☎️ Con-call Highlights  - #Granules India Ltd 

**Granules India Limited (Granules) Q3 FY25 Earnings Call Key Takeaways**

**Financial Performance:**

* **Revenue:** Rs.11,377 million, showing a 2% decline compared to the previous year but an 18% increase from the previous quarter. The decrease from last year is due to reduced demand and price erosion in the API/PFI segment, although this is partially offset by growth in finished dosages (FD). The quarter-on-quarter increase is attributed to recovery from a production pause in Q2, with FD sales contributing significantly to revenue.
* **Gross Margin:** Achieved 61.7%, reflecting an increase of 474 basis points year-over-year thanks to the profitable growth of FD sales, but a slight decrease of 20 basis points from the previous quarter. Gains in gross margin were limited by increased freight and other one-off expenses related to a US FDA inspection.
* **EBITDA:** Stood at Rs.7,020 million, marking an 8% decline from the previous year but a 17% rise from the previous quarter. The EBITDA margin was reduced to 20.2%, down from 21.7% year-over-year and slightly lower than 21% quarter-over-quarter, affected by one-time expenses.
* **Profit After Tax (PAT):** Rs.2,303 million, a 6% decline from the previous year but a 21% increase from the previous quarter, with a PAT margin of 10.3%.
* **Cash Flow from Operations:** Reported at Rs.1,315 million, a decrease from both the previous year and the sequential quarter due to increased receivables.
* **Capex:** Invested Rs.1,335 million during the quarter. Year to date, Capex includes Rs.2,425 million for Granules Life Sciences and Rs.236 million for other projects.
* **Net Debt:** Rs.8,289 million, an increase from Rs.7,973 million at the end of the previous quarter, with Net Debt/EBITDA at 0.90x.

**Operational Performance:**

* **Gagillapur Facility Inspection:** A US FDA inspection led to six Form 483 observations and the initiation of Official Action (OAI). Operations were voluntarily paused in September for risk assessment but resumed in October. 90% of corrective actions are completed, with full resolution expected by March 2025. Discussions are ongoing with the US FDA for a potential re-inspection.
* **Granules Life Sciences (GLS):** Phase 1 is commissioned with a capacity of 2.5 billion doses and commercial dispatches have begun. Phase 2 will add an additional 7.5 billion doses by Q4 FY25.
* **New Product Launches:** Introduced Bupropion SR Tabs, Lisdexamphetamine Chew Tabs, and Trazodone Hydrochloride in the US.
* **Product Pipeline:** Includes 83 ANDAs in the US, 12 in Europe, and 15 elsewhere awaiting approval.

**Future Outlook:**

* **Near-term Growth:** Expected from new product launches targeting the CNS and ADHD segments in the US. Launches from the Gagillapur facility are on hold pending the resolution of OAI status.
* **Long-term Growth:** Aims for 20%+ CAGR driven by new launches, capacity expansion, entry into new markets and dosage forms, and an enhanced oncology pipeline. FY26 is projected to be significantly better with resolved issues and expanded GLS capacity.
* **Capex Guidance:** FY26 Capex is forecasted at around Rs.5 billion.
* **Margin Outlook:** Improvement expected as one-time expenses decline, with projected EBITDA margins of 20-22%.

**Concerns:**

* **Gagillapur OAI Status:** Potentially impacts pending new product submissions.
* **API/PFI Business:** Facing ongoing price pressures and lower demand.
* **One-time Expenses:** Continue to affect margins, though expected to decrease.

**Other Key Points:**

* **Quality and Compliance:** Focus on enhancing quality and compliance with significant infrastructure and process improvements.
* **Customer Communication:** Regular engagement to transparently report remediation progress.
* **R&D Spend:** Ongoing investment to support expansion and innovation.

* Machine generated highlights, exercise diligence

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