India's pharmaceutical landscape is undergoing a significant transformation as bulk drug manufacturers pivot from traditional active pharmaceutical ingredients (APIs) toward high-value contract development and manufacturing services. This strategic shift comes as global pharmaceutical companies actively seek to diversify their supply chains beyond China.
The CDMO Growth Trajectory
According to a comprehensive BCG-IPSO report, India's contract research, development, and manufacturing organization (CRDMO) industry currently represents a modest $3-3.5 billion market, accounting for merely 2-3% of the global $145-billion market. However, the sector demonstrates explosive growth potential, with projections indicating it could reach $22-25 billion by 2035 as Indian companies develop capabilities to compete with established Chinese players.
JM Financial analysis reveals that China currently dominates with approximately 13% of the global CRDMO market share, creating substantial opportunity for Indian manufacturers to capture market share as global companies implement China-plus-one strategies.
Investment Surge and Market Validation
Market leaders are already commanding premium valuations that reflect investor confidence in this transition. Divi's Laboratories has emerged as India's second-largest pharmaceutical company by market capitalization, despite being smaller than several diversified competitors. The company's shares have gained 8% over the past year, outperforming the Nifty Pharma index's 5.5% increase.
Research-focused contract manufacturers have particularly captured market attention. Anthem Biosciences and Sai Life Sciences both delivered strong market debuts within the past year, with Anthem trading at a price-to-earnings ratio of 69.14 and Sai Life Sciences at 64.27. These valuations significantly outpace legacy pharmaceutical players like Dr Reddy's Laboratories (18.16 PE) and Cipla Ltd (22.72 PE).
Strategic Expansion Across the Sector
Multiple Indian pharmaceutical companies are executing ambitious expansion strategies to capture this emerging opportunity:
Mumbai-based Supriya Lifesciences has committed substantial resources to research and development for niche molecules, planning an initial ₹350 crore capital expenditure for a new facility in Patalganga alongside upgrades at existing sites. The company anticipates its first significant contract will contribute ₹25-30 crore this fiscal year, with another anaesthetics partnership expected to scale to approximately ₹70 crore annually.
"When you are fully backward integrated, there are numerous opportunities because many innovators or large multinationals want to relocate their manufacturing base from China or Europe to Indian companies. This is how we began securing CMO opportunities," explained Saloni Wagh, managing director of Supriya Lifesciences.
Granules India has pursued international acquisition strategy, purchasing Swiss CDMO Senn Chemicals AG in February and launching Ascelis Peptides, a global subsidiary focused on peptide-based therapeutics and CDMO services. Although peptides currently represent just 2% of their ₹12,970-crore second-quarter revenue, the company reports rapidly growing interest.
"Recent interactions at major industry events have reinforced growing interest from leading innovator pharma companies, emerging biotech, and cosmetic peptides customers. We are observing multiple feasibility programs, new inquiries, and renewed discussions with several global innovators," stated Sanjay Kumar, chief strategy officer at Granules India.
Organizational Restructuring for End-to-End Services
Jubilant Pharmova recently transferred its API business to its wholly-owned Jubilant Biosys subsidiary, which already houses drug discovery and CRDMO operations. This consolidation aims to create a seamless pathway from discovery through clinical trials to commercial scale manufacturing.
"The market requires partners who can support a molecule end to end," emphasized Tushar Gupta, COO of Jubilant Biosys-CRDMO. The company has onboarded four major pharmaceutical customers since last year and anticipates both its discovery and API-CDMO businesses growing approximately 20% annually over the next five years.
Jubilant Biosys, operating five facilities, is investing more than $120 million in a new Karnataka site expected to increase its discovery capacity by 2.5 times.
Challenges on the Path to Global Competitiveness
Despite the optimistic outlook and substantial investments, industry analysts caution that most Indian firms still face significant hurdles in competing globally. Scale, established track records, and demonstrated ability to rapidly scale production remain critical barriers to winning large mandates from global innovators.
"Typically, global innovators prefer partners with proven track records in the CDMO space and sufficient scale—when an innovator requests overnight production capacity scaling, they need assurance it can be delivered," explained Tausif Shaikh, pharmaceutical analyst at BNP Paribas.
Companies like Divi's Laboratories and Neuland Laboratories have successfully transitioned from generic API manufacturers to custom synthesis specialists, with such offerings now constituting more than half their revenues. For most firms, however, early acquisitions and capital expenditures represent diversification strategies rather than immediate competitive resets.
The anticipated benefits of the proposed US Biosecure Act, which aims to restrict American government and contractors from collaborating with specific Chinese firms, alongside increased requests for proposals, have generated market enthusiasm. However, these factors have not yet translated into significant financial performance improvements for most Indian CDMO players.
As India's pharmaceutical manufacturers continue their ascent up the value chain, the convergence of global supply chain diversification, substantial domestic investment, and evolving capabilities positions the country's CDMO sector for transformative growth in the coming decade.
