Aarti Industries Limited

Basic Materials — Specialty Chemicals · NSE

₹496.00−₹9.05 (−1.79%)

DalalBaazaar Score

40 / 100

🟡 Moderate

Verdict

CAUTION

Risk

High

Driven by moderate debt load, short-term liabilities exceed short-term assets, negative free cash flow.

In simple words: The business is earning a fairly low return on the money invested in it, with both sales and profits growing well. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:08 pm

Caution warranted. Multiple fundamental metrics — flagged in red below — point to either valuation stretch, leverage risk, or weakening profitability. This doesn't mean avoid the stock outright, but it does mean the burden of proof is on the growth story to justify the current price.

Understanding the Business

Company site ↗

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

What does this company do?

Aarti Industries Limited engages in the manufacturing and dealing in specialty chemicals and intermediates in India and internationally.

IndustrySpecialty Chemicals

SectorBasic Materials

Employees5,824

Annual revenue₹8,162 Cr

How does it make money?

Turns over ₹8,162 Cr a year. Of every ₹100 of sales, about ₹5 reaches shareholders as profit, with ₹14 left at the operating level before interest, tax and depreciation. Each of its 5,824 employees supports ₹1.40 Cr of revenue a year, the signature of a capital- or asset-led business.

EBITDA margin14.0%

Net margin5.1%

Revenue / employee₹1.40 Cr

Who are its competitors?

The closest listed comparisons in its industry are ASIAN PAINTS LIMITED, PIDILITE INDUSTRIES LTD, SRF LTD, UPL LIMITED. These are the companies its valuation and returns are measured against elsewhere in this report.

ASIAN PAINTS LIMITEDP/E 46.9x · ROE 22.3%

PIDILITE INDUSTRIES LTDP/E 57.8x · ROE 24.4%

SRF LTDP/E 33.8x · ROE 15.4%

UPL LIMITEDP/E 21.5x · ROE 6.1%

What is its competitive advantage?Little sign of one

Returns on capital of 7.5% 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.

ROCE7.5%

ROE7.0%

Peer median ROE22.3%

What is the outlook?

22 analysts covering the stock expect revenue to grow about 14.6% and earnings to grow about 41.4% in the year to 2028. These are estimates by people who follow the company, not a forecast for the wider industry.

Est. revenue growth+14.6%

Est. earnings growth+41.4%

Analysts22

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +26% while net margin moved -39% 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+26%

Margin effect-39%

DalalBaazaar Score

40/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ Revenue CAGR of only 7.9% — barely ahead of inflation
✗ Profit has declined at 8.4% a year
✗ Profit is compounding slower than revenue — margins are being squeezed as the business grows

Quality vs. Valuation

Company Quality

34/ 100

Weak

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

Valuation

55/ 100

Fair

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

33.9x

3Y Median

41.9x

40 monthly readings · mean 42.6x · range 30.2x–55.6x

Sector Median

40.4x

median of 4 sector peers

🟢Current valuation is approximately 19% below its 3y median of 41.9x. 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 16% below the peer median of 40.4x.

vs. its own history

Fair

41.9x median over 40 months · -19%

vs. sector peers

Fair

40.4x median of 4 peers · -16%

vs. generic bands

Fair

15x–35x

P/E (Trailing)

33.9x

P/B

3.01x

EV/EBITDA

19.6x

PEG

—

Dividend Yield

0.20%

What's Good / What's Bad

🟢 What's Going Well1

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

🔴 What Needs Attention8

Margins are compressing
EBITDA margin has slipped from 15.8% to 14.0% over 3 years.
Debt is rising
Total debt is up 71% over 3 years — worth checking what it funded.
Free cash flow is negative
The business is not currently covering its capital spending from operations.
Return on equity is falling
ROE has dropped from 11.1% to 7.0% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 12.4% to 7.5% — often a sign of competition or overexpansion.
Receivables growing faster than sales
Receivables are up 49% against revenue growth of 26% — customers are taking longer to pay.
Inventory building faster than sales
Inventory is up 68% against revenue growth of 26% — stock may not be moving.
Short-term liquidity is tight
Current ratio of 0.83 — near-term obligations exceed near-term assets.

Red Flags

7 items require attention · 3 high · 4 watch

🔴Debt has risen sharplyFinancial
Total debt is up 71% over 3 years, from ₹2,907 Cr to ₹4,966 Cr.
🔴Free cash flow negative for 4 yearsFinancial
The business has not covered its capital spending from operations for several years running, which has to be funded externally.
🔴Profit up while operating cash flow fallsFinancial
Reported profit rose but cash generated by operations declined — worth checking whether earnings are being supported by non-cash items or working capital.
🟡Profit is decliningFinancial
Net profit is down 23% over 3 years.
🟡Receivables growing faster than salesFinancial
Receivables up 49% against revenue up 26% — sales are being booked faster than they are collected.
🟡Inventory building faster than salesFinancial
Inventory up 68% against revenue up 26% — stock may not be moving.
🟡Short-term liquidity is tightFinancial
Current ratio of 0.83 — near-term obligations exceed near-term assets.

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?

Margins are being competed away
EBITDA margin has fallen from 15.8% to 14.0%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
The debt load needs earnings to hold up
Debt is 4.4x EBITDA. At that level a downturn in earnings turns a manageable balance sheet into a refinancing problem, and lenders get paid before shareholders.
Sales are being booked faster than collected
Receivables are up 49% against revenue up 26%. If customers keep taking longer to pay, reported profit will not turn into cash — and write-offs follow if some never do.
Growth barely outpaces inflation
Revenue compounding at 7.9% 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.
Returns on shareholder capital are falling
ROE has dropped from 11.1% to 7.0%. Each rupee of equity earns less than it did, so profit growth increasingly depends on raising more capital rather than on the existing base working harder.

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

1EBITDA margin holds above 12%✓ 14.0%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Debt / EBITDA falls below 3x✗ 4.4x
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✗ -₹343 Cr
Profit that never becomes cash eventually stops being profit.
4Interest cover stays above 3x✗ 2.4x
How much operating profit can fall before interest stops being comfortably covered.
5Revenue growth stays above 6% a year✓ 7.9% CAGR
Latest reported year was 42.5%. The bar is set below the established compounding rate, so ordinary variation does not trip it.

Investment Checklist

6 / 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

3 good · 5 neutral · 3 weak

Market Cap

₹17,992 Cr

Small Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

33.9x

Fair

Fairly valued against the generic band

P/B Ratio

3.01x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹14.61

Profitable

Profitable on a per-share basis

ROE

7.0%

Weak

Weak capital efficiency

ROCE

7.5%

Weak

Low return on total capital employed

Debt/Equity

0.83x

Moderate

Moderate leverage

Revenue Growth (YoY)

42.5%

Healthy

Healthy top-line growth

Profit Growth (YoY)

258.0%

Healthy

Profits growing at a healthy clip

Dividend Yield

0.20%

Modest

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

Free Cash Flow

-₹343 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹496

P/E (Forward)

24.8x

Improving

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

Operating Margin

8.9%

Average

Average margins

Net Margin

5.9%

Average

Average bottom-line conversion

Current Ratio

0.83

Adequate

Adequate, but no real cushion

Beta (vs Nifty)

0.65

Defensive

Steadier than the market

52W Range Position

74%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

484.7 / 501.9

Bearish alignment (short < long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

54.9

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹6,492 Cr	₹6,192 Cr	₹7,129 Cr	₹8,162 Cr	+7.9%
EBITDA	₹1,028 Cr	₹971 Cr	₹987 Cr	₹1,141 Cr	+3.6%
EBITDA Margin	15.8%	15.7%	13.8%	14.0%	—
PAT (Net Profit)	₹545 Cr	₹416 Cr	₹331 Cr	₹419 Cr	-8.4%
EPS	₹15.04	₹11.49	₹9.12	₹11.55	-8.4%
ROE	11.1%	7.9%	5.9%	7.0%	—
ROCE	12.4%	8.3%	7.1%	7.5%	—
Total Debt	₹2,907 Cr	₹3,623 Cr	₹3,848 Cr	₹4,966 Cr	+19.5%
Free Cash Flow	-₹8 Cr	-₹118 Cr	-₹144 Cr	-₹343 Cr	—

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

🟢 EBITDA has grown at 3.6% a year over 3 years.

🔴 EBITDA Margin has fallen from 15.8% to 14.0% over 3 years (-1.8 pts).

🔴 PAT (Net Profit) has shrunk at 8.4% a year over 3 years.

🔴 EPS has shrunk at 8.4% a year over 3 years.

🔴 ROE has fallen from 11.1% to 7.0% over 3 years (-4.0 pts).

🔴 ROCE has fallen from 12.4% to 7.5% over 3 years (-4.8 pts).

🔴 Total Debt has grown at 19.5% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹13,300 Cr

Total Liabilities

₹7,345 Cr

Total Debt

₹4,966 Cr

Cash & Equivalents

₹583 Cr

Operating Cash Flow

₹781 Cr

Capex

-₹1,124 Cr

Shareholding (proxy)

Institutional Holding

23.8%

Insider Holding

42.1%

Corporate Actions

Next Earnings

05 Nov 2026

Dividend Rate

₹1

Ex-Dividend Date

11 Sept 2026

Analyst Consensus

Recommendations

18 Buy · 1 Hold · 5 Sell

Target Price (Mean)

₹536.83

+8.2% vs CMP

Target Range

₹366 – ₹622

Peer Comparison

Company	P/E	ROE
ASIAN PAINTS LIMITED	46.9x	22.3%
PIDILITE INDUSTRIES LTD	57.8x	24.4%
SRF LTD	33.8x	15.4%
UPL LIMITED	21.5x	6.1%

Recent News

1 mixed5 general

What Aarti Industries Doubters Missed

Simply Wall Street, 15 Oct

AARTIIND Outlook for the Week

Equitypandit, 09 Oct

Stocks to buy: 5 midcap and chemical stocks with up to 25% upside potential

The Economic Times, 19 Aug

Aarti Industries jumps 5% on ₹1,500 crore long-term supply deal with global chemicals firm

CNBC TV18, 13 Oct

Aarti Industries Board to Discuss Raising Funds on October 1

Sahi, 28 SeptFunding

🟡Mixed / dependsNew funding changes the capital structure. Debt raises leverage; an equity raise dilutes existing holders.

Aarti Industries Ltd. Share Price at Fresh 52-Week High

Univest, 25 Aug

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

🔴Business QualityWeak7.5/20

🔴Financial HealthStretched6.6/20

🔴GrowthWeak5.7/20

🔴ProfitabilityWeak5.8/15

🟡ValuationFair8.1/15

🟡RiskModerate5.8/10

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 high-severity red flags sit above this conclusion and should be read first.

This thesis breaks if

✓EBITDA margin holds above 12%14.0%
✗Debt / EBITDA falls below 3x4.4x
✗Free cash flow remains positive-₹343 Cr
✗Interest cover stays above 3x2.4x
✓Revenue growth stays above 6% a year7.9% CAGR