Sai Parenterals lifts Q2 gross margin to 47.5% on FIFO controls

Sai Parenterals Limited raised consolidated Q2 FY27 gross margin to 47.5% from 40.9% in Q1 FY27 after consuming higher-cost inventory and introducing first-in, first-out (FIFO) controls through a new enterprise resource planning (ERP) system. Gross profit rose 26.4% sequentially to Rs 93.1 crore, while revenue from operations increased 9.0% to Rs 196.1 crore.

Why did Sai Parenterals’ Q2 gross margin rise?

Sai Parenterals attributed its Q2 FY27 gross-margin increase to tighter inventory management, including the consumption of higher-cost stock from earlier periods and strict FIFO controls on its new ERP system. Gross margin increased by 6.6 percentage points from 40.9% in Q1 FY27 to 47.5% in Q2 FY27, while management said inventory levels came down materially.

The sequential increase in gross profit exceeded the increase in revenue. Revenue rose by Rs 16.2 crore, from Rs 179.9 crore in Q1 FY27 to Rs 196.1 crore in Q2 FY27, whereas gross profit rose by Rs 19.4 crore, from Rs 73.7 crore to Rs 93.1 crore. Management said it sees scope for gross margin to move towards 50%, which is a management outlook rather than a reported result.

The company said year-on-year comparisons are not like-for-like because Q2 FY27 included a full quarter of Noumed Pharmaceuticals, while Q2 FY26 did not. Noumed was consolidated from November 12, 2025. On a reported basis, Q2 FY27 gross margin was 47.5%, compared with 36.7% in Q2 FY26.

How did Sai Parenterals’ Q2 earnings compare with Q1?

Sai Parenterals reported sequential growth in gross profit, earnings before interest, tax, depreciation and amortisation (EBITDA), and profit after tax (PAT) that outpaced revenue growth in Q2 FY27. EBITDA rose 67.4% to Rs 41.4 crore and PAT rose 32.7% to Rs 10.5 crore, while revenue increased 9.0% to Rs 196.1 crore.

EBITDA margin rose to 21.1% from 13.7% in Q1 FY27, and PAT margin increased to 5.4% from 4.4%. Depreciation and amortisation reached Rs 25.1 crore in Q2 FY27, compared with Rs 8.1 crore in Q1 FY27, reflecting capitalisation of the Unit III expansion and Noumed assets, Saicriti Pharma consolidation, and amortisation of molecules acquired from Sai Prathyak Laboratories.

Management said profit before tax held steady sequentially despite the increase in depreciation and amortisation. H1 FY27 PAT was Rs 18.4 crore, compared with Rs 7.8 crore in H1 FY26, although the company noted that the Noumed consolidation change affects the year-on-year comparison.

Is Sai Parenterals on track for its FY27 revenue target?

Sai Parenterals had recorded approximately half of its Rs 750 crore FY27 revenue target by September 30, 2026, with H1 FY27 revenue of Rs 376.0 crore. Management said this was ahead of its guided 45:55 revenue phasing between the first and second halves, and said the second half is seasonally stronger.

H1 FY27 gross profit was Rs 166.7 crore, producing a gross margin of 44.3%, compared with Rs 32.7 crore and a 36.6% margin in H1 FY26. H1 FY27 EBITDA was Rs 66.1 crore and EBITDA margin was 17.6%, compared with Rs 18.6 crore and a 20.8% margin in H1 FY26. Management said the 17.6% H1 margin was ahead of its approximately 17% full-year guidance.

Australia accounted for 76% of export revenue in Q2 FY27, down from 83% in Q1 FY27. Management said the Q1 share reflected additional Sai Parenterals volumes supplied to Noumed after third-party contract manufacturers fell short, while its planned export-capacity mix is broadly 70:30 between Australia and other markets.

What could change Sai Parenterals’ margins after Q2 FY27?

Sai Parenterals’ disclosed capacity plans include the completed Unit III expansion at Bhongir, which increased monthly capacity by 81% from 85.5 million units to 155 million units. Output is scheduled to ramp up from Q4 FY27, with most of the additional volume intended for Australia and New Zealand.

Noumed’s contracted Australian over-the-counter supply stood at AUD 232 million, or approximately Rs 1,506 crore, following a three-year AUD 30 million renewal on August 25, 2026 and a 7.5-year AUD 202 million agreement renewed on July 1, 2026. The company said much of this volume is currently third-party sourced and that production is expected to move progressively in-house as Adelaide and Indian capacity expand, converting distribution margin into manufacturing margin.

The Adelaide facility is scheduled to begin operations in January 2027, with commercial supply expected around April 2027. Until commercial supply begins, Sai Parenterals plans to support Noumed with bulk tablets from India.

How are Sai Parenterals’ acquisitions shaping operations?

Sai Parenterals completed the acquisition of 60% stakes in Saicriti Pharma Private Limited and Prathyak Laboratories Private Limited, deploying Rs 98.8 crore of initial public offering proceeds. The company invested Rs 83.83 crore in Saicriti and Rs 15 crore in Prathyak, while Rs 3.0 crore originally earmarked for a research centre was reallocated to general corporate purposes after shareholder approval.

Sai Prathyak Laboratories, acquired on October 5, 2026, became the group’s consolidated research and development centre with 28 research scientists, 174 molecules and 285 stock-keeping units across critical care and oncology. Sai Parenterals said the centre will begin taking external contract development and manufacturing organisation development contracts over the next two quarters, with revenue expected from FY28.

Saicriti Pharma’s injectable facility is targeted for completion in July 2027 and is expected to raise injectable capacity to approximately 154.66 million units. The facility will include four process lines covering liquid and lyophilised injectables, pre-filled syringe and cartridge combi-filling for glucagon-like peptide-1 products, dry-powder filling and ampoule filling.

Conclusion

Sai Parenterals’ Q2 FY27 profitability improvement was linked to inventory cost flow and ERP-based FIFO controls, rather than revenue growth alone. Gross margin rose to 47.5%, gross profit increased 26.4% sequentially and EBITDA increased 67.4%, while H1 revenue of Rs 376.0 crore reached about half of the company’s Rs 750 crore FY27 target.

The next disclosed milestones are the Unit III output ramp from Q4 FY27, Adelaide operations in January 2027 and expected commercial supply around April 2027. Management’s plans also depend on progressively shifting contracted Australian supply from third-party manufacturers to in-house production, while Saicriti’s injectable facility remains targeted for completion in July 2027.