Solara Active Pharma Sciences Limited (NSE: SOLARA) Q3 2026 Earnings Call dated Feb. 06, 2026
Corporate Participants:
Abhishek Singhal — Investor Relations Consultant
Arun Kumar Baskaran — Chief Financial Officer
Sandeep Rao — Managing Director and Chief Executive Officer
Sarat Kumar — Chief Financial Officer
Analysts:
Unidentified Participant
Sajal Kapoor — Analyst
Achal Jalan — Analyst
Nishant Bhat — Analyst
Deepak Chokhani — Analyst
Anupam Jain — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Solara Active Pharma Science Ltd. Q3NFY 26 earning conference call. As a reminder, all participant line will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation. Conclude should you need assistance during the conference call please signal an operator by pressing Star then zero on your touchstone phone. I now hand the conference over to Mr. Abhishek. Thank you and over to you sir.
Abhishek Singhal — Investor Relations Consultant
Very good afternoon and thank you for joining us today for Solara earnings call for the third quarter and nine month ended financial year 2026. Today we have with us Arun, Founder and non exit director Sandeep, MD and CEO and Sharath, CFO of the company to share the highlights of the business and financials for the quarter. I hope you’ve gone through our results release and the quarterly investor presentation that have been uploaded on our website as well as the stock exchange website. The transcript for this call will be available in a week’s time on the company’s website.
Please note that today’s discussion may be forward looking in nature and must be viewed in relation to the risk pertaining to our business. After the end of this call in case you have any further questions, please feel free to reach out to the investoration team. I now hand over the call to Arun to make his opening comments.
Arun Kumar Baskaran — Chief Financial Officer
Thank you, thank you Abhishek and thank you all for joining today’s call. Before I get the management to speak, I just wanted to give a little more color on our results today and our commentary around our business. So first of all, obviously we’ve been struggling significantly with the drag of our ibuprofen business. Most of you know that at one point Solara was the largest ibuprofen manufacturer on a global basis with all marquee brand names using the Solara API. Obviously the processes that we use for ibuprofen is dated, it’s almost about 20 years. However, large customers do not like us to change processes because it amounts to significant regulatory changes for them and we have been servicing our long standing customers for 2025 years, especially in the big pharma space.
Given that with the advent of significant new capacities out of India and the demand for ibuprofen not catching up to the capacities that has been built, we have been facing significant headwinds on the ibuprofen business. So while we have alluded to to this in our previous calls, we haven’t been as transparent as we have in this call in actually showcasing our ibuprofen business separately and as all of you will see that we continue to struggle with headwinds in terms of both pricing and capacity utilization. Our facility in Pondicherry is a single product facility. Consequently, it is challenging for us to sell the entire 6,000 ton capacity that that facility has added.
To that we have already called our Vizag facility which was partly funded by a big pharma. But however, the uptake of ibuprofen unfortunately is just not adding up. So having built both Vizag and pondicherry with almost 12,000 tons of Ibuprofen, 10 to 12,000 tons of Ibuprufen, with our current capacity utilization of only about 3,000 tons, we are finding significant headwinds in this PM. Added to that, the competitive landscape on the generic space is intense. Gross margins have dropped quite significantly resulting in a significant under recovery of a plant and then consequently that division causing bulk of the problems of the organization.
In the last two to three years, rather about 16, 16, 17 months ago, we started investing heavily in a non ibuprofen business. And I’m very pleased with that. The results of that division adjusted for the ibuprofen losses, you will notice that the non ibuprofen business now trades at a significant gross margin of 56% and an EBITDA of 25% which is of our industry or in the higher end of the industry range for API businesses. This is made out of operations coming from 4 of our FDA approved plants, making very complex products, very small products and niche products where we have pricing power.
And this is something that we continue to build. In the meantime, in consultation with the board, we have today decided to seek external advice in terms of what we should be doing with our ibuprofen business in the near term. While we continue to invest in the Solara growth API business and with more filings and approvals and customer acquisition, we expect that business to be a significant part of our future growth story. Having said that, the overall consolidated results are obviously depressing. We continue to focus on finding solutions for the ibuprofen based business including reducing our losses by taking certain surgical and clinical actions.
In terms of our cost structure in that business, we expect to continue to be an important relevant player in the space. And while we review the options that we have, we decided it’s prudent for us not to take any corporate actions or not. I mean we’ve already got an intention announced of our corporate actions relating to Vizag. But given this ibuprofen relook that the company’s management and the Board has approved to look at. We are just delaying all our corporate actions. We expect to have this the results of our analysis to be part of our Q4 results that will give a clear direction to the company.
Our thinking today is that we would put more capital and growth around our growth API business and would take certain actions in terms of cost reduction or strategic resets on our ibuprofen business. With that I will let I’ll pass on the phone to Sandeep and Sharat to make their opening statements and then we’re happy to take any specific questions on any of the subjects that I have spoken and or what my colleagues would soon thank you.
Sandeep Rao — Managing Director and Chief Executive Officer
Thank you. Thank you Arun for the detailed commentary. Good morning, good afternoon and good evening and thank you everybody for joining our Q3.26 earnings call at the outset. I sincerely appreciate your time and presence on the call and would like to thank each one of you for your continued support and trust in Solara. Our performance for Q3. 26 reflects a modest sequential growth as the build out in our growth business continues to gain momentum. While as Arun explained, the ibuprofen based business has been a drag, we continue to experience challenges and we continue to experience rising pressures.
The growth business, however, the growth API business includes the IBU derivatives and all the non IBU business that is clearly demonstrating superior profitability that business operates is currently operating at around 25% EBITDA margin with gross margins that are northwards of 55%. Obviously these numbers are class leading. This reinforces the objective we established at the start of the year which was to re pivot our business to one defined by sustainable, scalable, profitable and reliable growth. On the ibuprofen priest Arun said it all We’ve been a global leader in ibuprofen for about three decades. We’ve been serving market customers.
Our market customers have presented a sticky business. We continue to do that despite the fact that we face persistent headwinds given the very commodity nature of the base ibuprofen API business which is primarily driven by excess capacities, newer technologies which have resulted in lower realizations and depressed profitability. As Varun said, we are evaluating strategic options for this business and we’ll come back to you regarding our financial performance in the current quarter. The snapshot is as follows. The revenue has seen a 10% QoQ growth. We’ve delivered 346 crores. Gross margins are at 47% for the quarter.
It’s marginally down by 386 basis points on a QoQ basis primarily driven by the headwinds in the ibuprofen based business. Operating costs for the quarter are fairly flat. This has resulted in an EBITDA of 37 crores which reflects a marginal QoQ growth of 6% driven by lower gross margin impacted. Again because of the margin profile of the base imu business contribution from our developed markets continues to be strong at 75% of overall sales. Further, the change in the labor wage code which was effective on 21st November has resulted in a one time adverse impact of around 6.7 crores driven by the impact of increase in liability towards gratuitry and leave encashment.
In summary, I’d like to reiterate that the fundamentals of our business remain strong. I do firmly believe that we have a resilient operating model, very robust compliance framework and a diversified portfolio across key markets. With this I will hand over the MIC to Sarath for his comments.
Sarat Kumar — Chief Financial Officer
Thank you Sandeep, Good morning, good afternoon and good evening ladies and gentlemen and thank you for joining our Q3 earnings call for FY26 as shared by Arun and Sandeep. We have been facing significant headwinds in our ibuprofen base business and hence although we have clogged in a Q1Q growth of 10% in revenue and roughly 15% year on year growth for this quarter in terms of revenue numbers our gross margins have been hit by roughly close to 386 basis points which has resulted in a 47% gross margin for Q3 of FY26 and if you recall for the last few quarters this is one of the lowest gross margins what we are actually reporting this quarter.
However, having said that, if I just said for the ibuprofen base business, our catalog generics growth driven API business is something which is actually doing well and we have clogged in close to 51 to 55% kind of a range of gross margins in that business continuously. The OPEX cost for the business has been flat Q1 Q considering the cyclical nature of Q3, some of the expenses and hence we have clogged an EBITDA of 37 crores which is roughly 11% margins in the sole EBITDA although it’s a marginal growth Q on Q since we had a lower ebitda numbers in Q2 as we continue to focus our efforts on operating cost leverage and margin expansion, we also intend to chase our incremental business flow rate up healthier margins in the growth segment of the business.
In our Continuous journey towards a healthier balance sheet. We have been able to reduce our debt by close to 146 crores adjusted for the foreign exchange impact as well what we have on the closing debt and hence we have reduced that debt by close to 19%. 113 crores of that coming from the rights issue money what we had called in the first calls money right May 26 and balance 33 crores being actually generated from our operational cash flows. Further we have a line of sight to reduce the debt to sub 500 levels by May 26 post receipt of our final call money.
As Sandvik mentioned, Q3FY26 has been also impacted by a one time exception line item of roughly 67 million which is driven by impact on gratuity liability as well as rein catchment liability predominantly driven by the new labor code which are setting effort for November 25th. As we focus our work towards growth business we will continue to work on our OPEX and a healthy balance sheet. We actually thank you for your support and patience as we work towards turning around the company and we are happy. To take your questions. Thank you.
Questions and Answers:
operator
Thank you so much sir. Ladies and gentlemen, we’ll begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchdown telephone. If you wish to remove yourself from the question queue you may press star and two Participants are request to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question comes from the line of Sejal Kapoor from Anti fragile thinking. Please go ahead.
Sajal Kapoor
Thank you for taking my questions. Hi team. Excellent presentation. I like the openness, openness and integrity. Honesty. I’ve got few questions. I’m sure the strategic advisors have been appointed after thorough due diligence, right? From a long term shareholder perspective One thing we often watch closely is how aligned advisors are with the outcome. So how do we ensure there is enough accountability or quote unquote skin in the game if their recommendations on the ibuprofen business the future of the base or the commodity Ibuprofen not the derivatives or even the cramps split deliver as expected. That’s my first question.
Thank you.
Arun Kumar Baskaran
This is Arun. I’ll take your question. Thank you for your commentary and kind words. Listen, we believe that any work that we deploy focuses on the best value creation for all our stakeholders. We ensure that our processes are robust. We have a very independent committee of the board that reviews these kind of matters and it is not something that we are Obliged to follow through if it doesn’t create the necessary outcome for the benefit of the organization. At this time we are looking at what could be the best decision in terms of our people and the business and more importantly, our customers.
Now ibuprofen used to be historically a 30 year old business for the group, for Solara, before it used to be Sachem. So it is important that we ensure that we maintain a good relationship with our customers, give them the right answers. But until we do some soul searching and deep analysis of what we should do to be competitive in the ibuprofen business, that is the mandate that we are given. What do we what we have to do to be competitive and which parts of the ibuprofen. And now just like to answer your question and to be clear, the ibuprofen derivatives is not part of the numbers.
Ibuprofen derivatives is a very significant business for us and it is a growing business. It’s part of the growth business. Derivatives are an important part of our business. So what we talk about ibuprofen is the ibuprofen plain raw material. So if I add the derivatives to the ibuprofen business is profitable. But we can’t be running a business with an under recovery of this level until we take certain strategic and technical decisions. Clearly, for the generic market, we’re not competitive. We sell our gross margin at 21% is in spite of us selling the product at at least 15 to 17% greater than our competition because we sell to Big Pharma and they are completely aware of the situation and are aligned with our current pricing.
So it is therefore very essential that we take this call very carefully and with the right judgment. So just for your clarity, we will not do anything which kind of puts that philosophy at risk.
Sajal Kapoor
No, thank you Arun for answering that in greater detail. I mean as a long term shareholder, given I have watched your history very carefully over the long term, right from the Agila transaction and your humble beginnings to even the One Source transaction. The shareholder wealth has always been created by the group in the long run. And I’m sure this time it will not be any different. It’s just a matter of playing the game. You know, someone said, I think Naval Ravikant said that, you know, play long term games with long term people. So I’m definitely in that camp of playing long term games with long term people.
My second question is given our polymer engineering expertise under GMP conditions and peers successfully combining cdmo and complex APIs. So I’m talking about the listed Players in India who do both complex APIs and CDMO under one listed entity should an integrated structure be back on the table in the roadmap.
Arun Kumar Baskaran
Which is why we delayed the decision earlier. It was a balance sheet decision to carve out. But the although the ibuprofen business is loss making, as you can see from Sharif’s commentary, the rest of the business is generating enough free cash to actually pay down our debt. So one of the reasons is that is it even logical for us to take out, as you rightly said, the chemistry and the cramps business out. And that is why we have delayed that decision. So although at that time when we announced it, we thought it was the right thing to do, on further reflection we think there’s more value to retain everything in one house.
And that is why we kind of delayed that decision until such time. We have a clearer view on ibuprofen because our problem statement has now been clearly identified as ibuprofen plain. And if we can fix that through a technical intervention or a commercial intervention or a corporate action, we believe that the rest of the business is very profitable. As you can see, the 25% on the base non ibuprofen business is healthy. And if we can build that, which we are very confident we can, I simply believe that the opportunity for us to have integrated play between grants and chemistry is where we should be heading to.
And that’s exactly your point too. And I concur with that.
Sajal Kapoor
Thank you so much Arun. That’s super confidence building. Thank you so much. I’ll rejoin the queue.
Arun Kumar Baskaran
Thank you.
operator
Thank you so much. Ladies and gentlemen, anyone who wishes to ask a question may press star N1 on their touchstone telephone. Our next question come from the line of Krisha and individual investor. Please go ahead. Krishna, please.
Unidentified Participant
Hi, my question is on base ibuprofen API business. What is the future of this business like? Is there any scope of revival in this business as current ibuprofen prices are back to pre Covid levels? Can you give us some context on what revenues and margins did the ibuprofen API did in FY25 as well?
Arun Kumar Baskaran
Sorry, what is the last question?
Unidentified Participant
Can you give us some context of what revenues and margins will be IG posting API had in FY25?
Arun Kumar Baskaran
Yeah, I think Krishna, we can give you that details. The company will provide you that information. We probably we don’t have the COVID data immediately. As you can see these are management accounts. And your question is what we think about the future of the ibuprofen business. Is that at the current price and cost it makes. We are restricted to sell to only Big Pharma. And that has challenges in terms of under recovery. So we will have to. We should be in a good position to answer your question when we come up with our Q4 results.
Unidentified Participant
Understood. Thank you, sir.
Arun Kumar Baskaran
Thank you.
operator
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star n1 on their touch on telephone. Next question comes from the line of Achal Jalan from Ananta Capital. Please go ahead, Sandeep.
Achal Jalan
Sir, as per data from regulatory filings, our company has growth API molecules under validation whose dosage form is with one source. So our supply to them will begin by Q1 or by Q2 of FY27.
Arun Kumar Baskaran
Sorry, Sandeep, you won’t answer that. But I don’t think.
Sandeep Rao
I think I got the question. I think there is just a couple of products that we do with one source. I think your question was about. That. There’s one specific product that we do with one with our CDMO one source. And that approval should come in the FY27, our financial year time frame. I think that’s when the product launch will happen. So we are gearing up for launch on that product.
Achal Jalan
Okay. Yes, sir. Thank you.
operator
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press Star and one on their touchstone telephone. Our next question come from the line of Nishant but from Equity Works Ltd. Please go ahead.
Nishant Bhat
Yeah. Am I audible?
Sandeep Rao
Yes, we can hear you loud and clear.
Nishant Bhat
Yeah. My question was regarding the France business. How are things proceeding in that component. Of the business and what is the. Current situation of the Vizag plant And. When will it, you know, get operational?
Arun Kumar Baskaran
So Vizag is currently mothball because it also makes ibuprofen. And we are running short of capacities for our polymers. And we’re thinking of kind of bringing that back to life by changing the scope from a largely ibuprofen plant to a multipurpose plant and also build a high potent API plant. So we are working through that and part of this entire reset on ibuprofen. We should be able to address all your queries by the end of Q4.
Nishant Bhat
Okay, sir, that’s on my side.
Arun Kumar Baskaran
Thank you.
operator
Thank you. Ladies and gentlemen. Anyone who wishes to ask a question Can Press Star N1 on their touchdown telephone. Next question come from the line of Deepak Chokhani from Rate Capital. Please go ahead.
Deepak Chokhani
Good afternoon, sir. So on ibuprofen is the sale of business. Will. Will that be considered as one of the options? I know it’s too early and you’re going to appoint professional but is that also a consideration on the table?
Arun Kumar Baskaran
I think you you answered your question. We have to wait for our recommendations and then we will take a considered view and we should be in a position to let let you know by the end of April with our Q4 results.
Deepak Chokhani
Understood. Thank you.
operator
Thank you so much. Next question come from the line of CA Shilpa Sabhu, an individual investor. Please go ahead.
Unidentified Participant
We have five plants with the company right now and ibuprofen is using approximately 1/3 of the capacity. Our focus is right now on profitability. So why don’t we plan to sell one plant and repay our debt like we did in sell biotech?
Arun Kumar Baskaran
Well, I think this should be one of the solutions that the advisors may come up with and we let you know how it goes.
Unidentified Participant
Okay sir, thank you.
operator
Thank you. Our next question come from the line of Anupam Jain from Indira securities. Please. Correct.
Anupam Jain
Thanks for the opportunity sir. My only question is why we’re not disclaiming this number of ibuprofen of Solara on a standalone basis. Because this is where we’re not reporting ibuprofen number on a standalone basis. That this was lock making currently.
Sandeep Rao
No, no, we don’t, we don’t report ibuprofen numbers individually.
Anupam Jain
Yes. Yeah. This time you reported but before that. You didn’t report it. My question, my question was why did not did this earlier? We will, we will have been better informed about this.
Arun Kumar Baskaran
Yeah. Because the margin profile was significantly different last year when we with the, the challenges on the ibuprofen is happening since the last two quarters. So we thought it was prudent for you to know now because it has impacted us. As you can see the gross margins have dropped by almost 800 basis points between the last year and this year.
operator
Hello? Are you there sir? Hello? Since there is no response from the participant we will move forward to the next participant. A next question comes from the line of Sejal Kapfur from Antifragile Thinking. Thank you.
Sajal Kapoor
Yeah, thanks for the opportunity once again, Arun. Given that Solara has achieved 25% EBITDA from a high quality sustainable portfolio and very diversified one. We have so many DMFs that we have been reviving in recent months. How are we kind of applying quote unquote, kind of a rethink mindset to the R D strategy going forward and just to ensure that this revised portfolio of high quality APIs, complex APIs remains sustainable, scalable and retains high margin because there are certain pure play API players in India that do over 25% EBITDA margin on 54, 55% gross margins.
And again that’s a function of operational efficiency. But just on the R and D rethink, is there a scope or opportunity?
Arun Kumar Baskaran
There is. And there is a significant shift in our focus on R and D because we believe clearly, as one of the other investors asked us earlier, there is no need for two plants to make ibuprofen. So even if we decide to keep ibuprofen either for captive use or for very small customers at a reduced cost structure, if that is a solution, Vizag has to become a multi purpose plant. And therefore to get. Our intention is to get Vizag back, although it is FDA approved and live to get it back into commercial production by in the next five to six months.
And that will come with us making one of the blocks converting to a multi purpose plant, one of the blocks being converted to a high purchase API plant. And we are making the necessary investments as we speak. So obviously to do that we will also need R and D. And R and D has been kick started and we will see a large momentum. The last two, three years we were very focused on bringing back dormant DMFs back to life which is what has helped the small volume, high margin APIs to succeed the way it has ex cyber profit.
And they were also balancing our equipments to, I mean our capacities to meet that demand. And we also see the base business growing quite healthy. But to feed Vizag we need to revive R and D to a much higher level. And we’ve done that with investments and new talent that has come in to lead those initiatives. So to answer your point, the answer is yes.
Sajal Kapoor
Yeah. Thank you, Arun. Thank you once again. Thank you.
operator
Thank you. Our next question comes from the line of Maitri from Sapphire Capital. Please go ahead. Yes, you are.
Unidentified Participant
Yeah, Good afternoon. A few questions. Firstly on the growth API side, what sort of capacity utilization are we having currently?
Sandeep Rao
Sorry, go ahead.
Arun Kumar Baskaran
I was saying little over 70%.
Unidentified Participant
Could you repeat? Hello.
Sandeep Rao
Yeah, we said 70%. Mapsi, you have another question?
Unidentified Participant
Yeah, 70%. Okay. And since we are taking in more investments to kind of switch our ISAAC facility to be a more functional facility for the ingredients API business as well. What sort of growth targets do we have for FY27 just for the API growth business?
Arun Kumar Baskaran
We don’t give, we are not yet ready to give guidance for the growth business. We will do it along with our decision.
Unidentified Participant
And we did mention that we are like preparing up for a launch for an API for one source, if you could possibly mention the revenue opportunity you can get from that. And what sort of margins are we expecting from this particular launch?
Arun Kumar Baskaran
Don’t discuss specifics.
Unidentified Participant
And this gross margins in the API business, do we see them having a more not uptrend or they’ll be stagnant in this 55 to 56% range?
Arun Kumar Baskaran
I think it’s a good percentage point and as Seal mentioned earlier, it’s more a function of how operational efficiencies are. We are focusing more on operational efficiencies so that the EBITDA flow through could be even higher. But for now, I think you should be guided by these numbers for the next few years as we build the business.
Unidentified Participant
Okay, that is it for my time. Thank you.
operator
Thank you, ladies and gentlemen, as there are no further question from the participant, I would like to hand the conference over to the management for the closing comments. Thank you. And over to you, team.
Sandeep Rao
Arun. Do you want to give some closing comments?
Arun Kumar Baskaran
Go ahead, Sandeep.
Sandeep Rao
I would again like to say I know the results are not very encouraging, but I think we have more clarity and visibility on both our strategy and the future. There are some items that we have to come back to this broader theme, which we will do when we get into the results next quarter. But for now, thanks for being patient with us. Thanks for your support and thanks for your trust as we continue working diligently to build out Solara. Thank you.
operator
Thank you so much, sir. Ladies and gentlemen, on behalf of Solara Active Pharma Science Limited, that concludes this conference, thank you for joining us. And you may now disconnect your lines.