Granules India sees complex generics and peptide CDMO drive margin-led growth

Investment View and Key Growth Drivers

ICICI Direct Research, in its July 22, 2026 result update on Granules India, maintains a BUY view with a target price of Rs 1,045, compared with the current market price of Rs 875. The view is supported by improving operating performance, a rising mix of complex generics, capacity expansion and the peptide CDMO opportunity.

Granules India is a vertically integrated manufacturer of APIs, intermediates and finished dosages, with eight manufacturing facilities. Export markets account for about 94 per cent of sales. In April 2025, the company acquired Swiss peptide development and manufacturing CDMO Senn Chemicals AG, which reported FY25 revenue of about CHF 20 million.

Strong Q1 FY27 Operating Performance

Granules India reported Q1 FY27 revenue of Rs 1,467 crore, representing growth of about 21 per cent year on year and 0.7 per cent sequentially. North America, which represents 72 per cent of the business, drove growth, while Rest of World and Europe also contributed sequentially.

Complex Generics and Capacity Expansion

The broker highlights Granules India's strategic shift towards complex formulations, including CNS, ADHD and controlled-substance products, as the key driver of its next growth phase. Complex generics represented 50 per cent of formulations revenue in Q1 FY27, up 1,100 basis points year on year. Legacy integrated generics declined to 46 per cent from 55 per cent.

Granules India is also building an oncology franchise through dedicated API and formulations blocks at Vizag. The recently commissioned Genome Valley capacity in Hyderabad is expected by ICICI Direct to support growth in the US and European markets.

Gagillapur Remediation and Product Pipeline

Management indicated that remediation at the Gagillapur facility is essentially complete. All responses have been submitted to the USFDA, and there have been no agency concerns over the corrective actions. Granules India completed more than 330 customer and regulatory audits over two years without critical observations.

Nine product approvals are awaiting Gagillapur clearance and are intended for launch thereafter. Existing production has continued, although new approvals were affected by the warning letter. The company has transferred select products to GLS and GPI to mitigate risk.

• Management expects one to two controlled-substance launches over the next 1.5 to 2 years.
• Around five further IP-based controlled-substance products are in the pipeline.
• The first self-developed backward-integrated oncology product is expected in FY28 or FY29.

Peptide CDMO Opportunity

Senn Chemicals generated CHF 5 million in revenue in Q1 FY27. Management expects the second half to be stronger than the first half, positive PAT in FY27, and has reiterated a long-term objective of fivefold revenue growth in five years.

Management identifies US dollar 50 million in revenue and an EBITDA margin above 30 per cent as milestones around the midpoint of that journey. ICICI Direct expects Granules India to focus on profitability and free-cash-flow generation. The broker also views the Rs 665 crore preferential issue, along with an expected Rs 1,100 crore, as strengthening capital commitments for high-growth areas.

Estimates and Valuation

ICICI Direct estimates revenue and EBITDA compound annual growth rates of 14.7 per cent and 21.3 per cent, respectively, over FY26E to FY28E. EBITDA margin is projected to rise to 24.3 per cent in FY28E.

The target price of Rs 1,045 is based on valuing Granules India at 28 times FY28E EPS.

Key Risks

• Recurring regulatory issues because of the company's high exposure to the US market.
• Pricing pressure in regulated markets, especially the US.