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Informist, Saturday, May 23, 2026

By Eshitva Prakash and Vaishali Tyagi

MUMBAI – Divis Laboratories Ltd. expects to report a double-digit growth in its revenue in 2026-27 (Apr-Mar). The company's management said its margins for the period will be 'stable' but refused to provide numerical guidance due to supply and logistics uncertainities owing to the war in West Asia. The export-focussed company is facing pressure on its margins on the back of higher costs of materials and pricing pressure in its generics segment, its management said in a post-earnings conference call with analysts.

"Historically, we always look for a double-digit growth in our revenues, and that's what we would also say today," Nilima Divi, whole-time director (commercial) of the company, said. When analysts pointed out that the company's revenue in constant currency terms grew 6.8% on year, its management said, "The currency is fluctuating quite strongly, and looking at it, from that point of view... will not show you the real picture of the business, rather look at it from a complete revenue standpoint....we would look at a regular revenue growth rather than a constant currency growth rate at this point in time."

For the quarter ended March, the company's net profit rose over 13% on year to INR 7.56 billion, above consensus projection, but it reported a revenue growth of just above 10% on year at INR 27.93 billion, lower than the view on the Street. 

Around 89% of the company's revenue came from exports in FY26 and 74% of export revenues were drawn from markets in US and Europe. In this scenario, the company has a large exposure to logistical costs. "We remain cautious in our outlook. Freight-related cross-pressures are expected to continue in the near term, and we have incorporated these factors into our planning for the coming quarters," the management said.

Despite facing challenges in supply and logistics, the company's management said availability of raw materials and solvents have remained "broadly manageable". "For time-sensitive materials, such as solvents, where extended storage is neither practical nor economically viable, we implemented tighter coordination between procurement, production and planning teams to ensure continuity without disruption to manufacturing schedules. Currently, we are focusing on material availability on a quarterly basis. On the logistics side, shipments were planned and executed proactively to minimise delays," it added. 

The company said it is trying to strike a "fine balance" between having long-term contracts and spot purchases. "There are certain domestic manufacturers who have declared force majeure. So, the impact is there on multiple products, not just on solvents," a company official said. "We are reviewing this on a quarter-on-quarter basis, and we are trying to secure every month for the next three months to make sure that our production is continuously running for the next three months," he said. 

The company's margins have been under pressure for a few years, which the company's management attributed to pricing pressure in its generics business and high cost of materials. "I mean, we did see the increase (in margins) happen mainly during the COVID period, and then it slowly started settling down in the recent past, but again, with the war, we are seeing rise in prices," a company official said. When asked if new products from its custom synthesis business could drive better margins, the management said, "Right now, some, we are in the process of validation, like I explained. Some, we are going through pre-qualification. Some are still in the research and development state. Now, these have to go to our customers. They have to go through their qualification cycle."

"We are seeing price increases but we are factoring them in and we are trying to pass on wherever feasible," another official said. Most of the company's active pharmaceutical ingredients on the generic segment are backed by long-term contracts, which shields them from logistical cost fluctuations. There are different scenarios where we have long-term contracts for most of our products, the company's management said.  

The company said it was trying to procure enough raw materials and maintain a healthy buffer amid volatility in raw material prices. It said that most of its inventory costs in the March quarter were accrued early March, when the war between US and Iran started. Most of the increase in inventory, I would say you might be seeing from the Q1 (Apr-Jun)," a company official said.

The company expects to keep its capital expenditure steady in FY27, unless it gets a major custom synthesis order in the current financial year. "We have capital work in progress of 2,000 odd crore (INR 20 billion)," the management said. "So...unless we see any major custom census project or any new project that's in our way, it would be a constant capex." The company has an expansion plan of around INR 15 billion, out of which around INR 8 billion have already been capitalised in the March quarter.

The company reported net profit of INR 7.95 billion, up more than 13% on year. On Friday, shares of the company ended 0.4% higher at INR 6,887 on the National Stock Exchange.  End

Edited by Akul Nishant Akhoury

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