Detailed Narrative
Q4 FY26 Performance and Full Year Challenges
Natural Capsules reported a strong Q4 FY26 with consolidated revenue of Rs. 58.45 crores, a 55% QoQ and 30% YoY growth, and EBITDA recovering to Rs. 1.33 crores (157% QoQ improvement). This recovery was largely due to clearing Rs. 6 crores of deferred capsule dispatches. However, the full financial year FY26 saw revenue grow 11% YoY to Rs. 187.20 crores, but resulted in an EBITDA loss of Rs. 1.56 crores (negative 0.83% margin) and a net loss of Rs. 24.66 crores, primarily due to operational disruptions and pre-commercial API costs.
Strategic Focus on HPMC and API Growth
The company has commissioned a new HPMC line, increasing capacity from 19.5 billion to 25 billion capsules per annum, with revenue expected from H2 FY27 pending US market approvals. Commercial API sales commenced in Q4 FY26, and the company aims to achieve Rs. 70 crores in domestic API sales and Rs. 14 crores from the Fermbox contract in FY27. The long-term API revenue target is Rs. 250 crores within 2-3 years, requiring an additional Rs. 25-30 crores for clean room expansion.
Fermbox Collaboration and Fermentation Capacity Utilization
Natural Capsules formalized a contract manufacturing agreement with Fermbox Bio-Private Limited, which will utilize NCL's 40% spare fermentation capacity. Fermbox will invest approximately Rs. 60 crores in equipment at NCL's site, owning the assets while NCL can use them. This collaboration is expected to generate Rs. 14 crores in revenue for FY27 and potentially grow to Rs. 50 crores over 2-3 years, improving fermentation block utilization and NCL's technical capabilities.
Addressing API Profitability and Regulatory Approvals
Current API products yield low single-digit EBITDA margins due to the price-sensitive Indian market and Chinese competition. The company's strategy is to target semi-regulated and regulated markets (US, Europe) for better margins, with WHO GMP certification targeted for the next quarter, followed by CEP filing in Q2 next year and USFDA approval in Q3/Q4 next year. Prednisolone and Dexamethasone commercial scale production is targeted for Q2/Q3 FY27, with Betamethasone in Q4 FY27, aiming to leverage PLI benefits.
Liquidity Management and Fundraising Initiatives
The company acknowledges significant pressure on its balance sheet and is actively exploring various fundraising options to support the API business and manage liquidity. These options include applying for government RDI schemes (BIRAC), potential preferential allotments, and rights issues, with promoters intending to contribute equity without significant dilution. Debt levels are projected to remain around Rs. 100-110 crores for FY27 and FY28, with annual repayments of Rs. 10-12 crores.
HPMC Market Challenges and Outlook
HPMC revenue for FY26 was Rs. 8 crores, with US exports of Rs. 3 crores stopping post-July due to a 50% specific duty imposed by the US. The Neutra (wellness) business in the US remains slow due to high inflation and its non-essential nature. For FY27, HPMC revenue is conservatively guided at Rs. 20 crores, with major sales shifting to Mexico, Brazil, and other countries, and plans to start exports to Europe this year following organic certification.