Abstract

On December 17, 2020, Indian Pharma Company Divi’s Laboratories (Divi’s) achieved a market capitalization of Rs. 1 trillion, gaining a position among the top listed companies in the country, and becoming the second Pharma company to achieve this remarkable feat. In terms of revenue generation, Divi’s stood at the 12th position among pharma companies. Its stable business model, and the growing demand for the products and services offered by Divi’s placed it in a strong position in the global Active Pharmaceutical Ingredient (API) segment and in Contract Research and Manufacturing Services (CRAMS). To fulfil the growing demand for APIs and CRAMS, the management had invested in expanding the capacity of manufacturing units and establishing new plants. The investors and analysts were bullish about the stock price given the positive forecast for Divi’s. The present case study can be used to discuss the concept of market capitalization, the factors that contribute to the growth of market prices of a share, market capitalization, and investment decisions.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• The concept of market capitalization
• Factors contributing to the growth of the market value of a firm
• Classification of companies based on Market Capitalization
• Market Capitalization and its role in the investment decision

Keywords

Divis Laboratories; Market Capitalization; Rs. 1 trillion; Active Pharmaceutical Ingredients; Custom Synthesis; Contract Research and Manufacturing Services (CRAMS); Naproxen; Gabapentin; Pharma stocks; Indian stock market