SMS Pharmaceuticals Limited

Healthcare — Drug Manufacturers - General · NSE

₹450.10+₹25.15 (+5.92%)

DalalBaazaar Score

62 / 100

🟢 Good

Verdict

NEUTRAL

Risk

High

Driven by negative free cash flow, 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. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:03 pm

Understanding the Business

Company site ↗

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

What does this company do?

SMS Pharmaceuticals Limited manufactures and sells active pharmaceutical ingredients (APIs) and its intermediates in India and internationally.

IndustryDrug Manufacturers - General

SectorHealthcare

Employees1,617

Annual revenue₹883 Cr

How does it make money?

Turns over ₹883 Cr a year. Of every ₹100 of sales, about ₹12 reaches shareholders as profit, with ₹20 left at the operating level before interest, tax and depreciation. Each of its 1,617 employees supports ₹54.6 lakh of revenue a year, the signature of a people-led business.

Revenue / employee₹54.6 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.

Compared side by side in Peers ↓

What is its competitive advantage?Little sign of one

Returns on capital of 13.7% 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?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +70% while net margin moved -950% 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+70%

Margin effect-950%

DalalBaazaar Score

62/ 100

Good

Weighted across six categories. Every point is explained below.

✗ P/E of 42.5x is demanding — it needs sustained high growth to justify
• P/E is close to its own historical median of 40.6x
✗ P/B of 5.36x is a steep premium to book

Quality vs. Valuation

Company Quality

70/ 100

Good

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

Valuation

34/ 100

Expensive

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

A good business, but the price already reflects that. The quality is real; the question is whether you are overpaying for it today.

Historical Valuation

Current P/E

42.5x

2Y Median

40.6x

28 monthly readings · mean 41.9x · range 29.0x–59.6x

Sector Median

33.3x

median of 4 sector peers

🟡Currently trading close to its 2y median of 40.6x — the market is paying about what it usually pays for this company.

⚠️Against its sector it trades 27% above the peer median of 33.3x.

vs. its own history

Fair

40.6x median over 28 months · +5%

vs. sector peers

Expensive

33.3x median of 4 peers · +27%

vs. generic bands

Expensive

Above 35x

EV/EBITDA

25.4x

PEG

—

What's Good / What's Bad

🟢 What's Going Well3

Margins are improving
EBITDA margin is up from 11.3% to 20.2% over 3 years.
Return on equity is rising
ROE has improved from -1.5% to 13.0%.
Return on capital is rising
ROCE has improved from 4.2% to 13.7%.

🔴 What Needs Attention0

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

Red Flags

3 items require attention · 2 high · 1 watch

🔴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.
🟡Debt is increasingFinancial
Total debt is up 44% over 3 years.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Margin expansion has further to run
EBITDA margin has risen from 11.3% to 20.2%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.

🔴 Bear CaseWhat could go wrong?

A premium to the sector to defend
It trades 27% above the peer median. That premium needs a reason that persists, or it closes.
Earnings are hard to forecast
Profit has swung sharply from year to year, so any single year — good or bad — is a weak guide to the next. Cyclical earnings deserve lower multiples for that reason.
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.
Several serious flags at once
2 high-severity checks triggered. Individually each has an explanation; together they raise the chance that something structural is wrong rather than a one-off.

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

1Revenue growth stays above 14% a year✓ 19.3% CAGR
Latest reported year was 5.6%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 18%✓ 20.2%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Debt / EBITDA stays below 2x✗ 2.0x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
4Free cash flow remains positive✗ -₹71 Cr
Profit that never becomes cash eventually stops being profit.
5ROCE stays above 11%✓ 13.7%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

6 / 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 · 5 neutral · 4 weak

Market Cap

₹4,215 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

42.5x

Expensive

Expensive — verify against sector peers

P/B Ratio

5.36x

Rich

Steep premium to book — needs high, durable returns to justify

EPS (TTM)

₹10.6

Profitable

Profitable on a per-share basis

ROE

13.0%

Moderate

Moderate capital efficiency

ROCE

13.7%

Moderate

Moderate return on the capital in the business

Debt/Equity

0.46x

Low

Conservative leverage

Revenue Growth (YoY)

5.6%

Modest

Modest growth

Profit Growth (YoY)

-3.5%

Falling

Profits are shrinking

Dividend Yield

0.09%

Modest

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

Free Cash Flow

-₹71 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

Operating Margin

15.0%

Average

Average margins

Net Margin

11.4%

Good

Strong bottom-line conversion

Current Ratio

1.81

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.28

Defensive

Steadier than the market

52W Range Position

80%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

460.2 / 411.0

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

40.3

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹520 Cr	₹706 Cr	₹779 Cr	₹883 Cr	+19.3%
EBITDA	₹59 Cr	₹120 Cr	₹144 Cr	₹179 Cr	+45.1%
EBITDA Margin	11.3%	17.0%	18.5%	20.2%	—
PAT (Net Profit)	-₹7 Cr	₹50 Cr	₹69 Cr	₹102 Cr	—
EPS	₹-0.83	₹5.89	₹8.16	₹11.15	—
ROE	-1.5%	9.3%	10.8%	13.0%	—
ROCE	4.2%	12.6%	13.3%	13.7%	—
Total Debt	₹254 Cr	₹281 Cr	₹311 Cr	₹365 Cr	+12.8%
Free Cash Flow	-₹7 Cr	-₹2 Cr	-₹42 Cr	-₹71 Cr	—

🟢 Revenue has grown at 19.3% a year over 3 years.

🟢 EBITDA has grown at 45.1% a year over 3 years.

🟢 EBITDA Margin has risen from 11.3% to 20.2% over 3 years (+9.0 pts).

🟢 PAT (Net Profit) has turned positive, from -₹7 Cr to ₹102 Cr.

🟢 EPS has turned positive, from ₹-0.83 to ₹11.15.

🟢 ROE has risen from -1.5% to 13.0% over 3 years (+14.5 pts).

🟢 ROCE has risen from 4.2% to 13.7% over 3 years (+9.5 pts).

🔴 Total Debt has grown at 12.8% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹1,362 Cr

Total Liabilities

₹577 Cr

Cash & Equivalents

₹46 Cr

Operating Cash Flow

₹59 Cr

Capex

-₹131 Cr

Shareholding (proxy)

Institutional Holding

2.9%

Insider Holding

76.0%

Corporate Actions

Dividend Rate

₹0.4

Ex-Dividend Date

22 Sept 2026

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 mixed2 general

SMS Pharmaceuticals Share Price

Upstox, 16 Oct

SMS Pharmaceuticals Communicates TDS Provisions on Final Dividend of Rs.0.40 Per Share for FY 2025-26

scanx.trade, 16 OctCapital return

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

Here's Why We Think SMS Pharmaceuticals (NSE:SMSPHARMA) Might Deserve Your Attention Today

Simply Wall Street, 14 Sept

SMSPHARMA Forecast — Price Target — Prediction for 2027

TradingView, 23 JulAnalyst view

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

SMS Pharmaceuticals Share Price Rise: Sector and Peer View

Univest, 11 SeptPrice 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.

SMS Pharma Q4 Net Profit Climbs to ₹20.9 Cr with 1.4% YoY Growth

Sahi, 22 MayResults

🟡Mixed / dependsA results event. The figures on this page update once the new statements reach the data feed, which usually lags the announcement.

Watch Items

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

DalalBaazaar Thesis

StrongBusiness Quality · Financial Health · Growth · Profitability

WeakValuation · Risk

Points for each in the Score ↑

Good business, demanding price

The quality is real and the price already reflects it. Buying here is a bet that the business keeps compounding for long enough to grow into the multiple — which good businesses often do, but it removes the margin for error that a lower price would have given you. 2 high-severity red flags sit above this conclusion and should be read first.

2 of 5 tripwires tripped — Debt / EBITDA stays below 2x; Free cash flow remains positive · see Key things to watch ↑