Natural Capsules Ltd had a difficult start to FY27. The company saw a clear fall in revenue in the first quarter, while its net loss became larger. At the same time, other income rose sharply by 556%. This jump may look very strong at first glance, but it does not mean that the core business had a strong quarter.
For Q1 FY27, revenue from operations stood at ₹48.71 crore, down 17% from the same quarter last year. On a quarter-on-quarter basis, revenue rose 8%. The company also saw EBITDA at ₹1.12 crore, down 16% year-on-year. EBITDA margin, however, stood at 2.30%, up 2 basis points from the year-ago quarter.
The biggest concern was the net loss. Natural Capsules posted a net loss of ₹5.74 crore in Q1 FY27, wider by 15% from ₹4.96 crore in Q1 FY26. EPS came at negative ₹5.55, also 15% worse on a year-on-year basis.
Other income rises 556%
One of the most notable figures from the quarter was other income. It rose 556% year-on-year to ₹2.35 crore from ₹0.36 crore in Q1 FY26. On a quarter-on-quarter basis, other income rose 208%.
This rise gave some support to the final result, but investors should look at it with care. Other income is not the same as revenue from the main business. Revenue comes from the company’s core products and services, while other income can come from sources outside normal operations.
That is why the 556% rise should not be treated as proof of a major improvement in the business. The more important point is that revenue fell 17% and the company still had a net loss of ₹5.74 crore.
Finance cost puts pressure on profit
Finance cost was another major issue for Natural Capsules. It rose 97% year-on-year to ₹4.97 crore from ₹2.53 crore in the same quarter last year. On a quarter-on-quarter basis, finance cost rose 72%.
This sharp rise matters because the company’s EBITDA was only ₹1.12 crore. In simple terms, the business had a small operating profit before interest and other items, but finance cost alone stood at ₹4.97 crore.
This helps explain why the net result remained weak. Even though the company had some help from higher other income, the large finance cost put heavy pressure on the bottom line.
The numbers also show why revenue growth alone is not enough. Natural Capsules needs better sales, stronger operating profit and lower finance pressure if it wants a clear return to profit.
EBITDA gives one small positive sign
There was one positive point within the weak quarter. EBITDA rose 251% from the previous quarter. It moved from a very low base, so this rise needs some context. Even after that sharp quarter-on-quarter rise, EBITDA was still down 16% year-on-year at ₹1.12 crore.
The EBITDA margin stood at 2.30%, which was 2 basis points higher than the same quarter last year. On a quarter-on-quarter basis, the margin improved by 159 basis points.
This shows that the company did get some support from better realisations and a pass-through of higher input costs. However, the margin remains very thin. A 2.30% EBITDA margin leaves little room for a rise in finance cost or other expenses.
So, the margin result is better than it may seem from the loss figure, but it is still far from a strong level.
ERP change affected sales
The company also faced a short-term issue due to a new ERP system. Natural Capsules put the new system in place close to the end of the quarter. This caused some disruption to billing and dispatch.
As a result, sales from the final five days of the quarter moved to Q2 FY27. The company said this had a modest effect on the reported revenue figure.
This detail is important because the 17% revenue fall does not tell the full story by itself. Part of the weakness came from a timing issue caused by the ERP change.
Management also said the latest quarter should not be compared directly with the previous quarter. Q4 FY26 had the benefit of deferred inventory dispatch after a plant shutdown in Puducherry.
HPMC business faces demand uncertainty
Natural Capsules also faces some uncertainty in its HPMC capsule business. Demand has been erratic, while duty uncertainty in the US market has added pressure.
To make better use of its capacity, the company temporarily changed one HPMC production line to gelatine capsule production. Management expects a second line to follow next month.
This move shows that the company is trying to adjust its production mix based on market demand. It may help the company use its factories better while HPMC demand remains uncertain.
However, the long-term picture for HPMC remains important. A stable recovery in this part of the business could support revenue growth, but weak US demand or duty changes could continue to affect volumes.
API business moves ahead
The API business is another area that could matter for Natural Capsules in the years ahead. The company has made progress here despite some short-term pressure.
Geopolitical issues and currency moves hurt African export volumes routed through merchant exporters. A stronger Chinese yuan and a weaker Indian rupee also added pressure to this part of the business.
At the same time, Natural Capsules started its first batch under a contract manufacturing deal with Fermbox Bio in August. It also signed a new deal with a Mumbai-based client.
The company has also completed prednisolone synthesis at gram scale. Full backward-integrated production is expected by September. A fermentation step has also moved to an enzymatic route, which should help improve yield and lower cost.
These steps could become important if the API business gets more scale over time.
Regulatory progress adds another positive
Natural Capsules has also started the process for a WHO GMP application. An audit is expected by the end of Q2 FY27. The company has also appointed a Chief Operating Officer for its API business. The new executive has more than 30 years of industry experience.
Regulatory approval can help the company access more customers and markets, especially in the pharmaceutical supply chain. But this is a future opportunity rather than a benefit that has already changed the Q1 numbers.
Investors may therefore want to watch the next few quarters for proof that these new efforts can add real revenue and profit.
What investors should watch next
The Q1 FY27 result gives a mixed picture. Revenue is weak, the net loss is larger and finance cost is much higher. At the same time, the EBITDA margin has held up, other income has risen sharply, and the company has made progress in its API plans.
The most important factor now is core revenue. If sales recover in Q2 and the ERP issue no longer affects dispatch, the company may show a better top line. Management has also said that capsule demand has remained firm into Q2 FY27, with better visibility across segments.
The next key factor is finance cost. A 97% year-on-year rise is hard to ignore. Even a recovery in EBITDA may not lead to a strong profit unless the interest burden comes under control.
The bigger picture
Natural Capsules’ Q1 FY27 result is not a simple growth story. The 556% rise in other income is the headline number, but the core figures tell a more cautious story.
Revenue fell 17% to ₹48.71 crore. EBITDA fell 16% to ₹1.12 crore. Finance cost rose 97% to ₹4.97 crore. Net loss widened 15% to ₹5.74 crore. Other income rose 556% to ₹2.35 crore, while EBITDA margin moved up 2 basis points to 2.30%.
The company does have several possible growth areas, such as APIs, HPMC capsules and new contract manufacturing deals. Yet these plans need to show up in sales and profit before the Q1 weakness can be called a temporary phase.
For investors, the next few quarters will be more important than the 556% rise in other income. A sustained rise in core revenue, better EBITDA, lower finance cost and a clear improvement in net profit would provide a much stronger signal of recovery.
