Laurus Labs FY26: Margin reset, CDMO scale-up, and a bigger capex runway

Laurus Labs closed FY26 with a sharp improvement in both growth and profitability, supported by a stronger mix and sustained execution across its two main engines: CDMO and Affordable Medicines. For the year ended March 31, 2026, revenue rose to 6,813 crore (up 23% year-on-year). EBITDA increased to 1,826 crore (up 64%), and net profit rose to 889 crore (up 148%). Gross margin expanded to 60.4% from 55.4% in FY25, while EBITDA margin improved to 26.8% from 20.1%.

The March quarter added another data point to the recovery narrative. Q4 FY26 revenue reached 1,812 crore (up 5% year-on-year), EBITDA was 523 crore (up 10%), and net profit was 279 crore (up 19%). EBITDA margin in Q4 stood at 28.9%.

A notable feature of FY26 was the improved financial profile alongside continued investment. Operating cash flow increased to 1,624 crore from 602 crore in FY25. Net leverage reduced, with net debt to EBITDA at 1.3x versus 2.3x in FY25. At the same time, capex remained elevated at 1,070 crore, or 16% of sales.

FY26 performance in numbers

The year’s improvement was primarily driven by a better divisional mix and operating leverage. Management highlighted stronger contribution from CDMO, higher value products, and process improvements. In the concall, the company also stated that gross margin improvement was supported by raw material price softening and process improvements.

The balance sheet also reflected ongoing investment. Net fixed assets including CWIP increased to 4,879 crore from 4,316 crore, with additions linked to drug product expansions, peptide capacity, intermediate and API blocks, and the gene therapy and ADC investments at Hyderabad.

Segment mix: CDMO rises, ARV de-risking continues

Laurus has been repositioning its revenue mix away from ARV-led generics to a broader, more diversified platform. In FY26, the CDMO segment delivered 2,080 crore (up 36%), and its share rose to 31% of total revenue. Affordable Medicines delivered 4,733 crore (up 18%), forming 69% of sales.

Within CDMO, small molecules remained the key contributor at 1,896 crore (up 38%). The Bio segment reported 184 crore (up 15%). Q4 showed a further mix shift: CDMO was 33% of revenue versus 29% a year earlier.

ARV remains a large revenue line, even as its share declines. Management reiterated that ARV revenue in FY26 was 2,807 crore and that the company continues to service around one-third of the global HIV population. The presentation also shows ARV share declining from 67% in FY19 to 41% in FY26, while CDMO share increased from 13% to 31%.

In the concall, management stated ARV pricing was broadly constant during FY26. The stronger ARV performance came from higher utilization and volumes rather than pricing changes.

Capex and capacity: building for the next phase

A central theme in the presentation and the call was continued capacity build-out. FY22 to FY26 cumulative capex was shown at 4,300 crore (net additions including CWIP and other items), with 79% allocated to API and CDMO and 21% to drug products. The company also highlighted that more than 85% of growth capex was in a diversified portfolio, with 11 ongoing projects.

In the concall, management raised its near-term investment outlook. Capex planned is around 3,000 crore over the next two years. While gross debt could rise in FY27, management said debt to EBITDA is expected to remain at similar levels or soften.

Several projects were linked to defined commissioning timelines:

• Unit 7 greenfield project: first production expected to be ready for commercial validation by March 2027.
• Commercial peptide manufacturing block: expected to be ready for commercial validation in Q2 FY27.
• Fermentation greenfield site at Vizag for Laurus Bio: Phase 1 expected operational by end of 2026.
• Gene therapy and ADC cGMP facility at Hyderabad: commissioning and qualification targeted by mid 2027.

The company also referenced a new 532-acre Vizag site with an investment plan of over 600 million dollars over eight years, with capex beginning toward end FY27. However, specific annual spending numbers for this site were not detailed.

Risks and what management highlighted

Management acknowledged near-term uncertainties in supply chains. The Generics head noted that increasing geopolitical disruptions could impact raw material availability and logistics and create pressure on OTIF performance across the industry. The CFO said the company did not face supply disruptions in Q4 and expected no disruptions till end of June, though some pressure from input costs like solvents was acknowledged.

On CDMO, management stated that year-on-year growth is expected to remain positive, but quarterly performance could be lumpy. On destocking concerns raised by investors, the company said it does not currently see destocking risk for its recent commercialized CDMO products and does not expect heavy concentration on a single program.

Takeaways

FY26 marked a clear step-up year for Laurus Labs. Revenue growth was strong, margins reset higher, and cash generation improved enough to reduce leverage despite continuing capex. The mix shift toward CDMO is visible and was reinforced by management commentary around late-stage and commercial NCE supplies.

The next phase depends on execution of multiple capacity additions, particularly peptides, fermentation expansion, and advanced biologics platforms. Management provided commissioning and validation timelines for key assets and reiterated that a higher capex plan is backed by customer and product visibility rather than speculative expansion.