1. At a Glance – Blink and You’ll Miss the Drama
₹3,566 crore market cap. Stock price hovering around ₹391. Down ~22% in the last 3 months. ROCE ~13.5%. ROE ~13%. Debt ~₹440 crore. On paper, this looks like a boring, middle-aged pharma uncle who attends every wedding but dances to slow songs only.
But wait. Q3 FY26 just dropped: Revenue ₹602.9 crore, PAT ₹40.5 crore, and 9M FY26 PAT ₹139.7 crore. Interim dividend announced at ₹2 per share (yes, cash is still a thing here). US FDA import alert lifted earlier. New Sayakha plant commercialized. Capex humming along.
So why is the stock sulking like it lost a breakup text battle?
Because Aarti Drugs sits in that awkward zone:
Too big to be a scrappy turnaround story.
Too small to be a Divi’s Lab flex.
And stuck in APIs where pricing behaves like Indian weather—unpredictable and usually annoying.
This is not a “one-quarter wonder” story. This is a grind-it-out pharma saga, full of volume growth, margin pressure, regulatory soap operas, and management optimism that refuses to die. Curious yet?
2. Introduction – Welcome to the API Middleweight Championship
Aarti Drugs is part of the broader Aarti Group—yes, the same family tree that gave us Aarti Industries. Established in 1984, the company decided early on that it wouldn’t chase fancy patented molecules. Instead, it chose the mass-market API route: antibiotics, anti-diabetics, anti-fungals, anti-inflammatories. Stuff doctors prescribe daily and chemists sell like chai.
The upside?
Steady demand, massive volumes, global reach across 100+ countries.
The downside?
Brutal pricing cycles, Chinese competition, and customers who bargain harder than your local vegetable vendor.
Over the years, Aarti Drugs built scale—50+ APIs, leadership in fluoroquinolones, metronidazole derivatives, ketoconazole, nimesulide, celecoxib, and a global top position in metformin. This is not a nobody. This is an API factory that prints molecules for the world.
But scale without pricing power is like owning a dhaba on a highway with 10 identical dhabas next door. Volumes save you. Margins tease you. Investors lose
patience.
3. Business Model – WTF Do They Even Do?
Think of Aarti Drugs as a chemical kitchen for pharma companies.
Segment 1: APIs (81% of 9M FY25 revenue)
This is the bread, butter, and the occasional burnt toast.
- APIs like Ciprofloxacin, Metronidazole, Metformin HCL, Ketoconazole, Ofloxacin
- 9 manufacturing units
- Installed capacity: 45,937 MTPA
- Customers: Cipla, Sun Pharma, Lupin, Torrent, Abbott, Alembic, Intas
Problem?
In 9M FY25, API revenue declined 9% YoY due to pricing pressure and weak demand. Volumes went up. Realisations didn’t. Classic API pain.
Segment 2: Formulations (11%)
Handled via 100% subsidiary Pinnacle Life Science at Baddi.
- 80+ formulations
- Capacity: 3 billion tablets, 300 million capsules
- Revenue down 28% YoY in 9M FY25
Formulations were supposed to add stability. Instead, they decided to nap.
Segment 3: Specialty Chemicals & Intermediates (8%)
This is the hopeful child.
- Products: Benzene sulfonyl chloride, chlorosulphonation derivatives
- Installed capacity: 11,242 MTPA
- Backward integration for APIs
In 9M FY25:
Specialty chemicals revenue ↓ 3% YoY
Intermediates & others ↑ 22% YoY
This is where management wants margins to quietly improve without shouting about it.
4. Financials Overview – The Numbers Don’t Lie, They Just Sigh
Quarterly Comparison Table (₹ crore)
| Metric | Latest Qtr (Q3 FY26) | YoY Qtr (Q3 FY25) | Prev Qtr (Q2 FY26) | YoY % | QoQ % |
|---|---|---|---|---|---|
| Revenue | 602.9 | 528.8 | 579.0 | +14.0% | +4.1% |
| EBITDA | 42.0 | 60.0 | 75.0 | -30.0% | -44.0% |
| PAT | 40.5 | 33.8 | 42.0 | +19.8% | -3.6% |
| EPS (₹) | 4.43 | 3.71 | 4.58 | +19.4% | -3.3% |
Annualised EPS (Q3 rule):
Average of Q1, Q2, Q3 EPS
