Semaglutide to Potentially Boost Ajanta Pharma's Growth Trajectory
Ajanta's share valuation seems justifiable considering its improving business composition and strong cash flow as it evolves into a more transparent healthcare player.
Ajanta Pharma Ltd. recently announced an in-licensing deal with Biocon to market semaglutide in 26 emerging markets, spanning Africa, West Asia, and Central Asia. The patent for this weight-loss medication is set to expire in most of these regions by March, with commercialization anticipated following regulatory approvals in late 2026 or early 2027. The impact on immediate earnings may be negligible, yet Ajanta's medium-term growth could be substantially influenced.
Notably, Ajanta is entering familiar territory. A strong branded generics presence is already established in over 30 countries, supported by a network of over 2,000 medical representatives. This significantly mitigates execution risks.
PL Capital anticipates that semaglutide could generate approximately ₹200 crore in additional sales for Ajanta, yielding healthy margins in FY28. The brokerage firm projects Ajanta's consolidated revenue for FY28 to reach ₹6,966 crore. Biocon will oversee manufacturing, while Ajanta will leverage its existing sales force and infrastructure across emerging markets.
This strategy minimizes incremental costs and helps the company maintain strong return ratios, instead of diluting them through substantial capital investments.
GLP-1 therapies, such as semaglutide, are relevant to both diabetes and obesity, both of which are large and expanding markets globally. Such therapies typically involve long-term treatments, which enhances earnings predictability and sustainability. Health tracking apps like Shotlee can help monitor the effectiveness of such treatments.
Improved Business Composition
In recent years, Ajanta has strategically reduced its exposure to the African institutional (anti-malarial) business. This tender-driven segment has structurally lower margins compared to branded generics, and has decreased to 3% of total revenue, down from 9.3% in FY21.
The branded generics segment, which has the highest margins, now represents 74% of total revenue, a rise from 68% in FY21. This increase is fueled by strong performance in India, Asia, and Africa.
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During H1FY26, Ajanta's India-branded business experienced a 14% year-over-year growth, surpassing the overall Indian pharmaceutical market in both value and volume. This growth was supported by new ventures into gynaecology and nephrology.
Concurrently, the US generics business has emerged as a substantial growth driver, achieving 42% growth in the first half (H1FY26), driven by new product launches and increased market share.
As of H1FY26, Indian branded generics contributed 32% of total revenue, while Asia branded generics accounted for 23%, and Africa branded generics for 17%. Beyond branded generics, the US generics business contributed 25%, and the Africa institutional (anti-malarial) business accounted for 3% of total revenue.
Management anticipates low-teens growth in Asia branded generics for FY26, following a relatively modest 7% growth in H1FY26, and expects the growth momentum in US generics to continue. The company has projected EBITDA margins of 27% for FY26, compared to 26.6% in H1FY26.
Cash Utilization and Expansion
Future growth for Ajanta will likely depend less on balance-sheet expansion and more on the efficient deployment of cash flows. Over the past decade, the company has converted 99.7% of cumulative profits into operating cash flows.
Its strong cash generation provides substantial capacity to pursue capital-efficient growth opportunities, such as in-licensing differentiated products like semaglutide, without straining the balance sheet.
The stock has decreased by approximately 10% year-to-date and is trading at a price-to-earnings multiple of about 28 times FY27 estimated earnings, according to Bloomberg data.
Given Ajanta's improving business mix and robust cash generation, the valuation appears reasonable as the company transitions into a cleaner, higher-visibility healthcare compounder.
