Revenue from operations grew by 25% year-over-year, with profit after tax increasing by 31%.
India branded business delivered strong 24% growth, outperforming the IPM with volume growth 40% higher than the market.
Africa branded business posted a robust 30% sales increase, supported by new product launches and expanding field force.
Gross margins improved to 80% due to healthy margins across all geographies, with return on capital employed at 37%.
Board approved an interim dividend of INR32 per share, reflecting strong financial position and shareholder returns.
Negative Points
Asia branded business sales declined by 15% due to geopolitical disruptions and supply chain issues affecting dispatches.
US business growth of 57% is expected to normalize to mid single-digit for the full year due to anticipated price erosion and competition.
Employee costs rose 26% year-over-year due to annual increments and headcount additions, pressuring expenses.
Other expenses increased by 32% due to continued investments in products, brands, and people across the portfolio.
Foreign exchange loss of INR31 crore was recorded during the quarter, adding volatility to reported earnings.
Q & A Highlights
Q: The US business saw a 57% growth in Q1, which is a significant positive divergence from the mid-to-high single-digit guidance provided at the start of the year. How should we model the US business for the full year FY27?A: (Yogesh Agrawal, Managing Director) The Q1 performance was quite healthy and elevated. However, our guidance for the full year remains mid single-digit, slightly above that. We have factored in potential competition, price erosion, and some decline in the run rate for the rest of the year.
Q: The India business grew by a very strong 24%, but there seems to be a disconnect with the IQVIA data which shows a 15% growth for Ajanta. Can you explain this difference?A: (Rajesh Agrawal, Joint Managing Director) The IQVIA data for the 3-month period shows us at about 18%, not 15%. The difference between our reported 24% growth and the IQVIA number is due to the fact that our reported number includes the ARCADE generic segment and other factors. The performance is absolutely in line with our internal metrics.
Q: The Asia business declined by 15% due to geopolitical disruptions. You mentioned sales got pushed to Q2. Can you quantify the amount of business that was pushed out and give us visibility on the recovery?A: (Yogesh Agrawal, Managing Director) We cannot quantify the exact amount, but we are reasonably confident that the supplies have been made and the sales will be captured in Q2. The issue is purely a supply chain and logistics problem, not a demand issue. We expect Q2, Q3, and Q4 to perform much better, allowing us to catch up on the growth for the full year.
Q: The Africa branded business grew by 30% in Q1. You have guided for high double-digit growth for the full year. Will we see a high base effect in H2, or can the current run rate be maintained?A: (Yogesh Agrawal, Managing Director) The 30% growth in Q1 is a little higher than the trend. Over time, the growth rate will likely be a bit lower than what we are seeing now, but a high double-digit growth for the full year is very much achievable.
Q: Your gross margins improved to 80% in Q1, but your guidance for the full year is 78% plus or minus 100 bps. What cost headwinds are you expecting that will bring margins down in the coming quarters?A: (Arvind Agrawal, CFO) The primary factor is the expected price erosion in the US business, which we anticipate will taper down the gross margins. The product mix will be the main driver for the potential decline in margins.
Q: What are the key engines of growth for the company from a medium-term perspective, given that the last 3-year CAGR has been about 14%?A: (Rajesh Agrawal, Joint Managing Director) Our growth is driven by three main engines: 1) A strong pipeline of new product filings across India, emerging markets, and the US, which contributes 2-3% to growth. 2) Increasing market share in existing products and launching new brands. 3) Entering new markets like Asia, the Middle East, and Latin America, which are in the drawing board stage and will play out in 3-5 years.
Q: Can you provide a breakdown of the 57% YoY growth in the US business between volume growth and growth from new product launches?A: (Yogesh Agrawal, Managing Director) We do not provide that level of detail. Most of the business currently comes from existing products. The two new products launched in Q1 have yet to make a meaningful contribution to overall sales.
Q: Regarding the US administration’s recent announcement on generic pricing and tariffs, what are your thoughts and how are you preparing for potential impacts?A: (Yogesh Agrawal, Managing Director) We are carefully evaluating all developments. Right now, it is a proposal with a study period until April 2027. There is a lot of uncertainty, but we are keeping a very close eye on the ground to understand how it will impact us and what measures we need to take. It is still too far away to comment definitively.
Q: In the India business, our PCPM (per capita per month) is around 4.5 lakh, which is lower than some peers like Torrent or Dr. Reddy’s. How should we read this?A: (Rajesh Agrawal, Joint Managing Director) The comparison is not direct because the therapeutic segments we operate in are different. For example, Dr. Reddy’s may not be in ophthalmology, which is a significant part of our business. Our productivity in mature segments like ophthalmology is at par or better than the top companies. However, our productivity in newer segments like gynecology, which we entered only 18 months ago, is lower, bringing down the blended average.
