SOLARANSEQ2 FY26November 11, 2025

Solara Active Pharma Sciences Limited

6,698words

92turns

12analyst exchanges

3executives

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Management on call

Sandeep Rao

MANAGING DIRECTOR AND

Sarat Kumar

CHIEF FINANCIAL OFFICER– SOLARA ACTIVE PHARMA SCIENCES LIMITED

Abhishek Singhal

INVESTOR RELATIONS – SOLARA ACTIVE PHARMA SCIENCES LIMITED

Key numbers — 40 extracted

short-term disruptions have impacted our current quarter financial performance. The revenue has a 2% marginal decline Q-o-Q delivering INR314 crores. Gross margin continues to reflect a healthy prof

INR314 crore

our current quarter financial performance. The revenue has a 2% marginal decline Q-o-Q delivering INR314 crores. Gross margin continues to reflect a healthy profile at 51% with an absolute gross margin of I

51%

al decline Q-o-Q delivering INR314 crores. Gross margin continues to reflect a healthy profile at 51% with an absolute gross margin of INR160 crores, which reflects a decline of around 8% on a Q-o-Q

INR160 crore

es. Gross margin continues to reflect a healthy profile at 51% with an absolute gross margin of INR160 crores, which reflects a decline of around 8% on a Q-o-Q basis. Our operating costs for

profile at 51% with an absolute gross margin of INR160 crores, which reflects a decline of around 8% on a Q-o-Q basis. Our operating costs for the quarter have increased by aroun

INR9 crore

n a Q-o-Q basis. Our operating costs for the quarter have increased by around INR9 crores Q-o-Q driven primarily by annual cost increases as well as onetime upgradation costs of INR4 cro

INR4 crore

R9 crores Q-o-Q driven primarily by annual cost increases as well as onetime upgradation costs of INR4 crores related to the Mangalore facility. The net result is an EBITDA of INR35 crores, which reflects a

INR35 crore

pgradation costs of INR4 crores related to the Mangalore facility. The net result is an EBITDA of INR35 crores, which reflects a Q-o-Q degrowth of close to 39%, again driven primarily by sales and gross marg

39%

acility. The net result is an EBITDA of INR35 crores, which reflects a Q-o-Q degrowth of close to 39%, again driven primarily by sales and gross margin shortfall which was impacted by the short-term

INR30 crore

pex increase. To give you a perspective; given the Mangalore operational shutdown, we lost almost INR30 crores to INR35 crores in top line and around INR18 crores to INR20 crores at a gross margin level. T

INR18 crore

angalore operational shutdown, we lost almost INR30 crores to INR35 crores in top line and around INR18 crores to INR20 crores at a gross margin level. To give you a perspective; if these numbers were achiev

INR20 crore

onal shutdown, we lost almost INR30 crores to INR35 crores in top line and around INR18 crores to INR20 crores at a gross margin level. To give you a perspective; if these numbers were achieved, our performa

Guidance — 20 items

Abhishek Singhal

opening

“The transcript for this call will be available in a week's time on the company's website.”

Sarat Kumar

opening

“But at the same time, we are absolutely confident that both the medium-term as well as long- term business fundamentals remain the same and we look forward to a quick improvement in our financial performance in the upcoming quarters.”

Naman Bhansali

“So what is driving this increase and should we consider this particular INR121 crores as the new run rate going forward?”

Sarat Kumar

“And having said that, going forward we are also confident of maintaining that particular healthy gross margin profile of close to 51% plus.”

Sarat Kumar

“Even after adjusting for that particular cost, our cost base will be close to INR120- odd crores.”

Sarat Kumar

“So going forward on a consistent basis, we expect this cost base to hover around INR117 crores to INR120 crores depending on the volumes what we generate.”

Sandeep Rao

“In all likelihood, it will be related to the shutdown in the Mangalore facility.”

Sandeep Rao

“So I think going forward, we are going to make business choices of selling the right set of products to get to our EBITDA levels, but INR450 crores remains an aspirational target.”

Anand Mundra

“And sir, any guidance for this financial year with respect to EBITDA and revenue growth?”

Sandeep Rao

“So we have not issued any guidance, but what we said in Q1 is we've given an outlook and that outlook stated that we'll do 10% increment on sales and roughly 15%, 20% EBITDA.”

Risks & concerns — 7 flagged

Of course the positive impact of this, if I may say, is that we went through a U.S.

— Sandeep Rao

The revenue has a 2% marginal decline Q-o-Q delivering INR314 crores.

— Sandeep Rao

Gross margin continues to reflect a healthy profile at 51% with an absolute gross margin of INR160 crores, which reflects a decline of around 8% on a Q-o-Q basis.

— Sandeep Rao

Hence, this impact with a mix of decline in absolute gross margins resulted in Solara clocking an EBITDA margin of 11% with an absolute EBITDA value of INR35.2 crores, which reflects a degrowth of close to 39% Q-on-Q.

— Sarat Kumar

One is in terms of what you spoke about current liabilities being higher and that is actually putting a stress on the liquidity situation of the company.

— Sarat Kumar

But till the time we don't sign up an agreement wherein we can get debt at a lower cost, it would be very difficult on our part to commit to that.

— Sarat Kumar

Just wanted to understand, I mean just going by your experience talking to the customers and trying to find new markets, how easy or difficult is this going to be?

— Prolin Nandu

Q&A — 12 exchanges

I have 2 set of questions. First is on the gross margins, which have declined even after adjusting for the deferred delivery of our higher margin products and are now below the guided range of 53% to 55%. So could you help us understand the key reasons behind this and also are we confident of reverting to the guided margin range over the coming quarters? That is the first question. And second is on the fixed cost. So even after adjusting the onetime cost, our fixed costs stand at around INR121 crores per quarter, which is compared to the INR110 crores to INR115 crores over the past few quarter

Sarat Kumar

Naman, thank you for your question. I’ll take the first question first. So what I understand is, as you rightly pointed out, even after adjusting for the deferred sales what we had because of the short-term disruption, our gross margin profile would be still in the range of close to 52.5% kind of a percentage put together, which as compared to earlier quarters of 54% is slightly a dip. But having said that, we will always have a certain change in product mix from each quarter to quarter, like from one quarter to the other. So we are confident of maintaining a healthy gross margin of more than

Sir, just wanted to understand about this shutdown. How long was the shutdown and what was the period for the same?

Sandeep Rao

The shutdown was in the month of August and we shut the plant for 3 to 4 weeks. Okay. And what is the benefit of this shutdown, sir, in terms of upgradation in terms of production capacity or increase in capabilities? No, I think -- I remember in some calls, we had mentioned some of our plants are aging plants. They are old plants and they frequently require refurbishment. So this was the major upgradation exercise that we took up -- in the Mangalore facility, we took up a significant upgrade. As Sarat said, we spent almost INR4 crores to INR5 crores in that upgrade. The good news is that than

So I have 2 questions. My first question is like how many DMF filings do we have right now and how many products are there in the market? This is my first question.

Sandeep Rao

So right now we have roughly 90 to 95 DMF filings in the U.S., of which active products are around 35 to 40. Okay. My second question, sir, could you talk a little bit about our plans for launching new products and key ones which could drive growth for us for the next 2, 3 years? So good question because new products is the growth engine for us. So we've started the exercise on new products. In fact we've identified a number of products, which we have started working on. But given our industry, you know that there is a life cycle in getting those products to the market. So we have to go throug

Sandeep, we have slipped into this incorrigible habit of reporting a new "onetime" volatility almost every quarter. I know you have joined recently, but Solara has a track record of solid onetime. And this is just an observation not a question. Question really is why was preventive maintenance not planned to avoid a Q2 hit? And of the INR40 million cited as the onetime shutdown cost, was any portion capital in nature or linked to compliance upgrades?

Sandeep Rao

You want to take that? Sajal, thank you for your question. So first of all when we say, obviously this particular shutdown was actually planned. If you recall, Sandeep said that we had this unscheduled shutdown for an extended period of 3 to 4 weeks. So based on our normal preventive schedule, we always plan a shutdown of close to 1 week kind of a timeframe, wherein we plan to do most of the refurbishments for this thing. Now when we started this particular preventive maintenance, some of the other areas were identified, which we wanted to actually cover this as part of this particular mainten

Now, sir, you mentioned that we stick to about 10% revenue growth and 15% to 20% EBITDA growth. So are you talking on the adjusted basis or I mean on the reported because the loss that we have done in the second quarter so first half, our net-net we don't have any kind of profits? I mean we are 0 at the PAT level. So how should one look at -- I mean we stick to the guidance? I mean are you speaking on the adjusted basis?

Sarat Kumar

So when we are actually talking about guidance, we are talking on FY '25 base only. So we still expect our H2 to be much stronger than H1. Okay. Because ideally, that means your second half EBITDA margin has to improve substantially I mean to have that growth in EBITDA. FY '25 I think base was around INR256 crores, around about. So what's the aspirational EBITDA margins that we are looking at? You did mention that we are focused more on the EBITDA side. So see, one, if you actually recall what Sandeep said, what was sales which we got deferred by close to INR35-odd crores, that would have give

Why are we not able to reduce our cost of debt? Just now you said that it is 13%. Our leverage position also has significantly improved, right? What are difficulties there? That's my question one. And question two is, I understand that as of now, you are giving us an outlook of 10% growth in revenue. Is the business capable of growing more than 10%? Did you hear my question 1?

Sandeep Rao

First one we could hear. Second one we are struggling. Second one is like as of now, the outlook is 10%, right? Like is the business possible to deliver more than that going forward like in another 2 years or 3 years? Yes, that's my question 2. So I will take the second question. You're saying is this growth number possible? I think the answer is very much yes and this team is focused. As we said, our mantra has been to go from a reset to sustainable, scalable and profitable growth. So yes, we're working on it. Number of levers are there. One is finding newer markets for our products so streng

Sir, these sales which are lost, will this be serviced during the next quarter, quarter 3?

Sandeep Rao

The answer is that we haven't lost that business. We will operationally need to deliver to make sure that we can deliver. Yes, we will service the business in next two quarters. So the revenues which we were not able to show in Q2, those will get added up in Q3. That's what you mean? At the end of the day, we have lost 4 weeks of production. So we will have to produce as much material to cater to the business. So have purchase orders gone? The answer is no. Can we manufacture as much? That's something we will have to see as the quarter goes. But we will service that business if not in Q3, then

I was disconnected for a while so I'm not sure if I'm asking this question again. So my question would be on your further investments both in qualitative and quantitative terms as to what kind of money are we going to invest in this half, next year and so on? And secondly, when we talk about fulfilling our deferred revenue or the deferred orders, what kind of capacity utilization are we working on right now? And the third question, I'm not sure if it has been asked before. Any update on the ibuprofen pricing and your own contribution to the overall revenues in the last quarter?

Sandeep Rao

Okay. Future investments, look, we are not going to be making any big investments. All we are aiming to do is small bite size investments just bottlenecking our capacity. And whilst we are speaking with you, we have already done it, so it is work in progress. Secondly, I think your second question was about the deferred revenue, right? To the extent that we can manufacture our products, I think we should more or less make up for the lost revenue over the next quarters. Regarding ibu pricing, a couple of quarters back, we had said we are very picky about which customers we want to work with. Ou

A few questions from my side. One is that constantly on the call, you have been mentioning that you are thinking about the profitable growth and picking the right client. So incremental -- and also you mentioned incremental sales will come at a higher margin. Could you just give some texture around this as to how this will happen? Will you follow the same road same kind of a plan like you did in ibuprofen where you have increased the percentage of derivatives. And also related to this question would be you mentioned that in our industry, it takes 2, 3 years of approval cycle and so on and so f

Sandeep Rao

So you've asked many questions. Let me take it one at a time. You are right. You caught us right. We are talking of profitable growth coming from incremental sales. We are making a conscious choice to put our capex into areas where we get high gross margin. Even when we want to allocate capacity, we allocate in manufacturing that give us higher gross margin. So it's a conscious call whether it's in the development or it's a product that we manufacture for sale, we are making those conscious calls to be in products that drive profit. In the previous quarters, we said even about ibuprofen we mad

I have one question. Do we have any update on the Vizag facility because last year it was taken up for retrofitting and have we started operating commercially and is there any contribution in terms of revenue to a full scale?

Sandeep Rao

So right now that facility for the most part remains mothballed now. We will start the facility only once we have partnerships on the CRAM side.

So in last quarterly call, you had indicated that we want to pivot from a stable to a growth phase again at Solara, right? But we keep having these one-offs. So now looking at what has all happened, what is the team internally doing to avoid these incremental one-offs? Because to get back on that growth curve, we need to be able to have a visibility, right? So could you comment on that?

Sandeep Rao

I would want an answer to this question even before you asked it, right? We are looking forward and we want to have at least 3, 4 quarters of growth just to prove it to ourselves even more than proving it to you that we have a turnaround story here. So in that sense, we are always looking for what can get us down. And in this case, as Sarat mentioned this one-off, we anticipated that we will do shutdowns, but something that doesn't exceed a few days. But unfortunately, it took us at least 4 weeks of operational shutdown to get that and when it is up and running, it's more of an upgradation. So

Thanks a lot, everybody. I know it's been a yoyo ride with Sarat for some time. But I will reiterate that we strongly believe in our fundamentals. I think the underlying fundamentals of our business remain strong. Continue believing in us and we thank you for your continued support and trust. Thank you.

Management

Speaking time

Sandeep Rao

Sarat Kumar

Moderator

Deepak Poddar

Anand Mundra

Abhishek

Sajal Kapoor

Amresh Kumar

Prolin Nandu

Jagadish Sharma

Opening remarks

Abhishek Singhal

Thank you. Very good afternoon and thank you for joining us today for Solara earnings call for the second quarter and half year ended financial year 2026. Today, we have with us; Sandeep Rao, MD and CEO; and Sarat Kumar, CFO of the company to share the highlights of the business and financials for the quarter. I hope you've gone through our results release and the quarterly investor presentation that have been uploaded on our website as well as stock exchange website. The transcript for this call will be available in a week's time on the company's website. Please note that today's discussion may be forward-looking in nature and must be viewed in relation to the risks pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out to the Investor Relations team. I now hand over the call to Mr. Sandeep Rao to make his opening comments.

Sandeep Rao

Thank you, Abhishek. To start with: good morning, good afternoon and good evening and thank you all for joining in today's Q2 FY '26 earnings call. At the outset, I appreciate your time and presence in the call. Further to our earlier communications, we had informed you that the primary focus of the organization is on repivoting from reset to what we call as sustainable, scalable and reliable growth. Whilst our transformational journey remains intact, our financial performance during this quarter was impacted primarily by short-term disruptions. And these short-term disruptions are arising from an unscheduled operational shutdown of our Mangalore facility on account of facility upgradation. This operational shutdown resulted in delayed deliveries and reduced volumes manufactured out of the facility for the quarter. Of course the positive impact of this, if I may say, is that we went through a U.S. FDA audit between 25th and 29th of August. We successfully cleared this audit with 2 mino

Sarat Kumar

Thank you, Sandeep. Good morning, good afternoon and good evening. And first of all, thank you for joining in for our Q2 earnings call especially it being a holiday in some parts of India. As shared by Sandeep, although we are slightly disappointed as we have reported marginal degrowth in sales as well as in terms of absolute gross margin for the current quarter Q2, but I'm satisfied that our business maintains a healthy gross margin profile of 51% plus. We as a team do acknowledge that the business for the current quarter has been impacted by the short-term disruptions. But at the same time, we are absolutely confident that both the medium-term as well as long- term business fundamentals remain the same and we look forward to a quick improvement in our financial performance in the upcoming quarters. Having said that, during this quarter as a business, we have delivered marginal degrowth on top line; but with a healthy margin profile of 51%, which is close to some 264 basis points lowe

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