SMS Pharmaceuticals FY25 results: PAT up 39%, Rs 250cr capex planned for FY26 growth

SMS Pharmaceuticals Limited delivered a stellar financial performance in FY25, reporting a 39% year-on-year increase in profit after tax (PAT), underscoring the strength of its integrated business model, margin-accretive product mix, and backward integration strategy. The Hyderabad-based API and intermediates manufacturer posted a full-year PAT of ₹69.14 crore, compared to ₹49.83 crore in FY24, with earnings per share (EPS) rising in tandem to ₹8.16 from ₹5.89.

The company’s FY25 revenue from operations rose 10% to ₹782.75 crore, reflecting solid volume growth across high-value APIs. Sequential recovery was evident in the final quarter, with Q4FY25 revenue of ₹248.20 crore marking a sharp 43% rise over Q3. Gross margins improved to 33% for the year, up 330 basis points, while EBITDA stood at ₹139 crore with an 18% margin — a 132 bps gain over FY24.

This performance comes amid broader consolidation in India‘s pharmaceutical ingredients sector, where companies are actively pushing toward cost-efficient manufacturing and strategic capital expenditure in response to global supply chain pressures, regulatory tightening, and increasing demand for complex generics.

What Were the Key Business Drivers Behind the FY25 Turnaround?

Management attributed the margin and earnings expansion to three primary factors: the commercial scaling of ibuprofen production, onboarding of large global customers, and disciplined cost control through backward integration.

Notably, the Q4FY25 gross profit climbed to ₹74.88 crore, an 18% YoY jump, while EBITDA surged 21% to ₹40.81 crore. The PAT for the quarter stood at ₹20.31 crore, up 18% YoY, despite a slightly compressed PAT margin of 8% compared to 11% in the previous quarter.

Revenue growth was led by strong performance in key therapeutic segments. Anti-inflammatory APIs posted 22% YoY growth, reaching ₹147.63 crore, while ARV (anti-retroviral) revenues rose 15% to ₹162.83 crore. The anti-epileptic category saw the most dramatic rise, more than doubling to ₹29.21 crore — up 106% year-on-year. This shift toward high-value molecules is central to SMS Pharma’s evolving revenue composition.

The company’s associate, VKT Pharma Private Limited, also delivered robust financials, reporting a PAT of ₹4.93 crore. SMS Pharma’s attributable share stood at ₹1.73 crore, further boosting bottom-line growth and reinforcing the company’s strategic investment outlook.

How Did Backward Integration Affect Gross Margins and Operating Leverage?

One of the biggest contributors to SMS Pharma’s FY25 profitability was the full benefit of its ₹220 crore investment in backward integration over the past three years. With trial runs now complete, commercial production of intermediates for key APIs will begin in Q1 FY26. The impact of this initiative is already visible in margin data: gross margins climbed to 33% in FY25 from 30% in FY24, while Q4 gross margins stood at 30%, up 444 basis points YoY.

This integrated model is expected to reduce input volatility, lower procurement costs, and enhance SMS Pharma’s ability to meet compliance and traceability standards demanded by global clients. The company is targeting additional margin uplift from Q2 FY26 as full production comes online.

Operational leverage also played a role. EBITDA margins expanded to 18% in FY25, up from 16% in FY24, and PAT margins rose to 9%, indicating improved cost absorption across fixed infrastructure.

How Is the Capex Plan Positioned to Fuel Future Growth?

SMS Pharmaceuticals has unveiled a fresh ₹250 crore capex program to be deployed over the next 18 months. The capital will be used to scale the high-value API portfolio, augment capacity for new molecules, and strengthen its Contract Manufacturing Organization (CMO) capabilities. Additionally, a ₹10 crore infusion is planned for the peptide business through a subsidiary investment.

This signals a dual-track growth approach — scaling volume while moving up the value chain. The management has clearly articulated a FY26 target of 20% revenue growth and 20% EBITDA margin, backed by improved production economics and customer stickiness.

This investment also positions SMS Pharma to leverage growing demand from North America, Europe, and emerging markets for integrated suppliers capable of delivering regulatory-compliant, cost-effective APIs across multiple therapeutic classes.

What’s the Broader Market and Sectoral Context for API Players in India?

India’s API segment, historically dependent on imports for key intermediates, has seen accelerated domestic investment since FY21 due to global supply chain shocks and India’s Production Linked Incentive (PLI) schemes. Players like SMS Pharmaceuticals are aligning themselves with the government’s goal of API self-reliance and export competitiveness.

According to industry analysts, companies with backward-integrated models and therapeutic diversity are better placed to weather pricing volatility and regulatory hurdles. With increased scrutiny from global drug regulators and tightening ESG norms, SMS Pharma’s investments in quality infrastructure and compliance readiness further enhance its long-term positioning.

What Does the Dividend Policy and EPS Growth Say About Capital Discipline?

In line with its improved profitability, SMS Pharma’s board has recommended a final dividend of ₹0.40 per share, reflecting a consistent payout philosophy aimed at rewarding shareholders without compromising reinvestment needs. The payout marks a 40% return on face value and reflects confidence in sustainable free cash flow generation.

EPS of ₹8.16 in FY25, up from ₹5.89 in FY24, demonstrates not just profit growth but capital efficiency. The consistency of this improvement across quarters suggests a strong base from which FY26 expansion can be funded without balance sheet stress.

How Did the Stock React and What Is the Sentiment Outlook?

As of May 30, 2025, SMS Pharma’s stock closed at ₹266.40, down 1.47% from the previous session despite strong results. The dip could reflect short-term profit-booking or caution ahead of broader macroeconomic data releases. The stock’s 52-week range spans from ₹175.25 (June 2024 low) to ₹398.00 (September 2024 high), indicating a volatile trajectory largely driven by sectoral trends and institutional activity.

The current market capitalization stands at ₹2,361.69 crore with a free float of ₹816.04 crore. Traded volumes were 2.08 lakh shares with a delivery ratio of 53.90%, suggesting healthy long-term investor participation. The adjusted P/E ratio of 34.82 places the stock at a moderate valuation relative to peers in the mid-cap pharma space.

Institutional sentiment remains cautiously constructive. While valuation may cap immediate upside, the guidance-led visibility into FY26 and high-margin product shifts could serve as catalysts for medium-term rerating. Analysts believe the market will closely watch Q2FY26 numbers, where margin benefits from backward integration are expected to fully materialize.

What Can Investors Expect from SMS Pharma in FY26?

The management’s guidance of 20% topline growth and 20% EBITDA margin for FY26 is backed by credible execution levers — backward integration, customer expansion, and therapeutic diversification. As commercial production begins for new intermediates, cost advantages are expected to widen, making the earnings trajectory more defensible.

Investor interest is also likely to intensify around the company’s CMO strategy and peptides business, as these areas hold potential for higher realizations and entry into more regulated markets. The broader Indian pharma sector’s pivot to innovation-led outsourcing and advanced manufacturing dovetails with SMS Pharma’s roadmap.

For long-term investors, the stock offers a compelling narrative of operational turnaround, strategic clarity, and capacity-backed growth. While near-term market dynamics may create volatility, the company’s fundamentals support a “Buy on Dips” stance, especially around the ₹250–₹260 range.