Writing Divi’s Generic Story

LOVE ALL GROWTH engines. Some growth engines give me a lot of stability, some grow like rockets.” When Murali K. Divi, founder and managing director of Hyderabad-based Divi’s Laboratories, said this in reply to an analyst’s question during the quarterly earnings call in August, he was outlining his company’s philosophy for stable growth — growing established generics business, offering custom synthesis services to innovator companies, supplying large volumes of active pharmaceutical ingredients to MNCs and developing multiple products of contrast media (for imaging) or chemical agents.

In FY22, despite uncertain market conditions induced by the pandemic and geopolitical disorders, Divi’s registered 31% growth in revenues and 51% in net profits, the highest in last three years. “Divi’s remained resilient in the face of adversity, adapting and accelerating despite the disruptions,” says Murali K. Divi, 71, who has PhD in pharmaceutical sciences from Kakatiya University in Telangana.

A member of American Institute of Chemical Engineers and American Chemical Society, Divi led pharmaceutical research and manufacturing teams globally for over 15 years before venturing into entrepreneurship in 1990. Backed by decades of expertise in chemistry, he steered the company via backward integration, process innovation, capacity building and debottlenecking.

In an investor note, ICICI Securities said Divi’s remains “a compelling bet as a structurally well-positioned customs synthesis and API company, while some near-term margin pressure is transitory.” Its biggest strength is the strong relationship with global big pharma players while enjoying significant generic market share in products such as pain and common cold reliever Naproxen and Dextromethorphan and neuro drug Gabapentin. Divi’s is also the authorised API manufacturer of US multinational Merck & Co for Covid-19 medicine Molnupiravir.

Broking firm Geojit Financial Services highlights the strong product pipeline and ongoing capex aimed at portfolio expansion. “It has managed to debottleneck and de-risk its dependence on external supply to a large extent, while managing to achieve economies of scale. We remain optimistic about the company’s long-term financial performance and growth potential,” its investor note said.