Zydus margin falls 7.70 points as costs outpace revenue growth
Revenue rose 21.96% year on year, but higher expenses, interest and depreciation pulled net profit down 34.90%.
Filed 11 Aug 2026, 13:24 IST · Zydus Lifesciences Ltd (ZYDUSLIFE)
Key takeaways
- Consolidated operating margin fell 7.70 percentage points year on year to 24.07% as expenses grew 35.73%, ahead of revenue growth of 21.96%.
- Net profit declined 34.90% year on year despite higher revenue, with interest up 84.18%, depreciation up 132.97% and the tax rate 4.15 percentage points higher.
- Operating margin remained 1.40 percentage points above the 22.67% median for 61 Healthcare peers that had reported the quarter.
Price around the results
Revenue growth did not translate into operating profit
Consolidated revenue grew 21.96% year on year and 5.67% sequentially, but operating profit fell 7.62% and 24.47%, respectively. Expenses rose faster than revenue in both comparisons, increasing 35.73% year on year and 20.96% sequentially. The company’s presentation also said EBITDA margin was 24.1%, down 770 basis points year on year.
Interest and depreciation added to the profit squeeze
Interest increased 84.18% year on year and 26.83% sequentially, while depreciation rose 132.97% and 9.11%, respectively. The tax rate also increased to 26.35%, up 4.15 percentage points year on year and 7.16 percentage points sequentially, so the quarter’s net profit decline was not flattered by a lower tax rate. Other income contributed 9.35% of pre-tax profit, making it a noticeable but not dominant part of reported earnings quality.
Margin gave back the previous quarter’s rebound
Operating margin fell from 33.67% in Q4FY26 to 24.07% in Q1FY27, after improving from 26.46% in Q3FY26. It was also below the 31.77% recorded in Q1FY26, although it remained 1.40 percentage points above the 22.67% median among 61 Healthcare peers that had reported. The sequential reversal is sharper than the year-on-year decline because expenses grew 20.96% against revenue growth of 5.67%.
Management pointed to continued investment and capacity building
Management said organic capex was Rs 5,852 million during the quarter and that it was continuing to invest in the specialty and innovation pipeline. The company said its MedTech business was enhancing capabilities in focused therapies and that it had adopted a therapy-led approach in emerging markets. Management also said it targets net carbon neutrality by 2035 and net water neutrality by 2028.
Q1FY27 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q1FY27 | Q4FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹8,017 cr | ₹7,587 cr | +5.67% | +21.96% |
| Other income | ₹126 cr | ₹-264 cr | — | -33.60% |
| Expenses | ₹6,088 cr | ₹5,033 cr | +20.96% | +35.73% |
| Operating profit | ₹1,929 cr | ₹2,554 cr | -24.47% | -7.62% |
| Operating margin (%) | 24.07% | 33.67% | — | — |
| Interest | ₹156 cr | ₹123 cr | +26.83% | +84.18% |
| Depreciation | ₹555 cr | ₹508 cr | +9.11% | +132.97% |
| Profit before tax | ₹1,344 cr | ₹1,659 cr | -18.98% | -31.23% |
| Tax | ₹354 cr | ₹318 cr | +11.24% | -18.39% |
| Net profit | ₹990 cr | ₹1,341 cr | -26.16% | -34.90% |
| EPS (₹) | ₹9.35 | ₹12.65 | -26.09% | -35.87% |
Operating margin of 24.07% compares with a Healthcare sector median of 22.67% across 61 peers that have reported Q1FY27.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
Guidance & outlook
- The company targets net carbon neutrality by 2035.
- The company targets net water neutrality by 2028.
- The company plans to increase waste disposal via co-processing by 40% for India operations by 2026.
Expansion
- Organic capex was Rs. 5,852 million during the quarter.
New initiatives
- The company is continuing to invest in its specialty and innovation pipeline.
- MedTech is enhancing capabilities in focused therapies.
- In emerging markets, the company adopted a focused, therapy-led approach to build a more agile portfolio.
- The company is creating water recharge structures as part of its water management programme.
Competition
- Key Indian brands continued to hold dominant market share.
Problems & risks
- EBITDA margin declined 770 basis points year on year to 24.1%.
What to watch
- Whether operating margin recovers from 24.07% after the 9.60-percentage-point sequential decline.
- Whether expenses grow slower than revenue after rising 35.73% year on year against revenue growth of 21.96%.
- Whether interest and depreciation moderate from year-on-year increases of 84.18% and 132.97%.