Explained — How Aurobindo Pharma benefits from the DGFT decision on Pen-G

Shares of Aurobindo Pharma Ltd. gained over 5% in early trading on Friday, January 30, after the Directorate General of Foreign Trade (DGFT) announced the imposition of a Minimum Import Price (MIP) on Pen-G, 6-APA, and Amoxicillin.

As per the notification, an MIP of ₹2,216 per kilogram or $24 will be imposed on Pen-G, while an MIP of ₹2,733 per kilogram (~$30) and ₹3,405 per kilogram (~$37) will be imposed on Amoxicillin and 6-APA respectively.

The MIP will be effective immediately and will be in place till January 2027.

Pen-G is used to make 6-APA, which in-turn is used to manufacture Amoxicillin. Currently, companies are importing 6-APA to manufacture Amoxicillin. According to analysts, the current import price for Pen-G from China is between $17 to $18 per kilogram.

Why This Is Important For Aurobindo?

The decision is significant for Aurobindo Pharma as the company has capabilities across the entire value chain. It is the only Indian company currently operating with a Pen-G plant.

Auronbindo's Pen-G plant, backed by the Production-linked Incentive (PLI) scheme, was inaugurated in 2024. The current Pen-G capacity at the plant is 15,000 tonnes. In comparison, India needs around 9,000 tonnes of Pen-G annually.

The drugmaker has invested a sum of ₹2,700 crore for this facility, which is currently operating at a capacity of around 50% and analysts believe that this utilization level could ramp-up to 75% as well.

According to analysts, this move could result in a potential upside between ₹600 crore to ₹700 crore for Aurobindo Pharma's Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for financial year 2027.

Shares of Aurobindo Pharma are trading 4.2% higher on Friday at ₹1,199. The stock has seen subdued moves over the last 12 months, declining 2.6% before the start of today's session.