IOLCP - IOL Chemicals

📊 NSE: IOLCP 🏢 Pharmaceuticals - Indian - Bulk Drugs & Formln 📅 Last Updated: 12/14/2025 8:25

💰 Financial Performance

Revenue Growth by Segment

In Q2 FY26, total revenue from operations reached INR 567.5 Cr, reflecting a 7.9% YoY growth. Historically, in FY24, the Pharma segment remained stable with a marginal 0.3% increase, while the Chemical segment saw a 9% decline due to pricing pressures. The company is currently targeting a 10-15% annual revenue growth across segments.

Geographic Revenue Split

The company is strategically shifting from domestic to regulated markets (Europe and US) to improve price realization. It aims to increase its export revenue share to approximately 40% of total sales, supported by 15 DMFs and 20 CEPs filed for regulated markets.

Profitability Margins

Profitability showed significant YoY improvement in Q2 FY26 with PAT margins rising to 5.2% from 3.6% (INR 30 Cr, up 56.7% YoY). However, margins saw a temporary sequential dip due to elevated fuel costs (Punjab floods). FY24 PAT margin stood at 6.31% (INR 135.42 Cr) but moderated to 4.8% (INR 101 Cr) in FY25.

EBITDA Margin

EBITDA for Q2 FY26 was INR 64 Cr, a 33.3% YoY increase, with margins expanding by 212 basis points to 11.1%. The company targets an EBITDA margin of 13-14% in the near term, expecting a 1-2% annual improvement through better product mix and operational leverage.

Capital Expenditure

IOLCP plans to fund its entire capex for the next three years through internal accruals. Recent investments are focused on automation, infrastructure upgrades, and scaling the differentiated API pipeline to support a 10-15% growth trajectory.

Credit Rating & Borrowing

The company maintains a strong credit profile with CARE A+ (Stable) for long-term and CARE A1+ for short-term facilities. Overall gearing is low at 0.24x as of March 31, 2025, with an interest coverage ratio of 14.27x.

⚙️ Operational Drivers

Raw Materials

Key raw materials include Acetic Acid (primary for Ethyl Acetate), Iso-Butyl Benzene (IBB), and various chemical intermediates for APIs like Metformin and Paracetamol. Raw materials are a major cost driver, with Ethyl Acetate and Ibuprofen accounting for 72% of FY24 revenue.

Import Sources

The company procures the majority of its raw materials for the chemical segment from China. API raw materials are primarily sourced from the domestic Indian market.

Capacity Expansion

Total blended manufacturing capacity reached 1,80,222 MTPA as of March 31, 2025, up from 1,72,962 MTPA in FY24. Paracetamol capacity utilization is currently 55-56%, with a target to reach 65% by next year.

Raw Material Costs

Raw material costs are volatile; for instance, Ethyl Acetate margins are highly sensitive to Acetic Acid price fluctuations. The company passes on cost increases to customers with a lag of approximately two months due to inventory processing cycles.

Manufacturing Efficiency

Efficiency is driven by integrated operations where chemical segment products serve as intermediates for the API segment, reducing overall cost structures and improving operating leverage.

📈 Strategic Growth

Expected Growth Rate

10-15%

Growth Strategy

Growth will be achieved by shifting the customer base from domestic to regulated markets (Europe/US) to capture higher margins, increasing Paracetamol capacity utilization to 65%, and expanding the API portfolio (Metformin, Clopidogrel, Pantoprazole). The company is also securing clearances for new land for future industrial expansion.

Products & Services

Major products include Ibuprofen (36% of sales), Ethyl Acetate (36% of sales), Metformin, Paracetamol, Clopidogrel, Fenofibrate, Pantoprazole, Acetyl Chloride, and Iso-Butyl Benzene.

Brand Portfolio

IOL Chemicals and Pharmaceuticals Limited (IOLCP).

New Products/Services

The company is scaling its 'differentiated API pipeline' and has recently introduced Metformin, Clopidogrel, and Fenofibrate to reduce product concentration risk.

Market Expansion

Targeting regulated markets with 18 approved CEPs and 15 DMFs. The company is specifically looking to grow its presence in the US and Europe to achieve a 40% export revenue share.

Market Share & Ranking

IOLCP is a well-established market leader in Ibuprofen globally, with an installed capacity of 12,000 MTPA.

🌍 External Factors

Industry Trends

The industry is shifting toward high-quality, regulated market manufacturing. IOLCP is positioning itself by moving away from the domestic-heavy mix to a 40% export-oriented model to capture stable demand and better pricing.

Competitive Landscape

The company faces competition from domestic and Chinese manufacturers in the API and Ethyl Acetate markets, leading to selling price pressure as seen in Q1 FY25.

Competitive Moat

The moat is built on backward integration and cost leadership in Ibuprofen. By manufacturing its own key starting materials (KSMs) like IBB, IOLCP maintains a favorable cost structure that is difficult for non-integrated competitors to match.

Macro Economic Sensitivity

The business is sensitive to global pharmaceutical demand and industrial chemical cycles. Inflation in fuel and raw material costs directly impacts the 11.1% EBITDA margin.

Consumer Behavior

Stable and growing global demand for essential APIs like Ibuprofen and Paracetamol supports long-term volume recovery.

Geopolitical Risks

Heavy reliance on China for raw materials (Acetic Acid) exposes the company to trade disruptions and geopolitical tensions between India and China.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to USFDA standards (Ibuprofen facility approved in FY20). Notably, IOLCP's products are not covered under the Drug Price Control Order (DPCO), allowing for more flexible pricing.

Environmental Compliance

The company is in the process of securing environmental clearances for new land. It has received approvals from pollution control boards and focuses on minimizing adverse impacts on health and safety.

Taxation Policy Impact

The effective tax rate resulted in a PAT of INR 30 Cr from a PBT level in Q2 FY26, reflecting standard corporate tax applications.

Legal Contingencies

As of March 31, 2025, no significant or material orders were passed by regulators, courts, or tribunals impacting the company's status as a going concern. No proceedings are admitted under the Insolvency and Bankruptcy Code.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the volatility of raw material prices from China, which can impact margins by 1-2% annually. Regulatory delays in new product approvals could also impact the 10-15% growth target.