Laurus Labs — Q3 FY26 earnings call

Call held 28 Jan 2026

Management summary

Laurus Labs delivered a strong Q3 FY26, with significant revenue and profit growth driven by robust performance in its generics and CDMO segments. Gross and EBITDA margins expanded, and ROCE improved. The company continues to invest heavily in CAPEX for future growth, particularly in specialized modalities like ADC and peptides, while acknowledging that these new ventures will take time to generate substantial revenue.

Highlights

  • Q3 FY26 Revenue of ₹1,778 crores, contributing to 9M FY26 revenue of ₹5,001 crores, up 30% YoY.

  • Gross margins maintained around 60% (60.9% in Q3) and EBITDA margins expanded to 27% in Q3, with 9M EBITDA margin at 26.1%.

  • Profit after tax for 9M FY26 was ₹610 crores, reflecting a growth of 388%.

  • CDMO business recorded over 50% growth in 9M FY26, with Q3 sales at ₹408 crores, supported by strong recurring business and pipeline momentum.

  • Generics division revenues grew 37% in Q3 to ₹1,327 crores, and 26% in 9M to ₹3,510 crores, primarily due to higher ARV volumes and strong offtake in recently launched products.

  • ROCE improved to 18.5%, with expectations for further increase.

  • Successful completion of 110 quality audits by multiple regulatory agencies and customers without any critical points.

Concerns

  • Bio division Q3 sales were muted at ₹43 crores, though longer visibility on demand is expected.

  • ADC and Gene Therapy segments are not expected to generate meaningful revenues for the next 2-2.5 years.

  • CDMO revenues are expected to show lumpiness on a quarter-to-quarter basis due to phasing of deliveries.

Key financials

  1. Revenue ₹1,778 Cr +26%YoY
  2. Gross Margin 60.9%
  3. EBITDA Margin 27%
  4. EBITDA ₹485 Cr
  5. PAT ₹252 Cr
  6. ROCE 18.5%
  7. R&D Spend 4.1%

What they filed

Q1 FY27: revenue up 22.6%, net profit up 83.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,185 1,265 1,650 1,433 1,567 +32%1,509 +19%1,580 −4%1,757 +23%
EBITDA182 206 395 327 390 +114%346 +68%375 −5%499 +53%
Net profit42 57 252 158 216 +414%175 +207%192 −24%290 +84%
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

  • CDMO Small Molecule
    ₹408 Cr Sales
  • CDMO Bio Division
    ₹43 Cr Sales
  • Generics Division
    ₹1,327 Cr Revenues
  • ARV Formulation (9M)
    ₹865 Cr Revenues
  • ARV API (9M)
    ₹1,259 Cr Revenues
  • Total ARV (Q3)
    ₹744 Cr Revenues

Capital allocation

high confidence
  • Capex ₹246 Cr this quarter · ₹1,000 Cr (FY26) planned
    • Peptide development and manufacturing infrastructure
    • Antibody Drug Conjugate (ADC) GMP facility $25 Mn
    • Gene therapy process development labs
    • Vizag fermentation facility Phase-1 (400 kiloliters)
    • Krka Pharma JV FDA facility construction (Hyderabad Phase-1)
    On the CAPEX front we invested about Rs. 246 crores for the quarter and cumulatively for 9 months it is Rs. 735 crores. Our net debt stood at Rs. 2,092 crore which is similar range of quarter ended September and debt to EBITDA has further decreased to around 1.2x. The overall CAPEX this year will be about Rs. 1,000 crores and FY'26 based on the current estimate, we do feel it will be over Rs. 1,000 crores next year also. ADC is still at the nascent stage right now. We have allocated $25 million to the GMP facility which is under construction right now.
  • Debt Net ₹2,092 Cr · 1.2× EBITDA
    Our net debt stood at Rs. 2,092 crore which is similar range of quarter ended September and debt to EBITDA has further decreased to around 1.2x
  • M&A Krka Pharma Joint venture · Ongoing investment

    To manufacture formulations for European market, with APIs supplied by Laurus Labs. Phase-1 creating 3 billion solid oral capacity and 100 million potent molecule capacity.

    Phase-1 expected to be completed by mid-2027. Revenues from JV expected in next financial year (not current FY).

    Last month, we also announced increase in joint investments in Krka Pharma which is in line with our plan to support ongoing FDA facility construction in Hyderabad. Phase-1 is expected to be completed by mid-2027. The joint venture with the Krka Pharma is to manufacture formulations for European market where APIs will be supplied by us and in the Phase-1, we are creating 3 billion solid oral capacity and 100 million solid oral capacity for potent molecules. In the Phase-2, we will create another 5 billion tablet capacity in the solid oral space. Phase-1 we expect to complete by mid of 2027. This unit will primarily will do formulations packaging for various European markets and also some markets in Asia Pacific as well. We will have revenues in the next financial, not in this financial year.

Guidance & targets

Margin

  • Gross Margin Margin · coming quarter and next financial year · High confidence around 60%
    So, if you look at last quarter also we had the similar gross margin this quarter also that much and we expect to maintain gross margins of around 60% for the coming quarter and also next financial year.

    — Satyanarayana Chava

Capex

  • Overall CAPEX Capex · FY26 · High confidence about ₹1,000 crores
    The overall CAPEX this year will be about Rs. 1,000 crores and FY'26 based on the current estimate, we do feel it will be over Rs. 1,000 crores next year also.

    — Satyanarayana Chava

  • Overall CAPEX Capex · FY27 · High confidence over ₹1,000 crores

    — Satyanarayana Chava

CDMO

  • CDMO Growth CDMO · FY27 · Medium confidence healthy growth
    While we are not giving any concrete numbers for '27, we still expect a healthy growth over whatever we expect to report in '26.

    — Satyanarayana Chava

  • Q4 FY26 CDMO Performance CDMO · Q4 FY26 · High confidence better than Q4 FY25
    We indicated that Q4 FY'26 will be better than Q4 FY'25.

    — V. V. Ravi Kumar

  • ADC/Gene Therapy Revenue CDMO · next 2-2.5 years · High confidence no meaningful revenues
    We don't expect any meaningful revenues coming from ADCs in the next two years. ... we don't expect any revenues from ADCs and gene therapy at least in the next 24 months.

    — Satyanarayana Chava

Krka Pharma JV

  • Phase-1 Completion Krka Pharma JV · mid-2027 · High confidence mid-2027
    Phase-1 is expected to be completed by mid-2027.

    — Satyanarayana Chava

  • Revenue Generation Krka Pharma JV · next financial year · High confidence next financial year
    We will have revenues in the next financial, not in this financial year.

    — Satyanarayana Chava

ARV Business

  • ARV Revenue Run Rate ARV Business · current · High confidence ₹2,600 +/- 200 crores

    Previously ₹2,500 +/- 200 crores → ₹2,600 +/- 200 crores

    See, earlier we guided 2,500 plus or minus 200 crores. But you're right, current run rate is a little beyond that. The main contributor for that is, we have expanded our API capacities to meet our customer demand that is driving our positive growth there and now if I have to restate that currently we are at 2,600 plus or minus 200, I will put it that way.

    — Satyanarayana Chava

  • ARV API/FDF Growth ARV Business · FY28 · Medium confidence significant growth
    We will grow in the next year but significant growth will come in FY'28 because we are having capacities and we are validating some generic APIs and formulations. So, growth will be significant in FY'28 but there will be some growth in FY'27 as well, the generic API as well as the FDF space.

    — Satyanarayana Chava

Asset Turnover

  • Asset Turn Ratio Asset Turnover · over a period of time · Medium confidence 1.1
    We are not anticipating 1.4 at this moment but we are targeting 1.1 over a period of time.

    — V. V. Ravi Kumar

ROCE

  • ROCE Percentage ROCE · Medium confidence go up
    We expect to go up, but we are not committing it will go to 25, with a time bound program.

    — Satyanarayana Chava

What to watch in Q4 FY26

CDMO Revenue Growth

Next quarter (Q4 FY26) and FY27
Current Q3 sales ₹408 crores, 9M growth >50%
Target Healthy growth over FY26, Q4 FY26 better than Q4 FY25

Why it matters

CDMO is a key growth driver, and its lumpiness requires close monitoring of quarterly performance against annual targets.

CDMO revenues if you look at the overall year nine months we have grown significantly and we are also confident that the growth will continue like although the Q3 was a little softer because of timing of deliveries to our partners but we expect, if you look at Q4FY'25 versus Q4FY'26 we expect to grow. While we are not giving any concrete numbers for '27, we still expect a healthy growth over whatever we expect to report in '26.

Risks & concerns

  • Lumpiness in CDMO revenues

    medium

    CDMO revenues are subject to quarter-to-quarter lumpiness due to the phasing of deliveries, even for commercial supplies.

    Management acknowledged

  • Delayed revenue generation from new modalities

    medium

    ADC and Gene Therapy segments are not expected to generate meaningful revenues for the next 2-2.5 years, requiring sustained investment without immediate returns.

    Management acknowledged

  • ROCE target not committed within 12 months

    medium

    While ROCE is expected to improve from 18.5%, management is not committing to the 25% target within the next 12 months, especially with bio revenues stagnating until new capacity is operational.

    Management acknowledged

  • Bio division performance muted

    low

    Q3 sales for the Bio division were muted, though management expects better visibility and longer campaigns going forward.

    Management acknowledged

Q&A highlights

6 direct
CDMO business lumpiness and sustainability Partial
CDMO revenues if you look at the overall year nine months we have grown significantly and we are also confident that the growth will continue like although the Q3 was a little softer because of timing of deliveries to our partners but we expect, if you look at Q4FY'25 versus Q4FY'26 we expect to grow.

Analyst questioned the sequential slowdown in CDMO growth and its sustainability, given management's prior warnings about lumpiness. Management reiterated confidence in annual growth and Q4 improvement, but acknowledged Q3 softness due to delivery timing.

Asked by Rehan Syed

OPEX drag from specialized modalities (CGT, ADC) and budget sufficiency Direct
None of this pre-operative expenditure on any of our new initiatives is capitalized. So, every new modality expenditure is expensed. So, in the ADC space we are investing significantly both in OPEX and CAPEX but we are not capitalizing it.

Analyst inquired about the financial impact of investments in new modalities like CGT and ADC. Management clarified that all pre-operative expenditures for new modalities are expensed, not capitalized, indicating a direct impact on current profitability.

Asked by Rehan Syed

ROCE target of 25% and asset turnover given large CAPEX plans Partial
I think in case of bio, our revenues will stagnate until we operationalize our new capacity which will be by end of this calendar year and we are not committing that will achieve a ROCE of 25% in the next 12 months but we are confident that the ROCE percentage will go up from the current 18%.

Analyst challenged the feasibility of achieving the 25% ROCE target within 12 months given the large CAPEX for the Vizag complex and current asset turnover. Management clarified that bio revenues would stagnate until new capacity is operational and did not commit to the 25% ROCE target within 12 months, but expects it to improve from 18.5%.

Asked by Rehan Syed

Areas Laurus Labs will NOT enter despite opportunities Direct
Right now, we decide not to enter into large-scale MAB manufacturing, we don't want to do that. That's the area we decide not to get in. And the other area we decide not to enter right now is also sterile manufacturing.

Analyst asked about strategic areas the company has chosen not to pursue. Management explicitly stated they would not enter large-scale MAB manufacturing or sterile manufacturing, highlighting a focused capital allocation strategy.

Asked by Sajal Kapoor

Sustainability of generic business growth and Q3 step-up Direct
In the generic space, lion's share of revenues are coming from ARV with both APIs and formulations and that business is pretty stable. Actually, we are able to increase our market share in both API and formulations and our North American formulation and European CMO sales also going up. I think we believe those numbers what we did in Q3 are sustainable.

Analyst questioned the sustainability of the significant step-up in generics business in Q3. Management affirmed that the Q3 performance is sustainable, attributing it to increased market share in ARV APIs and formulations, and growth in North American and European CMO sales.

Asked by Vivek Agarwal

CDMO revenue growth in FY27 and shift to commercial supplies Direct
Majority of FY'27 revenues in our CDMO division will be commercial supplies and I think that much I can make a statement.

Analyst sought clarity on the drivers of CDMO growth in FY27, specifically if it would be from new large molecules. Management indicated that the majority of FY27 CDMO revenues would come from commercial supplies, signaling a maturation of pipeline projects.

Asked by Chirag Shah

ARV business run rate and sustainability of profitability Direct
See, earlier we guided 2,500 plus or minus 200 crores. But you're right, current run rate is a little beyond that. The main contributor for that is, we have expanded our API capacities to meet our customer demand that is driving our positive growth there and now if I have to restate that currently we are at 2,600 plus or minus 200, I will put it that way. But fundamentally hasn't changed much.

Analyst asked about the sustainability of the ARV business at a higher run rate than previously guided. Management confirmed the higher run rate of ₹2,600 +/- 200 crores is sustainable due to expanded API capacities and increased market share, despite past price reductions.

Asked by Nitin Agarwal

Competitive advantage in CDMO space amidst increasing competition Direct
I don't say we have an advantage, we were well prepared to take the opportunity. I will put it that way. So, people look at us, if there is a complex chemistry, if there is a scale involved, if it is a flow chemistry, if it is biocatalysis, if it's high energy chemistry and involves scale and we are the perfect partners. So, we have invested in these modalities and created capacities.

Analyst questioned Laurus Labs' competitive advantage in the increasingly crowded CDMO space. Management emphasized their preparedness and investments in complex chemistry, scale, flow chemistry, biocatalysis, and high-energy chemistry as key differentiators that attract partners.

Asked by Anjan Banerjee

2 min read 5 chapters

Detailed narrative

Strong Financial Performance in Q3 FY26

Laurus Labs reported robust financial results for Q3 FY26, with revenues reaching ₹1,778 crores. The nine-month period (9M FY26) saw total income from operations cross ₹5,001 crores, marking a 30% growth. Gross margins expanded to 60.9% in Q3, contributing to a 9M gross margin of 60.1%. EBITDA margins also saw healthy expansion, reaching 27% in Q3, with 9M EBITDA at ₹1,303 crores (26.1% margin). Profit after tax for 9M FY26 surged by 388% to ₹610 crores, and ROCE improved to 18.5%.

CDMO Business Momentum and Strategic Investments

The CDMO segment continued its strong trajectory, achieving over 50% growth in 9M FY26. Q3 sales for small molecules were ₹408 crores, while the Bio division contributed ₹43 crores. The company is investing significantly in CDMO capabilities, including peptide development and manufacturing infrastructure, and has allocated $25 million for an ADC GMP facility. Construction for a commercial-scale fermentation facility in Vizag (Phase-1, 400 kiloliters) is on track for operationalization by the end of 2026. Management expects healthy CDMO growth in FY27, with a majority of revenues from commercial supplies, though quarter-to-quarter lumpiness is anticipated.

Generics Division Driven by ARV and New Launches

The generics division demonstrated strong performance, with Q3 revenues growing 37% to ₹1,327 crores, and 9M revenues up 26% to ₹3,510 crores. This growth was primarily fueled by higher ARV volumes and successful offtake of recently launched products in developed markets. The ARV business, including both API and formulations, is stable, with 9M formulation revenues at ₹865 crores and API revenues at ₹1,259 crores. Total ARV revenues for Q3 were ₹744 crores. Management believes the current ARV run rate of ₹2,600 +/- 200 crores is sustainable due to expanded API capacities and increased market share.

R&D and Quality Focus

Laurus Labs maintained its commitment to R&D, with a 9M spend of 4.1% of sales, an 8% increase year-on-year. This investment supports portfolio complexity, scale, and new technology platforms, including Cell and Gene lab space. On the quality front, the company successfully passed over 110 quality audits by multiple regulatory agencies and customers without any critical observations. The company also reported an impressive 10 percentage point increase in its 2025 ESG score, achieving 81 out of 100 points.

Strategic Capital Allocation and Future Outlook

The company's capital allocation strategy prioritizes high-value business segments. Total CAPEX for FY26 is projected to be around ₹1,000 crores, with a similar amount expected for FY27. Investments include the Krka Pharma joint venture for European formulations, with Phase-1 completion by mid-2027 and revenues expected from the next financial year. While new modalities like ADC and gene therapy are under development, meaningful revenues from these are not expected for the next 2-2.5 years. The company aims to improve its ROCE from the current 18.5% and targets an asset turnover of 1.1 over time.

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