Marksans Pharma Limited — Q1 FY26 earnings call

Call held 13 Aug 2025

Management summary

Marksans Pharma reported a seasonally soft Q1 FY26 with operating revenue growing 5% YoY to INR620 crores, primarily driven by strong US market performance. However, profitability was impacted by high single-digit price erosion in the UK, increased employee expenses, and one-time provisions, leading to a 560 bps decline in EBITDA margin to 16.1% and a 34.7% drop in PAT. The company is focusing on strategic product launches and operational efficiencies to navigate market uncertainties and improve future performance, with early signs of demand recovery in Q2.

Highlights

  • Operating revenue of INR620 crores, up 5% YoY.

  • US and North America revenue increased 30.6% YoY to INR327.6 crores.

  • Gross profit of INR358.2 crores, up 8.9% YoY, with gross margin expanding 209 bps to 57.8%.

  • Received an EIR from the U.S. FDA for the Time-Cap Laboratories inspection.

  • Launched 4 high-margin liquid products in the U.K. to strengthen portfolio.

Concerns

  • Q1 FY26 was seasonally soft, with high single-digit price erosion in the U.K.

  • EBITDA margin declined 560 bps to 16.1% due to increased employee expenses, a one-time provision of INR10.48 crores, and INR6.2 crores forex loss.

  • Profit after tax decreased 34.7% YoY to INR58.2 crores.

  • Working capital cycle stood at 159 days due to accelerated shipments to the U.S.

Key financials

  1. Operating Revenue ₹620 Cr +5%YoY
  2. Gross Profit ₹358.2 Cr +8.9%YoY
  3. Gross Margin 57.8%
  4. EBITDA ₹100.1 Cr
  5. EBITDA Margin 16.1%
  6. PAT ₹58.2 Cr -34.7%YoY
  7. EPS ₹1.3
  8. Cash from Operations ₹48.7 Cr
  9. Capex ₹37.8 Cr
  10. R&D Spend ₹12.1 Cr

What they filed

Q1 FY27: revenue up 35.6%, net profit up 174.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue642 682 708 620 720 +12%754 +11%856 +21%841 +36%
EBITDA147 139 127 100 144 −2%161 +16%195 +54%213 +113%
Net profit98 105 91 58 99 +1%114 +9%149 +64%159 +174%
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
₹620 Cr Total
  • US and North America ₹327.6 Cr 52.8%
  • U.K. and EU Formulation ₹203.8 Cr 32.9%
  • Australia and New Zealand ₹57 Cr 9.2%
  • Rest of the world ₹31.6 Cr 5.1%

Capital allocation

high confidence
  • Capex ₹37.8 Cr
    • R&D expenses ₹12.1 Cr
    • Goa facility for multi-dosage manufacturing
    In Q1 FY '26, the cash from operations came in at INR48.7 crores. The capex during the period was INR37.8 crores. We spent INR12.1 crores in R&D in Q1, which amounts to 2% of the consolidated revenue. We are pleased to report that the newly -- facility in Goa is structurally near ready. We are now focused on enhancing operational efficiencies and scaling capacity to support multi-dosage manufacturing forms of tablet, capsules, liquid, creams, ointments and more.
  • Debt Debt disclosed
    We continue to remain debt-free, and the cash balance stood at INR711 crores as of 30th June 2025.
  • Liquidity Cash ₹711 Cr Balance sheet is strong and company is equipped to make additional investments in the U.S. if needed.
    We continue to remain debt-free, and the cash balance stood at INR711 crores as of 30th June 2025. See, I would like to add here that our balance sheet is pretty strong. And in case if there is need to do additional investments in U.S., we definitely will not shy away from doing that. So, that way, we are very well equipped and geared.

Guidance & targets

Revenue

  • FY26 Revenue Revenue · FY26 · Medium confidence very close to INR3,000 crores or maybe shy away from INR3,000 crores
    I think you've summarized it well. We should be very close to INR3,000 crores or maybe shy away from INR3,000 crores. But again, in the overall picture, we will still grow over the last year. But yes, from a INR3,000 crores, we may be shy of that.

    — Mark Saldanha

Margin

  • FY26 EBITDA Margin Margin · FY26 · Medium confidence more flattish year-on-year, somewhere between last year margin and 17%
    But year-on-year, I think it will be more flattish, somewhere around there. I think we should be somewhere between last year margin and the 17% what you are calculating. So, we should be somewhere in between that.

    — Mark Saldanha / Jitendra Sharma

Capacity

  • Teva Facility Revenue Contribution Capacity · Ongoing · Medium confidence INR800-odd crores
    Our aim is to go towards INR800-odd crores from the facility.

    — Mark Saldanha

Market Growth

  • UK Market Growth Market Growth · FY26 · High confidence flattish
    For the U.K. market, you're talking of? So, I believe it will be flattish.

    — Mark Saldanha

  • Australia and New Zealand Market Growth Market Growth · FY26 · Medium confidence better number than the previous year
    But technically, it's difficult to talk about quarter-on-quarter, but year-on-year, we will definitely show a better number than the previous year.

    — Mark Saldanha

What to watch in Q2 FY26

Demand recovery in Q2

next quarter (Q2 FY26)
Current early signs of demand recovery in Q2
Target strengthened momentum, better numbers

Why it matters

Will indicate if the seasonal softness and demand contraction are truly temporary and if the business momentum is building.

We already are witnessing early signs of demand recovery in Q2. We believe the momentum will strengthen as the year progresses.

Risks & concerns

  • High single-digit price erosion in UK

    high

    Abnormal price erosion in UK, partly due to cascading impact from US tariff uncertainties and companies offloading to other markets.

    Management acknowledged

  • Global tariff uncertainties and cascading impact on demand/pricing

    high

    Uncertainty around US tariffs slows demand, leads to companies offloading products in other markets causing price erosion, and affects consumer spending.

    Management acknowledged

  • Seasonal demand contraction in key markets (US, UK)

    medium

    Q1 was seasonally soft, driven by demand contraction in US and UK.

    Management acknowledged

  • Non-recurring financial impacts (integration expenses, EM provision, forex loss)

    medium

    Integration-related expenses, one-time provision of INR10.48 crores in emerging market division, and INR6.2 crores forex loss impacted profitability.

    Management acknowledged

  • Elevated working capital cycle

    medium

    Working capital cycle stood at 159 days due to accelerated shipments to the US ahead of anticipated tariff implications.

    Management acknowledged

Q&A highlights

7 direct
UK business degrowth and pricing pressure Direct
Second is the price erosion that we have witnessed, which has been a bit abnormal due to possibly various circumstances. One, again, having a cascading impact, which spills down from the tariff situation in the U.S. where uncertainty of tariff has basically slowed down demand in the U.S., thereby companies having a relook and refocus into different geographies for getting their revenues. So, we have witnessed a heavy pricing erosions happening in the U.K.

Explains the significant decline in UK revenue, attributing it to both seasonality and abnormal price erosion linked to broader global tariff uncertainties.

Asked by Ahmed Madha

US order book status and execution timeline Direct
So, our order book stands at $220 million today. Out of that, nearly $45 million to $50 million of that the execution will start in the month of October, November, December, based on the approvals and everything of that stuff.

Provides a concrete figure for the US order book and clarifies the timeline for revenue realization, indicating a partial impact in the current fiscal year.

Asked by Ahmed Madha

Gross margin improvement and Teva facility utilization Direct
The Teva facility that we spoke of, the Teva facility, we are now trending at very close to INR500 crores. I think in the Q1, we were trending more towards INR400 crores. So, there has been a better utilization from the Teva facility in the Q1 compared to the Q4. The gross margin increase is again the lowering of raw material cost.

Explains the drivers behind gross margin expansion (lower raw material costs) and provides an update on the ramp-up and utilization of the Teva facility.

Asked by Ahmed Madha

Impact of one-time expenses on Q1 profit Direct
So, like as we have stated in the presentation, so there were 2 items. One was the ECL provision, which we have made in receivables of INR10.48 crores. And there was one mark-to-market provision of INR6.2 crores, which we have made, and this has come from the forward contracts, which we have taken for GBP exports to U.K.

Quantifies the specific non-recurring items that impacted Q1 profitability, providing clarity on the underlying operational performance.

Asked by Deepesh Sancheti

Recurring nature of higher employee costs Direct
No, if you compare year-on-year number. But now, of course, in terms of the hiring, we are not having any more additional hirings. So, the employee costs and other expenses, which you are seeing in this quarter, we don't see these 2 items going up any further from here.

Clarifies that the increase in employee costs, a factor in margin decline, is not expected to recur at the same pace, suggesting potential stabilization or improvement in future quarters.

Asked by Deepesh Sancheti

Overall margin trajectory for FY26 and FY27 Partial
See, it is a bit difficult right now to give a margin guidance. Definitely, our objective here is to see; number one, to ensure how can we sustain our margins, which we had till last year. So that's the priority right now for us... For FY '27, again, it's a bit early to give any guidance.

Indicates management's cautious stance on margin guidance, especially for FY27, highlighting the current focus on sustaining margins amidst pricing pressures.

Asked by Meet Rachchh

Manufacturing strategy (US vs India) and tariff impact Direct
So, from a revenue standpoint of view, about 35%, 40% around is manufactured in U.S. The rest is manufactured in India... But today, it does not make sense for us to panic because literally, I don't think anyone knows what's going to happen tomorrow.

Provides insight into the company's manufacturing footprint and its cautious approach to strategic shifts given the unpredictable global tariff environment.

Asked by Ahmed Madha

India-UK FTA impact Direct
No, that's 0 impact. That's 0 impact.

Clarifies that the India-UK FTA is not expected to have any impact on the company's business.

Asked by Deepesh Sancheti

3 min read 7 chapters

Detailed narrative

Q1 FY26 Performance Overview

Marksans Pharma reported a 5% year-on-year increase in operating revenue to INR620 crores for Q1 FY26, despite a seasonally soft quarter. Gross profit grew 8.9% YoY to INR358.2 crores, with gross margin expanding by 209 basis points to 57.8%. However, EBITDA declined to INR100.1 crores, resulting in a 16.1% EBITDA margin, a 560 basis point decrease from the previous year. Profit after tax also saw a significant decline of 34.7% YoY, settling at INR58.2 crores, with EPS at INR1.3.

Geographical Performance and Market Dynamics

The US and North America market demonstrated strong growth, with revenue increasing 30.6% YoY to INR327.6 crores, driven by new product launches in digestive and pain management segments. Conversely, the UK and EU Formulation segment recorded INR203.8 crores, experiencing a seasonally soft quarter and high single-digit price erosion. The Australia and New Zealand market contributed INR57 crores, while the rest of the world generated INR31.6 crores. Management noted early signs of demand recovery in Q2, expecting momentum to strengthen through the year.

Margin Dynamics and Cost Management

Gross margin expanded to 57.8% due to the liquidation of high-cost inventories and benefits from softening input costs. However, EBITDA margin was impacted by several non-recurring factors, including integration-related expenses, a one-time provision of INR10.48 crores for the emerging market division, and a mark-to-market forex loss of INR6.2 crores. Employee expenses also increased due to recruitment for the new Goa facility, though management expects these costs not to rise further.

Strategic Initiatives and Pipeline

The company continues to strengthen its product pipeline, having received 3 regulatory approvals from the U.S. FDA and U.K. MHRA during the quarter. Four high-margin liquid products were successfully launched in the U.K., aligning with the strategy to build a diversified and margin-accretive portfolio. The US order book currently stands at $220 million, with execution for $45-50 million expected to commence in Q3 FY26.

Regulatory and Operational Updates

Marksans Pharma received an Establishment Inspection Report (EIR) from the U.S. FDA for the inspection conducted at its subsidiary, Time-Cap Laboratories. The newly constructed facility in Goa is structurally nearing completion, with a focus on enhancing operational efficiencies and scaling capacity for multi-dosage manufacturing forms. The Teva facility's utilization is improving, now trending close to INR500 crores in Q1, up from INR400 crores in Q4 FY25, with an aim to reach INR800 crores.

Working Capital and Liquidity

The working capital cycle for the quarter stood at 159 days, primarily impacted by accelerated shipments to the U.S. ahead of anticipated tariff implications. Despite this, the company remains debt-free, maintaining a healthy cash balance of INR711 crores as of June 30, 2025. Management affirmed its strong balance sheet and readiness to make additional investments in the U.S. if needed, without shying away.

Outlook and Challenges

The company anticipates FY26 revenue to be "very close to INR3,000 crores or maybe shy away from INR3,000 crores." EBITDA margins are expected to improve quarter-on-quarter but remain "flattish" year-on-year. The UK market is projected to be "flattish" for the year, while Australia and New Zealand are expected to show "nominal growth" year-on-year. Global tariff uncertainties continue to pose a risk, creating a cascading impact on demand and pricing across markets, which the company is navigating through disciplined execution and strategic agility.

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