Novartis India Ltd Reports Declining Quarterly Performance Amid Negative Financial Trend

Quarterly Financial Performance Highlights

In the latest quarter, Novartis India’s net sales declined by 7.6% to ₹85.90 crores, a reversal from previous periods where sales growth had been relatively flat or mildly positive. This contraction in revenue has exerted pressure on profitability, with the company’s profit after tax (PAT) plunging by 36.8% to ₹16.09 crores. Operating profit before depreciation, interest and taxes (PBDIT) also hit a low of ₹22.36 crores, reflecting margin compression and operational challenges.

The operating profit to net sales ratio dropped to 26.03%, the lowest in recent quarters, underscoring the squeeze on earnings quality. Earnings per share (EPS) correspondingly fell to ₹6.52, marking a significant decline from prior levels. Additionally, profit before tax excluding other income (PBT less OI) stood at ₹20.90 crores, the lowest recorded in the recent quarterly cycle.

Financial Trend Shift and Efficiency Metrics

Novartis India’s financial trend parameter has shifted from flat to negative over the last three months, with the score tumbling from +3 to -9. This negative trend is a cause for concern, signalling deteriorating fundamentals. The company’s debtors turnover ratio has also declined to 7.28 times, the lowest in the half-year period, indicating slower collection efficiency and potential working capital stress.

On a more positive note, the company’s return on capital employed (ROCE) remains robust at 17.94% for the half-year, the highest in recent periods. This suggests that despite the current headwinds, Novartis India continues to generate reasonable returns on its invested capital, a factor that may provide some cushion against the ongoing challenges.

Stock Price and Market Performance

The stock closed at ₹782.95 on 29 January 2026, down 2.22% from the previous close of ₹800.75. The share price has been volatile, with a 52-week high of ₹1,099.90 and a low of ₹744.95. Intraday trading on the day saw a high of ₹823.50 and a low of ₹780.10, reflecting investor uncertainty amid the weak quarterly results.

When compared to the broader market, Novartis India’s stock returns have underperformed the Sensex over the medium to long term. While the Sensex has delivered an 8.5% return over the past year, Novartis India’s stock has declined by 12.2% in the same period. Over three and five years, the stock’s cumulative returns of 26.1% and 20.8% lag behind the Sensex’s 38.8% and 75.7% respectively. The 10-year return is also negative at -0.55%, contrasting sharply with the Sensex’s robust 236.5% gain.

Mojo Score and Analyst Ratings

Novartis India’s current Mojo Score stands at 26.0, reflecting a deteriorated outlook. The Mojo Grade has been downgraded from 'Sell' to a more severe 'Strong Sell' as of 18 August 2025, signalling heightened caution among analysts. The market capitalisation grade remains low at 3, consistent with the company’s small-cap status and limited liquidity.

This downgrade reflects the negative financial trend and the sharp decline in quarterly profitability, which have overshadowed the company’s previously stable performance. Investors should weigh these factors carefully when considering exposure to this stock.

Sector Context and Industry Challenges

The Pharmaceuticals & Biotechnology sector has faced mixed fortunes recently, with some companies benefiting from innovation and export growth, while others grapple with pricing pressures and regulatory challenges. Novartis India’s negative quarterly performance contrasts with some peers who have managed to sustain revenue growth and margin expansion.

Given the sector’s competitive dynamics and evolving regulatory landscape, Novartis India’s recent results highlight the importance of operational efficiency and product portfolio strength in maintaining profitability. The company’s declining debtor turnover ratio and margin compression suggest that it may be facing headwinds in both market demand and cost management.

Outlook and Investor Considerations

Looking ahead, Novartis India will need to address its revenue contraction and margin pressures to restore investor confidence. The strong ROCE indicates that the company’s capital allocation remains effective, but improving sales growth and operational efficiency will be critical to reversing the negative financial trend.

Investors should monitor upcoming quarterly results closely for signs of stabilisation or further deterioration. The stock’s recent underperformance relative to the Sensex and the sector suggests that it may remain under pressure unless there is a clear turnaround in fundamentals.

Conclusion

Novartis India Ltd’s latest quarterly results reveal a clear shift to negative financial performance, with declining sales, shrinking margins, and reduced profitability. While the company maintains a strong ROCE, the overall financial trend and market response suggest caution for investors. The downgrade to a 'Strong Sell' rating by analysts further emphasises the challenges ahead.

For investors seeking exposure to the Pharmaceuticals & Biotechnology sector, it is prudent to consider the company’s current headwinds alongside potential alternatives that demonstrate stronger fundamentals and growth prospects.

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