SMS Pharma.

SMS Pharmaceuticals delivered a robust Q2 FY26, with revenue growing 23% year-on-year to INR242.4 crores. This strong top-line growth translated into significant profitability improvements, with PAT soaring 80% year-on-year to INR25.3 crores, marking the highest ever in a single quarter. EBITDA for the quarter increased by 54% year-on-year to INR48.3 crores, expanding the EBITDA margin to 20%. For the first half of FY26, revenue from operations reached INR438.4 crores, a 21% year-on-year growth, and PAT grew 50% year-on-year to INR45.8 crores.

A significant contributor to the strong performance and margin expansion is the successful commissioning and stabilization of backward integration projects. Over the past 12-18 months, the company invested INR150 crores to build in-house capabilities for critical intermediates, enhancing cost competitiveness, supply chain reliability, and quality. This strategy reduces dependence on external suppliers, particularly from China, and provides a distinct advantage in an environment where global customers seek non-Chinese sources. Gross profit margins improved to 32% in Q2 FY26, partly due to these initiatives, with further benefits expected in coming quarters.

R&D remains a core pillar of SMS Pharma's strategy, with successful product launches driving strong demand in regulated markets. The company plans to double its R&D strength (currently over 100 scientists) over the next two years and aims to file an additional 30 DMFs in the next 24-36 months, adding to the existing 120+ filings. A joint venture with Chemo, a Spanish multinational, has leveraged R&D strength to develop and manufacture first-to-market APIs, particularly in the Anti-diabetic segment where SMS Pharma established a leading position.

The company has commenced a new INR280 crores capex program, which is on track for completion by November 2026. This investment is aimed at enhancing capacities for existing APIs, building new product pipelines, and includes an INR30 crores outlay for acquiring land for a greenfield project. Additionally, investments have begun in R&D for peptide initiatives, with commercial operations targeted to start in FY29. These initiatives are expected to provide a clear growth path over the next 24-30 months.

SMS Pharma maintains a balanced and diversified product mix across therapeutic areas. While inflammatory and ERB segments are key growth drivers, the Anti-diabetic portfolio remains the largest therapeutic category, showing steady growth despite competitive pressures. Other segments like Anti-epileptic and Anti-erectile dysfunction, along with emerging molecules, are also showing healthy traction. The largest therapeutic category accounted for only 24% of the revenue, underscoring the company's focus on diversification and avoiding over-reliance on any single product or customer.

For Ibuprofen API, the company aims for 5,000 tons in FY26, which translates to an average of 450 tons per month. Currently, production is at approximately 350 tons per month, with plans to scale up. The ARV segment, characterized by moderate margins and tender-based sales, has shown good growth. Management expressed strong visibility for the ARV segment over the next three quarters, as their customers have been awarded tenders globally.