Lupin Limited Q2 profit falls 22% as EBITDA margin drops 770 bps

Lupin Limited reported Q2 FY2027 profit after tax of Rs 1,155.3 crore, down 22.2% year on year, as earnings before interest, tax, depreciation and amortisation (EBITDA) margin fell 770 basis points to 27.9% despite sales rising 14.0% in the quarter ended September 30, 2026.

Why did Lupin’s Q2 profit fall despite higher sales?

Lupin’s profit declined because personnel, manufacturing and depreciation costs rose faster than sales, while the foreign-exchange gain was smaller than a year earlier. Sales increased to Rs 7,785.5 crore from Rs 6,831.4 crore, and gross profit rose 15.4% to Rs 5,777.4 crore, but employee cost climbed 28.8% to Rs 1,423.6 crore and manufacturing and other expenses increased 23.2% to Rs 2,438.1 crore.

Employee cost was 18.3% of sales in Q2 FY2027, compared with 16.2% in Q2 FY2026, while manufacturing and other expenses rose to 31.3% from 29.0%. Lupin’s foreign-exchange gain declined to Rs 87 crore from Rs 203.8 crore, reducing one source of EBITDA support. Other income increased 40.8% to Rs 126.7 crore, but did not offset the higher operating costs and lower forex gain.

How did Lupin’s margin and costs change in Q2 FY2027?

Lupin’s EBITDA margin fell to 27.9% in Q2 FY2027 from 35.6% a year earlier and 31.4% in Q1 FY2027. The year-on-year decline was 770 basis points, while the sequential decline was 350 basis points. EBITDA fell 10.7% from Rs 2,431.3 crore in Q2 FY2026 and 15.8% from Rs 2,579.9 crore in Q1 FY2027.

Material cost rose 10.0% to Rs 2,008.1 crore, but declined as a share of sales to 25.8% from 26.7% in Q2 FY2026. The margin movement instead coincided with faster growth in employee and manufacturing costs. On a sequential basis, employee cost increased 2.9% and manufacturing and other expenses rose 4.1%, even as sales declined 5.3% from Rs 8,217.2 crore in Q1 FY2027.

Depreciation, amortisation and impairment expense rose 53.4% year on year to Rs 485.9 crore, or 6.2% of sales, compared with 4.6% a year earlier. This contributed to a 20.3% decline in earnings before interest and tax to Rs 1,685.3 crore. Finance cost declined 1.7% to Rs 105.7 crore and tax fell 18.7% to Rs 424.3 crore, but profit after tax still declined.

Which markets and businesses drove Lupin’s sales growth?

Lupin’s other developed markets business recorded the fastest sales growth, increasing 45.7% year on year to Rs 1,182.3 crore in Q2 FY2027. India sales rose 14.7% to Rs 2,383.6 crore, while U.S. sales increased 9.3% to Rs 3,020.2 crore. The U.S. remained the largest reported market, accounting for 39% of global sales, followed by India at 31%.

Total formulations sales increased 13.7% to Rs 7,476.9 crore, while active pharmaceutical ingredient, or API, sales grew 20.2% to Rs 308.6 crore. Emerging markets were the exception, with sales declining 3.5% to Rs 890.8 crore from Rs 922.8 crore. Growth in the U.S., India, other developed markets and API business together produced the 14.0% increase in total product sales.

The sequential market comparison was less favourable. U.S. sales declined 12.1% from Rs 3,434.8 crore in Q1 FY2027, and emerging-markets sales fell 10.0% from Rs 989.7 crore. India sales were broadly unchanged, rising 0.2%, while other developed markets grew 2.9%; total formulations sales declined 6.0% quarter on quarter.

What were Lupin’s R&D, regulatory and balance-sheet updates?

Lupin invested Rs 618.1 crore in research and development, or R&D, during Q2 FY2027, equal to 7.9% of sales. That was higher than Rs 522.2 crore, or 7.6% of sales, in Q2 FY2026. The company received four abbreviated new drug application, or ANDA, approvals and one new drug application 505(b)(2) approval from the U.S. Food and Drug Administration during the quarter.

Lupin launched one product in the U.S. during Q2 FY2027 and reported 149 generic products in that market. As of September 30, 2026, it had made 429 cumulative ANDA filings and received 353 approvals. Its disclosed pipeline also included 48 first-to-file filings, of which 21 were exclusive first-to-file opportunities, and 94 cumulative U.S. drug master file filings.

Operating working capital stood at Rs 7,542 crore as of September 30, 2026, representing 87 operating days for the quarter. Capital expenditure was Rs 223 crore in Q2 FY2027. Lupin reported net debt of negative Rs 3,349 crore and a net debt-to-equity ratio of negative 0.14 at the quarter end.

Conclusion

Lupin’s Q2 FY2027 performance shows that the Rs 954.1 crore year-on-year increase in sales did not translate into higher earnings. Gross profit rose by Rs 770.8 crore, but employee cost increased by Rs 318 crore, manufacturing and other expenses by Rs 458.5 crore, and depreciation, amortisation and impairment expense by Rs 169.1 crore, while the forex gain reduced by Rs 116.8 crore.

The next results will show whether sales growth in India, the U.S. and other developed markets can support profitability as Lupin continues R&D and commercial investment. Management said on November 4, 2026 that it remains focused on R&D and commercial capabilities, while the 48 first-to-file filings, including 21 exclusive opportunities, and further U.S. regulatory approvals remain disclosed items to watch.