Financial Modeling of Cipla

Financial Modeling of CiplaJuly 1, 2013

Financial Modeling of CiplaCorporate Bridge Consultancy Pvt. Ltd.Pranav Haldar Goa Institute of Management PGDM 2012-14

FINANCIAL MODELING OF CIPLA

SUMITTED TODr. Abhishek RangaFaculty Guide

BYPranav Haldar 2012224

July 1, 2013

ContentsAcknowledgement4Executive Summary5Background6Timeline6Financial Modeling - Industry Analysis7Financial Modeling - Historical Ratio Analysis8Financial Modeling - Financial Projections using Excel9Financial Modeling - Professional Valuation using Excel10Financial Modeling - Research Report11Appendix12Industry Analysis Submission12Historical Ratio Analysis Submission12Financial Projection using Excel Submission12Professional Valuation using Excel Submission12Research Report Submission12

AcknowledgementI would like to thank Corporate Bridge Consultancy Pvt. Ltd. for giving me the opportunity to work as a Research Intern in Corporate Bridge Internship Program on a Live Project titled Financial Modeling of Cipla from 24th April 2013 to 23rd June 2013.I would also like to thank Dr. Abhishek Ranga, my faculty guide to whom I reported during the internship duration, and Prof. Amiya Sahu for sharing their knowledge and helping me out during the entire duration of internship.Finally, I would like to extend my gratitude to Mr. Dheeraj Vaidya (ex CLSA India, JPMorgan), Mr. Mehul Shah (Corporate Bridge Research Team) and Ms. Akansha Jain (Corporate Bridge Research Team) for providing me timely feedback on my work and the entire support staff at Corporate Bridge for solving all the technical and non-technical queries.

Executive SummaryThe main purpose of this internship was to provide an excel based foundation on Financial Concepts and prepare a professional research analyst report on a LIVE company which in my case was Cipla.My project was to prepare a Financial Model of Cipla and recommend BUY/SELL.Since Financial Modeling and Valuation are the key "building block" skills required in today's business, banking and financial services thus I chose Financial Modeling of Cipla as my Live Project.The project was divided into 5 Assignments & 4 Online Tests.

The project was graded on the basis of my performances in the Assignments and Online Tests.

After completing each milestones, I submitted my assignment for Assessments, Review and Feedback by the Corporate Bridge Research Team.

Graded certificate will be awarded only after the completion of the full project and my project on Financial Modeling was to be completed within two months period.

Background

SummerInternship Program (SIP) Highlights:Summer Internship is a program designed by experts to equip one with industry endorsed skill sets in the area of Financial Modeling | Equity Research | Investment Banking | M&A | IPO | Private Equity etc. These are the sets of skills which currently owned by professionals in big financial companies like JP Morgan, Morgan Stanley, Credit Suisse, Goldman Sachs etc. One will undergo training in one of these areas and finish the projects assigned through Industry focused guidance with Corporate Bridge, India's largest e-learning IIM-IIT Alumni venture in Financial Research and Banking.

A brief on Internship Program of Corporate Bridge:One will be given Internship and Live Project in the area of Investment Banking, Equity Research, Financial Modeling or Project Finance. These Programs have been approved byCFA Institute, USA. And these are the only 4 programs in all over India which have been approved by CFA Institute, USA.One will undergo hands-on performance-orientedprojects focusing on high-end financial skill sets like Financial Modeling, Valuation, Merger Acquisitions, IPO, Pitch Book etc. These are the skill sets used by companies like JP Morgan, Deustche Bank, Goldman Sach, ICICI Securities and Banks.Timeline

ModuleMilestonesTimelinesType

1Prepare Industry Report24 April-5 May 2013Assignment

AccountingOnline Test

2Historical Ratio Analysis6 May-15 May 2013Assignment

Corporate FinanceOnline Test

3Financial Modeling of Cipla16 May-30 May 2013Assignment

ValuationsOnline Test

4Financial Modeling with Valuations of Cipla31 May-9 June 2013Assignment

Financial ModelingOnline Test

5Cipla Final Recommendation Report10 June-23 June 2013Assignment

Financial Modeling - Industry Analysis

Prepared an Industry analysis report. The main purpose of this report is to do the Industry analysis of the Sector under consideration. In my case it is the Pharmaceutical industry. Content and information considered in my Industry analysis report is as follows:i. Market Size, % of GDP etc ii. Supply & Demand iii. Consumer Behavior iv. Production Analysis v. Cost analysis vi. Perfect competition vii. Monopoly or Oligopoly viii. Factors of production ix. Interest Rates & Inflation and its impact x. Economy Impact (GDP, Interest Rates, Budget etc.) xi. Major Players xii. Market Size xiii. Comparison with Developed nations xiv. Drivers (Demand, Revenue, Cost etc.) xv. Foreign Investments xvi. Govt. Undertakings xvii. Future of the Sector xviii. SWOT Analysis

Financial Modeling - Historical Ratio Analysis

It included the understanding of Financial Statement Analysis. The typical approach to financial analysis included professional measures like Vertical Analysis, Horizontal Analysis and Ratio Analysis. However, before the starting calculations, the key challenge was to get the right data from various sources. This assignment consisted of two parts:i. Calculating the ratios in the provided Excel Template and fully appreciating its general trends ii. Commenting on Interpretation of Historical Ratios to be provided in the Word Template The interpretation included the following:i. Horizontal Analysisii. Vertical Analysisiii. Solvency Ratiosiv. Turnover Ratiosv. Profitability Ratiosvi. Cash Flow Ratios

Financial Modeling - Financial Projections using Excel

In this assignment I made financial projections using Excel by learning financial modeling forecasting techniques. The Excel being made consisted the following:i. Setting up the core financial statements ii. Working capital, Depreciation & amortization (PP&E), and Other balance sheet items. iii. Shareholders equity & Shares Outstanding iv. Debt & Interest v. Controlling circular references using automated circuit breakers vi. Balancing the model vii. Scenario analysis viii. Creating forms in Excel ix. Understanding the financials projections

Financial Modeling - Professional Valuation using Excel

After completing Assignment 2 Ratio analysis and Assignment 3 Financial Projections using Excel, we then move to Assignment 4 Valuations, that is in continuation of previous set of assignments Equity Valuation is the process of estimating the potential market value of a financial asset or liability. Valuations are required in many contexts including investment analysis, capital budgeting, merger and acquisition transactions, financial reporting, taxable events to determine the proper tax liability, and in litigation. Valuations were done using two methods:i. Intrinsic Valuation Method (DCF) which means primarily determines the value by estimating the expected future earnings from owning the asset discounted to their present valueii. Relative value models determine the value based on the market prices of similar assets. Discounted Cash Flows i. Calculate FCFF as discussed in class and the handbook ii. Apply a suitable WACC post the calculation of the capital structure iii. Find the Enterprise Value of the Firm iv. Find Equity Value of the Firm after the deduction of Net Debt v. Divide Equity Value of the Firm by the total number of shares to arrive at Intrinsic Fair Value of the company. vi. Do sensitivity analysis of WACC with Share Price Relative Valuations i. Identify the comparables based on the business, Market Capitalization and other filters ii. Identify the suitable valuation multiple to be used for this business. iii. Use the average valuation multiple to find the valuation of Pantaloon. iv. Suggest Undervalued or Over-valued. Target Price i. Based on DCF ii. Based on Relative Valuations iii. Recommend whether to BUY or SELL

Financial Modeling - Research Report

The main purpose of this assignment is to write an Investment thesis in a clear and structured way. Report considers the following information: i. Company Overview ii. Sector Report iii. Company Details iv. Key Concerns v. Financial Snapshot vi. Comment on Ratios vii. Valuation viii. Key Risks ix. Accounting Gimmicks x. Appendix (if any)

Report Structure i. First Page - Company description, Key investment argument, Key risks to our view ii. Third page onwards - Industry Analysis (already completed) iii. Company Financials Summary with Ratio Analysis of historical and forecasts (Key Assumptions) a. In between include graphs & charts prepared for the same b. Also include table for important ratios c. Discussion on EBITDA, EBIT, Gross Margins, key segments, ROE etc iv. Price Target Derivation - A Discussion on Valuations a. DCF discussion (small one) with a table for FCFF & WACC (only if you have done DCF, otherwise leave blank) b. Also include sensitivity table c. Relative Valuations discussion (comparable analysis table) d. Include tables, charts (P/BV, PE etc if made) v. Summary Sheet a. Income Statement Synopsis b. Balance Sheet Synopsis c. Cash Flow synopsis

Appendix

Please find all the assignments and excel sheets submitted by me during the internship for evaluation attached in the mail and also embedded in the below provided links.Industry Analysis Submission

Historical Ratio Analysis Submission

Financial Projection using Excel Submission

Professional Valuation using Excel Submission

Research Report Submission

Page 12

India Pranav Haldar

Sector Review Pharma (91) 9158114849

pranav.haldar@gmail.com

03 May 2013

Please see important notice on last page Page 1 of 5

Sector Overview The Indian pharmaceutical industry has been consistently growing at a CAGR

of more than 15% over the last five years and is likely to be among the top 10

countries in global market by value by 2020.

With an increase of 122% since 2011, the Indian pharmaceuticals market is forecasted to have a value of $27.3 billion.

India is one of the few countries whose domestic market is dominated by local players but the margins are 20-25% lower than other emerging economies.

$148 billion worth of patent are expected to expire between 2012 and 2018.

US market will remain the Indian pharma sectors main focus area which would be mainly driven by the sheer size of generic opportunities in the US market.

With Indian players starting to targeting complex chemistry products R&D spends are likely continue increasing in 2013.

The decision to increase the number of drugs under price control under National Pharmaceutical Pricing Policy (NPPP) 2011 not to have any major

impact on the profitability of the sector.

On the back of improvements in high middle-class population base, medical infrastructure and the establishment of intellectual property rights, the Indian

Pharma industry is expected to grow manifold.

Increase in Over-the-counter (OTC) drug sales in India is providing opportunities to achieve pharma brands enhancement and higher volumes.

Attractive tax benefits and reduced custom duties have made India an attractive destination for Global players who have a variety of options to utilize

their investments in India via CRAMS, Franchising, Joint ventures and

Licensing.

The M&A in Pharma sector in India has doubled compared to the previous years. Recently the govt. Of India tightened the norms for Pharma M&A but it

decided against putting any cap on foreign investment which remains at 100%.

Figure 1

Historical Growth of the Indian Pharma Market

Source: Corporate Catalyst India Report 2012, McKinsey Report India Pharma 2020

Consistent Growth

Exceptional Forecast

Low Domestic Margins

Expiring Patents

Focus on US Market

Increase in R&D spends

NPPP Impact

Favorable Factors

Increasing OTC Sales

Attractive

Destination for

Global players

M&A norms tightened

Indian Pharma

market has been

growing at 15%

mean CAGR since

2005

The sector looks set

to follow the

trajectory in coming years too

India Sector Review 03 May 2013

Please see important notice on last page Page 2 of 5

Figure 2

R&D spends likely to continue increasing in FY13

Source: Company Reports, Sample Size 47

Figure 3

Patent expires will provide opportunites of around $125 billion during 2013-15

Source: India Ratings Market

Figure 4

Break-up of Individual segments in the Indian Pharma market

Source: PWC Analysis India Pharma Outlook 2012

R&D spends of

Indian

Pharmaceutical

companies has

shown continuous

increase which is

likely to continue in

coming FYs

Expiring patents will

provide huge

opportunities to the

Indian Pharma

sector after 2012

Break-up of

Individual segments

in the Indian

Pharma market

clearly shows the

importance of the Generics market

India Sector Review 03 May 2013

Please see important notice on last page Page 3 of 5

Figure 5

Shifting Pattern in Global markets contribution

Source: IMS Market Prognosis, Apr 2011 Figure 6

Indian Drugs Exports

Source: Centre for Monitoring Indian Economy Figure 7

Drugs Exports from India Countries-Wise

Source: Centre for Monitoring Indian Economy

Contribution of

Pharmerging

Nations is set to

increase from 12%

to 28% by 2015

Whereas the

contribution of USA

will decrease from

41% to 30%

Indian Drugs

Exports increasing

at a growth rate of

about 28-29% p.a.

Exports set to be

about 775 INR

Billion by 2012

Exports seen to be

increasing to most

of the countries

including USA, UK,

Germany, Russia and Brazil consistently

India Sector Review 03 May 2013

Please see important notice on last page Page 4 of 5

Figure 8

Some of the leading Indian players by sales (INR Billion)

Source: Corporate Catalyst India Report 2013

Figure 9

US FDA approved manufacturing sites

Source: Crisil Research

Figure 10

Spending in Global Pharma Market by segments

Source: IMS Market Prognosis, Apr 2011

Ranbaxy Ltd., Dr.

Reddys Lab and Cipla among the

leading Indian

players by sales

India has the

highest number of

US FDA approved

manufacturing sites

making it a hot

destination for the

foreign investors

Contributions from

Generics set to

increase from 20%

in 2005 to about 39% in 2015

India Sector Review 03 May 2013

Page 5 of 5

Table 1

Alliances Entered Into by Indian Pharma Companies

Year Indian Pharma Company Alliance Partner

Feb-12 Jubilant Mnemosyne Pharmaceuticals Inc

Feb-12 Jubilant Lifesciences Ltd Endo Health solutions Inc

Jun-12 Dr Reddy's Laboratories Ltd Merck

Jun-12 Biocon Ltd Abbott Laboratories

Jul-12 Cipla Ltd Drugs for Neglected Diseases Initiative

Aug-12 Strides Arcolab Ltd. Gilead Sciences Inc

Aug-12 Ranbaxy Laboratories Ltd. Gilead Sciences Inc

Aug-12 Orchid Chemicals Hospira Inc

Oct-12 Piramal Healthcare Ltd Fujifilm Diosynth Biotechnologies

Nov-12 Biocon Ltd Bristol Myres Squibb

Source: Company filings

Table 2

Industry SWOT Analysis

Strengths Weaknesses

Low-cost, highly skilled and English speaking labor force

Govt. intervention and price control

Higher GDP growth has lead to a high per capita income which will increase the

healthcare expenditure Less investment in R&D

Opportunities Threats

Increased penetration of the rural market and tapping the rural demand

Competition from other emerging economies

Rapid Generic and OTC market growth Considerable threat of counterfeiting

Source: PWC India Pharma Outlook 2012, CB Research and Analysis

Budget FY13 Highlights

Investment allowance of 15% on new plants and machineries is a welcome step and is expected to boost investment in new projects

Also providing tax benefits to the industry simultaneously will help. Directional guidance on DTC and GST has provided much needed clarity.

Key to EDUCORPORATEBRIDGE investment rankings: BUY = Expected to outperform the local market by >10%; O-PF = Expected to

outperform the local market by 0-10%; U-PF = Expected to underperform the local market by 0-10%; SELL = Expected to underperform the local market by >10%. Performance is defined as 12-month total return (including dividends).

2011 EDUCORPORATEBRIDGE, India. Note: In the interests of timeliness, this document has not been edited.

Other disclosures will come

xXXXXXXXXXXXXXXXXXXXXXXXXX

Indian

Pharmaceutical

industry on M&A

spree

Corporate Bridge Cover

Corporate Bridge Group

This spreadsheet is designed to be used only in an academic context to illustrate concepts covered in Corporate Bridge training courses. THIS SPREADSHEET IS NOT TO BE USED FOR ANY RESEARCH OR TRADING PURPOSES. No responsibility is accepted by the Corporate Bridge Group. Corporate Bridge does not accept any obligation to correct or update this spreadsheet or to inform any user of the spreadsheet if the spreadsheet is inaccurate.

For further information and queries, please contact

info@educorporatebridge.comwww.educorporatebridge.com

IS

Cipla LimitedFY08FY09FY10FY11FY12FY13EFY14EFY15EFY16EFY17EIncome Sheet (Rupees in crores)HistoricalEstimates

Net Sales4,010.384,960.605,359.526,331.096,977.50Material Cost2,054.392,347.402,452.982,888.542,867.64Manufacturing Expenses194.07222.60231.05249.64218.08Gross Profit1,761.922,390.602,675.493,192.913,891.78Employee Cost214.01271.33319.10540.33728.21Other Expenses717.051,156.641,038.091,072.091,275.28Research & Development Expenses204.57235.50250.69259.79306.43EBITDA626.29727.131,067.611,320.701,581.86Depreciation & Amortization of Goodwill116.26151.79167.07248.03282.07EBIT510.03575.34900.541,072.671,299.79Interest Fixed Period10.7032.5322.0910.2412.13Interest Others0.640.410.867.08EBT498.69542.40877.591,055.351,287.66Other Income339.28354.49353.5091.64148.30Exceptional Items95.00EBT After Other Income & Exceptional Items837.97896.891,326.091,146.991,435.96Provision For Tax136.93124.50243.50191.00297.50Current Tax94.00101.00228.50227.70277.50MAT Entitlement / (Utilization)(70.00)Deferred Tax 36.5015.0015.0033.3020.00Fringe Benefit Tax6.438.50PAT701.04772.391,082.59955.991,138.46

Diluted Weighted Average Shares (millions)777,291,357777,291,357790,141,467802,921,357802,921,357

Basic and Diluted Earning per Share (Rs.) - Before Exceptional Item9.029.9412.5011.9114.18Basic and Diluted Earning per Share (Rs.) - After Exceptional Item9.029.9413.7011.9114.18

Vertical AnalysisHistoricalEstimates

Net Sales100%100%100%100%100%Material Cost51%47%46%46%41%Manufacturing Expenses5%4%4%4%3%Gross Profit44%48%50%50%56%Employee Cost5%5%6%9%10%Other Expenses18%23%19%17%18%Research & Development Expenses5%5%5%4%4%EBITDA16%15%20%21%23%Depreciation & Amortization of Goodwill3%3%3%4%4%EBIT13%12%17%17%19%Interest Fixed Period0%1%0%0%0%Interest Others0%0%0%0%0%EBT12%11%16%17%18%Other Income8%7%7%1%2%Exceptional Items0%0%2%0%0%EBT After Other Income & Exceptional Items21%18%25%18%21%Provision For Tax3%3%5%3%4%Current Tax2%2%4%4%4%MAT Entitlement / (Utilization)0%0%0%-1%0%Deferred Tax 1%0%0%1%0%Fringe Benefit Tax0%0%0%0%0%PAT17%16%20%15%16%Horizontal AnalysisHistoricalEstimates

Net Sales24%8%18%10%Material Cost14%4%18%-1%Manufacturing Expenses15%4%8%-13%Gross Profit36%12%19%22%Employee Cost27%18%69%35%Other Expenses61%-10%3%19%Research & Development Expenses15%6%4%18%EBITDA16%47%24%20%Depreciation & Amortization of Goodwill31%10%48%14%EBIT13%57%19%21%Interest Fixed Period204%-32%-54%18%Interest Others-36%110%723%-100%EBT9%62%20%22%Other Income4%-0%-74%62%Exceptional ItemsERROR:#DIV/0!ERROR:#DIV/0!-100%ERROR:#DIV/0!EBT After Other Income & Exceptional Items7%48%-14%25%Provision For Tax-9%96%-22%56%Current Tax7%126%-0%22%MAT Entitlement / (Utilization)ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!-100%Deferred Tax -59%0%122%-40%Fringe Benefit Tax32%-100%ERROR:#DIV/0!ERROR:#DIV/0!PAT10%40%-12%19%

BSCipla LimitedFY08FY09FY10FY11FY12FY13EFY14EFY15EFY16EFY17EBalance sheetHistoricalEstimatesShareholders FundsShare Capital155.46155.46160.58160.58160.58Reserves & Surplus3,599.714,192.345,749.996,452.377,389.70PAT701.04772.391,082.59955.991,138.46Total Equity4,456.215,120.196,993.167,568.948,688.74

LOAN FUNDSSecured Loans14.092.790.412.922.20Unsecured Loans526.36937.454.66437.5610.00Revolving Credit FacilityTotal Debt540.45940.245.07440.4812.20

Deferred Tax Liabilities149.15164.15179.15212.45232.45

Total5,145.816,224.587,177.388,221.878,933.39

Fixed AssetsGross Block2,201.792,693.292,895.443,929.003,284.72Less: Depreciation540.43700.80884.271,060.98282.06Net Block1,661.361,992.492,011.172,868.023,002.66Capital Work-in-Progress233.12366.32684.24253.07343.45Net Fixed Assets1,894.482,358.812,695.413,121.093,346.11

Investments93.4880.05265.10570.281,035.15

Current Assets, Loans & AdvancesInventories1,120.491,398.321,512.581,883.161,824.50Sundry Debtors1,406.491,852.861,552.711,497.041,519.31Cash & Bank Balances79.7053.3960.8484.1355.06Other Current Assets34.4923.454.7085.3353.98Loans & Advances1,103.44894.891,221.591,268.881,159.44Total Current Assets3,744.614,222.914,352.424,818.544,612.29

Less : Current Liabilities & Provisions

Current LiabilitiesSundry Creditors533.51757.43805.40775.09773.79Trade Deposits from customers20.6321.3021.6922.1231.73Unclaimed Dividends8.259.208.7612.7913.59Advances received74.43142.8877.5863.83106.12Unclaimed Preference Share Capital0.010.010.010.010.01Interest accrued but not due1.273.55Employee Dues8.9727.2413.60Book Overdraft37.0529.2524.95Other Liabilities232.8969.5320.5221.5836.65Total Current Liablities870.991,012.87998.25938.27986.84

ProvisionsLeave Encashment/Employee cost19.1814.8329.1233.2525.15Provision for taxation215.75Provision for dividends155.46155.46160.58160.58160.58Tax on dividends26.4226.4226.6726.0526.05Total provisions416.81196.71216.37219.88211.78

Total Current Liabilites and Provisions1,287.801,209.581,214.621,158.151,198.62

Net Current Assets2,456.813,013.333,137.803,660.393,413.67

Total4,444.775,452.196,098.317,351.767,794.93

Check701.04772.391,079.07870.111,138.460.00.00.00.00.0

Vertical AnalysisHistoricalEstimates

Shareholders FundsShare Capital3%2%2%2%2%Reserves & Surplus70%67%80%78%83%PAT14%12%15%12%13%Total Equity87%82%97%92%97%

LOAN FUNDSSecured Loans0%0%0%0%0%Unsecured Loans10%15%0%5%0%Revolving Credit Facility0%0%0%0%0%Total Debt11%15%0%5%0%

Deferred Tax Liabilities3%3%2%3%3%

Total100%100%100%100%100%

Fixed AssetsGross Block50%49%47%53%42%Less: Depreciation12%13%15%14%4%Net Block37%37%33%39%39%Capital Work-in-Progress5%7%11%3%4%Net Fixed Assets43%43%44%42%43%

Investments2%1%4%8%13%

Current Assets, Loans & AdvancesInventories25%26%25%26%23%Sundry Debtors32%34%25%20%19%Cash & Bank Balances2%1%1%1%1%Other Current Assets1%0%0%1%1%Loans & Advances25%16%20%17%15%Total Current Assets84%77%71%66%59%

Less : Current Liabilities & Provisions

Current LiabilitiesSundry Creditors12%14%13%11%10%Trade Deposits from customers0%0%0%0%0%Unclaimed Dividends0%0%0%0%0%Advances received2%3%1%1%1%Unclaimed Preference Share Capital0%0%0%0%0%Interest accrued but not due0%0%0%0%0%Employee Dues0%0%0%0%0%Book Overdraft0%0%1%0%0%Other Liabilities5%1%0%0%0%Total Current Liablities20%19%16%13%13%

ProvisionsLeave Encashment/Employee cost0%0%0%0%0%Provision for taxation5%0%0%0%0%Provision for dividends3%3%3%2%2%Tax on dividends1%0%0%0%0%Total provisions9%4%4%3%3%

Total Current Liabilites and Provisions29%22%20%16%15%

Net Current Assets55%55%51%50%44%

Total100%100%100%100%100%

Horizontal AnalysisHistoricalEstimates

Shareholders FundsShare Capital0%3%0%0%Reserves & Surplus16%37%12%15%PAT10%40%-12%19%Total Equity15%37%8%15%

Secured Loans-80%-85%612%-25%Unsecured Loans78%-100%9290%-98%Revolving Credit FacilityERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!Total Debt74%-99%8588%-97%

Deferred Tax Liabilities10%9%19%9%

Total21%15%15%9%

Gross Block22%8%36%-16%Less: Depreciation30%26%20%-73%Net Block20%1%43%5%Capital Work-in-Progress57%87%-63%36%Net Fixed Assets25%14%16%7%

Investments-14%231%115%82%

Inventories25%8%24%-3%Sundry Debtors32%-16%-4%1%Cash & Bank Balances-33%14%38%-35%Other Current Assets-32%-80%1716%-37%Loans & Advances-19%37%4%-9%Total Current Assets13%3%11%-4%

Less : Current Liabilities & Provisions

Current LiabilitiesSundry Creditors42%6%-4%-0%Trade Deposits from customers3%2%2%43%Unclaimed Dividends12%-5%46%6%Advances received92%-46%-18%66%Unclaimed Preference Share Capital0%0%0%0%Interest accrued but not due180%-100%ERROR:#DIV/0!ERROR:#DIV/0!Employee DuesERROR:#DIV/0!204%-50%-100%Book OverdraftERROR:#DIV/0!ERROR:#DIV/0!-21%-15%Other Liabilities-70%-70%5%70%Total Current Liablities16%-1%-6%5%

ProvisionsLeave Encashment/Employee cost-23%96%14%-24%Provision for taxation-100%ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!Provision for dividends0%3%0%0%Tax on dividends0%1%-2%0%Total provisions-53%10%2%-4%

Total Current Liabilites and Provisions-6%0%-5%3%

Net Current Assets23%4%17%-7%

Total23%12%21%6%

Ratio Anaylsis

Solvency RatiosCurrent ratio2.913.493.584.163.85Quick ratio2.042.342.342.532.33Cash ratio0.920.781.061.171.01

Receivables turnover2.462.913.514.209.19Inventory turnover1.791.771.581.693.38Payables turnover2.392.562.773.266.25

Receivables collection period148.32125.29103.8586.9539.74Inventory processing period204.44206.71230.89215.62107.91Payment period152.91142.81131.67111.9558.37Cash Collection Cycle199.86189.19203.07190.6189.28

Operating EfficiencyTotal asset turnover0.810.860.800.841.79Equity turnover0.840.820.740.781.61

Operating ProfitabilityGross Profit Margin0.440.480.500.500.56Operating Profit Margin0.130.120.170.170.19Net Profit Margin0.170.160.200.150.16

Return on total capital0.110.100.150.150.19ROE (Net Income / Common Equity)0.150.130.150.120.26

ROE DuPont Analysis Profit Margin0.170.160.200.150.16Asset Turnover0.900.910.880.860.90Financial Leverage1.001.060.870.970.90ROE0.160.150.150.130.13

ROE Extended DuPont AnalysisOperating profit margin0.130.120.170.170.19Asset turnover0.900.910.880.860.90Interest expense rate0.980.940.970.980.99Financial leverage1.001.060.870.970.90Tax retention rate1.411.421.230.910.88ROE0.160.150.150.130.13

Financial Risk RatiosDebt to equity ratio0.32%0.05%0.01%0.04%0.03%Debt ratio0.180.170.140.120.11Interest coverage ratio44.9817.4739.2461.93107.15

CFCipla LimitedFY08FY09FY10FY11FY12FY13EFY14EFY15EFY16EFY17ECash Flow StatementHistoricalEstimates

Cash Flow from Operating ActivitiesProfit before tax and prior period items838.36901.311,324.991,151.391,421.46

Adjustments for:Depreciation130.68170.60187.84248.03282.07Interest expense11.3432.9422.955.1412.13Unrealized foreign exchange gains(Net)(28.75)28.9220.38(5.41)(27.56)Interest expense allocated to Research &Development expenses0.351.020.71Sale of brand and other related rights(95.00)Provision for doubtful debts and advances10.5533.9539.680.4854.50Interest income(8.37)(15.13)(18.60)(7.54)(8.97)Dividend income(10.75)(8.62)(9.35)(8.97)(36.29)Profit on sale of investments (Net)(0.01)(0.07)(0.10)(0.30)(0.56)Loss on sale/discard of fixed assets (Net)(1.10)3.621.0519.7836.85Rent income(0.39)(2.02)(1.55)(1.65)(2.83)Operating profit before working capital changes941.911,146.521,473.001,400.951,730.80

Adjustments for:Increase/(Decrease) in trade payables and other liabilities311.1210.9930.79(55.19)10.08Increase in inventories(141.89)(277.83)(114.26)(370.58)58.66Increase in trade and other receivables(559.96)(439.34)(92.08)268.04167.82Working Capital Changes(390.73)(706.18)(175.55)(157.73)236.56

Cash generated from operations551.18440.341,297.451,243.221,967.36Direct taxes paid (Net)(170.98)(64.75)(255.77)(255.73)(322.27)Net cash from operating activities380.20375.591,041.68987.491,645.09

Cash flow before prior period itemPrior period item

Net cash from operating activities

Cash Flow from Investing ActivitiesPurchase of fixed assets/Capital work-in-progress(565.84)(703.19)(529.31)(687.76)(548.60)Sale of fixed assets3.053.393.8112.574.28Purchase consideration for acquisition of undertaking(30.64)Investment in subsidiary(17.42)(328.00)(114.78)Share application money(8.10)(33.54)Purchase of other investments(1,776.51)(3,041.25)(8,886.57)(5,228.18)(7,468.07)Sale of other investments1,799.573,054.748,720.315,251.257,118.92Sale of brand and other related rights95.00Interest received8.3711.7718.0811.889.23Dividend received10.758.629.358.9736.29Rent received0.392.001.551.672.83Loan to Subsidiary(13.53)17.76(204.47)(53.34)Short term deposits repaid (Net)(153.50)83.135.2164.55Brokerage incomeCash paid for acquisition, net of cash acquiredNet cash used in investing activities(687.25)(580.79)(562.23)(1,136.26)(1,046.78)

FCFF(687.25)(580.79)(562.23)(1,136.26)(1,046.78)0.00.00.00.00.0

Cash Flow from Financing ActivitiesProceeds from QIP issue675.99Expenses incurred onQIP issue(6.89)Proceeds from long term & other borrowings566.80927.23462.27867.74200.00Repayment of long term & other borrowings(118.39)(532.47)(1,397.44)(428.39)(628.47)Revolving Credit Facility Proceeds / (Repayment)Interest expense(11.69)(33.96)(23.66)(5.14)(12.13)Dividend paid(155.46)(155.46)(155.46)(160.58)(160.58)Tax on dividend(26.42)(26.42)(26.42)(26.67)(26.05)Interim dividend paid(64.23)Tax on interim dividend(10.67)Net cash used in finaning activities254.84178.92(471.61)172.06(627.23)

Net increase in cash and cash equivalents(52.21)(26.28)7.8423.29(28.92)Cash andCash Equivalents as at the beginning of the year131.4979.2853.0060.8483.98Cash andCash Equivalents as atthe end of the year79.2853.0060.8484.1355.06

Check105.5645.1637.55113.0555.060.00.00.00.0

Revenue buildup (in INR millions)Cipla LimitedFY07FY08FY09FY10FY11FY12EFY13EFY14EFY15EFY16ERevenue Build upHistoricalEstimates

Market Share International Domestic

SalesInternational Domestic

Option 1 - Revenue by geography

AfricaAustraliaEuropeAmericasMiddle EastTotal

Revenue by geographyAfrica

Australia

Europe

Americas

Middle East

Domestic (India)

Total

Option 2 - Revenue by business mix

Share for business mixExport formulationAPI

Domestic

Export Formulation API

Total Exports

Total Sales

This figures are provided in Annual report, Using these provide us with absolute sales figures in the respective regionwe can assume region wise growth rates and back calculate the Total Sales Figures for Cipla for FY13, FY14, FY15 and FY16This figures are provided in Annual report, Using these provide us with absolute sales figures in the Domestic as well as International

This figures are provided in Annual report, Using these provide us with absolute sales figures in the Domestic as well as International

Cost SheetCipla LimitedFY07FY08FY09FY10FY11FY12EFY13EFY14EFY15EFY16ECost SheetHistoricalEstimates

Sales

Direct CostMaterial CostMaterial Cost as % of sales

Manufacturing ExpensesManufacturing Expenses as % of Sales

Total Direct Cost0.000.000.000.000.000.000.000.000.000.00

Indirect Cost Employee CostEmployee Cost as % of Sales

Other ExpensesOther Expenses as % of Sales

Research & Development ExpensesResearch & Development Expenses as % of Sales

Total Indirect Cost 0.000.000.000.000.000.000.000.000.000.00

Total Direct Cost0.000.000.000.000.000.000.000.000.000.00

Calculate direct Cost as a % of Sales and back calculate direct cost for the remaining year.Calculate indirect Cost as a % of Sales and back calculate indirect cost for the remaining year.

Working Capital ScheduleCipla LimitedFY07FY08FY09FY10FY11FY12EFY13EFY14EFY15EFY16EWorking Capital ScheduleHistoricalEstimates

Net SalesCost of Sales (excluding D&A)

Working Capital BalancesAccounts Receivable, netInventoryOther Current AssetsTotal Non Cash Current Assets

Accounts PayableAccrued LiabilitiesOther Current LiabilitiesTotal Non-Debt Current Liabilities

Net Working Capital/ (Deficit)

(Increase)/ Decrease in Working Capital

Ratios & AssumptionsAccounts Receivable, net (Collection period in days)Inventory (Days outstanding)Other Current Assets (% of Net Sales)

PurchasesAccounts Payable (Days Payable)Accrued Liabilities (% of COGS)Other Current Liabilities (% of COGS)

Cash Flow from Individual line itemsAccounts Receivable, netInventory Other Current Assets Accounts Payable Accrued Liabilities Other Current Liabilities (Incease)/ Decrease in Working Capital

Check

Depn & Amo Schedule

Cipla LimitedFY07FY08FY09FY10FY11FY12EFY13EFY14EFY15EFY16EDepreciation ScheduleHistoricalEstimates

Net SalesCapital ExpendituresCapital Expenditures as % of Net Sales

Beginning Net PP&ECapital Expenditures(Depreciation Expense)(Asset Sales )Ending Net PP&EPPE (Break-up for 2011)AmountUseful LifeProportion of AssetsFreehold LandNALeasehold LandStraight Line Method of Depreciation