Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AAA/Stable/Crisil A1+’ ratings on the bank facilities and commercial paper programme of Sun Pharmaceutical Industries Ltd (Sun Pharma).

 

The ratings continue to reflect the leadership position of Sun Pharma in the domestic formulation segment, the ramp-up in its global specialty business, its strong presence in the regulated generic markets, expanding share in the emerging and rest-of-the-world markets (excluding India and the US) and robust financial risk profile. These strengths are partially offset by exposure to intense pricing pressure and regulatory risk in the domestic and regulated markets.

 

Consolidated revenue grew 11% on-year in the nine months of fiscal 2026 and 9% on-year in fiscal 2025, driven by healthy growth in the domestic and emerging and rest-of-the-world markets. This was supported by ramp-up in the sale of specialty products, led by new launches and high volume, even as growth in the US formulation markets was subdued amid continued pricing pressure in the generic segment.

 

The operating margin was healthy at 31.4% in the nine months of fiscal 2026 and 29.3% in fiscal 2025, supported by healthy revenue growth and increasing contribution of specialty products to the revenue mix (21% in nine months of fiscal 2026). Crisil Ratings expects the revenue to register high single-digit growth annually over the medium term, led by ramp-up in sales of key specialty products, including the recently launched Leqselvi and UNLOXYCT. The operating margin should sustain at 26-27% over the medium term after factoring in the research and development (R&D) expenses (forming 6-8% of revenue), lag in accrual of commensurate returns on specialty products vis-à-vis marketing expenses and exposure to foreign currency risk. Moreover, the impact of the policy changes in US formulation market around the Most Favored Nation (MFN) regulations for specialty drugs on Sun Pharma’s operating margin will be monitorable.

 

The financial risk profile remained strong as indicated by robust adjusted networth of over Rs 62,000 crore as on March 31, 2025, moderate debt and sizeable cash surplus of over Rs 25,000 crore as on December 31, 2025. Debt (including lease liabilities) increased from Rs 2,362 crore as on March 31, 2025, to around Rs 5,200 crore as on September 30, 2025, driven by the acquisition of Checkpoint Therapeutics Inc (Checkpoint), which was completed in May 2025. The financial risk profile is expected to remain strong over the medium term with moderate annual capital expenditure (capex) of Rs 2,000-2,500 crore for routine maintenance along with the company’s announced greenfield capex of Rs 3,000 crore for setting up a manufacturing facility in Madhya Pradesh. The working capital will be funded through cash accrual and liquid surplus. While the company may undertake strategic acquisitions, any sizeable acquisition and its impact on the profile of Sun Pharma will remain monitorable. Earlier in May 2025, Sun Pharma completed its acquisition of Checkpoint for $355 million. Checkpoint is a commercial-stage immunotherapy and targeted oncology company focused on novel treatments for patients with solid tumour cancer. The acquisition was followed by the launch of the acquired drug UNLOXYCT in the US markets in January 2026.

 

On July 24, 2025, Sun Pharma had announced that its subsidiaries, Sun Pharmaceutical Industries, Inc. (SPII) and Taro Pharmaceuticals U.S.A., Inc. (Taro) entered into a settlement agreement with putative End Purchaser Plaintiffs (EPPs) without any admission of guilt or violation of any statute, law, rule or regulation, or of any liability or wrongdoing, pursuant to which Taro and SPII agreed to pay an aggregate amount of $200.0 million (equivalent to Rs 1,711.2 crore), where there was a possibility for reduction if more than a certain percentage of the total insured class members opted out of the putative class, in exchange for a full release of all claims asserted against them (and all of their current and former parents, affiliates, predecessors and successors as well as their current and former directors, officers, employees and representatives). The court issued its order of approval in January 2026 dismissing the EPP matters on their merits, in their entirety, with prejudice.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of Sun Pharma and its various subsidiaries, joint ventures (JVs) and associates, collectively known as Sun Pharma, as these entities have considerable operational and financial linkages. For JVs and associates, a moderate integration approach is followed—Crisil Ratings factors in the share of profit from JVs, as also any incremental investment required by them. Intangibles (such as brands and trademarks) and goodwill on consolidation have also been amortised over five years.

 

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

Key Rating Drivers - Strengths

Leadership position in domestic formulations

Sun Pharma is the leader in the domestic formulation segment (contributed 33% to revenue in the nine months of fiscal 2026) with a market share of ~8.4% as on December 31, 2025 (source: All India Organisation of Chemists and Druggists MAT Data for December 2025). Its leading position in the chronic segment is backed by specialisation in technically complex products, strong brand equity and large product portfolio. Sun Pharma has 31 brands among the top 300 brands in the domestic market. It also ranks among the top 10 consumer healthcare companies in India and enjoys strong brand equity for key products such as Revital (vitamin and mineral supplement) and Volini (pain reliever). These brands give it a competitive edge and have helped lay the foundation for the global over-the-counter (OTC) business. Sun Pharma sells OTC products in over 20 international markets. Its key therapeutic areas in domestic formulations are neuropsychiatry, cardiology, gastroenterology, pain-analgesics and anti-infectives. The company continues to enjoy a dominant position in these segments.

 

Strong presence in the US and other regulated markets with robust specialty products portfolio

The US, which contributed around 29% to revenue in the first nine months of fiscal 2026, is among the key geographies for Sun Pharma. The company ranks 13th among the generic pharmaceutical companies in the US. It has a robust product pipeline and had filed 666 abbreviated new drug applications (ANDAs) and 71 new drug applications (NDAs) of which 116 ANDAs and 14 NDAs were pending approval from the US Food and Drug Administration (FDA) as on December 31, 2025. With extensive R&D over the past several years, Sun Pharma has established a robust portfolio of specialty products in the US and other regulated markets. The company launched its complex generic product, Lenalidomide (gRevlimid), in the US in fiscal 2023, which has supported growth even amid pricing pressure in the US generic segment. Successful launch of Deuruxolitinib (Leqselvi) in July 2025 and UNLOXYCT (through Sun Pharma’s acquisition of Checkpoint) in January 2026 is expected to further strengthen specialty product offerings over the medium term. Healthy market position in the other regulated markets of Europe, Japan, Canada and Australia is supported by the company’s strength in the specialty product, generic and OTC segments.

 

However, amid regulatory volatility, the impact of the policy changes in US formulation market around the MFN regulations for specialty drugs on Sun Pharma’s operating margin will be monitorable.

 

Strong financial risk profile

Driven by a healthy adjusted networth and moderate debt, the adjusted gearing was low at 0.05 time as on September 30, 2025. Large cash accrual will suffice to cover moderate capex (including the greenfield capex) and incremental working capital requirement, thus keeping the capital structure comfortable over the medium term. Debt protection metrics were healthy with adjusted interest coverage at over 50 times for the first nine months of fiscal 2026. Crisil Ratings expects these metrics to remain steady over the medium term. While large cash flow and sizeable liquid surplus will ensure strong financial flexibility, any substantial, debt-funded capex will be monitorable.

Key Rating Drivers - Weaknesses

Exposure to regulatory risk

Sun Pharma faces regulatory risk with instances of adverse observations for its plants. In December 2022, the US FDA issued an import alert for the company’s facility in Halol, Gujarat. Following this, the company also received a warning letter for its facilities at Dadra and Mohali and the facility at Baska was classified as ‘Official Action Initiated’ (OAI) by US FDA. This will impact sales of the facilities until the non-compliances are resolved. Four of its facilities (at Taonsa, Karkhadi, Paonta Sahib and Dewas) continue to be subject to certain provisions of the consent decree of permanent injunction. Resolution of pending regulatory issues and sustained compliance remain monitorable. Crisil Ratings notes that Sun Pharma provided for a sizeable settlement amount in the last quarter of fiscal 2022 for alleged violation of antitrust laws with respect to ANDAs for three drugs: Valganciclovir, Valsartan and Esomeprazole. This settlement is without any admission of guilt or wrongdoing. Crisil Ratings also understands that Sun Pharma is engaged in other ongoing litigations and there are tax liabilities under dispute as well, the impact of which may not be ascertainable at present. Any sizeable settlements or adverse regulatory outcomes materially impacting cash surplus will be monitorable.

 

Susceptibility to intense competition

Sun Pharma faces intense competition in the US generics market with the introduction of authorised generics, customer consolidation, faster pace of ANDA approvals by the US FDA, and healthcare cost-containment measures by the US government. Also, players in the US and Europe remain vulnerable to pricing pressure on account of entry of several cost-competitive Indian players. Increasing competition in international markets and R&D cost could constrain the operating margin.

Liquidity Superior

Crisil Ratings expects annual cash accrual of Rs 9,000-10,000 crore to be sufficient to cover near-term debt obligation and incremental working capital requirement. Organic capex is expected to remain moderate at Rs 2,000-2,500 crore annually along with the announced greenfield capex of Rs 3,000 crore and is likely to be funded through cash accrual and liquid surplus. Liquid surplus was strong at over Rs 25,000 crore as on December 31, 2025. Any significant payout towards legal or regulatory claim settlements or large acquisition will remain monitorable.

ESG Profile

• Sun Pharma targets 35% reduction in absolute carbon emissions by fiscal 2030 (scope 1 and 2) and 10% water consumption reduction by fiscal 2025, compared to its fiscal 2020 base year. In alignment to this goal, it has reduced absolute scope 1 and 2 emission by ~25% and water consumption by ~32% in fiscal 2025 compared with the base year
• In fiscal 2025, share of renewable energy in its overall energy mix increased to ~50% compared with ~45% in the previous fiscal
• It has also set a target of disposing 30% of hazardous waste via co-processing by fiscal 2025 and exceed this target by disposing 47% of hazardous waste through this route in fiscal 2025
• Sun Pharma is one of the few pharmaceutical players in India to conduct a Taskforce on Climate-related Financial Disclosures (TCFD) based scenario analysis for identification of physical risks and transition risks and a Taskforce on Nature-related Financial Disclosures Framework (TNFD) based biodiversity risk identification (TNFD covered 5 of its 35 plants)
• Additionally, it reported zero workforce fatalities and has relatively high share of employees trained on skill upgradation and safety measures. Sun Pharma’s gender diversity improved marginally from 12% in fiscal 2024 to 13% in fiscal 2025 though it remains lower than the peer average
• Sun Pharma’s governance structure is characterised by ~50% of its board comprising independent directors, ~25% woman directors, presence of lead independent director, high attendance of independent directors at board and committee meetings (~96%), dedicated investor grievance redressal system and extensive financial and ESG related disclosures

 

There is growing importance of ESG among investors and lenders. The company’s commitment to ESG principles will play a key role in enhancing stakeholder confidence and ensure ease of raising capital from markets where ESG compliance is a key factor.

Outlook Stable

Sun Pharma will continue to benefit from healthy revenue growth in the Indian formulations, specialty business and international generics markets, driven by its strong position, diverse geographical base and comfortable product pipeline. Robust revenue growth and strong profitability will ensure financial risk profile remains comfortable over the medium term, supported by large cash accrual and substantial cash surplus.

Rating sensitivity factors

Downward factors:

• Any sizeable revenue decline, or operating profitability dropping below 15-17%
• Any stretch in working capital cycle or large, debt-funded capex or acquisitions impacting debt metrics; for instance, debt to OPBDIT in excess of 0.7-0.9 time
• Any material adverse regulatory outcome, leading to significant payouts for settlement of claims, impacting liquidity and debt metrics.

About the Company

Sun Pharma was formed as a partnership in 1982 in Vapi, Gujarat, to manufacture drugs. It was reconstituted as a limited company in 1993. Dilip Shanghvi is the promoter. Sun Pharma is one of the largest Indian pharmaceutical companies with a leading position in the high-growth chronic segments. Its product mix comprises formulations and bulk drugs with the former accounting for nearly 95% of revenue. Product acquisitions by the company have helped establish its global specialty business. Acquisitions in the generics business helped broaden the global product basket and enhance presence in key geographies.

 

In the first nine months of fiscal 2026, the company reported revenue of Rs 43,850 crore (Rs 39,620 crore in the corresponding period of fiscal 2025) and net profit of Rs 8,799 crore (Rs 8,811 crore).

Key Financial Indicators (consolidated numbers) 

Particulars	Unit	2025	2024
Revenue	Rs crore	52,664	48,560
Adjusted profit after tax (APAT)*	Rs crore	11,032	9,457
APAT margin	%	20.9	19.5
Adjusted debt/adjusted networth*	Times	0.04	0.05
Interest coverage	Times	74.11	60.99

*Adjusted for intangibles and goodwill amortisation

Any other information: Not applicable