SMSPHARMA - SMS Pharma.

📊 NSE: SMSPHARMA 🏢 Pharmaceuticals - Indian - Bulk Drugs 📅 Last Updated: 12/14/2025 13:31

💰 Financial Performance

Revenue Growth by Segment

The Anti-Retroviral (ARV) segment saw a significant recovery, increasing its revenue contribution to 20% in FY24 from just 3% in FY23. Ibuprofen revenue grew 1.6x in FY24. Overall revenue for Q2 FY26 reached INR 242 Cr, a 23% YoY increase from INR 197 Cr in Q2 FY25. FY25 total revenue stood at INR 788 Cr, up 11% from INR 712 Cr in FY24.

Geographic Revenue Split

As of Q2 FY26, the revenue split is: EOU/SEZ/DE Sales (27%), Europe (26%), North America (24%), India (15%), and Asia excluding India (9%). Regulatory markets collectively account for 88% of total revenue.

Profitability Margins

Net Profit Margin improved to 8.74% in FY25 from 6.97% in FY24, a 25% increase. Gross margins expanded by 30% YoY in Q2 FY26, primarily driven by successful backward integration initiatives. Return on Net Worth increased by 19% to reach 11.00% in FY25.

EBITDA Margin

EBITDA margin stood at 20% in Q2 FY26, representing a 54% YoY increase. The operating profit margin for FY25 was 18.68%, up 9% from 17.10% in FY24. The company targets a sustained 20% EBITDA margin for FY26 through operating leverage and backward integration.

Capital Expenditure

The company is executing a INR 280 Cr capex program scheduled for completion by November 2026. This follows a previous INR 250 Cr capex aimed at driving new product launches and expanding the CMO business.

Credit Rating & Borrowing

Long-term bank facilities (INR 350.87 Cr) are rated CARE A; Positive (upgraded from Stable). Short-term facilities (INR 52.83 Cr) were upgraded to CARE A1 from CARE A2+. Interest coverage ratio improved 47% to 7.89x in FY25 due to higher EBITDA.

⚙️ Operational Drivers

Raw Materials

Key raw materials include intermediates for Ibuprofen and ARV drugs. While specific chemical names are not listed, backward integration for these materials is a core strategy to reduce the 30% margin volatility previously experienced.

Import Sources

The company is actively reducing dependence on imports through backward integration, particularly to mitigate risks from international supply chains in Asia and Europe.

Capacity Expansion

Current total reactor volume is 3,120 KL. The company operates one of Asia’s largest production blocks for Ibuprofen at its Vishakhapatnam facility. Planned expansion via the INR 280 Cr capex aims to support 8-10 new product launches in the next 12-18 months.

Raw Material Costs

Raw material costs are being optimized through backward integration, which contributed to a 30% YoY expansion in gross margins in Q2 FY26. Historically, input price escalation in FY23 led to negative margins in the Ibuprofen segment before stabilizing.

Manufacturing Efficiency

The company targets a net asset turnover of 1.5x, which it identifies as among the best in the industry. Efficiency is driven by advanced plant engineering and a large technical team of 100+ scientists.

Logistics & Distribution

Export sales, including deemed exports, constituted approximately 67% of gross sales revenue in FY23, requiring extensive global distribution networks to serve 800+ customers.

📈 Strategic Growth

Expected Growth Rate

20%

Growth Strategy

Growth will be achieved through a three-pronged strategy: completing the INR 280 Cr backward integration project to boost margins, launching 8-10 new products in therapeutic areas like anti-diabetic and anti-migraine, and expanding the CMO business. The company also leverages its JV with Spanish giant Chemo Iberica S.A. to penetrate regulated markets.

Products & Services

Active Pharmaceutical Ingredients (APIs) and intermediates for therapeutic segments including Anti-Retroviral (ARV), Anti-Diabetic, Anti-Inflammatory (Ibuprofen), Anti-Migraine (Triptans), and Anti-Ulcerants.

Brand Portfolio

SMS Pharmaceuticals Limited (Corporate Brand).

New Products/Services

Planned launch of 8-10 new products in the next 12-18 months. Since FY22, 20 new products have already been added to the portfolio.

Market Expansion

Focusing on strengthening presence in regulated markets (US and Europe) which currently contribute to the majority of export revenue. The company currently exports to over 75 countries.

Market Share & Ranking

The company claims #1 global and domestic leadership in key products, including being the world's largest manufacturer of Ranitidine API historically and a leader in anti-migraine triptans.

Strategic Alliances

Maintains a strategic Joint Venture (JV) with Spanish pharmaceutical company Chemo Iberica S.A. for product development and market access.

🌍 External Factors

Industry Trends

The Indian API industry is shifting toward backward integration to reduce China-dependency and moving toward niche, high-value molecules. SMS is positioned as a vertically integrated player with a focus on R&D and globally compliant facilities.

Competitive Landscape

Operates in a highly competitive and fragmented API market. Key competitors include large and mid-sized Indian and global API manufacturers in the ARV and Ibuprofen segments.

Competitive Moat

Moat is built on high switching costs for regulated market customers, 120+ DMF filings, and USFDA/PMDA approved facilities (Unit II and VII). These are sustainable due to the complex, lengthy, and expensive nature of the regulatory approval process for new competitors.

Macro Economic Sensitivity

Sensitive to global pharmaceutical demand and Indian government 'pro-policies' for API exports, which are projected to grow at an 8.3% CAGR to $22 billion by 2030.

Consumer Behavior

Increasing global prevalence of chronic diseases like diabetes and migraine is fueling long-term demand for the company's specific API portfolio.

Geopolitical Risks

Trade barriers and regulatory changes in the US and Europe (regulated markets) pose risks to the 88% of revenue sourced from these regions.

⚖️ Regulatory & Governance

Industry Regulations

Strict adherence to USFDA, PMDA Japan, EDQM (Europe), and ANVISA (Brazil) standards is mandatory for operations. Non-compliance risks include regulatory bans on products or facilities.

Environmental Compliance

The company provides comprehensive safety training and manages environment hazards; it complies with corporate governance as per SEBI (LODR) regulations.

⚠️ Risk Analysis

Key Uncertainties

Regulatory risk is the primary uncertainty; any adverse finding by the USFDA could impact 88% of revenue. Raw material price volatility and the successful timely completion of the INR 280 Cr capex are also critical.