Aurobindo Pharma: DGFT's Pen-G Price Rule May Add ₹700 Crore to EBITDA

Introduction

Aurobindo Pharma Ltd. is poised for a significant financial uplift following a crucial policy decision by the Directorate General of Foreign Trade (DGFT). The Indian government body has imposed a Minimum Import Price (MIP) on key pharmaceutical ingredients, including Penicillin-G (Pen-G), 6-APA, and Amoxicillin. This move is expected to directly benefit Aurobindo Pharma, as it is the only domestic manufacturer with an operational Pen-G plant, potentially adding up to ₹700 crore to its EBITDA by the financial year 2027.

The DGFT's Strategic Intervention

In a notification released on January 29, 2026, the DGFT outlined the new pricing framework designed to protect domestic manufacturers from cheaper imports, primarily from China. The MIP has been set at ₹2,216 per kilogram (approximately $14) for Pen-G. For its derivatives, the floor price for Amoxicillin is ₹2,733 per kilogram ($10), and for 6-APA, it is ₹3,405 per kilogram ($17). This regulation is effective immediately and will remain in place until January 2027, providing a stable and protected pricing environment for domestic producers.

Aurobindo Pharma's Unique Position

The DGFT's decision places Aurobindo Pharma in a highly advantageous position. The company possesses capabilities across the entire Pen-G value chain, from the base material to the final antibiotic. Pen-G is a critical starting material for 6-APA, which is then used to manufacture Amoxicillin, a widely used antibiotic. Previously, many Indian companies imported 6-APA directly. With the new MIP, vertically integrated players like Aurobindo stand to gain a substantial competitive edge. The company's Pen-G plant, inaugurated in 2024 under the government's Production-Linked Incentive (PLI) scheme, makes it the sole Indian producer of this key ingredient.

A Closer Look at the Pen-G Facility

Aurobindo Pharma has made a significant capital investment of ₹2,700 crore in its Kakinada-based Pen-G facility. The plant has an annual production capacity of 15,000 tonnes, which comfortably exceeds India's total annual requirement of around 9,000 tonnes. This surplus capacity opens up possibilities for exports and the production of value-added downstream products. Currently, the plant is operating at about 50% of its capacity, and analysts project that utilization could ramp up to 75% following the implementation of the MIP, as domestic demand shifts from imports to locally produced Pen-G.

Financial Implications and Market Impact

The economic benefit for Aurobindo is clear. Before the DGFT's intervention, the import price for Pen-G from China was in the range of $17 to $18 per kilogram. The new MIP of $14 per kilogram establishes a price floor that significantly improves the profitability of domestic production. Analysts estimate that this protective measure could result in an EBITDA upside of ₹600 crore to ₹700 crore for the company in FY27. The market responded positively to the news, with shares of Aurobindo Pharma closing 1.1% higher at ₹1,152 on Thursday.

Key Data Summary

Analyst Perspectives and Broader Context

While the MIP provides a strong tailwind, the market landscape remains competitive. The policy directly addresses the pricing pressure from Chinese imports that had previously challenged domestic players. Analyst outlook on the company is mixed, reflecting diverse growth drivers and challenges. Motilal Oswal remains bullish, citing growth in US/Europe markets and biosimilars, with a target price of ₹1,430. In contrast, Macquarie has maintained an 'Underperform' rating with a target of ₹1,010, indicating caution. The DGFT's decision, however, is a specific, positive catalyst that directly supports the company's significant investment in the Pen-G segment.

Conclusion

The imposition of a Minimum Import Price on Pen-G and its derivatives is a landmark decision for India's pharmaceutical sector and a major victory for Aurobindo Pharma. It validates the company's strategic ₹2,700 crore investment in domestic manufacturing capabilities, aligning its growth with the 'Make in India' initiative. This policy provides a much-needed shield against predatory pricing from imports and creates a clear pathway for improved profitability and higher capacity utilization. Investors will now be closely watching how quickly Aurobindo can scale its Pen-G operations to capitalize on this favorable regulatory environment.