Encube Ethicals Limited IPO

01At a glance

What the company does: develops and manufactures topical and transdermal medicines, creams, ointments, gels, sprays, hormone products and patches, in three businesses: its own generics for the U.S., UK and Europe, contract manufacturing for other drug companies, and branded products in India (AP p.3).

Who pays it: U.S. wholesalers, purchasing organisations and pharmacy chains for generics; more than 160 pharmaceutical companies in 50 countries for contract manufacturing; Indian consumers for Soframycin (AP p.3). The top ten customers were 59.74% of FY26 revenue (DRHP p.32).

Why it is raising money: it is not. The offer is entirely a sale by the founder and an investor (AP p.6).

How fast it has grown: revenue from ₹10,859 million in FY24 to ₹18,487 million in FY26, and profit from ₹1,561 million to ₹4,367 million (AP p.7).

The one thing to understand: growth is coming from U.S. generics. That business grew 56.62% a year from FY24 to FY26 and overtook contract manufacturing as the largest line (AP p.3). One site, in Goa, produced 85.12% of FY26 revenue (DRHP p.36).

02The business, in plain words

Topical medicines, creams and ointments applied to the skin, are harder to copy than tablets, because proving that a generic cream works like the original is technically demanding. Companies that master it can earn better margins in markets like the U.S., where each approved generic (an ANDA) is a licence to market the product.

A U.S. pharmacy chain needs a generic steroid cream → Encube, holding an approved ANDA, makes it in Goa and ships it to a U.S. wholesaler → the wholesaler supplies the pharmacy → Encube is paid for each tube, net of discounts and rebates.

The company had commercialised 51 ANDAs in the U.S. and had 43 more in the pipeline, plus 25 dossiers in the UK and Germany, at March 2026 (AP p.3). In India it markets the Soframycin brand, with new powders and sprays (AP p.3).

Earnings equation: Revenue ≈ products approved × units × net price, plus contract manufacturing fees. EBITDA margin was 35.9% in FY26, our arithmetic (AP p.7).

03Where the money comes from

Source: AP p.3.

Products made for outside India were 71.39%, 68.59% and 74.00% of revenue over FY24 to FY26 (DRHP p.28). The top ten CDMO customers were 78.22% of CDMO revenue in FY26 (DRHP p.239).

04The growth record

Source: AP p.7, AP p.8. Margins are our arithmetic.

Our arithmetic: revenue grew about 30.5% a year from FY24 to FY26 and profit after tax about 67.3% a year (our arithmetic, AP p.7). The offer document puts return on capital employed at 18.47% in FY24, 23.66% in FY25 and 32.30% in FY26 (DRHP p.140).

05What the growth is made of

U.S. and European generics added ₹5,104 million of revenue over two years, against ₹1,926 million from contract manufacturing and ₹512 million from India (AP p.3, our arithmetic). Sale of products grew 41.10% in FY26, while sale of services, contract work, fell 20.5% (DRHP p.391). EBITDA margin rose over the same period (AP p.7).

06Earnings quality

Operating cash flow rose less than profit in FY26 to ₹3,031 million against ₹4,367 million, and the document notes significant working-capital needs (AP p.7, DRHP p.40). Some U.S. subsidiaries, Encube Ethicals Inc, Tioga Research and EnZen Therapeutics, have made losses (DRHP p.52).

07The balance sheet

Source: AP p.7.

Borrowings are small against net worth (AP p.7). Investment outflows of about ₹2,500 to 2,650 million a year went into plant and R&D (AP p.8).

08What the money is for

Nothing, for the company. The objects are to carry out the offer for sale and to list the shares; the sellers bear the expenses (AP p.6).

09Who is selling

Source: AP p.1. The Frontier amount is our arithmetic from the ₹30,000 million total.

10Promoters

The promoter is Mehul Madhusudan Shah, founder, chairman and managing director, who has been on the board since incorporation in 1995 (AP p.5). Mehul Madhusudan Shah is vice-president for the western region of the Indian Drugs Manufacturers' Association (AP p.5).

11Who already owns it

Source: AP p.6.

12What changed just before the IPO

• Generics overtook CDMO as the largest business in FY26 (AP p.3).
• Contract services fell 20.5% in FY26 (DRHP p.391).
• Profit rose 75% in FY26 (AP p.7).
• Share split: the face value was sub-divided from ₹10 to ₹1 in May 2026 (DRHP p.106).
• Last allotment: 1,900 shares at ₹325 each on 22 May 2026, on exercise of employee stock options (DRHP p.106).
• Auditor: Walker Chandiok & Co LLP was appointed on 28 September 2023 on completion of the term of Shaparia Mehta & Associates LLP (DRHP p.97).
• Public company: converted from a private limited company in June 2026 (DRHP p.273).

13Capacity and expansion

In FY26 the Goa facility ran at 77.45% of capacity, the hormone unit at 40.28%, and the Indore facility at 96.67% (DRHP p.49). The company receives no money from the offer for expansion (AP p.6).

14Market size and industry structure

The Frost & Sullivan report cited in the offer document puts the global topical-drug market at $59 billion in FY26, forecast to reach $86 billion by FY31, with generics 78% of it; the topical CDMO market was $5 billion (AP p.5). Those forecasts are Frost & Sullivan's, and newboard has not tested them.

15Competitive position

What the document claims, and what it rests on:

• Technical depth in topicals and patches, a harder-to-copy dosage form (AP p.3).
• A deep U.S. portfolio: 51 commercialised ANDAs and 43 in the pipeline (AP p.3).
• A broad CDMO client base of over 160 companies (AP p.3).

Against that: dependence on one site in Goa, U.S. pricing pressure and regulatory inspection risk (DRHP p.29, DRHP p.36, DRHP p.39).

16Peers the company named

The document gives an industry P/E range of 20.73 to 97.49, average 37.43, for its listed pharmaceutical peers (DRHP p.133). For Encube it gives FY26 earnings per share of ₹14.38 basic and ₹14.36 diluted, net asset value per share of ₹64.29 and return on net worth of 25.21% (AP p.7). No P/E is possible for the company until a price band is set.

17Risks, in plain words

• One site. Goa produced 85.12% of FY26 revenue; a regulatory action there would hit most of the business (DRHP p.36).
• U.S. regulation. Plants are inspected by regulators and customers; a failed inspection could stop shipments (DRHP p.29).
• Customer concentration. The top ten customers are about 60% of revenue (DRHP p.32).
• Generics pricing. Competition and price erosion in U.S. generics (DRHP p.39).
• Currency. Most revenue is earned abroad (DRHP p.28, DRHP p.44).

18Litigation and regulatory matters

The litigation summary was not read in detail for this study.

19Related-party transactions

Not read in detail for this study.

20What the offer document does not say

In the sections read for this study, the document does not give:

• The outcome of the latest U.S. FDA inspection of the Goa site, in the pages read.
• Why contract services revenue fell in FY26.
• Profit by business.
• The litigation position, not read here.
• The price band, lot size or issue dates, which is normal at DRHP stage.

21Five questions for management

1. What was the outcome of the most recent U.S. FDA inspection at Goa, and when is the next expected?
2. How much of FY26 generics revenue came from the five largest products?
3. Why did contract services revenue fall 20.5% in FY26?
4. What backup capacity exists if Goa is disrupted?
5. What are the U.S. subsidiaries' losses, and what is the plan for them?

2Sources and cited facts

This study was read from 2 documents the company filed. The 57 figures it cites are listed under the document each came from, with the page and the sentence as printed.