Detailed Narrative
Q2 FY26 Financial Performance and H1 Overview
Marksans Pharma reported a strong Q2 FY26, with operating revenue growing 16% sequentially to ₹720.4 crores, a 12.2% increase year-on-year. This recovery follows a softer Q1, driven by improved demand and operational execution. Profitability also saw significant improvement, with EBITDA growing 44% QoQ and PAT increasing 70% QoQ to ₹99.1 crores, resulting in an EBITDA margin of 20.1%. For the first half of FY26, operating revenue stood at ₹1,340.4 crores, an 8.8% YoY increase, with an EBITDA margin of 18.2% and PAT of ₹157.3 crores. R&D spend for H1 FY26 was ₹26.2 crores, representing 2% of consolidated revenue.
Geographical Market Performance and Outlook
The US & North America market delivered robust performance in Q2 FY26, with revenue growing 27% YoY to ₹387 crores, supported by new launches in digestive health and pain management. The UK business showed stable results and improved demand, with its subsidiary Relonchem receiving three new marketing authorizations from U.K. MHRA. Management aims to double UK revenues over the next 5 to 7 years and expects a 'better 2026 than 2025' for the UK. European expansion is underway, with organic operations starting in Germany in 2026, focusing on four key countries, and exploring smaller M&As across Europe.
Capacity Expansion and Future CAPEX Plans
The company's current tablet manufacturing capacity at its old plant is 700-800 million units per month. Marksans plans to expand this to 1.2-1.3 billion tablets and triple its soft gel capacity. This expansion project is slated for 2026, with a budgeted CAPEX of approximately ₹100 crores. The company's Unit 2 facility in Verna, Goa, recently completed a US FDA inspection with zero form 483 observations, strengthening its manufacturing foundation and supporting future growth.
US Tariff Clarity and Market Sentiment
Management confirmed that the uncertainty surrounding US pharma tariffs has largely dissipated, with clarity emerging that pharmaceutical products will not be subject to tariffs. This resolution has improved business sentiment, leading to increased traction with clients. While past geopolitical issues and inflation concerns had caused some hesitation, the company believes the worst is behind them regarding tariff-related disruptions, allowing for a clearer focus on growth.
Working Capital Management and Inventory Strategy
The working capital cycle for H1 FY26 stood at 150 days, which is higher than the average target of 120-130 days. This was a conscious decision to build up inventory due to past uncertainties related to tariffs, ensuring sufficient stock holdings. Management expects further improvement in the coming quarters, with the working capital cycle projected to return to the 120-130 day range within the next two to three quarters as tariff-related disruptions ease and inventory normalizes.
Profitability Outlook and Margin Targets
EBITDA and PAT grew significantly quarter-on-quarter, driven by operating leverage and improved cost efficiencies. Despite some gross margin compression due to product mix and UK pricing pressure, the company achieved a 20.1% EBITDA margin in Q2 FY26. For the full fiscal year 2026, Marksans Pharma is guiding for an EBITDA margin in the 19% to 20% band, with potential for it to be slightly higher, reflecting confidence in sustained profitability through growth and operational discipline.