APIs are a key ingredient for making different kinds of medicines in the country. And yet, nearly 65-70% of supplies of APIs in the country are still imported from China. The government has encouraged expansion of local production of APIs to ensure regular domestic supplies of APIs to the local pharma industry. A situation akin to the rare earth industry where dependence from China has created supply side problems and the government wants local suppliers to take over.
APIs, or Active Pharmaceutical Ingredients, which are a biologically active component of a medicine, and it is responsible for producing the intended therapeutic effects. And the supply disruptions of API that were witnessed from China during Covid have also added to the urgency of expanding local API production.
In the domestic API industry, key Indian suppliers that have emerged include Divi’s Laboratories, Aarti Drugs, Laurus Laboratories, Neuland Laboratories and Solara Active Pharma Sciences.
Dalal Street has also recognised the importance of API suppliers – for instance, Laurus Labs ended 3% higher at Rs 1,045.3 on Friday, and its 52-week high of Rs 1,049 was reached on intra-Friday trade. Divi’s Laboratories gained 1.4% to Rs 6,478 on Friday, and its 52-week high of Rs 7,077.7 was reached on 8 July, 2025.
Neuland Laboratories gained 1.6% to Rs 16,067 on Friday, and it had reached its 52-week high of Rs 19, 748.4 on 10 November, 2025.
Divi’s Labs: The Global Heavyweight
Hyderabad-based Divi’s Labs is a prominent manufacturer and supplier of high-quality active pharmaceutical ingredients (APIs) and intermediates for global innovator companies, and it has established a partnership with several of the world’s leading pharma companies, including 12 of the top 20 Big Pharma companies.
It has a presence in over 100 countries, and its generic APIs division is positioned as the world’s largest API manufacturer in 10 of the 30 generic APIs it manufactures. The Hyderabad-based company’s product portfolio includes a diverse range of APIs used in the manufacture of drugs for cardiovascular, anti-inflammatory, anti-cancer, and central nervous system drugs.
It has three manufacturing facilities and it is ranked among the top 3 API manufacturers globally. And with several patented medications losing their patent protection in calendar year 2026 and 2027, the opportunities for API supplies to generic manufacturers remain strong.
In FY25, its consolidated revenues from operations were Rs 9,360 crore, a growth of 19.3% y-o-y, with sales in north America at Rs 1,488 crore, in Europe they were Rs 5,192 crore, in India Rs 1,105 crore, and Asia Rs 1,044 crore.
Its consolidated net profit of Rs 2,191 crore in FY25, grew nearly 37% on a y-o-y basis.
And in the September 2025 quarter, its consolidated revenue from operations grew 16% y-o-y to Rs 2,715 crore and its net profit also expanded 35% y-o-y to Rs 689 crore in the quarter under review.
Laurus Labs: The 900% Profit Surge
The Hyderabad-based Laurus Labs is a leading global API supplier to top global generic pharmaceutical companies for diverse segments like, antiretrovirals, oncology, steroids, hormones and cardiovascular. Its generics business, which includes API and finished dosage formulation (FDF), had revenues of Rs 4,020 crore during FY25.
Its consolidated revenue from operations was Rs 5,554 crore during FY25, a growth of 10.2% on a y-o-y basis, and its net profit grew 122% y-o-y to Rs 358 crore.
In the September 2025 quarter, its revenue from operations grew 35.2% y-o-y to Rs 1,653.5 crore. The company has highlighted its API sales in Q2FY26 were Rs 617 crore, a growth of 10.8% on a y-o-y basis. Its net profit grew nearly 883% y-o-y to Rs 194.5 crore in Q2FY26.
Neuland Labs: The Niche Player
Neuland Labs offers agile and flexible API manufacturing and development services for small molecules and peptides. It offers 100 plus APIs in 10 different therapeutic segments and has more than four decades of experience in API manufacturing.
It has highlighted a 1,174 KL API manufacturing capacity for FY25, and the API activities are part of its CMS division.
The CMS division accounted for 43% of its consolidated revenue from operations of Rs 1476.8 crore for FY25, and its revenues fell nearly 5 % y-o-y. Its consolidated net profit of Rs 260 crore in FY25 was a decline of 13% y-o-y.
And during the September 2025 quarter, the CMS division accounted for nearly 60% of its consolidated revenue of Rs 514.3 crore, and its revenues grew 65.8% on a y-o-y basis. Its consolidated net profit grew nearly 200% on a y-o-y basis to Rs 96.9 crore in Q2FY26.
The Verdict: Are They Too Expensive?
Divi’s Laboratories trades at a consolidated P/E of 69, and it has a return on equity (ROE) of 15.4%, according to Screener.in. Neuland Laboratories trades at a P/E of more than 100 times and has a ROE of 14.8%
Laurus Laboratories trades at a P/E of more than 80 times and has a ROE of 7.5%.
Clearly, these stocks trade at rich valuations. However, given the key role of APIs in pharma manufacturing, investors could keep these stocks on their watch list.
Disclaimer:
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
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Amriteshwar Mathur is a financial journalist with over 20 years of experience.
Disclosure: The writer and his family do not hold the stocks discussed in this article.
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