Shilpa Medicare is moving beyond its traditional active pharmaceutical ingredient business as formulations, biologics and contract development and manufacturing organisation operations become larger contributors to growth. The company is adding capacity in oncology APIs and peptides while building a pipeline of biosimilars, novel drugs and complex formulations.
The shift is already visible in its financial performance. Quarterly revenue rose 43% year over year to Rs 469 crore in Q1FY27, the company's highest ever. EBITDA increased 42% to Rs 139 crore, with the margin at 30%, while profit after tax more than doubled to Rs 101 crore.
At the same time, Shilpa has reduced its net debt-to-EBITDA ratio to 1.3x from 6.7x three years ago, giving it greater financial flexibility to invest in newer businesses. The company expects limited capital expenditure over the next three years, while several recently commissioned manufacturing assets still have room to increase utilisation.
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The key question after a 238% gain in the stock in 2026 is whether these new growth engines can sustain the pace of earnings growth.
API Expansion
APIs are the raw materials used to make medicines. Shilpa supplies oncology and non-oncology APIs, specialty polymers and peptides to pharmaceutical manufacturers in more than 50 countries.
The API business remains the company's largest revenue contributor, although the focus is shifting towards more complex products. Third-party API revenue increased 15% year over year to Rs 216 crore in Q1FY27, accounting for 47% of revenue.
Its specialty portfolio includes ursodeoxycholic acid, or UDCA, tranexamic acid, oncology APIs, peptides and GLP-1 ingredients. UDCA is used in medicines for liver and gallstone disease, while tranexamic acid is used to prevent or control excessive bleeding. Specialty polymers are used in products such as eye drops.
Shilpa has added more than 15 molecules to its oncology API pipeline, targeting drug patent expiries through 2032. Three late-stage new chemical entity CDMO programmes are expected to enter commercial production from FY28.
Capacity expansion is therefore a key part of the plan. Shilpa is increasing reactor capacity and batch sizes for products such as UDCA and tranexamic acid. A dedicated oncology API manufacturing block is due to be commissioned in FY27.
The company is also building a large solid-phase peptide synthesis facility in India, with completion targeted for FY27. The facility will manufacture peptide-based ingredients, including those used in the weight-loss drug market.
Formulation Growth
Finished formulations are becoming the second major growth engine. These include tablets, capsules, injectables, oral films and transdermal patches that can be sold directly or through marketing partners.
Formulation revenue more than doubled to Rs 198 crore in Q1FY27, accounting for 42% of revenue. Growth came across geographies, supported by the commercial scaling of proprietary products and demand for oncology injectables in the US.
Domestic formulation revenue rose 179% to Rs 24 crore, helped by Noduca, the company's non-alcoholic fatty liver disease product. European formulation revenue increased 84% to Rs 57 crore, taking the business to an annual run rate of more than Rs 200 crore.
The US business generated Rs 45 crore, supported by products including Pemetrexed Ready-to-use and Bortezomib Ready-to-use.
The pipeline also provides potential growth over the next two years. Shilpa expects to initiate global Phase II clinical trials for its non-alcoholic fatty liver disease programme in FY27. It has received European Medicines Agency approval for its Rotigotine transdermal patch for Parkinson's disease, with commercialisation in Europe expected in FY27.
The company also expects to launch Ondansetron Extended-Release Injection in FY27 and plans to launch generic versions of Abraxane, Enzalutamide and Abiraterone in FY28.
More than 50% of Shilpa's formulation requirements are supported by its internal API production. This reduces its dependence on external suppliers and could support profitability as formulation volumes increase.
Biologics Pipeline
Biologics and biosimilars currently account for a smaller share of revenue but form an important part of Shilpa's longer-term strategy.
Segment revenue rose 42% to Rs 52 crore in Q1FY27, accounting for 11% of total revenue. The business covers biosimilars, novel biological entities, recombinant human albumin and microbial and mammalian manufacturing platforms.
Shilpa has added four biosimilar programmes to its pipeline: Nivolumab, Pembrolizumab, Daratumumab and Dupilumab. These target large global therapeutic markets and could create additional commercial opportunities as development progresses.
Aflibercept biosimilar is another opportunity, with a planned India launch in FY27 through partnerships with three ophthalmic companies.
Recombinant human albumin is another long-term asset. Global Phase III trials across India and Europe are entering the execution phase in the first half of FY27.
Shilpa has an exclusive European commercialisation agreement with Orion Corporation for therapeutic use. Development and regulatory milestones under the agreement are expected to generate incremental income.
The company has also filed a US Drug Master File for excipient-grade recombinant human albumin and distributed samples to US clients. This creates a potential near-term non-therapeutic revenue stream while global Phase III trials progress.
Shilpa is also working on two novel biological entity programmes with mAbTree Biologics and Alveolus Bio. Its first antibody-drug conjugate is expected to enter first-in-human studies in FY27, supported by a dedicated facility.
CDMO Expansion
The CDMO business adds another source of potential growth.
Shilpa develops processes and manufactures products for global pharmaceutical companies. It has onboarded customers across the US, Europe and Japan and secured two new late-stage projects with Japanese pharmaceutical companies in Q1FY27.
The company has also signed a US healthcare customer for specialised polymers used in eye-care products, with commercial execution expected from the second half of FY27. A European customer is expected to begin commercial purchases of an active drug ingredient during the same period.
Shilpa now has more than 25 active CDMO projects across small molecules, peptides and biologics. Converting these projects into commercial contracts could add to manufacturing revenue over time.
Earnings Test
Shilpa's growth story now depends on converting its investments and development pipeline into commercial revenue.
Near-term growth drivers include new oncology API capacity, higher volumes of UDCA and tranexamic acid, peptide manufacturing, US oncology injectables, European formulation launches and new CDMO contracts.
Q1FY27 results show that the expansion is already contributing to revenue and profitability. Return on capital employed increased to 12.5% in Q1FY27 from 8.8% in FY25. Further increases in utilisation at newly commissioned plants could support operating leverage and improve ROCE.
At 74x earnings, Shilpa trades below Divi's Laboratories at 84x, Laurus at 100x and Sai Life Sciences at 93x, based on the multiples cited in the analysis.
The valuation leaves earnings growth as an important monitor. The company will need its newer businesses and capacity additions to translate into sustained commercial revenue.
The key risks include delays in clinical trials or partner execution, pricing pressure from competition, higher raw material costs and a slower-than-expected increase in utilisation across new facilities.
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