AARTIDRUGS - Aarti Drugs

📊 NSE: AARTIDRUGS 🏢 Pharmaceuticals - Indian - Bulk Drugs 📅 Last Updated: 12/13/2025 17:43

💰 Financial Performance

Revenue Growth by Segment

Therapeutic-wise revenue within the API segment for Q2 FY26: Anti-biotic (36.1%), Anti-protozoal (18.8%), Anti-diabetic (15.3%), Anti-inflammatory (11.8%), Anti-fungal (11.7%), and Others (6.4%). Consolidated revenue for FY 2024-25 was INR 2,403.4 Cr, reflecting a 5% YoY decline.

Geographic Revenue Split

Export demand remained robust in Q2 FY26, offsetting soft domestic demand trends, particularly in the antibiotics category. Specific regional percentage splits were not disclosed in the available documents.

Profitability Margins

Consolidated PAT margin for FY 2024-25 was 7.0% (INR 168.1 Cr). For Q2 FY26, the PAT margin was 6.9% (INR 45 Cr), up from 5.8% (INR 35 Cr) in Q2 FY25. Gross margin for Q2 FY26 improved to 37.5%, up 310 bps YoY.

EBITDA Margin

EBITDA margin for FY 2024-25 was 12.6% (INR 303.4 Cr). For Q2 FY26, EBITDA margin improved to 12.9% (INR 84.4 Cr), a 23% YoY increase in absolute EBITDA and a 150 bps margin improvement.

Capital Expenditure

A capex program of INR 600 Cr is nearly complete. During Q2 FY26, the company incurred capex of approximately INR 45.6 Cr to boost capacity and margins.

Credit Rating & Borrowing

CRISIL ratings reflect an established market position and strong financial risk profile. Finance costs for FY 2024-25 were INR 35.87 Cr (Consolidated). The Debt-Equity ratio stood at 0.45 as of March 31, 2025.

⚙️ Operational Drivers

Raw Materials

Specific raw materials include Amines (for the Sayakha facility) and inputs for Metformin. COGS for Q2 FY26 was INR 408.3 Cr, representing approximately 62.5% of net revenue.

Capacity Expansion

The Sayakha amines facility was commissioned in September 2025 as a pivotal step in backward integration. Future growth is driven by two Greenfield projects and ongoing Brownfield expansions.

Raw Material Costs

COGS for H1 FY26 was INR 781.7 Cr compared to INR 753.8 Cr in H1 FY25. The company uses backward integration to mitigate susceptibility to raw material price fluctuations.

Manufacturing Efficiency

Manufacturing efficiency is driven by de-bottlenecking and continuous technological enhancement. Capacity utilization is expected to improve as new capacities contribute meaningfully.

Logistics & Distribution

The company maintains an expansive and resilient distribution system, though specific costs as a percentage of revenue were not disclosed.

📈 Strategic Growth

Expected Growth Rate

15%

Growth Strategy

Growth will be achieved through backward integration (Sayakha amines facility), capacity expansion (Greenfield and Brownfield projects), and a target to return consolidated EBITDA margins to 15-16% sequentially. The company is also evaluating a new product portfolio for the next 5-10 years to grow revenue from INR 5,000 Cr to INR 10,000 Cr.

Products & Services

Active Pharmaceutical Ingredients (APIs) including Metformin, Antibiotics, Anti-protozoals, Anti-inflammatory, Anti-fungal drugs, and Formulations (via Pinnacle Life Science).

Brand Portfolio

Aarti Drugs Limited, Pinnacle Life Science Private Limited.

New Products/Services

The company is in early-phase discussions to enter the GLP-1 (anti-diabetic) market with intermediaries or APIs, targeting long-term growth over the next 5-10 years.

Market Expansion

Focusing on robust export demand to offset domestic weakness. Target regions include developed markets with stringent quality and compliance requirements.

🌍 External Factors

Industry Trends

The industry faces high R&D costs and long gestation periods. Current trends show soft domestic demand in antibiotics but robust export demand. The company is positioning for future growth in GLP-1 and amines.

Competitive Landscape

The industry is highly competitive with intense competition from both domestic and international players.

Competitive Moat

Durable advantages include cost leadership through backward integration and long-standing client relationships. These are sustainable due to high entry barriers in complex manufacturing.

Macro Economic Sensitivity

Sensitive to changes in economic conditions, government policies, and regulatory environments. CRISIL notes susceptibility to raw material price volatility.

Consumer Behavior

Shift in demand trends showing softness in the domestic antibiotics category while export demand remains strong.

Geopolitical Risks

The company is navigating geopolitical challenges in the broader operating environment which necessitate a focus on operational resilience.

⚖️ Regulatory & Governance

Industry Regulations

Operations must meet stringent quality and compliance requirements of domestic and international regulators (e.g., pollution norms, manufacturing standards).

Environmental Compliance

The company has shifted to eco-friendly packaging (paper bags, fibre drums) and maintains an EcoVadis score in the 89th percentile globally.

Taxation Policy Impact

Total tax expenses for FY 2024-25 were INR 43.67 Cr on a consolidated PBT of INR 211.77 Cr, representing an effective tax rate of approximately 20.6%.