Summary
Solara Active Pharma Sciences Limited - Q3 FY26 Earnings Call Summary Friday, February 06, 2026 14:00 IST
Event Participants
Executives 4 Abhishek Singhal (Investor Relations), Arun Kumar (Founder and Non-Executive Director), Sandeep Rao (MD and CEO), Sarat Kumar (CFO)
Analysts 6 Aanchal Jalan (Ananta Capital), Anupam Jain (Indira Securities), CA Shilpa Saboo (Individual Investor), Deepak Chokhani (Raid Capital), Krishna (Individual Investor), Sajal Kapoor (Antifragile Thinking)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹346 crores | +10% QoQ and +15% YoY; growth driven by non-ibuprofen segments. |
| Gross Margin | 47% | -386 bps QoQ; lowest in recent quarters due to pricing pressure in base ibuprofen. |
| EBITDA | ₹37 crores | +6% QoQ growth; margins at 11% constrained by under-recovery in ibuprofen plants. |
| Non-Ibuprofen Gross Margin | 56% | Management highlighted this core “growth” segment trades at superior industry margins. |
| Non-Ibuprofen EBITDA | 25% | Adjusted for ibuprofen drag, the non-ibuprofen division is highly profitable. |
| Debt Reduction | ₹146 crores | 19% reduction (adjusted for FX); ₹113 cr from rights issue and ₹33 cr from operations. |
| Exceptional Items | ₹6.7 crores | One-time hit due to New Labour Wage Code impact on gratuity and leave encashment. |
| Capacity Utilization | ~70% | Specific to the Growth API business; Ibuprofen facility significantly under-utilized. |
Geographic & Segment Commentary
- Growth API (Non-Ibuprofen): This segment includes ibuprofen derivatives and niche, complex APIs across 4 FDA-approved plants. It operates at 55%+ gross margins and 25% EBITDA, focusing on sustainable and scalable products where the company maintains pricing power.
- Ibuprofen Base Business: Faces severe headwinds due to dated 20-year-old processes and excess global capacity. Current utilization is only ~3,000 tons against a total capacity of 10,000-12,000 tons, resulting in significant under-recovery and a depressed 21% gross margin.
- Developed Markets: Continues to be the primary revenue driver, contributing 75% of overall sales, reflecting a strong compliance framework and sticky big pharma relationships.
Company-Specific & Strategic Commentary
- Ibuprofen Strategic Review: Management has appointed external advisors to evaluate surgical actions for the base ibuprofen business, including potential cost resets or corporate actions, with results expected by Q4 FY26.
- Vizag Facility Reset: Currently mothballed, the Vizag plant is being repurposed from a single-product ibuprofen facility to a multi-purpose plant including a high-potent API (HPAPI) block.
- R&D Pivot: Shifting focus from merely reviving dormant DMFs to supporting high-margin, small-volume products and feeding the new multi-purpose capacities at Vizag.
- Delayed De-merger: The previously announced corporate action to carve out the CRAMS business is on hold as management re-evaluates the value of an integrated “Chemistry and CRAMS” model once the ibuprofen drag is addressed.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Debt Level | < ₹500 crores by May 2026 | Expected post-receipt of the final call money from the rights issue. |
| Strategic Roadmap | Clarity by Q4 FY26 | Management will provide a definitive direction on the ibuprofen business and growth API guidance in the next earnings cycle. |
| Vizag Operations | Re-commence in 5-6 months | Transitioning to a multi-purpose and HPAPI facility to improve asset utilization. |
Risks & Constraints
| Risk | Context |
|---|---|
| Ibuprofen Commodity Pricing | Intense competition from new Indian capacities and dated manufacturing processes make Solara uncompetitive in the generic ibuprofen market. |
| Asset Under-utilization | Massive overcapacity in ibuprofen (3k tons utilization vs 12k tons capacity) creates a significant P&L drag through unabsorbed fixed costs. |
| Regulatory & Labor Costs | The implementation of the new labor wage code (Nov 2025) has already impacted margins and may pose ongoing cost pressures. |
Q&A Highlights
Ibuprofen Segment Separation
- Question: Why was the ibuprofen business not reported separately earlier? (Anupam Jain)
- Answer: The margin profile only deteriorated significantly in the last two quarters (dropping ~800 bps YoY), making the transparency necessary now to show the strength of the non-ibuprofen business (Arun Kumar).
Strategic Review & Advisor Accountability
- Question: How are advisors held accountable for the outcome of the strategic review? (Sajal Kapoor)
- Answer: A Board committee reviews all recommendations; the focus is on maintaining big pharma relationships while fixing the 21% gross margin “under-recovery” through technical or commercial interventions (Arun Kumar).
Synergies with OneSource
- Question: When will supply for growth molecules to OneSource begin? (Aanchal Jalan)
- Answer: At least one specific product approval is expected in FY27, and the company is currently gearing up for that launch (Sandeep Rao).
Future of Vizag Plant
- Question: What is the current status and future of the Vizag plant? (Nishant Bhatt)
- Answer: It is currently mothballed but will be converted into a multi-purpose facility with a high-potent API block to diversify away from pure ibuprofen (Arun Kumar).
Key Takeaway
Solara Active Pharma Sciences reported a bifurcated Q3 FY26 performance, where a robust non-ibuprofen “growth” business (25% EBITDA, 56% Gross Margin) was overshadowed by the structural drag of the base ibuprofen segment. While consolidated revenues grew 10% QoQ to ₹346 crores, margins were pressured by severe under-utilization and pricing headwinds in ibuprofen, which saw gross margins drop to 47%. Strategically, the company has paused previously planned corporate split-offs to conduct a comprehensive review of the ibuprofen business and is repurposing its Vizag facility for high-potent APIs. With debt expected to fall below ₹500 crores by May 2026 and a clear 70% utilization in growth segments, the management is pivoting toward a high-margin, integrated chemistry model. A definitive strategic reset for the ibuprofen business is anticipated by the Q4 FY26 results to unlock the value of the profitable core API portfolio.
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