1. At a Glance – Small API, Big Mood Swings
Auro Laboratories Ltd is a classic small-cap API manufacturer with a mid-life crisis. Market cap of ₹168 Cr, stock price chilling around ₹270, and a P/E of ~57x for a company that just clocked ₹28.4 Cr in TTM revenue. Yes, you read that right. The stock has rallied ~47% in the last 3 months, probably because Q3 FY26 numbers looked like a Bollywood comeback montage.
Latest quarter (Dec 2025) delivered ₹9.39 Cr sales and ₹1.95 Cr PAT, translating into an eye-popping 43.24% operating margin. On paper, this looks like pharma nirvana. In reality, this is a company whose entire personality is Metformin HCL, contributing ~80% of revenue.
Debt stands at ₹43.9 Cr, current ratio is a weak 0.61, and debtor days have ballooned to 177 days—basically customers are treating Auro Labs like an interest-free FD. ROCE is a sad 3.85%, ROE is 4.33%, yet valuation is partying like a biotech unicorn.
So the big question:
👉 Is this a genuine turnaround story or just one strong quarter wearing heavy makeup?
2. Introduction – From Bulk Drugs to Bulk Confusion
Auro Laboratories Ltd was incorporated in 1989, back when liberalisation was still a rumour. The company operates in bulk drugs (APIs), manufacturing generic molecules with a strong bias towards anti-diabetics, especially Metformin Hydrochloride—India’s most overworked molecule after Paracetamol.
For years, Auro Labs has been a steady-but-forgettable API player. Sales stagnated, margins yo-yoed, and growth rates politely declined. Then came FY24–FY26, when management decided to break things to fix things—halting operations, expanding capacity, borrowing heavily, and betting the farm on future volumes.
The result?
- FY25 sales collapsed to ₹19.4 Cr
- Debt shot up
- Working capital went rogue
- And investors went from “ignore” to “OMG Q3 PROFIT VAR 3800% 😱”
But here’s the thing: low base miracles are still
miracles… just very small ones.
The story of Auro Labs today is not about size, it’s about timing. Capacity expansion is underway, WHO-GMP is secured till 2028, exports dominate revenue, and Metformin demand globally refuses to die.
Yet governance hiccups, CFO musical chairs, auditor resignations, and liquidity stress keep waving red flags like it’s Republic Day.
So let’s slow down and actually understand what this company does.
3. Business Model – WTF Do They Even Do?
Auro Labs manufactures generic APIs, with Metformin HCL being the undisputed kingpin. If Metformin sneezes, Auro Labs catches pneumonia.
Core Products:
- Metformin Hydrochloride (anti-diabetic API)
- Chlorphenamine Maleate (antihistamine)
- Chlorzoxazone (muscle relaxant)
Out of these, Metformin alone contributes ~80% of revenue. Diversification exists only in PowerPoint slides.
Manufacturing Setup:
- Single manufacturing unit at Tarapur, Maharashtra
- WHO-cGMP & ISO certified
- Installed capacity: ~500 TPA currently
- Expansion underway to double Metformin capacity from 1,800 MTPA to 3,600 MTPA
The company also does:
- Toll manufacturing
- Custom API/intermediate manufacturing
But let’s be honest—these are side dishes. The main thali is Metformin.
Geography:
- Exports ~86%
- Domestic ~14%
Export markets include Europe, UK, Africa, and parts of Asia.
Which raises an uncomfortable question:
👉 What happens if Metformin pricing turns ugly or China dumps supply again?
4. Financials Overview – One Quarter
