Fundamental Analysis:

Cipla is a leading pharmaceutical company in India with a strong and profitable businessmodel.

The company has a well-diversified portfolio, without any overdependence on aparticular

segment. The company owns around 30 manufacturing plants. The manufacturingfacilities are

approved by the major international regulatory agencies including the US FDA,MHRA (UK) and

WHO.It conducts research for developing innovative drug delivery systems for both new and

existing drugs with major focus on new medical devices in the area of respiratory

medicineincluding an inhaler device for insulin.

SHAREHOLDING PATTERN:

Shareholding of Promoter and

Promoter Group(36.83)

Indian(16.05)

Foreign(20.79)

Public Shareholding(63.17)

Institutions(33.30)

Non-Institutions(29.86)

INVESTMENT STRATEGY

Low Risk global strategy-Cipla's strategy for its generics business is to enter into

bulk drug supply arrangements with companies well entrenched in the generic

markets.Cipla has entered into partnerships for 125 products with 8 companies in the US

and astrategic alliance to develop over 50 generic products for the generics

majorTeva/Ivax. The company thus, intends to enter specialty segments with a low-

risk return approach ensuring relatively stable earnings flow.

Anti-asthma and anti-HIV focus to augur well: Cipla enjoys a near dominant positionin

the asthma segment (about 20% of sales). It is one of the few companies globally having

the required technology to manufacture CFC-free inhalers. With CFC inhalersto be

compulsorily phased out by 2010, this segment is expected to see growth in thefuture

Debt to equity and coverage ratios is favorable to minority equity investors

KEY RISKS

An unfavourable court ruling in an ongoing litigation between the Government of India

and Cipla regarding alleged overcharging of certain drugs could potentially

pressurise the Company’s bottom line.

If the cost of raw material keep on increasing due to increased pressure on

Chinesecompanies to move to higher level drugs, companies margin will be hit

drastically.

ECONOMIC ACTIVITIES

The company is presents:

Prescription Drugs

Veterinary Drugs

OTC Bulk

Drugs

Technolol services

The key competitors of the company are:

RECENT DEVELOPMENTS

On 19th

August , 2009 the Delhi High court allowed it to see the generic versionof Bayer’s

cancer drug.

During April 2009, the USFDA raised 9 deviations in the manufacturing process during

inspection of the company’s Bangalore unit. The company has stated that itwould submit

it response to the Regulator within the stipulated time period. On theAdcock Ingram-

Cipla Medpro issue in South Africa, the company has stated that itwould support its

partner (Cipla Medpro) in case of any hostile takeover by Adcock. Cipla Medpro

currently contributes around 7% of the company’s Total Exports and there can be risks

to this contribution in case of any hostile takeover by Adcock

July 2009: Recently ,the Delhi High Court allowed Cipla to manufacture and sellgeneric

version of patented lung cancer drug 'Erlotinid' invented by Swiss Pharmacompany

Hoffman La Roche Ltd

Aug 2009: It also lost Indian government order for Tami flu to Hetero

Dr. Reddy’s Labs

Lupin

Sun Pharma

Glaxosmithkline

FINANCIAL

Mar '11

Mar

'10 Mar '09 Mar '08 Mar '07

Investment Valuation Ratios

Face Value 2.00 2.00 2.00 2.00 2.00

Dividend Per Share 2.80 2.00 2.00 2.00 2.00

Operating Profit Per Share (Rs) 15.96 17.20 16.02 10.96 10.57

Net Operating Profit Per Share (Rs) 78.70 69.82 67.34 54.08 45.83

Free Reserves Per Share (Rs) 80.25 71.54 53.86 46.20 39.52

Bonus in Equity Capital 94.44 94.44 97.55 97.55 97.55

Profitability Ratios

Operating Profit Margin(%) 20.27 24.63 23.78 20.27 23.07

Profit Before Interest And Tax Margin(%) 16.41 21.32 20.52 16.90 19.80

Gross Profit Margin(%) 16.65 21.68 20.88 17.16 24.27

Cash Profit Margin(%) 18.25 21.11 21.75 17.85 21.26

Adjusted Cash Margin(%) 18.25 21.11 21.75 17.85 20.30

Net Profit Margin(%) 14.98 18.97 14.58 16.43 18.41

Adjusted Net Profit Margin(%) 14.98 18.97 14.58 16.43 17.45

Return On Capital Employed(%) 16.22 22.16 22.39 18.17 23.40

Return On Net Worth(%) 14.54 18.31 17.89 18.72 20.70

Adjusted Return on Net Worth(%) 14.25 17.57 23.17 16.85 19.61

Return on Assets Excluding Revaluations 82.25 73.55 55.86 48.20 41.52

Return on Assets Including Revaluations 82.36 73.66 55.97 48.32 41.64

Return on Long Term Funds(%) 17.29 22.16 26.79 18.24 23.45

Liquidity And Solvency Ratios

Current Ratio 1.94 2.17 1.81 2.62 2.65

Quick Ratio 1.56 1.57 1.93 1.88 1.76

Debt Equity Ratio 0.07 -- 0.22 0.15 0.04

Long Term Debt Equity Ratio -- -- 0.02 0.15 0.04

Debt Coverage Ratios

Interest Cover 222.40 57.08 35.92 67.27 112.84

Total Debt to Owners Fund 0.07 0.00 0.22 0.15 0.04

Financial Charges Coverage Ratio 126.22 52.13 25.56 50.81 79.53

Financial Charges Coverage Ratio Post Tax 110.41 45.05 18.78 47.10 70.12

Management Efficiency Ratios

Inventory Turnover Ratio 3.73 4.18 3.79 3.83 3.71

Debtors Turnover Ratio 4.14 3.31 3.24 3.47 3.74

Investments Turnover Ratio 3.73 4.18 3.79 3.83 3.74

Fixed Assets Turnover Ratio 1.61 1.94 1.94 1.91 2.75

Total Assets Turnover Ratio 0.90 0.95 0.99 0.97 1.06

Asset Turnover Ratio 1.61 1.94 1.94 1.91 1.98

Average Raw Material Holding 110.90 113.47 203.30 181.28 200.76

Average Finished Goods Held 43.20 41.38 41.54 37.36 41.94

Number of Days In Working Capital 191.58 190.01 196.07 201.02 179.98

Profit & Loss Account Ratios

Material Cost Composition 48.83 47.94 48.01 51.44 49.26

Imported Composition of Raw Materials Consumed 40.63 43.85 42.63 44.03 42.17

Selling Distribution Cost Composi

tion 6.10 5.82 7.17 6.77 6.34

Expenses as Composition of Total Sales 54.08 54.54 56.55 53.65 52.36

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 27.23 17.31 23.41 25.92 27.22

Dividend Payout Ratio Cash Profit 21.99 15.01 19.58 21.85 23.57

Earning Retention Ratio 72.22 81.97 81.93 71.20 71.28

Cash Earning Retention Ratio 77.65 84.44 84.30 76.14 75.31

AdjustedCash Flow Times 0.38 0.00 0.81 0.76 0.17

Mar

'11 Mar '10 Mar '09 Mar '08 Mar '07

Earnings Per Share 11.96 13.47 9.99 9.02 8.59

Book Value 82.25 73.55 55.86 48.20 41.52

The company’s debt to equity & leverage ratios are very favorable

Company has posted phenomenal sales growth over the period of last 3-4 years

EPS growth has been very low due to equity dilution during the period of 2006-07

Commenting on the road ahead the company, they are looking at 10% top line

andbottom-line growth in FY10, and Operating margins are seen at 23-25%

The net sales for the quarter ended march 09 grew by 14% to Rs. 1235 cr this wasmainly

driven by strong performance in Domestic market and its Formulationssegment in

exports. Others segment (Others include Technology Knowhow/fees andother services)

which grew by 225.1%

SWOT ANALYSIS

STRENGTHS

Ranks #2 in the retail prescription market in India;

18 brands that feature among the top-300 brands;

Large basket of 1,500 formulations; and

Partnered 8 leading generics companies in the US for nearly 125 projects.

Cipla has a voluminous productportfolio containing more than 200brands some of

which are the leadingbrands in their respective category

The company has excellent processR&D skills which are considered to beone of the

best in the country

The Company has excellent distribution network.

WEAKNESSES

Impact of IPR regime.

It is not present in CRAMS and BioPharmaceutical segment which are thebest

projected segment in the industry.

OPPORTUNITIES

Biotherapeutics – A new and promising area;

Agreement with Avesthagen; and

Venturing towards areas of cardiology and anti-cancer.

THREATS

Partnership related; and

Potential de-rating.

STRATEGIC TIE-UPS

Subsidiary in Dubai: Cipla has set up a wholly owned subsidiary, Cipla FZE situated at

Jebel Ai Free Zone in Dubai, United Arab Emirates. This is the part of strategy to

explore the growing markets in middle east countries through exports.

It has a research alliance with a Bangalore-based biotech company Avesthagen, to

develop biotherapeutic products;

Cipla entered agreement with Pentech Pharma of USA for marketing a range of generic

products for American market;

The first phase of the new formulation plant at Baddi, Himachal Pradesh, for the

manufacture of tablets and capsules commenced commercial production in April 2005;

and

Presence in Africa and Europe.

Mayank Gupt

11-MBA-29

11-5941

M.B.A. 3rd Sem.