Solara Active Pharma Sciences Limited — Q3 FY26 earnings call

Call held 10 Feb 2026

Management summary

Solara Active Pharma Sciences reported a challenging Q3 FY26, primarily due to significant headwinds in its legacy ibuprofen business, which impacted overall gross margins to 47%. Despite this, the non-ibuprofen growth API segment demonstrated strong profitability with 56% gross margins and 25% EBITDA. The company is actively evaluating strategic options for the ibuprofen business and aims to revive its mothballed Vizag plant for multipurpose API production, while also reducing debt by INR 146 crores and targeting sub INR 500 crores by May '26.

Highlights

  • Non-ibuprofen growth API business demonstrated strong profitability with 56% gross margin and 25% EBITDA, above industry range.

  • Revenue grew 10% quarter-on-quarter to INR 346 crores, and approximately 15% year-on-year.

  • Debt was reduced by INR 146 crores, including INR 113 crores from rights issue and INR 33 crores from operational cash flows.

  • Developed markets continue to be a strong contributor, accounting for 75% of overall sales.

  • Strategic R&D focus shifted towards high-potent APIs and conversion of Vizag plant to a multipurpose facility, with commercial production targeted within 5-6 months.

Concerns

  • The legacy ibuprofen business remains a significant drag, facing headwinds in pricing and capacity utilization, impacting overall profitability.

  • Gross margins for the quarter were 47%, a decline of 386 basis points quarter-on-quarter, making it one of the lowest reported.

  • A one-time adverse impact of INR 6.7 crores (INR 67 million) was incurred due to increased gratuity and leave encashment liability from the new labor wage code.

  • The Vizag facility is currently mothballed, and the Pondicherry facility operates at low utilization (3,000 tons out of 12,000 tons total capacity).

Key financials

  1. Revenue ₹346 Cr +15%YoY
  2. Gross Margin 47% -3.9%QoQ
  3. EBITDA ₹37 Cr +6%QoQ
  4. Exceptional Item (Labor Code) 67 Mn

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.

Segment breakdown

  • Non-Ibuprofen / Growth API Business
    56% Gross Margin25% EBITDA Margin

Capital allocation

high confidence
  • Debt Debt disclosed
    • Repayment Debt reduced by INR 146 crores (19% reduction), comprising INR 113 crores from rights issue and INR 33 crores from operational cash flows. ₹146 Cr
    In our continuous journey towards a healthier balance sheet, we have been able to reduce our debt by close to INR146 crores adjusted for the foreign exchange impact as well what we have on the closing debt. And hence, we have reduced our debt by close to 19%, INR113 crores of that coming from the rights issue money, what we had called in the first call, money of rights, by May '26 and balance INR33 crores being actually generated from our operational cash flows.

Guidance & targets

Debt

  • Debt Reduction Debt · By May '26 · High confidence Sub INR 500 crores
    Further, we have a line of sight to reduce the debt to sub INR500 crores levels by May '26 post receipt of our final call money.

    — Sarat Kumar

Capacity

  • Vizag Plant Commercial Production Capacity · Next 5-6 months · High confidence Operational
    to get it back into commercial production by -- in the next 5 to 6 months.

    — Arun Kumar

Product Launch

  • OneSource CDMO Product Launch Product Launch · FY27 · High confidence Launch
    And that approval should come in the FY '27, our financial year time frame. I think that's when the product launch will happen.

    — Sandeep Rao

Other

  • Ibuprofen Business Analysis Results Other · Q4 results · High confidence Results of analysis
    We expect to have this -- the results of an analysis to be part of our Q4 results.

    — Arun Kumar

  • Ibuprofen Business Strategic Decisions Other · End of April · High confidence Clear view/decisions
    We have to wait for our recommendations, and then we will take a considered view, and we should be in a position to let you know by the end of April with our Q4 results.

    — Arun Kumar

What to watch in Q4 FY26

Ibuprofen Business Strategic Decisions & Financial Impact

Q4 FY26 results (end of April)
Current Under strategic review, results expected Q4 FY26.
Target Clear decisions on ibuprofen business, including potential cost reductions or strategic resets, and quantified financial impact.

Why it matters

The resolution of the ibuprofen business is central to improving overall company profitability and future strategic direction.

We expect to have this -- the results of an anlysis to be part of our Q4 results.

Risks & concerns

  • Headwinds in ibuprofen business (pricing, capacity utilization, dated processes)

    high

    Ibuprofen business is a significant drag on overall profitability due to intense competition, excess capacity, and dated processes, leading to under-recovery.

    Management acknowledged

  • One-time financial impact from new labor wage code

    medium

    INR 6.7 crores (or INR 67 million) adverse impact due to increased gratuity and leave encashment liability effective November 21, 2025.

    Management acknowledged

  • Delay in corporate actions due to ibuprofen business re-evaluation

    medium

    All corporate actions, including previously announced intentions for Vizag, are being delayed until the strategic review of the ibuprofen business is complete.

    Management acknowledged

Q&A highlights

4 direct, 1 evasive
Strategic advisors' accountability for ibuprofen business recommendations Direct
Listen, we believe that any work that we deploy focuses on the best value creation for all our stakeholders. We ensure that our processes are robust. We have a very independent committee of the Board that reviews these kind of matters. It is not something that we are obliged to follow through if it doesn't create the necessary outcome for the benefit of the organization.

Addresses concerns about the independence and effectiveness of the strategic review for the struggling ibuprofen business.

Asked by Sajal Kapoor

Integrated structure (CDMO + complex APIs) vs. carve-out of ibuprofen business Direct
Earlier, it was a balance sheet decision to carve out, but the -- although the ibuprofen business is loss-making, as you can hear from Sarat's commentary, the rest of the business is generating enough free cash to actually pay down our debt. So one of the reasons is that isn't even logical for us to take out, as you rightly said, the chemistry and the CRAMS business out. And that is why we have delayed that decision.

Clarifies the company's current stance on not carving out the ibuprofen business, citing the profitability of other segments and debt reduction.

Asked by Sajal Kapoor

Future of ibuprofen API business, FY25 revenues/margins Partial
I think, Krishna, we can give you that detail. The company will provide you that information. We probably don't have the carve-out data immediately. As you can see, these are management accounts. And your question is what we think about the future of the ibuprofen business is that at the current price and cost it makes, we are restricted to sell to only big pharma. And that has challenges in terms of under recovery. So, we should be in a good position to answer your question when we come up with our Q4 results.

Highlights the lack of immediate detailed financial breakdown for the ibuprofen segment, which is a key concern for investors, and defers the answer to Q4 results.

Asked by Krishna

Reason for not disclosing ibuprofen business's loss-making status earlier Direct
Yes, because the margin profile was significantly different last year when we reported and the challenges on the ibuprofen is happening since the last 2 quarters. So we thought it was prudent for you to know now because it has impacted us. As you can see, the gross margins have dropped by almost 800 basis points between the last year and this year.

Explains the timing of the disclosure, indicating that the significant impact of the ibuprofen business is a more recent development (last 2 quarters).

Asked by Anupam Jain

R&D strategy for sustainable, high-margin portfolio and Vizag plant conversion Direct
There is, and there is a significant shift in our focus on R&D because we believe clearly, as one of the other investors asked us earlier, there is no need for 2 plants to make ibuprofen. So even if we decide to keep ibuprofen either for captive use or for very small customers at a reduced cost structure, if that is a solution, Vizag has to become a multipurpose plant... to get it back into commercial production by -- in the next 5 to 6 months.

Details the strategic shift in R&D focus towards high-potent APIs and the plan to convert the Vizag plant, indicating future growth drivers beyond traditional ibuprofen.

Asked by Sajal Kapoor

Growth targets for FY27 for the API growth business Evasive
So we don't give we are not yet ready to give a guidance for the growth business. We will do it along with our decision on ibuprofen.

Indicates that while the growth API business is performing well, specific forward-looking targets are still being formulated and are linked to the resolution of the ibuprofen strategy.

Asked by Maitri

2 min read 6 chapters

Detailed narrative

Ibuprofen Business Challenges and Strategic Review

The company is facing significant headwinds in its legacy ibuprofen business, which has been a drag on overall performance. This segment, once a global leader, is now impacted by dated processes, intense generic competition, and excess capacity, leading to low utilization (3,000 tons out of 12,000 tons total capacity). Management has initiated a strategic review, seeking external advice, with results expected by Q4 FY26 and decisions by end of April.

Strong Performance of Non-Ibuprofen Growth API Segment

In contrast to the ibuprofen business, the non-ibuprofen growth API segment is performing robustly. This segment, which the company has invested in over the last 16-17 months, reported a gross margin of 56% and an EBITDA margin of 25%, placing it at the higher end of the industry range for API businesses. This growth is driven by complex, niche products from four FDA-approved plants, and contributes 75% of overall sales from developed markets.

Q3 FY26 Financial Overview

For Q3 FY26, Solara reported a revenue of INR 346 crores, marking a 10% sequential growth and approximately 15% year-on-year growth. However, gross margins declined by 386 basis points quarter-on-quarter to 47%, primarily due to the ibuprofen business. EBITDA for the quarter stood at INR 37 crores, reflecting a marginal 6% Q-o-Q growth, also impacted by the lower gross margins.

Debt Reduction and Balance Sheet Strengthening

The company has made progress in strengthening its balance sheet, reducing debt by INR 146 crores, representing a 19% reduction. This was achieved through INR 113 crores from rights issue proceeds and INR 33 crores from operational cash flows. Management has a clear line of sight to further reduce debt to below INR 500 crores by May 2026, post the receipt of final call money.

Vizag Plant Conversion and R&D Focus

The mothballed Vizag facility, which previously produced ibuprofen, is planned for conversion into a multipurpose and high-potent API plant. This strategic shift, supported by renewed R&D efforts and investments in new talent, aims to bring the plant back into commercial production within the next 5-6 months. This initiative is part of a broader R&D rethink to build a sustainable, scalable, and high-margin portfolio.

One-Time Impact from New Labor Code

The company incurred a one-time adverse financial impact of INR 6.7 crores (or INR 67 million) in Q3 FY26. This was due to increased liability for gratuity and leave encashment, resulting from the new labor wage code that became effective on November 21, 2025.

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