Murali Divi, the billionaire scientist behind Divi’s Labs, is richer by $6 billion, and counting, since the pandemic

• Murali Divi is the founder of Divi’s Labs, one of the top three manufacturers of active pharmaceutical ingredients (API).
• Divi went to the US with $7 in his hands and came back with $40,000, while earning $65,000 a year working as a pharmacist.
• In the last one year, Divi’s wealth has surged by more than two times to over $10 billion.
• Find out what the future holds for Murali Divi and his company, Divi’s Labs.

From the small town of Machilipatnam in Andhra Pradesh to founding a company with a market capitalisation of nearly ₹1.3 lakh crore (over $17 billion), Murali Divi has come a long way to find himself on the Hurun India Rich List 2021.

According to the latest update to the Hurun list, Murali Divi with a wealth of ₹79,000 crore is the 14th richest person in India, leaving behind the old money magnates like the Wadias, Mistrys, Godrejs and Agarwals. What makes it even better is the fact that Divi’s father managed the family of 14 on a meagre pension of ₹10,000 per month.

Indeed, nothing quite describes the emergence of small-town India as one of the drivers of the country’s growth as the stories of people like Murali Divi or Girish Mathrubootham, whose father was a bank officer.

Today, Divi’s Labs commands a market capitalisation of ₹1.28 lakh crore – almost three times of what it was on March 23, 2020, when India went into a nationwide lockdown due to the COVID-19 pandemic.

On October 4, the stock added another 10% to its value after it was chosen as the authorised manufacturer for Merck and Ridgeback’s oral antiviral Molnupiravir, which is under trial, and the results so far show that it can reduce the need for hospitalisation for patients with a mild or moderate case of COVID-19.

What sent the share price of Divi’s Labs in another orbit compared to other companies is its effective utilisation of capital and expanding supply of APIs to US pharma companies in 2020, even as the world struggled to cope up with China shutting off the supply chain for the pharma sector.

Since the pandemic, Murali Divi has seen his wealth more than double, from a little under $4 billion at the beginning of 2020 to over $10 billion now.

But what does the future hold for this billionaire scientist’s company, Divi’s Labs? Here’s a quick look at the risks for the company and what its strengths are:

Pressure on drug prices in US

The US government has been forcing prices of medicines down for a few years now by approving more generic versions. This is likely to continue and may even get worse, according to analysts at Ambit Capital. But that is not a problem unique to Divi’s. Other companies like Sun Pharma, Lupin, Dr Reddy’s etc. have also been facing similar pricing pressure.

Resumption of physical inspections of plants

The US Federal Drug Administration (FDA) had eased its watch on the quality of drugs exported from India in the wake of the pandemic.

However, the hawks at the USFDA may return to their old ways of surprise inspections at manufacturing plants and that’s a risk for all companies.

The increased compliance burden could prove to be a double-edged sword for pharma companies, including Divi’s Labs, according to Ambit Capital.

Proactive capacity scale-up and technology upgrades

One of the secrets of Divi’s rise to be the second biggest drug maker in the country, by market capitalisation, is its ability to scale up capacity and cut costs using technology.

“It is still supplying legacy products, showing both its strength and continuing demand in these products. Its next leg of growth is expected to come from 16 new molecules it is currently working on,” said Motilal Oswal in its September report, which said that the shares of Divi’s Labs could go up to ₹5,750, another 10%, in the next one year.

Strong partnerships with innovators

The report further adds that Divi’s Labs has a strong relationship with big pharma companies, including six out of the top ten innovators including Merck, Pfizer, and GlaxoSmithKline.

“Divi can supply both clinical quantities and at large commercial scale, thus supporting innovators from API research to commercial manufacturing,” says the report.

The scientist behind the billionaire

To make things worse, Divi failed his intermediate exams (the equivalent of higher secondary) twice due to weak English. However, instead of giving up and resigning himself to his failures, Divi doubled down and grabbed the opportunity to go to the US as a pharmacist instead of becoming a chemist like his elder brothers.

When Divi left India for the states in 1976, he was 25 years old with $7 in his hands, according to Forbes India. From there, he went on to draw a salary of $65,000 a year at US companies like Trinity Chemical and Fike Chemical.

He would soon come back to India with his wife and children with $40,000 and no plans for the future. He went with the flow and in 1984, teamed up with Kallam Anji Reddy to build Cheminor, which would later (in 2000) be merged with Dr. Reddy’s Laboratories, also co-founded by Reddy.

Six years later, Divi founded Divi’s Laboratories, his own pharma company. Headquartered in Hyderabad, the company makes active pharmaceutical ingredients (API) and intermediates. APIs are the key inputs that go into making a drug.

From nowhere in 1990, Divi’s Labs is now one of the top three API manufacturers in the world.

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