Strides Pharma Science Limited — Q3 FY26 earnings call

Call held 30 Jan 2026

Management summary

Strides Pharma reported a strong Q3 FY26, driven by robust profitability and significant growth in Ex-U.S. markets, which now contribute 47% of revenues and grew 20% YoY. Gross margins exceeded 60%, and EBITDA reached a record Rs. 236 crores, up 12% YoY. The company also improved its debt/EBITDA ratio to 1.59x and ROCE to 15.8%, despite flat U.S. revenue due to seasonal factors and product discontinuations.

Highlights

  • Gross margins touched 60% plus in Q3 FY26, with overall gross margins reaching 59.8%.

  • Ex-U.S. markets contributed 47% of Q3 FY26 revenues and achieved 20% year-on-year growth.

  • EBITDA grew 12% year-on-year to Rs. 236 crores, which is the highest ever quarterly EBITDA for the company.

  • Operational PAT grew 39% year-on-year to Rs. 128 crores, with an operational EPS of Rs. 13.9 per share.

  • Debt/EBITDA improved to 1.59x, and Return on Capital Employed (ROCE) improved to 15.8%.

Concerns

  • U.S. revenue was largely flat at $70 million compared to the previous year, impacted by a muted flu season and new competition.

  • The company discontinued 8 products that did not meet profitability thresholds over the last 9 months.

  • Slower than expected quota allocations contributed to muted growth in the U.S. control substances business.

  • Cash-to-cash cycle increased slightly to 124 days due to a shift in business mix towards Ex-U.S. markets and seasonal holidays.

Key financials

  1. Revenue ₹1,191.92 Cr +3.6%YoY
  2. Gross Margin 59.8%
  3. EBITDA ₹236 Cr +12%YoY
  4. EBITDA Margin 19.8%
  5. Operational PAT ₹128 Cr +39%YoY
  6. Operational EPS ₹13.9
  7. Reported PAT ₹208 Cr
  8. Reported EPS ₹21.9
  9. ROCE 15.8%
  10. Cash-to-Cash Cycle 124 days

What they filed

Q1 FY27: revenue up 12.9%, net profit up 55.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,167 1,154 1,190 1,120 1,221 +5%1,195 +4%1,323 +11%1,265 +13%
EBITDA184 210 218 218 231 +26%236 +12%240 +10%228 +5%
Net profit72 90 86 106 132 +83%208 +131%129 +50%165 +56%
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

Share of Revenue
198.6 Mn Total
  • U.S. Market 70 Mn 35.2%
  • Ex-U.S. Markets 64 Mn 32.2%
  • Other Regulated Markets (ORM) 48 Mn 24.2%
  • Growth Markets 16.6 Mn 8.4%

Capital allocation

high confidence
  • Capex ₹100 Cr
    • Tangible and intangible assets, including targeted global product rights ₹284 Cr
    We have also invested Rs. 284 crores in CAPEX in both tangible and intangible assets. In addition to the maintenance CAPEX, we have also made investments for growth and we have acquired certain targeted global product rights, which will drive our growth in the near future in both the US and the Ex-US markets. Taking into account the negative impact of currency on our net debt, which was of about Rs. 83 crores, our net debt stands at Rs. 1,436 crores. And despite this impact, we have improved our trailing 12 months EBITDA to net debt ratio to 1.59x. We had ended at 1.9x in FY'25.
  • Debt Net ₹1,436 Cr · 1.6× EBITDA
    • Repayment Reduced net debt on a constant currency basis over 9 months ₹169 Cr
    As we speak, our debt/EBITDA is about 1.59x. We are on track to get to the targeted ratios and the overall debt, if you really see it, has reduced by about Rs. 170 crores, Rs 1,696 million on a constant currency basis and return on capital employed improved to 15.8% aided by consistent results, improved profit show as well as the better balance sheet management, cash-to-cash cycles.
  • Liquidity Liquidity disclosed Operational cash of Rs. 484 crores for the 9-month period, which is approximately 70% EBITDA to operating cash.
    So, after funding for this increase in working capital, we have delivered an operational cash of Rs. 484 crores for the 9-month period, which is approximately 70% EBITDA to operating cash.

Guidance & targets

Market Share

  • Ex-US Revenue vs US Revenue Market Share · by Q3 FY28 · Medium confidence Parity (mirror US markets)
    our endeavor was to mirror those markets in the long term, in two years from now

    — Badree Komandur

Revenue

  • US Revenue Revenue · FY28 · High confidence $400 million
    Our endeavor is to reach about $400 million in U.S.

    — Badree Komandur

  • Revenue from R&D programs Revenue · Next 12-18 months · Medium confidence Start delivering revenue
    R&D programs which will start delivering revenue in the next 12 months to 18 months.

    — Badree Komandur

  • Nasal Spray Revenue Revenue · 2027-2028 · High confidence Start kicking in
    revenue should start kicking in from 2027-2028, I think.

    — Badree Komandur

Profitability

  • Gross Margin Profitability · Ongoing · High confidence 58-60%
    it can be between a 58% to 60% range.

    — Badree Komandur

Efficiency

  • Cash-to-cash cycle Efficiency · Ongoing · High confidence 120-125 days
    we expect it to be in the range of 120 to 125 days

    — Badree Komandur

Tax

  • Effective Tax Rate Tax · FY26 · High confidence 15-18%
    Effective tax rate for the quarter is at 15% and we expect it to be in the range of 15% to 18% for the year.

    — Vikesh Kumar

Capex

  • Maintenance Capex Capex · FY26 · High confidence 100-125 crores
    maintenance CAPEX standpoint, we are on track in the 100 crore to 125 crore kind of a range.

    — Vikesh Kumar

Business Performance

  • Control Substances Business Business Performance · Next few quarters · Medium confidence Normalcy
    control substances coming to a normalcy in the next few quarters from now.

    — Badree Komandur

What to watch in Q4 FY26

US Control Substances Business Normalcy

Next few quarters
Current Slower than expected quota allocations
Target Normalcy in operations and quota allocations

Why it matters

Normalization of this business is key for US growth trajectory and achieving FY28 targets.

control substances coming to a normalcy in the next few quarters from now.

Risks & concerns

  • Competition in generics market

    medium

    Competition is always present and can be specific to certain molecules, impacting growth.

    Management acknowledged

  • Pricing pressure in generics business

    medium

    Price erosions are inherent to the generics business and are a function of market dynamics and players.

    Management acknowledged

  • Slower than expected quota allocations for US control substances

    medium

    Contributed to muted growth in the U.S. business, requiring a full year of operation to demonstrate ability for more quota.

    Management acknowledged

  • Seasonal sales volatility (e.g., flu season)

    low

    Muted flu season sales in Q3 FY26 impacted US business, unlike previous years.

    Management acknowledged

  • Currency impact on net debt

    low

    Negative impact of Rs. 83 crores on net debt due to exchange rate depreciation, though overall debt reduction achieved on constant currency basis.

    Management acknowledged

Q&A highlights

7 direct
Contribution of discontinued products Partial
it is not very a material number from an yearly standpoint, it is not a very material number from that.

Analyst sought quantification of impact from product discontinuations, but management provided a qualitative answer.

Asked by Anand

Reasons for lower US business growth Direct
this quarter was mainly because of the flu season. From a flu season perspective, it came in the, maybe the last few days of December. We will have to watch out. Usually, it will be a good Q3 and Q4. It was delayed this time. And that is the reason you are seeing the muted growth plus the discontinuation of the six products.

Management explained the factors contributing to the flat US revenue, including seasonal delays and product discontinuations.

Asked by Anand

Sustainable gross margin and rupee depreciation impact Direct
it can be between a 58% to 60% range. Don't hold us on for each and every quarter. Our endeavor is to reach the higher end of the range always.

Management provided a range for sustainable gross margins, clarifying the current quarter's higher margin was due to business mix.

Asked by Anand

Debt currency impact and P&L routing Direct
So, as far as the debt restatements are concerned, they are already reflected in the P&L. Some of the long-term loans, they don't get routed through the P&L and they are directly reinstated on the balance sheet.

Clarified how currency impact on debt is accounted for, distinguishing between P&L and balance sheet restatements for different loan types.

Asked by Anand

Overall revenue growth drivers given flat trend Direct
the growth will be led by many levers, which are all part of this, as far as the U.S. is concerned, we have got a number of, number of dormant products. The control substances should pan out quite well for us in the near term. We are also investing on long-term growth.

Management outlined multiple strategic levers for future revenue growth beyond the current quarter's flat performance.

Asked by Saumya

Increase in cash-to-cash cycle Direct
Today, that market is very lower compared to the overall mix. And that's the reason you see an increase in the cash-to-cash cycles. And plus, because of the holidays and a few other factors, the cash-to-cash cycles are slightly one or two days high. But I think overall it will be within that 120 to 125 range.

Management explained the operational reasons for the temporary increase in cash-to-cash cycle and reiterated the target range.

Asked by Saumya

Consistency of ORM growth Direct
We have got a regulatory pathway in place. We have got products, we have got strategies, we have got markets, we have got customers, right? So, from our perspective, the build phase is already over, as far as the Ex-US market is concerned.

Management provided confidence in the sustained growth of Ex-US markets, citing strategic investments and execution.

Asked by Sarvesh Gupta

US business stagnation and FY28 target Direct
As I said, it is there in the presentation itself. But for your purpose, I will reiterate for you. There are a number of dormant products which will contribute to that growth. Plus, I also talked about the control substances coming to a normalcy in the next few quarters from now. Plus, we also invested in R&D programs which will start delivering revenue in the next 12 months to 18 months.

Analyst questioned the feasibility of the FY28 US target given current flat performance, prompting management to reiterate key growth drivers.

Asked by Krisha

2 min read 6 chapters

Detailed narrative

Robust Profitability and Margin Expansion

Strides Pharma achieved strong profitability in Q3 FY26, with gross margins exceeding 60% and overall gross margins reaching 59.8%. This led to a 12% year-on-year increase in EBITDA, which stood at Rs. 236 crores, marking the highest quarterly EBITDA in the company's history. The EBITDA margin for the quarter was 19.8%, contributing to a 39% YoY growth in operational PAT to Rs. 128 crores and an operational EPS of Rs. 13.9.

Ex-U.S. Markets as a Key Growth Driver

Ex-U.S. markets emerged as a significant growth engine, contributing 47% of the total Q3 FY26 revenues and demonstrating a robust 20% year-on-year growth. Within this segment, Other Regulated Markets (ORM) grew 21% YoY to $48 million, while Growth Markets delivered $16.6 million, up 19% YoY. The company's long-term strategy aims for Ex-U.S. markets to mirror the U.S. markets in terms of revenue contribution within two years.

U.S. Business Performance and Strategic Outlook

The U.S. business experienced a largely flat revenue performance at $70 million compared to the previous year. This was attributed to a muted flu season, increased competition, and slower-than-expected quota allocations for control substances. Despite these challenges, Strides remains committed to its FY28 U.S. revenue aspiration of $400 million, supported by the relaunch of dormant products, normalization of control substances, and ongoing R&D investments.

Strengthening Balance Sheet and Capital Efficiency

The company continued to strengthen its balance sheet, improving the debt/EBITDA ratio to 1.59x and achieving a Return on Capital Employed (ROCE) of 15.8%. Net debt reduced by Rs. 169 crores on a constant currency basis over the nine-month period, despite a negative currency impact of Rs. 83 crores, bringing the total net debt to Rs. 1,436 crores. The cash-to-cash cycle was 124 days, slightly higher due to business mix and holidays, but expected to remain within the 120-125 day range.

Strategic Investments and Future Pipeline

Strides invested Rs. 284 crores in CAPEX during the nine-month period, covering both tangible and intangible assets, including the acquisition of targeted global product rights. The company's maintenance CAPEX for FY26 is projected to be in the range of Rs. 100-125 crores. Strategic investments are also being made in complex areas such as control substances, nasal sprays, and 505(b)(2) programs, with R&D programs expected to start generating revenue within the next 12-18 months.

Management Changes and ESG Focus

The company announced the appointment of Peter Hardwick as CEO of North American Business, bringing 30 years of pharmaceutical experience to drive sustainable growth in the region. Nandini Matiyani also joined as Executive VP of HR to lead global people agenda. Strides improved its ESG score from 75 to 80, reflecting continued focus on responsible growth, compliance, and strong governance practices.

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