Ajanta Pharma Limited (AJANTPHARM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Ajanta Pharma Q3 FY 2026 Earnings Conference Call. [Operator Instructions] 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, sir.

Good afternoon, everyone, and welcome to Ajanta's earnings call. With me today, I have Mr. Rajesh Agrawal, our Joint Managing Director; Mr. Arvind Agrawal, our CFO, Mr. Rajeev Agarwal, our VP, Finance and Investor Relations. I hope all of you have received the results by now. For the overall business performance, we have now completed the third quarter and first 9 months of the current financial year on a strong note. For the quarter, our revenue from the operations grew by 20% and our margins remained resilient despite higher investments in operating expenses. All our businesses are shaping broadly in line with our plans and we remain confident about sustaining this growth momentum going forward. This trend is also reflected in our returns. As of December 2025, our return on capital employed stands at 34% and return on net worth stands at 26%, reinforcing our position among the best performing companies in the industry. Let me take you through the different business verticals. I will start with the branded generic business in Asia and Africa, which contributed 40% of total revenue. We continue to invest heavily in people, products and market expansions to ensure long-term consistent growth. I'll give you the overview of Asia first. During the quarter, Asia branded generic business sales stood at INR 288 crores compared to INR 316 crores last year, reflecting a degrowth of 9%. For the 9-month period, sales stood at INR 902 crores compared to INR 888 crores last year, registering a growth of 2%. Asia performance was modestly below our internal plan, driven by softer-than-anticipated performance in the few markets. We remain confident that the business will return to its normal growth trajectory over the coming quarters. During the 9 months, we launched 13 new products, largely in chronic therapies, which strengthens the long-term quality and sustainability of the Asia business. Now we move to the Africa. During the quarter, Africa branded business sales stood at INR 230 crores compared to INR 173 crores last year, registering an impressive growth of 33%. For the 9-month period, sales stood at INR 679 crores compared to INR 617 crores last year, reflecting a growth of 10%. During the quarter, we launched 1 new product taking the total number of launches to 7 during the 9 months of the year. At the beginning of the year, our internal plan envisaged double-digit growth from Asia while Africa was expected to deliver modest mid-single-digit growth. Over the course of the year, the performance mix evolved differently. Africa delivered stronger-than-anticipated performance surpassing our initial plan for both the quarter and the 9-month period. Asia, on the other hand, remained modestly below our original plan due to softer traction in certain markets. Overall, our branded generic business continues to remain in line with our guidance, and we are confident of continued healthy performance over the coming quarters. Let us talk about other 2 verticals of international business now. U.S. generics. As guided earlier, the U.S. Generics business delivered an excellent performance. During the quarter, U.S. generic business sales stood at INR 399 crores compared to INR 263 crores last year, registering an impressive growth of 52%. For the 9-month period, sales stood at INR 1,052 crores compared to INR 723 crores last year, reflecting robust growth of 46%. The strong performance was driven by 8 new product launches over the last 12 months, supported by consistent execution and strong customer relationships. The U.S. generic business contributed 26% of the company's total revenue during the 9-month period. We continue to remain a preferred partner for the distributors and customers due to a reliable supply, quality standards and committed execution. Moving to Africa institution. During the quarter, Africa institution business sales stood at INR 41 crores compared to INR 33 crores last year, registering an excellent growth of 22%. For the 9-month period, sales stood at INR 111 crores compared to INR 118 crores, reflecting a moderate degrowth of 6%. The institution business contributed approximately 3% of the company's total revenue during the 9-month period. We expect modest growth for the full year with Q4 performance anticipated to be stronger than the first 9 months. Now I invite Mr. Rajesh Agrawal, our Joint MD. Thank you, and over to you.

Thank you. Good afternoon, everyone. I will now take you through the Asia business performance. We have completed current quarter and 9 months on a strong growth for the India business. In current year, India business contributed 31% to the company's total revenue, supported by the launch of 16 new products, including one first time in the country. During the current quarter, sales stood at INR 409 crores compared to INR 345 crores in the same quarter of the previous year. registering an excellent growth of 19%. In 9 months of the year, sales stood at 1,250 crores compared to INR 1,083 crores in the previous year, registering a healthy growth of 15%. Our India business also includes revenue from the trade generics segment which contributed INR 48 crores in Q3 against INR 43 crores, a growth of 10%. And in the first 9 months, INR 139 crores against INR 130 crores, a growth of 7%. I will now take you through Ajanta's performance as per IQVIA MAT December 2025. We continue to outperform the Indian pharmaceutical market by 28% as per IQVIA MAT December 2025, with Ajanta delivering an impressive growth of 11% compared to IPM's 9%. We continue to exceed volume growth by 47% to IPM and new launches by 59%. This positive trend is evident across most therapeutic segments in which we operate, where our growth has consistently outpaced the segment growth. We remain confident of sustaining this momentum in the coming quarters. In the covered market, we are fifth largest in IPM and among top 10 in all our therapeutic segments as per IQVIA MAT December 2025. Cardiologic contributed 36%, followed by ophthalmology, 30%; dermatology, 24%, with the remaining 10% coming from pain in India branded sales. You may observe that the growth in cardiology segment as per IQVIA is slower than IPM, but our internal growth numbers indicate growth in line with the IPM. This appears to be due to some anomaly in the IQVIA data, and we are in touch with them to resolve the same. The new therapy of gynecology is taking good shape and is expected to contribute meaningfully to the revenue in the coming years. I am pleased to share that during the quarter, we added 150 medical representatives across our existing therapy areas, taking the total additions for the current year to 300. With this, our overall MR strength now stands at 3,750 MRs. The newly onboarded teams are being integrated swiftly with a strong focus on accelerating productivity and driving effective field execution. With this, I now invite Arvind Agrawal, our CFO, to take you through the financial performance. Thank you, and over to you.

Thank you, and good afternoon to all. Before we begin, I would like to mention that during this call, we may make certain forward-looking statements. These statements are based on management's current expectations and are subject to risks and uncertainties that may cause actual results to differ materially. The company does not undertake any obligation to update these statements publicly. I will now take you through the consolidated financial performance on a year-on-year basis. Total revenue in the third quarter stood at INR 1,375 crores compared to INR 1,146 crores last year, registering a healthy growth of 20%. For the 9-month period, revenue stood at INR 4,031 crores compared to INR 3,478 crores last year, reflecting a growth of 16%. As you may have observed, our diversified business segments have consistently helped us maintain growth momentum over the years despite temporary softness in some markets, which is a normal part of business. Growth during the year so far has been mainly driven by the India branded business and the U.S. generic segment. Gross margin stood at 79% for the quarter and 78% for the 9-month period. For the full year FY '26, we expect gross margin to remain around 78% plus or minus 1%. Personnel costs for the quarter stood at INR 331 crores compared to INR 265 crores last year, reflecting an increase of 25%. For the 9-month period, personnel costs were INR 950 crores compared to INR 810 crores last year, reflecting an increase of 17%. The increase was mainly due to medical representative additions across brand and generic businesses over the last 12 months. During the quarter, the Government of India's new labor code became applicable. Based on our initial assessment, an additional provision of INR 7 crores has been made towards liabilities arising from the new code. Other expenses for the quarter stood at INR 376 crores compared to INR 302 crores last year, reflecting an increase of 24%. For the 9-month period, other expenses stood at INR 1,140 crores compared to INR 918 crores also reflecting an increase of 24%. These expenses represent our continued strategic investment in products, brand and people across our branded generic portfolio. We expect other expenses to broadly remain in line with trends seen during the current quarter. R&D spend, which is included within personnel and other expenses remained at around 5% of the total revenue and is expected to continue at similar levels. R&D expenditure for the quarter stood at INR 63 crores compared to INR 53 crores last year. For the 9-month period, R&D spend stood at INR 182 crores compared to INR 161 crores last year. EBITDA for the quarter stood at INR 382 crores compared to INR 321 crores last year, reflecting a growth of 19%. For the 9-month period, EBITDA stood at INR 1,061 crores compared to INR 962 crores last year, registering a growth of 10%. EBITDA margin stood at 28% for the quarter and 26% for the 9-month period. Excluding the impact of mark-to-market foreign exchange movement, EBITDA margins remained in line with our guidance of 27% plus or minus 1% for the 9-month period. Mark-to-market ForEx loss recorded under other expenses stood at INR 61 crores during the 9 months, while ForEx gain under other income stood at INR 53 crores. Excluding this impact, EBITDA margin for the 9-month period would have been around 28%. There were no mark-to-market losses during the quarter. We remain confident of maintaining EBITDA margin of 27% plus or minus 1% for the remaining period and for the full year. Profit after tax for the quarter stood at INR 274 crores compared to INR 233 crores last year, reflecting a growth of 18%. For the 9-month period, PAT stood at INR 789 crores compared to INR 695 crores last year, reflecting a growth of 14%. PAT margin remained stable at 20% for both the quarter and the 9-month period. The effective tax rate for the 9-month period stood at 23% and is expected to remain in a similar rate for the full year. Capital expenditure during the 9-month period stood at INR 235 crores and is expected to be in line with our full year guidance of around INR 300 crores. With this, we now open the floor for questions and answers.

[Operator Instructions] Our first question comes from the line of Tushar Manudhane from Motilal Oswal.

Sir, firstly, some clarification on the growth guidance which you gave for full year '26, if you could just repeat?

It is in line with what we said, mid-teens growth for the whole year.

Understood. And sir, secondly, on gross margins, which has seen significant improvement for the quarter and wherein you've seen geographies like U.S. growing at a much higher rate. So if you could just explain this improvement in gross margin and sustainability of gross margin?

I think what I just mentioned, I think you should consider 78% plus/minus 1%. Some variations keep on happening quarter-to-quarter. But overall, I think we are very confident that we should be able to maintain it at about 28% plus/minus 1%.

And for the U.S. business, we have launched 8 products in the last 12 months which are now -- we are seeing the full year benefit of that. Plus, we have seen the increase in the market share for some few products. And also, we have one seasonal product for the flu, where basically the season starts in the December, January. So that also aided growth for the current quarter. The combination of all these 3 aspects, it has cost resulted in to a very robust growth of the U.S. business.

Got it sir. So if I -- now that the launch benefit has been sort of reflected entirely and we end FY '26 on a very strong note as far as U.S. business is concerned, given the pace of launches, if you could -- may not be in terms of exact numbers per se, but how do you think about FY '27 for U.S. geography?

It should be good only, but I think it will be a bit early to give the guidance from that. I think let's do that in the next quarter when we have all our plans closer and then we'll have more concrete numbers in terms of our budgets, which are finalized. But overall, I think I the growth probably will not be in the similar line of what we have seen in current year. But I think we should be able to post double-digit growth for sure.

And just lastly on this, how much would have been the constant currency growth for U.S. business?

Come again?

Sir, how much of the constant currency growth for U.S. business for 3Q 9 months, FY '26?

I think I don't have that figure right now. Yes, I will share it later. We've seen some dollar movement. Our growth is, of course. far. far. The volume growth is far bigger than the currency rupee appreciation.

Our next question is from the line of Abdul Puranwala from ICICI Securities.

Sir, first on the India growth of close to 19%. Sir, you mentioned the cardiology portfolio has grown in line with the pharma market growth or the like-to-like basis growth. But what exactly has driven this outperformance, if you could highlight?

No, I think it's mostly a little bit of seasonal also for us in some sense. But at the same time, we have had some very good activities and very good customer connect. That has happened. Like I said, our gynecology has done much better than what we were expecting. Dermatology, as you would have seen, we have gained 2 ranks. So we outperformed the market by nearly 2x the growth rate. So these are the segments that have contributed better than what we were expecting.

Understood. And so would the 150 reps that you have added this quarter, and I believe in international geography as well. So where exactly are the MRs getting deployed and any new product you're launching either on the GLP side, in India and overseas with your recent partnership? And should we think of this addition in that way or that will be over and above what you have done recently?

Number of reps, what we have added in domestic are across these 4 therapeutic segments, and that is basically pan-Indian. So in that sense, there is no new division or new therapy launch. These are basically just to increase the coverage wherever our productivity was higher. We felt that we need to cover more effectively. So that is what it is. For GLP, we will be launching in India under our own trademark, and we hope to be in the first wave of the product launches that will happen in the month of March. So that will naturally be factored into the growth plans of next year, which will start from April to next March. So that is what it is. I don't know if you have -- do you have any other question on this?

Yes. So with regards to GLP, then your overseas partnership with Biocon, if you could shed some light as to how the arrangement is?

So the arrangement will be that they will be supplying to the finished product. They have the finished products. They have all the required data, which they have filed in all the regulated markets and we have tied up with them for 26 countries where 23 is exclusive tie-up with us. Three countries semi-exclusive, which means semi-exclusive is they can come back on their own or they can give to one. So at the most, they can give one more company other than Ajanta. So we are looking to start filing the dossiers from Q1 in all our markets. And from 12 months onwards, we should start getting the approvals in various countries. So we are starting -- we are looking, if all going well, from like I think '27, '28, the revenues for the GLP-1 should start coming in. So it's fairly straightforward. They will give us the product. We will take -- commercialize it in the 26 countries where we have a very strong ground presence through our field force and promo plans.

Yes, and it will be in our brand name.

So sir, fair to assume that this would be like a profit-sharing agreement or you would be paying some upfront fee, something like that, yes?

There is some confidentiality agreements which we have in place. So I'm not able to give the exact details. But it's a combination of all what we have just mentioned. It is going to be transfer price and there'll be some arrangement on some kind of mechanism on some profit share, things like that yes.

Understood. And sir, last one, if I may, just a bookkeeping question. On the depreciation expense, so that has been ranging a little higher as compared to what we have done last year. So what exactly is the reason for that?

Basically, we commenced one more manufacturing facility at Pithampur for the liquid line, which we announced last quarter. So that particular depreciation has already come in, in this particular quarter. So because of that, the depreciation is increasing.

Our next question is from the line of Aman Kumar Singh, an individual investor.

Yes, good evening. I have 2 questions to us. One is about the dividend payouts in terms of percentages of PAT, we have maintained both payout in terms of dividend and buyback in last 4, 5 years in a range between 60% to 80%. This year, we have given a payout of about 44%. Do we expect the similar kind of a payout from the trend what we have seen in the past?

I think it is still not decided because there is one more quarter, which is going to be there. So we need to take a call in the meeting. But as we mentioned, you must have seen the article on that, we are increasing our trust on the acquisition. So if that happens, and in that case, maybe Board will advise accordingly. So I think we need to wait till quarter 4 for the decision of the Board.

Yes. And another question is that we are nearing becoming a $500 million turnover company what is our road map or a plan to go from $500 million to $1 billion company? Please elaborate on this.

The plans are -- it's an everyday progress which is being made. In the existing markets, we are continuously, as you have seen in the last 2, 3 years, increasing the field. We are increasing the therapeutic segments. In India, we have launched 2 new therapeutic segments. Internationally, we have got into the psychiatry portfolio. The idea is to increase the new therapeutic segments. Internationally, we are looking to add at least one new therapeutic segment next year. So the idea is to increase our field presence in various markets, add new therapeutic segments. And we are also looking to expand into the new territories, possibly into the Latin America, which is probably -- I think we're going to take a serious look at it. So there will be some new geographies also, which will get added in the coming time. So with all this, I think we are expecting and hoping the growth momentum to continue in the coming years. It was there in the press also that we are actively looking for the acquisition also. And we -- as it was there in the news that we have INR 1,000 crores plus for that. So all those possibilities also do exist. Let us see if and when they materialize.

Yes. And one last question I have is, like there was also a news article regarding -- although it was denied by the company that there can be an acquisition of non-related business from Ajanta Pharma. So I hope that the denial is firm, and we are still only focusing ourselves on the pharmaceutical business?

Absolutely. We are very clear about this. You must have seen that later on, the clarification also came that it is by one of the promoters family office, not by Ajanta Pharma. Ajanta Pharma remains only in Pharma business, and we will continue to do this business only.

Our next question comes from the line of [ Kashish Takur ] from Elara Capital.

Sir, just 2 questions related to India business, we have shown quite good numbers. just wanted to understand the breakup of the India growth, like in the terms of volume growth, price and new products?

Yes, sure. I will share that with you in a second. So volume growth, IPM is at 2.1%. This is the composition of 8.9% IPM growth and [indiscernible] has grown at 3.1% as per IQVIA. So we are 1.5x faster than the IPM in the volume. And for the new products, IPM has shown a contribution of 2.5% in the growth and Ajanta has shown 3.9%, 4.9% -- 3.9%. So again, nearly 1.5x the IPM growth rate in the contribution towards our 11.4% growth.

Understood. And sir, what has to be the PCPM plus, although we've been adding around 150 during this quarter as well. So I wanted to know that.

PCPM for the quarter, I'm not able to hear clearly, sorry.

Yes, PCPM for the quarter.

For the quarter, it will not be there. But I think for the PCPM, if you want, for 9 months period, we are at about INR 3.6 crores, 3.6 lakhs per month.

Our next question is a follow-up from Tushar Manudhane from Motilal Oswal.

Sir, just on this GLP Semaglutide for Asia, Africa, while at least in India, it seems it's going to be a competitive market even in the first wave of market permission. If you could just provide certain insights on the Asia, Africa focused geography, how do you see the competition shaping up post-patent expiry in these markets where we have sort of tied up exclusively with Biocon?

We believe that India would be more -- there will be more aggressive competition in India, which could be in the range of what 10, 12, 15 to 20 plus. But in our markets, we believe it will not be as aggressive. We are expecting it should remain around 4% to 6%, depending on which companies get approval, what kind of -- what time point, but it will not be -- the competition intensity will not -- in the emerging markets should not be as high as what we are going to see in India.

And subsequently, given this low competition, but from a pricing point of view, given your experience with the earlier products in, let's say, India, Asia, Africa, how do you see the pricing playing out given where per capita income, given the demand? Any color you can throw or it's too early to ask, whichever?

I can give you a general sense. As you know, the DNA of Ajanta operate at an acceptable margin. We are not interested to sell the product without the margin threshold, which is good enough for us. So overall, the margin should be good only, decent only. And as I said, the pricing is also a factor of how much competition you will be having in the market. And since we are not expecting as aggressive competition as we are going to see in India, we believe the pricing should remain pretty decent, and we are expecting some good margins. Overall, I think that's the broader color which I can give you.

And would it require additional marketing in MRs or marketing spend or this product will get funneled to existing?

Exactly. It will go through the existing in all our markets, we already have CBD presence, cardio diabetes presence is there in all our markets wherever we are going -- we've tied up this. And that's precisely the reason for us to go because it really complements our presence in this segment. And the second is the weight loss. So both these segments, so our existing team will be able to handle this product. In fact, we'll be able to capitalize on this product better because we already have the relationships with the doctors in the field in this specialty.

Our next question comes from the line of [indiscernible] from White Oak..