Ajanta Pharma Ltd (AJANTPHARM) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Ajanta Pharma Q2 FY '27 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Yogesh Agrawal, Managing Director of Ajanta Pharma Limited. Thank you, and over to you, Mr. Agrawal.
Yogesh Agrawal (Ajanta Pharma Ltd): Thank you. Good afternoon, everyone, and welcome to Ajanta Pharma's Q2 earning call. With me, I have today Mr. Rajesh Agrawal, our Joint Managing Director, Mr. Arvind Agrawal, our CFO, Mr. Rajeev Agrawal, our Vice President, Finance and Investor Relations. I hope all of you have received the financial results by now. Before we start, here is the order for today: I'll cover the group and our international businesses. Our Joint Managing Director will take India, and our CFO will close with the financials and our guidance for the year. Please note that during this call, we may take we may make certain forward-looking statements which are subject to risks and uncertainties. I will start with overall business performance and happy to inform you that we have closed the second quarter on a healthy note. Revenue from operations for the quarter grew by 33% to ₹1,794 crores. EBITDA grew by 47% to ₹543 crores at a margin of 30%, and profit after tax grew by 49% to ₹388 crores. For the first half, revenue grew by 29% to ₹3,420 crores, and a profit after tax by 40% to ₹722 crores. Our financial position
Yogesh Agrawal (Ajanta Pharma Ltd): with return on capital employed at 41% and return on net worth at 31% as at end of September 2026. These robust returns reaffirm our position among the industry's leading performers. Let me now take you through our key business verticals, starting with branded generic business in Asia and Africa, which contributed 38% to total revenue in the second quarter of the current financial year. We continue investing in new markets and products, which will ensure consistent growth in this part of the business. Starting with Asia branded generics, I am pleased to share that despite the ongoing geopolitical tensions in the Middle East, our proactive efforts to leverage alternative shipping routes have enabled us to ensure the safe and timely delivery of consignments to our respective markets. This has resulted in our Asia branded generic business bouncing back during the quarter, with a growth of 18% and a sales of Rs. 366 crores, compared with 310 crores in the corresponding quarter last year. In the first half, sales were at Rs. 621 crores, compared with Rs. 614 crores in the corresponding period last year, representing a growth of 1%. During the first half, we launched four new products in the region and are confident that growth momentum will continue in coming quarters. Moving to our Africa branded generic business, in Q2, it continued to deliver a strong performance, with sales increasing by 41% to Rs. 312 crores, compared with Rs. 221 crores in the corresponding quarter last year. In H1, sales were at Rs. 607 crores compared with Rs. 449 crores in the corresponding period last year, representing an excellent growth of 35%. This robust growth in the first half reflects gains in the market share, new product launches, field force addition over the last two to three years and a favorable currency movement. During the first half, we launched three new products, further supporting our continued expansion across the region. As can be seen, our conscious call to keep the business well diversified across markets enables us to keep performing and delivering growth in spite of the challenges. Let us now turn to other two verticals within our international business. Our US generic business continued to deliver a strong performance, contributing 27% to our revenue in the second quarter. During Q2, revenue grew by 41% to Rs. 484 crores compared to Rs. 344 crores in the corresponding quarter last year. For the first half of the year, revenue stood at Rs. 971 crores, registering a growth of 49% over Rs. 653 crores in the same period last year. The strong growth in Q2 and H1 was partly supported by a lower base in the corresponding periods of the previous year. During the second half of FY 2026, we had few limited competition products, which had driven healthy growth since. New players have now entered these products, which will moderate our growth momentum during the second half of the year. Taking this factor into the consideration, we maintain our full-year revenue growth guidance of high-single digit for the US generic business. During the first half, we launched three products, received four final approvals and filed one ANDA. We currently have 17 ANDAs pending approval. Let me now discuss our Africa institution business, which delivered a stronger than expected performance during the quarter, contributing 7% to our total revenue. Q2 sales grew by 259% to Rs. 116 crores, compared to Rs. 32 crores in the corresponding quarter last year. For the first half of the year, sales stood at Rs. 187 crores, registering a growth of 164% over Rs. 71 crores in the same period last year. As we have consistently highlighted in our earlier communications, procurements by institutional agencies remain unpredictable both in terms of timings and the value. While we witnessed strong procurement activity during the first half of the year, given the inherent uncertainty in this business, we do not expect the same level of sales to sustain in the second half. Now, I invite Mr. Rajesh Agrawal, our Joint Managing Director, to brief you on India business. Thank you, and over to you.
Rajesh Agrawal (Ajanta Pharma Ltd): Thank you.
Rajesh Agrawal (Ajanta Pharma Ltd): Welcome to all of you. Our India business continued to deliver excellent performance in the second quarter of the current financial year. The strategic investments we have made in expanding our field force and entering new therapeutic areas have started yielding encouraging results. We remain committed to these investments to drive sustainable growth in the coming quarters and years ahead. Reflecting Reflecting this progress, I'm pleased to share that our overall ranking in the Indian pharmaceutical market has improved to 23rd in September 2026, from 24th in March 2026. According to IQVIA MACS September 2026 data, Ajanta continued to outperform the Indian pharmaceutical market, registering growth of 17% compared to the market growth of 13%. Our volume growth stood at 18%, ahead of the overall market, while our growth from new product launches exceeded the market by 70%. Importantly, this performance was broad-based across most of our therapeutic segments, with our growth consistently expecting exceeding the respective segment averages. We remain confident of sustaining this positive movement momentum in the years ahead. Within our covered market, we continue to rank among the top 10 players across all our core therapeutic segments. Cardiology remained the largest contributor to our India branded sales at 37%, followed by Ophthalmology at 28%, Dermatology at 22%, and Pain Management at 10%. Our newer therapeutic areas contributed the remaining 3%, reflecting the gradual progress of our diversification efforts. Coming to our financial performance, the India business contributed 28% to the company's total revenue during the second quarter. Q2 sales grew by 16% to Rs. 504 crores, compared to Rs. 432 crores in the corresponding quarter last year. For the first half of the year, sales grew by a healthy 20% to Rs. 1,013 crores, compared to Rs. 841 crores in the same period last year. Field force productivity, measured as PCPM, improved to Rs. 4.5 lakhs in the first half, as against Rs. 3.7 lakh in FY 2026. This performance was further supported by our continued focus on new product introductions. Our India business also includes the trade generic segment, which contributed Rs. 56 crore in Q2 and Rs. 104 crore during the first half of the current financial year. With this, I now invite Mr. Arvind Agrawal, our CFO, to take you through the financial performance. Thank you, and over to you, Arvind.
Arvind Agrawal (Ajanta Pharma Ltd): Thank you, and good afternoon to all. I will take you through the consolidated financial performance for second quarter and first half of the current year. Revenue from operations for the second quarter grew by a healthy 33% to Rs. 1,794 crores, compared with Rs. 1,354 crores in the corresponding quarter last year. In the first half, revenue grew by 29% to Rs. 3,420 crores, compared with 2,656 crores in the corresponding period last year. Of this, India contributed 28%, branded generics across Asia and Africa contributed 38%, US generic contributed 27%, and Africa institution 7% during the second quarter of the current year. This is an affirmation of our diversified business model, supporting consistent growth even in the face of challenges in some of our markets. Our gross margin stood at 79% for the second quarter and first half of the year. The improvement over FY 2026 was primarily due to favorable currency. For the full year, we expect gross margin to remain around 78% with a variation of plus or minus 100 basis points. Personnel cost remained stable at Q1 level and stood at Rs. 384 crores in Q2 compared with 317 crores in the corresponding quarter last year.
Arvind Agrawal (Ajanta Pharma Ltd): an increase of 21%. In the first half, cost stood at Rs. 765 crores compared with Rs. 620 crores in the corresponding period last year, representing an increase of 23%. This increase was mainly attributable to annual increments, field force expansion, and additional manpower and manufacturing facility. R&D expenditure, which is included within personal cost and other expenses, stood at Rs. 72 crores in Q2 compared with 63 crores in corresponding quarter last year. In first half, cost stood at 138 crores compared with Rs. 119 crores in the corresponding period last year. This represented approximately 4% of our total revenue. For the full year, we expect R&D expenditure to be around 5% of revenue, with spending stepping up in the second half. Other expenses in Q2 stood at Rs. 483 crores, compared with Rs. 392 crores in the corresponding quarter last year, representing an increase of 23%. In first half of the year, expenses were at Rs. 971 crores compared with Rs. 765 crores in the corresponding period last year, representing an increase of 27%. First half other expenses include a foreign exchange loss of Rs. 26 crores. The increase in other expenses is in line with our business growth and mainly reflects higher selling expenses, international logistics, and manufacturing costs. The increase in expenses also reflects our continued strategic investments in products, brands, and people across the branded generic portfolio. We expect other expenses to remain broadly aligned with the current trend. EBITDA for the second quarter was Rs. 543 crores, up 47% from 369 crores in the corresponding quarter last year, at a margin of 30% against 27% last year. There was no foreign exchange loss in the quarter, so reported and adjusted EBITDA are the same. For the first half, reported EBITDA was 971 crores at a margin of 28%. Excluding the foreign exchange loss of Rs. 26 crores booked under other expenses, adjusted EBITDA was Rs. 997 crores, up 34% from Rs. 745 crores last year, at a margin of 29%. We remain confident of maintaining an EBITDA margin of around 27%, with a variation of plus or minus 100 basis points, while continuing to invest in the development of our markets. This implies a lower margin in the second half than in the first as competition in the US builds, institutional sales normalize, and we step up investment in R&D and our field force. During the second quarter, other income stood at Rs. 42 crores, and in first half, it was Rs. 108 crores. Other income includes gain from foreign exchange of Rs. 24 crores in second quarter and 69 crores in the first half of the current year. Taken together with a Rs. 26 crore loss under other expenses, a net foreign exchange effect for the first half was a gain of Rs. 43 crores. Profit after tax for the second quarter grew by 49% to 388 crores compared with Rs. 260 crores in the corresponding quarter last year, a margin of about 22% of revenue. For the first half, profit after tax grew by 40% to Rs. 722 crores compared with 516 crores in the corresponding period last year. The effective tax rate for the first half stood at 26.5% and is expected to be around this level for the full year. Capital expenditure during the first half stood at Rs. 210 crores. For the financial year 2027, we expect capital expenditure to be around Rs. 400 crores, including around Rs. 150 crores of maintenance capex and the balance for capacity expansion. Coming to the working capital and return ratios, our financial position has strengthened between March '26 and September 2026, where return on capital employed improved from 33% to 41% and return on net worth from 25% to 31%. This was supported by better working capital management, with trade receivable days
Arvind Agrawal (Ajanta Pharma Ltd): reducing from 125 to 100 days as there was better collection in the US business. Inventory days also improved from 63 to 52 days, as we continue to focus on enhancing working capital efficiency. We closed to September 2026 with net cash and investment of rupees 574 crores, after paying the interim dividend of about rupees 400 crores during the quarter. To sum up, there are three things to take away from today. First, a strong first half. Revenue from operations up 29% to rupees 3,420 crores and profit after tax up 40% to rupees 722 crores, with every business growing in the second quarter. Second, our financial year 2027 guidance is unchanged, revenue growth in the high teens, which factors in a moderation in the second half as new competition in the US takes effect and institutional sales normalize. Gross margins of about 78% and EBITDA margin of around 27%, each with a variation of plus or minus 100 basis points. R&D at around 5% of revenue and effective tax rate of about 26.5% and capital expenditure of around 400 crores. Third, our balance sheet keeps getting stronger with return on capital employed at 41% and return on net worth at 31%. Our core branded generic business in India, Asia and Africa remain the foundation for consistent growth in the years ahead. With this, we now open the floor for question and answer. Thank you.
Moderator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Niharika Agarwal with Nirmal Bang. Please go ahead.
Niharika Agarwal (Nirmal Bang): Thank you for the opportunity. My question was more towards the US Generics. We saw approximately a 49% growth in H1. So, I wanted to understand what is really driving this growth. Is it the new launches or market share gains in existing products or improving pricing?
Yogesh Agrawal (Ajanta Pharma Ltd): No. From the last last year second half onwards, we had a product which had a limited competition situation. And we continued that for second half of the last year and currently this first two quarters, first quarter and second quarter. So, because of that the sales in the US is are at elevated levels which we have seen and that is what has shown into the 49% growth for the quarter. And as we have shared in our opening remarks the new end new competition has come in for this product. So, we are expecting our market share for this product to be reduced. And because of that, the sales will get normalized for the US going forward in the next quarters.
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