Newly listed Divi's Labs was not hampered by the overwhelming weakness of the market as it strode up 4.1% to Rs 201 on BSE.

Modest volumes of 1.7 lakh shares were witnessed on the counter of the pharma company. In contrast, the general market is being deluged by selling on reports that US troops have encountered stiff resistance from Iraqi forces, enroute to Baghdad. The BSE Sensex was down 44 points to 3,174.56 by the end of one half of trading today.

Institutional investors are believed to be mopping up Divi's. Certain (anonymous) funds that did not get the opportunity to pick up the stock in the initial public offer of the company in February 2003 are getting in now after the scrip's listing.

DLL has proved volatile on alternate bouts of buying and selling (due to profit taking) on the counter. The scrip made a sparkling debut on BSE when it settled at a premium of 25.8% on 12 March 2003. The scrip gained further to hit a high of Rs 180.70 on 13 March 2003. In the next trading session on 17 March 2003, the scrip shed 4.4% to Rs 172.60. From there, it gained 7.7% in the next three trading sessions to Rs 185.90 on 21 March 2003. It rallied further today.

DLL had got overwhelming response to its IPO that was made in February 2003. The initial public offering of the Hyderabad-based pharmaceuticals company was oversubscribed 19.5 times. Against an offer of 32.04 lakh shares of the company, constituting 25% of the company's post-issue paid-up capital, applications were received for 6.24 crore shares.

DLL is into bulk drugs and contract research. Besides producing generic active pharma ingredients and intermediates for generics, the company has ventured into custom synthesis for select MNCs by developing intermediates for new chemical entities being developed by them. It associates with these MNCs at the early drug development stage with the ultimate aim of becoming a "preferred supplier" of APIs and intermediaries to such MNCs, when their discovery drugs are launched in the market. Thus the company builds its API pipeline and gets a ready market from MNCs, by associating with them from the basic research stage.

Divi's Laboratories is promoted by Murali K Divi, who had also co-promoted Cheminor Drugs (now merged with Dr Reddy's Laboratories) and was its managing director till May 1990. He had also co-promoted Globe Organics in 1998. The promoter group holds a 59.96% stake in Divi's, which came down to 54.02% after the issue.

Divi's Laboratories' turnover has risen at a CAGR of 22.08% in the past four years, from Rs 93.22 crore in FY 1997-98 to Rs 207.05 in FY 2001-02. In the half year ended September 2002, it reported a turnover of Rs 114.43 crore (Rs 1.14 billion), and OPM of 23.6%. The net profit stood at Rs 22.61 crore. The long-term debt, as of September 2002, was Rs 42.10 crore. The debt-equity ratio has been steadily coming down from 1.1:1 in FY 1997-98 to 0.3:1 as of September 2002.

Divi's Laboratories has been focusing on increasing its business in the regulated markets of Europe and the US. These constituted about 73% of the turnover in the half year ended September 2002. The domestic turnover constituted about 10% and the rest of the world contributed about 17%. Since inception, Divi's exported more than 90% of its turnover. The company's regulated market-intensive approach augurs well in view of the substantial potential and also superior margins therein.

The promoters of DLL held a 59.96% equity stake in the company before the IPO. Post-IPO, their holding has slipped to 54.02%.