Granules FY26: Margin Expansion, Complex Generics Shift, and a New Peptide CDMO Engine

/n# Granules FY26: Margin Expansion, Complex Generics Shift, and a New Peptide CDMO Engine

Granules India closed FY26 with a step-up in scale and profitability. Revenue reached INR 53,656 million, up 20% year on year, taking the company past the INR 50,000 million milestone. Profitability improved alongside growth. Gross margin expanded to 65.0% from 61.5% in FY25, and EBITDA rose 25% to INR 11,851 million with margins at 22.1%. PAT increased 19% to INR 5,950 million.

Management framed FY26 as a year of stabilization and reset after a period of regulatory and operating correction. The financial results reflect that positioning: stronger margins, improving leverage, and continued investments in R and D and capacity, while remediation at Gagillapur continues and awaits USFDA reinspection.

A more diversified revenue base, with Europe stepping up

Granules remains primarily a formulations-led business. Finished Dosages contributed INR 39,893 million in FY26, or 74% of sales. APIs were INR 6,822 million (13%), PFI was INR 5,348 million (10%), and CDMO contributed INR 1,593 million (3%), establishing a fourth business vertical for the year.

By geography, North America is still the largest market at INR 39,839 million (74%). The notable change in FY26 came from Europe, where revenue grew 81% year on year to INR 8,022 million, increasing its share to 15%. ROW revenue was broadly flat at INR 5,796 million (11%). Management also stated that Europe growth would have been 49% even excluding Senn, indicating momentum beyond the acquisition.

The quarterly trend also showed consistency. The company highlighted six consecutive quarters of sequential growth, and Q4 FY26 delivered revenue of INR 14,706 million, up 23% year on year and 6% sequentially.

Margin expansion driven by product mix and peptides

Granules’ margin expansion has been multi-year. The presentation shows gross margin rising from 50.0% in FY22 to 65.0% in FY26, with EBITDA margin improving from 19.2% to 22.1% over the same period.

Management attributed FY26 margin gains to a structurally improved product mix, led by complex generics, along with the stability provided by integrated generics and backward integration in key molecules. Within Finished Dosages, the shift is measurable: Complex Gx increased to 43% of the FD mix in FY26 versus 31% in FY25, while Integrated Gx reduced to 52% from 63%.

The new peptide CDMO platform also began to contribute to profitability. Q4 FY26 CDMO revenue was INR 699 million, and management stated that the peptide CDMO business achieved positive EBITDA in Q4. For the year, management highlighted that FY26 EBITDA includes a loss of INR 445 million in Ascelis, underscoring that FY26 was still an investment and transition year for the platform despite breakeven in the last quarter.

R and D spend remained elevated at INR 2,853 million, or 5.3% of sales in FY26. Management linked this to pipeline development in CNS and ADHD, oncology, MUPS, and other high-barrier formulations.

Execution priorities: compliance readiness, capacity scale-up, and capex discipline

A central operational issue for Granules remains the Gagillapur facility, which is under reinspection status. The investor presentation states that post-warning letter remediation is progressing on schedule, with a USFDA meeting completed in January and responses submitted in February. On the call, management reiterated that they are ready for an anytime audit but cannot estimate when the FDA will visit.

At the same time, management highlighted improvements across the broader footprint. The quality slide indicates that 6 of 8 facilities hold a clean EIR, with GLS and GCH Packaging securing EIR within FY26. The GPI facility in Virginia underwent an FDA inspection in March to April 2026 resulting in four procedural Form 483 observations and no data integrity findings, with responses submitted.

On capacity, Granules pointed to the Genome Valley GLS facility as a key growth driver. The presentation states the 10 billion dosage GLS facility is USFDA approved and Rx product shipments have started, supporting a multi-site manufacturing model.

Capital allocation remained active. FY26 capex was INR 5,547 million, and cumulative capex from FY22 to FY26 was stated at INR 23,107 million. Net debt reduced to INR 4,021 million, and net debt to EBITDA improved to 0.34x, supported by an equity infusion of INR 6,656 million in FY26 as well as operating performance.

Working capital remains an area to monitor. While FY26 net working capital to sales was reported at 33%, Q4 showed a rise to 33% from 27% in Q3, and cash flow from operations in Q4 was INR 1,003 million, reflecting a growth-linked working capital build.

What management guided for FY27

Management avoided committing to margin guidance for FY27 due to uncertainty around raw material, packaging, and freight costs and the timing of pass-through. However, several forward indicators were provided.

Capex for FY27 was guided at about INR 600 crores, described as broad-based including a new API facility, IT investments, and a US distribution and warehouse project. Management added that INR 200 crores plus would be for the US distribution investment.

For the peptide CDMO platform, management stated the FY27 focus is to deliver PAT positive performance on an annual basis, while accepting that quarterly performance may vary due to project shipment timing.

Remediation spend is expected to reduce. Management quantified FY26 remediation expense at about INR 50 crores plus and stated that it should be substantially lower from FY27 onward.

On balance sheet and working capital, management indicated that net debt could be flattish to slightly higher depending on capex timing and working capital needs. They also indicated an intention to maintain working capital to sales around the 33% range.

Takeaways

FY26 confirmed that Granules’ strategy is translating into measurable financial outcomes: sustained revenue growth, higher gross margins, and a visible shift toward complex generics. The emergence of peptide CDMO as a revenue vertical is still early but has already reached EBITDA breakeven in Q4.

The near-term swing factor remains regulatory timelines, particularly the reinspection at Gagillapur, alongside volatility in input costs and freight. Management’s stated priorities for FY27 are clear: sustained FDA readiness at Gagillapur, scaling GLS commercialization, accelerating complex and differentiated products, and disciplined capital allocation under a higher capex plan.