PROJECT REPORT

CIPLA LTD

EQUITY RESEARCH
INDUSTRY: PHARMACEUTICALS

REPORT BY: BHAKTI SUNIL SHINDE

BHAKTI SHINDE- GURU NANAK INSTITUTE OF MANAGEMENT STUDIES

PHARMACEUTICALS INDUSTRY- SNAPSHOT

Introduction
India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry
supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic
demand in the US and 25 per cent of all medicine in UK.
India enjoys an important position in the global pharmaceuticals sector. The country also has
a large pool of scientists and engineers who have the potential to steer the industry ahead to
an even higher level. Presently over 80 per cent of the antiretroviral drugs used globally to
combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian
pharmaceutical firms.

Market Size
Indian pharmaceutical sector is expected to grow to US$ 100 billion and medical device
market expected to grow US$ 25 billion by 2025. Pharmaceuticals exports from India stood
at US$ 19.14 billion in FY19 and US$ 13.69 billion in FY20 (up to January 2020).
Pharmaceutical exports include bulk drugs, intermediates, drug formulations, biologicals,
Ayush & herbal products and surgicals.
Indian companies received 304 Abbreviated New Drug Application (ANDA) approvals from
the US Food and Drug Administration (USFDA) in 2017 and received a total of 415 product
approvals in 2018 and 73 tentative approvals. The country accounts for around 30 per cent
(by volume) and about 10 per cent (value) in the US$ 70-80 billion US generics market.
India's biotechnology industry comprising biopharmaceuticals, bio-services, bio-agriculture,
bio-industry and bioinformatics is expected grow at an average growth rate of around 30 per
cent a year and reach US$ 100 billion by 2025.
India’s domestic pharmaceutical market turnover reached Rs 1.4 lakh crore (US$ 20.03
billion) in 2019, growing 9.8 per cent year-on-year (in Rs) from Rs 129,015 crore (US$ 18.12
billion) in 2018.

Investments and Recent Developments

The Union Cabinet has given its nod for the amendment of the existing Foreign Direct
Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 per cent
under the automatic route for manufacturing of medical devices subject to certain conditions.
The drugs and pharmaceuticals sector attracted cumulative FDI inflows worth US$ 16.25
billion between April 2000 and June 2019, according to data released by the Department for
Promotion of Industry and Internal Trade (DPIIT).

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BHAKTI SHINDE- GURU NANAK INSTITUTE OF MANAGEMENT STUDIES

Some of the recent developments/investments in the Indian pharmaceutical sector are as

follows:
 Affordable medicines under the Pradhan Mantri Bhartiya Janaushadhi Pariyojana
(PMBJP) have led to savings of Rs 1,000 crore (US$ 143.08 million) for Indian
citizens in FY19.
 During December 2019, on moving annual total (MAT) basis, industry growth was at
9.8 per cent, with price growth at 5.3 per cent, new product growth at 2.7 per cent
while volume growth at two per cent y-o-y.
 In October 2019, Telangana government proposed Hyderabad Pharma City with
financial assistance from Central government of Rs 3,418 crore (US$ 489 million).
 As on August 2019, the moving annual turnover (MAT) for biosimilar molecules sold
in the domestic market stood at Rs 1,498 crore (US$ 214.31 million).
 Healthcare sector witnessed private equity of total US$ 1.1 billion with 27 deals in
first half of 2019.
 The exports of Indian pharmaceutical industry to the US will get a boost, as branded
drugs worth US$ 55 billion will become off-patent during 2017-2019.

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BHAKTI SHINDE- GURU NANAK INSTITUTE OF MANAGEMENT STUDIES

INTRODUCTION

CIPLA LIMITED is an Indian multinational pharmaceutical and

biotechnology company, headquartered in Mumbai, India. Cipla primarily
develops medicines to treat respiratory, cardiovascular disease, arthritis,
diabetes, weight control and depression; other medical conditions.
As of 17 September 2014, its market capitalisation was ₹49,611.58 crore
(equivalent to ₹530 billion or US$7.5 billion in 2019), making it India's 42nd
largest publicly traded company by market value.
On 23 April 2019, Cipla appointed Dr. Raju Mistry as Global Chief People
Officer.

HISTORY

It was founded by Khwaja Abdul Hamied as 'The Chemical, Industrial &

Pharmaceutical Laboratories' in 1935 in Mumbai. The name of the Company
was changed to 'Cipla Limited' on 20 July 1984 the year 1985, US FDA
approved the company's bulk drug manufacturing facilities. Led by the
founder's son Yusuf Hamied, a Cambridge-educated chemist, the company
provided generic AIDS and other drugs to treat poor people in the developing
world. In 1995, Cipla launched Deferiprone, the world's first oral iron chelator.
In 2001, Cipla offered medicines (antiretrovirals) for HIV treatment at a
fractional cost (less than $350 per year per patient).

In 2013 Cipla acquired the South African company Cipla-Medpro, kept it as a

subsidiary, and changed its name to Cipla Medpro South Africa Limited. At the
time of the acquisition Cipla-Medpro had been a distribution partner for Cipla
and was South Africa's third biggest pharmaceutical company. The company
had been founded in 2002 and was known as Enaleni Pharmaceuticals Ltd.

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OPERATIONS

Cipla has 34 manufacturing units in 8 locations across India and a presence in

over 80 countries. Exports accounted for 48% ₹4,948 crore (equivalent to ₹68
billion or US$950 million in 2019) of its revenue for FY 2013–14. Cipla spent
INR 517 cr. (5.4% of revenue) in FY 2013–14 on R&D activities. The primary
focus areas for R&D were development of new formulations, drug-delivery
systems and APIs (active pharmaceutical ingredients). Cipla also cooperates
with other enterprises in areas such as consulting, commissioning, engineering,
project appraisal, quality control, know-how transfer, support, and plant supply.

As on 31 March 2013, the company had 22,036 employees (out of which 2,455
were women (7.30%) and 23 were employees with disabilities (0.1%)). During
the FY 2013–14, the company incurred ₹1,285 crore (equivalent to ₹17 billion
or US$230 million in 2019) on employee benefit expenses.

LISTING

The equity shares of Cipla are listed on the Bombay Stock Exchange, where it is
a constituent of the BSE SENSEX index, and the National Stock Exchange of
India, where it is a constituent of the CNX Nifty. Its Global Depository Receipts
(GDRs) are listed on the Luxembourg Stock Exchange.
As of 30 September 2014, the promoter group, Y. K. Hamied and his family
held around 36.80% equity shares in Cipla. Around 148,000 individual
shareholders held approx. 18.67% of its shares. LIC is the largest non-promoter
shareholder with approx. 6.45% shareholding in the company by the end of
September 2013.

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BOARD OF DIRECTORS

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CORPORATE INFORMATION

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BUSINESS MODEL

 At the heart of the operations lies their business model, which determines
the way they calibrate the six capitals and transform input into outcomes
to achieve strategic goals. The business model demonstrates how they
conduct business to retain leadership position across markets.

 In addition to providing an overarching view of value creation process,

the model also outlines the interconnectedness between the capitals.

 The OneCipla ethos and Credo, which reflect in their day-to-day business
conduct, form the bedrock of their business model and inspire the
employees to operate within the perimeter of ethics, transparency and
good governance with every step they take.

 The business model is driven by elements that are critical to Cipla and
encompasses the internal and external factors influencing the company.

 These elements allow them to monitor the forces influencing business, to

stay agile and to deliver sustained stakeholder value.

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PRODUCTS

CIPLA HEADQUARTERS

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GEOGRAPHICAL PRESENCE

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NSE INDEX AS ON 12TH MAY,2020

RECOMMENDATIONS

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FINANCIAL DATA

REVENUE FROM OPERATIONS EBITDA

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BALANCE SHEET

Particulars Mar'19 Mar'18 Mar'17 Mar'16 Mar'15

Liabilities 12 12 12 12 12
Months Months Months Months Months
Share Capital 161.14 161.02 160.90 160.68 160.59
Reserves & Surplus 15620.77 13952.50 12639.61 11825.20 10920.59
Net Worth 15781.91 14113.52 12800.51 11985.88 11090.15
Secured Loan .00 .00 .00 .00 .67
Unsecured Loan .00 174.43 324.33 1131.81 1379.94
TOTAL LIABILITIES 15781.91 14287.95 13124.84 13117.69 12470.76
Assets
Gross Block 5985.30 5629.64 5089.81 4240.43 5935.63
(-) Acc. Depreciation 1795.99 1309.29 854.23 414.32 2342.01
Net Block 4189.31 4320.35 4235.58 3826.11 3584.65
Capital Work in Progress 297.33 462.60 555.77 551.05 360.71
Investments 5815.19 4636.98 4285.89 4255.78 4421.10
Inventories 2868.41 3037.98 2653.50 2918.47 3289.20
Sundry Debtors 3168.73 2336.32 1938.79 1896.41 2058.91
Cash and Bank 174.56 227.53 58.46 53.01 82.76
Loans and Advances 1905.28 2073.21 1879.23 1738.22 1385.52
Total Current Assets 8116.98 7675.04 6529.98 6606.11 6816.39
Current Liabilities 2100.23 2284.39 2093.99 1740.14 2219.61
Provisions 536.67 522.63 388.39 381.22 501.45
Total Current Liabilities 2636.90 2807.02 2482.38 2121.36 2721.06
NET CURRENT ASSETS 5480.08 4868.02 4047.60 4484.75 4095.33
Misc. Expenses .00 .00 .00 .00 .00
TOTAL 15781.91 14287.95 13124.84 13117.69 12470.76
ASSETS(A+B+C+D+E)

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BHAKTI SHINDE- GURU NANAK INSTITUTE OF MANAGEMENT STUDIES

PROFIT AND LOSS AC

Mar'18 Mar'17 Mar'16 Mar'15

  12Months 12Months 12Months 12Months 12Months
INCOME:
Sales Turnover 12374.01 11444.81 10974.58 12117.72 10224.72
Excise Duty .00 54.91 206.09 .00 92.94
NET SALES 12374.01 11389.90 10768.49 12117.72 10131.78
Other Income 577.5200 334.8800 129.8500 280.3000 147.9100
TOTAL INCOME 12951.53 11724.78 10898.34 12398.02 10279.69
EXPENDITURE:
Manufacturing Expenses 264.93 239.01 206.28 207.56 198.19
Material Consumed 4608.65 4275.12 4235.44 5011.53 4065.32
Personal Expenses 1839.84 1785.94 1728.97 1778.56 1505.58
Selling Expenses .00 .00 .00 207.14 .00
Administrative Expenses 3158.59 2894.28 3001.54 2859.50 2401.38
Expenses Capitalised .00 .00 .00 .00 .00
Provisions Made .00 .00 .00 .00 .00
TOTAL EXPENDITURE 9872.01 9194.35 9172.23 10064.29 8170.47
Operating Profit 2502.00 2195.55 1596.26 2053.43 1961.31
EBITDA 3079.52 2530.43 1726.11 2333.73 2109.22
Depreciation 569.72 529.61 499.97 442.69 433.20
Other Write-offs .00 .00 .00 .00 .00
EBIT 2509.80 2000.82 1226.14 1891.04 1676.02
Interest 16.97 11.90 39.20 147.07 136.05
EBT 2492.83 1988.92 1186.94 1743.97 1539.97
Taxes 604.42 442.88 212.00 281.67 358.88
Profit and Loss for the Year 1888.41 1546.04 974.94 1462.30 1181.09
Non Recurring Items 7.81 -75.75 6.93 -7.00 .00
Other Non Cash Adjustments .00 .00 .00 .00 .00
Other Adjustments -7.81 -1.77 -6.93 7.00 .00
REPORTED PAT 1888.41 1468.52 974.94 1462.30 1181.09
KEY ITEMS
Preference Dividend .00 .00 .00 .00 .00
Equity Dividend 281.97 132.61 128.16 180.92 127.90
Equity Dividend (%) 174.98 82.36 79.65 112.60 79.64
Shares in Issue (Lakhs) 8057.01 8051.19 8045.10 8033.84 8029.60
EPS - Annualised (Rs) 23.44 18.24 12.12 18.20 14.71

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BHAKTI SHINDE- GURU NANAK INSTITUTE OF MANAGEMENT STUDIES

CASH FLOW STATEMENT

Particulars Mar'19 Mar'18 Mar'17 Mar'16 Mar'15

Profit Before Tax 2492.83 1911.4 1186.94 1743.97 1539.97

0

Net Cash Flow from Operating Activity 1468.05 1116.5 2207.39 1728.40 1051.41
3

Net Cash Used in Investing Activity - -592.16 - - -

1147.05 1191.25 1205.67 1194.28

Net Cash Used in Financing Activity -473.32 -350.96 - -547.00 179.60

1010.80

Net Inc/Dec In Cash and Cash Equivalent -152.98 172.85 4.84 -24.58 36.72

Cash and Cash Equivalent - Beginning of the 217.45 44.60 39.76 64.34 46.04
Year

Cash and Cash Equivalent - End of the Year 64.47 217.45 44.60 39.76 82.76

CAPITAL STRUCTURE

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BHAKTI SHINDE- GURU NANAK INSTITUTE OF MANAGEMENT STUDIES

Period Instrument Authorized Issued -PAIDUP-

Capital Capital
From To   (Rs. cr) (Rs. cr) Shares Face Capital
(nos) Value (Rs.
Cr)
2018 2019 Equity 175.0 161.1 805701266 2.0 161.1
Share
2017 2018 Equity 175.0 161.0 805119164 2.0 161.0
Share
2016 2017 Equity 175.0 161.1 804510074 2.0 160.9
Share
2015 2016 Equity 175.0 160.9 803384282 2.0 160.7
Share
2014 2015 Equity 175.0 160.8 802960440 2.0 160.6
Share
2013 2014 Equity 175.0 160.8 802921357 2.0 160.6
Share
2012 2013 Equity 175.0 160.8 802921357 2.0 160.6
Share
2011 2012 Equity 175.0 160.8 802921357 2.0 160.6
Share
2010 2011 Equity 175.0 160.8 802921357 2.0 160.6
Share
2009 2010 Equity 175.0 160.8 802921357 2.0 160.6
Share
2008 2009 Equity 175.0 155.7 777291357 2.0 155.5
Share
2007 2008 Equity 175.0 155.7 777291357 2.0 155.5
Share
2006 2007 Equity 175.0 155.7 777291357 2.0 155.5
Share
2005 2006 Equity 175.0 60.2 299870233 2.0 60.0
Share
2004 2005 Equity 65.0 60.2 299870233 2.0 60.0
Share
2003 2004 Equity 65.0 60.2 59972349 10.0 60.0
Share

TECHNICAL CHARTS

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FINANCIAL RATIOS

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HUMAN RESOURCES

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The employees are the foundation and bedrock of success. People

Cipla are committed to providing a conducive, progressive an open,
diverse and inclusive work environment for all their employees. They
are focused on building a talent-driven, highperformance organisation
in line with our OneCipla Credo.

ANALYSIS
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Revenue from Operations

FY 18-19 revenue stands at H16,362 crores with 5 years CAGR of 10% has largely been
driven by strong performance in home markets of India, North America new launches and
acquisitions, and South Africa private market partly offset by challenges in Middle Eastern
markets. Our focus for next year is on continuing the growth trajectory in key markets and
investments in portfolio for sustainable growth.

EBITDA
Absolute EBITDA saw a CAGR of 10.1% over the last 5 years, owing to contribution from
new businesses, improvement in the portfolio mix, new launches in North America partly
impacted by higher R&D investments in recent years. Strong growth momentum across key
markets coupled with margin expansion and cost reduction has resulted in ~80 bps
improvement in EBITDA on YoY basis.

Net Profit after Tax attributable to shareholders

Over the years, depreciation and amortisation costs have increased due to increased Capital
investment. Further, the profits of FY 17-18 to FY 18-19 saw the impact of impairment of
assets related to InvaGen. For the full year, the PAT increased by 8% to H1528 crores despite
higher tax incidence and higher impairment. There is an increase in ETR for FY 18-19 due to
expiry of tax holiday benefit in one of Cipla’s plants

Debt ratios
FY 15-16 had elevated Debt-Equity ratio of 0.32 and Debt – EBITDA ratio of 1.51 due to
acquisition of InvaGen & Exelan through debt fund. During the years, Cipla has managed to
lower the Debt- Equity ratio to 0.10 and Debt – EBITDA ratio to 0.50 generating strong
cashflow.

Return on Equity (RoE)

Cipla's FY 18-19 ROE stands at 10.4%. Cipla is committed to generating shareholder value.

SHAREHOLDING PATTERN

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Standalone September March December September

2019 2019 2018 2018

Promoters 36.68 36.7 36.7 36.74

Pledged 0 0 0 0

FII/FPI 23.63 25.96 25.24 25.62

Total DII 23.49 21.21 21.73 21.47

Fin.Insts 0.39 0.35 0.34 0.25

Insurance Co 3.79 3.4 2.49 2.1

MF 13.24 10.27 10.9 10.99

Others DIIs 6.07 7.19 8 8.13

Others 16.2 16.13 16.34 16.17

Total 100 100 100.01 100

AS ON 31ST DECEMBER 2019

DIVIDEND SUMMARY

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For the year ending March 2019 Cipla has declared an equity dividend of 150.00%
amounting to Rs 3 per share. At the current share price of Rs 572.20 this results in a
dividend yield of 0.52%.

The company has a good dividend track report and has consistently declared
dividends for the last 5 years.

Announcement Effective Dividend Dividend Remarks

Date Date Type (%)
20-02-2020 19-03-2020 Interim 150.00 Rs.3.0000 per
share(150%)Interim Dividend
21-02-2020 19-03-2020 Special 50.00 Rs.1.0000 per
share(50%)Special Dividend
22-05-2019 31-07-2019 Final 150.00 Rs.3.0000 per
share(150%)Dividend
22-05-2018 13-08-2018 Final 150.00 Rs.3.0000 per
share(150%)Dividend
25-05-2017 26-07-2017 Final 100.00 Rs.2.0000 per
share(100%)Dividend
24-05-2016 12-09-2016 Final 100.00 Rs.2.0000 per
share(100%)Dividend
29-05-2015 11-08-2015 Final 100.00 Rs.2.0000 per
share(100%)Dividend
29-05-2014 06-08-2014 Final 100.00 Rs.2.0000 per
share(100%)Dividend
29-05-2013 06-08-2013 Final 100.00 Rs.2.0000 per
share(100%)Dividend
07-06-2012 01-08-2012 Final 100.00 -
29-06-2011 09-08-2011 Final 100.00 -
25-08-2010 03-09-2010 Interim 40.00 Special Interim Dividend
15-06-2010 23-07-2010 Final 100.00 -
15-07-2009 10-08-2009 Final 100.00 -
18-07-2008 12-08-2008 Final 100.00 AGM
20-07-2007 08-08-2007 Final 100.00 AGM
21-07-2006 18-08-2006 Final 100.00 AGM
22-07-2005 19-08-2005 Final 175.00 AGM
26-07-2004 19-08-2004 Final 150.00 AGM
15-07-2003 22-08-2003 Final 100.00 AGM
24-07-2002 14-08-2002 Final 70.00 AGM
19-07-2001 06-08-2001 Final 45.00 AGM

PEER COMPARISON

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Company Last % 52 Wk 52 Wk Market Sales Net

Name Price Chang High Low Cap Qtr Profit
e Qtr
Cipla 569.55 -0.11 632.05 356.75 45919.36 12,374.0 1,888.41
1

Sun Pharma 460.50 1.79 504.85 315.20 110489.3 10,303.2 816.60

8 1

Divis Labs 2367.25 1.11 2473.65 1466.95 62843.05 4,879.66 1,332.65

Dr Reddys 3750.05 -0.86 4099.90 2352.00 62315.36 10,625.5 1,277.30

Labs 0

Torrent 2420.65 0.71 2679.45 1453.00 40962.9 5,762.00 745.00

Pharma

6 MONTHS COMPARISON

IMPACT OF COVID-19 ON PHARMACEUTICALS

Corona Virus (Covid-19) has almost impacted every industry, causing steep inroads into the
global economy. Pharma industry is no exception. In this blog let us understand the impact on
the pharma industry.

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BHAKTI SHINDE- GURU NANAK INSTITUTE OF MANAGEMENT STUDIES

1.Cost of Drugs and Raw materials

The impact Covid-19 has created in China and the lockdown in India, United States, and
other countries, further increases the chances of shoot up in the cost of raw materials and
drugs. 13% of the brand and generic manufacturers are based out of China and according to
the FDA, as of 2018, 24% of medicines and 31% of medical ingredients were imported from
India. 
Example 
 The cost of Paracetamol in India has gone up to Indian Rupees 400-450 per kilogram
from Rupees 250- 300 per kilogram 
 The price of vitamins and penicillin have increased by 40- 50 % in India
If the current situation continues to prolong, the cost of essential drugs might increase in the
US and other countries as well.
2.Supply Chain
Pharma supply chain is fragile, and the impact created by Covid-19 has brought it to limelight
once again. 
There are two types of drugs 
1.Brand Name Drugs
These are products protected with a reliable supply chain and profitable to the manufacturers.
Example-Truvada
2.Generic Drugs
The profit for these types of drugs is very marginal and the supply chain is lean. The API
plant for these are often overseas with India and China dominating the API market. The API
may be manufactured in a single plant and each stage holds very little inventory. The problem
at any stage can cause drug shortage with the average drug shortage lasting for 14 months and
there are cases where it has lasted for 3 years even.
 
According to a recent survey, emergency care, anesthesia care, and pain management drugs
are the drugs which mostly get affected due to shortage.
The current situation might cause a shortage and increase in demands of certain medications
such as Hydroxychloroquine and Chloroquine, which are most talked about during these
pandemic times.
It is believed that the shortage might not occur for now as companies have stocks at least for
the next 5 months.
3.FDA Policies
The Covid impact, demand for drugs and the lockdown in various countries may force the
FDA to allow relaxation in a few areas:

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BHAKTI SHINDE- GURU NANAK INSTITUTE OF MANAGEMENT STUDIES

 The review process of Generic medicine is lengthy, the demand and shortage created
may also force minor changes
 The Federal law requires the manufacturers to notify the FDA about shortages when
the circumstance arises. The rules do not apply to medical devices as it is
manufactured at multiple plants. The shortage of devices during the pandemic might
force the FDA to rethink on regulations on devices
 FDA might also rethink the number of inspections on the overseas manufacturing
plants
Example-To maximize the number of respirators available, FDA and CDC recently
announced that certain respirators regulated by CDC, but not by the FDA, can also be used.
4.Data & Analytics
Pharma industry has an enormous amount of data, which also brings in various challenges
 Integrating siloed data and derive insights
 Infrastructure to leverage the power of Big Data
 Leveraging unstructured data
 Advance insights from clinical trails
 Data privacy
 Social listening
The cost of drug development is skyrocketing, and the time taken for a drug to be launched is
also high. The industry has been using data for years, but the challenge lies in leveraging its
full potential. A large amount of clinical and molecular data available over the years can help
in predictive analytics, which can be used to hasten the process of clinical trials and drug
development.
Companies are leveraging data and analytics, but the current situation might want them to use
data even more efficiently for clinical trials, forecasting, and marketing. Infrastructure for big
data and social listening will also play a key role.

5.Real-World Data (RWD)

New drug development is estimated to cost $2.6 billion which is up from 1 billion in 2013.
On top of the cost involved, the time taken for development& clinical trials, might bring in
more focus towards RWD. 
Almost 95% of the companies are using RWD or will be using it by 2021. Data accessibility
and security issues are a few of the challenges in using RWD, but it can be sorted out and will
gain more popularity as companies and the regulatory bodies from here on might look to
bring in innovative measures in clinical trials. 

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Clinical trials are gold dust for pharma but there are cases in the past where the drugs were
pulled out from the market even after FDA approval. The main problem with clinical trial is
it looks at a homogeneous population. To address this, FDA might relax the regulations on
RWD.
6.Digital Health
Digital health might be the next big thing as telemedicine / video consultations, health-related
videos and apps are gaining popularity.
Investment in online portals that help doctor-patient interaction will increase. 
Example of gaining digital popularity
 Wellmind health (provides online courses for mindfulness-based cognitive therapy)
has seen a recent uptrend in the purchase and enquires
 Due to the current pandemic situation, hospitals in the UK have been instructed by
NHS England to increase telemedicine/video consultations
 Meditation apps Calm and Headspace have released free digital offerings to help
people cope up with panic and anxiety
7.Primary and Secondary Market
To control the drug shortages that occur often companies will reassess their strategies on the
primary and secondary market for manufacturing.

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THANK YOU

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