HDFC Mutual Fund schemes increased their aggregate holding in Alkem Laboratories to 5.017% on August 24, 2026. The acquisition pushed the fund’s stake above the 5% threshold mandated for disclosure under SEBI regulations.

The purchase of 25,019 shares was executed through the open market. This transaction raised the fund’s total shareholding from 59,73,409 shares (4.996%) to 59,98,428 shares.

Regulatory Disclosure

The disclosure was filed in compliance with Regulation 29(1) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. HDFC Asset Management Company Limited, the investment manager for HDFC Mutual Fund, submitted the details to Alkem Laboratories and the stock exchanges where the company is listed.

The filing confirms that none of the acquired shares carry encumbrances such as pledges or liens. There were no changes in voting rights otherwise than by shares, nor any acquisition of warrants or convertible securities.

Portfolio Composition

The stake is held across multiple HDFC Mutual Fund schemes acting as persons acting in concert (PAC). Key funds involved in the holding include:

• HDFC BSE 500 ETF
• HDFC BSE 500 Index Fund
• HDFC Arbitrage Fund
• HDFC Value Fund
• HDFC Balanced Advantage Fund
• HDFC Large and Mid Cap Fund
• HDFC Pharma and Healthcare Fund
• HDFC Mid Cap Fund

Capital Structure Context

Alkem Laboratories has a paid-up equity share capital of ₹23,91,30,000, comprising 11,95,65,000 equity shares of ₹2 each. The total diluted share/voting capital remains unaffected as no convertible instruments were involved in this transaction.

Alkem Laboratories reported a significant year-on-year decline in consolidated net profit for the first quarter of FY27 (ended June 30, 2026). Net profit fell 21.7% to ₹5,200 million from ₹6,643 million in the corresponding period last year. This decline occurred despite an 10.9% growth in revenue from operations, which rose to ₹37,402 million from ₹33,711 million in Q1FY26. Management clarified that the profit degrowth was primarily due to taxation reasons linked to the switch to the new tax regime.

The divergence between top-line growth and bottom-line contraction highlights persistent pressure on operating efficiency. EBITDA grew modestly by 3.7% to ₹7,661 million from ₹7,391 million, but the EBITDA margin contracted significantly by 140 basis points to 20.5% from 21.9% in the prior year quarter. This margin compression indicates that cost structures or mix shifts are eroding profitability faster than revenue expansion can offset.

Financial Performance

On a standalone basis, Alkem Laboratories reported a net profit of ₹5,699.8 million for continuing operations, down from ₹6,222.6 million in Q1FY26. Standalone revenue from operations for continuing operations rose 12.5% to ₹26,677.3 million from ₹23,721.7 million. The standalone results exclude discontinued operations related to the Generic Business, which was transferred to wholly owned subsidiary Alkem Wellness Limited effective October 1, 2025.

Geographic and Segment Highlights

Domestic business sales grew 10.3% year-on-year to ₹24,978 million, contributing 67.1% to total sales. According to IQVIA (SSA) data, Alkem registered a volume/value growth of 13.2% year-on-year, outperforming the Indian Pharmaceutical Market (IPM) growth of 12.2% by 100 basis points. The company outperformed the market in seven key therapy areas, including Anti-infectives, Gastro-intestinal, and Pain management.

International sales rose 16.0% to ₹12,223 million. This was driven by robust growth in non-US markets, where sales surged 34.5% to ₹4,785 million from ₹3,556 million. US business sales grew more moderately by 6.5% to ₹7,439 million. During the quarter, the company received five ANDA approvals in the US, including one tentative approval.

Strategic Developments and Tax Regime

The Board of Directors, in its meeting held on August 14, 2026, approved the unaudited financial results for the quarter ended June 30, 2026. A key strategic update is the company's decision to opt for the new tax regime under Section 115BAA of the Income-tax Act, 1961, starting from FY27. This decision follows amendments introduced under the Finance Act, 2026, allowing the set-off of available Minimum Alternate Tax (MAT) credit under the new regime. Consequently, tax expense for the current quarter has been recognized based on enacted rates applicable under the new regime. Management guided that the consolidated tax rate will range between 30% and 32% for the full year, higher than the standalone rate, due to deferred tax asset non-creation on loss-making entities like Enzene.

Additionally, the Group, through its wholly owned subsidiary Alkem Medtech Private Limited, acquired a majority stake in Occlutech Holding AG, Switzerland, on July 16, 2026. As this acquisition was completed subsequent to the end of the reporting quarter, it has no impact on the consolidated financial results for Q1FY27. Management targets ₹400 crore in sales with breakeven EBITDA from Occlutech for the current fiscal year, with integration benefits expected to materialize over the next three to four years.

Operational Insights from Earnings Call

During the earnings conference call, management provided further context on the financial performance:

• Trade Generics Drag: Domestic growth was dragged down by flattish performance in the Trade Generics segment, which faced intense competition and stricter credit policies. Branded generics grew 12%. Management expects Trade Generics growth to recover in subsequent quarters.
• Cost Pressures: Employee costs rose over 16% due to annual increments, the addition of 1,200 medical representatives, and operational ramp-up at the Enzene CDMO facility. Other expenses increased due to foreign currency translation effects, with subsidiaries' expenses converting at rates nearly 10% higher than the previous year.
• CDMO Investments: The US CDMO operation incurred approximately ₹60 crore in operational expenses for the quarter. Management stated that annualized revenue of $25 million to $30 million is required to reach breakeven, with expectations for revenue contribution in FY28. The facility focuses on monoclonal antibodies and clinical trial supplies.
• Regulatory Update: The Daman facility received an OAI status from the US FDA. Approximately 45% of US revenue comes from this facility. Management confirmed that product supplies continue without interruption and corrective actions are underway.
• Biosimilars: Seven biosimilar products have been launched in India, generating approximately ₹150 crore in annual sales. The denosumab biosimilar approval in the US has been delayed by a few months. Xgeva biosimilar launch in Europe is expected within three months.

What the Numbers Show

The primary analytical observation is the sharp divergence between revenue growth and net profit performance. While Alkem Laboratories managed to grow its consolidated top line by nearly 11%, net profit fell by over 21%. This disconnect is driven by the compression in EBITDA margins, which failed to keep pace with revenue expansion. Furthermore, R&D expenses increased significantly to ₹1,502 million (4.0% of revenue) from ₹1,184 million (3.5% of revenue) in the prior year quarter, indicating higher investment intensity that weighed on operating margins. The data indicates that while demand supports sales volume, particularly in non-US international markets, input costs or pricing pressures are impacting operating leverage, leading to a notable erosion in profitability at both operating and bottom-line levels. Additionally, the shift to the new tax regime has structurally altered the effective tax rate, contributing to the bottom-line decline despite stable pre-tax profits.

Source: https://lodr-files.dhan.co/lodr-inputs/Company/INE540L01014/912f8a3b-e5b7-4454-acc8-385dc3710057.pdf