Aarti Drugs Limited

Healthcare — Drug Manufacturers - Specialty & Generic · NSE

₹396.00−₹0.45 (−0.11%)

DalalBaazaar Score

57 / 100

🟡 Moderate

Verdict

NEUTRAL

Risk

Moderate

Driven by micro-cap size, which brings thin liquidity, falling profits.

In simple words: Reasonable but unspectacular business quality, though profits are falling even as sales grow. The direction of profits is the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 8:28 pm

Understanding the Business

Company site ↗

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

What does this company do?

Aarti Drugs Limited, through its subsidiaries, engages in the manufacture and marketing of active pharmaceutical ingredients (APIs), pharmaceutical intermediates, specialty chemicals, and formulations in India and internationally.

IndustryDrug Manufacturers - Specialty & Generic

SectorHealthcare

Employees1,355

Annual revenue₹2,521 Cr

How does it make money?

Turns over ₹2,521 Cr a year. Of every ₹100 of sales, about ₹8 reaches shareholders as profit, with ₹13 left at the operating level before interest, tax and depreciation. Each of its 1,355 employees supports ₹1.86 Cr of revenue a year, the signature of a capital- or asset-led business.

Revenue / employee₹1.86 Cr

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 12.9% 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 is the outlook?

1 analysts covering the stock expect revenue to grow about 11.0% and earnings to grow about 17.7% in the year to 2028. These are estimates by people who follow the company, not a forecast for the wider industry.

Est. revenue growth+11.0%

Est. earnings growth+17.7%

Analysts1

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved -7% while net margin moved +26% 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-7%

Margin effect+26%

DalalBaazaar Score

57/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ Revenue has contracted at 2.3% a year
✗ Profit CAGR of only 5.4%
✗ Profit fell 6.9% in the latest year

Quality vs. Valuation

Company Quality

53/ 100

Average

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

Valuation

67/ 100

Fair

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

A reasonable business at a reasonable price — neither the quality nor the valuation stands out in either direction.

Historical Valuation

Current P/E

18.9x

3Y Median

24.8x

40 monthly readings · mean 24.2x · range 17.4x–31.9x

Sector Median

33.3x

median of 4 sector peers

🟢Current valuation is approximately 24% below its 3y median of 24.8x. Cheaper than its own history, which is worth a reason too: the market may be pricing in something the backward-looking numbers do not show.

🟢Against its sector it trades 43% below the peer median of 33.3x.

vs. its own history

Cheap

24.8x median over 40 months · -24%

vs. sector peers

Cheap

33.3x median of 4 peers · -43%

vs. generic bands

Fair

15x–35x

EV/EBITDA

13.3x

PEG

3.48

What's Good / What's Bad

🟢 What's Going Well2

Cash flow has turned positive
Free cash flow moved from negative to positive over 3 years.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention1

Return on capital is falling
ROCE has declined from 17.5% to 12.9% — often a sign of competition or overexpansion.

Red Flags

No automated checks triggered

None of the automated financial checks below were triggered on the years of data available. That is not the same as a clean bill of health — see what could not be checked.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Priced below its own history
The stock trades 24% below its own median multiple. If the business performs as it has and simply re-rates back to normal, that gap is return on its own.
Cheaper than its peers
It trades 43% below the sector median. Either the market sees a problem the numbers do not show, or the discount closes.
Self-funding with balance-sheet headroom
Positive free cash flow of ₹80 Cr alongside low debt means growth, buybacks or dividends need no outside money — and a downturn can be absorbed rather than refinanced.
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?

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 11%✓ 12.5%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Free cash flow remains positive✓ ₹80 Cr
Profit that never becomes cash eventually stops being profit.
3Debt / EBITDA stays below 2x✓ 1.8x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
4ROCE stays above 10%✓ 12.9%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.
5Interest cover stays above 4x✓ 7.3x
How much operating profit can fall before interest stops being comfortably covered.

Investment Checklist

7 / 12 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
✓ Analyst consensus isn't majority-sell
✗ Short-term technical trend isn't bearish

Price history

Quick Metrics

4 good · 6 neutral · 1 weak

Market Cap

₹3,614 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

18.9x

Fair

Fairly valued against the generic band

P/B Ratio

2.33x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹20.93

Profitable

Profitable on a per-share basis

ROE

12.6%

Moderate

Moderate capital efficiency

ROCE

12.9%

Moderate

Moderate return on the capital in the business

Debt/Equity

0.37x

Low

Conservative leverage

Revenue Growth (YoY)

19.0%

Healthy

Healthy top-line growth

Profit Growth (YoY)

-6.9%

Falling

Profits are shrinking

Dividend Yield

0.51%

Modest

Small cash return — most of the return has to come from the price

Free Cash Flow

₹80 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

P/E (Forward)

14.2x

Improving

Below the trailing multiple — the street expects earnings to grow into the price

Operating Margin

11.5%

Average

Average margins

Net Margin

7.1%

Average

Average bottom-line conversion

Current Ratio

1.59

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.31

Defensive

Steadier than the market

52W Range Position

36%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

420.5 / 421.3

Bearish alignment (short < long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

27.3

Oversold zone

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹2,706 Cr	₹2,509 Cr	₹2,369 Cr	₹2,521 Cr	-2.3%
EBITDA	₹309 Cr	₹323 Cr	₹307 Cr	₹315 Cr	+0.6%
EBITDA Margin	11.4%	12.9%	13.0%	12.5%	—
PAT (Net Profit)	₹166 Cr	₹171 Cr	₹168 Cr	₹195 Cr	+5.4%
EPS	₹17.97	₹18.56	₹18.35	₹21.36	+5.9%
ROE	13.9%	13.4%	12.3%	12.6%	—
ROCE	17.5%	16.4%	14.3%	12.9%	—
Total Debt	₹609 Cr	₹564 Cr	₹615 Cr	₹577 Cr	-1.8%
Free Cash Flow	-₹31 Cr	₹133 Cr	₹67 Cr	₹80 Cr	—

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

🟡 EBITDA has been broadly flat over 3 years (0.6% a year).

🟢 EBITDA Margin has risen from 11.4% to 12.5% over 3 years (+1.1 pts).

🟢 PAT (Net Profit) has grown at 5.4% a year over 3 years.

🟢 EPS has grown at 5.9% a year over 3 years.

🔴 ROE has fallen from 13.9% to 12.6% over 3 years (-1.4 pts).

🔴 ROCE has fallen from 17.5% to 12.9% over 3 years (-4.6 pts).

🟡 Total Debt has been broadly flat over 3 years (-1.8% a year).

🟢 Free Cash Flow has turned positive, from -₹31 Cr to ₹80 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹2,815 Cr

Total Liabilities

₹1,266 Cr

Cash & Equivalents

₹7 Cr

Operating Cash Flow

₹254 Cr

Capex

-₹173 Cr

Shareholding (proxy)

Institutional Holding

11.0%

Insider Holding

59.6%

Corporate Actions

Dividend Rate

₹2

Ex-Dividend Date

09 Feb 2026

Analyst Consensus

Recommendations

1 Buy · 0 Hold · 0 Sell

Target Price (Mean)

₹474

+19.7% vs CMP

Target Range

₹474 – ₹474

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

1 positive3 mixed1 negative1 general

Stock Updates: Aarti Drugs Set To Open Share Buyback Offer On April 27

NDTV Profit, 17 OctCapital return

🟢Potentially positiveCash or shares returned to holders. A buyback is only good value if the shares were cheap when bought.

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

Value Research, 02 Sept

Aarti Drugs Limited Just Recorded A 6.8% EPS Beat: Here's What Analysts Are Forecasting Next

Simply Wall Street, 20 MayAnalyst view

🟡Mixed / dependsBroker commentary — an opinion about the price rather than new information about the business.

Why Is Aarti Drugs Share Price Falling: Key Reasons and Investor Analysis 2026

Univest, 13 MayPrice move

🟡Mixed / dependsA price move rather than a change in the business. If the figures on this page have not moved, the fall is either an opportunity or news they have yet to catch up with.

Aarti Drugs Q1 profit falls 7% despite 19% revenue growth; announces leadership transition

CNBC TV18, 31 JulResults

🔴Potentially negativeReported deterioration, which feeds the growth and margin inputs on this page directly.

Aarti Drugs to consider March 2026 quarterly results tomorrow; shares rise 0.72% in previous session

Moneycontrol.com, 30 JulPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.
RSI is in oversold territory — could mean either a bargain or a stock still falling for good reason. Check the 'why' before assuming reversal.

DalalBaazaar Thesis

StrongFinancial Health · Valuation

MiddlingBusiness Quality · Profitability · Risk

WeakGrowth

Points for each in the Score ↑

Unremarkable in both directions

A reasonable business at a reasonable price. Nothing here is alarming and nothing is compelling, which usually means the decision rests on things this data cannot see — the industry's direction, management's intent, and what else is available to you.

All 5 tripwires holding · see Key things to watch ↑