Strides FY26: Ex-US growth lifts margins while the US stays steady

Strides Pharma Science ended FY26 with a stronger profitability profile even as revenue growth stayed moderate. Consolidated revenue for FY26 was INR 48,587 million, up 6.4% year on year. The more important movement was in margins. Gross margin expanded to 59.7% from 56.6% and EBITDA rose 15.3% to INR 9,253 million, taking the EBITDA margin to 19.0%.

The earnings leverage was visible at the bottom line. Operational PAT rose 50.3% to INR 5,181 million and operational EPS increased to INR 56.2. Reported PAT was higher at INR 5,745 million, supported by one-time income that management referenced as sale of an investment property in Q3.

Q4 momentum and the cost headwind

Q4FY26 revenue was INR 13,235 million, up 11.2% year on year. Gross margin was steady at 59.5% and EBITDA was INR 2,397 million, up 10%. The EBITDA margin for the quarter dipped slightly to 18.1%.

Management attributed the margin softness to elevated supply chain costs late in the year. The CFO stated that logistics and air freight costs in Q4 were around INR 20 crores higher than previous quarters. Even with this headwind, operational PAT for the quarter increased 20% to INR 1,357 million and operational EPS rose to INR 14.7.

The mix shift: Ex-US becomes the main growth engine

The company’s FY26 narrative was dominated by the performance outside the US. Ex-US markets grew 21% year on year, and management described this as a structural shift in the business mix. In the revenue composition chart, the US accounted for 51% of FY26 revenue, Growth Markets for 34%, Other Regulated Markets for 12%, and Access Markets fell to 3%.

Other Regulated Markets were described as all regulated markets other than the US. The company highlighted momentum across regions such as Europe, the UK, Australia and the Nordics, supported by customer advocacy and dependable supply. Growth Markets were described as Africa plus newer geographies across LATAM, MENA and APAC, with Africa leading performance in FY26.

Access Markets continued to shrink and management positioned this as tactical. In the deck, Access Markets revenue declined from INR 2,937 million in FY24 to INR 1,286 million in FY26.

US business: steady revenue, but seasonality did not help

The US business delivered FY26 revenue of USD 284 million versus USD 291 million in FY25. Management pointed to two drivers behind the muted growth: a weaker-than-expected flu season in the second half and competitive intensity in select molecules.

The company also reinforced its profitability discipline in the US. It launched 6 products in FY26 but discontinued 9 products that did not meet internal margin thresholds. Management stressed a policy of launching when the market offers an opportunity, rather than launching aggressively and risking margin dilution.

Strides ended March 2026 with 223 ANDAs filed and 208 ANDAs approved, spanning 150 products. The US commercialized product count was stated at 70. Management also said the company ranks among the top 3 in 37 products, which together contribute around 75% of total US revenue.

Growth investments and leverage: balancing ambition with discipline

Strides continued to invest in medium-term and long-term growth programs. The deck stated that FY26 capex included intangibles of INR 1,820 million towards IP purchase and partnered R and D programs. On the call, management also referenced spending INR 2,500 million over the last 24 months on IP purchase and partnered R and D.

Beyond R and D and IP, the company is building capabilities in controlled substances and complex generics. Management described controlled substances as an in-US for US strategy, with growth linked to DEA quota allocations. It explained that new entrants typically need 1 to 2 years to build a sales track record before seeking higher quotas, and said the company has already gone back to the DEA for additional quota with no fixed timeline.

For complex generics, management highlighted investments into nasal sprays, transdermal patches and films. The company filed a second nasal spray in May 2026. However, management consistently framed these modalities as FY28 and beyond contributors, with filings expected in the next 12 to 18 months and commercialization later.

On Growth Markets, the acquisition of a Sandoz portfolio was positioned as a catalyst. Management said contributions are expected from H2FY27 (October to March), and it expects the branded portfolio to expand materially with this addition.

Cash flows, debt and the FX drag

The balance sheet trajectory stayed favorable on key leverage metrics. The deck reported net debt to EBITDA at 1.55x in FY26, improving from 1.90x in FY25. Reported net debt was INR 14,365 million, but management highlighted that on constant currency, net debt was INR 13,250 million.

A key disclosed swing factor was FX. The company reported an adverse currency impact of INR 1,115 million due to restatement of borrowings to current exchange rates.

Operating cash flow for FY26 was INR 7,025 million. The CFO stated that this corresponds to 76% EBITDA to operating cash conversion. Working capital was a watch item, with the cash-to-cash cycle rising to 124 days from 117 days, driven by higher inventory days. Management framed the inventory build as partly supporting Ex-US growth and partly adding resilience in a more volatile supply chain environment.

What to watch from here

Management’s outlook focused on three levers. First, it reiterated an aspiration for the North America business to reach around USD 375 million to USD 400 million by FY28, with growth expected to recover from H2FY27. Second, it signaled a longer-term margin ambition of EBITDA upwards of 20% while keeping gross margins in the 58% to 60% range. Third, it indicated sustained investment in growth, including capex plus intangible investments around INR 300 crores per year for the next two years and R and D spend expected to be upwards of USD 20 million to USD 25 million over the coming two years.

FY26 also ended with a shareholder return marker. The Board recommended a dividend of INR 5 per share.

Taken together, Strides FY26 performance shows a business that is increasingly being powered by Ex-US markets, while the US portfolio is being managed for profitability and a pipeline reset. The next important checkpoints are the pace of US recovery from H2FY27, the timing and scale of controlled substances quota gains, and the translation of FY26 investments into approvals and launches over FY27 and beyond.