Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA+/Stable/Crisil A1+’ ratings on the bank facilities and commercial paper of Alkem Laboratories Ltd (Alkem).

 

On February 13, 2026, Alkem in a binding offer has offered to acquire a majority stake in Switzerland-based medical device company - Occlutech Holding AG (Occlutech), through its wholly owned subsidiary Alkem Medtech Pvt Ltd. Alkem Medtech proposes to enter into a share purchase agreement with Occlutech and the proposed transaction is expected to be concluded by the first quarter of fiscal 2027. The implied equity valuation of Occlutech is EUR 180.70 million (~Rs 1,952 crore), with Alkem proposing to acquire up to 55%, translating into an estimated cash outflow of ~Rs 1,100 crore. The transaction is proposed to be funded entirely through internal accruals/cash on hand. The proposed acquisition marks Alkem’s entry into the advanced structural heart device segment. Occlutech, with Rs 487 crore in CY25 revenues, has a global presence through a diversified distribution network and a portfolio of high-quality, regulatory-compliant products. The proposed acquisition is expected to diversify Alkem’s business beyond its core pharmaceutical portfolio and enhance its presence in the high-margin medical devices segment. The transaction is subject to customary conditions, including foreign direct investment (FDI) approvals in Italy, Sweden, and a precautionary filing in France.

 

Alkem continues to maintain a strong financial risk profile, supported by annual operating cash accruals of ~Rs 1,500 crore and robust free cash and equivalents of Rs 4,081 crore as on September 2025. Crisil Ratings believes that with the proposed acquisition (~Rs 1,100 crore) and ongoing capex plans of ~Rs 700 crore, Alkem is expected to maintain comfortable liquidity and moderate leverage metrics, underpinned by its healthy cash generation from operations.

 

The ratings continue to reflect the established position of Alkem in the domestic formulations market and strong financial risk profile. These strengths are partially offset by high dependence on the acute therapeutic segments and susceptibility to regulatory changes, including price revisions under the drug price control order.

 

Revenue continues to grow at a healthy pace of 13% on-year to Rs 11,108 crore in the first nine months of fiscal 2026 supported by healthy growth across all markets. The domestic market sales (contributing 67% to revenues in the third quarter of fiscal 2026) grew by 5.5% while sales to the US market (contributing 19% of revenue the third quarter of fiscal 2026) grew by 18%. The company also continues to increase its presence in the rest-of-world markets (contributing 10% of revenue in the third quarter of fiscal 2026), with focus on expanding geographical reach and capitalising growing opportunities in the semi-regulated markets. Crisil Ratings believes, revenue is expected to grow by 4-5% annually, supported by new product launches and backed by price hikes undertaken across the product portfolio and its leadership position in key therapeutic areas. Operating margin consistently improved and stood at 22.5% in the first nine months of fiscal 2026 on account of stable input costs and focused investments in value accretive products. Going forward, with stable input costs, continued focus on cost optimisation and improving share in chronic therapies, the operating margin may improve to 19-20% over the medium-term.

 

The financial risk profile is strong, with adjusted gearing of 0.11 time as on September 30, 2025. Total debt from banks stood at Rs 1,962 crore of which long term debt from banks comprised Rs 468 crore, lease liabilities of Rs 394 crore and working capital borrowings of Rs 1,494 crore as on September 30, 2025. Gearing is expected to remain below 0.1 time over the medium term. While capital expenditure (capex) requirement in fiscal 2026 should remain elevated at Rs 900-950 crore, it is expected to be prudently funded.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of Alkem and its 32 subsidiaries and one associate company. This is because all these entities, collectively referred to as Alkem, have significant operational linkages and a common management.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

Established market position in domestic market

Alkem ranks fifth as per the IQVIA Moving Average Total [MAT], March 2025 (source: Company Annual Report), in the domestic formulations market, with a strong position in acute therapies. The company has maintained its leading rank in anti-infective therapy and is among the top three players in gastrointestinal, vitamins/minerals/nutrients and pain/analgesics therapies. Its leading brand, Clavam, is the second-largest selling brand in the molecule category (as per IQVIA MAT March 2025). Alkem has other leading brands, Pan, Pan-D, A to Z NS, Xone and Taxim-O, among the six brands that feature in the top 100 revenue-generating brands in India.

 

Strong financial risk profile

The financial risk profile is strong, with adjusted gearing of 0.11 time as on September 30, 2025. Total debt from banks stood at Rs 1,962 crore of which long term debt from banks comprised Rs 468 crore, lease liabilities of Rs 394 crore and working capital borrowings of Rs 1,494 crore as on September 30, 2025. Gross current assets were ~250 days as on September 30, 2025, driven by receivables and inventory of 77 and 96 days, respectively. Capex requirement of Rs 750 crore in fiscal 2026 is expected to be prudently funded. The company is also proposed to acquire a 51-55% stake in Occlutech Holdings AG for a total outflow of ~Rs 1,100 crore. Factoring the same, the financial risk profile and liquidity profile should remain strong over the medium term, supported by expected gearing of below 0.2 time and steady cash flow.

Key Rating Drivers - Weaknesses

High dependence on the acute therapeutic segment and the domestic market

Sales in the domestic market formed ~70% of the overall revenue for Alkem in fiscal 2025. Also, a sizeable proportion of this revenue (over 80% in fiscal 2025) is derived from the slower growing acute therapeutic segment, such as anti-infectives and pain/analgesics. This exposes the company to pricing pressure amid intense competition, with about 30% of the products under price control. In recent years, Alkem has ventured into the fast-growing, anti-diabetes, dermatology, respiratory neurology and oncology segments. The company has about 12,500 sales representatives, of which about 15% are in the chronic segment. Although Alkem has created separate divisions to focus on the chronic therapeutic segment, contribution from the acute sector may continue to be significant over the medium term. Revenue diversification into the chronic segment in the domestic as well as international markets will remain a key monitorable.

 

Exposure to risks related to regulatory changes

The company is susceptible to regulatory changes in the Indian and global markets. Addition to list of drugs covered under national list of essential medicines affect product pricing and, hence, profitability, though the extent of impact may differ. In the international market, regulatory risks are manifested by increasing scrutiny and inspections by the United States Food and Drug Administration (USFDA), European Medical Agency and Therapeutic Goods Administration, Australia. As on date, none of the company’s facilities have any outstanding observations from the USFDA. Continued regulatory compliance and product launches would be critical for revenue growth and will remain a key monitorable.

Liquidity Strong

Cash accrual, expected at over Rs. 1500 crore per annum, should be sufficient to cover capex of ~700-750 Crore in fiscal 2026 amid nominal debt repayment obligation over the next few years. Liquidity is also supported by unencumbered cash surplus of Rs 4,081 crore as on September 30, 2025 (excluding real estate investment). 

Outlook Stable

The business risk profile of Alkem will remain stable over the medium term, led by its established market position in the domestic market. Healthy cash generation and prudent capital spending will help sustain healthy financial risk profile over the medium term.

Rating Sensitivity Factors

Upward Factors

• Revenue growth of over 15% per annum, with increased revenue contribution from the international market
• Strong and sustained improvement in the operating margin, led by higher share of chronic therapies in the domestic market
• Stable financial risk profile, backed by efficient working capital management

 

Downward Factors

• Operating margin dropping below 13% on a sustained basis
• Subdued revenue growth because of high competition or downward price revisions
• Larger-than-expected debt-funded capex or acquisition or real estate investments.

About the Company

Incorporated in 1973 and promoted by the late Mr Samprada Singh and Mr Basudeo N Singh, Alkem is among the top 10 players in formulations market in India. It is present in various therapeutic segments, including antibiotics, non-steroidal anti-inflammatory drugs, gastroenterology and antioxidants. The company is also present in chronic segments, such as neuropsychiatry, anti- diabetes, respiratory, dermatology, and urology. cardiovascular and oncology. It exports to the US, countries in the Asia-Pacific region, Latin America, Africa and the Commonwealth of Independent States.

 

Manufacturing facilities for formulations are in Baddi, Himachal Pradesh; Indore, Madhya Pradesh; Sikkim; Daman, Pune, Maharashtra. Facilities for active pharmaceutical ingredients are in Mandva and Ankleshwar in Gujarat and in California, USA. Also, Alkem has three research and development facilities across India and the US.

 

The company is listed on the Bombay Stock Exchange and the National Stock Exchange. As on December 31, 2025 the promoters and their entities held 51.20%, mutual funds held 9.97%, individuals held 21.54% and the remaining was held by others.

 

In the first nine months of fiscal 2026, the company reported revenue of Rs 11,108 crore (Rs 9,821 crore in the corresponding period of fiscal 2025) and net profit of Rs 2,736 crore (Rs 2,137 crore).

Key financials (consolidated)

As on/For the period ended March 31		2025	2024
Operating income	Rs crore	12,964	12,668
Adjusted PAT*	Rs crore	2,215	1,811
Adjusted PAT margin	%	17.1	14.3
Adjusted debt/adjusted networth	Times	0.11	0.12
Adjusted interest coverage	Times	24.3	22.7

*Adjusted for amortisation of intangibles and goodwill

Any other information: Not Applicable