Divi's Laboratories Limited Q3 FY26 Earnings Call Summary

Summary

Divi’s Laboratories Limited - Q3 FY2026 Earnings Call Summary Wednesday, February 11, 2026 15:00 hrs. IST

Event Participants

Executives 4 Dr. Kiran S. Divi (CEO), Ms. Nilima Prasad Divi (Director, Commercial), Mr. M. Satish Choudhury (Company Secretary & CIRO), Mr. Venkatesa Perumallu Pasumarthy (CFO)

Analysts 11 Abdulkader Puranwala, Ankush Mahajan, Damayanti Kerai, Dhaval Khut, Girish Bakhru, Harshit Dhoot, Kunal Dhamesha, Madhav, Neha Manpuria, Shyam Srinivasan, Surya Narayan Patra, Tushar Manudhane

Financials & KPIs

Geographic & Segment Commentary

• Custom Synthesis (CS): Contributed 57% of revenue this quarter. Focus remains on multiple RFPs and large-scale validation of projects, with several molecules expected to hit commercial volumes over the next 12 months.
• Generics: Constituted 43% of revenue. While volume traction is healthy in focused products, the segment continues to face competitive pricing pressures, particularly in older molecules.
• Nutraceuticals: Reported revenue of ₹214 crores for the quarter (+₹38 crores YoY). Business momentum remains steady as the company celebrates 20 years in this segment with ongoing capacity expansions.
• Geography: Exports accounted for 89% of total sales. The US and Europe remain the primary markets, contributing a combined 73% of total export revenue.

Company-Specific & Strategic Commentary

• Peptide Strategy: Divi’s is scaling its Peptide segment using Solid Phase Peptide Synthesis (SPPS) and Liquid Phase (LPPS). The company has completed a dedicated building for an innovator and is ramping up production of protected amino acids and fragments for GLP-1 and anti-inflammatory programs.
• Backward Integration (Unit 3): The Kakinada facility is currently producing starting materials and intermediates to support Units 1 and 2. This strategy has allowed the company to free up GMP capacity at older sites for high-value CS projects.
• Technology Platforms: Management is deploying automation, mechanochemistry, and electrochemistry to improve process safety and sustainability. These platforms are specifically targeting complex chemistries like azide chemistry to minimize human intervention.
• Regulatory Compliance: Successfully concluded a US FDA general CGMP inspection at Unit 1 (Choutuppal) during the quarter with a positive outcome.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Peptide and GLP-1 Progress

• Question: What is the status of GLP-1 capacity and the dedicated building? (Surya Narayan Patra)
• Answer: Pilot plant construction is complete; one commercial building with large-scale SPPS is finished based on customer requirements. Validations are ongoing (Dr. Kiran Divi).
• Question: Is the focus on protected amino acids or fragments? (Madhav)
• Answer: Divi’s is supplying protected amino acids in tens of tonnes and also using them to manufacture fragments for innovators. The focus is broader than GLP-1, extending to psoriasis and anti-inflammatory categories (Dr. Kiran Divi).

Custom Synthesis Pipeline

• Question: What is the timeline for the three dedicated CS projects? (Madhav/Neha Manpuria)
• Answer: Commercial volumes are expected to move in Q3/Q4 of Calendar Year 2027, assuming regulatory approvals stay on track (Dr. Kiran Divi).
• Question: Are these new approvals or secondary sourcing? (Kunal Dhamesha)
• Answer: It is a mix of three buckets: helping launch new molecules (Phase III), acting as a secondary source, and late-lifecycle management (Dr. Kiran Divi).

Operational Strategy

• Question: What is driving the improvement in gross margins? (Kunal Dhamesha)
• Answer: Primarily product mix; CS contribution rose to 57%. Management cautions against looking at quarter-on-quarter volatility due to shipment “lumpiness” (Ms. Nilima Divi).
• Question: How does Unit 3 fit into the long-term plan? (Neha Manpuria)
• Answer: Unit 3 currently produces intermediates. This allows Divi’s to empty blocks at Units 1 and 2 for new CS projects while Unit 3 undergoes its own gradual FDA qualification for APIs (Dr. Kiran Divi).

Key Takeaway

Divi’s Laboratories delivered a steady Q3 FY2026 with total income rising 12% YoY to ₹2,692 crores, supported by a favorable shift toward Custom Synthesis (57% of mix). Despite a one-time ₹74 crore charge due to labor code revisions, operating margins improved as material costs fell to 36.3% of revenue. The company is aggressively positioning itself in the global peptide market, leveraging decades of experience in protected amino acids and a new dedicated SPPS facility. Strategic focus remains on the commercialization of three major dedicated CS projects by late 2027 and the continued transition of Unit 3 into a full-scale manufacturing hub. While generic pricing remains a headwind, backward integration and a robust ₹2,394 crore CWIP pipeline provide a clear path for sustained double-digit growth. Management remains optimistic about commercializing several new molecules over the next 12 months as validation phases conclude.