Zydus Lifesciences Limited

Healthcare — Drug Manufacturers - Specialty & Generic · NSE

₹1,123.00−₹17.20 (−1.51%)

DalalBaazaar Score

74 / 100

🟢 Good

Verdict

REASONABLE

Risk

Low

Driven by negative free cash flow, falling profits.

In simple words: Strong business and financial position, 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, 6:10 pm

Mixed / neutral. No major red flags jump out, but nothing here screams "obviously cheap" either. This is a name that needs a peer comparison and a view on near-term earnings triggers before sizing a position.

Understanding the Business

Company site ↗

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

What does this company do?

Zydus Lifesciences Limited engages in the research, development, production, marketing, distribution, and sale of pharmaceutical products in India, the United States, Europe, and internationally.

IndustryDrug Manufacturers - Specialty & Generic

SectorHealthcare

Employees29,980

Annual revenue₹26,720 Cr

How does it make money?

Turns over ₹26,720 Cr a year. Of every ₹100 of sales, about ₹19 reaches shareholders as profit, with ₹33 left at the operating level before interest, tax and depreciation. Each of its 29,980 employees supports ₹89.1 lakh of revenue a year, the signature of a people-led business.

EBITDA margin33.3%

Net margin18.9%

Revenue / employee₹89.1 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?Some evidence

ROCE of 19.0% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

ROCE19.0%

ROE18.6%

Peer median ROE14.5%

What is the outlook?

26 analysts covering the stock expect revenue to grow about 10.9% and earnings to grow about 22.2% in the year to 2028. These are estimates by people who follow the company, not a forecast for the wider industry.

Est. revenue growth+10.9%

Est. earnings growth+22.2%

Analysts26

What has been driving growth?

Sales and margins have both contributed to where profit is now. Over 3 years revenue moved +58% while net margin moved +62% 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+58%

Margin effect+62%

DalalBaazaar Score

74/ 100

Good

Weighted across six categories. Every point is explained below.

• P/E of 25.0x already prices in growth
• P/E is close to its own historical median of 25.3x

Quality vs. Valuation

Company Quality

79/ 100

Good

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

Valuation

70/ 100

Cheap

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

A good business currently available at an undemanding price — the combination this framework is built to look for.

Historical Valuation

Current P/E

25.0x

3Y Median

25.3x

40 monthly readings · mean 29.5x · range 19.4x–64.6x

Sector Median

33.3x

median of 4 sector peers

🟡Currently trading close to its 3y median of 25.3x — the market is paying about what it usually pays for this company.

🟢Against its sector it trades 25% below the peer median of 33.3x.

vs. its own history

Fair

25.3x median over 40 months · -1%

vs. sector peers

Cheap

33.3x median of 4 peers · -25%

vs. generic bands

Fair

15x–35x

P/E (Trailing)

25.0x

P/B

4.17x

EV/EBITDA

13.9x

PEG

0.68

Dividend Yield

0.09%

What's Good / What's Bad

🟢 What's Going Well4

Margins are improving
EBITDA margin is up from 19.8% to 33.3% over 3 years.
Return on equity is rising
ROE has improved from 11.2% to 18.6%.
Return on capital is rising
ROCE has improved from 13.4% to 19.0%.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention2

Debt is rising
Total debt is up 946% over 3 years — worth checking what it funded.
Free cash flow is negative
The business is not currently covering its capital spending from operations.

Red Flags

3 items require attention · 2 high · 1 watch

🔴Debt has risen sharplyFinancial
Total debt is up 946% over 3 years, from ₹1,195 Cr to ₹12,496 Cr.
🔴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.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹555 Cr in the latest year.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 19.0% means each rupee reinvested earns well above what capital costs. If the company can keep deploying at this rate, growth creates value rather than just consuming cash.
Margin expansion has further to run
EBITDA margin has risen from 19.8% to 33.3%. 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 25% 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?

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 12% a year✓ 16.5% CAGR
Latest reported year was 22.0%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 31%✓ 33.3%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✗ -₹555 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 1.4x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 16%✓ 19.0%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

10 / 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

6 good · 3 neutral · 2 weak

Market Cap

₹1.12 L Cr

Large Cap

Large, widely-covered business — typically the steadiest of the bands

P/E (Trailing)

25.0x

Fair

Fairly valued against the generic band

P/B Ratio

4.17x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹44.87

Profitable

Profitable on a per-share basis

ROE

18.6%

Strong

Strong capital efficiency

ROCE

19.0%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

0.42x

Low

Conservative leverage

Revenue Growth (YoY)

22.0%

Healthy

Healthy top-line growth

Profit Growth (YoY)

-35.9%

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

-₹555 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹1,123

P/E (Forward)

22.8x

Improving

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

Operating Margin

16.4%

Good

Healthy core-business profitability

Net Margin

15.8%

Good

Strong bottom-line conversion

Current Ratio

1.27

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.37

Defensive

Steadier than the market

52W Range Position

72%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

1154.8 / 1144.6

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

31.6

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹16,878 Cr	₹19,022 Cr	₹22,574 Cr	₹26,720 Cr	+16.5%
EBITDA	₹3,342 Cr	₹5,511 Cr	₹7,113 Cr	₹8,904 Cr	+38.6%
EBITDA Margin	19.8%	29.0%	31.5%	33.3%	—
PAT (Net Profit)	₹1,960 Cr	₹3,860 Cr	₹4,526 Cr	₹5,040 Cr	+37.0%
EPS	₹19.3	₹38.14	₹44.97	₹50.09	+37.4%
ROE	11.2%	19.5%	18.9%	18.6%	—
ROCE	13.4%	20.3%	21.7%	19.0%	—
Total Debt	₹1,195 Cr	₹804 Cr	₹3,213 Cr	₹12,496 Cr	+118.7%
Free Cash Flow	₹1,658 Cr	₹2,290 Cr	₹5,087 Cr	-₹555 Cr	—

🟢 Revenue has grown at 16.5% a year over 3 years.

🟢 EBITDA has grown at 38.6% a year over 3 years.

🟢 EBITDA Margin has risen from 19.8% to 33.3% over 3 years (+13.5 pts).

🟢 PAT (Net Profit) has grown at 37.0% a year over 3 years.

🟢 EPS has grown at 37.4% a year over 3 years.

🟢 ROE has risen from 11.2% to 18.6% over 3 years (+7.4 pts).

🟢 ROCE has risen from 13.4% to 19.0% over 3 years (+5.6 pts).

🔴 Total Debt has grown at 118.7% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹1,658 Cr to -₹555 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹52,407 Cr

Total Liabilities

₹22,824 Cr

Total Debt

₹12,496 Cr

Cash & Equivalents

₹855 Cr

Operating Cash Flow

₹2,117 Cr

Capex

-₹2,672 Cr

Shareholding (proxy)

Institutional Holding

15.5%

Insider Holding

75.2%

Corporate Actions

Next Earnings

05 Nov 2026

Dividend Rate

₹1

Ex-Dividend Date

24 Jul 2026

Analyst Consensus

Recommendations

15 Buy · 8 Hold · 6 Sell

Target Price (Mean)

₹1,210.29

+7.8% vs CMP

Target Range

₹800 – ₹1,457.48

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

Zydus Lifesciences Signs $20 Million Sri Lanka Pharma Deal; Shares Rise 0.37%

HDFC Sky, 15 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.

Zydus Lifesciences shares jump 2% to hit 52-week high as US FDA concludes inspection at New Jersey office

Upstox, 27 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.

Zydus Lifesciences Rises 2% on Sri Lanka Plant Deal

Equitypandit, 15 Oct

Zydus Lifesciences gains 2%, hits 52-week high in weak market; here's why

Business Standard, 28 Sept

Explained - Why Zydus Life shares are down 2% but Bernstein sees nearly 30% upside

CNBC TV18, 14 OctPrice 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.

Zydus Lifesciences shares drop 3% after Q1 earnings. Here's why Nuvama upgraded rating, hiked target

The Economic Times, 12 AugAnalyst view

🟢Potentially positiveAn analyst opinion changing, which moves the price without changing the business.

Watch Items

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

DalalBaazaar Thesis

🟢Business QualityStrong17.1/20

🟡Financial HealthAdequate12/20

🟢GrowthStrong18.5/20

🟢ProfitabilityStrong12/15

🟡ValuationFair8.1/15

🟢RiskLow6.7/10

Attractive on both counts

A good business currently available at an undemanding price — the combination this framework exists to look for. The work left is qualitative: whether the advantage the numbers imply is one you can identify and expect to last. 2 high-severity red flags sit above this conclusion and should be read first.

This thesis breaks if

✓Revenue growth stays above 12% a year16.5% CAGR
✓EBITDA margin holds above 31%33.3%
✗Free cash flow remains positive-₹555 Cr
✓Debt / EBITDA stays below 2x1.4x
✓ROCE stays above 16%19.0%