Akums Drugs & Pharmaceuticals Limited: Navigating Headwinds with Strategic Expansion in Q2 FY26

Akums Drugs & Pharmaceuticals Limited, a prominent player in the Indian pharmaceutical contract development and manufacturing organization (CDMO) space, recently announced its financial results for the second quarter of fiscal year 2026 (Q2 FY26). The company reported a consolidated revenue of INR 1,018 crores, marking a modest decline of 1.5% year-on-year. Despite a healthy 7% volume growth in its core CDMO business, the quarter was characterized by margin pressures, primarily due to the persistent downward trend in Active Pharmaceutical Ingredient (API) prices and the slower-than-expected ramp-up of new manufacturing facilities. Operating EBITDA for the quarter stood at INR 94 crores, a 22% decrease year-on-year, reflecting the impact of operating deleverage and increased overheads.

Segment-wise, the CDMO business remained the largest contributor, generating INR 804 crores and accounting for 79% of the total revenue. This segment demonstrated resilience with a 7% volume growth, outpacing the flat growth observed in the broader Indian Pharmaceutical Market (IPM). However, the decline in API prices impacted the overall profitability of this cost-plus operating model. The domestic branded formulations business showed positive momentum, growing 5.3% year-on-year to INR 122 crores, driven by a focus on gynecology, cardio, diabetes, and pediatrics. In contrast, the international branded formulations segment experienced a 14.3% year-on-year decline to INR 22 crores, attributed to seasonal factors in key markets like the Philippines, Uganda, and Nigeria. The API business, while strategically important, continued to face challenges with declining prices, contributing INR 44 crores to revenue. The Trade Generics segment, undergoing a strategic scale-down, reported INR 24 crores in revenue and continued to incur losses.

Strategic Initiatives and Future Outlook

Akums is actively pursuing several strategic initiatives to drive long-term growth and mitigate current headwinds. A significant development is the joint venture with the Zambian government to establish a pharmaceutical manufacturing plant. Akums will hold a 51% stake in this USD 45 million project, which is expected to commence production in CY 2028. This partnership not only provides a foothold in the growing Zambian pharmaceutical market but also includes a commitment from the Zambian government to procure USD 50 million worth of medicines from Akums' Indian facilities over FY27 and FY28. This initiative aims to position Zambia as a pharma export hub for neighboring African countries, catering to diverse therapeutic areas.

In Europe, Akums is making steady progress with its CDMO contract. The company successfully made its first commercial supply of Dapagliflozin tablets to Switzerland in Q2 FY26, with Rivaroxaban tablet supply anticipated in Q3. Plant 2 underwent a European GMP audit in October 2025, with approval expected in Q4 FY26. With Plants 1 and 3 already EU-GMP accredited and three more plants in the pipeline for approval, Akums is building a robust infrastructure for European exports. The company has also filed two CEPs for key APIs and has a pipeline of over 10 products for European filings by 2028, projecting an annual revenue contribution of over INR 300 crores from initial European supplies by FY27.

Operational Challenges and Management Response

The API business continues to be a focal point for management. Despite an 8-10% year-on-year drop in prices for the top 200 APIs, Akums is committed to turning around this segment by focusing on a higher gross margin portfolio and implementing aggressive cost optimization initiatives. The company has already achieved annualized savings of approximately INR 7 crores in employee expenses within the API division and expects full-year losses to be lower than the previous year, with a target to become month-on-month positive in six to seven months. The Trade Generics segment is being systematically scaled down, with management aiming to either provision for existing losses or retain only profit-generating operations by the end of the fiscal year.

Management acknowledged that Q2 performance was below expectations, primarily due to the slower-than-expected ramp-up of new facilities, which incurred fixed overheads without commensurate revenue generation. This, coupled with longer approval timelines and client audits for new injectable and oral solids facilities, impacted overall margins. Despite these challenges, the company maintains a robust cash position with over INR 1,600 crore in net cash, providing significant leverage for both organic and inorganic growth opportunities. Akums' strategy emphasizes disciplined capital allocation, with capex for the first six months at INR 107 crores, and a similar amount projected for the latter half of the year, focusing on R&D and European expansion. The company remains confident in its long-term growth prospects, driven by strategic partnerships, innovation, and operational efficiencies, aiming to deliver sustained shareholder value.