MUMBAI, Dec. 1 -- Once focused on low-margin active pharmaceutical ingredients (APIs), India's bulk drug manufacturers are raising their ambitions, with several now investing heavily in R&D to win contract development and manufacturing work from global drugmakers. The shift reflects ambition and timing. While APIs remain a mainstay, firms are building capabilities in niche molecules, drug discovery, development and scaled manufacturing, with global firms looking to derisk supply chains away from China. JM Financial analysis says China accounts for about 13% of the global contract research, development and manufacturing organization (CRDMO) market. Some have won early business with global innovators, but analysts say most lack scale and track record to compete globally. Investor enthusiasm suggests the market is betting on a change. Contract development and manufacturing organizations (CDMOs) gained strong momentum over the past two years on the back of a China-plus-one theme, as seen in the valuations of industry leaders. For instance, Divi's Laboratories-India's second-largest pharma company by market capitalization-has outperformed many larger diversified drugmakers. Its shares rose 8% in past year, outpacing the Nifty Pharma's 5.5% gain. Research-focused contract manufacturers have drawn investor interest. Anthem Biosciences and Sai Life Sciences posted robust market debuts in the past year; Anthem now trades at a price-to-earnings ratio of 69.14, while Sai Life Sciences trades at 64.27. In contrast, legacy players such as Dr Reddy's Laboratories and Cipla trade at far lower PE multiples of 18.16 and 22.72, respectively. A February report on India's CRDMO sector by BCG-IPSO said the industry is at a tipping point, with massive headroom to grow, "fuelled by competitive advantage in small molecule capabilities, faster startup time, focus on quality and cost advantage." The CRDMO industry is small, at $3-3.5 billion, or just 2-3% of the $145 billion global market, the BCG-IPSO report said. It is, however, expanding rapidly. The report estimated that the domestic sector could reach $22-25 billion by 2035 as firms build capabilities to rival Chinese incumbents. That expansion is already underway. Supriya Lifescience has been investing in R&D for niche molecules and has planned an initial Rs.350 crore capex for a new facility in Patalganga, alongside upgrades at other sites. The firm expects its first large contract to contribute Rs.25-30 crore this fiscal, with another anaesthetics partnership poised to scale to around Rs.70 crore annually. "When you are fully backward integrated, there are a lot of opportunities because a lot of innovators or large multinationals want to move the manufacturing base from China or Europe to Indian companies. That is how we started getting CMO opportunities," managing director Saloni Wagh said. Granules India is making a similar push. It acquired Swiss CDMO Senn Chemicals AG in February and launched Ascelis Peptides-focused on CDMO services and peptide-based therapeutics. Though peptides make up just 2% of its Rs.12,970 crore Q2 revenue, interest is rising. "Recent interactions at major industry events.have reinforced growing interest from leading innovator pharma companies, emerging biotech, and cosmetic peptides customers. We are seeing multiple feasibility programs, new inquiries, and renewed discussion with several global innovators," chief strategy officer Sanjay Kumar told investors in November....