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Natural Capsules FY26: Revenue Up, Profitability Hit by API Ramp and Plant Disruption

Natural Capsules Limited (NCL) closed FY26 with higher consolidated revenue but sharply weaker profitability. Consolidated revenue from operations rose to INR 187.20 crore in FY26 from INR 169.21 crore in FY25, a year-on-year increase of 11%. The stress point was earnings. FY26 EBITDA (excluding other income) turned negative at INR 1.56 crore versus INR 17.52 crore in FY25, and the company reported a consolidated net loss of INR 24.66 crore.

In Q4 FY26, the company reported a rebound on operating momentum. Consolidated revenue from operations stood at INR 58.45 crore, up 55% quarter-on-quarter and 30% year-on-year. EBITDA recovered to INR 1.33 crore with an EBITDA margin of 2.28%. But depreciation of INR 4.28 crore and finance costs of INR 2.89 crore for the quarter kept reported profit in the red, with PAT at a loss of INR 4.98 crore.

The management’s explanation for FY26’s profitability decline was direct and consistent across the presentation and concall. The year carried two major drags: operational disruption in the capsules business due to a temporary shutdown at the Puducherry plant, and the pre-commercial and early-commercial cost burden of the API subsidiary, Natural Biogenex Private Limited (NBPL). As the Tumkur API assets entered their depreciation cycle and term debt was drawn, depreciation and finance costs rose materially.

What drove Q4 recovery in capsules

Management described Q4 as the strongest quarter of FY26 operationally for the capsules business, largely because deferred dispatches from the earlier Puducherry shutdown were cleared. It quantified that the impact of these delayed dispatches on the standalone capsules business was about INR 6 crore. Importantly, management said these sales carried higher profitability because the associated costs had already been absorbed in the preceding quarter.

On capacity and product development, NCL highlighted that an incremental HPMC line for double-zero capsules is now ready. Management expects revenue from this line to begin flowing in the second half of the current financial year (FY27), subject to client approval in US markets. The message for FY27 on capsules was stability rather than aggressive growth: utilize capacity optimally, improve operational efficiency, and push a better product mix to enhance profitability.

NCL’s presentation positions the company as a hard capsule shell manufacturer with a long operating history, including being a pioneer in vegetarian capsules in India and the second largest Indian manufacturer for gelatin capsules. It reported installed capsules capacity at 20.25 billion capsules per annum in FY26 and exports revenue contribution of 28.94% in FY26. The company also reported 311 customers and 615 team members.

FY26 financial snapshot

The balance sheet indicates that net worth reduced in FY26. Total equity (net worth) declined to INR 234.72 crore in FY26 from INR 257.16 crore in FY25. On cash flows, operating cash flow remained positive at INR 10.92 crore in FY26, while investing cash flow was negative at INR 10.77 crore and financing cash flow slightly negative at INR 0.62 crore.

The API journey: commercial sales start, profitability still depends on approvals

NCL’s key strategic pivot is the API segment, pursued through NBPL, incorporated in 2020. The company is building capabilities in steroidal APIs including Hydrocortisone, Prednisolone, Betamethasone, and Dexamethasone and their derivatives. The presentation highlights a greenfield capex at Tumkur across 5 acres and positions it as an integrated facility in India for steroidal APIs using fermentation and synthesis, targeting compliance with WHO GMP, USFDA, and EU GMP guidelines.

A major milestone in Q4 FY26 was the start of commercial API sales. Management called this a long journey and a genuine milestone. But it also flagged that the current API set carries a lower margin profile. According to management, the path to improved profitability requires clearances from regulatory authorities and customers so the company can serve higher-margin customers and geographies.

The presentation also outlines approvals under the Government of India’s Production Linked Incentive (PLI) scheme for three products: Dexamethasone (planned 10 MT), Betamethasone (planned 12 MT), and Prednisolone (planned 15 MT). NCL expects incentive eligibility over six years, with stated incentive rates for fermentation-based products and an overall incentive expectation of about INR 67 crore over six years. In the concall, management stated it did not receive any PLI incentive in FY26 and did not build PLI receipts into FY27 forecasts due to timing uncertainty.

Fermbox collaboration: a second revenue stream at Tumkur

During Q4 FY26, NBPL executed definitive framework and contract manufacturing agreements with Fermbox Bio Private Limited. Under this collaboration, Fermbox will provide fermentation technology and equipment at the Tumkur facility, while NBPL undertakes licensed manufacturing, quality assurance and regulatory compliance. Management expects this to improve fermentation asset utilization and strengthen fermentation-based CDMO capabilities.

In FY27 guidance shared during the concall, management included a revenue contribution from the Fermbox contract. It also described the arrangement as operationally supervised by Fermbox, with NCL’s team supporting ground operations.

FY27 guidance: growth ambition, margin caution

On the June 2026 concall, management gave explicit revenue guidance for FY27 across businesses:

Management also shared margin assumptions for capsules: about 13% EBITDA margin for gelatin and about 18% for HPMC. It framed FY27 as a year focused on restoring profitability at the consolidated level, while acknowledging API margins could remain muted until better customer segments and geographies open up.

The discussion on HPMC demand was candid. Management said US nutraceutical demand slowed and that sales to the US stopped after July in the prior year due to tariffs. For FY26, it stated that out of about INR 8 crore of HPMC sales, around INR 3 crore came from the US and only until around July. It expects low contribution from the US in FY27 and highlighted other markets such as Mexico and Brazil, alongside intent to start Europe.

On leverage, the CFO indicated consolidated debt could remain around INR 100 to 110 crore in FY27, with annual repayments in the range of INR 10 to 12 crore.

Takeaways

NCL’s FY26 shows the classic transition phase where reported profits are pressured by capex-linked depreciation and interest, even while revenue trends improve. The capsules business remains the operating backbone, with high utilization reported in the presentation and management emphasis on improving mix toward regulated markets and higher-value variants.

The API business has crossed a key threshold with commercial sales starting in Q4 FY26, but the company’s own commentary makes it clear that profitability depends on regulatory progress and customer mix upgrades. The Fermbox agreement adds a parallel path to monetize fermentation assets. FY27 is framed as an execution year, with management targeting higher revenue and a return toward consolidated profitability, while keeping expectations conservative on incentives and regulatory timing.