Sunpharma analysis

EXECUTIVE 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 project an attempt has been made to analyzed 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 study will help us to determine the financial health of a company.

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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 SUN PHARMACEUTICALS INDUSTRIES LIMITED

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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) update released in July 2009, 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. Global Outlook: The deterioration in the global outlook that started in September 2008 continued in

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the second quarter of 2009, although some tentative signs of stabilization have begun to emerge. Reflecting the continued decline, the IMF in its July Update of the World Economic Outlook (WEO) has projected that the global economy will shrink by 1.4 per cent in 2009, a shade more than the contraction of 1.3 per cent projected earlier in April 2009. The global economy is, however, projected to recover and expand by 2.5 per cent in 2010 (Table 1). Projections by other international agencies such as the World Bank also do not hold any promise of recovery in 2009. Table 1: Global GDP Growth (%)

Country/Region

2009

2010

US

(-) 2.6

0.8

UK

(-) 4.2

0.2

Euro Area

(-) 4.8

(-) 0.3

Japan

(-) 6.0

1.7

China

7.5

8.5

India

5.4

6.5

World

(-)1.4

2.5

Source: IMF World Economic Outlook, July 8, 2009. In the US, real GDP declined at an annual rate of 5.5 per cent in Q1 of 2009, driven mainly by a decline in consumption and exports. The IMF’s July WEO Update has projected real GDP of the US to shrink by 2.6 per cent in 2009, a slight improvement from a contraction of 2.8 per cent projected in the April WEO. The main macroeconomic indicators continued to be adverse in Q2 of 2009 with the unemployment rate increasing to 9.5 per cent in June 2009 accompanied by a dip in wage growth, industrial production, capacity utilization and consumer sentiment. SUN PHARMACEUTICALS INDUSTRIES LIMITED

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Retail sales and consumption continued to be weak as households were still engaged in repairing their balance sheets ruptured by the fall in asset prices. The below trend growth is likely to persist for some more time. Consequently, spare capacity and unemployment are expected to rise Domestic Outlook The Indian economy grew by 6.7 per cent in 2008-09 according to the revised estimates of the Central Statistical Organization (CSO) – better than most analysts had expected, but lower than the growth of 9.0 per cent in 2007-08. The deceleration in GDP growth was particularly pronounced during the second half of 2008-09, largely due to the adverse impact of the global economic crisis.

Table 2: Real GDP Growth (%) Activity

Financial Year 200708

200809

Quarterly Growth

Quarterly Growth

Quarterly Growth

Quarterly Growth

Q1 Q2 (Apr-Jun) (Jul-Sep)

Q3 (Oct-Dec)

Q4 (JanMar)

Agriculture 4.9

1.6

3.0

2.7

(-) 0.8

2.7

Industry

7.4

2.6

5.1

4.8

1.6

(-) 0.5

Services

10.8

9.4

10.0

9.8

9.5

8.4

Overall GDP

9.0

6.7

7.8

7.7

5.8

5.8

Source: Central Statistical Organization (CSO). Agriculture The agriculture sector, which recorded an average annual growth rate of 4.9 per cent SUN PHARMACEUTICALS INDUSTRIES LIMITED

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during 2003-08, expanded only by 1.6 per cent during 2008-09. In 2008-09, food grains production was 233.9 million tons, up from 230.8 million tons last year. This was also an all-time high. Allied activities – horticulture, floriculture, forestry, livestock and fisheries – which account for a substantial share in agriculture remained buoyant. However, the production of commercial crops such as major oilseeds, cotton, jute and sugarcane was lower. Looking ahead to the current year, the progress of the south-west monsoon has been slow and halting. By July 22, 2009, monsoon rainfall was 19 per cent below normal in the country as a whole. At a disaggregated level, rainfall was deficient/scanty in 19 of the 36 meteorological subdivisions. While kharif sowing has picked up in July, the delayed monsoon can impact agricultural output. Although the share of agriculture and allied activities in GDP has declined over the years and is currently at 17.5 per cent, good agricultural performance is critical not only because it employs over 55 per cent of the labour force but also for ensuring stability in food prices. Industry Industrial sector growth decelerated significantly to 2.6 per cent in 2008-09 from 8.5 per cent in the previous year due largely to negligible/negative growth during four months in the second half of the year. This pushed down the growth rate of the index of industrial production (IIP) to an abysmally low of 0.4 per cent during the second half of 2008-09 from 5.0 per cent in the first half. During April-May 2009, however, industrial growth turned positive with IIP increasing by 1.9 per cent. While growth in the basic, intermediate and consumer durable goods sectors picked up, the capital goods and consumer non-durable sectors showed negative growth. The core infrastructure sector, with a weight of 26.7 per cent in the IIP, recorded a higher growth of 4.8 per cent during April-June 2009, up from 3.5 per cent in the corresponding period in the previous year. The leading indicators of industrial production, both quantitative and qualitative, suggest that the recent downturn has

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been arrested and a pick-up is on the way forward, albeit with some lag. Services the performance of the services sector during April-May 2009 presents a mixed but predictable picture. Trade-related services such as cargo handled at major sea and airports, as also passengers handled at international terminals continue to show deceleration/negative growth. Domestic activity-related services such as communication and construction are showing signs of upturn.

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 SUN PHARMACEUTICALS INDUSTRIES LIMITED

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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 tieups 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. 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.

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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 markets. We expect more such deals to be signed between generics and innovators for the emerging markets.

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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 SUN PHARMACEUTICALS INDUSTRIES LIMITED

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pipelines for proprietary products which could hit the market in 2012-13.

SWOT ANALYSIS OF PHARMA SECTOR

STRENGTHS: ➢ Cost effective technology

➢ Low healthcare expenditure ➢ Production of duplicate drugs

➢ 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

OPPORTUNITIES ➢ Incredible export potential ➢ Increasing health consciousness ➢ New innovative therapeutic products ➢ Globalization ➢ Drug delivery system management ➢ Increased incomes

WEAKNESSES ➢ Low Indian share in world pharmaceutical market (about 2%) ➢ Lack of strategic planning

➢ Production of generic drugs ➢ Contract manufacturing ➢ Clinical trials & research ➢ Drug molecules

➢ Fragmented capacities ➢ Low R&D investments ➢ Absence of association between institutes and industry SUN PHARMACEUTICALS INDUSTRIES LIMITED

THREATS ➢ Small number of discoveries ➢ Competition from MNCs 11

➢ Transformation of process patent to product patent (TRIPS) ➢ Outdated Sales and marketing

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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.

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THE FUTURE OF INDIAN PHARMACEUTICAL SECTOR IS VERY BRIGHT BECAUSE OF THE FOLLOWING FACTORS : ➢ Clinical trials in India cost US$ 25 million each, whereas in US they cost between US$ 300-350 million each. ➢ Indian pharmaceutical companies are spending 30-50% less on custom

synthesis services as compared to its global costs. ➢ In India investigational new drug stage costs around US$ 10-15 million, which is almost 1/10th of its cost in US (US$ 100-150million).

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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

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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 SUN PHARMACEUTICALS INDUSTRIES LIMITED

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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 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

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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 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. The Differences Charts vs. Financial Statements At the most basic level, a technical analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements. By looking at the balance sheet, cash flow statement and income statement, a fundamental analyst tries to determine a company's value. In financial terms, an analyst attempts to measure a company's intrinsic value. In this approach, investment SUN PHARMACEUTICALS INDUSTRIES LIMITED

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decisions are fairly easy to make - if the price of a stock trades below its intrinsic value, it's a good investment. Technical traders, on the other hand, believe there is no reason to analyze a company's fundamentals because these are all accounted for in the stock's price. Technicians believe that all the information they need about a stock can be found in its charts. Time Horizon Fundamental analysis takes a relatively long-term approach to analyzing the market compared to technical analysis. While technical analysis can be used on a timeframe of weeks, days or even minutes, fundamental analysis often looks at data over a number of years. The different timeframes that these two approaches use is a result of the nature of the investing style to which they each adhere. It can take a long time for a company's value to be reflected in the market, so when a fundamental analyst estimates intrinsic value, a gain is not realized until the stock's market price rises to its "correct" value. This type of investing is called value investing and assumes that the short-term market is wrong, but that the price of a particular stock will correct itself over the long run. This "long run" can represent a timeframe of as long as several years, in some cases. Furthermore, the numbers that a fundamentalist analyzes are only released over long periods of time. Financial statements are filed quarterly and changes in earnings per share don't emerge on a daily basis like price and volume information. Also remember that fundamentals are the actual characteristics of a business. New management can't implement sweeping changes overnight and it takes time to create new products, marketing campaigns, supply chains, etc. Part of the reason that fundamental analysts use a long-term timeframe, therefore, is because the data they

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use to analyze a stock is generated much more slowly than the price and volume data used by technical analysts. Trading Versus Investing: Not only is technical analysis more short term in nature that fundamental analysis, but the goals of a purchase (or sale) of a stock are usually different for each approach. In general, technical analysis is used for a trade, whereas fundamental analysis is used to make an investment. Investors buy assets they believe can increase in value, while traders buy assets they believe they can sell to somebody else at a greater price. The line between a trade and an investment can be blurry, but it does characterize a difference between the two schools.

The Critics Some critics see technical analysis as a form of black magic. Don't be surprised to see them question the validity of the discipline to the point where they mock its supporters. In fact, technical analysis has only recently begun to enjoy some mainstream credibility. While most analysts on Wall Street focus on the fundamental side, just about any major brokerage now employs technical analysts as well. EFFICIENT MARKET THEORY: Much of the criticism of technical analysis has its roots in academic theory specifically the efficient market hypothesis (EMH). This theory says that the market's price is always the correct one - any past trading information is already reflected in the price of the stock and, therefore, any analysis to find undervalued securities is useless. There are three versions of EMH. In the first, called weak form efficiency, all past price information is already included in the current price. According to weak form SUN PHARMACEUTICALS INDUSTRIES LIMITED

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efficiency, technical analysis can't predict future movements because all past information has already been accounted for and, therefore, analyzing the stock's past price movements will provide no insight into its future movements. In the second, semi-strong form efficiency, fundamental analysis is also claimed to be of little use in finding investment opportunities. The third is strong form efficiency, which states that all information in the market is accounted for in a stock's price and neither technical nor fundamental analysis can provide investors with an edge. There is no right answer as to who is correct. There are arguments to be made on both sides and, therefore, it's up to you to do the homework and determine your own philosophy. Can They Co-Exist? Although technical analysis and fundamental analysis are seen by many as polar opposites - the oil and water of investing - many market participants have experienced great success by combining the two. For example, some fundamental analysts use technical analysis techniques to figure out the best time to enter into an undervalued security. Oftentimes, this situation occurs when the security is severely oversold. By timing entry into a security, the gains on the investment can be greatly improved. Alternatively, some technical traders might look at fundamentals to add strength to a technical signal. For example, if a sell signal is given through technical patterns and indicators, a technical trader might look to reaffirm his or her decision by looking at some key fundamental data. Oftentimes, having both the fundamentals and technicals on your side can provide the best-case scenario for a trade. While mixing some of the components of technical and fundamental analysis is not

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well received by the most devoted groups in each school, there are certainly benefits to at least understanding both schools of thought. Here I have done only fundamental analysis of Sun pharmaceuticals ltd.

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 SUN PHARMACEUTICALS INDUSTRIES LIMITED

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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 : SUN PHARMACEUTICALS INDUSTRIES LIMITED

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Acquisition of Tamil Nadu Dadha Pharmaceuticals Ltd.

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 nonsterile sections have been approved by the USFDA.

2005: SUN PHARMACEUTICALS INDUSTRIES LIMITED

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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 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. SUN PHARMACEUTICALS INDUSTRIES LIMITED

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Fundamental Analysis: SHAREHOLDING PATTERN AT SUN PHARHARMACEUTICALS LTD. AS ON 31ST MARCH, 2009 : 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

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Gragh: 1

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. 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.

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Graph 2:

SUN PHARMA PERFORMANCE FROM JUN 04 TO JUN 09 : Graph 3:

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SUNPHARMA

STOCK PRICE

3000 2500 2000 1500

Series1

1000 500 Apr-08

Apr-07

Apr-06

Apr-05

Apr-04

Apr-03

Apr-02

Apr-01

Apr-00

Apr-99

Apr-98

0

MONTH

Reason for stock price hike in June 1999 to Jan 20001) 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 Global, the prestigious international magazine recently rated Sun Pharma among the best 200 global companies for 2002.

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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 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

SUN PHARMACEUTICALS INDUSTRIES LIMITED

30

this area which would be a key differentiator.

Graph 4:

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 180day 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. SUN PHARMACEUTICALS INDUSTRIES LIMITED

31

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. TARO ACQUISITION STILL PENDING: ➢ Sun has been unable to close the proposed US$ 454mn acquisition of Taro announced in May 2007. There has been a series of allegations/counter allegations from both the parties, but the issues remain unresolved. After the failure of both parties to settle out of court, the verdict will be presented by the Supreme Court of Israel. Sun had a favourable verdict from the lower court, but it was challenged by Taro in the Supreme Court. Sun has so far infused US$ 105mn for a 36% stake and 22% voting rights Table 4:

ACQUIRES ASSETS WITH AN AIM TO GENERATE HIGH ROI

SUN PHARMACEUTICALS INDUSTRIES LIMITED

32

➢ 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. KEY RISKS TO SUN PHARMAEUTICALS: DELAY IN ANDA approvals for launch in US MARKET: ➢ Since Coraco’s facility faces a warning letter , its 25 pending ANDAs are likely to be considered for approvals. Sun’s ANDA (83 pending approvals) are therefore crucial for driving growth in US. If the ANDA approvals are delayed , the economic benefit may not be realized at its highest potential as the dalay may cause company’s approval to be behind the competition. Further negative news flow on Coraco,s US FDA status ➢ As Coraco’s own manufactured products have been seized by US FDA , it wil not

able to distribute these products in the US till the the facility does not meet the US FDA cGMP requirements. While our US numbers for Sun Pharma are conservative , any further negative news from US FDA could have asignificany negative fallout.

SUN PHARMACEUTICALS INDUSTRIES LIMITED

33

AUDITED TARO NUMBERS ARE AT SIGNIFICANT DEVIATION: ➢ Taro is in process of restating its historic financials . Its current financials are baesd on the management estimates and may change when audited numbers are reported.If these numbers are at a significant deviation, particularly on the lower side , it may result in a drag in probability of Sun’s operations.

Financial Analysis: Table 5 Profit and Loss Particulars No. of Months Gross Sales Sales Job Work / Contract receipts Prcessing Charges / Service Income Others operational income Less :Inter divisional transfers Less: Sales Returns Less: Excise Net Sales EXPENDITURE : Increase/Decrease in Stock Opening Balances

Rs. In millions Mar 2009 12 39254.50 28336.50

Mar 2008 Mar 2007 Mar 2006 Mar 2005 12 12 12 12 32107.60 23027.50 17429.20 12638.60 24273.50 17221.30 13530.10 10443.50

0

0

0

0

0

0

0

0

0

0

10918.00

7834.10

5806.20

3899.10

2195.10

0

0

0

0

0

0 639.00 38615.50

0 617.10 31490.50

0 568.60 22458.90

0 613.70 16815.50

0 487.30 12151.30

-387.00

-572.30

4.50

-286.80

SUN PHARMACEUTICALS INDUSTRIES LIMITED

-202.50

34

Work In Progress Finished Goods Shares, Units and Bonds Other Less : Work In Progress Finished Goods Shares, Units and Bonds Other Raw Materials Consumed Opening Raw Materials Purchases Raw Materials Closing Raw Materials Other Direct Purchases / Brought in cost Others Power & Fuel Cost Employee Cost Other Manufacturing Expenses General and Administration Expenses Selling and Distribution Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalized Total Expenditure Operating Profit (Excl OI) Other Income Interest Dividend Profits on sale of FA Profits on sale of Investments Forex Exchange Gains Other Operating Profit Interest PBDT Depreciation Profit Before Taxation & Exceptional Items

1278.80 805.40 0 0.00

1045.10 865.30 0 0.00

908.80 587.50 0 27.10

489.70 434.30 0 0.00

428.60 499.90 0 0.00

1357.10 964.90 0 49.00 18974.40 1489.20 6835.20 2056.70

1278.80 805.40 0 28.70 15441.20 1296.00 6247.50 1680.50

1045.10 865.30 0 0.00 11993.90 1066.40 5139.10 1296.00

908.80 587.50 0 0.00 8881.30 907.80 9039.90 1066.40

489.70 434.30 0 0.00 5559.40 685.40 5781.80 907.80

12706.70

9578.20

7084.40

0

0

0.00 504.40 1448.40

0.00 373.60 1202.00

0.00 310.90 989.20

0.00 255.50 820.10

0.00 144.80 827.80

2475.70

1938.50

1991.20

1524.80

620.60

546.50

886.00

699.50

489.50

646.20

3052.30

1898.00

1430.50

1207.70

721.30

179.10

146.80

171.00

158.90

380.70

0

0

0

0

0

26894.00 11721.50 1848.90 1186.60 0 0

21683.60 9806.90 1326.80 1119.10 0 0

17199.20 5259.70 1696.40 1123.00 13.80 110.40

12765.50 4050.00 1356.40 943.00 0 0.20

8905.30 3246.00 431.80 117.60 0 1.60

263.70

129.50

52.00

109.30

68.50

0 398.60 13570.40 27.70 13542.70 588.60

0 78.20 11133.70 50.60 11083.10 561.10

0 397.20 6956.10 88.00 6868.10 462.70

0 303.90 5406.40 112.30 5294.10 407.30

0 244.10 3677.80 114.70 3563.10 328.30

12954.10

10522.00

6405.40

4886.80

3234.80

SUN PHARMACEUTICALS INDUSTRIES LIMITED

35

Exceptional Income / Expenses Profit Before Tax Provision for Tax Current Income Tax Deferred Tax Fringe Benefit tax Others Profits After Tax Appropriations General Reserve Proposed Equity Dividend Preference Dividend Corporate Dividend Tax Statutory Reserve Other Appropriation Profit & Loss Balance C/F Equity Dividend % Earnings Per Share Book Value per share

Balance sheet :

0

0

0

0

0

12954.10 301.20 241.00 44.80 15.40 0.00 12652.90 23940.80 0 2847.90 0 484.00 0 -117.00 16225.90 275.00 61.10 248.72

10522.00 381.60 330.90 36.20 14.50 0.00 10140.40 16848.80 0 2174.70 0.50 372.00 0 13.70 11287.90 210.00 48.96 203.15

6405.40 116.10 56.30 48.80 11.00 0.00 6289.30 10192.00 0 1300.10 0.80 182.50 0 0.20 6708.40 135.00 32.52 126.58

4886.80 273.90 73.80 191.40 8.70 0.00 4612.90 7207.40 0 1023.00 0.80 143.60 0 136.80 3903.20 110.00 24.84 78.80

3234.80 177.70 65.30 112.40 0 0.00 3057.10 4964.70 0 695.70 0.80 99.10 0 74.60 2594.50 75.00 16.48 59.51

table 6 :

Particulars SOURCES OF FUNDS Share Capital Equity - Paid Up Adjustments to Equitys Preference Capital Paid Up Unclassified Shares Paid Up Face Value Total Reserve Securities Premium Capital Reserves Profit & Loss Account Balance General Reserves Debenture Redemption

Rs. In Million Mar 2009

Mar 2008

Mar 2007

Mar 2006

Mar 2005

1035.60 1035.60 0

1035.60 1035.60 0

980.70 967.00 0

942.70 928.70 0

941.60 927.60 0

0.00

0.00

13.70

14.00

14.00

0

0

0

0

0

5.00 50478.60 15099.10 259.10

5.00 41040.60 15099.10 259.10

5.00 23514.20 5165.90 259.10

5.00 13706.70 156.50 259.10

5.00 10112.80 0 267.20

16225.90

11287.90

6708.40

3903.20

2594.50

18740.00 0

14240.00 0

11240.00 0

9247.30 0

7110.60 0

SUN PHARMACEUTICALS INDUSTRIES LIMITED

36

Reserve Capital Redemption Reserve Exchange Fluctuation reserve Statutory Reserves Other Reserves Revaluation reserve Shareholder's Funds Secured Loans Non Convertible Debentures Term Loans - Banks Term Loans Institutions Working Capital Loans - Bank Deferred Credit Hire Purchase / Financial Lease Other Secured Unsecured Loans Fixed Deposits - Public Commercial Paper Deferred Tax Loan Other Unsecured Loan Total Debts Total Liabilities APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation

154.50

154.50

140.80

140.60

140.50

0

0

0

0

0

0 0.00 0.00 51514.20 236.00

0 0.00 0.00 42076.20 228.80

0 0.00 0.00 24494.90 203.90

0 0.00 0.00 14649.40 182.30

0 0.00 0.00 11054.50 139.20

0

0

0

0

0

236.00

228.80

203.90

182.30

139.20

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0

0

0

0

0

0

0

0

0

0

0.00 0 0.00 0 0 0.00 236.00 51750.20

0.00 796.40 0.00 0 0 796.40 1025.20 43101.40

0.00 10477.60 0.00 0 0 10477.60 10681.50 35176.40

0.00 17275.90 0.00 0 0 17275.90 17458.20 32107.60

0.00 18007.30 306.20 0 2.40 17698.70 18146.50 29201.00

10619.00

9350.30

8387.00

7442.60

6120.50

3626.40

3049.90

2494.10

2080.70

1729.00

6992.60

6300.40

5892.90

5361.90

4391.50

759.50

334.30

319.10

308.00

479.40

0

0

0

0

0

26945.90

18435.70

10574.90

7796.20

9852.40

Quoted Equity

0.00

0.00

0.00

0.00

0.00

Unquoted Equity

1.00

3.10

3.10

3.60

3.10

Net Block Capital Work in Progress Pre-operative Expenses pending Investments

SUN PHARMACEUTICALS INDUSTRIES LIMITED

37

Units Other Investments Market Value of Quoted Investements Current Assets, Loans & Advances Inventories

8488.50 18456.40

1015.00 17417.60

1180.00 9391.80

1250.00 6542.60

6162.00 3687.30

1500.40

6031.90

4440.60

4905.30

3041.70

4867.40

3896.30

3333.80

2634.10

1866.20

Raw Materials

2056.70

1489.20

1155.80

950.50

829.70

Work-in Progress Finished Goods Stores and Spare Other Inventory Sundry Debtors Debtors more than Six months Debtors Others Less : Provisions for Doubtful Debts Cash and Bank Other Current Assets Loans and Advances Total Current Assets Less : C. L. and Provisions Current Liabilities

1357.10 964.90 133.50 355.20 6800.30

1278.80 805.40 131.60 191.30 10554.40

1045.10 865.30 127.40 140.20 5648.70

908.80 587.50 71.40 115.90 2564.70

489.70 434.30 34.40 78.10 2349.70

620.80

589.70

421.80

427.20

259.30

6243.10

10055.80

5291.50

2172.40

2111.80

64.60

34.90

21.40

63.60

91.10

12654.70 512.60 3286.50 28121.50

10724.20 257.80 3618.70 29051.40

12026.80 327.00 3086.80 24423.10

12308.20 175.50 4890.20 22572.70

8900.30 45.00 4384.10 17545.30

5730.90

7263.10

4863.40

1661.80

1370.10

Sundry Creditors

4777.90

6464.80

3759.70

769.60

642.30

Acceptances Bank Overdraft / Short term credit Unclaimed Dividend Interest Accrued But Not Due Other Liabilities Provisions Proposed Equity Dividend Provision for Corporate Dividend Tax Provision for Tax Other Provisions Total Current Liabilities

0

0

0

0

0

0

0

0

0

0

19.50

14.40

29.50

7.40

6.20

0

17.60

20.80

33.10

23.70

933.50 4164.20

766.30 2627.90

1053.40 77.00

851.70 1225.00

697.90 844.50

2847.90

2174.70

0

1023.00

695.70

484.00

369.60

0

143.60

97.70

743.80 88.50 9895.10

1.00 82.60 9891.00

0.80 76.20 4940.40

0 58.40 2886.80

0 51.10 2214.60

SUN PHARMACEUTICALS INDUSTRIES LIMITED

38

Net Current Assets Deferred Tax Assets

18226.40 58.30

19160.40 64.80

19482.70 44.40

19685.90 26.80

15330.70 26.40

Deferred Tax Liability

1232.50

1194.20

1137.60

1071.20

879.40

-1174.20

-1129.40

-1093.20

-1044.40

-853.00

51750.20 1022.20

43101.40 731.50

35176.40 1113.10

32107.60 686.80

29201.00 567.00

Deferred Tax Assets / Liabilities Total Assets Contingent Liabilities

➢ Financial Analysis:

➢ Sun Pharma reported 22 % increase on Y-o-Y basis from March 2008 to March 2009. ➢ Company reported increase in PAT by 24.7 % as compared to last year. ➢ Due to increased PAT and no. of shareholders remaining same EPS has

increased by nearly 25 % on Y-o-Y basis from March 2008- March 2009 ➢ 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.

SUN PHARMACEUTICALS INDUSTRIES LIMITED

39

Cash Flow Statement: Table 7 Particulars Profit Before Tax Adjustment Depreciation Impairment Interest Expeses Profit/Loss on sale of Fixed Assets Profit/Loss on sale of Investments Dividend Received Interest Income Diminution in the value / Write off of Investments Transferred from Revaluation Reserve Effect of Exchange Rate Change Net Prior Year Adjustments Provision & Written Off Excess of cost over fair value of investments Taxes Paid Taxes refunded

SUN PHARMACEUTICALS INDUSTRIES LIMITED

(Rs.in Millions)

Mar 2009 12954.00 -1413.50 588.50 0 27.70 5.60 -263.70 0 -1187.30

Mar 2008 Mar 2007 Mar 2006 Mar 2005 10522.00 6405.40 4886.80 3234.80 -197.10 -969.20 -590.30 233.20 561.10 462.70 407.30 328.30 0 0 0 0 50.60 88.00 112.30 114.80 1.00 -110.20 0.60 6.70 -129.50 -52.00 -109.30 -68.50 0 -13.80 0 0 -1119.60 -1123.30 -943.50 -219.50

0

0

0

0

0

0 -621.80 0 28.00

0 418.70 0 -5.80

0 -267.20 0 15.30

0 -91.60 0 12.40

0 15.30 0 39.00

0

0

0

0

0

0 0

0 0

0 0

0 0

0 0

40

Baddebts irrecoverables written off Provision for doubtful debts & advances Misc. Expenses written off Other Adjustments Changes In working Capital Trade & Other receivables Inventories Loans & Advances Investments Trade & Other payables Other Cash Flow after changes in Working Capital Interest Paid Tax Paid Other Direct Expenses paid Extra & Other Item Cash Flow from Operating Activites Cash Flow from Investing Activities Purchase of Fixed Assets Sale of Fixed Assets Profit/Loss on sale of Fixed Assets Profit/Loss on sale of Investments Purchase of Investment Sale of Investments Investment in Subsidiaries Dividend Income Interest Income Increase/ Decrease in Loans Loans & advances given to subsidiaries / partnership firms etc. Advances for capital expenditure Intercorporate deposits Other Investment Activities Cash Flow from Financing Activites Increase / (Decrease) in Loan Funds Proceeds from Long Term Borrowings Repayment of Long Term Borrowings Proceeds from Debenture / Bonds Repayment of Debenture / Bonds Short Term Loans SUN PHARMACEUTICALS INDUSTRIES LIMITED

9.50

0

0

21.60

19.00

0

26.40

31.30

0

0

0 0 1075.50 3609.40 -971.10 0 0 -1562.80 0

0 0

0 0 -3612.00 -776.00 -5715.00 -3064.90 -562.50 -699.70 0 0 0 0 2665.50 2988.60 0 0

0 -0.10 -1034.70 -626.20 -767.90 0 0 359.40 0

0 -1.90 -1170.80 -1071.60 -251.70 0 0 152.50 0

6712.90 4660.20

3261.80

2297.20

0 153.50 0 0 3108.30 1607.60 -1241.50 17.60 0 0

0 99.10 0 0 2198.10 -8634.40 -1275.20 37.00 0 0

12616.00 0 -8.90 0 0 12624.90 -6603.70 -1739.90 47.60 0 0 62945.10 56828.30 0 0 844.90 0

0 451.60 0 0 6261.30 -7434.90 -991.60 2.10 0 0

0 154.60 0 0 4505.60 -1125.80 -1407.80 188.50 0 0

29934.30 0 0 1044.00 0

18431.40 0 13.80 1076.30 0

21989.50 0 0 652.40 0

13517.60 0 0 125.70 0

0

0

0

0

0

0 360.50 0 -3256.70 -796.40 7.20 0 0 0 0

0 486.70 -244.90 -60.60 24.90 0 0 0 0 0

0 1735.80 -5.10 -3604.80 -887.90 0 0 0 0 0

0 -100.60 0 -1308.00 42.90 0 0 0 -136.70 -308.80

0 -3324.90 0 14578.90 -66.60 0 0 16015.80 -125.60 -410.30

-37665.50 -21158.70 -19709.80 -17714.60

41

Increase / (Decrease) in Preference Capital Proceeds from Prefernce Shares Capital Redemtion of Prefernce Shares Capital proceeds from Shares Warrants Proceeds from Issue of Equity Share Capital Buy Back of Equity Shares Capital Equity Dividend Paid Preference Dividend Interest Paid Changes in working capital borrowings Loans (to) / from subsidiaries Net inc/dec in cash / Export credit facilities and other short term loans Income tax on dividend paid Expenses on issue of shares Other Financial Activities Net Cash Inflow / Outflow Opening Cash & Cash Equivalents Cash & Cash Equivalent on Amalgamation / Take over / Merger Cash & Cash Equivalent of Subsidiaries under liquidations Effect of Foreign Exchange Fluctuations Closing Cash & Cash Equivalent

0

0

0

0

0

0

0

0

0

0

0 0

-13.70 0

-0.20 0

-0.10 0

-140.50 0

0

0

0

0

0

0 -2069.60 0 -45.30 0 0

0 -18.00 0 -53.80 0 0

0 -2628.70 0 -88.00 0 0

0 -793.00 0 -112.30 0 0

0 -624.70 0 -69.20 0 0

0

0

0

0

0

-352.60 0 0 2764.50 9773.10

0 0 0 -1234.20 12084.80

0 0 0 -225.00 12309.80

0 0 0 3407.90 8900.30

0 0 0 8142.60 757.50

0

0

0

0

0.20

0

0

0

0

0

0

0

0

0

0

12537.60

10850.60 12084.80 12308.20 8900.30

➢ 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.

SUN PHARMACEUTICALS INDUSTRIES LIMITED

42

➢ 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.

SUN PHARMACEUTICALS INDUSTRIES LIMITED

43

Ratio:

Table 8:

Rs.

In Millions Par Ope ticu rati Ear lars ona ning DP sl & S(R Boo Fin Per ks) PE anci Sha NA R(x Per al re )V/S for RO Rat (Rs) hare ma A RO ios (Rs) nce (%) E RO Rat (%) CE Ass ios (%) et Sale Tur s/Fi Wor nov xed king Effi er(x Ass Cap cien Fixe )ital/ et(x dcy Rec )Inve Sale Rat Cap eiva s(x) ios ital/ ble ntor Pay Sale day y able Gro s(x) sNet Day day wth sCor Rat Sale io es EBI Gro EBI T PA wth TD Gro T EPS (%) A wth Gro Fin Gro (%) wth anci Tot wth (%) al Cur (%) Sta Deb rent Qui bilit t/Eq Rati ck Inte y uity o(x) Rati rest Tot Rat (x) o(x) Cov al ios er(x Deb

Ma

Ma

Ma

Ma

Ma

r 20 61.1 0913.7 0 5248. 72 18.2 1

r 20 48.9 0810.5 6 0203. 15 25.1 5

r 20 32.5 07 2 6.75

r 20 24.8 06 4 5.50

r 20 16.4 05 8 3.75

126. 58 32.4 1

78.8 034.8 8

59.5 128.6 0

24.4 524.5 6 25.0 91.21

23.5 324.1 0 24.5 31.22

17.8 825.6 8 18.4 61.46

14.3 731.4 9 15.5 71.76

10.4 727.6 6 11.4 71.62

3.93 0.46

3.62 0.60

2.91 0.85

2.57 1.13

2.25 1.21

25.4 4 80.6 840.7 475.9 1

27.6 2 92.1 041.1 088.0 3

34.3 7 65.0 947.3 048.4 4

38.9 1 51.4 647.1 220.3 0

44.3 9 52.4 750.2 631.9 2

22.6 3 21.8 922.7 924.7 824.8 0

40.2 1 60.0 662.8 261.2 350.5 5

33.5 6 28.6 629.8 936.3 430.9 2

38.3 8 47.0 049.2 550.8 950.7 3

0.00 4.91 4.06 468. 66 0.00

0.02 4.00 3.46 208. 94 0.00

0.44 5.02 4.34 73.7 9 0.05

1.19 13.5 8 12.0 044.5 20.11

28.6 4 14.5 112.5 417.8 741.0 61.64 12.8 1 11.4 429.2 00.21

) t/M cap( x)

KEY FINDINGS SUN PHARMACEUTICALS INDUSTRIES LIMITED

44

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. 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

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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 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 SUN PHARMACEUTICALS INDUSTRIES LIMITED

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Average length of time units are in inventory. 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 2008 to 2009. 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.

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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

KEY FINDINGS AT SUN PHARMACEUTICALS: Sustainable competitive advantage: Most linear cost structure in the industry, strong product filings in key markets, which includes a range of complex products. Financial structure : Sun Pharma is a debt-free company Earnings visibility : Likely to improve as more limited competition products are launched and Caraco’s warning letter status is withdrawn by the US FDA. Future event triggers: Launch of limited competition products in the US and

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withdrawal of Caraco’s warning letter by the US FDA Expected price momentum: Stock could remain weak in the near term till the time clarity emerges on resumption of Caraco operations

OBSERVATION OF THE STUDY ➢

From the Above analysis it is viable to hold the shares of Sun

Pharmaceuticals Industries Ltd for Short-run. If planning for Long-run you can buy the shares. ➢

Consistency in domestic market share to be maintained. Sun continues to

gain market share in domestic market through new launches and and strong doctor SUN PHARMACEUTICALS INDUSTRIES LIMITED

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coverage despite having a high base and non recurring sales in Q4FY09 ➢

Difficult to manufacture generics ensure generics ensure continuing cash

flows beyond the limited period: sun has been able to identify products which are difficult to manufacture and enjoy limited competition for a significant period after the exclusivity has got over. Generic Protonix and Ethyol are two such products currently in the market while the sun waiting approval for generic Effexor XR, a US$ 2.6 bn opportunity with two competing players. ➢

However there are three main obstacles in the way of Successful analysis:

inadequacies or incorrectness of data, future uncertainties, and irrational market behavior. This may prove my analysis wrong.

ABBREVIATION PPP- Purchasing Power Parity. GDP- Gross Domestic Product. NCE- New Chemical Entity. FDA- Foods and Drugs Administration. SUN PHARMACEUTICALS INDUSTRIES LIMITED

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ANDA- Abbreviated New Drug Application. NDDS- Novel Drug Delivery System. DMF- Drug Master File. DPCO- Drug Price Control Order. CRAMS- Contract Manufacturing and Research CRO- Clinical Research Outsourcing. OTC- Over the Counter. NPPA- National Pharmaceutical Pricing Authority. R&D- Research and Development. NDDR- New Drug Discovery Research.

BIBLIOGHRAPHY Book: Title: Investment Analysis and Portfolio Management SUN PHARMACEUTICALS INDUSTRIES LIMITED

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Author: Prasanna Chandra Publisher: Tata McGraw Hill Publication. (2ndedition) Magazines/Journals: Title: Indian Industry – A Monthly Review Date of issue: June, 2009 Publisher: ICFAI University Press Websites: www.sunpharmaceuticals.com www.myiris.com www.equitymaster.com www.jgsfinancial.com www.investopedia.com www.businessworld.com www.rbi.org.in www.nseindia.com www.ibef.org www.businessstandard.com www.timesofindia.com

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