The Nifty Pharma index hit a record on Monday, led by companies that manufacture for global drugmakers rather than sell their own generics. Divi’s Laboratories’ value crossed ₹3 lakh crore for the first time.
Indian pharma stocks had their best day in weeks on Monday, with the Nifty Pharma index hitting a record high. The gains were not spread evenly. They were concentrated in companies that make drugs and ingredients for other pharmaceutical companies.
Divi’s Laboratories led the charge. The stock hit a record ₹11,818 on the BSE, pushing its market value above ₹3 lakh crore for the first time. It has gained about 15% in two sessions since its results on Saturday.
Consolidated net profit rose 64% to ₹1,127 crore in the September quarter, from ₹689 crore a year earlier. Revenue from operations grew 35% to ₹3,676 crore. Profit rose 25% from the June quarter alone.
The margin was the standout. EBITDA margin widened to 42.6% from 32.7% a year earlier, a level few manufacturers anywhere achieve. Management reiterated its guidance for double-digit revenue growth in the second half of the year
Divi’s makes active pharmaceutical ingredients, the chemical compounds that give medicines their effect, and runs a large custom synthesis business, manufacturing complex molecules for global drug companies under long-term contracts.
Gland: the injectables story
Gland Pharma jumped as much as 7.9% to a 52-week high of ₹3,372, valuing the company at about ₹55,227 crore. Its September-quarter profit rose 58% to ₹291 crore, as US sales jumped 42% and its contract manufacturing business grew 31%.
Companies that sell their own generic tablets in the US, including Lupin, Zydus and Cipla, have been hurt by falling prices and new competition. Companies that manufacture for others, or make hard-to-copy products, are thriving.
Several forces are helping them. Global drugmakers want to reduce their dependence on Chinese suppliers, and India is the main alternative. A wave of new drugs, including obesity and diabetes treatments, needs complex ingredients that only a few manufacturers can make at scale. And contract manufacturing brings long-term relationships and steadier revenue than selling generics directly.
Though some of these stocks seems to have run up a lot. Divi’s has risen about 76% this year, and contract manufacturers now trade at valuations far above traditional generic drugmakers. Their earnings depend heavily on a small number of large global clients, and a lost contract or a delayed drug launch can hit results hard.
There is also a policy risk. Any change in US trade rules for pharmaceuticals would affect the entire sector, though contract manufacturers that are deeply embedded in global supply chains may be better protected than most.
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