Natural Capsules Limited has received a temporary closure order from the Department of Drug Controller for its Pondicherry manufacturing plant on December 26, 2025. The pharmaceutical company disclosed this regulatory action to stock exchanges under SEBI listing regulations.

Regulatory Action Details

The Department of Drug Controller issued the temporary closure direction following an alleged violation by the company. According to the disclosure, Natural Capsules Limited supplied materials to a customer whose drug license had expired, constituting a regulatory contravention.

Company Response and Next Steps

The company has acknowledged the regulatory order and is taking immediate corrective measures. Natural Capsules Limited stated it will submit all relevant documents to the Department of Drug Controller for revocation of the closure direction at the earliest possible time.

The management has committed to keeping stock exchanges informed of any material developments relating to this matter as they occur.

Financial and Operational Impact

The temporary closure affects the operations of the Pondicherry manufacturing plant. However, the company has indicated that the financial impact of this closure is yet to be ascertained. The duration of the temporary closure will depend on the regulatory review process and the company's compliance with corrective measures.

Regulatory Compliance

This disclosure was made pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The company provided detailed information as required under the regulatory framework, ensuring transparency with stakeholders regarding this material development.

Natural Capsules Limited , a leading manufacturer of capsules and APIs, reported a challenging second quarter for FY26, with a net loss of Rs 6.99 crores despite a modest revenue growth. The company faced headwinds from US tariff impacts on HPMC capsule exports and technical challenges in scaling up its API facility.

Financial Performance

Natural Capsules reported a quarterly revenue growth of 1.33% to Rs 45.80 crores. However, the company posted negative EBITDA margins of 1.93%, resulting in a net loss of Rs 6.99 crores for Q2 FY26.

Capsule Business Performance

The company's capsule business showed resilience despite external challenges:

• Gelatin capsule production reached 4.74 billion units in Q2 FY26, up from 4.66 billion in Q1.
• HPMC capsule production decreased to 67 million units in Q2 from 969 million units in Q1, primarily due to US tariff impacts.
• The company maintains an EBITDA margin of 11.5% to 12% in its capsule division.

API Division Challenges

The API division faced significant hurdles:

• Revenue from the API division was approximately Rs 1.22 crores in Q2.
• The division reported an operational loss of Rs 11.47 crores, including depreciation and interest.
• Technical challenges in scaling up from 10KL to 60KL fermentation batches have impacted production.

Strategic Initiatives

To address current challenges, Natural Capsules is undertaking several initiatives:

1. Engaging Chinese consultants to improve fermentation yields and process efficiency.
2. Exploring contract manufacturing opportunities to utilize spare API capacity.
3. Diversifying export markets for capsules, with increased focus on Brazil and other countries.
4. Continuing efforts to obtain US FDA and European regulatory approvals for the API facility.

Revised Guidance

Due to the ongoing challenges, Natural Capsules has revised its annual revenue guidance:

Management Commentary

Sunil Mundra, Managing Director of Natural Capsules, stated, "We are demonstrating resilience through disciplined investment capacity, ongoing R&D efforts, and strengthening regulatory compliance. These short-term headwinds do not alter our long-term strategy or the fundamentals of our business."

Future Outlook

Despite current challenges, the company remains optimistic about its long-term prospects:

• The new HPMC production line is scheduled for commissioning by the end of Q3 FY26.
• Management expects to resolve API production issues by Q4 FY26.
• The company aims to achieve cash break-even in the API division at a revenue of about Rs 100 crores with 7-8% EBITDA margin.

Natural Capsules continues to navigate through a complex business environment, balancing short-term challenges with long-term growth strategies. The company's ability to overcome technical hurdles in API production and capitalize on potential opportunities in the US market post-tariff resolution will be crucial for its future performance.