At a Glance: Aurobindo Pharma went from being India’s generics superstar to battling FDA fire drills, margin migraines, and the curse of scale. With US revenue still leading the charge and margins bouncing back, is this a revival script — or just painkiller placebo?
1. 💊 Business Model: From Molecules to Millions
- Aurobindo makes Active Pharmaceutical Ingredients (APIs) and generic formulations, exporting across 150+ countries.
- US Generics = 40%+ of total revenue. Rest from EU, India, ROW (rest of world).
- Large presence in oral solids, injectables, and specialty drugs.
- Also entered biosimilars, OTC, and complex generics to future-proof biz.
2. 📅 FY25 Recap: The Comeback Quarter?
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | ₹24,855 Cr | ₹29,002 Cr | ₹31,724 Cr |
| Net Profit | ₹1,928 Cr | ₹3,169 Cr | ₹3,484 Cr |
| EBITDA | ₹3,707 Cr | ₹5,826 Cr | ₹6,551 Cr |
| OPM (%) | 15% | 20% | 21% |
| ROCE (%) | 9% | 14% | 14% |
| EPS (₹) | ₹32.90 | ₹54.15 | ₹59.49 |
- Margins have improved post-FY23 slump.
- Profits doubled in 2 years — thanks to better product mix and cost controls.
- But don’t ignore: still below peak margins of 2017–2019.
3. 📉 5-Year Track: Not Quite the Pharma Fairy Tale
- Stock CAGR (5Y): 8%
- Sales CAGR (5Y): 6.55%
- Profit CAGR (5Y): 4%
- Margins compressed during 2020–23 due to raw material inflation + US FDA issues
- ROCE, ROE dipped to single digits but recovering now
4. 🌎 US Market: Big Cheese, Big Risks
- Aurobindo is #1 Indian generic supplier to the US
- But: intense pricing pressure, ANDA approval delays, and site audits
- Revenue is growing, but not fast enough to justify capex-heavy model
- US dependency is a double-edged sword
5. 🇪🇺 Europe & India: Stabilizers, Not Growth Engines
- EU business doing okay — diversified across 8 countries
- India biz small (~₹2,200 Cr), growing ~10% annually
- Not leadership position yet in domestic pharma
- Doesn’t enjoy Sun or Cipla-style pricing power in India
6. 🏗️ Capex Binge or Strategic Scaling?
- Fixed assets: ₹11,024 Cr (FY23) → ₹16,428 Cr (FY25)
- Borrowings up: ₹5,286 Cr → ₹8,263 Cr
- Cash flows positive, but FCF negative due to investments
- 8+ manufacturing units across Vizag, Hyderabad, US, and EU
- Focus on injectables, biosimilars, and US FDA-compliant upgrades
7. 🔥 FDA Woes: Ghosts of the Past
- Past: Warning letters, import alerts = major speedbumps
- Present: Most issues resolved, plants re-inspected
- Future: Any slip-up can hammer stock again
- They’ve improved compliance, but market has PTSD
8. 💰 Cash Flow Check-up
| Metric | FY25 |
|---|---|
| Operating Cash Flow | ₹3,925 Cr |
| Investing Cash Flow | ₹(1,876) Cr |
| Financing Cash Flow | ₹120 Cr |
| Net Cash Flow | ₹2,169 Cr |
- Operationally healthy
- But capex is still aggressive, eating into cash reserves
9. 📈 Valuation Zone: Reasonable or Risky?
- P/E: 19.4x — lower than most peers
- Book Value: ₹557 vs CMP ₹1,150 → P/B of ~2.06x
- Fair value range: ₹1,000 – ₹1,250, depending on US growth and margin trajectory
10. 📊 Shareholding Snapshot
| Category | Mar 2025 |
|---|---|
| Promoters | 51.82% |
| FIIs | 15.33% |
| DIIs | 26.23% |
| Public | 6.61% |
- DII stake growing — institutions see value
- FII stake falling — global funds trimming risk
- Public holding very low = not yet retail darling
11. 🚩 Red Flags & Risks
- High working capital cycle (244 days)
- Weak dividend payout (~10%) despite decent profits
- Overdependence on one geography (US)
- Capitalizing interest costs? Screener hint: yes.
12. 🤔 Verdict (No Buy/Sell Advice)
- Aurobindo isn’t in ICU, but it’s still under observation.
- If US generics pick up and margins hold, rerating possible.
- But overcommitment to capex, regulatory risk, and lack of moat in India = caution required
- Treat it like a medicine: right dose, right timing — or side effects follow.
Tags: Aurobindo Pharma, US Generics, FDA Compliance, Pharma Stocks India, Nifty 500 Healthcare, EduInvesting, Pharma Earnings Recap, Capex-heavy Pharma
✍️ Written by Prashant | 🗓️ 14 June 2025
