Cipla Q3 Results: Why Did This Pharma Stock’s Net Profit Fall 57%?

Synopsis: Cipla’s Q3 net profit fell 57% YoY to Rs. 674 cr due to a Rs. 1,107 cr acquisition of diabetes drug rights and a Rs. 276 cr rise in gratuity and leave liabilities under India’s new labour codes.

This is one of the leading Indian pharmaceutical companies known for its wide range of generic medicines and active pharmaceutical ingredients, serving markets across many countries is now in the spotlight after it reported Q3 results with a net profit decline of 57%.

With a market capitalisation of Rs. 1,06,577 cr, the shares of Cipla Ltd are currently trading at Rs. 1,319.40 per share, declining 5% in today’s market session, making a low of Rs. 1,303.80, down from its previous close of Rs. 1,371.55 per share.

Q3 Result Highlights 

YoY performance

Revenue from operations is flat at Rs. 7,074 cr in Q3FY26 from Rs. 7,073 cr in Q3FY25. Total expenses increased from Rs. 5,378 cr to Rs. 6,111.8 cr. Net profit down by 57% from Rs. 1,583 cr to Rs. 674 cr over the same period. 

QoQ performance 

Revenue from operations fell by 7% to Rs. 7,074 cr in Q3FY26 from Rs. 7,589 cr in Q2FY26. Total expenses increased from Rs. 6,004.8 cr to Rs. 6,111.8 cr. Net profit down by 50% from Rs. 1,353 cr to Rs. 674.56 cr over the same period. 

Reason for the fall 

Cipla’s stock experienced a significant drop of 57% in net profit primarily due to a combination of large one-time financial outlays and increased liabilities impacting investor sentiment. 

During the quarter ended 31st December 2025, the company paid Rs. 1,107.28 crore to acquire perpetual rights for manufacturing and marketing Galvus and Galvus combination brands for type 2 diabetes, pursuant to a trademark license agreement with Novartis Pharma AG. 

While this acquisition strengthens Cipla’s portfolio, the size of the payment represented a substantial cash outflow, raising concerns among investors about short-term liquidity and return on investment.

Additionally, the introduction of India’s New Labour Codes, effective 21st November 2025 resulted in an increase in Cipla’s gratuity and leave liabilities by Rs. 275.91 crore, primarily due to the redefinition of “wages” for employees and contract labour. 

The company classified this as an exceptional item in its consolidated financial results, highlighting its non-recurring but material impact. The combination of this large exceptional expense and the acquisition cost led the market to reassess Cipla’s near-term financial performance, triggering the sharp decline in its share price.

Key Highlights for the Quarter

Cipla delivered strong growth across key markets during the quarter, with One-India reporting a 10% YoY increase, and the overall chronic portfolio rising to 62.3% of the market mix. In North America, quarterly revenue reached $167 million, while the One Africa prescription business secured the No. 2 rank in the market. Emerging Markets and Europe maintained momentum, posting their fourth consecutive quarterly revenue above $100 million, with a 7% YoY growth in USD terms.

The company continued to invest in innovation, with R&D expenditure rising 37.4% YoY to Rs. 494 cr, representing 7% of sales, supported by increased product filings and development initiatives. Cipla also maintained a strong net cash position of Rs. 10,229 cr, with debt primarily consisting of lease liabilities, reflecting a solid financial position to support future growth.

About the company 

Cipla is a healthcare company built on the foundation of care, guided by its purpose, “Caring for Life.” The company operates in 74 markets, offering over 1,500 products across multiple therapeutic categories and more than 50 dosage forms, while focusing on making healthcare more affordable in key markets such as India, South Africa, and the U.S, as well as other emerging economies.

It demonstrates strong financial health, with a ROCE of 22.7% and ROE of 17.8%, reflecting efficient capital utilisation and shareholder returns. The company has a very low debt-to-equity ratio of 0.01 and a PEG ratio of 0.76, suggesting the stock may be undervalued relative to its growth. 

With a stock P/E of 19.5 versus an industry P/E of 29.3, it appears attractively priced. The company has delivered impressive profit growth of 28.7% CAGR over the last five years while maintaining a healthy dividend payout of 24.8%, highlighting both growth and shareholder-friendly returns.

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