1. At a Glance

Aarti Drugs Ltd (ADL), the ₹4,516 crore market-cap smallcap pharma daredevil, just dropped itsQ2 FY26numbers, and it’s giving us more twists than a daily soap. The company reportedrevenue of ₹652.9 croreandPAT of ₹45.2 crore, marking a29.3% jump in profitsYoY, even as the API market remains flatter than a paracetamol strip left in the sun.

The stock trades at₹491/share, barely moving in the last 3 months (–0.06%), yet up 17% in 6 months. It’s valued at aP/E of 22.7x,EV/EBITDA of 15.5x, andROE of 12.7%— not bad, but not enough to make big pharma jealous. The company’s debt stands at ₹573 crore, implying aDebt/Equity ratio of 0.39, which is the pharma equivalent of “manageable BP levels.”

But Aarti Drugs isn’t just about APIs — it’s also about legal battles (Rs.230.7 crore IGST case), environmental hiccups (HCl leak at Tarapur), and big dreams (Sayakha greenfield project going commercial). Think of it as a desi version of Breaking Bad — less chemistry class, more compliance headaches.

2. Introduction – APIs, Capex, and a Courtroom Cameo

In the labyrinthine world of Indian pharma, Aarti Drugs Ltd is that overachiever cousin — top of the class in makingActive Pharmaceutical Ingredients (APIs), yet constantly under the teacher’s radar for “disciplinary issues.”

Founded in 1984 and part of the ₹1,000 million Aarti Group, the company manufactures and sellsAPIs, pharma intermediates, specialty chemicals, and formulations, exporting to over 100 countries. It’s like the Amazon of bulk drugs — but instead of books, it sells molecules.

In FY25, while India debated about Paracetamol’s price and China’s dumping, Aarti Drugs kept busy:

• Announced₹600 crore capexplan — partially executed.
• Commissioned its Sayakha plant(Rs.220 crore) in September 2025.
• Survived an HCl leak, courtesy of the MPCB’s watchful eyes.
• Faced and foughta ₹230.7 crore GST demand — and won, for now, as theBombay High Courtset it aside in October 2025.

Yet amidst all this, the company posted a respectablerevenue of ₹2,477 crore (TTM)and aPAT of ₹199 crore. That’s consistency with drama — a true Bollywood business story.

So, what’s cooking in Tarapur’s labs, courts, and solar farms? Let’s dive in.

3. Business Model – WTF Do They Even Do?

Aarti Drugs is in the business ofmaking the ingredients that make your medicines work.If pharma brands are the Bollywood stars, Aarti is the camera crew behind the scenes making sure the movie actually gets shot.

a) API (81% of 9M FY25 revenue)The bread, butter, and paracetamol of Aarti’s business. It’s one of thelargest global producersof molecules like Ciprofloxacin, Metronidazole, Ketoconazole, and Nimesulide. The company runs9 manufacturing units with a 45,937 MTPA capacity. Despite pricing pressures and weaker demand, this segment still anchors the ship.

b) Formulations (11%)Through its subsidiary Pinnacle Life Science, Aarti makes 80+ formulations at its Baddi plant —3 billion tablets and 300 million capsules per year.But FY25 wasn’t kind — this division saw a28% YoY declinethanks to regulatory headwinds and global competition.

c) Specialty Chemicals & Intermediates (8%)A backward-integrated segment producing benzene sulfonyl chloride and other intermediates — the “raw material for the raw material.” It’s niche, chemical-heavy, and thankfully not as volatile as TikTok trends.

By therapy area,antibiotics make up 45%, followed byanti-diabetic (16%),anti-protozoal (14%),anti-inflammatory (12%), andanti-fungal (12%)