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Premium pharma player: Divis Labs

Divis generated an average ROCE of 33 per cent, which is one of the best among its peers

Premium pharma player: Divis Labs

After explaining the filters and mentioning which companies were successful in passing through them in the first part, we continue with the series by bringing before you one cash flow leader each day. Today, we bring before you a major pharma contract manufacturer--Divis Laboratories.

Divis Laboratories was founded in 1990 by Murali Divi, who is well known for the revival of Cheminor, a sick contract manufacturing firm acquired by Dr. Reddy's Laboratories. Murli Divi earlier worked as a director with Dr. Reddy's.

Premium pharma player: Divis Labs

The company's focus on contract manufacturing services and its strategy of not competing with mainstream pharma companies in the US differentiate it from other pharma companies. Divis provides contract manufacturing services to 20 of the world's top 25 pharma companies. The predominance of Divis can be envisaged from the fact that USFDA, the US drugs regulator, exempted some of its drugs from import ban since a ban would lead to a shortage of supplies in the US markets.

Cash-flow generation ability of Divis is an outcome of its superior margins, even though it operates in the API (active pharmaceutical ingredients) business, which is a low-margin business and contributes 50 per cent of its revenues. In the last five years, Divis generated an average ROCE of 33 per cent, which is one of the best among its peers.