Godavari Drugs Limited

Healthcare — Drug Manufacturers - Specialty & Generic · BSE

₹133.40+₹3.60 (+2.77%)

DalalBaazaar Score

35 / 100

🔴 Weak

Verdict

CAUTION

Risk

High

Driven by moderate debt load, negative free cash flow, micro-cap size, which brings thin liquidity.

In simple words: The business is earning a fairly low return on the money invested in it, though profits are falling even as sales grow. 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 Godavari Drugs Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Godavari Drugs Limited manufactures and sells active pharmaceutical ingredients (APIs), drug intermediaries, and fine chemicals in India.

IndustryDrug Manufacturers - Specialty & Generic

SectorHealthcare

Employees112

Annual revenue₹106 Cr

How does it make money?

Turns over ₹106 Cr a year. Of every ₹100 of sales, about ₹4 reaches shareholders as profit, with ₹10 left at the operating level before interest, tax and depreciation. Each of its 112 employees supports ₹94.5 lakh of revenue a year, the signature of a people-led business.

EBITDA margin10.1%

Net margin3.9%

Revenue / employee₹94.5 lakh

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.

SUN PHARMACEUTICAL IND LP/E 34.9x · ROE 14.5%

DR. REDDY S LABORATORIESP/E 31.0x · ROE 8.8%

CIPLA LTDP/E 31.8x · ROE 9.8%

DIVI S LABORATORIES LTDP/E 83.0x · ROE 17.5%

What is its competitive advantage?Little sign of one

Returns on capital of 7.4% 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.

ROCE7.4%

ROE5.4%

Peer median ROE14.5%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved -34% while net margin moved +63% 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-34%

Margin effect+63%

DalalBaazaar Score

35/ 100

Weak

Weighted across six categories. Every point is explained below.

✗ Revenue has contracted at 12.8% a year
✗ Profit CAGR of only 2.6%
✗ Profit fell 20.3% in the latest year

Quality vs. Valuation

Company Quality

30/ 100

Weak

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

Valuation

49/ 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

26.3x

3Y Median

17.9x

40 monthly readings · mean 17.2x · range 11.1x–24.9x

Sector Median

33.3x

median of 4 sector peers

⚠️Current valuation is approximately 47% above its 3y median of 17.9x. 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 21% below the peer median of 33.3x.

vs. its own history

Expensive

17.9x median over 40 months · +47%

vs. sector peers

Cheap

33.3x median of 4 peers · -21%

vs. generic bands

Fair

15x–35x

P/E (Trailing)

26.3x

P/B

1.33x

EV/EBITDA

20.2x

PEG

10.09

Dividend Yield

None

What's Good / What's Bad

🟢 What's Going Well2

Margins are improving
EBITDA margin is up from 6.0% to 10.1% over 3 years.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention6

Debt is rising
Total debt is up 43% 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 11.3% to 5.4% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 16.3% to 7.4% — often a sign of competition or overexpansion.
Inventory building faster than sales
Inventory is up 132% against revenue growth of -34% — stock may not be moving.
Valuation above its historical average
At 26.3x the stock trades 47% above its own median of 17.9x.

Red Flags

4 items require attention · 1 high · 3 watch

🔴Inventory building faster than salesFinancial
Inventory up 132% against revenue up -34% — stock may not be moving.
🟡Debt is increasingFinancial
Total debt is up 43% over 3 years.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹26 Cr in the latest year.
🟡Shareholders have been dilutedOwnership
Shares outstanding are up 34% over 3 years — each existing share owns a smaller slice of the company.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Margin expansion has further to run
EBITDA margin has risen from 6.0% to 10.1%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.
Cheaper than its peers
It trades 21% below the sector median. Either the market sees a problem the numbers do not show, or the discount closes.
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 7.7x 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 47% 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.
Returns on shareholder capital are falling
ROE has dropped from 11.3% to 5.4%. 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.
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 8%✓ 10.1%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Debt / EBITDA falls below 3x✗ 7.7x
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✗ -₹26 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.
5ROCE stays above 8%✗ 7.4%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

5 / 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

3 good · 4 neutral · 4 weak

Market Cap

₹146 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

26.3x

Fair

Fairly valued against the generic band

P/B Ratio

1.33x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹5.08

Profitable

Profitable on a per-share basis

ROE

5.4%

Weak

Weak capital efficiency

ROCE

7.4%

Weak

Low return on total capital employed

Debt/Equity

1.01x

Moderate

Moderate leverage

Revenue Growth (YoY)

18.0%

Healthy

Healthy top-line growth

Profit Growth (YoY)

-20.3%

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

-₹26 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹133.4

Operating Margin

7.4%

Average

Average margins

Net Margin

3.7%

Average

Average bottom-line conversion

Current Ratio

1.31

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.45

Defensive

Steadier than the market

52W Range Position

85%

Near high

Near its 52-week high

Technical Snapshot

SMA 20 / SMA 50

122.4 / 111.8

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

58.6

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹160 Cr	₹157 Cr	₹113 Cr	₹106 Cr	-12.8%
EBITDA	₹10 Cr	₹13 Cr	₹12 Cr	₹11 Cr	+3.8%
EBITDA Margin	6.0%	8.2%	10.5%	10.1%	—
PAT (Net Profit)	₹4 Cr	₹6 Cr	₹4 Cr	₹4 Cr	+2.6%
EPS	₹5.03	₹7.37	₹5.82	₹5.36	+2.1%
ROE	11.3%	14.2%	10.1%	5.4%	—
ROCE	16.3%	20.3%	13.5%	7.4%	—
Total Debt	₹57 Cr	₹58 Cr	₹64 Cr	₹82 Cr	+12.6%
Free Cash Flow	₹4 Cr	₹5 Cr	-₹9 Cr	-₹26 Cr	—

🔴 Revenue has shrunk at 12.8% a year over 3 years.

🟢 EBITDA has grown at 3.8% a year over 3 years.

🟢 EBITDA Margin has risen from 6.0% to 10.1% over 3 years (+4.1 pts).

🟢 PAT (Net Profit) has grown at 2.6% a year over 3 years.

🟢 EPS has grown at 2.1% a year over 3 years.

🔴 ROE has fallen from 11.3% to 5.4% over 3 years (-5.9 pts).

🔴 ROCE has fallen from 16.3% to 7.4% over 3 years (-8.9 pts).

🔴 Total Debt has grown at 12.6% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹4 Cr to -₹26 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹200 Cr

Total Liabilities

₹125 Cr

Total Debt

₹82 Cr

Cash & Equivalents

₹12 Cr

Operating Cash Flow

₹1 Cr

Capex

-₹27 Cr

Shareholding (proxy)

Institutional Holding

2.2%

Insider Holding

51.2%

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 mixed5 general

Godavari Drugs Share Price live snapshot near 52-week peak

Univest, 09 Oct

Godavari Drugs board approves ₹340 million working capital limit from ICICI Bank

scanx.trade, 14 Oct

Godavari Drugs Limited Approves Availing Working Capital Limits of Up to INR 340 Million from ICICI Bank Limited

marketscreener.com, 14 Oct

Godavari Drugs Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 29 Aug

Godavari Drugs Ltd is Rated Hold by MarketsMOJO

MarketsMojo, 10 Oct

Godavari Drugs Ltd. Share Price Rise Streak: What Data Shows

Univest, 09 OctPrice 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.

DalalBaazaar Thesis

🔴Business QualityWeak5.9/20

🔴Financial HealthStretched7/20

🔴GrowthWeak4.8/20

🔴ProfitabilityWeak4.6/15

🟡ValuationFair7.5/15

🟡RiskModerate5.4/10

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. 1 high-severity red flag sits above this conclusion and should be read first.

This thesis breaks if

✓EBITDA margin holds above 8%10.1%
✗Debt / EBITDA falls below 3x7.7x
✗Free cash flow remains positive-₹26 Cr
✗Interest cover stays above 3x2.4x
✗ROCE stays above 8%7.4%