India Ratings Upgrades Glenmark Pharma's Bank Loans to IND AA+/Stable

India Ratings and Research (Ind-Ra) has upgraded Glenmark Pharmaceuticals Ltd’s (GPL) long-term bank loans to ‘IND AA+’ from ‘IND AA’ with a Stable Outlook, while affirming the short-term bank loans at ‘IND A1+’. The agency has also rated GPL’s additional bank loans. The upgrade reflects Ind-Ra’s expectation of improved financial visibility at Ichnos Glenmark Innovation (IGI), a 100% subsidiary of GPL, in FY26 and beyond after the ISB 2001 licensing agreement in July 2025. GPL recognized USD560 million from this deal in FY26, out of the total USD700 million received. The balance amount is likely to be received in two installments of USD70 million each in FY27 and FY28. This transaction is expected to significantly reduce IGI’s dependence on GPL for capital support. Consequently, Ind-Ra believes GPL is unlikely to make any material incremental investments in IGI, supporting its profitability profile and enhancing annual cash flows by around USD70 million over FY27-FY28. The upfront proceeds provide IGI with funding visibility over the next three years, while also creating additional growth capital for GPL’s core business operations. The rating upgrade also reflects a likely improvement in GPL’s operating profitability over FY27-FY30, its diversified business profile, and comfortable credit metrics, led by a strong liquidity position and financial flexibility. The company’s ability to sustain revenue and profitability growth while maintaining comfortable cash flows and ROCE, along with the prudent utilization of proceeds from the licensing transaction, are key rating monitorables. GPL’s management expects the consolidated net adjusted leverage (net adjusted debt/EBITDA) to remain negative over the couple of years. The agency also expects the net leverage, on a consolidated basis, to remain strong over FY27-FY29, led by healthy operating profitability and significant cash built up on the books. GPL recognized around USD560 million as revenue in FY26 from the AbbV ie out-licensing deal for ISB 2001, with the remaining amount to be recognized in coming years. The inflow significantly strengthened GPL's balance sheet and liquidity, helping it achieve a net cash position with zero gross debt at FYE26 while maintaining a healthy cash buffer. The consolidated net adjusted leverage was negative 0.13x in FY26 (FY25: 0.34x) and the interest coverage (EBITDA/gross interest) was 21.9x (11.4x). Ind-Ra has factored in a capex of ₹900 million in FY27 (FY26: ₹1,360 million; FY25: ₹750 million). Furthermore, the EBITDA margin is likely to improve in FY27, driven by a moderate R&D spend (7%-8% of sales vs past five-year average of 9%), the ramp-up of Ryaltris sales, a greater focus on the high-margin India business, niche launches in the US market, and positive operating leverage in the Europe and Latin America markets. GPL’s management expects a revenue of ₹17,000 million-18,000 million and an EBITDA margin of 21%-22% in FY27. The EBITDA margin is likely to expand further in FY28 and FY29, led by the launch of differentiated products across geographies. The company's US revenue increased significantly in FY26, primarily due to the recognition of upfront and deferred income from the out-licensing agreement for ISB-2001 (USD560 million in FY26; USD70 million each in FY27 and FY28). GPL launched 13 products in FY26 across various segments, further strengthening its portfolio. The company marketed 225 generic products in the US and had 53 ANDA applications pending FDA approval, including 26 Paragraph IV filings, in 1QFY27. The company's India business delivered a weak performance in FY26 (down 17% yoy), due to a one-time GST-related adjustment, discontinuation of select non-core brands, and underperformance of the diabetes segment. However, secondary sales continued to outperform the IPM, indicating that the end-market demand was healthy. GPL’s India business delivered strong revenue growth of 15.5% yoy in 1QFY27.