Pharma stocks benefit from rising healthcare demand, aging populations, and increasing chronic diseases. Strong companies with quality brands, export presence, or niche products can generate steady cash flows and good margins.
Some pharma firms also offer long-term growth through new product launches, specialty drugs, biotech research, and expansion into global markets.
However, pharma investing also carries risks. Regulatory actions from agencies like the USFDA can hurt exports, delay approvals, or shut plants temporarily. Pricing pressure in generics markets can reduce margins.
Here are 3 undervalued pharma stocks.
We have considered strong return ratios of 19% or more, promoter holdings of more than 65% and good track record of dividends.
#1 Zydus Lifesciences
First on our list is the stock of Zydus Lifesciences.
Zydus Lifesciences (formerly known as Cadila Healthcare Limited), is a leading Indian Pharmaceutical company is a fully integrated, global healthcare provider. The company has strong capabilities across the spectrum of the pharmaceutical value chain. From formulations to active pharmaceutical ingredients and animal healthcare products to wellness products, Zydus provides comprehensive healthcare solutions.
| ROE | 19.3% |
| ROCE | 26% |
| Promoter Holdings | 75% |
| Dividend | 1,100% |
| Current Market Price | Rs 929.9 |
The promoters of the company hold a 75% stake. The company pays a robust dividend of 1,100%.
On the financial front, Zydus reported Q3 FY26 consolidated revenues of Rs 68.6 billion (bn), up 30% on a year-on-year (YoY) basis. Excluding acquisitions too, the base sustained double-digit growth with all key businesses delivering ahead of expectations.
Net profit for the quarter, adjusted for the exceptional expense on account of the new labour code impact and acquisition related cost, was Rs 11.1 bn, up 9% YoY.
The company recently received the Establishment Inspection Report (EIR) and approval letter from the USFDA at its SEZ oncology injectable manufacturing site Ahmedabad.
Looking ahead, the company is optimistic about the upcoming NDA filing for its molecule Saroglitazar in the US market. This will help catalyse the next phase of growth and will solidify Zydus’ position as a leader in the specialty pharmaceutical space.
#2 Torrent Pharmaceuticals
Second on our list is the stock of Torrent Pharmaceuticals.
The company is the flagship company of the Torrent Group. Post JB Pharma acquisition it is ranked 5th in the Indian Pharmaceuticals market and is amongst the top 5 in the therapeutics segments of Cardiovascular (CV), Gastro Intestinal (GI), Central Nervous System (CNS), Pain Management and CosmoDermatology.
| ROE | 25.2% |
| ROCE | 33.3% |
| Promoter Holdings | 68.31% |
| Dividend | 640% |
| Current Market Price | Rs 4,110 |
The promoters of the company hold 68.31% stake. The ROE of the company was strong at 25.2%.
Torrent Pharma has a consistent track record of dividend and profitability.
Moving ahead, the company recently announced the launch of its Semaglutide brands – Sembolic and Semalix – in India, in both oral and injectable formulations. The launch expands the company’s presence in metabolic disorders such as type-2 diabetes and obesity.
Torrent Pharma is the first Indian company to offer this treatment across oral and injectable formulations, giving healthcare professionals a holistic choice for treating patients.
It has good prospects driven by its leadership in chronic therapies like cardiac and CNS, which ensure steady, recurring demand. Strategic acquisitions such as JB Chemicals are expected to enhance scale and domestic market share.
#3 Ajanta Pharma
Next on our list is the stock of Ajanta Pharma.
Ajanta Pharma is a specialty pharmaceutical company with a presence in more than 30 countries.
The company has a strong emphasis on innovation, customer needs, and delivering differentiated products using advanced technology.
| ROE | 24.3% |
| ROCE | 32% |
| Promoter Holdings | 66.25% |
| Dividend | 1,400% |
| Current Market Price | Rs 2,773 |
The company has good return ratios, strong promoter holding of 66.25%, and dividend of 1,400%.
Ajanta Pharma’s outlook seems promising, supported by its robust branded generics presence in regions like India, Asia, and Africa, alongside an expanding generics business in the US.
The company’s recent FY26 quarterly performance demonstrated solid growth in both revenue and profits, reflecting consistent execution.
With a foothold in specialised therapy areas such as cardiology, dermatology, and ophthalmology, it leverages trusted relationships with healthcare professionals to generate sustained demand.
Additionally, its focus on chronic therapies is strengthening revenue predictability and fostering long-term resilience while improving overall earnings quality.
Should You Consider Pharma Stocks?
Pharma stocks can be worth considering as part of a diversified portfolio. The sector is driven by steady healthcare demand, ageing populations, rising chronic diseases, and export opportunities.
In India, many pharma companies also gain from generics, specialty drugs, and domestic healthcare growth. Some offer defensive qualities during market volatility.
However, risks include USFDA regulatory issues, pricing pressure, patent expiries, currency movements, and high competition.
Performance can vary sharply between companies. Investors should focus on strong balance sheets, research pipeline, compliance track record, and valuations.
Overall, specific pharma stocks can be good, selective long-term investments, but not a blind sector-wide investment.
Investors should evaluate the company’s fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here…
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