IOL Chemicals and Pharmaceuticals: Navigating Growth Amidst Shifting Tides in Q2 & H1 FY26

IOL Chemicals and Pharmaceuticals Limited, a prominent player in the Indian API and specialty chemicals sector, has reported a resilient performance for the second quarter and first half of the financial year 2026. Despite facing a challenging operating environment marked by cost pressures and supply chain disruptions, the company demonstrated consistent growth, driven by its diversified portfolio and expanding traction in non-Ibuprofen APIs. The management's strategic focus on operational efficiency, regulatory compliance, and market expansion has been central to its performance.

For Q2 FY26, IOL Chemicals reported revenue from operations of INR 567.5 crore, reflecting a 7.9% year-on-year growth. The company's EBITDA increased by 33.3% to INR 64 crore, with margins expanding to 11.1%, supported by improved operating leverage and cost efficiency. Profit After Tax (PAT) saw a significant jump of 56.7% year-on-year, reaching INR 30 crore, with the PAT margin improving to 5.2% from 3.6% in the prior year. For the first half of FY26, the company's revenue from operations stood at INR 1,119.2 crore, an 8.9% increase year-on-year, while PAT grew 31.0% to INR 64 crore, with a PAT margin of 5.6%.

Segmental Performance and Strategic Shifts

The company's performance was bolstered by both its Pharmaceuticals and Chemicals segments. The Pharmaceuticals segment, which contributed approximately 59.48% to the total revenue in H1 FY26, continues to gain traction, particularly from its non-Ibuprofen APIs. Within the pharma segment, Ibuprofen accounted for 62% of the revenue, while other APIs contributed 38%. The company is actively working towards a 50-50 revenue mix between Ibuprofen and other pharma products in the coming years, highlighting its commitment to diversification. Key products driving this shift include Paracetamol, Metformin, Clopidogrel, Fenofibrate, and Pantoprazole.

The fully automated Paracetamol facility is ramping up well, with stable export volumes and increasing traction across regulated markets. The company expects this facility to reach approximately 65% capacity utilization by March end of the current financial year. The Chemicals segment, contributing about 40.52% to the total revenue, also saw steady volume recovery, although pricing remained subdued. The company's focus on process discipline and cost optimization is crucial for maintaining profitability in this segment.

Financial Summary (H1 FY26 vs H1 FY25)

Operational Excellence and Global Footprint Expansion

IOL Chemicals continues to strengthen its operational capabilities and expand its global footprint. The company recently received a Certificate of Suitability (CEP) from EDQM for Pantoprazole Sodium Sesquihydrate Process-III in October 2025. This certification enables exports to Europe and other CEP-compliant markets, reinforcing its position in the regulated markets. Pantoprazole sodium, a proton pump inhibitor, is a critical molecule used in treating gastroesophageal reflux disease.

Further solidifying its international presence, IOL Chemicals incorporated IOL Pharmaxis UK Limited, a wholly-owned subsidiary, in October 2025. This subsidiary aims to strengthen international operations in its core Pharmaceuticals and Chemicals business, expanding its global reach and improving customer proximity, especially in the European zone. The company's robust regulatory standing is also evident from its recent EU GMP inspection, which concluded without any major observations, affirming its high-quality manufacturing standards.

Segment Revenue (H1 FY26 vs H1 FY25)

IOL Chemicals is also making significant investments in capacity expansion and infrastructure. The company commenced a new Unit 11 for Paracetamol manufacturing with an installed capacity of 10,800 MTPA and enhanced the capacity of Clopidogrel Bisulphate from 180 MTPA to 240 MTPA. These expansions are crucial for meeting growing demand and supporting stable export volumes. The company's strategic capex plan for the current year is INR 150-200 crore, allocated for growth capex, infrastructure, land, new software, and automation, with a similar outlay planned for the next year.

Outlook and Investor Confidence

Despite the temporary sequential dip in profitability due to elevated fuel costs, IOL Chemicals remains optimistic about its future performance. The management expects profitability to normalize in the coming quarters and aims to achieve an EBITDA margin of 13% to 14% for H2 FY26, with a projected 1% to 2% increase every year. The company is targeting a revenue growth of 10% to 15% annually, aiming for INR 2,600 to INR 2,700 crore revenue and an EBITDA margin of 13% to 15% for FY27.

The company's strong balance sheet, with minimum leverage and healthy liquidity (Debt to Equity Ratio of 0.07), provides the flexibility to pursue growth initiatives without compromising financial stability. The strategic land acquisition of 101 acres near its existing facility further underscores its long-term growth vision. IOL Chemicals' commitment to innovation, regulatory excellence, and market diversification positions it well for sustained growth and long-term value creation for all stakeholders.