth on the full financial year basis.

    — A.K. Jain

R&D

  • R&D Spend (% of Turnover) R&D · current financial year · High confidence around 4%
    Higher R&D spend of around 4% of turnover will continue in the for the current financial year.

    — A.K. Jain

  • R&D Spend (% of Turnover) R&D · next financial year · Medium confidence 4.5-4.75%

    Previously 4% → 4.5-4.75%

    So this 4% may go to around 4.5% or 4.75% in next financial year.

    — A.K. Jain

Margin

  • Consolidated EBITDA Margin Margin · second half · High confidence around 1% better than 20%

    Previously around 20% → around 1% better than 20%

    from our guidance of around 20% consolidated margin, the margin are expected to be better by almost around 1% in the second half, and that improvement will be there.

    — A.K. Jain

  • Unichem EBITDA Margin Margin · 1.5 to 2 years · Medium confidence 15-20%
    I would say it may for that margins to go up, it may be around 1.5 to 2 years.

    — A.K. Jain

  • Standalone EBITDA Margin Margin · compared to last financial year · High confidence continue to improve
    margin will continue to improve compared to last financial year.

    — A.K. Jain

  • Consolidated EBITDA Margin Margin · High confidence continue to improve
    that trend will continue.

    — A.K. Jain

Headcount

  • Field Force Additions Headcount · annually · High confidence 400-500 people
    maybe around 400 to 500 people annually can be added.

    — A.K. Jain

Market Share

  • Ipca India Growth vs Market Market Share · High confidence higher than market growth
    we are very confident our growth will be higher than the market growth.

    — Management

What to watch in Q3 FY26

Unichem EBITDA Margin Improvement

Next quarter (for initial signs of improvement)
Current ~11% (Q2 FY26)
Target Progress towards 15-20%

Why it matters

Key to realizing full synergy benefits from the Unichem acquisition and overall consolidated margin expansion.

The business also has to mature because business starts, so it will take time. So, let's say, I would say it may for that margins to go up, it may be around 1.5 to 2 years.

Risks & concerns

  • Domestic Business Impact from GST Rationalization

    medium

    Domestic business in Q2 FY26 was impacted by GST rate rationalizations and rate structure correction in September 2025.

    Management acknowledged

  • Unichem Market Share Loss & Price Erosion

    medium

    Unichem lost market share in some products due to increased competition and lower pricing, impacting its gross margin.

    Management acknowledged

  • US Market Pricing Pressures

    medium

    Pricing pressures are definitely present in the US market, and one-time buying opportunities are lower.

    Management acknowledged

  • Unichem European Restructuring & Forex Impact

    low

    Unichem's Q1 FY26 performance was impacted by European restructuring and a provision of INR10-12 crores due to adverse Euro movement, which is now resolved.

    Management acknowledged

  • Lyka Labs Business Impact

    low

    Lyka Labs' business was impacted by GST rationalizations and rejections, leading to a INR5-7 crores impact on its overall numbers.

    Management acknowledged

Q&A highlights

6 direct
Unichem Synergies & Margin Improvement Partial
As far as the business issues are concerned, number one was that we should extend their product to the various markets. So that work has started. And I think around 12 product dossiers are filed in European market and other markets, that filing has started. So that work and after this filing, probably approval may take around 1 year to 1.5 years. That's the time. And then we'll start extending their product businesses to the other markets.

Management detailed the strategy for Unichem's growth and margin improvement, including timelines for regulatory approvals and market expansion, indicating a longer-term realization of full benefits.

Asked by Saion Mukherjee

Unichem R&D Spend and Duplication Direct
No, that expenditure reduction will not happen because Unichem has to do a lot of work in terms of, let's say, extending their dossier to the various markets... What we have eliminated is that both the teams will not work on a common product. So there will be no duplication. But as far as work is concerned, in fact, that cost has already increased and will keep on remain at that level because a lot of incremental work needs to be done in order to get better certification of their product range from other markets.

Clarified that R&D spend will not decrease post-acquisition due to necessary market extension work and better product certification, but duplication of efforts will be avoided.

Asked by Aanchal

Unichem Cash Situation & Jogeshwari Land Sale Direct
No, Unichem doesn't require cash. In fact, they have surplus right now also. And current quarter also, they have generated cash from business, and they will continue to do that. So I don't think -- and we already sold their Jogeshwari land... Transaction happened in the month of October. So it will get reflected in the third quarter.

Confirmed Unichem's financial health and the timing of the Jogeshwari land sale proceeds, indicating no immediate need for cash infusion.

Asked by Rajakumar

Unichem Inventory Levels Direct
Unichem business is more or less U.S. business, almost around 80% is U.S. business. And their cycle is such that they need to keep around three months inventory at the U.S. and transit inventories and all that kind of thing... We are working also on reduction of those kind of inventory. You will notice that in this quarter, we have reduced overall inventory by almost around INR150 crores in the system.

Explained the reason for historically high inventory (US business cycle) and highlighted a significant reduction of INR150 crores this quarter, indicating improved working capital management.

Asked by Rajakumar

Ipca's R&D for Biosimilars & Future Spend Direct
I think overall, the R&D spend in the current financial year is going to remain around 4% of our turnover because a lot of filing and bioequivalence studies and our filing in various markets is also getting -- that pipeline is also becoming very strong. So those expenditures are also increasing. And also your biosimilar expenditures are there. Once the clinical trials start, that cost will be extra. So this 4% may go to around 4.5% or 4.75% in next financial year.

Provided clear guidance on R&D spend for current and next fiscal year, linking it to pipeline strength and biosimilar development, indicating a rising investment in future growth.

Asked by Kunal

Gross Margin Robustness & Product Mix Direct
material cost is down by almost around 3% to 4% kind of reduction there in material cost... But since our product mix is improving, let's say, my chronic product mix is improving, my other product mix is improving, where we have higher margins. So that is resulting in the overall margin.

Explained the key drivers behind the robust gross margin, attributing it to both material cost reduction and a favorable shift in product mix towards higher-margin chronic businesses.

Asked by Kunal

Unichem Generic Business Price Erosion & Market Share Loss Direct
Unichem has lost market share in certain of its products. That is also because of the lower prices for that product and increase in the competition... Yes, the gross margin has come down mainly because of that loss of market share.

Acknowledged market share loss and gross margin impact for Unichem due to intensified competition and price erosion in the generic business, highlighting a challenge for the acquired entity.

Asked by Dharmil Shah

Ipca's GLP Preparedness Partial
See as far as GLP is concerned, we didn't have R&D of that kind for GLP... So now we have already in process of putting the facility for R&D, biotech R&D for E. coli-based product. But it's going to take time. So we will not be there in that kind of race for -- in the current phase of the product. But next phase of product, whenever it comes, we'll be there.

Provided clarity on Ipca's current stance and future plans regarding GLP, indicating a strategic, longer-term entry into this segment rather than immediate participation in the current phase.

Asked by Surya Narayan Patra

2 min read 6 chapters

Detailed narrative

Q2 FY26 Performance Overview and Market Outperformance

Ipca Laboratories delivered a strong Q2 FY26, with its domestic formulation business growing approximately 8%. Despite impacts from GST rate rationalizations in September 2025, the company outpaced the Indian Pharmaceutical Market (IPM), achieving 11.6% growth against the market's 7.8%. This performance led to an improvement in Ipca's MAT September 2025 market share to 2.8% from 2.3% a year ago, while maintaining its 16th rank in the market.

Robust Margin Expansion Driven by Product Mix and Cost Control

The company reported significant margin expansion in Q2 FY26. Standalone EBITDA margin improved by 2.57% to 25.46% from 22.89% in Q2 FY25. Consolidated EBITDA margin also saw a 2.58% improvement, reaching 21.68% from 19.1%. This positive trend was primarily attributed to a 3-4% reduction in material costs and an improving product mix, with chronic businesses now contributing 35% to Ipca's overall revenue, up from 34%.

Strong API Growth Amidst Mixed Export Performance

The API business was a key highlight, demonstrating robust growth of 28% in Q2 FY26, with revenue increasing from INR319 crores to INR408 crores. In contrast, the export formulation business experienced a decline of approximately 9% in Q2 FY26, falling to INR493 crores from INR541 crores in the prior fiscal year's Q2. However, for the first half of FY26, export formulations remained almost flat at INR941 crores compared to INR937 crores in H1 FY25.

Unichem Integration and Synergy Realization

Integration efforts for Unichem are progressing, with 12 product dossiers filed in European and other markets, with approvals anticipated in 1-1.5 years. Management clarified that R&D spend for Unichem would not decrease due to necessary market extension work, but duplication of efforts would be avoided. Unichem's Q2 EBITDA margin was around 11%, with a target to reach 15-20% in 1.5-2 years. Additionally, Unichem successfully reduced its inventory by approximately INR150 crores this quarter.

Increased R&D Investment for Future Pipeline and Biosimilars

Ipca's R&D spend increased to 3.91% of turnover in Q2 FY26 from 2.7% in Q2 FY25. The company plans to maintain R&D spend around 4% for the full year, potentially increasing it to 4.5-4.75% in the next fiscal year. This investment supports a strengthening pipeline, including bioequivalence studies and filings in various markets. Ipca is also initiating biotech R&D for E. coli-based products, signaling a long-term strategic entry into the GLP segment.

Positive Outlook and Guidance for FY26

The company provided a positive outlook, guiding for an overall India growth of 10-11% for FY26. The API business is expected to grow 14-15% for the full year, and generic formulations are projected to grow 8-9% in H2 FY26. Consolidated EBITDA margin is anticipated to improve by approximately 1% in H2 FY26 compared to the 20% guidance, driven by continued product mix improvement and cost efficiencies.

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