Can Granules India leverage its strong product pipeline to offset recent profit declines?

Synopsis

Granules India's stock shows a slight recovery despite reporting lower profits in the June quarter. Investors are positive about the company's product pipeline and business stabilisation. The company anticipates better growth in FY27. Approvals for six products in Europe are awaited. Granules focuses on CNS, ADHD, and oncology products. The Gagillapur facility remediation is progressing well with US FDA.

ET Intelligence Group: The stock of Granules India has shown a marginal recovery of 5% since August 11 despite lower absolute profits and margins reported by the pharma company in the June quarter.

This has also reduced its one-month loss on the bourses to around 7%.

Investor optimism hinges on the company's strong product pipeline and expected stabilisation in the recently acquired businesses. The company has guided for better growth rates in FY27 compared with the current fiscal year.

In Europe, Granules has six products awaiting approval in coming quarters. The company continues to spend on large volume products in Central Nervous System (CNS) Attention Deficit Hyperactivity Disorder (ADHD) therapy and oncology.

Granules acquired Senn Chemicals AG, a Switzerland-based peptides maker, at an enterprise value of ₹450 crore in early 2025. Granules targets an additional investment of ₹100 crore in this facility and ₹20-30 crore towards R&D lab in FY26. For FY27, capex will be for manufacturing expansion.

Agencies

Granules' one facility in Hyderabad will become operational by October and another commercial scale facility is targeted to complete by the end of FY27. The R&D facilities in India will have peptide synthesis as well as characterisation. It means the characterisation will happen in India even if drug development happens in Switzerland. The company believes it to become a cost-efficient source outside of China.

The Gagillapur facility, one of the largest single-unit manufacturing sites for PFIs and finished dosages, is in the final stages of remediation with the US FDA with a fourth status report being submitted in July and no concerns being received so far. It has cleared inspections by German and Danish authorities, with Denmark granting an EU GMP certificate in July 2025.

On a year-on-year basis, Granules' revenue from operations including Senn Chemicals (₹29.1 crore) grew 3% to ₹1,210.1 crore, driven by 7% and 12% rise in North America and Europe business. However, net profit dropped 16% to ₹112.6 crore in the June 2025 quarter. Ebitda margin dropped to 20.4% in June 2025 quarter from 22% a year ago, on account of higher manpower costs with consolidation of Senn Chemicals, which is expected to stabilise.

Motilal Oswal Financial Services has reduced earnings estimates by 5% and 2% for FY26 and FY27 on account of increased timeline for approvals from Gagillapur facility, lower sales in some of the markets due to supply backlog. "While it is addressing the compliance aspect at Gagillapur site in a comprehensive manner, it is implementing efforts for adding differentiated products to its portfolio to improve growth prospects," it added.

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