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Cipla Ltd
Exports drive growth
Company Background
Share Price Chart The Chemical, Industrial & Pharmaceutical Laboratories which came to be popularly
known as Cipla was founded by Dr K.A. Hamied in 1935. A Mumbai-based company
currently Cipla is a leading domestic Indian pharmaceutical company with a market
share of about 5.85% and crossed Rs20bn mark in revenues during FY04.The
company is currently ranked first in trade sales as per the ORG IMS retail audit.
Business
Cipla’s businesses are broadly divided into the following segments:
• Formulations
• Bulk drugs & Intermediates
• Technology services
Formulations
In the domestic market Cipla is a leading player in the formulations segment. Cipla
manufactures and markets wide range of formulations in various conventional and
advanced dosage forms such as tablets & capsules, liquids, creams, aerosole, inhalation
devices, injections and sterile solutions; covering a large number of therapeutic segments
the main ones being anti-asthmatics, anti-biotics, cardiovascular, anti-AIDS and anti-
diarrhoeals. The formulations segment is divided into prescription drugs and OTC
products. The OTC product range covers therapeutic areas such as analgesics-oral,
calcium preparations, cold & flu, dental care etc. The formulations segment is Cipla’s
main stay and contributes over 75% of the company’s gross revenues.
Technology Services
Cipla also offers technology for products and processes and derives revenues in the
form of Royalty, technology know-how fees and licensing income under this segment.
The company earned revenues of Rs544mn from technology services in FY04 as
against Rs69mn in FY03.Though the scale is small the growth momentum is high in
this segment.
Manufacturing Facilities
Cipla’s has manufacturing facilities for bulk drugs and formulations in Patalganga,
Vikhroli, Bangalore, Kurkumbh and Goa. A number of dosage forms and API’s
manufactured in the company’ various facilities have several regulatory approvals
including the US FDA, MHRA UK, PIC Germany, MCC South Africa, TGA Australia,
WHO Geneva and the Department of Health, Canada. The company is in the process
of setting up a new formulation plant at Baddi in Himachal Pradesh.
Financial Analysis
High growth in revenues
Gross sales of the company were at Rs 20,910mn in FY04 recording an impressive
growth of 28% yoy. The sales growth was driven by exports of both API and
formulations at Rs8,123mn, a 44% yoy growth. Total exports contributed, to about
38% of gross revenues in FY04.
Geographyw ise breakup of exports
North,Central Africa
& South 22%
America
37%
Australasia
8%
The company grew at a CAGR of 25% in the period FY01 to FY04.Its presence in
the regulated markets increased significantly due to buoyancy in exports. The company
is now focussing on increasing its presence in the finished dosage formulations (generics)
segment overseas. It has consolidated existing alliances and entered into new
arangements with leading US generic companies for supply of finished dosage
formulations. Similar arrangements are worked out in other overseas market.
58
Others 98
2922
Bulk Drugs 4213
12517
Finished Dosage form 15435
The company derived 78% of its revenues from finished dosage segment in FY04
while bulk drugs contribute 21 % to gross sales in FY04.
Outlook
Exports of API’s and formulations witnessed good growth and this trend is likely to
continue going forward on the back of the huge global generics opportunity and Cipla’s
strong strategic alliances with global pharmaceutical companies. Currently Cipla exports
to over 150 companies across the globe and has an alliance with leading US generics
companies such as Ivax, Watson etc.
The other growth engine of the company is its technological excellence and the
company’s focus on new drug delivery systems (NDDS) such as inhaler products.
The future strategy of the company is to forge and strengthen the existing strategic
alliances with global pharma majors in order to expand its international operations,
particularly in the generics segment.
Balance Sheet
Period to FY01 FY02 FY03 FY04
(Rs mn) (12) (12) (12) (12)
Sources
Share Capital 600 600 600 600
Reserves 6,647 8,302 10,101 12,041
Net Worth 7,247 8,901 10,701 12,641
Loan Funds 240 339 948 2,106
Deferred Tax liability 562 659
Total 7,487 9,240 12,211 15,406
Uses
Gross Block 2,838 4,187 5,170 7,408
Accd Depreciation (997) (1,211) (1,459) (1,932)
Net Block 1,841 2,975 3,710 5,476
Capital WIP 31 19 288 560
Total Fixed Assets 1,872 2,994 3,999 6,036
Investments 2,229 1,437 1,266 1,804
Total Current Assets 6,340 9,705 12,911 14,362
Total Current Liabilities (2,956) (4,501) (5,966) (6,796)
Net Working Capital 3,384 5,205 6,945 7,566
Miscellaneous expenditure 2 2 1
Deferred Tax assets (397) 0
Total 7,487 9,240 12,211 15,406
Ratios
FY01 FY02 FY03 FY04
(12) (12) (12) (12)
Per share ratios
EPS (Rs) 29.9 34.6 41.3 49.3
Div per share 3.0 3.5 10.0 15.0
Book value per share 120.8 148.4 178.4 210.8
Valuation ratios
P/E 0.0 0.0 0.0 6.1
P/BV 0.0 0.0 0.0 1.4
EV/sales 0.0 0.0 0.0 1.1
EV/ PBIT 0.0 0.0 0.0 5.0
EV/PBIDT 0.0 0.0 0.0 4.4
Profitability ratios
OPM (%) 22.3 22.7 20.4 18.4
PAT (%) 18.5 16.3 17.2 16.0
ROCE 36.0 38.3 31.8 34.3
RONW 24.7 23.3 23.2 23.4
Liquidity ratios
Current ratio 2.1 2.2 2.2 2.1
Debtors days 56.5 72.9 90.2 98.7
Inventory days 104.0 113.5 149.6 112.7
Creditors days 41.2 42.7 51.9 35.2
Leverage ratios
Debt / Total equity 0.03 0.04 0.09 0.17
Component ratios
Raw material 50.3 47.5 49.8 56.0
Staff cost 5.2 5.0 5.1 7.5
Other expenditure 22.3 24.8 24.7 16.0
Payout ratios
Dividend Payout Ratio 11.1 10.1 27.3 34.3