Divis Labs to spend ~15 billion on expansion by 15 months

Divis Laboratories, maker of active pharmaceutical ingredients (APIs) and drug intermediates, will spend ~15 billion to expand existing facilities over the next 15 months.

The company said it would be investing ~6 billion each on its Unit-2 at the Vizag SEZ in Andhra and Unit-1 of its Nalgonda SEZ in Telangana. And, another ~3 billion for de-bottlenecking at Vizag. All the work is expected to be complete by end-December 2019. The company currently operates four multipurpose manufacturing facilities, from these two sites.

The management said the investment was to cater to the rising opportunities in generic and big pharmaceutical businesses. The company makes key ingredients for the final products of formulations companies. Its portfolio has two broad segments. One is generic APIs and nutraceuticals, the second being custom synthesis of APIs, intermediates and speciality ingredients for innovator pharma giants.

One of the largest API makers from India, it exported 87 per cent of its products to various global pharma companies in Europe, America and other countries in 2017-18. The European market took 44 per cent of its export; the US market contributed 29 per cent of its total revenue.

Divis has a portfolio of 122 products, used in finished dosages and formulations across diverse therapeutic areas, from global pharma players.

The stock touched a 52week high on Monday at ~1,450.40, about 15 per cent higher than the previous day's close, on the back of its report on significant rise in revenue and profit in the September quarter. Revenue rose 47 per cent to ~13.6 billion and net profit nearly doubled, to almost ~4 billion for the quarter.

Total revenue in 2017-18 was close to ~40 billion.

Two years before, the company had planned to build a third manufacturing facility in Kakinada (Andhra), of a size similar to the existing sites. However, after facing issues related to land, it decided to proceed with expansion of the existing units, without waiting till these issues were cleared for the Kakinada project.

Last year, the company faced an import rap from the US Food and Drug Administration. The latter regulator lifted the ban in November last year, as the company was able to resolve the regulatory issues within eight months.