India’s pharmaceutical sector is at a pivotal moment, with active pharmaceutical ingredients (APIs) presenting a multi-billion-dollar opportunity. The country has leveraged the China+1 strategy to gain a foothold in global API markets, but the real challenge lies in scaling capabilities to meet growing international demand.
Speaking at the VCCircle Healthcare Summit 2025 in Mumbai, Prasanna Bora, Managing Director - Life Sciences at o3 Capital, shared key insights on how India can strengthen its position in the API space, capitalize on M&A opportunities, and develop long-term sustainability in pharmaceutical manufacturing.
China+1: More Than Just an Alternative
“India is not trying to replace China but provide a strong complementary supply chain,” Bora stated.
He pointed out that while China dominates API production with exports worth $40 bn, India currently exports just around $4 bn worth of APIs. Even if India captures a fraction of this market, it translates into a significant growth opportunity.
However, Bora emphasized that India cannot compete on cost with China at the moment. “China’s cost efficiencies are unmatched, and rather than focusing on price wars, India must focus on reliability, compliance, and quality manufacturing,” he said.
M&A as a Growth Lever
One of the critical themes Bora touched upon was the role of mergers and acquisitions (M&A) in building API capabilities.
“We’re seeing European pharmaceutical players looking at India as a strategic hub for API manufacturing,” he noted. While organic growth remains an option, inorganic expansion through acquisitions is emerging as a preferred route for global firms wanting to establish a presence in India.
“Maybe transactions are not closed in the last 18 months, but there is enough and more interest that we are seeing from select people wanting to set up base in India, wanting to acquire companies in India,” he added.
Scaling Innovation and Moving Up the Value Chain
Bora stressed that moving beyond commodity APIs is the key to long-term success.
“Our manufacturers need to shift towards high-value, complex APIs. It’s not just about bulk production; it’s about building capabilities that global players seek,” he said.
He further stated that he sees significant opportunities for Indian manufacturers in the CDMO sector alongside API production and believes India can emerge as a strong alternative partner to China in this space.
“The CDMO sector presents a massive scale-up opportunity for Indian players, given that we currently hold only about 5% of the global market. The headroom for growth is phenomenal. While we are trailing behind countries like Korea, the potential is immense,” he said.
Government Policies: PLI and Beyond
The Production-Linked Incentive (PLI) scheme has been a step in the right direction, but Bora pointed out that more needs to be done.
“PLI schemes have provided a much-needed boost, but incentives must be expanded. To cater to such a large population, the PLI scheme needs to go up 2-4x to make sure we have enough at least for the essential drugs” he said.
He also called for stronger policy measures to address challenges in API production, particularly in creating an ecosystem that encourages domestic API firms to scale operations efficiently.
The COVID-19 Wake-Up Call and Supply Chain Security
The pandemic exposed vulnerabilities in global supply chains, making API self-reliance a necessity rather than a choice.
“The COVID-19 crisis highlighted our dependence on China for essential APIs. While we have made some progress, we need larger-scale manufacturing to truly de-risk our supply chains,” Bora said.
He advocated for expanding India’s API production capacity to ensure security in case of future disruptions.
The Future of APIs in India
With the global API market evolving, Bora remains optimistic about India’s potential.
“There is a huge opportunity for India to emerge as a leader in API manufacturing. But for that, we need to build expertise in high-value APIs, attract global investments, and create a sustainable ecosystem for long-term growth,” he said.
“I think it's more about ensuring that we have enough and more local capital production to meet our own needs, even if it is at a premium, because that is supply assurance,” he concluded.
About o3 Capital
o3 Capital is India's leading mid-market investment bank, delivering financial and strategic advice to our clients. We provide responsible advice by leveraging our deep domain knowledge, access to key decision makers and successful transaction experience of over 18 years. We bring a unique combination of insights, expertise and innovation, enabling us to address our clients’ most challenging assignments.
We bring our expertise to serving a wide range of clients, including established market leaders, private equity houses, large global corporate entities and cutting-edge start-ups. Every transaction is personally managed from start to finish by experienced senior bankers with specific sector experience and a deep commitment to our client's success. Healthcare and Lifesciences are two key verticals for us, and we have a strong track record of delivering tailored, responsible, and unbiased solutions. We have closed several deals worth bns of dollars in the space and are a trusted partner across the ecosystem. Our teams are based out of Mumbai, Bengaluru & New York.
No VCCircle journalist was involved in the creation/production of this content.