Sun Pharma sales rise 11.8% as EBITDA margin falls to 29.3%

Sun Pharmaceutical Industries Limited, referred to as Sun Pharma, reported Q2FY27 sales of Rs 16,100.01 crore, up 11.8% year-on-year, while EBITDA rose 4.8% to Rs 4,743.90 crore. EBITDA margin declined to 29.3% from 31.3%, as sales growth exceeded the increase in operating profit during the quarter ended September 30, 2026.

Why did Sun Pharma’s EBITDA margin decline in Q2FY27?

Sun Pharma’s EBITDA margin declined by 200 basis points year-on-year to 29.3% in Q2FY27, although gross margin increased to 80.8% from 79.3%. EBITDA, or earnings before interest, tax, depreciation and amortisation, increased to Rs 4,743.90 crore from Rs 4,527.10 crore, while sales increased to Rs 16,100.01 crore from Rs 14,405.22 crore.

Employee-benefit expense rose to Rs 3,274.16 crore from Rs 2,764.79 crore, while other expenses increased to Rs 5,162.39 crore from Rs 4,634.21 crore. Cost of materials consumed was Rs 2,318.70 crore, compared with Rs 1,621.51 crore a year earlier. These expense lines rose alongside the 150-basis-point increase in gross margin reported in Sun Pharma’s earnings presentation.

Total expenses in the consolidated financial statements rose to Rs 12,287.83 crore in Q2FY27 from Rs 10,780.62 crore in Q2FY26. Revenue from operations increased by Rs 1,720.40 crore to Rs 16,198.71 crore, including Rs 98.70 crore of other operating revenue. The reported EBITDA measure increased by Rs 216.80 crore, less than the rise in sales.

Which businesses drove Sun Pharma’s Q2FY27 sales growth?

Sun Pharma’s India formulations business was the largest disclosed contributor to quarterly sales growth, rising 17.3% to Rs 5,552.28 crore from Rs 4,734.79 crore. India formulations accounted for 34.5% of consolidated sales in Q2FY27, and Sun Pharma launched 14 products in the quarter and 19 products in the first half.

Emerging Markets formulations rose to Rs 3,340.25 crore from Rs 2,836.69 crore, while Rest of World formulations increased to Rs 2,304.00 crore from Rs 2,041.49 crore. US formulations were Rs 4,347.10 crore against Rs 4,328.79 crore a year earlier in the sales snapshot, while Sun Pharma reported an 8.2% decline in US formulation sales in dollar terms.

External active pharmaceutical ingredient, or API, sales increased 13.7% to Rs 488.86 crore from Rs 429.87 crore. Total formulations sales rose to Rs 15,543.63 crore from Rs 13,941.76 crore, and other sales increased to Rs 67.52 crore from Rs 33.59 crore. Formulations, API and other sales together made up Q2FY27 sales of Rs 16,100.01 crore.

Global Innovative Medicines sales grew 6.9% and represented 21.1% of total consolidated sales in Q2FY27. Management said momentum in India, Emerging Markets and Rest of World drove quarterly performance. It also reported US approval of Ilumya for treatment of adults with active psoriatic arthritis.

How did Sun Pharma’s profit and exceptional costs change?

Sun Pharma’s reported net profit declined to Rs 1,988.53 crore in Q2FY27 from Rs 3,117.95 crore a year earlier, following Rs 1,268.83 crore of exceptional items in the quarter. Adjusted net profit, excluding exceptional items, increased 1.4% to Rs 3,162.00 crore from Rs 3,118.00 crore, according to the earnings presentation.

Profit before exceptional items and tax rose 6.3% to Rs 4,428.20 crore from Rs 4,167.61 crore. After exceptional items, profit before tax was Rs 3,159.37 crore, compared with Rs 4,167.61 crore in Q2FY26, when no exceptional item was recorded. Basic and diluted earnings per share both fell to Rs 8.30 from Rs 13.00.

The exceptional charge included Rs 346.16 crore of diligence, legal, filing, commitment, syndication and other transaction costs linked to the definitive agreement to acquire Organon & Co. Sun Pharma said additional acquisition-related costs are expected in subsequent periods, while the transaction remains subject to approvals and closing conditions.

Sun Pharma also recorded Rs 922.67 crore, including legal costs, under a September 10, 2026 settlement agreement. Sun Pharmaceutical Industries, Inc., Taro Pharmaceutical Industries Ltd. and Taro Pharmaceuticals U.S.A., Inc. signed the agreement with a plaintiff in US generic pharmaceuticals pricing antitrust litigation. The two disclosed items account for the Rs 1,268.83 crore exceptional charge.

What do Sun Pharma’s first-half results and cash flows show?

Sun Pharma’s H1FY27 sales rose 11.0% to Rs 31,283.56 crore, while EBITDA increased 3.8% to Rs 9,161.60 crore. First-half EBITDA margin was 29.1%, down from 31.2% in H1FY26. The six-month result therefore showed the same pattern as Q2FY27: sales grew faster than EBITDA.

Reported H1FY27 net profit was Rs 4,883.32 crore, compared with Rs 5,396.58 crore in H1FY26. Adjusted net profit increased 2.2% to Rs 6,251.50 crore. India formulations sales rose 16.6% to Rs 11,027.17 crore in the first half, compared with total sales growth of Rs 3,092.27 crore year-on-year.

Net cash generated from operating activities was Rs 3,141.34 crore in H1FY27, lower than Rs 4,781.02 crore in H1FY26. Trade receivables absorbed Rs 2,641.75 crore of cash and inventories absorbed Rs 856.01 crore, while net income tax paid or refunded was an outflow of Rs 1,317.61 crore.

Cash and cash equivalents stood at Rs 18,400.95 crore on September 30, 2026, up from Rs 9,770.51 crore on March 31, 2026. Investing activities generated Rs 8,306.63 crore of net cash, against a Rs 6,690.69 crore outflow in the prior-year half, while financing activities used Rs 2,937.34 crore.

What is Sun Pharma planning after the Q2FY27 result?

Sun Pharma said integration planning for the proposed Organon acquisition was progressing across functions and workstreams. Management said regulatory approvals had been secured in a majority of regions and remaining jurisdictions were tracking on schedule, subject to the transaction’s approvals and closing conditions.

Research and development expenditure was Rs 778.42 crore in Q2FY27, or 4.8% of sales, compared with Rs 782.65 crore a year earlier. Sun Pharma reported five novel entities in clinical development, filed four abbreviated new drug applications, or ANDAs, during the quarter and received approval for three.

Sun Pharma reported 561 approved ANDAs in the US and 120 filings awaiting US Food and Drug Administration approval, including 26 tentative approvals. The company also had 58 approved new drug applications and 12 awaiting approval. Its pipeline schedules topline data for GL0034 in type 2 diabetes during the second half of FY27.

Conclusion

Sun Pharma’s Q2FY27 results combined 11.8% sales growth with a 200-basis-point EBITDA margin decline to 29.3%. India formulations grew 17.3% to Rs 5,552.28 crore, while Emerging Markets, Rest of World and API sales also increased; however, reported net profit fell to Rs 1,988.53 crore after Rs 1,268.83 crore of exceptional items.

The next developments to watch are remaining regulatory approvals and closing conditions for the Organon transaction, as Sun Pharma expects further acquisition-related costs in subsequent periods. The company also plans a US launch of Ilumya for psoriatic arthritis and expects GL0034 topline data during the second half of FY27.