Granules Q2 revenue reaches Rs 1,560 crore, profit rises 39%

Granules India Limited reported Q2 FY27 revenue of Rs 1,560 crore, up 20% year on year, while profit after tax rose 39% to Rs 181.8 crore despite higher input and logistics costs linked to West Asia tensions. Revenue growth across all reported segments offset margin pressure, although gross margin declined 134 basis points year on year.

How did Granules perform in Q2 FY27?

Granules delivered Rs 1,560 crore of revenue in Q2 FY27, compared with Rs 1,297 crore in Q2 FY26 and Rs 1,476.8 crore in Q1 FY27. The 20% year-on-year increase and 6% sequential increase were supported by growth across finished dosages, active pharmaceutical ingredients, pharmaceutical formulation intermediates and contract development and manufacturing.

Earnings before interest, tax, depreciation and amortisation, or EBITDA, rose 21% year on year to Rs 337.6 crore from Rs 278.2 crore. It was flat from Rs 338.9 crore in Q1 FY27, as the EBITDA margin declined to 21.6% from 22.9% in the preceding quarter. Profit before tax increased 38% year on year to Rs 243.4 crore, while profit after tax, or PAT, rose to Rs 181.8 crore from Rs 130.6 crore.

PAT margin was 11.7% in Q2 FY27, compared with 10.1% a year earlier and 12.2% in Q1 FY27. Thus, PAT grew Rs 51.2 crore from Q2 FY26 and Rs 1.8 crore sequentially, but the sequential margin comparison shows that revenue growth did not fully prevent cost pressure from affecting profitability ratios.

Why did Granules’ margins decline despite higher revenue?

Granules’ gross margin was 64.4% in Q2 FY27, down 134 basis points, or 1.34 percentage points, from 65.7% in Q2 FY26 and down 126 basis points from 65.6% in Q1 FY27. Management attributed the movement to elevated input costs and higher logistics costs caused by the ongoing West Asia conflict.

Gross profit nonetheless increased 18% year on year to Rs 1,003.9 crore from Rs 852 crore because revenue grew faster in absolute rupee terms. Sequential gross profit increased 4% from Rs 969 crore, a slower pace than the 6% revenue increase, which explains the quarter-on-quarter gross-margin reduction.

Operating expenditure also rose. Manpower cost was Rs 258.1 crore, up 18% year on year and 1% sequentially; research and development, or R&D, expenditure was Rs 88.5 crore, up 26% year on year; and other expenses rose 13% year on year to Rs 319.7 crore. Management said cost pressures would persist and that it was working with customers to manage them with a lag.

Which business segments drove Granules’ growth?

Finished dosages, or FD, remained Granules’ largest segment at Rs 1,141.7 crore in Q2 FY27, representing 73% of revenue and increasing 18% year on year. Active pharmaceutical ingredients, or API, generated Rs 209.1 crore, up 23%, while pharmaceutical formulation intermediates, or PFI, generated Rs 160.4 crore, up 20%.

Contract development and manufacturing, or CDMO, revenue recorded the largest year-on-year percentage increase, rising 77% to Rs 48.8 crore from Rs 27.6 crore. However, CDMO revenue declined 19% from Rs 60 crore in Q1 FY27, whereas PFI rose 24% sequentially to Rs 160.4 crore and API rose 8% to Rs 209.1 crore.

The peptide CDMO operation reported an EBITDA loss of Rs 15.2 crore in Q2 FY27, compared with a Rs 12.4 crore loss in Q1 FY27 and a Rs 20 crore loss in Q2 FY26. Separately, Granules said complex generics revenue grew 38% year on year in Q2 FY27, while complex generics represented 47% of product mix, compared with 40% in Q2 FY26.

Which regions contributed most to Granules’ revenue growth?

North America remained Granules’ principal market, contributing Rs 1,125.7 crore, or 72% of Q2 FY27 revenue. The region grew 14% year on year from Rs 988.2 crore and 7% sequentially from Rs 1,056.3 crore, but its share of revenue was lower than the 76% recorded in Q2 FY26.

Europe was the fastest-growing reported region, with revenue rising 65% year on year to Rs 251.7 crore from Rs 152.8 crore. Granules attributed Europe’s growth to increased CDMO revenue and stronger performance across the broader portfolio; Europe represented 16% of revenue, up from 12% a year earlier.

Rest of world revenue increased 17% year on year to Rs 182.5 crore and 3% from Q1 FY27. The regional mix shows that Europe added Rs 98.9 crore of year-on-year revenue, while North America added Rs 137.5 crore, leaving North America the larger absolute contributor despite Europe’s higher growth rate.

What changed in Granules’ balance sheet and cash flow?

Granules moved to net cash of Rs 828 crore in Q2 FY27 after receiving the balance warrant proceeds, compared with net debt of Rs 101.2 crore in Q1 FY27. Net debt to EBITDA consequently moved to negative 0.61 times from positive 0.07 times, using the company’s definition of interest-bearing borrowings less cash and bank balances.

Cash flow from operations fell to Rs 65 crore in Q2 FY27 from Rs 387.4 crore in Q1 FY27 and Rs 193.7 crore in Q2 FY26. Management said the reduction reflected a planned investment in working capital to support growth and supply continuity, while net working capital to sales increased to 30% from 29% in Q1 FY27.

Capital expenditure was Rs 130.4 crore in Q2 FY27, compared with Rs 89 crore in Q1 FY27. Return on capital employed, or ROCE, was 17.6%, below 18.0% in Q1 FY27 but 138 basis points above the prior-year level; Granules defines ROCE as annualised earnings before interest and tax divided by average capital employed.

Conclusion

Granules combined 20% revenue growth with a 39% rise in PAT in Q2 FY27, led by increases in all four business segments and particularly rapid growth in Europe and CDMO revenue. The comparison across quarters also shows a trade-off: gross margin fell to 64.4%, EBITDA was flat sequentially at Rs 337.6 crore, and peptide CDMO remained loss-making at Rs 15.2 crore.

Investors will next watch management’s response to the stated persistence of input and logistics-cost pressures, including customer pricing actions that may occur with a lag. Granules also disclosed three potential first-to-file abbreviated new drug applications, or ANDAs, and plans to invest its Rs 828 crore net-cash position in R&D, manufacturing and quality, alongside about Rs 2,000 crore of organic capital expenditure over three to four years.