Aarey Drugs & Pharmaceuticals Limited

Healthcare — Drug Manufacturers - Specialty & Generic · NSE

₹113.00+₹4.26 (+3.92%)

DalalBaazaar Score

39 / 100

🔴 Weak

Verdict

CAUTION

Risk

High

Driven by negative free cash flow, micro-cap size, which brings thin liquidity, a very high earnings multiple, which leaves little margin for disappointment.

In simple words: The business is earning a fairly low return on the money invested in it, but sales are shrinking. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:49 pm

Understanding the Business

Company site ↗

The 60-second version of Aarey Drugs & Pharmaceuticals Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Aarey Drugs & Pharmaceuticals Limited manufactures and sells active pharmaceutical ingredients, intermediates, and specialty chemicals for various industrial applications in India.

IndustryDrug Manufacturers - Specialty & Generic

SectorHealthcare

Annual revenue₹471 Cr

How does it make money?

Turns over ₹471 Cr a year. Of every ₹100 of sales, about ₹1 reaches shareholders as profit, with ₹3 left at the operating level before interest, tax and depreciation.

Who are its competitors?

The closest listed comparisons in its industry are SUN PHARMACEUTICAL IND L, DR. REDDY S LABORATORIES, CIPLA LTD, DIVI S LABORATORIES LTD. These are the companies its valuation and returns are measured against elsewhere in this report.

Compared side by side in Peers ↓

What is its competitive advantage?Little sign of one

Returns on capital of 6.6% are at or below what the capital likely costs. That is the financial pattern of a business competing largely on price, where advantage has to come from execution rather than position.

Peer median ROE14.5%

What has been driving growth?

Growth has come mainly from selling more, rather than from keeping more of each sale. Over 3 years revenue moved +14% while net margin moved -8% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+14%

Margin effect-8%

DalalBaazaar Score

39/ 100

Weak

Weighted across six categories. Every point is explained below.

✗ ROE of 2.6% is weak

Quality vs. Valuation

Company Quality

40/ 100

Weak

How good the business is, ignoring the share price entirely.

Valuation

25/ 100

Expensive

What you are being asked to pay, ignoring how good the business is.

Weak on business quality and not cheap enough to compensate.

Historical Valuation

Current P/E

76.9x

3Y Median

35.7x

40 monthly readings · mean 42.8x · range 18.2x–81.3x

Sector Median

33.3x

median of 4 sector peers

⚠️Current valuation is approximately 115% above its 3y median of 35.7x. Paying more than usual needs a reason — faster growth, a better balance sheet, or a re-rating you believe in.

⚠️Against its sector it trades 131% above the peer median of 33.3x.

vs. its own history

Expensive

35.7x median over 40 months · +115%

vs. sector peers

Expensive

33.3x median of 4 peers · +131%

vs. generic bands

Expensive

Above 35x

EV/EBITDA

31.8x

PEG

45.02

What's Good / What's Bad

🟢 What's Going Well1

Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention0

Nothing stands out as clearly deteriorating on the years of data available.

Red Flags

3 items require attention · 3 watch

🟡Debt is increasingFinancial
Total debt is up 32% over 3 years.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹2 Cr in the latest year.
🟡Inventory building faster than salesFinancial
Inventory up 44% against revenue up 14% — stock may not be moving.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

The debt load needs earnings to hold up
Debt is 3.9x EBITDA. At that level a downturn in earnings turns a manageable balance sheet into a refinancing problem, and lenders get paid before shareholders.
The price already assumes success
The stock trades 115% above its own median multiple. At this level the business has to deliver just to stand still, and a stumble is repriced twice — lower earnings on a lower multiple.
Growth barely outpaces inflation
Revenue compounding at 4.5% a year is close to the rate prices rise, so the business is gaining little ground in real terms. That leaves the share price dependent on a re-rating rather than on earnings growth.
Size brings its own risk
Micro Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1EBITDA margin holds above 1%✓ 2.7%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Debt / EBITDA falls below 3x✗ 3.9x
Already stretched, so this is a reduction target rather than a level to hold. Around 3x is where lenders typically start attaching conditions.
3Free cash flow remains positive✗ -₹2 Cr
Profit that never becomes cash eventually stops being profit.
4Interest cover stays above 3x✗ 2.2x
How much operating profit can fall before interest stops being comfortably covered.
5Revenue growth stays above 4% a year✓ 4.5% CAGR
Latest reported year was -56.3%. The bar is set below the established compounding rate, so ordinary variation does not trip it.

Investment Checklist

3 / 11 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✗ Strong return on capital employed (ROCE ≥ 15%)
✗ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✗ Revenue growing year-over-year
✗ Profit growing year-over-year
✗ Not trading at an extreme valuation (P/E < 40x)
✗ Not buying right at the 52-week high
✓ Short-term technical trend isn't bearish

Price history

Quick Metrics

2 good · 3 neutral · 6 weak

Market Cap

₹360 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

76.9x

Expensive

Expensive — verify against sector peers

P/B Ratio

2.14x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹1.47

Profitable

Profitable on a per-share basis

ROE

2.6%

Weak

Weak capital efficiency

ROCE

6.6%

Weak

Low return on total capital employed

Debt/Equity

0.40x

Low

Conservative leverage

Revenue Growth (YoY)

-56.3%

Shrinking

Sales are contracting

Profit Growth (YoY)

-25.0%

Falling

Profits are shrinking

Dividend Yield

None

No dividend yield reported — usually means no payout, but verify if one was recently initiated

Free Cash Flow

-₹2 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

Operating Margin

1.1%

Weak

Thin margins leave little room for error

Net Margin

0.9%

Weak

Very little revenue reaches the bottom line

Current Ratio

1.81

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

1.24

Market-like

Moves roughly in line with the market

52W Range Position

99%

Near high

Near its 52-week high

Technical Snapshot

SMA 20 / SMA 50

104.1 / 94.8

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

69.6

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹413 Cr	₹395 Cr	₹472 Cr	₹471 Cr	+4.5%
EBITDA	₹10 Cr	₹11 Cr	₹12 Cr	₹13 Cr	+7.9%
EBITDA Margin	2.5%	2.9%	2.5%	2.7%	—
PAT (Net Profit)	₹4 Cr	₹5 Cr	₹4 Cr	₹4 Cr	+1.7%
EPS	₹1.49	₹1.84	₹1.41	₹1.39	-2.3%
ROE	3.2%	3.5%	2.9%	2.6%	—
ROCE	7.0%	7.1%	7.1%	6.6%	—
Total Debt	₹38 Cr	₹31 Cr	₹35 Cr	₹50 Cr	+9.8%
Free Cash Flow	-₹2 Cr	-₹4 Cr	₹5 Cr	-₹2 Cr	—

🟢 Revenue has grown at 4.5% a year over 3 years.

🟢 EBITDA has grown at 7.9% a year over 3 years.

🟡 EBITDA Margin has held roughly flat at 2.7% over 3 years.

🟡 PAT (Net Profit) has been broadly flat over 3 years (1.7% a year).

🔴 EPS has shrunk at 2.3% a year over 3 years.

🟡 ROE has held roughly flat at 2.6% over 3 years.

🟡 ROCE has held roughly flat at 6.6% over 3 years.

🔴 Total Debt has grown at 9.8% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹297 Cr

Total Liabilities

₹147 Cr

Cash & Equivalents

₹1 Cr

Operating Cash Flow

₹10 Cr

Capex

-₹12 Cr

Shareholding (proxy)

Institutional Holding

1.8%

Insider Holding

52.1%

Peer Comparison

Company	P/E	ROE
SUN PHARMACEUTICAL IND L	34.9x	14.5%
DR. REDDY S LABORATORIES	31.0x	8.8%
CIPLA LTD	31.8x	9.8%
DIVI S LABORATORIES LTD	83.0x	17.5%

Recent News

6 general

Aarey Drugs & Pharmaceuticals (AAREYDRUGS) Share Price near 52-week high after 1.02% rise

Univest, 08 Oct

Broad-Based Technical Strength Lifts Aarey Drugs & Pharmaceuticals Ltd to 52-Week High of Rs 112.15

MarketsMojo, 16 Oct

Aarey Drugs & Pharmaceuticals Ltd. Key Financial Ratios – Valuation, Profitability & More

Value Research, 30 Aug

Aarey Drugs & Pharmaceuticals: Promoters Convert 2.52 Million Warrants into Equity

Whalesbook, 05 Oct

Aarey Drugs AGM passes all resolutions with near-unanimous support

scanx.trade, 05 Oct

Aarey Drugs & Pharmaceuticals Lower Circuit Today

Univest, 08 Oct

Watch Items

Revenue growth is negative (-56.3%) on the latest reported period — check if this is one-off or a trend.
Trading very close to its 52-week high — momentum-driven entries here carry more mean-reversion risk.
Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

MiddlingFinancial Health

WeakBusiness Quality · Growth · Profitability · Valuation · Risk

Points for each in the Score ↑

Weak on the fundamentals

Poor scores on business quality without a price low enough to compensate. There is no obvious argument for owning this over a stronger company at a similar valuation.

3 of 5 tripwires tripped — Debt / EBITDA falls below 3x; Free cash flow remains positive; Interest cover stays above 3x · see Key things to watch ↑