Aarti Drugs surges 14% on firm Q1 result, approves buyback via tender route

The board has approved the buyback of 665,000 equity shares at Rs 900 per share via the tender offer route

Shares of Aarti Drugs surged 14 per cent to hit a 52-week high of Rs 583.95 on the BSE in Monday’s intra-day trade amid heavy volumes after its board approved a share buyback plan via the tender offer route. 

The company will buyback 665,000 equity shares at Rs 900 per share via a tender offer. It said it will buy back equity shares aggregating up to Rs 59.85 crore, which is 5.44 per cent and 5.10 per cent of the fully paid-up equity share capital and free reserves.

The stock of the pharmaceuticals company has surpassed its previous high of Rs 534.90, touched on July 17, 2023. The average trading volumes on the counter jumped over six-fold with a combined 6.6 million shares having changed hands on the NSE and BSE.
 

Aarti Drugs is a pharmaceutical company with interests in active pharmaceutical ingredients (API), formulation, specialty chemicals and intermediates.

Meanwhile, for the April-June quarter (Q1FY24), Aarti Drugs reported 38 per cent year-on-year (YoY) jump in its consolidated profit after tax (PAT) at Rs 48 crore. Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin improved 200 bps YoY at 12.8 per cent.

The company posted revenue growth of 6.3 per cent YoY at Rs 661.7 crore in Q1FY24, which was primarily driven by good volume growth getting partially set off by the downward rate variance. Growth in API business was led by volume growth of 18 per cent driven by domestic market demand uplift.

The company expects improved margin levels each quarter from now onwards as the input price is seen to be stabilised, which is also witnessed in Q1FY24 margin performance, though there might be few products specific instances where raw materials are still showing downward trend. Moreover, exports have been a laggard for API this quarter due to USD shortages for some of the export geographies, the management said.

Looking beyond the short-term challenges, the management remains positive about the opportunities both in API and non API business. The growth trajectory is expected to be healthy for all the segments in the upcoming period driven by the execution of existing projects and higher utilization of existing capacities. The pace of growth in exports is expected to continue in the formulation business.

The capex for Q1FY24 stood Rs 48 crore and is expected to be in the range of Rs 250-350 crore for the FY24. With all the Capex plans getting executed this fiscal year i.e Gujarat Saykha Capex, Tarapur Capex on Dermatology and Specialty chemical, which are high margin accretive segments, will lead to better growth for the company’s business. Due to some external factors, the project is now expected to come into commercial operations in Q3FY24, the company said.