HYDERABAD: City-based Divi’s Laboratories on Thursday became the second pharma player in the country, after Sun Pharma, to enter the elite league of companies with a market capitalization of Rs 1 lakh crore or more. Led by Reliance Industries, there are just 31 companies, out of a total of about 5,000 companies in India, which can boast of this milestone.
With its entry into the big league, Divi’s Labs also left behind the traditional big daddies of Dalal Street like Bajaj Auto (Rs 94,639 crore), Tata Steel (Rs 72,810 crore), Mahindra & Mahindra (Rs 90759 crore), and many more. In its sector, Dr. Reddy’s Laboratories is at Rs 84,384 crore, while Cipla is at Rs 63,161 crore, BSE data showed.
Pharma player beats biggies like Bajaj Auto, Tata Steel & M&M
Divi’s has set a blistering pace on the bourses in the past decade: From about Rs 8,000 crore in December 2010, the company’s market value at Thursday’s close was Rs 1.02 lakh crore, a jump of over 12 times during this period. The stock closed the day’s session on BSE at Rs 3,825, more than double from its March low of Rs 1,633.
According to analysts, the key ingredient of the company’s success is its positioning as one of the key global suppliers of APIs like Naproxen (a nonsteroidal anti-inflammatory drug), Dextromethorphan (cough suppressant), and Gabapentin (anti-convulsant), a position it attained by edging out some global pharma giants, and sharp focus on CRAMS.
The stock attracts savvy investors because of its robust and steady business model that is perceived as relatively less risky from the regulatory point of view, analysts pointed out. “It has a combination of good market share in select molecules globally and has a relatively robust business model with steady and sustainable earnings, unlike other Indian pharma companies that play in the generic formulations space and operate on the litigation led business model,” said Tushar Manudhane, lead analyst-pharma, Motilal Oswal Financial Services.
More than 650 foreign together hold 18.3% in the company while domestic mutual funds, including SBI Mutual Fund, Axis Mutual Fund, and Reliance Mutual Funds, hold 14.8% while LIC holds 1.1% stake. The promoters of the company led by its founder according to Surya Patra, VP-research, PhillipCapital India, the primary factor for the huge jump in market cap is the robust export opportunity that has been provided by Covid-19.
“People were concerned about dependence on China due to which supplies of critical APIs were disrupted but companies like Divi’s, with its positioning as a fully integrated manufacturer of APIs and custom synthesis, has delivered robust growth beyond investor expectations and has emerged as one of the most predictable firms from the investor point of view,” Patra explained. Divi’s Laboratories was set up in October 1990 by Murali Krishna Divi after he quit Dr. Reddy’s Laboratories, which he joined in 1984 as director and where he helped turn around ailing Cheminor Drugs that was acquired by Dr. Reddy’s.