Zydus revenue rises 29% as EBITDA margin falls to 24%

Zydus Lifesciences Limited reported Q2 FY27 revenue from operations of Rs 790.96 crore, up 29% year on year, while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 6.0% to Rs 189.45 crore and the EBITDA margin declined to 24.0% from 32.9% in Q2 FY26.

Why did Zydus revenue grow in Q2 FY27?

Zydus increased total revenue to Rs 790.96 crore in Q2 FY27 from Rs 612.32 crore in Q2 FY26, but revenue was lower than Rs 801.70 crore in Q1 FY27. The year-on-year increase was supported by growth across reported businesses, while the quarter-on-quarter comparison shows a Rs 10.74 crore decline from the preceding quarter.

North America formulations was Zydus's largest sales business in Q2 FY27, contributing 43% of total business sales of Rs 775.44 crore. Its sales rose 20.8% year on year to Rs 331.45 crore, compared with 18.3% growth in India formulations to Rs 188.44 crore and 33.2% growth in International Markets formulations to Rs 100.09 crore.

Consumer Wellness posted the fastest reported growth rate at 76% and represented 14% of Q2 FY27 business sales, while MedTech grew 47% and represented 3%. The presentation does not provide rupee sales for these two segments, but it identifies North America formulations, India formulations and International Markets formulations as the three businesses with disclosed quarterly sales values.

India branded formulations grew 19% year on year, with secondary sales up 20% in Q2 FY27. Zydus said volume and new products accounted for around two-thirds of secondary-sales growth, while chronic and sub-chronic products represented 56.9% of India formulations, an increase of 450 basis points over four years.

Why did Zydus EBITDA margin fall to 24%?

Zydus reported an EBITDA margin of 24.0% in Q2 FY27, compared with 32.9% in Q2 FY26, a decline of 8.9 percentage points based on the reported margins. EBITDA fell to Rs 189.45 crore from Rs 201.58 crore despite the Rs 178.64 crore increase in total revenue over the same period.

Gross margin did not move in line with the EBITDA margin. Gross margin was 72.8% in Q2 FY27, versus 72.4% in Q2 FY26, and gross profit rose to Rs 575.52 crore from Rs 443.27 crore. This establishes that gross profit expanded year on year, while the margin movement occurred between gross profit and EBITDA.

Research and development (R&D) spending rose to Rs 65.73 crore in Q2 FY27, or 8.3% of revenue, from Rs 48.20 crore, or 7.9%, in Q2 FY26. R&D was also above Rs 64.24 crore in Q1 FY27, but the presentation does not provide an operating-cost bridge that quantifies other expense categories behind the EBITDA decline.

How did the EBITDA decline affect Zydus profit after tax?

Zydus reported profit after tax (PAT) of Rs 92.55 crore in Q2 FY27, down 26.6% year on year from Rs 126.09 crore in Q2 FY26. PAT was also below Rs 96.04 crore in Q1 FY27, a sequential decline of Rs 3.49 crore, which was larger in percentage terms than the reported 6.0% EBITDA decline year on year.

The presentation does not disclose finance cost, depreciation, tax expense, exceptional items or a reconciliation from EBITDA to PAT for Q2 FY27. The disclosed figures therefore show a Rs 33.54 crore year-on-year reduction in PAT, but do not support assigning portions of the decline to finance costs, depreciation or tax.

Organic capital expenditure was Rs 46.55 crore in Q2 FY27, compared with Rs 49.11 crore in Q2 FY26 and Rs 58.75 crore in Q1 FY27. Net debt stood at Rs 519.98 crore as of September 30, 2026, while net debt to EBITDA was 0.62 times, down from 0.68 times in Q1 FY27 and up from 0.28 times in Q2 FY26.

What business and regulatory developments should Zydus readers track?

Zydus's North America formulations sales rose 7.0% sequentially to Rs 331.45 crore in Q2 FY27 from Rs 309.79 crore in Q1 FY27. India formulations increased 3.8% sequentially to Rs 188.44 crore, while International Markets formulations rose 2.8% to Rs 100.09 crore, making North America the largest disclosed contributor to both sales and sequential sales growth.

In North America, Zydus launched five new products during Q2 FY27 and launched the first generic version of Riociguat tablets in October 2026. The company filed four abbreviated new drug applications (ANDAs) and received 12 ANDA approvals in the quarter, including two tentative approvals; H1 FY27 filings and approvals were nine and 22, respectively.

United States Food and Drug Administration inspections at Zydus's SEZ II Ahmedabad and Moraiya formulations facilities concluded with one and five observations, respectively. Zydus also said it received approval for a transdermal product on October 21, 2026, following the Moraiya inspection, while the presentation does not state when the observations will be resolved.

Conclusion

Zydus delivered higher Q2 FY27 revenue across its formulations businesses, with North America formulations contributing 43% of sales and Consumer Wellness recording 76% growth. However, EBITDA declined to Rs 189.45 crore and the EBITDA margin fell to 24.0%, even as gross margin increased to 72.8% and R&D spending reached 8.3% of revenue.

The next disclosures to watch are the sales contribution from five North America product launches, the outcome of the 22 ANDA approvals reported in H1 FY27, and updates on the one SEZ II Ahmedabad and five Moraiya inspection observations. Zydus also reported net debt of Rs 519.98 crore as of September 30, 2026, alongside Q2 FY27 organic capital expenditure of Rs 46.55 crore.