Industrial Presentation on:

By:
Swapnil Kale
MBA-A-1(17)
Contents:

1. Company History
2. Company Profile
3. Board of Directors & Offices
4. Organizational Structure
5. Products
6. Exports
7. Marketing Strategy
8. Competitors
9. Market Conditions
10. Recent News
1. Company History:
Khwaja Abdul Hamied, the founder of Cipla, was born on
October 31, 1898. In 1935, he set up The Chemical, Industrial & Pharmaceutical
Laboratories, which came to be popularly known as Cipla. He gave the company all his
patent and proprietary formulas for several drugs and medicines, without charging any
royalty. On August 17, 1935, Cipla was registered as a public limited company with an
authorized capital of Rs 6 lacs. The search for suitable premises ended at 289, Belasis Road
(the present corporate office) where a small bungalow with a few rooms was taken on lease
for 20 years for Rs 350 a month. Cipla was officially opened on September 22, 1937 when
the first products were ready for the market. July 4, 1939 was a red-letter day for Cipla, when
the Father of the Nation, Mahatma Gandhi, honoured the factory with a visit. He was
"delighted to visit this Indian enterprise", he noted later. From the time Cipla came to the aid
of the nation gasping for essential medicines during the Second World War, the company has
been among the leaders in the pharmaceutical industry in India. On October 31, 1939, the
books showed an all time high loss of Rs 67,935. That was the last time the company ever
recorded a deficit. In 1942, Dr Hamied's blueprint for a technical industrial research institute
was accepted by the government and led to the birth of the Council of Scientific and
Industrial Research (CSIR), which is today the apex research body in the country. In 1944,
the company bought the premises at Bombay Central and decided to put up a "first class
modern pharmaceutical works and laboratory." It was also decided to acquire land and
buildings at Vikhroli. With severe import restrictions hampering production, the company
decided to commence manufacturing the basic chemicals required for pharmaceuticals. In
1946, Cipla's product for hypertension, Serpinoid, was exported to the American Roland
Corporation, to the tune of Rs 8 lacs. Five years later, the company entered into an agreement
with a Swiss firm for manufacturing foromycene. Dr Yusuf Hamied, the founder's son,
returned with a doctorate in chemistry from Cambridge and joined Cipla as an officer in
charge of research and development in 1960. In 1961, the Vikhroli factory started
manufacturing diosgenin. This heralded the manufacture of several steroids and hormones
derived from diosgenin.

2. Company Profile:
Cipla is based in India’s commercial capital Mumbai, The
Chemical, Industrial & Pharmaceutical Laboratories. Today, Cipla is a leading player in anti-
infective and anti-asthmatic formulations. The company also specializes in the manufacturing
of steroids and hormones. Cipla manufactured ampicillin for the first time in the country in
1968. In 1983, Cipla developed two anticancer drugs, vinblastine and vincristine from the
common garden plant Vinca rosea in association with the National Chemical Laboratory. The
company pioneered the manufacture of the antiretroviral drug, zidovudine, in technological
collaboration with Indian Institute of Chemical Technology in 1993. In 1997 Cipla became
the first company in the world by launching transparent Rotahaler, a dry powder inhaler
device. In 1998 the company launched lamivudine, and became one of the few companies in
the world to offer all three component drugs of retroviral combination therapy (zidovudine
and stavudine already launched).Cipla received clearance from the Drugs Controller General
of India to manufacture and market the country's first non-nucleoside reverse transcriptase
inhibitor (NNRTI), nevirapine, for the treatment of AIDS. Cipla Ltd became India’s second
largest pharmaceutical, edged out the multinational giant GlaxoSmithKline which was
reigning supreme in the country for long, in terms of drug sales last year. Consistently
maintaining a fast-track growth momentum, Cipla has registered an 80-percent jump in net
profit for the quarter ended on March 31 2006, driven by growth in domestic sales and
exports. In the fourth quarter, Cipla posted a net profit of 1.90 billion rupees. Net sales grew
63 percent to 8.7 billion rupees. Cipla's exports in the quarter grew 63.7 percent while
domestic sales rose 56.4 percent. Cipla anticipates 15 to 20 percent growth in this year.
Cipla's R&D division focuses on the development of new products and new drug delivery
systems across a range of therapies. The company is spending over 4 per cent of its total
turnover on R&D activities. The company supplies drugs to treat over 2 lac HIV-positive
patients worldwide. The company has also been among the major suppliers of anti-malarial
drugs and drugs for schistosomiasis to international markets.

Business Overview
The present businesses of Cipla can be broadly classified into:
Domestic branded formulation sales (74% of total sales; 19-20% operating profit margin)
Domestic unbranded formulation sales (7% of total sales; over 10% operating profit margin)
Exports (19% of total sales; around 38-40% operating profit margin). Breakup of exports is
as follows:

Europe (17%), US (30%), Africa (34%), Middle East (8%) and Australia (11%).
Cipla has been relatively low profile on its R&D initiatives compared to the domestic peers,
all of whom have set their sights on discovering new chemical entities (NCEs). But lately,
R&D spend of Cipla has increased by 25% to Rs. 300 mn (4% of sales) and the company has
an R&D team of 200 people. In future the R&D expenditure is expected to grow at a faster
pace compared to sales and might rise to over 5% of sales. The business environment for
Cipla has become highly competitive in the last few years. The major factors affecting Cipla
are as follows:
New Drug R&D costs are prohibitive, which has made MNC’s to spread their R&D costs
through Mergers / Acquisitions.
In Indian Pharmaceutical Sector prices of over 60% of the Drugs/Formulations is controlled
by the government through DPCO (Drug Price Control Order). For Cipla DPCO coverage is
around 55% Low entry barriers in the bulk drugs market has led to a situation of over-
capacity, which has made major domestic players, shift their focus towards formulations
segment. As a result Cipla, which is earning nearly 80-85 percent of its sales from
formulations, is facing increasing competition. With the focus on post 2005 era, MNC’s are
strengthening their position in India through marketing tie-ups with local majors and fully
owned subsidiaries. This can lead to even higher degree of competition.
Shareholding Pattern (As on 30/06/2009):
The company has an equity capital base of Rs. 60.2 cr. and the face value of share is Rs. 2
The market capitalization as on Sept 04, 2009 was Rs. 20738.36 cr. The promoters are
holding 39.38% stake in the company. The free float available in the market is 60.62%.

Share holding 30/06/2009 31/03/2009 31/12/2008

pattern as on :
No. Of % No. Of % No. Of %
Shares Holding Shares Holding Shares Holding
Promoter's holding
Indian Promoters 139365360 17.93 13936536 17.93 13936536 17.93
0 0
Foreign Promoters 166742687 21.45 16674268 21.45 16674268 21.45
7 7
Sub total 306108047 39.38 30610804 39.38 30610804 39.38
7 7
Non promoter's holding
Institutional investors
Banks Fin. Inst. and 100475671 12.93 10781308 13.87 10839955 13.95
Insurance 7 4
FII's 115218568 14.82 10414763 13.40 10460301 13.46
3 4
Sub total 248022118 31.91 24722541 31.81 24520072 31.55
5 6
Other investors
Private Corporate 20695402 2.66 16638521 2.14 15889637 2.04
Bodies
NRI's/OCB's/Foreign 26780056 3.45 26890755 3.46 26886776 3.46
Others
Others 7607146 0.98 8908066 1.15 8645766 1.11
Sub total 55082604 7.09 52437342 6.75 51422179 6.62
General public 168078588 21.62 17152055 22.07 17456040 22.46
 3 5
Grand total 777291357 100.00 77729135 100.00 77729135 100.00
7 7

3. Board of Directors & Offices:

Board of Directors
• Chairman & Managing Director
Dr. Y.K. Hamied
• Joint Managing Directors
Mr. M.K. Hamied
Mr. Amar Lulla
• Non-Executive Directors
Dr. M.K.Gujar
Mr. V.C. Kotwal
Dr. H.R. Manchanda
Mr. S.A.A. Pinto
Mr. M.R. Raghavan
Mr. Ramesh Shroff
Manufacturing and R&D facilities
• Mumbai
Corporate Office and R& D centre for formulations
289, J. B. B. Marg, Mumbai Central, Mumbai - 400 008
• Vikhroli
Manufacturing of bulk drugs & formulations (Liquid Orals,
Aerosols), R&D bulk drugs & formulations
• Bangalore
Manufacturing of bulk drugs & formulations (R&D Bulk drugs)
Approved by US FDA (for bulk drugs); WHO
• Patalganga
Manufacturing plant for bulk drugs & formulations (R&D Bulk drugs)
• Kurkumbh
Manufacturing facility for bulk drugs & formulations (R&D Bulk drugs)
• Goa
Manufacturing set up for formulations
• Baddi, Himachal Pradesh
Manufacturing of tablets & capsules, formulations

4. Organizational Structure:
Cipla has incorporated a unique, flat organization structure that seems to work for them.
Brother, MK Hamied, looks after marketing and his cousin Amar Lulla heads the finance
division, while YK Hamied is responsible for Cipla's overall vision and strategy. Stories
about Hamied the workaholic are legendary. Managers at Cipla say that whenever he is in
India, he is in office by seven in the morning, looking at new products in the laboratories.
Hamied is basically a scientist by nature. Apart from driving Cipla's international growth he
is actively involved with his 200-people strong R&D division. Employees at Cipla are very
well paid. His chemists with PhD's make about $10,000 (Rs480, 000) a year, a good salary in
India. The lowest-paid of his 3,500 employees makes about $2,400 (Rs115, 200) a year.
Hamied may be generous with employees but it does not mean that he is not aware of costs.
In fact the reason he manages to charge less for all his drugs is because he is a shrewd cost
cutter, and keeps his overheads low.

5. Products:
Cipla has the largest product basket among all the pharmaceutical players in India ranging
from prescription to OTC to animal health, besides a big kitty for active pharmaceutical
ingredients (APIs) or bulk drugs.
Prescription
Amoebicides/Antiprotozoals, Anabolic steroids, Anaesthetics, Analgesics/Antipyretics,
Antacids, Anthelmintics, Anti-inflammatory drugs, Anti-TB drugs, Antiacne drugs,
Antiallergic drugs, Antialzheimer drugs, Antiasthma drugs, Antibiotics and Antibacterials
Anticancer drugs etc.
OTC
Cipla’s over-the-counter drugs portfolio comprises the following segments
Analgesics – Oral, Artificial Sweetener, Calcium Preparations, Child Care, Cold & Flu,
Constipation, Cosmetics & Skin Care, Dental Care & Oral Hygiene, Diarrhoea, Food
Supplements, Indigestion, Infant Food, Medicated Plasters, Medicated Shampoos,Veterinary
etc.
Cipla’s animal health care products division has four sections dedicated for equine, poultry,
companion animals, livestock animals products, apart from Herbal Specialities.
Active Pharmaceutical Ingredients(API)
Cipla is one of the biggest exporter of low-cost, high quality APIs across the world. Major
bulk drugs and intermediates manufactured by Cipla are:
Adefovir Dipivoxyl, Albendazole USP, Albuterol Sulfate, Alendronate Sodium.3H2O,
Alprazolam, Amlodipine Besylate, Anastrazole, Atorvastatin, Aripiprazole, Azelastine HCl
etc.

6. Exports:
Cipla exports raw materials, intermediates, prescription drugs, OTC (Over the Counter)
products and veterinary products to more than 160 countries including the U.S. and a number
of countries in Europe, Africa, Australia, Latin America and the Middle East. Cipla shipped
products worth more than Rs.10, 500 million last year. Cipla also offers technology for
products and processes. Cipla's manufacturing facilities have been approved by: Food and
Drug Administration (FDA), USA; Medicines and Healthcare products Regulatory Agency
(MHRA), UK; Therapeutic Goods Administration (TGA), Australia Medicines Control
Council (MCC), South Africa; National Institute of Pharmacy (NIP), Hungary;
Pharmaceutical Inspection Convention (PIC), Germany; World Health Organization (WHO);
Department of Health, Canada State Institute for the Control of Drugs, Slovak Republic and
ANVISA, Brazil. Cipla keeps the steady momentum of growth with an overall growth of
more than 57% in income from operations for the quarter ended March 2006. Currently, we
are one of the largest exporters of pharmaceutical products in India, exporting APIs and
formulation products to more than 160 countries including the U.S., and a number of
countries in Europe, Africa, Australia, Latin America and the Middle East. Both the
international as well as the domestic business have recorded a growth of more than 56% and
63% respectively, in the last quarter. All the major segments including anti-asthmatics,
cardiovascular and anti-biotics/bacterials segments have shown good performance in the
domestic market. In the exports markets, anti-retroviral, anti-malarial, anti-asthmatics, anti-
depressants and cardiovascular segments have performed well. Cipla has filed 658 DMF’s
(Drug Master File) and 71 ANDA’s (Abbreviated New Drug Application). The company has
also secured 170 marketing authorizations in Europe, 4,000 product registrations globally
and 7000 pending approvals and Exports grew by 37%; Accounts for 50% of total sales;
API(active pharmaceutical ingredients) exports grew by 120%.

7. Marketing Strategy:
Cipla follows an excellent marketing strategy.
• Strategic Tie-Ups
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. Cipla entered agreement with Pentech Pharma of
USA for marketing a range of generic products for American market. Pentech is involved in
developing therapies for lifestyle and quality of life conditions. This will further boost its
export performance.
• Low-risk business model:
Robust partnership model – CIPLA has entered into global tie-ups with various generic
players (like Watson, Mylan, Barr and Ivax) for supplying its generic products. This strategy
enables Cipla to leverage local market knowledge of its partners and utilize its own R&D,
product development, and manufacturing skills. Cipla's offer to sell anti- aids drugs at one-
third the price to developing countries like South Africa or any other country. The questions
were raised against the strategy the company follows but Cipla is not committing any illegal
or unethical act as it is entitled to sell anti- aids drugs in any country that does not have the
requisite patent protection. Cipla is not using pirated technology since India does not have a
product patent regime. Therefore, Cipla has the right to develop and reverse engineer any
pharmaceutical product not protected by the country's laws. Therefore, the issue is whether
Cipla is selling its products below its costs or is it able to sell cheaply because it has not
incurred any research and development (R&D) expenses like multinationals incur in
developing drugs. Cipla is entitled to "make hay while the sun shines', in other words,
capitalize on a sympathetic patent law in India, but keeping in mind that after 2010, the world
(and Indian) pharmaceutical industry will become a "jungle', where only the "fittest' will
survive.

8. Competitors:
These are some of the competitors of CIPLA - APOLLO HOSPITALS (HOSPITAL&
MEDICAL SERVICES), AURBINDO PHARMA, BILCARE (PACKAGING), BIOCON,
DISHMAN PHARMA, DIVIS LABS, Dr. REDDY's LABS, Pftizer, GlaxoSmithKline,
Alkem, Glen mark, Ipca LABS , Lupin, Opto Circuits(Hospitals & Medical Services), Orchid
Chemicals, Nicholos Piramal Health, Ranbaxy Labs, Sterling Bio, Sun Pharma, Sun Pharma
Advanced Research Company, Wockhardt, Zydus Cadila Healthcare, Ajanta Pharma ,
Alembic, Zandu Pharma , Aarti Drugs etc.

Competition Table (BSE Data):

Company Last Price Market Sales Net Profit Total
Cap. (Rs. Turnover Assets
cr.)
Sun Pharma 1,177.25 24,382.78 3,861.55 1,265.29 5,175.02
Cipla 268.05 20738.36 5,270.54 767.83 4,336.35
Ranbaxy Labs 319.80 13,443.49 4,494.52 -1,032.33 7,442.15
Dr Reddy’s Labs 784.70 13,235.32 4,197.53 560.89 5,899.40
GlaxoSmithKlin 1,439.45 12,192.58 1,685.56 576.57 1,546.72
e
Lupin 975.40 8,228.35 2,967.13 416.97 2,320.21
Piramal Health 328.30 6,861.90 2,333.46 275.32 1,520.76
Divis Labs 514.95 6,723.03 1,203.49 421.26 960.05
Cadila Health 449.00 6,128.81 1,945.72 265.91 2,052.70
Glenmark 216.50 5,425.18 856.11 217.93 1,552.79
9. Market Condition:

BSE
1 week 2 week 1 month 3 month 6 month 9 month 1 year
Price 269.85 258.85 281.95 231.60 192.05 183.45 236.50
Gain / -0.87% 3.34% -5.13% 15.5% 39.29% 45.82% 13.11%
Loss

NSE
1 week 2 week 1 month 3 month 6 month 9 month 1 year
Price 269.15 258.15 282.85 232.55 192.50 183.45 236.25
Gain / -24.37% -21.15% -28.04% -12.47% 5.74% 10.96% -13.84%
Loss

10. Recent News:

1. CIPLA had a research alliance with a Bangalore-based biotech company Avesthagen,
to develop biotherapeutic products. CIPLA has terminated its marketing agreement
with Avesthagen and is looking at selling its 5.8% stake in the Bangalore-based
company. Cipla terminated the agreement due to Avesthagen’s alleged failure to meet
targets. Under the agreement, Avesthagen was supposed to develop the biosimilar
products and Cipla would have used its strong marketing force to commercialize and
 market it. Cipla was, however, not happy with the progress of Avesthagen’s research.
The Mumbai-based generics major is, however, clear that it wants a presence in the
biosimilar space and is close to finalizing a deal with a Chinese partner. Cipla is keen
on partnering with a Chinese player for its biosimilar venture since the Chinese are
strong in this space. The products will be developed in China and manufactured in
India. Cipla’s termination of its agreement with Avesthagen has resulted in the
biotech company going it alone in the Indian market.
2. CIPLA plans to raise Rs 1,500 cr. either by issuing foreign currency convertible
bonds or through global depository receipts (GDRs) to clear its debt as well as
finance its capital expenditure. Addressing the shareholders at the company’s annual
general meeting, chairman and MD YK Hamied said the pharma company has debt of
Rs 800 cr. and plans to invest Rs 500-600 cr. in the next two years. Cipla is so far the
only company to manufacture generic versions of both Tamiflu and Relenza. Reports
say that if the virus mutates, it could wipe out half the world’s population The
Company’s version of Tamiflu, Antiflu, is the only generic anti-viral drug approved
by the WHO. After taking a hit of Rs 228 cr. in forex losses last year, Cipla has
changed its hedging policy. The company is now hedging all its loans and covering
all net exports on a monthly basis. This is due to the fluctuation in the currency
market.