Laurus Labs makes the active ingredients inside medicines, and increasingly makes medicines to order for other drug companies. It began in HIV treatments and still supplies them, but the faster-growing half of the business is contract development and manufacturing — taking a customer's molecule from laboratory to commercial scale. It runs 15 manufacturing sites and employs 8,126 people, of whom 3,134 are scientists.
Growing again, after two years of not growing. Revenue was ₹2,026 crore in the June quarter, up 29%, and ₹6,813 crore last year, up 22.7%, with profit up 148% to ₹889 crore. But revenue three years ago was ₹6,041 crore, so the company has added only 4.1% a year over that period — this is a recovery to an old peak rather than a climb past it.
Improving, from a stretched position. Debt-to-equity is 0.48, with borrowings of ₹2,518 crore against ₹114 crore of cash and ₹5,300 crore of shareholders' funds. Net debt is now 1.3 times annual operating profit, against 3.4 times two years ago.
Laurus Labs is converting a shift in its sales mix into much higher margins. Contract manufacturing grew 67% in the June quarter and now makes up 43% of revenue, lifting operating margin to 31.8% from 24.8% a year earlier. It is spending 19% of revenue on new plants while still collecting cash.
Almost entirely on its own. It spent ₹394 crore on plants in the June quarter, 19% of revenue, and more than ₹4,700 crore over five years, of which over 85% went to growth rather than maintenance. New sites are under construction at Vizag and a joint venture plant with KRKA is being built at Hyderabad. The only purchase was in-licensing two cancer-drug assets from Aarvik Therapeutics.
Improving sharply. Operating margin reached 31.8% in the June quarter, 7.0 percentage points higher than a year earlier, and gross margin 62.7%, up 3.3 points. For the full year, operating margin was 26.2% against 19.0%. The gain comes from selling more contract manufacturing, which earns more than generics.
It is doing none of the three in any large way. The share count has risen 0.6% over five years, so existing holders have not been diluted. Borrowings fell from ₹2,764 crore to ₹2,518 crore. It pays a dividend of ₹2 a share, about 12% of profit.
Much more than a year ago. Return on capital rose to 18.0% from 10.1%, and return on equity to 16.8% from 8.0%. The company's own measure of how hard its factories work remains at 0.9 times, below its five-year average of above 1.0 — so the newest plants are not yet earning their keep.
Yes, comfortably. It generated ₹1,624 crore of cash from operations against ₹889 crore of reported profit, and over three years has collected roughly twice its profit in cash. It now takes 115 days to get paid, down from 132.
Contract manufacturing revenue was ₹870 crore in the June quarter, 43% of the total and 67% higher than a year earlier, drawn from more than 125 active customer projects. The older HIV business is flat, at ₹669 crore and 3% growth, so all of the momentum sits in the newer half. Regulatory standing is strong: 54 successful inspections by the US, WHO, European and Japanese regulators, 92 drug master files and 96 finished-product dossiers filed to date.
Laurus Labs was founded and is run by Dr. Satyanarayana Chava, its chief executive, with V.V. Ravi Kumar as finance director. In April 2024 two members of the founder's family, Krishna Chaitanya Chava and Soumya Chava, were appointed executive directors. The founding family owns 27.47% of the company.
The auditors, Deloitte Haskins & Sells LLP, signed off with no objections, no qualifications and no matters they wanted to draw attention to. Contingent liabilities — claims the company disputes and has not provided for — are disclosed in the accounts.
Laurus Labs sells in two halves. Affordable medicines — active ingredients and finished tablets, largely for HIV — were 57% of June-quarter revenue, and contract manufacturing for other drug companies 43%. A small biotechnology business using fermentation makes up the remainder.
Divi's Laboratories, Syngene International, Piramal Pharma, Sai Life Sciences, Neuland Laboratories and Cohance Lifesciences are the main listed Indian rivals. In affordable HIV medicines it competes with Aurobindo, Cipla and Hetero.
In its favour: contract manufacturing growing 67% with more than 125 projects running, margins up seven points, and early positions in cell therapy and antibody drug conjugates. Against it: the HIV business that still provides a third of revenue grew only 3%, the fermentation arm fell 46% from the previous quarter, and factories are not yet running at their historical productivity.
Long-term. Western drug companies are moving manufacturing out of China and increasingly outsource it entirely, and India is the main beneficiary. Demand is tied to drug development pipelines rather than to consumer cycles, though individual contracts are lumpy and a customer's failed trial can remove a revenue line at short notice.
Laurus Labs is priced for the recovery to continue. The share has more than doubled in a year and now carries one of the higher ratings in Indian pharmaceuticals. Institutions have been buying steadily for three years while small shareholders have sold.
Expensive on every measure. The share is at 111 times earnings, 18.6 times book value and 14.5 times sales, on earnings of ₹16.46 a share and a market value of ₹98,802 crore. That is the dearest of the listed contract manufacturers on earnings — Divi's Laboratories trades at 86 times its last full year and Syngene International at 55 — though on sales Laurus at 14.5 times sits below Divi's 21. Set against growth it is steeper still: profit has compounded at 4% over three years, putting the price-to-earnings-growth ratio near 28.
Bought. Foreign funds have risen from 24.0% to 28.0% over three years and Indian funds from 11.0% to 13.7%, taking institutions together from 35.0% to 41.7%. Small shareholders fell from 37.8% to 30.8% and their number dropped from 4.03 lakh to 2.92 lakh. The sharpest move was the June quarter, when foreign funds went from 25.8% to 28.0%.
Seven investors own more than 1%. The largest are Mirae Asset Large & Midcap Fund at 4.33% and Capital Group's New World Fund at 4.28%, followed by Anukar Projects at 3.24% and Smallcap World Fund at 2.77%. The individual investor Akash Bhanshali has held about 1.3% in every quarter for three years.
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