Granules India Ltd (GRANULES) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to the Granules India Limited Q2 and H1 FY27 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 this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference has been recorded. I now hand the conference over to Ms. Prachi Ambre from Ernst & Young Investor Relations. Thank you and over to you, ma'am.
Prachi Ambre (Ernst & Young Investor Relations): Thank you, Swapnali. On behalf of Granules India Limited, I extend a very warm welcome to all the participants on the Q2 and H1 FY27 financial results discussion call. Today on the call, we have Dr. Krishna Prasad Chigurupati, Chairman and Managing Director, Ms. Priyanka Chigurupati, Executive Director, Mr. Mukesh Surana, Chief Financial Officer,
Prachi Ambre (Ernst & Young Investor Relations): Dr. P. V. Srinivas, Chief Technology Officer; and Mr. Sanjay Kumar, CEO of SenTides India Private Limited. Before we begin the call, I would like to give a short disclaimer. This call contains some of the forward-looking statements which are completely based on our expectations, beliefs and opinions as of today. The statements are not a guarantee of our future performance and involve unforeseen risks and uncertainties. With this, I would like to hand over the call to Krishna Prasad sir for his opening remarks. Over to you, sir. Thank you.
Krishna Prasad Chigurupati (Granules India Ltd): Thank you, Prachi. And a very good evening, ladies and gentlemen. Thank you for joining us today and for your continued interest in Granules. We have uploaded our detailed quarterly presentation, and I trust you have had a chance to go through it. Let me first provide an update on our Gagillapur facility. The US FDA conducted a cGMP inspection of the facility from October 19 to October 30th. This was the first FDA inspection since the warning letter issued in February '25 following the 19- 2024 inspection. The inspection concluded with a Form 483 containing 11 observations. Based on our assessment, none of the observations relate to data integrity, cross-contamination or facility upkeep. They concern investigations, change control, process and equipment qualification, visual inspection controls and documentation practices. There is no impact on manufacturing or distribution of products from this site. We will submit a comprehensive response within the stipulated 15 business days days detailing our corrective and preventive actions. We believe these observations are addressable and remain focused on demonstrating the effectiveness and sustainability of our quality systems. Coming to our performance, Q2 was another strong quarter for Granules. Revenue grew 20% year-on-year to 15,600 million, crossing 50-- 15,000 million hailed quarterly revenue for the first time in our history. EBITDA grew 21%, while PAT increased 39% to 1,000 818 million. This also marks our eighth consecutive quarter of sequential revenue growth. These results were delivered despite a challenging operating environment. Geopolitical developments continue to put pressure on input and logistics costs across the industry. We expect some of these pressures to persist, with customer price adjustments following with a lag. Against this backdrop, the consistency of our performance gives us confidence in the underlying strength and momentum of the business. In our September investor presentation, I spoke about our return to growth as the beginning and beginning to a new journey. Our growth strategy has multiple pillars: controlled substances under our Make in America platform, complex generics and early market opportunities, geographical expansion, oncology and peptide CDMO. The progress across our business is beginning to validate this direction. North America, our largest market, continued to grow led by controlled substances. Europe sustained its growth momentum, while our efforts to develop the rest of the world markets are beginning to contribute. Our peptide CDMO business through Sen also grew year-on-year. This platform remains in in its build-out phase, with the near-term focus on strengthening execution, customer delivery and profitability. One of the most significant changes within Granules is the evolution
Krishna Prasad Chigurupati (Granules India Ltd): our R&D and product development strategy. We are pursuing differentiated opportunities, addressing greater technical complexity and building the potential for early market entry. Our first-to-file strategy is a visible outcome of this transformation. Over the last three quarters, we have announced filings for three potential sole first-to-file ANDAs, generic Dyanavel XR or amphetamine-based extended-release ODT, sodium oxybate and ruxolitinib. Several more such products are under development, with with filings targeted over the next six to seven quarters. These opportunities have a different commercial profile from conventional generics. Successful early entry, particularly into products with significant technical or regulatory barriers, can create substantial value. The timing and extent of this contribution will depend on regulatory and litigation outcomes, and the upside may be uneven across quarters. Alongside these opportunities, we have 26 ANDAs awaiting approval, providing a strong pipeline for the next wave of launches. On sustainability, we continue to make steady progress through our Sedex assessments and CRISIL scores. Four of our facilities have also achieved zero waste to landfill certification. We remain focused on making these improvements an integral part of how we operate. Granules today is fundamentally different from the company we were a few years ago. We have a broad portfolio, deeper development capabilities, and multiple avenues for growth. Our focus remains on disciplined execution, strengthening quality, delivering reliable reliability to customers, and translating our investments into sustained growth and earnings. With this, I hand over to Sanjay to provide a more detailed update on the progress of the peptide vertical. Over to you, Sanjay.
Sanjay Kumar (SenTides India Private Limited): Thank you, sir. Coming to SAN Peptides, we continue to make progress across regulatory compliance, commercial development, and the expansion of our capabilities in Switzerland and India. During the quarter, SAN Chemicals site in Zurich successfully completed its Swissmedic GMP inspection with no critical findings and acceptable GMP compliance status. This reflects a meaningful progress in strengthening our quality system and regulatory capabilities compared with previous inspection two years ago. On the commercial front, we are seeing strong momentum. A theranostic-related pharmaceutical project has been revived after nearly two years driven by progress in its clinical developments. We have also renewed engagement on supply partnership with two major peptide CDMO players and initiated discussions for a second-year manufacturing campaign with another CDMO partner following successful delivery last year. Importantly, our increased business development efforts, industry outreach, and re-engagement with long-standing customer relationships have resulted in a strong inflow of RFPs and RFQs during the recent months. Our focus now is on converting this expanding opportunity funnel, leveraging SAN's expertise and our extended development capabilities. In parallel, we are advancing our CRDMO platform. Our oligonucleotide scientific leadership is now on board with additional team members expected to join over the next quarter. The R&D teams in Zurich and Hyderabad are already collaborating closely as we prepare to expand our footprint across both peptides and oligonucleotides. On the manufacturing side, our India project team is in place and progressing the planning and design of our proposed integrated peptide manufacturing facility at Vizag. At Zurich, our immediate priority remains operational execution and delivery readiness as we prepare for a more active fourth quarter of this financial year. We are aligning our manufacturing plans and resources with scheduled customer offtakes while
Sanjay Kumar (SenTides India Private Limited): anticipating customary December holidays and the planned maintenance break during December. Overall, our priorities are focused towards strengthening customer engagement, converting our growing pipeline into the business and building an integrated CRDMO platform capable of supporting the next phase of growth for CZ. With this, I hand it over to Mukesh, our CFO, for taking us through financials.
Mukesh Surana (Granules India Ltd): Thank you, CMD, and Sanjay. Good evening, everyone. I will now walk you through the financial performance for Q2 FY '27. Revenue for the quarter was INR15,600 million, up 20% year-on-year and 6% quarter-on-quarter. Growth was broad-based across our businesses and key markets supported by steady demand for our product portfolio and higher growth of complex generics. Gross margins: Gross margin was INR10,039 million, up 18% year-on-year and 4% quarter-on-quarter as the business continued to scale. Gross margin stood at 64.4%, down 134 basis points year-on-year and 126 basis points quarter-on-quarter. The moderation primarily reflected higher input costs arising from the ongoing conflict in West Asia, partly offset by lower-cost safety inventory carried into the quarter in USA. We continue to monitor input costs and freight costs closely and are engaging with the customers to pass on increases wherever possible also with a time lag. EBITDA and profitability: EBITDA was INR3,376 million, up 21% year-on-year and stable quarter-on-quarter. EBITDA margin stood at 21.6%, up 19 basis points year-on-year and down 131 basis points quarter-on-quarter. The quarter-on-quarter movement in margin was driven by higher input costs and logistics costs due to the ongoing conflict in West Asia. R&D: R&D expenses were INR885 million or 5.7% of sales, up 26% year-on-year and 1% quarter-on-quarter. R&D is the engine of our transformation from a volume-led to a value-led innovation-driven company. We have intentionally focused our efforts on high-barrier areas such as P2, PTSP, oncology, MUPS and complex formulations where limited competition allow us to build a differentiated and lasting position. PBT: PBT was INR2,434 million, up 38% year-on-year and 1% quarter-on-quarter. PBT margin improved to 15.6% from 13.6% in Q2 FY '26, an improvement of around 200 basis points. Net debt: We closed the quarter with a net cash position of INR8,280 million compared with net debt of INR1,112 million in Q1 FY '27. Receipt of balance proceeds of warrants moved up moved us into cash position, strengthening our balance sheet and supporting growth, capacity expansion and R&D. Working capital: Net working capital to sales was 30% compared with 29% in Q1 FY '27 and 29% in Q2 FY '26 and remained stable in this range. Cash conversion cycle was 231 days compared with 229 days in Q1 FY '27. This movement was the result of a deliberate inventory build-up mainly in the US to ensure supply continuity in line with the demand. Cash flow from operations: Cash flow from operation was INR650 million compared with INR3,874 million in Q1 FY '27 and INR1,937 million in Q2 FY '26. This was mainly due to a planned increase in working capital to support the business growth. CapEx: CapEx was INR1,304 million compared with INR890 million in Q1 FY '27 and INR2,112 million in Q2 FY '26. We continue to strengthen our manufacturing and packaging capabilities. ROCE: ROCE was 17.6%, up 138 basis points year-on-year and broadly stable quarter-on-quarter compared with 18%. This improvement was achieved even as we continue to invest in working capital and CapEx to support our next phase of growth. With this, I open the floor for questions. Thank you.
Moderator: Thank you, sir. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and then two.
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