ALKEM - Alkem Lab

📊 NSE: ALKEM 🏢 Pharmaceuticals - Indian - Bulk Drugs & Formln 📅 Last Updated: 12/13/2025 18:08

💰 Financial Performance

Revenue Growth by Segment

Total revenue grew 2.3% YoY to INR 12,964.5 Cr in FY25. Domestic formulation sales grew 7% YoY in FY25, while US sales de-grew 15% in H1FY25 due to price erosion and supply chain issues. Rest of World (ROW) sales grew 33% in FY24 and 7% in H1FY25. In Q2 FY26, total revenue reached INR 4,001 Cr, a 17.2% YoY increase.

Geographic Revenue Split

The domestic market is the primary driver, contributing 70% of total revenue (INR 9,075 Cr in FY25). The US market accounts for 22% (INR 2,852 Cr), and the Rest of the World (ROW) contributes the remaining 8-10%.

Profitability Margins

Adjusted PAT margin improved from 14.3% in FY24 to 17.1% in FY25 (INR 2,215 Cr). This improvement was driven by a better product mix and cost control measures. Return on Capital Employed (ROCE) averaged 20% between FY20-FY24 and is projected to reach ~22% by FY27.

EBITDA Margin

EBITDA margin stood at 23.0% in Q2 FY26 (INR 920.8 Cr). The PBILDT margin improved by 520 bps in H1FY25 compared to the previous year, primarily due to benign raw material prices and rationalization of the product portfolio to focus on high-margin chronic therapies.

Capital Expenditure

Planned capital expenditure for FY26 is estimated at INR 700-750 Cr. This spending is intended for capacity maintenance and expansion into new segments like biosimilars and orthopedic implants, funded primarily through internal accruals.

Credit Rating & Borrowing

Maintains a strong credit profile with ratings of CRISIL AA+/Stable/A1+ and CARE AA+; Stable / CARE A1+. Total debt as of March 31, 2025, was INR 1,381 Cr, with an overall gearing ratio of 0.11x, indicating very low reliance on external debt.

⚙️ Operational Drivers

Raw Materials

Specific names not disclosed, but raw materials, freight, and input costs are cited as major margin drivers, with 'benign' pricing contributing to a 520 bps margin improvement in H1FY25.

Capacity Expansion

Operates 19 manufacturing facilities (18 in India, 1 in the US) and 4 R&D centers. A new CDMO plant for Enzene in the US recently became operational in September 2025, with a target revenue capacity of INR 300 Cr within 12-18 months.

Raw Material Costs

Raw material costs remained benign in H1FY25, supporting margin expansion. The company uses a strategy of rationalizing its product portfolio to offset input cost volatility and focus on higher-margin products.

Manufacturing Efficiency

Focusing on 'profitable growth' by rationalizing low-margin products. ROCE is expected to remain healthy at ~22% for FY25-FY27, reflecting efficient asset utilization.

Logistics & Distribution

Distribution is managed by a field force of over 12,000 medical representatives (MRs) and 8,000 stockists to ensure demand off-take for new and existing products.

📈 Strategic Growth

Expected Growth Rate

5-8%

Growth Strategy

Growth will be achieved by outperforming the Indian pharmaceutical market by 100-150 bps through new launches in chronic therapies (diabetes, oncology, neurology). Additionally, the company is scaling its US CDMO business (Enzene) and entering the orthopedic implant market to diversify revenue streams.

Products & Services

Pharmaceutical formulations in therapeutic areas including anti-infectives, gastroenterology, pain/analgesics, anti-diabetics, cardiology, oncology, dermatology, and biosimilars.

Brand Portfolio

Alkem (Parent Brand), Enzene (Biosimilars). Specific product brand names not listed in the provided text.

New Products/Services

Launched 4 products in the US in Q2 FY26. New CDMO operations in the US are expected to contribute INR 70-80 Cr in revenue for the current fiscal year.

Market Expansion

Expanding presence in regulated and semi-regulated markets including Australia, Chile, Philippines, Kazakhstan, and Europe. Target is to increase the share of international revenue beyond the current 30%.

Market Share & Ranking

Ranked 5th in the Indian pharmaceutical market according to IQVIA MAT March 2025.

🌍 External Factors

Industry Trends

The industry is shifting toward chronic therapies and biosimilars. Alkem is positioning itself by increasing its chronic segment sales force and investing in Enzene Bioscience to capture higher-growth biotech opportunities.

Competitive Landscape

Faces intense competition in the acute segment from other large Indian generic players, leading to pricing pressure.

Competitive Moat

Moat is built on a 50-year legacy, a dominant position in anti-infectives/gastro (Rank 5 in India), and a massive distribution network of 12,000+ MRs. This scale makes it difficult for new entrants to compete on distribution and brand recall.

Macro Economic Sensitivity

Sensitive to healthcare spending and inflation in raw material/freight costs, which impacted margins in previous years before normalizing in FY24.

Consumer Behavior

Increasing demand for chronic disease management (diabetes, heart health) is driving the company's shift in focus from acute to chronic therapies.

Geopolitical Risks

Operations in 40+ countries expose the company to changes in import/export policies and political conditions in key global markets.

⚖️ Regulatory & Governance

Industry Regulations

Subject to USFDA inspections (all sites currently have EIR) and Indian DPCO/NLEM price controls which affect ~30% of domestic revenue.

⚠️ Risk Analysis

Key Uncertainties

High dependence on the acute segment (80% of domestic sales) which is slower-growing and prone to price revisions. Regulatory risks from USFDA or Indian price control changes could impact margins by 2-3%.