Marksans Pharma Limited — Q4 FY25 earnings call

Call held 20 May 2025

Management summary

Marksans Pharma reported record revenue and profit for FY25, driven by strong growth in the US market and an expanding OTC product pipeline. While Q4 saw some margin compression due to higher operating costs, the company remains optimistic about future growth, capacity utilization, and strategic M&A, maintaining a debt-free status and recommending a dividend.

Highlights

  • Operating revenue for FY25 reached an all-time high of ₹2,623 crores, up 20.5% YoY.

  • PAT for FY25 increased 21.5% YoY to ₹383 crores, also an all-time high.

  • Gross margin expanded 407 bps to 56.4% for FY25, driven by better product mix and lower raw material prices.

  • US and North America market was a significant growth driver, experiencing a 34.7% YoY increase in revenue for FY25.

  • The company remains debt-free with a cash balance of ₹704 crores as of March 31, 2025, and received a long-term debt rating upgrade to IND AA-.

Concerns

  • EBITDA margin for Q4 FY25 decreased by 183 bps to 17.8% due to increased employee expenses (Goa facility) and R&D expenses.

  • Working capital cycle increased to 127 days, primarily due to inventory build-up for new product launches.

  • Uncertainty surrounding potential US tariffs and geopolitical issues, though management believes significant tariffs would be passed on to consumers.

Key financials

2 periods

Q4 FY25

  • Operating Revenue
    ₹708.5 Cr
    YoY +26.5%
  • PAT
    ₹90.7 Cr
    YoY +16.9%
  • EBITDA Margin
    17.8%
  • Gross Margin
    54.1%
  • EPS
    ₹2

FY25

  • Operating Revenue
    ₹2,623 Cr
    YoY +20.5%
  • PAT
    ₹383 Cr
    YoY +21.5%
  • EBITDA
    ₹529 Cr
    YoY +15.3%
  • EBITDA Margin
    20.2%
  • Gross Margin
    56.4%
  • EPS
    ₹8.4
  • R&D Spend
    ₹57.9 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
US and North America (FY25) ₹1,237 Cr 37.1%
UK and EU (FY25) ₹1,030 Cr 30.9%
US and North America (Q4 FY25) ₹328.6 Cr 9.9%
UK and EU (Q4 FY25) ₹274.1 Cr 8.2%
Australia and New Zealand (FY25) ₹253 Cr 7.6%
Rest of the World (FY25) ₹104 Cr 3.1%
Australia and New Zealand (Q4 FY25) ₹76.5 Cr 2.3%
Rest of the World (Q4 FY25) ₹29.3 Cr 0.9%

Order book

high confidence

Total value

$220 Mn

as of 2025-05-20 quantified

Execution

Takes about 6 to 8 months to start executing contracts; $30-35 million will ship in September, $20 million in Feb/March.

The US order book is growing, but tariff uncertainty has been a damper. Management is optimistic about reaching $300 million within two years.

Source: Q&A

Capital allocation

high confidence
  • Capex $8 Mn
    So last year, of course, we did CAPEX of Rs. 173 crores. And I think this year also, the CAPEX we will continue to incur. It will be lower than last year, but I think we should be somewhere between, say, $8 million to $10 million overall.
  • Debt Debt disclosed
    We continue to remain debt-free and the cash balance stood at Rs. 704 crores as of 31st March of 2025. Additionally, India Ratings and Research has upgraded the company's long-term debt to IND AA- from IND A+ with a stable outlook and affirmed short-term debt at IND A1+, enhancing our financial credibility.
  • Dividend ₹0.8/share (final)
    As a part of our commitment and enhancing shareholder value, I am pleased to announce that the Board has recommended a dividend of Rs. 0.8 per equity share, representing 80% of the face value per share.
  • M&A European acquisitions Acquisition · Announced · Consideration ₹[object Object] (undisclosed)

    To expand presence in the European market.

    I mean if they do come our way, then we need that corpus with us to execute it and to fund that. And we also need CAPEX of around Rs. 100-odd crores for our plant. So taking into consideration all these transactions that we have on our plate, you are looking at a minimum Rs. 400-odd crores being kept aside only for that.
  • Liquidity Cash ₹704 Cr Minimum ₹400 crores needed for M&A and plant CAPEX.
    We continue to remain debt-free and the cash balance stood at Rs. 704 crores as of 31st March of 2025.

Guidance & targets

Revenue

  • Operating Revenue Revenue · FY26 · High confidence ₹3,000 crores
    Yes, very much, Bino, because we have done Rs. 2,600 crores. So we are very optimistic that we are very much on track for the Rs. 3,000 crores.

    — Mark Saldanha

Growth Rate

  • Overall Growth Rate Growth Rate · FY26 · High confidence 17%
    No, I think that is very doable, Bino. We would like to improve over the 17%, obviously. And we are optimistic that the market dynamics will stabilize. The geopolitical issues will probably settle down. But I think on a conservative basis, 17% is definitely doable.

    — Mark Saldanha

EBITDA Margin

  • EBITDA Margin EBITDA Margin · Long-term · High confidence 21-22%
    See, I think definitely, we can do 21%, 22% EBITDA margin once this kind of operating leverage gets in.

    — Jitendra Sharma

R&D Spend

  • R&D Spend as % of Revenue R&D Spend · Year-on-year basis · High confidence 1.9-2%
    Moving on, we do expect the R&D expenditure to remain between, say, 1.9% to 2% on a year-on-year basis.

    — Jitendra Sharma

Teva Facility

  • Teva Facility Capacity Utilization Teva Facility · Within 6 months · Medium confidence 50-60%
    With this hiring, we do believe our scale up would basically meet with at least 50% to 60% of our capacity growth that we have targeted historically.

    — Mark Saldanha

  • Teva Facility Revenue (Current Trend) Teva Facility · Current (first few months) · High confidence ₹400-500 crores
    Today, not in the last quarter, not in the fourth quarter, but in the first quarter, we are trending around at Rs. 400 crores, which is pretty much half of what we had spoken of Rs. 800 crores coming out of the plant.

    — Mark Saldanha

  • Teva Facility Revenue (Long-term) Teva Facility · Eventually · Medium confidence ₹1,000 crores
    I do believe this plant will hit Rs. 1,000 crores eventually.

    — Mark Saldanha

US Order Book

  • US Order Book Value US Order Book · Within 2 years · Medium confidence $300 million
    But we are optimistic that we would basically look at a $300 million order book status within the next 2 years.

    — Mark Saldanha

Freight Cost

  • Freight Cost as % of Sales Freight Cost · FY26 · High confidence 4%
    But yes, now it has stabilized, and I think it will come back to 4% in FY '26.

    — Jitendra Sharma

Working Capital

  • Working Capital Days Working Capital · Ongoing · High confidence 125-135 days
    But in terms of number of days, I think it should be very much at the level at which we are at present. ... it will remain within the range of 125 to 135 days.

    — Jitendra Sharma

Product Launches

  • New Product Launches Product Launches · Between now and September · High confidence 70-odd products
    So we do believe we will see at least 50-odd products in different segments, in different therapeutic segments, whether it might be cold, whether it might be digestive, whether it might be pain and some in prescription also. So we do believe we'll be launching very close to about 70-odd products between now and, let's say, September.

    — Mark Saldanha

OTC Business

  • OTC Business Share OTC Business · Future · Low confidence 85%
    It may grow, Nitin, honestly, because we are very strong in OTC. So like I have always said, it may grow, and you may see OTC having maybe 85%.

    — Mark Saldanha

What to watch in Q1 FY26

Teva Facility Revenue Contribution

Latter part of the year
Current ₹400-500 crores (current trend)
Target Moving towards ₹600-700 crores

Why it matters

The Teva facility is a key growth driver, and its ramp-up is crucial for achieving overall revenue targets.

So hopefully, in the latter part of the year, we will be moving probably more towards Rs. 600 crores, Rs. 700-odd crores in terms of the trending part of it, not the actual revenue, but the trending part of it.

Risks & concerns

  • US Tariffs and Geopolitical Issues

    medium

    Uncertainty regarding US tariffs and their potential impact on costs, though management believes significant tariffs would be passed on to consumers.

    Management acknowledged

  • Working Capital Cycle Increase

    low

    Working capital days increased to 127 days due to inventory build-up for new product launches, but expected to stabilize.

    Management acknowledged

  • Slower Cough and Cold Season

    low

    Q4 FY25 witnessed a slower cough and cold season, impacting product mix and potentially revenue in that segment.

    Management acknowledged

Q&A highlights

7 direct
Teva Facility Utilization and Hiring Direct
With this hiring, we do believe our scale up would basically meet with at least 50% to 60% of our capacity growth that we have targeted historically. Today, not in the last quarter, not in the fourth quarter, but in the first quarter, we are trending around at Rs. 400 crores, which is pretty much half of what we had spoken of Rs. 800 crores coming out of the plant.

Clarifies the current operational status and ramp-up trajectory of the key acquired facility, indicating significant progress towards capacity targets.

Asked by Ahmed Madha

R&D Cost Normalization Direct
So last year, like we have spent 2.21% of our revenue on R&D expenses. And in the Q4, like so if I compare with the Q3 R&D spend with Q4, so in Q3, our R&D spend was Rs. 11.71 crores. And in Q4, it increased to Rs. 23.47 crores. So there was an increase of almost Rs. 12 crores in the Q4. And we have done a lot of filings, both in U.S. and in U.K. during the Q4. Moving on, we do expect the R&D expenditure to remain between, say, 1.9% to 2% on a year-on-year basis.

Explains the reason for higher R&D costs in Q4 and provides clear guidance on the expected R&D spend as a percentage of revenue going forward, which is crucial for margin analysis.

Asked by Ahmed Madha

US Tariffs Impact and Pre-buying Partial
No, not exactly. There's no prebuying in quarter 1. The U.S. tariff is a universal question, honestly, I don't think anyone has the right answer for that. We are optimistic that India's proposal of the trade balance or the zero tariff recommendations would fly. And even if there is a tariff implemented, it would probably be very nominal in nature.

Addresses a significant macroeconomic risk, providing management's perspective on the likelihood and impact of US tariffs, and confirming no pre-buying activity.

Asked by Ahmed Madha

Working Capital Days Direct
Jitendra here. So see, our current working capital cycle is of 127 days. So there is a slight increase as compared to last year. And our inventory levels have gone up. So right now, we are in the process of building up inventory because a lot of new launches have taken place during last year, specifically in U.S. And we need to ensure that we should have at least like 3 to 4 months of inventory at any given point of time. ... it will remain within the range of 125 to 135 days.

Explains the reason for the increase in working capital days (inventory build-up for new launches) and provides a stable range for future expectations, addressing concerns about cash generation.

Asked by Gautam Gosar

FY26 Revenue Target and Growth Sustainability Direct
Yes, very much, Bino, because we have done Rs. 2,600 crores. So we are very optimistic that we are very much on track for the Rs. 3,000 crores. ... No, I think that is very doable, Bino. We would like to improve over the 17%, obviously.

Reaffirms confidence in achieving the FY26 revenue target and indicates an aspiration for growth rates higher than the 17% implied for FY26, signaling strong future outlook.

Asked by Bino Pathiparampil

EBITDA Margin Improvement and Operating Leverage Direct
Yes. So that is very nominal. I think basically, we will be at par, or we will be able to maintain the EBITDA, if not improve the EBITDA. So we are quite optimistic and bullish on those aspects on the EBITDA front of it. ... See, I think definitely, we can do 21%, 22% EBITDA margin once this kind of operating leverage gets in.

Provides clarity on the path to margin improvement, attributing it to operating leverage from new capacity and confirming a target EBITDA margin range.

Asked by Bino Pathiparampil

FY26 Capex Plan Direct
So last year, of course, we did CAPEX of Rs. 173 crores. And I think this year also, the CAPEX we will continue to incur. It will be lower than last year, but I think we should be somewhere between, say, $8 million to $10 million overall.

Gives a specific, lower capex guidance for FY26 compared to FY25, indicating a period of consolidation after significant investments.

Asked by Bino Pathiparampil

US Tariffs and Retailer Absorption Direct
So the President will do what he believes he has to do to calm situations down or to show his strength are. I don't think it is possible to control cost if tariffs are in play, cost will go up. ... So technically, all raw materials coming into the U.S., the tariffs will have an impact on that. ... if it is 10% or anything above 10%, we will definitely work on passing it down. And we will still be competitive compared to the domestic manufacturing in the U.S. because they will also have the brunt of raw material tariffs.

A critical discussion on the potential impact of US tariffs, with management asserting that significant tariffs would be passed on to consumers, maintaining competitive positioning against domestic US manufacturers.

Asked by Bharat Shah

3 min read 6 chapters

Detailed narrative

Robust Financial Performance in FY25

Marksans Pharma achieved an all-time high in both revenue and profit for FY25. Operating revenue increased by 20.5% year-on-year to ₹2,623 crores, up from ₹2,177 crores in the previous year. Profit after tax (PAT) also saw a significant growth of 21.5% year-on-year, reaching ₹383 crores compared to ₹315 crores in FY24. The gross margin expanded by 407 basis points to 56.4% for the full year, indicating improved operational efficiency and product mix.

Q4 FY25 Performance and Margin Dynamics

In Q4 FY25, the company reported operating revenue of ₹708.5 crores, a 26.5% increase year-on-year, and PAT of ₹90.7 crores, up 16.9% year-on-year. However, the EBITDA margin for the quarter stood at 17.8%, a decrease of 183 basis points from the same quarter last year. This decline was primarily attributed to an increase in employee expenses due to headcount additions at the acquired Goa facility and higher R&D expenses. A slower cough and cold season also impacted the product mix during the quarter.

Teva Facility Ramp-up and Capacity Expansion

The acquired Teva facility is progressing well, with management indicating that current utilization is trending at ₹400-500 crores, aiming to reach ₹600-700 crores in the latter part of the year and eventually ₹1,000 crores. The facility is currently producing around 350 million tablets, with an objective to cross 450-500 million in the first half and then 600-700 million. Management expects to meet 50-60% of its historical capacity growth targets within the next six months, with capacity expansion initiatives advancing to materialize operating leverage benefits in the next financial year.

Strategic Focus on Product Pipeline and Market Growth

Marksans Pharma continues to focus on expanding its product pipeline, having commercialized 58 SKUs during the year and with 79 more products in the pipeline. In the UK, 12 products received approval, and 18 additional products were filed. The company aims to launch approximately 70 new products across various therapeutic segments by September. The US market remains a significant growth driver, with the current order book at $220 million and a target to reach $300 million within two years, driven by new product launches and market share gains.

Capital Allocation and Shareholder Returns

The company maintains a debt-free status, with a cash balance of ₹704 crores as of March 31, 2025. The Board recommended a dividend of ₹0.8 per equity share, representing 80% of the face value. Capital expenditure for FY25 was ₹173 crores, and for FY26, it is projected to be $8-10 million. Marksans is actively pursuing European M&A opportunities, with potential deals in the €30-40 million range, and plans to allocate a minimum of ₹400 crores for these strategic initiatives and plant CAPEX.

US Tariffs and Working Capital Management

Management addressed concerns regarding potential US tariffs, stating that if tariffs are significant (e.g., 10% or more), they would likely be passed on to consumers, as retailers cannot absorb such costs. No pre-buying activity was observed in Q1 FY26 due to tariff anticipation. The working capital cycle increased to 127 days, primarily due to inventory build-up for new product launches, but is expected to remain stable within the 125-135 day range. Freight costs, which were high in the first two quarters of FY25, have stabilized and are expected to return to 4% of sales in FY26.

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