Abhishek.

V
08D0256
3rd B.Com ‘C’

1
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 SUMMARY

Fundamental analysis involves analyzing the underlying forces that

affect the well being of the economy, industry groups, and companies. Most often,
the aim of company analysis is to derive a stock's current fair value and forecast
future value. If fair value is not equal to the current stock price, fundamental analysts
believe that the stock is either over or under valued and the market price will
ultimately gravitate towards fair value. By believing that prices do not accurately
reflect all available information, fundamental analysts look to capitalize on
perceived price discrepancies.
In this assignment myself has made an attempt to analyze the financial
performance of Sun Pharmaceuticals Industries limited.
Earlier part of the report gives information about Indian economy and Industry
scenario
And the later part of the project gives information about company financial
performance and ratios analysis.
This is made to determine the financial health of a company.

2
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 INDIAN ECONOMY

Indian Economy has covered a long ground since it was liberalized in

1991. Today, India has the fourth largest economy in terms of
purchasing power parity (PPP) behind only the USA, China, and Japan. It is
slated to overtake Japan and become the third major economic power in the next
ten years. India is also one of the few markets in the world which offers high
prospects for growth and earning potential in practically all areas of business.
Indian economic growth has been among the fastest in the world in the recent Years.

India was a highly protected, semi-socialist autarkic economy till 1991. There
were numerous structural and bureaucratic impediments in setting up a new
business and Foreign investment was not welcomed. The opening up of the Indian
economy in 1991, Unleashed the latent entrepreneurial talent of the Indian and in less
than two decades India has established itself as the next economic superpower of the
world.

Now in mid 2009, the global economy is showing incipient signs of stabilization, of
course not recovery. The pace of decline in economic activity in several major
advanced economies has slowed, frozen credit markets have thawed and equity
markets have begun to recover. Recent months have witnessed industrial activity
reviving in a number of emerging market economies (EMEs) such as China, Korea,
Brazil and India. Notwithstanding some positive signs, the path and the time horizon
for global recovery remain uncertain. Consumption demand remains subdued as
unemployment levels have raised. Business and consumer confidence are yet to show
definitive signs of revival. Global trade, according to the International Monetary
Fund (IMF), is projected to shrink by over 12 per cent in 2009; private capital flows
are also expected to decline. The continuing process of balance sheet adjustment by
both households and businesses is inhibiting recovery in many economies. Reflecting
these several uncertainties, the IMF, in its latest World Economic Outlook (WEO)

3
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 update released in July 2010, has further revised downwards the global
growth forecast for 2009 to (-)1.4 per cent from its April 2009 forecast
of (-)1.3 per cent.
The crisis, which affected the global financial system and engulfed most
countries of the world, had all the ingredients for a severe disruption of the world
economy on the scale of the Great Depression.  However, it was mitigated by bold,
large and decisive actions taken in concert by governments and central banks in each
country, and which came to be increasingly co-ordinate across countries.
Consequently, while the financial sector appears to be stabilizing, economic
recession in the real sector persists.

The Indian economy experienced a significant slowdown in 2008-09 in comparison

with the robust growth performance in the preceding five years, largely due to the
knock-on effect of the global financial crisis. The worst hit has been the export
sector, which has been recording negative growth since October 2008. This, in turn,
impacted the manufacturing sector. Investment demand was also dented by the
decline in corporate profitability and increased uncertainties about future prospects.
Private consumption decelerated significantly. The services sector, which has been
the main driver of growth for more than a decade, also slowed down. The financial
sector, however, remained relatively unaffected despite the severe stress caused by
the global deleveraging process, which triggered capital outflows in the second half
of 2008-09.

4
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 INDIAN PHARMACEUTICAL INDUSTRY

Indian pharmaceutical sector has an estimated market value of about US $10 billion.
It's at 4th rank in terms of total pharmaceutical production and 13th in terms
of value. It is growing at an average rate of 7.2 % and is expected to grow to US $
14 billion by 2011.

Over the last two years the pharmaceutical market value has increased to about US $
355 million because of the launch of new products. According to an estimate, 3900
new generic products have been launched in the past two years. These have been by
and large launched by big brands in the pharmacy sector.

With the Product Patent Act, which came into action in January 2005, this
industry is able to attract big MNCs to India. Earlier these big firms had
apprehensions in launching new drugs in the Indian market.
At present, a large number of Indian pharmaceuticals companies are looking for tie-
ups with foreign firms for in-license drugs. GlaxoSmithKline is among the top
choices for the firms that wish to launch their product in India, but do not have any
branch over here.

Contract research and pharmaceutical outsourcing are the new avenues in

the Pharmaceutical market. Contract manufacturing is growing at a very fast
pace and is estimated to grow to US $ 30billion, whereas contract research is
estimated to reach US $ 6-10 billion.

Indian multinational companies like Dr. Reddy’s Lab, Sun Pharmaceuticals Ltd,
Cipla, Ranbaxy, etc have created awareness about the Indian market prospects in
the international pharmaceutical market.

5
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Approvals given by Foods and Drugs Administration (FDA) and
ANDA (Abbreviated New Drug Application)/DMF (Drug Master
File) have played an important role in making India a cost-effective
and high quality product manufacturer. Furthermore, the changes that took
place in the patent law, change of process patent to product patent, have
helped in reducing the risk of loss for intellectual property.

According to industry estimates, generics are estimated to witness a revenue CAGR

of 9% over 2008-2013 to US$ 135bn. It is expected that the emerging markets will
continue to expand while the matured generics markets slow down further. Volume
growth of 10-11%, coupled with 4-5% growth from new product launches and 7-8%
price erosion in existing products would be the key components of growth.

Key growth drivers are an ageing world population, rising healthcare spending and
increasing acceptance for generics. As we move towards 2050, the world population
in the age group of 40-59 and 60+ are estimated to jump from 1.4bn to 2.3bn and
0.7bn to 1.9bn respectively. This would put further pressure on the spiraling
healthcare spending of the developed countries which has been growing faster than
the GDP. The government of these countries would have no choice but to increase
generic penetration. Generics are also gaining increasing acceptance from regulated
markets. A case in point is Japan which has a generic penetration target of 30% in
volume by 2012 from 5% (US$ 3bn) currently.

 We have witnessed a series of acquisitions/partnerships announced in the

emerging markets lately.
 Acquisition in these markets has picked up steam starting in 2008 when
innovators realized the need to be in these markets for sustainability.
 Large pharmacy companies like Pfizer have announced a greater need to be
present in emerging markets. GlaxoSmithKline and Dr Reddy’s recently formed
a strategic alliance to develop and market over 100 products in emerging

6
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 markets. We expect more such deals to be signed between generics and
innovators for the emerging markets.

:
7
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 TARGETTING EMERGING MARKETS

 The slowing US and EU markets are forcing pharmacy companies to look at

emerging markets led by BRICS (Brazil, Russia, India, China and South Africa)
more seriously for growth.
 These markets have strong growth potential (estimated to witness a CAGR of
12-15% over 2009-2014) driven by increasing per capita spend, lower
penetration of modern medicines, increasing insurance penetration and
improving lifestyle. These markets are branded in nature and therefore offer
higher margins but have strong entry barriers in the form of doctor relationship
and brand recalls

Increasing innovator – generic acquisitions/ partnerships:

 Acquisition of Ranbaxy by Daiichi Sankyo in 2008 is a case in point where
synergies can be leveraged between an innovator and a generic company.
 Recent announcements between Pfizer-Eurobond Parma and Claris Life science
and the latest alliance between GSK and Dr Reddy’s for over 100 products in the
emerging markets highlight the need for partnership models in pharma.
 We believe more acquisitions particularly in the emerging markets, would
unfold over the next few years. We are also seeing generic companies building
pipelines for proprietary products which could hit the market in 2012-13.

8
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 SWOT ANALYSIS OF PHARMA SECTOR

STRENGTHS:
 Cost effective technology
 Strong and well-developed
manufacturing base
 Clinical research and trials
 Knowledge based, low- cost
manpower in science &
technology
 Proficiency in path-breaking
research
 High-quality formulations and
drugs
 High standards of purity
 World-class process
development labs
WEAKNESSES
 Low Indian share in world
pharmaceutical market (about
2%)
 Lack of strategic planning
 Fragmented capacities
 Low R&D investments
 Absence of association
between institutes and industry
 Low healthcare expenditure
 Production of duplicate drugs
OPPORTUNITIES
 Incredible export potential
 Increasing health
consciousness
 New innovative therapeutic
products
 Globalization
 Drug delivery system
management
 Increased incomes
 Production of generic drugs
 Contract manufacturing
 Clinical trials & research
 Drug molecules
THREATS
 Small number of discoveries
 Competition from MNCs
 Transformation of process
patent to product patent
(TRIPS)
 Outdated Sales and marketing
methods

9
SUN PHARMACEUTICALS INDUSTRIES LIMITED
  Non-tariff imposed by developed
barriers countries

FUTURE SCENARIO

The dream of Indian pharmaceutical companies for marking their presence globally
and competing with the pharmaceutical companies from the developed countries like
Europe, Japan, and United States is now coming true.

The new patent regime has led many multinational pharmaceutical companies to look
at India as an attractive destination not only for R&D but also for contract
manufacturing, Conduct of clinical trials and generic drug research. With market
value of about US$ 45billion in 2005, the generic sector is expected to grow to US$
100 billion in the next few years.

The Indian companies are using the revenue generated from generic drug sales
to Promote drug discovery projects and new delivery technologies. Contract
research in India is also growing at the rate of 20-25% per year and was valued at
US$ 10-120million In 2005. India is holding a major share in world's contract
research business activity and It continues to expand its presence.

Clinical Research Outsourcing (CRO), a budding industry valued over US$ 118
million Per year in India, is estimated to grow to US$ 380 million by 2010, as MNCs
are entering the market with ambitious plans. By revising its R&D policies the
government is trying to boost R&D in domestic pharma industry. It is giving tax
exemption for a period of ten years and relieving customs and excise duties of all
the drugs and material imported or exported for clinical trials to promote
innovative R&D.

10
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 CHALLENGES: PHARMA SECTOR

 Attracting and retaining skilled workforce.

 Controlling operating costs.
 Generic competition.
 Fake drugs.
 Pricing pressure & shrinking margins.
 Managing regulatory Compliance.
 Sustaining growth in global market.
 Intellectual Property Protection
 Realizing tangible value from strategic alliances, joint ventures (JVs) and
partnering arrangements

11
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 ANALYSIS OF COMPANY
Overview:
The methods used to analyze securities and make investment decisions fall into two
very broad categories: fundamental analysis and technical analysis. Fundamental
analysis involves analyzing the characteristics of a company in order to estimate its
value. Technical analysis takes a completely different approach; it doesn't care one
bit about the "value" of a company or a commodity. Technicians (sometimes called
chartists) are only interested in the price movements in the market.
Despite all the fancy and exotic tools it employs, technical analysis really just studies
supply and demand in a market in an attempt to determine what direction, or trend,
will continue in the future. In other words, technical analysis attempts to understand
the emotions in the market by studying the market itself, as opposed to its
components. If you understand the benefits and limitations of technical analysis, it
can give you a new set of tools or skills that will enable you to be a better trader or
investor.

What Is Fundamental Analysis?

Fundamental analysis is the cornerstone of investing. In fact, some would say that
you aren't really investing if you aren't performing fundamental analysis.Because the
subject is so broad, however, it's tough to know where to start. There are an endless
number of investment strategies that are very different from each other, yet almost all
use the fundamentals.

The goal of this tutorial is to provide a foundation for understanding fundamental

analysis. It's geared primarily at new investors who don't know a balance sheet from
an income statement.While you may not be a "stock-picker extraordinaire" by the
end of this tutorial, you will have a much more solid grasp of the language and
12
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 concepts behind security analysis and be able to use this to further your
knowledge in other areas without feeling totally lost.
The biggest part of fundamental analysis involves delving into the
financial statements. Also known as quantitative analysis, this involves
looking at revenue, expenses, assets, liabilities and all the other financial aspects of a
company. Fundamental analysts look at this information to gain insight on a
company's future performance. A good part of this report will be about the balance
sheet, income statement, cash flow statement and how they all fit together.

What Is Technical Analysis?

Technical analysis is a method of evaluating securities by analyzing the statistics
generated by market activity, such as past prices and volume. Technical analysts do
not attempt to measure a security's intrinsic value, but instead use charts and other
tools to identify patterns that can suggest future activity.
Just as there are many investment styles on the fundamental side, there are also many
different types of technical traders. Some rely on chart patterns, others use technical
indicators and oscillators, and most use some combination of the two. In any case,
technical analysts' exclusive use of historical price and volume data is what separates
them from their fundamental counterparts. Unlike fundamental analysts, technical
analysts don't care whether a stock is undervalued - the only thing that matters is a
security's past trading data and what information this data can provide about where
the security might move in the future.
The field of technical analysis is based on three assumptions:
1.     The market discounts everything.
2.     Price moves in trends.
3.     History tends to repeat itself.
Technical analysis can be used on any security with historical trading data. This
includes stocks, futures and commodities, fixed-income securities, forex, etc. In this
tutorial, we'll usually analyze stocks in our examples, but keep in mind that these
concepts can be applied to any type of security. In fact, technical analysis is more
frequently associated with commodities and forex, where the participants are
13
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 predominantly traders.

Fundamental Vs. Technical Analysis:

Technical analysis and fundamental analysis are the two main schools of
thought in the financial markets. As we've mentioned, technical analysis looks at the
price movement of a security and uses this data to predict its future price movements.
Fundamental analysis, on the other hand, looks at economic factors, known as
fundamentals. Let's get into the details of how these two approaches differ, the
criticisms against technical analysis and how technical and fundamental analysis can
be used together to analyze securities.

14
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 SUN PHARMACEUTICALS INDUSTRIES
LIMITED
Company profile:
Sun Pharmaceuticals Industries Ltd. is an international speciality pharma company,
with a presence in 30 markets. Sun Pharma also make active pharmaceutical
ingredients. In branded markets, Sun pharma products are prescribed in chronic
therapy areas like cardiology, psychiatry, neurology, gastroenterology, diabetology
and respiratory.
Sun Pharma came into existence as a startup with just 5 products in 1983. In the time
since, Sun pharma have crossed several milestones to emerge as an important
speciality pharma company with technically complex products in global markets, and
a leading pharma company in India.
In India, Sun Pharma have reached leadership in each of the therapy areas that they
operate in, and are rated among the leading companies by key customers.
Strengthening market share and keeping this customer focus remains a high priority
area for the company.

In the post-1996 years, Sun Pharma have used a combination of internal growth and
acquisitions to drive growth; important mergers were those of the US, Detroit based
Caraco Pharm Labs, ICN Hungary (now called Alkaloida Chemical Company
Exclusive Group), and that of the internationally approved plants at Halol, India as
well as Bryan, Ohio, US and Cranbury, NJ, US.
Sun Pharma has shifted work related to new molecules and drug delivery systems to
a company, SPARC, which is listed on the Indian stock exchange.
Key Milestones post 1996:

1997 :
Acquisition of Tamil Nadu Dadha Pharmaceuticals Ltd.
15
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 1998:
Brand buyout : Brands from Natco Pharma

1999 :
Acquisition of Milmet Labs

2000:
Acquisition of Pradeep Drug Company Ltd

2004 :

Sun Pharma increased stake in Caraco to 66%. By 2007, this stake has reached 75%
on a diluted basis.
The formulation site in Halol, India (the erstwhile MJ Pharma site) received approval
from USFDA, UK MHRA, South African MCC, Brazilian ANVISA and Columbian
INVIMA
Sun Pharma acquires a Cephalosporin Actives manufacturer, Phlox Pharma, with
European approval for cefuroxime axetil amorphous. By 2007, a formulations facility
to make sterile and non sterile formulations have been built, and the API and non-
sterile sections have been approved by the USFDA.
2005:
Sun Pharma buys a plant in Bryan, Ohio, US and the business of ICN, Hungary from
Valeant Pharma.
Sun Pharma acquires the intellectual property and assets of Able Labs from the US
District Bankruptcy court in New Jersey in December 2005.
Dilip Shanghvi, the CMD, receives the E&Y Entrepreneur of the Year award in
healthcare and life sciences for 2005.
Sun Pharma is selected by Forbes amongst the best 200 companies (sales less than
USD 1 billion) in Asia. This is the fourth time in 5 years that the company has been
selected.

2006:
Announced the demerger of innovative business with pipelines, people, equipment
16
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 and funding, into a new company.
2007:
Completed the demerger of the innovative business, with requisite legal
and regulatory approvals. SPARC ltd, the new company, is listed on the
stock exchanges in India, the first pure research company to be so listed.
In May 2007, we, along with our subsidiaries, signed definitive agreements to
acquire Taro Pharmaceutical Industries Ltd., (TAROF, Pink Sheets), a multinational
generic manufacturer with established subsidiaries, manufacturing and products
across the U.S., Israel, Canada for $454 mill. This all-cash deal is subject to Taro
shareholder approval and requisite regulatory clearances
2008:
In November 2008, Sun Pharma along with subsidiaries, acquired 100% ownership
of Chattem Chemicals, Inc.,a narcotic raw material importer and manufacturer of
controlled substances with a approved facility in Tennessee. This will offer vertical
integration for our controlled substance dosage form business in the US.

Fundamental Analysis:

SHAREHOLDING PATTERN AT SUN PHARHARMACEUTICALS LTD. AS

ON 31ST MARCH, 2010 :
Table -3
Type Of Shareholder %
Of
Shar
es
Promoters and group 63.7
1
Mutual Funds or UTI 3.52
Financial Institutions or banks 2.29
FII 18.1
Corporates/HNIs 5.89
Retail Investors 6.49
Total 100

17
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Shareholding Pattern
Corporat Retail
es/HNIs Investor
6% s
FII 6%
18%
Financia
l Promote
Instituti rs and
ons or group
banks 64%
2% Mutual
Funds or
UTI
4%

CONSISTANT PERFORMANCE IN DOMESTIC MARKET:

1. Sun Pharma is the sixth largest company in India (in terms of prescription sales)
with a market share of 3.5%. Sun has witnessed a revenue CAGR of 28% over FY05-
FY09, driven by its focus on chronic space, vertical integration and strong doctor
relationships. Sun’s efforts have translated into a top 3 position in over 50% of its
strong 450 brands. Sun is No.1 in key therapeutics like Psychiatry, Neurology,
Cardiology, Ophthalmology, Diabetology and Orthopedics. These segments are not
easy to penetrate.

18
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 2. Despite a high base, Sun’s strong performance in the domestic
market is likely to continue, driven by new product launches and volume
growth in existing products.

SUN PHARMA PERFORMANCE FROM JUN 04 TO JUN 09 :

19
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 SUNPHARMA

3000
STOCK PRICE

2500
2000
1500 Series1
1000
500
0
Apr-99

Apr-00

Apr-02

Apr-03

Apr-04
Apr-98

Apr-01

Apr-05

Apr-06

Apr-07

Apr-08
MONTH

Reason for stock price hike in June 1999 to Jan 2000-

1) The Company has merged its wholly owned export subsidiary Sun Pharma
Exports with itself. Sun Pharma merged its 99.28% subsidiary - Sun
Pharmaceuticals Exports.
2) Sun Pharmaceutical Industries Ltd has approved the merger of the ailing Pradeep
Drug Company Ltd.
3) The company, ranked 5th by domestic prescription product sales, has been
consistently adding to market share from 2.47% in November 2000 to 2.78% in
November 2001 (ORG Retail Chemist Audit, November 2000 and 2001). Forbes

20
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Global, the prestigious international magazine recently rated Sun Pharma
among the best 200 global companies for 2002.

Reason for stock price hike in April 2004

Sun Pharmaceutical Industries purchased additional stake in Caraco enhancing it’s
holding to 63.14%

Reason for stock price hike in 2007

1) Sun Pharmaceutical acquires Taro for 4 million

KEY FACTORS IN SUN PHARMA’S PERFORMANCE:

DESPITE CORACO’S SETBACK, US SALES TO GROW FROM SUN’S

OWN FILINGS:

1. Sun’s subsidiary in the US, Caraco’s 33 products was recently seized by the US FDA
for non compliance of cGMP requirements for a sustained period. The US FDA also
mentioned that these products would not be allowed to be distributed in the US till the
time Caraco’s facility comes up to the US FDA standards. The recent action is a
significant setback as the 33 products accounted for a major chunk of Caraco’s own
manufactured products having sales of US$ 112mn in FY09. In addition, Caraco’s 25
ANDAs pending approval would not be considered for approval as well.
2. Despite the setback on Caraco, Sun’s own filings will drive growth for the US
market. Caraco is a facility specializing in oral solids (tablets) while complex
products are from Sun’s facilities in India, which have all clearance from the US
21
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 FDA. Sun and Caraco together have 108 ANDAs awaiting approval, of
which Sun alone has 83 ANDAs, including filings from its Cranbury
facility. These filings include products for controlled substances a US$
6bn opportunity with limited competition due to the nature of the
products. Sun is looking at vertical integration in this area which would be a key
differentiator.

LAUNCH OF TECHNICALLY COMPLEX PRODUCTS HAS ENSURED

CONTINUING CASH FLOW BEYOND THE LIMITED PERIOD:
1. Sun’s forte has been the launch of technically complex products in the US, which not
only generate cash flows during the exclusivity period, but beyond that as well. Sun
has a mix of products, both blockbuster (Pantoprazole-US$ 2.3bn) and small size
products (Ethyol-US$ 80mn), but these have witnessed limited competition due to
the complex nature of products.
2. Generic Ultracet, launched in Dec ’05, is still a market with three other generics apart
from the innovator. Generic Protonix, launched at risk with a 180-day exclusivity,
has generated sales of US$ 340mn, while generic Ethyol launched at risk with 180-
day exclusivity is estimated to have generated US$ 25mn with no generic
competition. Protonix patent expiry is in Dec ’10 while Ethyol’s patent expiry is only
in July ’12.
22
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 3. Sun has refiled its ANDA for generic Effexor XR with the US FDA
based on Osmotica’s product. Sun has not been sued by Wyeth and is
now awaiting approval from the US FDA. Sun is confident of generating
some revenue from the US$ 2.6bn opportunity during the exclusivity
period starting July ‘10. Effexor XR is not a part of our estimates
4. While there are no other big opportunities visible currently, we believe that each of
these existing opportunities have the potential to generate sustainable cash flows in
the near future.

23
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 ACQUIRES ASSETS WITH AN AIM TO GENERATE HIGH ROI

 Sun Pharma has historically shown interest in acquiring distressed assets,

which could emerge as a strategic fit or as an entry point in key markets for the
company. Sun’s key acquisition includes Caraco in 1997, which then was loss-
making and had a turnover of US$ 0.8mn. Sun’s technology transfer resulted in a
turnaround in Caraco’s operations in 2003. For FY09, Caraco reported sales of US$
317mn with a profitability of US$ 21mn.
 Sun’s other strategic acquisition includes a plant in Hungary (Alkaloida Chemicals)
which makes controlled substance APIs for entry into the US$ 6bn controlled
substances market in the US which has significant entry barriers. It later acquired
manufacturing assets of Able Labs for the manufacture of controlled substances from
the US Bankruptcy Court of the District of New Jersey for US$ 23mn.
 Sun strengthened its position in the controlled substances space by acquiring Chattem
Labs, a narcotic raw material importer and manufacturer of controlled substances
with a facility in Tennessee.

24
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Financial Analysis: Table 5

Profit and Loss Rs. In millions

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006

No. of Months 12 12 12 12 12
Gross Sales 39254.50 32107.60 23027.50 17429.20 12638.60
Less :Inter divisional
0 0 0 0 0
transfers
Less: Sales Returns 0 0 0 0 0
Less: Excise 639.00 617.10 568.60 613.70 487.30
Net Sales 38615.50 31490.50 22458.90 16815.50 12151.30
EXPENDITURE :
Increase/Decrease in Stock -286.80 -202.50 -387.00 -572.30 4.50

Raw Materials Consumed 18974.40 15441.20 11993.90 8881.30 5559.40

Power & Fuel Cost 504.40 373.60 310.90 255.50 144.80
Employee Cost 1448.40 1202.00 989.20 820.10 827.80
Other Manufacturing
2475.70 1938.50 1991.20 1524.80 620.60
Expenses
General and Administration
546.50 886.00 699.50 489.50 646.20
Expenses
Selling and Distribution
3052.30 1898.00 1430.50 1207.70 721.30
Expenses
Miscellaneous Expenses 179.10 146.80 171.00 158.90 380.70
Less: Pre-operative
0 0 0 0 0
Expenses Capitalized
Total Expenditure 26894.00 21683.60 17199.20 12765.50 8905.30
Operating Profit (Excl
11721.50 9806.90 5259.70 4050.00 3246.00
OI)
Other Income 1848.90 1326.80 1696.40 1356.40 431.80
Operating Profit 13570.40 11133.70 6956.10 5406.40 3677.80
Interest 27.70 50.60 88.00 112.30 114.70
PBDT 13542.70 11083.10 6868.10 5294.10 3563.10
Depreciation 588.60 561.10 462.70 407.30 328.30
Profit Before Taxation &
12954.10 10522.00 6405.40 4886.80 3234.80
Exceptional Items
Exceptional Income /
0 0 0 0 0
Expenses
Profit Before Tax 12954.10 10522.00 6405.40 4886.80 3234.80
Provision for Tax 301.20 381.60 116.10 273.90 177.70
Profits After Tax 12652.90 10140.40 6289.30 4612.90 3057.10
Appropriations 23940.80 16848.80 10192.00 7207.40 4964.70
Equity Dividend % 275.00 210.00 135.00 110.00 75.00
Earnings Per Share 61.10 48.96 32.52 24.84 16.48

25
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Book Value per share 248.72 203.15 126.58 78.80 59.51

Balance sheet : table 6 : Rs. In Million

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006

SOURCES OF
FUNDS
Share Capital 1035.60 1035.60 980.70 942.70 941.60

Total Reserve 50478.60 41040.60 23514.20 13706.70 10112.80

Shareholder's Funds 51514.20 42076.20 24494.90 14649.40 11054.50

Secured Loans 236.00 228.80 203.90 182.30 139.20

Unsecured Loans 0 796.40 10477.60 17275.90 18007.30

Total Debts 236.00 1025.20 10681.50 17458.20 18146.50

Total Liabilities 51750.20 43101.40 35176.40 32107.60 29201.00
APPLICATION OF
FUNDS :
Gross Block 10619.00 9350.30 8387.00 7442.60 6120.50
Less: Accumulated
3626.40 3049.90 2494.10 2080.70 1729.00
Depreciation
Net Block 6992.60 6300.40 5892.90 5361.90 4391.50
Capital Work in
759.50 334.30 319.10 308.00 479.40
Progress
Pre-operative Expenses
0 0 0 0 0
pending
Investments 26945.90 18435.70 10574.90 7796.20 9852.40

26
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Current Assets, Loans
& Advances
Inventories 4867.40 3896.30 3333.80 2634.10 1866.20

Sundry Debtors 6800.30 10554.40 5648.70 2564.70 2349.70

Cash and Bank 12654.70 10724.20 12026.80 12308.20 8900.30

Other Current Assets 512.60 257.80 327.00 175.50 45.00
Loans and Advances 3286.50 3618.70 3086.80 4890.20 4384.10
Total Current Assets 28121.50 29051.40 24423.10 22572.70 17545.30
Less : C. L. and
Provisions
Current Liabilities 5730.90 7263.10 4863.40 1661.80 1370.10

Provisions 4164.20 2627.90 77.00 1225.00 844.50

Total Current Liabilities 9895.10 9891.00 4940.40 2886.80 2214.60

Net Current Assets 18226.40 19160.40 19482.70 19685.90 15330.70
Deferred Tax Assets 58.30 64.80 44.40 26.80 26.40
Deferred Tax Liability 1232.50 1194.20 1137.60 1071.20 879.40
Deferred Tax Assets /
-1174.20 -1129.40 -1093.20 -1044.40 -853.00
Liabilities
Total Assets 51750.20 43101.40 35176.40 32107.60 29201.00
Contingent Liabilities 1022.20 731.50 1113.10 686.80 567.00


Financial Analysis:
 Sun Pharma reported 22 % increase on Y-o-Y basis from March 2009 to March
2010.
 Company reported increase in PAT by 24.7 % as compared to last year.

27
SUN PHARMACEUTICALS INDUSTRIES LIMITED
  Due to increased PAT and no. of shareholders remaining same
EPS has increased
by nearly 25 % on Y-o-Y basis from March 2009- March 2010
 Company has returned all its unsecured debts thus pushing down
debt to equity
ratio in order to able company to access for more debts as and when required
by the company.
 Size of balance sheet has increased significantly by Rs. 8649 million i.e. 20 %
increase as compared to last year due to increase in reserves.
 Company’s debtors have decreased as compared to last year denoting better
administration and debtor collection by company even in recessionary situations.
Cash Flow Statement:

Table 7 (Rs.in Millions)

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006

Profit Before Tax 12954.00 10522.00 6405.40 4886.80 3234.80
Adjustment -1413.50 -197.10 -969.20 -590.30 233.20

Changes In working Capital 1075.50 -3612.00 -776.00 -1034.70 -1170.80

Cash Flow after changes in
12616.00 6712.90 4660.20 3261.80 2297.20
Working Capital
Cash Flow from Operating Activites 12624.90 6261.30 4505.60 3108.30 2198.10
Cash Flow from Investing Activities -6603.70 -7434.90 -1125.80 1607.60 -8634.40

Cash Flow from Financing Activites -3256.70 -60.60 -3604.80 -1308.00 14578.90

Net Cash Inflow / Outflow 2764.50 -1234.20 -225.00 3407.90 8142.60

Opening Cash & Cash Equivalents 9773.10 12084.80 12309.80 8900.30 757.50
Cash & Cash Equivalent on
0 0 0 0 0.20
Amalgamation / Take over / Merger
Cash & Cash Equivalent of
0 0 0 0 0
Subsidiaries under liquidations
Effect of Foreign Exchange
0 0 0 0 0
Fluctuations
Closing Cash & Cash Equivalent 12537.60 10850.60 12084.80 12308.20 8900.30

28
SUN PHARMACEUTICALS INDUSTRIES LIMITED
  Cash flow from operating activities has increased significantly amounting
double as compared to last year indicates higher operational efficiency and
increased operating activities to generate higher returns for company.

 Cash flow from investing activities shows outflow of funds indicating that
company has invested in different investment avenues as valuations were
downgraded during the year because of global recessionary conditions.

 Financial activities showing significant cash outflow as company has repaid all
its unsecured loans becoming debt free company.

29
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Ratio: : Rs. In Millions

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006

Operational & Financial Ratios
Earnings Per Share (Rs) 61.10 48.96 32.52 24.84 16.48
DPS(Rs) 13.75 10.50 6.75 5.50 3.75
Book NAV/Share(Rs) 248.72 203.15 126.58 78.80 59.51
PER(x) 18.21 25.15 32.41 34.88 28.60
Performance Ratios
ROA (%) 24.45 23.53 17.88 14.37 10.47
ROE (%) 24.56 24.10 25.68 31.49 27.66
ROCE (%) 25.09 24.53 18.46 15.57 11.47
Asset Turnover(x) 1.21 1.22 1.46 1.76 1.62
Sales/Fixed Asset(x) 3.93 3.62 2.91 2.57 2.25
Working Capital/Sales(x) 0.46 0.60 0.85 1.13 1.21
Efficiency Ratios
Fixed Capital/Sales(x) 25.44 27.62 34.37 38.91 44.39
Receivable days 80.68 92.10 65.09 51.46 52.47
Inventory Days 40.74 41.10 47.30 47.12 50.26
Payable days 75.91 88.03 48.44 20.30 31.92
Growth Ratio
Net Sales Growth (%) 22.63 40.21 33.56 38.38 28.64
Core EBITDA Growth (%) 21.89 60.06 28.66 47.00 14.51
EBIT Growth (%) 22.79 62.82 29.89 49.25 12.54
PAT Growth (%) 24.78 61.23 36.34 50.89 17.87
EPS Growth(%) 24.80 50.55 30.92 50.73 -41.06
Financial Stability Ratios
Total Debt/Equity(x) 0.00 0.02 0.44 1.19 1.64
Current Ratio(x) 4.91 4.00 5.02 13.58 12.81
Quick Ratio(x) 4.06 3.46 4.34 12.00 11.44
Interest Cover(x) 468.66 208.94 73.79 44.52 29.20
Total Debt/Mcap(x) 0.00 0.00 0.05 0.11 0.21

KEY FINDINGS

30
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Analysis of Key Ratios:

Current Ratio: This ratio is to ascertain whether a company's short-term

assets (cash, cash equivalents, marketable securities, receivables and inventory) are
readily available to pay off its short-term liabilities (notes payable, current
portion of term debt, payables, accrued expenses and taxes). In theory, the
higher the current ratio, the better is the Company.
Current ratio =Current Assets
Current Liabilities

In this case, the ratio has increased from 4.0 to 4.99. This is due to increase in current
liability.

Quick Ratio
(Cash + AR) / Total Current Liabilities
This is a slightly more conservative measure of liquidity because it uses only
your available cash and accounts receivable in the equation.Also called Acid-Test
Ratio, this is very similar to your current ratio but it includes only those current
assets that can be most readily used to pay bills today: cash and accounts receivable.
The quick ratio excludes inventory, which must first be sold and the cash
collected before it can be used to pay liabilities. It also excludes current assets like
prepaid expenses, which are never converted to cash. They are simply assets you paid
for in advance.
In general, company should try to maintain a quick ratio of 1 to 1, which means you
have $1 worth of cash and accounts receivable for every $1 dollar
of total current liabilities.
In this case, the ratio has increased from 3.46 to 4.06 This is due to increase in

31
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 current liability.

Debt / Equity Ratio: Debt equity ratio has become zero as company has paid off all
the debts. It was 0.02% last year.

Interest Coverage Ratio: Interest Coverage Ratio also shows an upward trend. It
has increased from 208% to 468% during the period from 2008 to 2009. This
is a healthy indicator and evidently illustrates that company will be able to pay
interest which is very miniscule on the secured borrowings very easily even if profits
do not grow at the expected rate.

Working Capital Cycle

Receivable Days:
Days in Period (usually 365) / Sales/Receivables Ratio
Average time in days that your receivables are outstanding. Measures your
control of your credit and collections. Greater the days, greater probability for
delinquencies.
Receivable days are decreased from 92 days to 80 days, shows increasing control
over credit and collections by company.
Payable days:
Days in Period (usually 365) / Sales/Payables Ratio
Average time in days that your Payables are outstanding. Measures your
credibility with suppliers.

Inventory Days:
Days in period (91) / COGS / Inventory Ratio
Average length of time units are in inventory.

32
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 EPS (Earnings per Share): Earnings per share are generally
considered to be the single most important variable in determining
a share's price. It is also a major component of the price-to-earnings valuation
ratio. Earnings per Share have increased from Rs. 48.96 Per share to Rs.61.10 per
share from 2009 to 2010. Due to higher Profit after tax and strong future trends I
feel the EPS will surely continue to increase.

ROE (Return on Equity Capital): The return on equity measures the profitability
of equity funds invested in the firm. It is regarded as a very important measure
because it reflects the productivity of the ownership.
The return on shareholder’s equity is quite good as it has increased from 24.1% to
24.56 % and it shows an upward trend, this has increased due to increase in
the Profits.

ROCE (Return on Capital Employed): ROCE should always be higher than

the rate at which the company borrows; otherwise any increase in borrowing will
reduce shareholders' earnings. It has increased from 24.53% to 25.09 % this shows
that capital employed is optimally used.

P/E (Price Earnings ratio): In general, a stock with a high P/E ratio
suggests that investors are expecting higher earnings growth in the future compared
to the overall market, as investors are paying more for today's earnings in
anticipation of future earnings growth. Hence, as a generalization, stocks with
this characteristic are considered to be growth stocks. Conversely, a stock with a
low P/E ratio suggests that investors have more modest expectations for its future
growth compared to the market as a whole.

33
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Assets Turnover

Net Sales / Net Assets

This ratio measures your productive use of your fixed assets—the amount of
sales generated for every dollar’s worth of assets. It is calculated by dividing
sales in dollars by assets in dollars. Asset turnover measures your company’s
efficiency at using its assets in generating sales or revenue; the higher the number the
better. It also indicates pricing strategy: companies with low profit margins tend to
have high asset turnover; those with high profit margins have low asset
turnover. Largely depreciated fixed assets or a labor-intensive operation may distort
this ratio

34
SUN PHARMACEUTICALS INDUSTRIES LIMITED