What is Pharma APIs and what API stocks to invest in

Pharma API Stock

Active Pharma Ingredients (APIs) are the raw materials that go into the manufacture of medicines. Currently, China is the world largest API manufacturer followed by the US and India. However, the gap between them is not too much. The big advantage for India is the potential growth opportunity. 

India’s API industry is estimated at Rs.79,800 crore as of 2020 but it is likely to grow at 8.57% CAGR over next 5 years to Rs.131,000 crore by 2026. Chinese API industry will grow by just 6.5% in the same period. These refer to the merchant API business which are non-exclusive in nature.

Broadly, Indian APIs cater to 7 major therapeutic applications.

  • Oncology
  • Diabetes
  • Cardiovascular Diseases
  • Pain Management
  • Respiratory Diseases
  • Communicable Diseases
  • Central Nervous System issues

In recent times, 3 factors shifted the game in favour of Indian API manufacturers. Firstly, most countries believe that China did play a role in supressing details of the pandemic and hence would prefer to diversify from their overt API dependence on China. Secondly, the Chinese government has clamped down heavily on environmental lapses and API industry has come in for a lot flak, disrupting supply chains. That opened a new window of opportunity for India. Lastly, to promote APIs, government of India also offered Product linked incentives (PLI) scheme for APIs. Here is a look at some major API names in India and thematic investment ideas.


Also Read: Glenmark Pharma IPO Information Note


What API stocks to buy in India?

Some of the major API players in India include Divi’s Laboratories, Aarti Drugs, Neuland Laboratories, Solara Active Pharma, Granules India etc. In fact, the forthcoming IPO of Glenmark Life Sciences is a pure API play as it gets 90% of its revenues from API sales. Here are 3 API stocks to take a close look at.

  1. Divi’s Laboratories: is a pure play API company which caters to innovator companies. It reported 50% top line and 81% bottom line growth in Jun-21 quarter. With a market cap of over Rs.90,000 crore, Divi has emerged as the second most valuable pharma play.
  2. Aarti Drugs: made its mark as a key paracetamol API maker, which has been a China domain for long. The pandemic saw a huge demand shift in favour of Aarti Drugs, making the stock a multi-bagger. Its APIs for antibiotics like Ciprofloxacin have seen heavy demand. Despite the rally, it remains a solid play on Indian API.
  3. Solara Active Pharma: was formed by demerging the API divisions of Strides and Sequent. It has a huge portfolio of over 50 molecules manufactured across six of its facilities. The stock has doubled in the last 1 year but remains a niche play in APIs.


Glenmark Life Sciences IPO: A low hanging fruit, it is the API division of Glenmark Pharma. It promises growth and pedigree to investors along with valuations that are among the lowest in the API peer group. 

API, along with CDMO, is emerging as the big story for Indian pharma. India has the expertise and the companies to make the best of the opportunity.

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Life Insurance Corporation LIC - IPO Update


For over 60 years Life Insurance Corporation or LIC has been undoubtedly the most trusted brand in India. LIC was popular and trusted, not only for the protection products it offered, but was also seen as a face of the government. LIC plans to issue shares in the Indian IPO market during FY22.

About Life Insurance Corporation (LIC)

LIC was formed under the Life Insurance Corporation Act, 1956; which governs LIC’s framework and functioning. The government plans to divest 10% of its stake in LIC through the IPO (currently, government owns 100% of LIC). However, subsequently, rules were amended to even allow an IPO with 5% dilution for companies with market cap above Rs.100,000 crore. 

While actuarial estimates of value are awaited, LIC is estimated to be valued in the range of Rs.12,00,000 crore to Rs.15,00,000 crore. A 5% sale would entail an IPO size of Rs.75,000 crore while a 10% sale will entail an IPO size of Rs.150,000 crore. Either ways, LIC promises to be India’s biggest ever IPO by a margin.

Understanding the LIC business model

LIC offers life insurance products that encompass the complete including pure-risk covers, term policies, endowment policies, whole-life policies, money-back policies, ULIPs etc. One big advantage LIC brings to the table is the sovereign guarantee backing each and every policy issued by LIC; a benefit not available in any other life insurer. 

Some of the statistics pertaining to LIC are staggering. It has nearly 290,000 employees and the business is fuelled by its massive network of 22,78,000 agents. As of the end of the FY20 financial year, LIC had total assets of 37,75,000 crore. 

LIC is India’s largest institutional investor with an equity AUM of Rs.665,000 crore in FY20. Just to give a perspective, this AUM is more than the combined equity fund AUM of India’s 3 largest equity mutual funds viz. SBI MF, ICICI Pru MF and HDFC MF combined.

How does LIC compare with competition

When it comes to the life insurance industry, LIC is the undisputed leader. It currently commands a market share of 66%, which is more than the combined share of the next 3 private sector life insurers. For FY21, LIC earned first-year premiums of Rs.184,000 crore and this figure has been steadily growing over the years. Unlike the PSU banks, which rapidly lost market share to private banks, LIC has held on to its leadership, despite stiff competition.

Also Read: LIC IPO Government Approval

When is the LIC IPO scheduled?

The dates for LIC IPO are yet to be announced, which is likely after the actuarial valuation and the completion of multiple levels of approvals. The IPO is tentatively expected to hit the market around Jan-Feb 2022. Certainly, it will happen this fiscal year as the government is counting on the LIC divestment to meet its full year divestment target of Rs.175,000 crore.

There are 3 things to keep an eye on. Government sold stakes in two non-life insurers; GIC Re and New India Assurance in 2017 and both IPOs trade at 60% discount to issue price. Secondly, higher market share and asset base do not necessarily translate into better valuations, as we have seen in PSU banks. Finally, gross NPAs of LIC lending portfolio scaled past 6.20% in FY20. Despite these minor concerns, LIC is likely to be a marquee IPO in the Indian context.

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CarTrade Tech Ltd (CarTrade) - IPO Update

CarTrade IPO

Year 2021 looks like the year of digital IPOs. With the success of the Zomato IPO, others like Paytm and MobiKwik are fast tracking their IPO plans. One interesting digital IPO will be CarTrade Tech Ltd (owners of cartrade.com platform). In a draft red herring prospectus (DRHP) filed with SEBI, the company plans to sell close to 13.5 million shares to the public via offer for sale (OFS) raising approximately Rs.2,000 crore in the process.

About CarTrade Tech Ltd (CarTrade)

CarTrade was founded by Vinay Sanghi, former CEO of Mahindra First Choice Wheels, in 2009. CarTrade is a platform where potential buyers and sellers can register and also buy and sell used cars as well as new cars. The used car market in India is estimated at $27 billion as of Dec-20 and is estimated to grow at 15% annually.

The CarTrade platform runs 2 sub-portals. CarTrade.com caters to the consumers in buying and selling used and new cars. The B2B CarTradeExchange.com helps car dealers source leads and fulfil client requirements using the ecommerce channel more effectively.

Understanding the CarTrade business model

As is clear from the business description, CarTrade has a B2C component to its online business as well as a B2B portion. The company is backed by some of the marquee private equity names like Warburg Pincus, Temasek of Singapore, JP Morgan and March Capital. Some of its sub-platforms like CarWale.com and BikeWale.com are already ranked number one in relative search popularity.

Interestingly, CarTrade is one of the few online digital businesses in India to be making profits. For FY19 and FY20, the company made net profits of Rs.9.50 crore and Rs.7.62 crore on top line revenues of Rs.243 crore and Rs.298 crore respectively. If you combine its 3 principal B2C platforms; CarTrade, CarWale and BikeWale, it has around 29.9 million unique visitors in a month with more than 87% being organic visitors. That has the potential for huge expansion of ROI per customer.

What is the USP that CarTrade brings to the table?

The online digital offering comes as an end-to-end package for customers. The portals offer used car information, on-road dealer prices, certified used cars, expert reviews as well as a wide choice for buyers and sellers to make a most judicious choice. For a $27 billion industry like used cars and growing at 15% annually, the industry was highly fragmented with little centralized information and guidance. That is the gap that CarTrade fills.

CarTrade competes with names like Cars24, Quickr, OLX, Droom and Mahindra First Choice. In the past, CarTrade made inorganic acquisitions of CarWale, Axel Springer as well as Vehicle auctioning platform, Shriram Automall.

What are the details of the CarTrade IPO?

CarTrade plans to come out with ab IPO of up to 13.5 million shares via OFS. Selling shareholders will be as under.

Selling Shareholder

Percentage to be sold


1.61 million shares

Highdell Investments

5.38 million shares

MacRithie Investments

3.57 million shares

Springfield Venture

1.12 million shares

Binod Vinod Sanghi

1.83 million shares


Earlier in 2021, CarTrade raised $25 million funding round led by IIFL and Malabar Investment Advisors at a valuation of $1 billion. The CarTrade IPO valuation is likely to be better than pure Unicorn status. While the actual date is yet to be announced, the IPO is expected to hit the IPO market around August 2021. 

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One 97 Communications Ltd Paytm - IPO Update

Paytm IPO

Paytm (owned by One97 Communications Ltd) is likely to be the biggest IPO in Indian stock market history. The company has already filed the draft red herring prospectus (DRHP) with SEBI for its proposed Rs.16,600 crore IPO and is awaiting SEBI approval for the same. The IPO consists of Rs.8,300 by way of fresh issue and Rs.8,300 crore by way of offer-for-sale.

Post the SEBI approval, Paytm will file the RHP with the Registrar of Companies (ROC) before the actual issue. While the actual date will be finalized only after the DRHP approval by SEBI, it is tentatively expected during the second half of August.

About One97 Communications Ltd Paytm

The company was promoted by Vijay Shekhar Sharma way back in 2000 and offers a complete digital payment ecosystem in India. Apart from offering its own proprietary wallet and bank account, The company also facilitates commerce, bill payments and bank to bank transfer of funds on its platform, including UPI transfers.

As of March 2021, it has a client base of over 33 crore who transacted on the platform with 2.10 crore registered merchants. In its last round of funding in 2019, the company was valued at $16 billion and it is expected that its valuation post-IPO would be in the range of $25 billion to $30 billion making it among the valuable digital properties in India.

How Paytm transformed digital money in India

Digital money caught on in India with the rise of mobile connectivity, smart-phone usage and superior broadband speeds but the big trigger came in 2016. The demonetization process initiated by the Modi government in November 2016 resulted in a sudden scarcity of physical money and Paytm became the default digital payment wallet for Indians. 

While the promoter, Vijay Shekhar Sharma holds 14.61% in Paytm, other major investors include marquee names like Softbank, Alibaba.com, Antfin Netherlands and the redoubtable Berkshire Hathaway. 

How do the financials of Paytm look

Paytm has been making net losses over the last 3 years, although the net loss has been narrowing with a gradual fall in the promotional expenditure. Here is a quick summary.





Total Assets

Rs.9,151 crore

Rs.10,303 crore

Rs.8,767 crore

Total Revenues

Rs.3,187 crore

Rs.3,541 crore

Rs.3,580 crore

Net Profits

Rs.(1,701) crore

Rs.(2,943) crore

Rs.(4,231) crore


As is evident from the above table, losses have clearly narrowed even as revenues took a hit due to COVID in FY21. The fresh issue proceeds of Rs.8,300 crore will be mainly used for acquiring customers, strengthening the payment system, strategic partnerships, inorganic acquisitions and for higher-end technology investments.

How to approach the Paytm IPO?

Most digital IPOs would be enthused by the response to the Zomato IPO, which was subscribed over 38 times despite being a Rs.9,375 crore IPO. That reassures the markets that the Paytm IPO size should not pose a major challenge. On the financial side, Paytm has been narrowing losses through lower promotional expenditure.
But the bigger value add is the intangibles of 33 crore customers and 2.1 crore merchants. Paytm has built the ecosystem and can keep adding plug-ins like Paytm Mall, Paytm Money and many more to leverage its customer franchise. It is when the network effect kicks in that the business will actually start to look appealing.

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Go Airlines India (GoAir) - IPO Update

Go Airlines India

GoAir, an Indian budget airlines owned by the Nusli Wadia group, is planning to come out with an IPO shortly. The DRHP was filed by GoAir with SEBI in May 2021 and it is expecting the approval by July 2021, post which the company would bring out the public issue in August. While the company is yet to confirm, the media had reported that the GoAir IPO was put on hold for 90 days by SEBI due to investigations in its group company, Bombay Dyeing over lapses in compliance. We shall come back to this subject of delay in IPO approval later.

What is the GoAir IPO all about?

GoAir had filed the DRHP with SEBI in May 2021 to raise a sum of Rs.3,600 crore via the IPO route. The entire issue will be a fresh issue with promoters not offloading any stake in the company except for the dilution due to the fresh issue. Go Air has also christened its brand as Go First.

The GoAir IPO will have a QIB allocation of 50%, retail allocation of 35% and HNI allocation of 15%. Against its overall debt of Rs.7,346 crore, Go Air will use the issue proceeds to repay debt of Rs.1,780 crore and replace letters of credit (LC).

The company will also use the funds to repay operating liabilities to Indian Oil Corporation and to invest in new planes. This money will also be used to fund the current order book position of 98 A320 Neo aircraft, which will be delivered in tranches through 2024.

Key facts to know about GoAir ahead of the IPO

Here are some important facts to know about the Go Air business ahead of the IPO.

  1. GoAir, owned by Wadia group, commenced operations in 2005 with its maiden flight between Mumbai and Ahmedabad. Currently, GoAir flies to 37 destinations including 28 domestic and 9 international routes. Wadia group also owns Bombay Dyeing, Britannia, National Peroxide, BBTC and Wadia Realty.
  2. Go Air has flown 8.38 crore passengers on its flights between 2010 and 2020 and has consistently been an industry leader in on-time performance. In a tough year like 2020, GoAir had 88.9% load factor, putting it on top in flying efficiency.
  3. GoAir has a fleet of 56 aircraft consisting of 46 A-320 aircraft and the remaining 10 aircraft being A-320 NEO aircraft. Its order book consists of 98 A-320 NEO aircraft to be delivered in tranches till 2024.
  4. There are some financial concerns too. In FY21, cash flows from operations had fallen to Rs.232 crore from Rs.1738 crore in the previous year. GoAir has been consistently making losses between 2016 and 2020. To add to the financial headwinds, the total debt of GoAir stands at Rs.7,346 crore while net worth is Rs(-1,961) crore.

Reported delay in DRHP approval

It has been reported that SEBI has put off the approval of the GoAir IPO due to pending investigations in Bombay Dyeing since 2019. Under the extant rules, when a group company is under investigation, SEBI can postpone the IPO by 90 days and again for a period of 45 days. However, neither SEBI, nor the Wadia group has confirmed the receipt of any such communication from SEBI. Investors need to keep their fingers crossed till then.

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Nuvoco Vistas Ltd - IPO Update

Nuvoco Vistas IPO

Nuvoco Vistas is the cement arm of the Nirma group of Ahmedabad. Nirma had pioneered the concept to low-cost detergents for households in the 1980s and had taken on the might of Hindustan Unilever. Subsequently, Nirma listed on the stock exchanges and later in 2012 it had voluntarily opted to delist. Now the cement arm of Nirma, Nuvoco Vistas, has filed DRHP with SEBI for a public issue of Rs.5,000 crore. The issue is expected in August 2021.

A quick background of Nuvoco Vistas

Normally, Nuvoco Vistas is not a name you immediately recollect when you talk of cement, but it has the fifth largest cement capacity in India. At 22.32 MTPA, Nuvoco Vistas ranks after UltraTech, Shree Cements, Ambuja/ACC and Dalmia Cements in that order. But, Nuvoco is a cement company largely built on inorganic expansion.

Nuvoco Vistas commenced operations in 1999 by buying the cement business of Tata Steel. Later Nuvoco added the cement business of Raymond in 2000 and the ready mix concrete business of Larsen & Toubro in 2008. In 2016, Nuvoco acquired the India cement business of Lafarge and in 2020 it successfully bid for the cement business of Emami.

In between these acquisitions, Nuvoco also commissioned its own greenfield cement plants in Chittorgarh and Nimbol in Rajasthan and later at Bhiwani in Haryana. Currently, Nuvoco has 11 cement plants spread across West Bengal, Bihar, Odisha, Chhattisgarh, Jharkhand, Rajasthan and Haryana. It is predominant in the East, followed by the North.

How does Nuvoco Vistas stack up on financials?

Here is a quick summary of Nuvoco Vistas financials for the last 3 years till FY21.





Net Worth

Rs.7,372 crore

Rs.5,279 crore

Rs.4,988 crore

Sales Revenues

Rs.5,806 crore

Rs.6,793 crore

Rs.7,052 crore

Net Profits

Rs.23 crore

Rs.250 crore

Rs-27 crore

Cement companies came under pressure in FY21 due to COVID pressures. However, it would be interesting to see how much valuation a typical large cement company could command. Since profits have been quite volatile, one possible benchmark is the Price to Sales. 

Also read: Nuvoco Vistas the next IPO

The cement with the highest Price to Sales Ratio is Shree Cement at P/S of 8X. However, the median for other companies like Ultratech, Ambuja and Dalmia Cements ranges from 5-6 times P/S. By that parameter, Nuvoco Vistas should get a base case valuation of around Rs.35,000 crore to Rs.40,000 crore on listing, based on normalized sales, excluding the stress of COVID on sales.

What we need to know about the Nuvoco Vistas IPO?

Nuvoco Vistas plans to make a public offer of Rs.5,000 crore, of which Rs.1,500 crore will be by way of fresh issue and the balance Rs.3,500 crore will be by way of offer for sale by the existing shareholders. Cement companies like Ambuja Cements, Dalmia Bharat, Shree Cements and UltraTech have had a dream run on the bourses and are quoting at the higher end of their valuation bands.

While the big push to infrastructure should favour the cement story, there is one more factor. Nuvoco Vistas IPO will be the first cement IPO in India since Burnpur in 2007. For a commodity that builds the foundations of national structures, cement has been an oft-ignored story in the markets. Nuvoco Vistas is, perhaps, in the right place at the right time.