Granules India's shares are under scrutiny following an observation issued by the U.S. Food and Drug Administration (FDA) for its active pharmaceutical ingredient (API) facility located in Telangana. The inspection, which concluded on June 20, 2025, has raised concerns among investors and analysts, although the company has stated it will address the observation within the stipulated timeframe.

The FDA conducted its inspection of the API Unit-I facility in Bonthapally village, Sangareddy district, from June 16 to June 20, 2025. Following the inspection, the FDA issued a Form 483 with one observation. A Form 483 is issued when, in the FDA investigator's judgment, conditions or practices observed indicate that any food, drug, device, or cosmetic has been adulterated or is being prepared, packed, or held under conditions whereby it may become adulterated or rendered injurious to health. It is important to note that a Form 483 does not constitute a final determination by the agency that the conditions are in violation of regulations.

Granules India has acknowledged the observation and stated that it will respond to the FDA within the required timeframe. The company is currently preparing a comprehensive response to address the concerns raised during the inspection.

The Bonthapally facility is a significant manufacturing site for Granules India. It is one of the world's largest single-site paracetamol API manufacturing plants by volume. In addition to paracetamol, the facility also manufactures Metformin and Guaifenesin APIs. These APIs are used in a variety of medications, including those for chronic and respiratory conditions.

This is not the first time Granules India has faced regulatory scrutiny from the US FDA. In February 2025, shares of Granules India tumbled nearly 8% after the US FDA issued a warning letter to the company's Gagillapur facility. The warning letter, issued on February 26, 2025, followed an inspection in August 2024 and highlighted four key areas of concern that had been previously noted in the FDA Form 483 observations. Despite the warning, the company clarified that the manufacturing and distribution of existing products from the Gagillapur facility remained unaffected, although the warning letter could delay the FDA review of pending product applications from the site until compliance issues are fully resolved.

Earlier, in September 2024, the US FDA issued six observations to Granules India's Gagillapur facility in Hyderabad after an inspection between August 26 and September 6, 2024. The inspection covered both Current Good Manufacturing Practice (cGMP) and Pre-Approval Inspection (PAI) processes. Following this news, Granules India's stock fell by over 16% on the BSE. The FDA's report cited six observations around poor quality control procedures, subpar cleaning, cross-contamination risks and more.

Conversely, Granules India has also received positive news from the US FDA regarding other facilities. In November 2024, Granules India announced that it had received an Establishment Inspection Report (EIR) from the US FDA for its Unit V facility located at Jawaharlal Nehru Pharma City (JNPC), Anakapalli District, Andhra Pradesh. The US FDA inspection classified the facility as "No Action Indicated" (NAI), indicating compliance with current Good Manufacturing Practices (cGMP) standards and confirming that no further regulatory action was required. Similarly, in 2023, Granules India completed two US FDA audits for its API facilities in Vizag and Jeedimetla with zero 483 observations.

Despite the recent regulatory challenges, analysts remain optimistic about Granules India's prospects. Seven analysts tracking the company have a 'buy' rating on the stock, according to Bloomberg data. The average of 12-month analysts' price target implies a potential upside of 25.1%.

Granules India's stock closed 1.47% higher at Rs 487.35 apiece on the National Stock Exchange before the announcement, compared to a 1.29% rise in the benchmark Nifty. The stock has risen 3.19% in the last 12 months but has fallen 17.72% on a year-to-date basis.