Solara Active Pharma Sciences Limited — Q1 FY26 earnings call

Call held 25 Jul 2025

Management summary

Solara Active Pharma Sciences reported a strong Q1 FY26, with significant QoQ growth in revenue, EBITDA, and PAT, driven by a focus on high-margin business and cost containment. The company made substantial progress in debt reduction, lowering its net debt to EBITDA ratio. While the core API business showed resilience, the CRAMS division is in an investment phase, with expectations of a tepid year before becoming a meaningful contributor in 2-3 years.

Highlights

  • Revenue grew 15% QoQ to ₹320 crores, indicating a strong start to FY26.

  • Gross margin remained healthy at 54%, with absolute gross margin at ₹173 crores (up 8% QoQ).

  • EBITDA of ₹57 crores reflects a 13% QoQ and 36% YoY growth, with an 18% margin.

  • PAT of ₹105 million is the highest in the last 12+ quarters, resulting in a positive EPS of ₹2.5.

  • Debt reduced by ₹143 crores (18% of opening debt), primarily from rights issue proceeds and operational cash flows.

Concerns

  • CRAMS business is expected to have a 'tepid year' in FY26 due to significant investments and repurposing of the Vizag plant.

  • Ibuprofen market continues to face intense competitive pressure from new entrants and pricing challenges.

  • The push of ₹200 crores debt to the newly formed CRAMS company (Synthix Global Pharma Solutions) implies a need for equity infusion.

Key financials

  1. Revenue ₹320 Cr +15%QoQ
  2. Gross Margin 54%
  3. Absolute Gross Margin ₹173 Cr +8%QoQ
  4. EBITDA ₹57 Cr +36%YoY
  5. EBITDA Margin 18%
  6. PAT ₹10.5 Cr
  7. EPS ₹2.5

What they filed

Q1 FY27: revenue up 19.7%, net profit up 45.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue347 300 273 319 314 −10%349 +16%387 +42%382 +20%
EBITDA61 58 45 57 35 −43%37 −36%58 +29%62 +9%
Net profit8 8 -2 11 -10 −225%-17 −312%10 +600%16 +45%
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.

Capital allocation

high confidence
  • Capex Capex disclosed
    • Repurposing Vizag plant for CRAMS division
    So to be honest with you, we have to make some significant investments to build out the CRAMS division in terms of repurposing the Vizag plant, which is what we are in the process of getting our redesign done.
  • Debt 2.7× EBITDA
    • Repayment Reduced debt by ₹143 crores (18% reduction from opening debt of FY26), with ₹113 crores from rights issue and ₹31 crores from operational cash flows. ₹143 Cr
    In our journey towards a healthier balance sheet, I'm actually glad to share with you that we have been able to reduce roughly INR143 crores of debt which reflects 18% reduction in the opening debt what we had started FY '26 with. Out of that, roughly INR113 crores came in from the first call money of the rights issue, which we had got in May '26 and the balance, close to INR31 crores came from the operational cash flows, which eventually brings our net debt to EBITDA ratio to close to 2.7x, if I take our Q1 EBITDA run rate.

Guidance & targets

Revenue

  • Top line growth Revenue · FY26 · High confidence around 10%
    And the third thing I said is that we expect our business to grow top line by around 10% and EBITDA by around 15% to 20%.

    — Sandeep Rao

Profitability

  • EBITDA growth Profitability · FY26 · High confidence around 15% to 20%
    And the third thing I said is that we expect our business to grow top line by around 10% and EBITDA by around 15% to 20%.

    — Sandeep Rao

  • EBITDA range Profitability · FY26 · Medium confidence INR 240-250 crores
    And secondly, so we have guided for EBITDA growth of around 15% to 20% for FY '26, which indicates a INR240 crores to INR250 crores range and with INR57-odd crores in Q1 considerably stronger second half.

    — Krisha Mehta

Debt

  • Net debt to EBITDA Debt · Q1 FY27 · High confidence sub INR450 crores level, which will reflect a net debt-to-EBITDA ratio of 1.5x
    Further, we have a line of sight, as we shared earlier, that by Q1 of FY '27, we will bring our debt to sub INR450 crores level, which will reflect a net debt-to-EBITDA ratio of 1.5x.

    — Sarat Kumar

  • Net debt to EBITDA (post CRAMS debt push) Debt · Medium confidence less than 1
    As we shared earlier, subject to the statutory approvals, once we push down INR200 crores of debt to the newly formed CRAMS company, Solara's net debt-to-EBITDA ratio should be less than 1.

    — Sarat Kumar

CRAMS Business Growth

  • CRAMS revenue growth CRAMS Business Growth · next few years · Medium confidence from INR100 crores to maybe, let's say, 4, 5x
    Okay. My last question is, so we have very ambitious targets for this business where we would like to grow this from INR100 crores to maybe, let's say, 4, 5x in the next few years.

    — Mohammad Patel

Capex

  • CRAMS capex and loss funding Capex · High confidence INR200 crores in the first phase
    And that is why the facility where we have almost one-third of our group capacity under completely underutilized is being shifted to the CRAMS business. New capex will go only to repurpose some of the equipments, not major capex is required consequently, but we think that capex and loss funding will be in the range of at least INR200 crores in the first phase. -- for us to take it to up to a INR400 crores, INR500 crores CRAMS business. But that's going to take us quite some time to get there, 3 to 4 years, as we said earlier.

    — Arun Kumar

  • CRAMS business target size from capex Capex · 3 to 4 years · Medium confidence INR400 crores, INR500 crores
    New capex will go only to repurpose some of the equipments, not major capex is required consequently, but we think that capex and loss funding will be in the range of at least INR200 crores in the first phase. -- for us to take it to up to a INR400 crores, INR500 crores CRAMS business. But that's going to take us quite some time to get there, 3 to 4 years, as we said earlier.

    — Arun Kumar

Margin

  • Gross margin in Catalogue API segment Margin · FY26 · High confidence 53% to 55%
    In the past, we have indicated that a 53% to 55% gross margin range is sustainable in Catalogue API segment. Would it be reasonable to assume that the midpoint of this range would be good base for FY '26?

    — Sarat Kumar

What to watch in Q2 FY26

CRAMS business fund raising details

next call
Current Implied need for equity infusion
Target Specifics on pref or rights issue

Why it matters

This will determine the capital structure and funding strategy for the newly formed CRAMS entity.

Also, as you mentioned about the equity for the CRAMS business, the fund raising, will it be a pref or like a rights issue? ... It's very early days for now. We will probably have more answers for you in the next call.

Risks & concerns

  • Intense competition and pricing pressure in Ibuprofen market

    high

    New entrants, new chemistry, and pricing challenges persist, leading Solara to focus on derivatives and complex programs.

    Management acknowledged

  • Tepid growth and significant investments for CRAMS business in near term

    medium

    FY26 is expected to be a tepid year for CRAMS due to necessary investments in repurposing the Vizag plant, with meaningful business expected in 2-3 years.

    Management acknowledged

  • Need for equity infusion for CRAMS company

    medium

    Pushing ₹200 crores of debt to the newly formed CRAMS company (Synthix Global Pharma Solutions) will likely necessitate an equity infusion to maintain a healthy balance sheet.

    Analyst acknowledged

Q&A highlights

6 direct
CRAMS business top line and annual guidance Direct
So the run rate, Vishal, for that business as we when we announced the CRAMS carve out, it's just about INR100 crores. So we are INR100 crores on an annualized basis. So currently, the run rate is within that range, quarterly run rate. ... So to be honest with you, we have to make some significant investments to build out the CRAMS division in terms of repurposing the Vizag plant, which is what we are in the process of getting our redesign done. So I think this year will also be quite a tepid year for that division.

Clarifies the current scale and near-term outlook for the CRAMS business, indicating a period of investment rather than immediate growth.

Asked by Vishal, Systematix Group

Ibuprofen contribution to revenue and market stability Direct
So, ibuprofen as a portfolio, we have close to done roughly 30% of the business entirely from ibuprofen, which includes ibuprofen plain as well as ibu derivatives. ... Yes, the pricing is stable. The pricing is stable because we're only working with up-tier high-quality marquee customers in the developed markets.

Provides specific data on ibuprofen's reduced share of revenue and management's strategy to maintain pricing stability by focusing on high-quality customers.

Asked by Jagadish Sharma

API pricing trends and stabilization Partial
So it's very selective. It's not across the industry on specific products. We do see some challenges. But overall, if you look at Solara, we have actually reduced our focus on top line growth, which effectively means that any lines which are not profitable, we are exiting and we're very focused on getting the right network, therefore, the kind of business that we want to keep for us and the businesses we keep the 77%, 78% regulated market focus is very sticky.

Indicates that while industry-wide pricing pressure persists, Solara is mitigating this by exiting unprofitable lines and focusing on regulated, sticky markets.

Asked by Jagadish Sharma

EBITDA growth guidance and potential for exceeding it Partial
We keep a quarter at a time, but for now, your mathematical understanding of our EBITDA range is accurate. And I think our focus is to be in that range. And at this stage, we think it's a little too early to revise any guidance, one or two more quarters is what where we will be in a more comfortable situation to make -- address that query of yours.

Management acknowledges the implied stronger H2 but refrains from revising guidance, suggesting a cautious approach despite a strong Q1.

Asked by Krisha Mehta

Equity infusion for CRAMS company after debt push Direct
And the other question is, we are injecting INR200 crores of debt into Synthix Global Pharma Solutions, which today is a subscale business with weak or maybe negative operating cash flow. So it's almost certain that an equity infusion will be needed soon to keep the balance sheet healthy. Is that a reasonable fair assumption? Arun Kumar: It is.

Confirms the likelihood of an equity infusion for the CRAMS business, which is a significant capital allocation event.

Asked by Sajal Kapoor

Regulatory approval for new ibuprofen route Direct
No, we're still in the process of implementing it. So we have not we're really still in the development process. We haven't taken into approval as yet.

Provides an update on a key product development, indicating it's still in early stages and not yet approved.

Asked by Pranav Gandhi

Gross margin decline from 57% to 54% QoQ Direct
Yes. Dheeraj if you see so what we have done is with respect to gross margin profile, we have a certain product mix. So as a business, it would not be fair to assume exactly 57% every quarter. So from our 57%, what we had clocked in Q4, we are down to 54% but if you see in terms of overall for the past 5 or 6 quarters, we have gradually scaled that number from 40s level to a mid-50s kind of range. And we believe that being in a catalogue generics API business, this gross margin profile is fairly healthy.

Explains the slight QoQ margin fluctuation as a result of product mix and reiterates the sustainability of the current margin profile for the business.

Asked by Dheeraj Shah

CRAMS capex plan and target business size Direct
New capex will go only to repurpose some of the equipments, not major capex is required consequently, but we think that capex and loss funding will be in the range of at least INR200 crores in the first phase. -- for us to take it to up to a INR400 crores, INR500 crores CRAMS business. But that's going to take us quite some time to get there, 3 to 4 years, as we said earlier.

Outlines the initial investment for the CRAMS division and the long-term revenue potential it aims to unlock, providing a roadmap for this strategic pivot.

Asked by Krisha Kansara

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Detailed narrative

Strong Q1 FY26 Performance and Strategic Reset

Solara Active Pharma Sciences commenced FY26 with robust performance, achieving ₹320 crores in revenue, a 15% QoQ increase. The company's gross margin stood at a healthy 54%, contributing ₹173 crores in absolute gross margin, up 8% QoQ. EBITDA reached ₹57 crores, reflecting a 13% QoQ and 36% YoY growth, with an 18% margin. This strong start is attributed to a strategic reset focusing on margin expansion, debt reduction, and establishing good governance, with developed markets contributing a significant 77% of overall sales.

Debt Reduction and Balance Sheet Strengthening

The company successfully reduced its debt by ₹143 crores in Q1 FY26, representing an 18% reduction from the beginning of the fiscal year. This reduction was primarily funded by ₹113 crores from the rights issue and ₹31 crores from operational cash flows. Consequently, the net debt to EBITDA ratio improved to 2.7x. Management targets further reduction to sub ₹450 crores by Q1 FY27, aiming for a 1.5x net debt to EBITDA ratio, and potentially less than 1x if ₹200 crores of debt is transferred to the CRAMS company.

CRAMS Business: Investment Phase and Long-term Vision

The CRAMS division is currently in an investment phase, with FY26 anticipated to be a 'tepid year' due to significant capital expenditure for repurposing the Vizag plant. The company expects to invest at least ₹200 crores in capex and loss funding in the first phase, aiming to grow the CRAMS business from its current ₹100 crores annualized run rate to ₹400-500 crores over the next 3-4 years. Management confirmed that an equity infusion would likely be needed for the newly formed CRAMS entity, Synthix Global Pharma Solutions, to maintain a healthy balance sheet.

Ibuprofen Portfolio and Market Strategy

Ibuprofen and its derivatives now constitute approximately 30% of Solara's business in Q1 FY26, a reduction from the previous 50% reliance. The company maintains that pricing for its ibuprofen products is stable due to a conscious strategy of serving only 'up-tier high-quality marquee customers' in developed markets. While the broader ibuprofen market faces intense competitive pressure from new entrants and pricing challenges, Solara is pivoting towards derivatives and more complex programs to mitigate these headwinds.

Operational Efficiency and Margin Sustainability

Solara is actively pursuing cost improvement programs, operational efficiency, and network optimization to drive profitability. The company's capacity utilization stands at 60-65% across its facilities, with an asset turnover ratio close to 1.2. Management aims to sustain gross margins in the 53-55% range for its Catalogue API segment in FY26, emphasizing that the current 54% gross margin is healthy and reflects the quality of its business mix.

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