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Informist, Thursday, May 21, 2026

 

By Eshitva Prakash

 

MUMBAI – Torrent Pharmaceuticals Ltd.'s consolidated revenue is expected to surge in the March quarter, helped by the purchase of a controlling stake in JB Chemicals & Pharmaceuticals Ltd. However, brokerages said this debt-fuelled acquisition is likely to hit the company's profitability because of an increase in interest costs. Organic growth is seen higher due to strong domestic sales of generic medicines, according to analysts tracking the company.

 

Torrent Pharmaceuticals completed the acquisition of 48.80% stake in JB Chemicals from US-based global investment firm KKR for INR 119.17 billion and gained controlling promoter status on Jan. 21.  The company said the acquisition will enable its entry in the contract development and manufacturing organisation business.

 

The company secured up to INR 200 billion in funding from global banks HSBC, Standard Chartered, and Barclays to finance the acquisition, several media outlets and broking firms said. The management said the acquisition would be accretive to earnings per share in the financial year 2027-28 (Apr-Mar). Torrent Pharma expects its net debt to earnings before interest, tax, depreciation, and amortisation ratio to peak at 2.8 in FY27. It plans to bring this ratio below 0.5 in a couple of years after completion of the merger.

 

Torrent Pharma is expected to report 10.7% year-on-year increase in consolidated net profit for the March quarter to nearly INR 5.78 billion, according to an average of estimates from nine brokerages. This would be the sharpest deceleration in the company's bottom-line growth in 11 quarters. The projection implies a 10% sequential fall in net profit, which will be the worst quarter-on-quarter performance in 13 quarters.

 

Motilal Oswal Financial Services Ltd., Nuvama Wealth Management Ltd., and Elara Securities (India) Pvt. Ltd. see the company's net profit declining 10-25% on year. At the other end, Equirus Securities Pvt. Ltd. expects a 40% rise in the bottom line. This wide spread in net profit estimates indicates that brokerages have varying opinions on the extent of the impact on Torrent Pharma's profitability from the JB Chemicals acquisition.

 

The company's consolidated sales are expected to surge almost 35% on year to INR 39.78 billion, according to the average of estimates. If the company manages to post these figures, it will be the strongest year-on-year growth in sales in over eight years.

 

Nuvama has the highest estimate among brokerages for the company's consolidated sales in the March quarter at INR 43.22 billion. JM Financial Institutional Securities Pvt. Ltd. has the lowest projection for the quarter at INR 33.31 billion. The two estimates imply a sales growth of 46% and 12.6% on year, respectively.

 

Nuvama expects the consolidated entity of Torrent Pharma and JB Chemicals to report 48% sales growth in India. However, the company's profitability will probably shrink, primarily because of higher interest costs, the brokerage said. "The (March) quarter would see restructuring impact at JB as well as higher amortisation and interest costs, leading to contraction of profitability at Torrent Pharma," it said.

 

GROWTH DRIVER

Brokerages expect Torrent Pharma to report robust sales growth in India, even on an organic basis without contribution from JB Chemicals. Nuvama and Kotak Securities Ltd. see the company's sales in India rising around 15% and 14% on year, respectively. Torrent Pharma had reported revenues of INR 17.98 billion from its India business, up 14% on year, for the December quarter.

 

India-focused pharmaceutical companies are likely to outperform those that have a high level of exposure to the US market, owing to a sharp decline in US generic sales and the winding down of generic Revlimid sales. "Domestic-heavy companies like Torrent will maintain healthy growth trajectory with strong IPM (Indian pharmaceutical market) growth," Equirus Securities said.

 

Brokerage commentary is sparse on generic semaglutide sales for the company. Equirus said Torrent Pharma will benefit from the launch of the blockbuster weight loss drug in the March quarter, but did not give any sales projections.

 

Torrent Pharma launched its generic semaglutide brands--Sembolic and Semalix--in India, in oral and injectable formulations. It was the first company in India to launch the oral form of the generic drug. The company had previously signed a licensing agreement with Zydus Lifesciences Ltd. to co-market its semaglutide injection.

 

MIXED GLOBAL MARKETS

The brokerages expect healthy revenue growth for the company in the US, supported by new product launches and an improvement in core portfolio sales. It is among the handful of pharmaceutical companies for which brokerages expect decent US sales growth in the March quarter, although its exposure to the market is limited.  For the December quarter, the company had reported a revenue of INR 3.21 billion in the US, up 19% on year. In constant currency terms, its revenues from the country were up 12% on year at $36 million.

 

Nuvama expects the company to report a revenue of $40 million in the US for the March quarter, up over 14% on year. Around $6 million of this revenue is likely to come from the sale of the company's generic Entresto drug, which is used mainly in patients suffering from chronic heart failure, the brokerage said. Motilal Oswal said the company's US sales may rise over 24% on year. Kotak Securities sees the company's US sales at $38 million, flat on year.

 

Brokerage opinion is mixed on the company's performance in international markets outside the US. The company had reported a revenue of INR 3.04 billion from Germany for the December quarter, up 8% on year.  However, its revenue fell 6% on year in constant currency terms to around $33.95 million. The company's sales in Germany are expected to decline further, by around 4% on year in constant currency terms, because of supply disruption at a third-party supplier, according to Nuvama. Kotak Securities expects a 7% year-on-year growth in sales, implying flattish sequential performance in constant currency terms. Torrent Pharma had earlier said it expects these supply issues to have a lower impact in the March quarter.

 

Equirus Securities said the company's revenue from Germany will benefit from the recent depreciation in the rupee. The domestic currency's weakness will also benefit the company's Brazil business, Kotak Securities said.

 

Torrent Pharmaceuticals is expected to report an EBITDA of INR 12.52 billion, up nearly 30% on year, according to the average of estimates. The highest projection for the EBITDA is from brokerage Motilal Oswal at INR 13.29 billion, while the lowest is from JM Financial at INR 10.85 billion. The company's EBITDA margin will be under pressure because of higher operating expenditure, Nuvama said.

 

Of the 10 brokerage reports on the company available with Informist, six have a "buy" or equivalent recommendation on the stock with an average target price of INR 4,551, an implied upside of 7.6% from the current market price. Four brokerages have a "hold" rating with an average target price of INR 4,053. Thursday, the company's shares closed at INR 4,469.20 on the National Stock Exchange, up 0.9% from Wednesday. Since the company declared its December quarter earnings, its shares have risen more than 9%.

 

Following are the March quarter earnings estimates for Torrent Pharma from nine brokerages, in INR billion, in descending order of the net profit estimate:

 

Brokerage	Net Sales	Net Profit	EBITDA
Equirus Securities Pvt. Ltd.	41.76	7.31	13.14
YES Securities (India) Ltd.	40.59	6.89	12.67
Prabhudas Lilladher Pvt. Ltd.	33.74	6.81	11.31
Kotak Securities Ltd.	41.06	6.79	12.66
JM Financial Institutional Securities Pvt. Ltd.	33.31	5.97	10.85
ICICI Securities Ltd.	41.02	5.78	13.00
Motilal Oswal Financial Services Ltd.	42.06	4.65	13.29
Nuvama Wealth Management Ltd.	43.22	3.94	13.03
Elara Securities (India) Pvt. Ltd.	41.30	3.90	12.70
Average	39.78	5.78	12.52

 

End

 

Edited by Rajeev Pai

 

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