Sai Life

Sai Life Sciences delivered a robust Q3 FY26, with total revenue growing 27% YoY to INR 556 crores. EBITDA for the quarter surged 54% YoY to INR 191 crores, resulting in a healthy 34% EBITDA margin. Profit after tax (PAT) also saw significant growth, up 86% YoY to INR 100 crores. For the nine-month period, revenues increased 43% YoY to INR 1,590 crores, and EBITDA grew 79% YoY to INR 472 crores, with margins expanding to 30% from 24% in the prior year, primarily due to operating leverage on employee costs (450 bps) and material margin improvement (100 bps). The company is well on track to achieve its stated 28-30% EBITDA margin goal.

The CDMO business continues to perform strongly, contributing approximately 65% of the Q3 revenues and growing 31% YoY. Over 90% of CDMO revenues are derived from large pharma customers, and the company added 7 molecules to its late-phase and commercial pipeline during the financial year. The CRO segment, accounting for 35% of revenues, grew 19% YoY. This growth is largely driven by expanding engagements with large pharma customers and strategic investments in discovery capabilities, such as AI-based retrosynthesis tools and advanced photochemical platforms, which help deliver higher scientific value and shorten discovery timelines.

Sai Life Sciences has multiple capital expenditure programs firmly on track. The R&D expansion at Unit 8 in Hyderabad, adding 200 fume hoods, is scheduled for commissioning in Q4 FY26. The civil infrastructure for the process R&D building, which will double total process R&D capacity, is set for commissioning by September '26. A peptide process development and pilot facility will also be operational by September '26, and OEB laboratories by October '26. The Bidar manufacturing capacity is set to increase by 70% with the addition of 450 KL by Q4 FY27, and Phase I of the Animal Health facility will be completed by March '27. Additionally, a new mixed-use site in Hyderabad, featuring non-GMP, peptide, and GMP capacity, is expected to be operational within 18-24 months.

Management emphasized a strategy focused on sustainable growth, deepening customer partnerships, and creating long-term value. The company's ability to win commercial contracts is attributed to 15 years of trust-building, investments in specialized capabilities, and long-term relationships with large pharma innovators. They are adopting a 'technology first' approach to capacity expansion, ensuring facilities remain best-in-class rather than just adding capacity for short-term wins. An external consulting firm is defining an AI-first roadmap to increase automation and allow scientists to focus on high-value science, further enhancing productivity and efficiency.

The company's revenue recognition is based on completion, not dispatch, aligning with IFRS and Ind AS regulations. This allows for revenue recognition based on contractual milestones in certain cases. Regarding industry trends, management noted that India is increasingly a preferred destination for pharmaceutical outsourcing, leading to a rise in strategic conversations with global pharma innovators. While acknowledging general industry risks like inventory destocking, Sai Life Sciences mitigates this through a broad and diversified portfolio, focusing on adding multiple molecules to its pipeline rather than relying on a few large products.