Synopsis:
Aarti Drugs reported strong year-on-year growth in Q1 FY26, with net profit rising 63.6 percent. While sequential performance declined, strategic expansions and backward integration are underway.
One of India’s key pharmaceutical API manufacturers was in focus today following the release of its Q1 FY26 results. The company posted a solid year-on-year growth in revenues and profitability, although sequentially, earnings remained under pressure.
With new capacity expansions and a strong backward integration strategy underway, the company is positioning itself to capitalize on emerging global opportunities, particularly in regulated markets.
The company in focus is Aarti Drugs Limited, which currently holds a market capitalization of Rs. 4,845 crore. The stock opened today at Rs. 525, higher than its previous close of Rs. 523.20, and touched an intraday high of Rs. 542, reflecting a gain of approximately 3.58 percent over the previous closing price.
What’s the News?
On a Quarter-on-Quarter basis, Aarti Drugs reported a decline in its financial performance. Revenue from operations fell by 12.7 percent, decreasing from Rs. 677 crore in March 2025 to Rs. 591 crore in June 2025. Operating profit fell by 20.4 percent from Rs. 93 crore to Rs. 74 crore.
Profit before tax dropped by 28.2 percent, falling from Rs. 71 crore to Rs. 51 crore. Net profit also declined by 14.3 percent, reducing from Rs. 63 crore to Rs. 54 crore.
On a Year-on-Year basis, however, the company displayed healthy growth across all key metrics. Revenue from operations grew by 6.5 percent from Rs. 555 crore in Q1 FY25 to Rs. 591 crore in Q1 FY26.
Operating profit increased by 13.8 percent from Rs. 65 crore to Rs. 74 crore. Profit before tax rose by 15.9 percent from Rs. 44 crore to Rs. 51 crore. Net profit surged by an impressive 63.6 percent, jumping from Rs. 33 crore to Rs. 54 crore.
Aarti Drugs continues to maintain a stable financial profile with a Return on Capital Employed (ROCE) of 12.9 percent and a Return on Equity (ROE) of 12.7 percent. The company’s debt-to-equity ratio remains moderate at 0.45, reflecting a balanced capital structure. The Return on Assets (ROA) stands at 6.71 percent, and the dividend payout ratio is at 5.43 percent.
Segment wise, APIs remain the company’s largest revenue contributor at 77.6 percent, followed by formulations at 13.6 percent, specialty chemicals at 5.6 percent, and intermediates and others accounting for 3.2 percent of total revenues.
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Comments from the Management
Commenting on the Q1 FY26 performance, Mr. Adhish Patil, CFO & COO of Aarti Drugs Limited, emphasized the company’s focus on margin improvement, capacity expansion, and capturing emerging global opportunities.
He stated, “In Q1 FY26, Revenues grew by 6% YoY to Rs. 591 crores with Gross Profit Margins improving by 130 basis points YoY to 36.8%. EBITDA has increased by 12% YoY to Rs. 74 crores and EBITDA Margins improving to 12.6%. The quarter witnessed improved demand for active pharmaceutical ingredients (APIs), leading to a recovery and growth in volumes as compared to Q1FY25.”
On the company’s strategic expansions, Mr. Patil said, “We have started trial production at our new greenfield facility in Sayakha, Gujarat, mainly for backward integration into anti-diabetic products. This is a key step to improve profit margins and reduce input cost volatility over time.”
He further added, regarding its new greenfield salicylic acid plant, that “We are now focused on ramping up operations with plans to scale production to over 800 tonnes per month, and expand capacity to around 1,600 tonnes per month by the end of FY26.”
Addressing global developments, Mr. Patil highlighted, “While this may disrupt sourcing patterns for several players, it also opens up new opportunities for Indian API manufacturers.
Aarti Drugs, with a recently USFDA-approved API facility and established manufacturing capabilities, is strategically positioned to meet this demand shift. The commissioning of new capacity at Sayakha and Tarapur supports this readiness and enhances the Company’s ability to serve regulated export markets”.
About the Company
Aarti Drugs Limited is engaged in the manufacturing and sale of Active Pharmaceutical Ingredients (APIs), pharma intermediates, specialty chemicals, and formulations. The company exports its APIs and specialty chemicals to over 100 countries worldwide, reinforcing its strong global presence in the pharmaceutical space.
Written by Manan Gangwar
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