Indian CRDMO market to outpace APAC; HDFC Sec starts coverage on top firms
While HDFC Securities has assigned a 'Buy' rating to Divi's Labs, Sai Life Sciences, and Piramal Pharma, it has given an 'Add' rating to Anthem BioSciences and a 'Reduce' rating to Laurus Labs
Kumar Gaurav New Delhi HDFC Securities remains broadly optimistic on the long-term growth outlook for India’s pharmaceutical sector and has initiated coverage on
Divi’s Laboratories, Sai Life Sciences, Piramal Pharma, Anthem BioSciences, and Laurus Labs, citing that the country’s contract research, development, and manufacturing organisations (CRDMOs) are at a critical juncture.
Mehul Sheth and Divyaxa Agnihotri, analysts at HDFC Securities, expect India’s CRDMO market to be the fastest-growing in the Asia-Pacific (APAC) region, with a compound annual growth rate (CAGR) of 13.4 per cent, compared to the broader APAC growth rate of 10.8 per cent.
“The Indian CRDMO market is poised to grow rapidly at a CAGR of 13.4 per cent over 2024-2029E, reaching $15 billion by 2029, making it the fastest-growing in APAC,” the analysts said in their research note.
Well-positioned to capture opportunities
HDFC Securities notes that over the past decade, Indian CRDMOs have invested heavily to build their capacities and capabilities. These organisations are now well-positioned to capture emerging opportunities.
The key drivers of this growth, according to the brokerage, include a broader service offering across the product lifecycle—from discovery to commercialisation. They also point to the creation of multiple entry points through an efficient supply chain and continuous process upgrades in areas like flow chemistry, green chemistry, continuous processes, fermentation, and high-potency APIs. Additionally, advancements in therapeutics such as r-DNA/RNA, weight loss GLPs, and ADCs are expected to meet global needs.
Further, the brokerage has highlighted that the country’s CRDMOs also have a significant cost advantage due to low-cost, skilled manpower, compared to other geographies, which could help mitigate the potential rise in costs for global innovators caused by regulatory hurdles like IRA and MFN. The ongoing China+1 strategy, HDFC Securities said, is expected to further reduce dependence on a single country.
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While the sector may face headwinds from global markets, HDFC Securities believes that the mid-to-long-term growth prospects remain strong. The growth is expected to be supported by an increasing number of molecules in clinical trials, steady global R&D spending, and cost optimisation by global firms seeking low-cost but quality manufacturing bases.
"While near-term growth is expected to face headwinds from global funding slowdowns and delays in decision-making—driven by uncertain regulatory and geopolitical conditions—the mid-to-long-term outlook remains strong. This is backed by more molecules in clinical trials, steady global R&D spending, and cost optimisation by global firms. Additionally, the US ‘patent cliff’ is expected to drive growth for CRDMOs," the analysts noted.
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(Disclaimer: The views and investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.)
 "Indian CRDMO market to outpace APAC; HDFC Sec starts coverage on top firms")
