Indian contract drug makers timed their IPOs right. But is the business worth the premium?
Export-focused CRDMOs including Anthem Biosciences, Sai Life Sciences and Divi's Laboratories are trading at expensive valuations, reflecting investor enthusiasm as innovator drug companies look at diversifying and derisking their operations. However, experts cautioned that while CRDMOs are expected to post high growth, their financial performances have yet to reflect it.
Bengaluru-based Anthem Biosciences made a stellar debut on the stock exchanges on 21 July, listing on the National Stock Exchange at a premium of 27 percent over its initial public offering price of ₹ 570. The IPO, with an issue size of ₹ 3,395.79 crore, was subscribed 67.42 times. Anthem's stock traded at a price-to-earnings (PE) ratio of 93.24 on 25 July.
'The good news is that… China is a behemoth. So, we have that much headroom to grow,' Ajay Bhardwaj, managing director and chief executive officer, told Mint earlier.
About 65% of India's imported bulk drugs and advanced drug intermediates worth $3.5 billion in FY25 came from China, according to the commerce ministry. The government wants to strengthen local manufacturing through an upgraded drugs production-linked incentive scheme as it pushes for self-sufficiency in bulk drugs that go into manufacturing medicines.
The Indian CRDMO industry today is worth $3-3.5 billion, making up only 2-3% of the global CRDMO market, which is worth $145 billion. It grew at a compound annual growth rate of 15% from 2019-2024, according to a recent report by BCG and IPSO.
The industry is at a tipping point, with strong fundamentals and massive headroom to grow, fueled by competitive advantage in small molecule capabilities, faster startup time, focus on quality and cost advantages, the report noted.
Unlike CRDMOs, CDMOs (contract development and manufacturing organisations) are typically involved in manufacturing already commercialised drugs.
Sai Life Sciences, which made its market debut in December 2024, traded at ₹ 837 on 25 July, close to its high of about ₹ 851, valuing the company at roughly 102 times trailing earnings and about 8.2 times book value.
Divi's Laboratories and Syngene International also traded at premiums, at a PE ratio of 80.31 and 55.09, respectively. In comparison, generic pharmaceutical giants are valued relatively modestly: Sun Pharmaceutical Industries trades at a PE ratio of 37.37, Dr Reddy's Laboratories at 18.84, and Cipla at 23.53.
Sai Life Sciences shares are up over 18% since listing on the NSE. Divi's Laboratories gained 35.56% from 30 July 2024 to 28 July 2025, Piramal Pharma rose 20.36%, while Syngene International's shares were down 12.72%.
Syngene International, a unit of biopharmaceutical company Biocon, kicked off this fiscal's earnings season last week. It posted an 11% year-on-year rise in revenue from operations to ₹ 875 crore for Q1, a robust start compared to its FY25 performance (4% revenue growth YoY). The management maintained its expectation of revenue growth in the mid‑teens for FY26.
Sai Life Sciences delivered 16% revenue growth to ₹ 1,695 crore in FY25. Divi's reported a 19% year-on-year rise in full-year revenue to ₹ 9,360 crore in FY25, while net profit surged 37% to ₹ 2,191 crore.
Divi's is expected to post revenue growth of 18% year-on-year in Q1FY26, according to brokerage BNP Paribas.
'The Indian CDMO sub-sector presents a highly promising opportunity as investors view it as a direct beneficiary of the China+1 thematic,' Sunil Khaitan, managing director leading financing in India at Goldman Sachs, told Mint. 'We expect the capital markets activity in this space to further accelerate over the next 6-12 months.'
The China-plus one theme – to diversify supply chains and reduce overdependence on China – is a key driver, but it's not just that.
CRDMOs are on an aggressive capacity expansion track as they anticipate winning over more clients in the future and bank on technological niches to cater to biotech companies as demand for new technologies and drugs grows.
Anthem has expertise in new chemical entities as well as biologics (drugs made from living organisms or their components) and capabilities to work on RNAi (a gene regulatory mechanism), antibody drug conjugates that target and kill cancer cells, peptides (short chains of amino acids), lipids, and oligonucleotides (synthesised nucleic acids).
OneSource Specialty Pharma, a subsidiary of Strides Pharma, which listed in January, expects its focus on niche areas such as biologics, drug substances, injectables, and drug-device combinations to drive growth. Its offerings in drug-device combinations, particularly for GLP-1s (hormones that regulate blood sugar levels), which are often sold in pen-filled devices, is expected to be a major growth opportunity.
'We are currently executing a 5x expansion of our cartridge-filling capabilities to meet our customer demand and which will significantly boost future revenue,' CEO Neeraj Sharma told Mint in an emailed response.
Anthem Biosciences and Sai Life Sciences did not respond to Mint's queries.
Investors are looking at CRDMOs not just for potential growth driven by these tailwinds but also as diversification of their portfolios, experts said. Opportunities in traditional pharma companies with a focus on domestic formulations and US generics are drying up because of a slowdown in new approvals and regulatory issues.
'The investor would like to have exposure to companies and segments which have the potential for high growth and themes of shifting manufacturing from China to India,' Tausif Shaikh, healthcare and pharma analyst at BNP Paribas, told Mint.
While CRDMOs have reported steady, mid-teen revenue growth, their performance has not been encouraging enough even as valuations remain expensive, Shaikh pointed out.
Unlike sectors such as healthcare services, where one can gauge a company's performance based on metrics like hospital bed occupancy and average revenue per bed, for contract drug manufacturers, management commentary is the main indicator of the company's expected growth and performance, said Shaikh.
Most companies report an uptick in interest from innovators to hire their services and have embarked on aggressive capacity expansion. Syngene plans to boost its biologics manufacturing footprint in FY26 through its newly acquired US facility for $36.5 million.
Divi's Laboratories is undertaking a ₹ 650-700 crore capacity expansion at its existing facilities, while Sai Life Sciences has completed the second phase of its Bidar Unit IV capacity expansion for small-molecule active pharmaceutical ingredients and intermediates.
On the back of this, the growth outlook remains strong.
"Earnings are expected to be strong for export-oriented CDMOs for the next 2-3 years considering the capex projects and potential addition of new molecules,' Shrikant Akolkar, pharma equity research analyst at brokerage Nuvama, told Mint.
However, the CDMO business is non-linear, Akolkar said, adding that one must pay attention to the annual performance and not a couple of quarters of number misses.
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