Indian CDMO firms outpace peers with 60%+ returns amid booming outsourcing demand

Over the last half-year, Indian contract development and manufacturing organisations have markedly outperformed the broader pharma and health markets, with the leading five listed firms posting average returns above 60% and Laurus Labs achieving a 90% surge. This performance reflects heightened outsourcing and supply-chain rebalancing by global pharma and biotech firms, bolstered by increased funding for biologics, a robust biosimilar pipeline, and growing peptide demand.

In Q1 FY27 the sector recorded double-digit year-on-year revenue growth and a 60% jump in operating profit, even as a few companies faced temporary client destocking. However, average price-to-earnings ratios of 66× for FY27 suggest that much of the anticipated growth is already priced in. Forecasts anticipate the CDMO market, currently generating $3-3.5 billion, to expand sevenfold to $22-25 billion by 2035, driven by capacity expansions, higher utilisation, and US policy moves such as the Pentagon’s Section 1260H list. Brokers highlight Divi’s Laboratories, Laurus Labs and Sai Life Sciences as top picks, while noting that elevated valuations could curb future upside.