Dr Reddy’s Q2 Results: Net Profit Falls 36% To Rs 925 Crore As US Sales Decline, Margins Recover To 20.6%

Dr. Reddy's Laboratories reported a 36% year-on-year decline in its net profit for the September quarter of FY27, as lower revenue from North America weighed on earnings against a high base created by strong sales of generic Revlimid in the previous year.

However, the pharmaceutical company delivered a strong sequential recovery, with profit more than doubling from the June quarter as operating margins improved and a one-time provision related to semaglutide eased.

Dr Reddy's Q2 Results FY27: Net Profit Slumps 36% To Rs 925 Crore, Margins Rebound

The Hyderabad-based drugmaker's profit attributable to equity holders stood at Rs 925 crore in Q2 FY27, compared with Rs 1,437 crore in the corresponding quarter last year. On a quarter-on-quarter basis, profit rose from Rs 444 crore in Q1 FY27, reflecting an improvement in operating performance.

Dr Reddy's Q2 Earnings: Revenue Falls 1.5% YoY To Rs 8,671 Crore

Revenue from operations declined 1.5% year-on-year to Rs 8,671 crore in the September quarter. However, revenue increased 7.4% sequentially, recovering from the softer performance reported in the June quarter.

The contrasting year-on-year and quarter-on-quarter trends highlight the pressure on the company's North American business, alongside stronger growth in India and emerging markets. While the fading contribution from a high-value generic drug weighed on the annual comparison, other markets helped support overall revenue.

North America Sales Drop 23% As Revlimid Benefit Fades

North America remained a key pressure point for Dr. Reddy's during the quarter, with revenue from the region falling 23% year-on-year to Rs 2,490 crore. The decline was largely linked to the high base of the previous year, when sales of generic Revlimid had provided a significant boost to revenue and profitability.

The normalisation of this contribution affected the company's reported performance, highlighting the impact that product-specific opportunities can have on pharmaceutical companies operating in the US generics market. Pricing pressure and changes in the contribution of high-value products can also influence growth and margins in this segment.

Despite the weakness in North America, Dr.. Reddy's reported growth across its India and emerging markets businesses, helping offset some of the pressure on consolidated revenue.

India Revenue Rises 17%, Emerging Markets Grow 24%

Revenue from India increased 17% year-on-year to Rs 1,850 crore, while emerging markets revenue rose 24% to Rs 2,060 crore during the September quarter. The growth in these markets provided support as North American sales weakened. It also highlighted the contribution of Dr.. Reddy's businesses beyond the US generics market to its overall performance.

For investors, the regional performance remains an important factor to track, as the pace of growth in India and emerging markets could help cushion the impact of fluctuations in North America.

Dr.. Reddy's EBITDA Margin Recovers To 20.6% After Semaglutide Provision

Dr.. Reddy's operating performance improved sequentially in Q2 FY27, with earnings before interest, tax, depreciation and amortisation (EBITDA) reaching Rs 1,780 crore. The EBITDA margin stood at 20.6%, compared with 16.3% in the June quarter.

The recovery followed a Rs 240-crore provision recorded in Q1 FY27 related to semaglutide active pharmaceutical ingredient (API) quality issues. The provision included inventory write-downs and associated costs, which weighed on profitability in the previous quarter.

Gross margin also improved to 52.1% in Q2 FY27 from 46.5% in Q1 FY27. The improvement in both gross and EBITDA margins indicated a recovery from the preceding quarter's cost-related pressure.

Although the year-on-year decline in profit remained significant, the sequential improvement suggests that the impact of the earlier one-off charge eased during the September quarter. However, the fading benefit from generic Revlimid continued to affect the comparison with the previous year.

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