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The 21st edition of Investor's Edge, released on July 30th, offers compelling insights. This issue highlights key takeaways from Q1FY26 concalls of noteworthy companies across industries. Let's dive in!
The S curve turning to be profitable
“I think one by one on contribution margin, we are at 60%, as you noted. Last year, in the same quarter, we were at 50%, so significant improvement there. We have set high 50s, so we want to just leave some room for quarter on quarter aberrations. But we do think this is the right ballpark for us going forward. With respect to EBITDA, so we're not doing adjusted EBITDA anymore. We're not doing EBITDA before ESOP costs. So of course, this is straight up EBITDA reported GAAP EBITDA. We do think that what we had said earlier about 15% to 20% EBITDA Margin over the next two, three years is still the number to drive towards. And that seems more achievable today than even a few quarters ago, because the contribution margin is very good, and we are seeing that keeping a tight leash on indirect expenses overall does still allow us to grow very well. But as I just said, we may do a little bit more of investments, but this will be more than offset by growth in contribution margin.”
Merchant payments are the disproportionate focus for the company
“I think we've sort of called that out in terms of focus area. So merchant payments are disproportionately the focus. It's the core of the company. So merchant payments and across the span. So I know Paytm probably gets more headlines for smaller merchants and financial inclusion. But what we did want to call out this quarter also is that we cover the entire span, including enterprise merchants, both online and offline. So merchant payments are the core. And there's a huge amount of growth possibilities there, a huge amount of innovation is possible. And we are going to drive that. So in a sense, that is a big focus area. Vijay has mentioned wallet and BNPL earlier. And that is something which is not like a one month or two month thing. But that is something that we are actively working on. On the financial services side, as all of you probably appreciate by now, merchant lending has been fantastic with our partners and really been a star. And we run that business very conservatively. But it just has enormous tailwinds, which we benefit from now that we have got the business model right. And then on the personal loan and credit card side, we just kind of wait for the recovery.”
Four year plan to grow retail loan book @ 25%
“We had set ourselves a retail book growth target of 25% CAGR over the four-year plan period against which as of 30th June-25 our retail asset book growth stood at 28% CAGR. Given our outlook of the business environment and a risk calibrated growth in Rural Business Finance and Two Wheeler Finance business, our YoY Retail Book growth for the quarter stood at 18% supported by strong performances in Farmer Finance disbursements with a 16% YoY growth, a 65% YoY growth in Personal Loans disbursement, a 24% YoY growth in Housing Loans and a 30% YoY growth in SME Finance disbursements. We continue to maintain our focus on sourcing more prime and near prime customers who exhibit credit resilience, which led to the Prime customer share in our Two Wheeler Finance disbursements increasing to 84% in the month of June 25, which stood at 53% for the month of March-24. Our journey towards building a prime-dominant portfolio which showcases resilience across business cycles continues with a strong focus on credit and risk frameworks.”
Gold Loan to be a big cross sell opportunity for the company
“In the last quarter’s call, we had announced our foray into the Gold Loans business through the acquisition of the Gold Loan business of Paul Merchants Finance Pvt. Ltd. I am pleased to inform that the technology systems and people integration was achieved in a short timeframe of around 2 months, leading to an amalgamation of 130 branches, 700+ employees and ~Rs. 1,300 Cr of book. Gold loans, a high yield secured product will add significant value to our retail business franchise going forward. We foresee that this business will serve as a big cross-sell opportunity to our ~65 lacs RGL & MFI and Farm Equipment Finance active customer base and the customers forming a part of our existing customer database of 2.6 Cr+ customers, who have gold loans o/s of over Rs. 16,000 Cr.”
Planning strong expansion to cater the gold loan business well
“We envisage that our field force of 20,000+ officers will force multiply the gold loans lead generation process and direct incoming business to our branches. In the coming quarters we also plan on expanding our geo-presence through branch expansion with ~175 additional locations focused on areas with high cross-sell potential. By the end of FY26, we plan on establishing a distribution strength of 300+ gold loan branches. Many of these branches will be in our new format Sampoorna branches which will sell other products like Micro-LAP, SME loans and Personal loans apart from Gold loans. Apart from North, our expansion locations will be focused in our traditional areas of strength in the eastern and southern states.”
Getting on new launches to cushion the topline impact of Revlimid
“On our U.S. pipeline, we are now closer to commercializing generic Advair and welcome the promulgation signed by the administration for approving U.S. facilities faster. In parallel, we remain committed to launching 2 to 3 peptide assets in this year. We are also preparing for key respiratory launches later in the fiscal year, including generic Symbicort and a couple of more inhalation assets. Normalized Lanreotide full year of gAbraxane, Nilotinib, peptide launches and our respiratory pipeline will cushion our generic Revlimid top line impact and fuel the long-term growth story for the U.S. market. On the supply front, our U.S. business is well diversified with roughly 1/3 of our U.S. revenue from -- each coming from our U.S. facilities, India operations and strategic partners. We have also begun receiving supplies from our U.S. FDA facility in China, further enhancing the scalability and resilience for our North America business. Our China facility now is fully utilized.
Lanreotide has already matched last year's average quarterly sales, and we see room for growth ahead. We expanded our portfolio with 2 key launches, Nano Paclitaxel and Nilotinib, strengthening our presence in complex generics and oncology. We also signed an agreement to launch Cipla's first biosimilar in the U.S. expected in quarter 2 FY '26, a key milestone that marks our entry into this high potential segment.”
Can achieve faster volume growth in FY27
“See, I mean assuming we close FY'26 at 10%-15% and everything in terms of macro, in terms of geopolitical, in terms of global trade war, all these things settle down along with Indian consumption starts to revive, then FY'27 growth could be much higher than 15%- 20% because of the low base of FY'26. And like we said that in terms of capacity, in terms of distribution network, in terms of new products which we launched in last one to two years, the new product pipeline which is there in next 2 years, the new segments like renewable energy, like heavy construction where we are adding more products and we are becoming more aggressive, we are penetrating deeper into these industries. So, yes, I mean FY'27 could be much higher than 15%-20%.”
Looking to make balance sheet liability free not just debt free
“One is that if I generate $100 of EBITDA, okay, my operating cash flow will be similar, right, $9,500. So, we have created four buckets, okay, of $25 each. Number one will go for serving tax, which will go to the government, first bucket. Second bucket will go into CAPEX. We are a growth-oriented company, right. We are looking for newer geographies, newer areas, newer products. So, 20%-25% of our cash flow we want to spend on CAPEX. Third bucket of 25% is shareholder reward in form of dividend or buyback, right. It will depend on the board and shareholder approvals, right. But yes, we do want to distribute more dividend or go for buyback, right. And the last bucket, which is 25%, that is, we are keeping as a buffer, which gets added onto our balance sheet and we repay our liabilities, right. So, if you see that in Q1 also, our current liabilities, which are payables, creditors, are reduced by almost Rs. 400 crores-Rs. 500 crores. So, as we generate more cash, we want to have our balance sheet as totally liability-free. We are debt-free today, but we want to be liability free. And maybe we buy steel on cash and look for some discounts from the steel mills.”
Changed assessment of the current year based on the heightened competition
Due to heightened competitive activity, pricing on the acquisition, higher portfolio attrition and benign real estate market, AUM growth assessment for FY ‘26 is expected to be in the range of 21%-23%.
Our hope would be that by end of Quarter 3 or so, we should be able to go back to, that is why we have not changed our medium-term guidance, while we have changed the assessment for the current year. The reason for that is because of very intense competitive activity, as you see, the disbursements grew by 22% on a Y-o-Y, but AUM growth was same or flat in terms of an absolute number. That was of heightened competitive activities due to rate cut pressure in the segments what we operate. We estimate that it will still flow through for 1 or 2 quarters. After that we are expected to come back to the normal trajectory what we think. That is what we assess as of today.
Investing in people to build the business momentum
“I think on a broad basis, just to add to what Pradeep has mentioned, the employee cost that is at what we have earlier guided, one, building our team as far as the HNI team concerns. Now we already have about 90 team members. And anyway, right now, we have taken a call, we'll go up to 100 team members. We'll restrict to that and see the outcome of this -- broader business outcome point of view. Second, we have been having in mind that to have somebody to build as a business in addition to the existing team of people who could be the driver of this business for the larger growth.
That's something we have been seeing. Of course, this headcount would come partially a little bit in our role, a little bit come in the -- mostly will come in the Sun Life role. That is how we are planning. So headcount will increase, but not actually a significant increase in the cost as a result of that. And then as and when we GIFT City this year, once we convert that into a subsidiary company for which we would take some steps in the current financial year. That may warrant some bit of marginal capital investment, which is not very significant. But however, we may, of course, have the right set of people at least to carry out the compliance-related work as well as if you have to have somebody to build the business, at that point it will take -- anyway that will take about 6 months for us to crystallize it.”
Gross‑margin inflection to ~60 %
So on the gross margins, the business mix has really helped it. As you can see, the access market is our lowest ever, and that has really also helped improve gross margins. And even the product portfolio in the U.S., the product mix has also helped us. But we would say that it is -- we would remain in the range. I think 58% to 60% is a good range for us to remain in.
And on the OpEx, even last quarter, we had mentioned that the H2 was a good run rate, and we will continue at that run rate.
Tariff buffer: one‑third of sales already made in the U.S.; room to ramp shifts
“One‑third of our revenue comes from the Chestnut Ridge facility … we have scaled down from a two‑shift operation to a single‑shift operation and if need be, we can increase our shifts and it will improve capacities that we have in the U.S.”
“Beyond‑generics” pipeline taking shape (nasal sprays, patches, films)
“The first nasal‑spray product has been filed … at least three or four filings will be made this year. We will also have our first patch available for commercial operations by the end of this financial year.”
Medium‑term ambition: debt‑free in 3‑4 years
“From a long‑term perspective, we want to remain debt‑free in the next three to four years … that is what we are working on.”
Broad‑based topline rebound – every vertical except lubes grew double‑digits
“I’m very happy to inform you of an excellent performance in this quarter … revenues have shot up by 22 %, and EBITDA margin has also shot up … all the sectors are doing very good … Paint, thanks to ABG … Pharma … has again grown by around 11 % … Food & FMCG … achieved 14 % – 16 % growth in the current quarter.”
Pharma break‑in faster than planned; INR 35 cr FY26 target intact.
“I’m pleasantly surprised that we could break in much faster … several approvals … will start turning into commercial orders … our set target of ₹35 crores for the current financial year for Pharma is very much achievable.”
Printing bottleneck fixed – label lead time cut from 5 weeks to 10 days.
“With the enhanced capacities in printing and die‑cutting, the label connectivity has improved … instead of 3‑to‑5 weeks waiting, surges in demand can be met within 10 days. Clients ‘are happy this season with our supplies in time’.”
Bold ambition – become a top‑10 Indian developer
“Our ambition to be a leading real‑estate company in the country remains very much in focus… we intend to keep that kind of growth ambition and maybe even accelerate it a bit.”
City‑centric “chief business officer” model for agility
“We have created Chief Business Officers to drive city‑level performance. These leaders are responsible for growth, profitability and delivery within their geographies… This approach… gives us the agility to scale into new markets while maintaining strong operational discipline.”
Business‑development target: another ₹5,000 cr of GDV, 40‑40‑20 across Bengaluru, Ahmedabad, MMR
We are on track to conclude the ongoing business plan of adding new projects with a cumulative top line of around ₹5,000 crores… investment plans are 40‑40‑20 – 40 % each in Bengaluru and Ahmedabad and 20 % in the new market of MMR.”
Scaling Mumbai cautiously but confidently, leveraging Gujarati brand pull
“Mumbai will be seeded in a very smart way… we do believe the brand resonates with the Gujarati community in Mumbai in a very unique way and we want to bring both our second‑home horizontal capability and redevelopment capability to carve out a niche.”
Medium‑term guide reconfirmed: 12‑15 % revenue CAGR, ROCE > 20 %
“We remain committed to that growth of 12 %–15 % in the medium term… It is great to leave when the business is at such strong momentum and when the ROCE has crossed 20 %.”
We have 2 kinds of rhythms that as a company, we go through. One is our annual operating plan, and then it is a 3-year plan. In fact, we are now getting into our next 3-year planning cycle. We just completed the previous 3-year plan. So as a part of the next 3-year plan, there is a movement. As a part of the earlier 3-year plan, at least the good part is many of the milestones, which we had set for ourselves with these 2 brands have broadly been aligned and achieved. So as we look at the next 3-year time line, we have also told the market that both of these brands have to have a higher lift in EBITDA bps compared to the overall portfolio because they are moving from a lower base. So that is the kind of milestone that we have done, which Shailesh refers to as that mid-single-digit EBITDA. And that's kind of the North Star for these 2 brands.”
Strategic Brand Investments Fuel Over 30% B2C Growth, with Focus on Online Visibility & Market Share Gains
“So I think it's a conscious aggressive investment across the brand. In this quarter, for example, in Tommy Hilfiger, I mentioned the F1 movie, and we invested heavily behind that association because one-off time and brand has benefited a lot from that. Also in U.S. Polo and Arrow and Flying Machine also, we have invested heavily in online visibility because online B2C is a very focused priority channel for us and be it the top marketing or the top of the funnel, we have gone ahead and spent money across that. Given the scale and size of the brand U.S. Polo, a lot of that dollar value or the rupee value goes into U.S. Polo to support that growth. And the business in B2C has grown more than 30% and the advertising spend also has higher basis points. So you can assume that the growth in value terms will be quite high. But that's a conscious decision we have taken to gain market share and to keep the brand salient and grow the brands aggressively.”
We hope this deep dive into the Q1FY26 concalls of these dynamic companies has provided you with valuable perspectives. The "Investors' Edge" is designed to equip you with the knowledge to navigate the ever-evolving business landscape.
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Disclaimer: This blog post is for informational purposes only and does not constitute financial advice or a recommendation to buy or sell any securities.
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