Aarti Drugs reported consolidated Q3 FY26 revenue growth of 8% YoY to INR602.9 crores, though EBITDA declined 10% YoY due to utilization pressures. Management cited weaker antibiotic demand, shipment delays from China, and initial ramp-up pains at new greenfield facilities as headwinds. Positively, the company sees an inflection point with stabilizing realizations, projecting 12% to 15% volume growth in FY27.
Q3 FY26 Performance Overview and Headwinds
Aarti Drugs Limited hosted its Q3 and 9M FY26 Earnings Conference Call on February 4, 2026. Management detailed several factors negatively impacting quarterly performance, primarily low utilization levels impacting operating leverage. Specific challenges included weaker antibiotic demand, shipment delays from China straining supply chains, and temporary constraints from a voluntary shutdown for refurbishment at one plant. Additionally, new greenfield facilities operated below optimal capacity during their initial ramp-up phase.
Positive Operational Developments
Despite challenges, the standalone business showed a 7% volume growth YoY. Export markets, particularly formulations, were noted as a key growth driver. The Sayakha facility, operational since September ’25, achieved 30% utilization in its first quarter, with expectations to reach nearly 50% by March/April 2026. Furthermore, the backward integration facility for metformin is progressing, aiming to meet 100% captive requirements in the coming quarters.
Consolidated Financial Highlights (Q3 FY26)
At the consolidated level for Q3 FY ’26:
- Revenue stood at INR602.9 crores, an 8% YoY growth over INR557.1 crores in Q3 FY ’25.
- EBITDA was INR56.3 crores (down 10% YoY), with a margin of 9.3%.
- PAT surged by 58% YoY to INR40.5 crores, translating to a PAT margin of 6.7%.
For the 9 months FY ’26, revenue grew 8% YoY to INR1,846.6 crores, and PAT rose 49% YoY to INR139.7 crores.
Segment Breakdown (Q3 FY26 Standalone)
Standalone revenue reached INR530.0 crores (88% of consolidated revenue), with exports contributing 37%. In the API segment, the antibiotic category was the largest contributor at 35.1%. The Formulation segment revenue stood at INR76.6 crores, marking a significant 58% YoY growth, with exports comprising 67% of this segment.
Outlook and Future Guidance
Management indicated that January sales show an encouraging trend, suggesting an inflection point for realizations and volume momentum. Volume growth for FY ’27 is anticipated to be around 12% to 15%, primarily driven by new projects like salicylic acid and Sayakha amines. The target for EBITDA margins in the next fiscal year is set between 12% to 13%, with an ideal steady state of 14% to 15%.
Regarding capital expenditure, the company expects to spend INR150 crores to INR200 crores annually for the next two years, covering expansion, oncology dossier development, and maintenance capex. Current debt at the consolidated level is approximately INR540 crores.
Specialty Focus Areas
The oncology formulation business, despite being pre-revenue, accounts for an estimated 40% to 50% of future revenue potential over the next three years, requiring a corresponding investment proportion. The salicylic acid backward integration project, initially slowed by market entry by Chinese competition, is expected to benefit from potential anti-dumping duty applications, aiming for stabilization to 1,000 metric tons per month within 12 months.
Source: BSE
