Divis Laboratories Q4 FY26 Earnings Call: Capex Surges to Rs.2,500 Crores, Guides Double-Digit Revenue Growth

Divis Laboratories Ltd held its Q4 FY26 earnings call on May 23, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Headline Results & Full-Year Performance

• Q4 FY25-2026 consolidated total income of Rs.2,986 crores— PBT came in at Rs.963 crores (vs. Rs.864 crores in Q4 FY24-2025) and PAT at Rs.751 crores; the quarter included a forex gain of Rs.90 crores.
• FY25-2026 full-year consolidated total income of Rs.11,067 crores— up from Rs.9,712 crores in FY24-2025; PBT stood at Rs.3,388 crores (including a Rs.74 crore exceptional labour code impact) vs. Rs.2,916 crores; PAT rose to Rs.2,568 crores from Rs.2,191 crores.
• Constant currency growth of 6.82% for FY25-2026— management prefers focusing on absolute revenue growth due to currency volatility; no specific FY26-27 constant-currency target was provided.
• Material consumption improved to 38.8% of sales in FY25-2026— down from 39.8% in the prior year, reflecting better input-cost management.
• Exports contributed ~89% of sales revenue— Europe and the US together represented ~74% of export revenue; product mix between generics and custom synthesis was 45% and 55% respectively.

Elevated Investment & Long-Term Supply Agreements

• FY26 capex of Rs.2,500 crores (~24% of sales)— sharply up from Rs.1,400 crores in FY25 and well above the historical 13%-of-sales average; capitalised assets during FY25-2026 totalled Rs.1,544 crores, with ~Rs.800 crores capitalised in Q4 alone.
• Capital work in progress stood at Rs.2,113 crores as of 31 March 2026— the Kakinada expansion plan of Rs.1,500 crores has Rs.600 crores already capitalised; management guided that CAPEX for FY27-2028 will remain constant at the current Rs.2,000 crore CWIP level, barring any major new custom synthesis project.
• Revenue conversion from elevated capex typically occurs within a 2-year cycle— though actual timelines depend on customer regulatory approvals and can range from 6 months to 3 years; management declined to confirm an analyst reference to a possible Rs.1,500 crore capex for FY27.
• Three dedicated-capacity CS projects have completed validation— commercialisation is subject to customer regulatory approvals, with management hopeful by calendar 2027 but noting potential delays based on submission timelines.
• Unit 3 facility operations progressed steadily during FY26— supporting backward integration and capacity optimisation by transferring select activities from Unit 1 and Unit 2, with a 2–4 month qualification lead time.

EBITDA Compression, Raw-Material Pressures & Outlook

• FY25-2026 EBITDA margin (ex-other income) settled at 32–32.5%— compared to a 40% peak during the COVID-driven Molnupiravir period; historically the company operated at 37–38% margins.
• Margin compression driven by generic pricing pressure and elevated raw-material costs— post-COVID and war impacts raised input costs; management aims to return to ~32% margins but stated this is contingent on market conditions with no timeline provided.
• Full impact of higher raw-material prices expected to reflect in Q1 FY2026-2027— management cited ongoing raw-material cost pressures and efforts to stabilise margins close to current levels; price increases due to crude oil and input costs are being factored in and passed on where feasible.
• Generic API segment backed by long-term contracts with variability clauses— some contracts are reviewed quarterly or directly linked to raw-material cost; spot sales (quarterly negotiations) exist for South America, Eastern Europe and Asia.
• Supply chain disruptions impacted only one month of FY 2025-2026— difficulties persist in FY 2026-2027 with no production stoppages; several suppliers invoked force majeure due to geopolitical tensions in West Asia; freight costs expected to continue rising in the near term.

Generics, Custom Synthesis, Peptides & Contrast Media

• Generic business maintained stable volumes throughout FY25-2026— though pricing environment remained competitive; API revenue pickup in Q3–Q4 FY25-2026 was driven by volume growth from the existing product portfolio, not new molecule additions.
• Custom synthesis segment saw strong and progressive customer engagement in FY26— with an active project pipeline and molecules progressing toward commercialisation; the CSM division has a strong pipeline at phase 2, phase 3, qualification-completed, and validation-completed stages pending agency approvals.
• Peptide business capabilities deepened in FY26— multiple fragments successfully validated during Q4 with more in the pipeline; the facility uses 3,000-litre solid-phase peptide synthesis (SPPS) reactors, described as unmatched in India; management targets becoming "one of the largest global players" in the segment.
• Contrast media: commercial iodine-based sales ongoing for multiple tons— backed by long-term contracts with three major innovator players; gadolinium-based molecules remain at qualification stage (phase 2/3), with revenues expected only upon customer regulatory approvals (period unspecified).
• Nutraceutical business revenue for FY25-2026 was Rs.946 crores— up from Rs.781 crores in FY24-2025; no loss of revenue due to logistics issues in Q4 FY25-2026 was reported.

Flow Chemistry, Biocatalysis & Compliance Readiness

• Technology investments in FY26 continued in continuous flow chemistry, biocatalysis, and automation— aimed at enhancing safety and scale; these platforms underpin the custom synthesis and peptide scale-up capabilities.
• All plants (Unit 1 and Unit 2) are CGMP-compliant under USFDA, EDQM, and Japanese authorities— prepared for regulatory inspections; management cannot predict whether USFDA or other agencies will inspect facilities, as that is a regulatory agency decision dependent on customer filings.
• Proactive procurement and domestic sourcing initiatives helped maintain material availability— despite logistics constraints from geopolitical disruptions; inventory remained stable at Rs.3,600–Rs.3,900 crores quarter over quarter, with most inventory increase expected from Q1 FY2027-2028.
• CSR initiatives impacted over 1 lakh children in FY26— safe drinking water programs reached more than 11 lakh individuals daily across Telangana and Andhra Pradesh.

Double-Digit Revenue, Stable Margins & Pipeline Visibility

• Management reiterated a double-digit revenue growth outlook for FY 2026-2027— without specifying upside from dedicated capex projects; no specific FY26-27 revenue guidance was provided in absolute or constant-currency terms.
• Margin outlook for FY 2026-2027 described as stable— management declined to provide a specific figure due to the uncertain environment; custom synthesis product mix could support margins, but projects are in validation/pre-qualification/R&D stages with uncertain timelines.
• New product launches expected as molecules go off-patent in FY 2026-2027— these should add to future volume growth in the API segment; no single product caused revenue decline, with the multi-product portfolio and continuous project rotation offsetting individual product impacts.
• GLP-1 shift toward orals is mitigated by long-term agreements with customers— management confirmed no supply impact from the therapeutic shift; specific GLP-1 revenue timing could not be addressed due to audio issues during the Q&A segment.
• Peptide pipeline remains healthy with multiple customers at validation, qualification, and R&D stages— opportunities span different therapeutic segments; specific details on validated chain length or product allocation are restricted due to CDAs.