💰 Financial Performance

Revenue Growth by Segment

Total operating income for Q2 FY26 was INR 887 million, a 23.6% sequential increase. The Pharmaceutical segment contributed 83% of revenue (INR 732 million), growing 30.7% QoQ. The Nutraceutical segment contributed 17% (INR 155 million), but faced a YoY decline due to the deferment of institutional orders and softer domestic demand (INR 38 million vs INR 50 million in Q1).

Geographic Revenue Split

Exports are the primary driver, accounting for 83% of total revenue (INR 728 million in Q2 FY26), reflecting a 21% sequential improvement. Domestic business contributed approximately 17% (INR 127 million), remaining broadly stable compared to previous quarters.

Profitability Margins

Profitability showed sequential improvement with a net loss reduction from INR 19 million in Q1 FY26 to INR 4 million in Q2 FY26. This was driven by a better product mix and operational efficiencies. Operating profit margin for FY24 was 12.04%, down from 14.33% in FY23 due to higher employee costs.

EBITDA Margin

EBITDA margin for Q2 FY26 stood at 8.8%, an improvement from 7.9% in Q1 FY26. Management expects a significant jump in EBITDA during H2 FY26 to align with FY25 levels, as historically 60% of business occurs in the second half of the fiscal year.

Capital Expenditure

Total planned debt-funded capex is INR 60.42 crore as of June 30, 2025. This includes INR 40.87 crore from external debt and INR 21.53 crore from internal accruals. Specific projects include a new Tamsulosin and Dutasteride facility and the relocation of the Cephalosporin unit to meet EU-GMP standards.

Credit Rating & Borrowing

The company maintains an 'Adequate' liquidity position with ratings reaffirmed by Acuité. Borrowing includes a planned INR 40.87 crore for capex. Interest costs are a factor in the financial risk profile, which moderated in FY24 due to higher debt levels for working capital and capex.

⚙️ Operational Drivers

Raw Materials

Specific chemical names and their exact percentage of total cost are not disclosed in the available documents; however, the company produces Cephalosporin, Tamsulosin, and Dutasteride formulations.

Import Sources

The company sources raw materials both internationally and from domestic suppliers within India to ensure business continuity and mitigate geopolitical risks.

Capacity Expansion

Planned expansion includes a new manufacturing facility for Tamsulosin and Dutasteride and the relocation of the Cephalosporin unit to comply with EU-GMP and WHO-GMP standards. Capex of INR 5-7 crore is also allocated for completing balance projects and INR 5 crore for CAPA implementation.

Raw Material Costs

Raw material costs are managed through a strategy of diversifying geographic presence and establishing alternative domestic sources to reduce dependence on single regions and mitigate price volatility.

Manufacturing Efficiency

Efficiency is being driven by a shift toward more digitized operations and a focus on high-margin New Innovative Products (NIP) and Oral Thin Films (OTF).

Logistics & Distribution

Distribution is global, covering 50+ countries including Asia, Africa, MENA, Latin America, and the EU. Exports account for 83% of revenue, making logistics a critical component of the cost structure.

📈 Strategic Growth

Expected Growth Rate

0%

Growth Strategy

Growth will be achieved by completing EU-GMP remediation to unlock regulated markets, expanding the New Innovative Products (NIP) and Oral Thin Films (OTF) portfolio, and executing a robust order book in H2 FY26. The company is also pursuing contract manufacturing at alternate sites for 'Star product 1' to bypass current regulatory hurdles.

Products & Services

Small formulation dosages, sustained and controlled-release pellets, Oral Thin Films (OTF), New Innovative Products (NIP), Tamsulosin, Dutasteride, and Cephalosporin formulations.

Brand Portfolio

ZIM Laboratories, ZIM Health Technologies, ZIM Thinorals.

New Products/Services

New Innovative Products (NIP) and Oral Thin Films (OTF) contributed INR 81 million in Q2 FY26. Combined with licensing income (INR 29 million), these segments represent 19% of total operating income.

Market Expansion

Targeting high-potential developed markets in FY26, with recent investments in subsidiaries like ZIMTAS PTY LTD (Australia) and SIA ZIM Laboratories (Latvia) to strengthen local presence.

Market Share & Ranking

The company holds a 3 Star Export House Status from the Ministry of Commerce & Industry, India.

Strategic Alliances

The company uses strategic partnerships and local offices in 50+ countries; specific partner names for JVs are not disclosed.

🌍 External Factors

Industry Trends

The pharmaceutical industry is evolving toward stricter regulatory standards (EU-GMP/WHO-GMP) and innovative drug delivery systems like Oral Thin Films. ZIM is positioning itself as an innovation-led player to capture higher margins in developed markets.

Competitive Landscape

Faces intense competition from global generic players and local manufacturers in Pharmerging markets, leading to pricing pressures.

Competitive Moat

Moat is built on specialized R&D in drug delivery (OTF/NIP) and a 30-year track record in complex export markets. Sustainability depends on successfully regaining EU-GMP certification to monetize its patent/MA portfolio.

Macro Economic Sensitivity

Highly sensitive to global economic conditions and USD currency availability in 'Rest of World' (ROW) markets, which impacted the Nutra segment's ability to receive advance payments.

Consumer Behavior

Increased sensitivity toward product performance and a shift toward innovative dosage forms (sustained release/OTF) in both Pharma and Nutra segments.

Geopolitical Risks

Exposure to political instability and trade restrictions in 50+ countries. Mitigation involves geographic diversification and sourcing alternative raw materials domestically.

⚖️ Regulatory & Governance

Industry Regulations

Operations are heavily impacted by EU-GMP (European Union Good Manufacturing Practices) suspension, which has delayed the innovative-led segment. Compliance with WHO-GMP and DGFT (3 Star Export House) standards is also required.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the timeline for EU-GMP remediation; failure to reinstate clearances will continue to stall growth in high-margin regulated markets.

Geographic Concentration Risk

83% of revenue is concentrated in export markets, with significant exposure to Pharmerging regions and the Middle East.

Third Party Dependencies

Dependency on a single customer for 14-15% of revenue and reliance on institutional orders for the Nutraceutical segment.

Technology Obsolescence Risk

The company is mitigating technology risks by investing 9.7% of revenue into R&D and shifting toward digitized manufacturing processes.

Credit & Counterparty Risk

Receivables risk is highlighted by the deterioration of the working capital cycle to 125 days and delays in receiving letters of credit from ROW customers.