Cadilla Project Report

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Cadila Healthcare Report2 11

Project Report

AProject ReportOn

Financial Analysis

Of

Cadila Healthcare LimitedSubmitted to

Global Institute of ManagementGujarat Technological University

On

8/11/2011

In Partial fulfillment of the requirements for theAccounting for Managers course in the

Master of Business Administration ProgrammeBy

Deval Patel

Dharmik Mehta-

Premkumar P Joshi24


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Preface

First company in India to launch an indigenously developed andmanufactured H1N1 vaccineVaxiFlu-S.

Forayed into the new therapy segment of Hepatology with thelaunch of a super specialty division Zydus Heptiza.

Focused efforts in cardiology and respiratory segments haveyielded expected results, with the Company outpacing themarket growth in both these segments and strengthening itsmarket share.

Launched over 60 new products including line extensions in theformulations market, of which, 24 were first in India.

Overall, the India formulations business posted sales ofRs. 17,145 mio., up by 19%.

Signed an agreement with Bayer Healthcare to form BayerZydus Pharma Pvt. Ltd., a joint venture to market products inIndia with a focus on womens healthcare, metabolic disorders,

diagnostic imaging, cardiovascular diseases, anti-diabetictreatments and oncology.


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Contents

Chapter 1: Introduction

Chapter 2: Financial AnalysisChapter 3: Comparative Balance sheet

Chapter 4: Ratio Analysis

Chapter 5: Comparative Profit & Loss A/C

Chapter 6: Cash Flow Statement

Chapter 7: Findings & Suggestions

Chapter 8: Contemporary Issues in theCompany

Chapter 9: Bibliography


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Introduction

India Formulations

First company in India to launch an indigenously developedand manufactured H1N1 vaccineVaxiFlu-S.

Forayed into the new therapy segment of Hepatology with

the launch of a super specialty division Zydus Heptiza.

Focused efforts in cardiology and respiratory segmentshave yielded expected results, with the Company outpacingthe market growth in both these segments andstrengthening its market share.

Launched over 60 new products including line extensionsin the formulations market, of which, 24 were first in India.

Overall, the India formulations business posted sales ofRs. 17,145 mio., up by 19%.

Signed an agreement with Bayer Healthcare to form BayerZydus Pharma Pvt. Ltd., a joint venture to market productsin India with a focus on womens healthcare, metabolic

disorders, diagnostic imaging, cardiovascular diseases, anti-diabetic treatments and oncology.


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Global Formulations

US business posted sales of Rs. 9,655 mio., up by 44% y-y,

with launch of 11 new products, including four Day-1launches. Zydus Pharmaceuticals USA Inc. is now amongstthe top 3 players in the market for nine out of the top tenproducts marketed by it in the US and has recently beenranked 12th amongst the top US generic companies basedon scripts.

Despite the challenging time that the overall French marketfaces, the French business continued to progress andoutpaced the market growth. Launched over 20 newproducts and l line extensions in France, including fourDay-1 launches. Continued to increase market presence inSpain through new product launches. The Company nowranks amongst the top 20 generic companies in Spain.Overall, posted sales of Rs. 2,740 mio., in Europe, up by13% in constant Euro terms.

Continued to make headway in Japan in spite of pricereductions during the year. With the launch of Amlodipinein Japan, the Company became the first Indian company toget marketing approval and launch a product manufacturedin India. Also launched 3 in-licensed products, including

two Day-1 launches. During the year, Japan operationsposted sales of Rs. 422 mio., up by 34% y-y.


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Business in Brazil continued to progress well with a

healthy growth in both the branded and pure genericssegments with the launch of 4 new products. Business inthe other emerging markets of Asia Pacific, Africa and theMiddle East also registered a healthy growth, maintainingleadership positions in Sri Lanka, Myanmar, Uganda andSudan. Overall, registered Sales of Rs. 4,230 mio., in theemerging markets, up by 24% y-y.

Entered the Mexican pharmaceuticals market with thesetting up of the new subsidiaryZydus PharmaceuticalsMexico S.A. de C.V. Valued at approx. $9 bn, the Mexicanpharmaceuticals market is growing at over 8% and offersgreat potential.

Awards and Recognition

Declared the Emerging Company of the Year by the

Economic Times Awards for Corporate Excellence 2010.

Ranked 75th amongst the top 100 stocks in India by ET

Wealth.


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Consolidated Financial Highlights

Total income from operations was up by 26% y-y to Rs.46.3 bni.e. over $1 bn from Rs. 36.9 bn last year.

EBIDT was up by 27% y-y to Rs. 10,262 mio., from Rs.8,086 mio., lastyear. EBIDT margin was up by 0.3% to

22.2% from 21.9% last year.

Operating profit before tax (excl. non-operating incomes,exceptional items and exchange rate fluctuation on forexloans) was up by 38% y-y to Rs. 8,212 mio., from Rs.5,939 mio., last year.

Net profit after tax was up by 41% y-y to Rs. 7,110 mio.,from Rs. 5,051 mio., last year, and in line, EPS was also upby 41% to Rs. 34.73 from Rs. 24.67 last year.

Return on average capital employed increased to 24.5%vis--vis 21.1% last year, while return on average net worthincreased to 37.5% from 35.9% last year.


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Managements Discussion and Analysis 2010-11

Economy and Industry Overview

Global Economy and the Pharmaceutical I ndustry

As reported by the World Bank in the Global EconomicProspects 2011, the real GDP of the global economy isestimated to have expanded by 3.9% in 2010, led by a

strong domestic demand in the developing countries.

The economic activities in most of the developingcountries, which experienced a downward trend followingthe global economic crisis post 2008, have, or are close tohaving recovered. This has been supported by a resurgencein the international and domestic financial flows and a hikein commodity prices, which has helped economies of thedeveloping countries regain the growth rates close to thoseobserved in the pre-crisis period. Conversely, the recoveryprocess in many high-income countries has been weaker.

The robust recovery process in the developing countries isquite remarkable as it reflects a significant expansion oftheir domestic markets, which contributed to 46% of the

global growth in 2010. Going forward, developingcountries are expected to lead the growth journey andoutpace high-income developed countries in terms ofeconomic growth. (Source: World Bank Report on Global

Economic Prospects 2011)


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I ndian Economy and Pharmaceutical I ndustry

The fundamentals of the Indian economy continued toremain strong during FY 10-11. The GDP is estimated tohave grown by 8.6% in 2010-11 as compared to 8% in2009-10 which is remarkable considering the muted growthglobally.This growth has been witnessed across all themajor sub-sectors in the industry and services. Despite thesluggish growth in the global markets, the employmentopportunities continued to show an upward trend in India.

The inflationary trends which have been steadily rising area cause for concern. The average Wholesale Price Index(WPI) inflation rate for 2010-11 was 9.4% as compared to3.6% in 2009-10. (Source: Monthly Economic Report,March 2011 as published by Ministry of Finance, Govt. ofIndia)

India is one of the fastest growing pharmaceutical marketsin the world and its market size has nearly doubled since2005. The Indian pharmaceutical market is expected tocontinue growing in double digits and establish its presenceamongst the worldstop ten markets. The domesticpharmaceuticals market grew by 15% in 2010-11 andreached a size of over Rs. 48000 crores (Source: IMS MATMar-11). This was led by rising income levels, anincreasing awareness about healthcare and highergovernment spending on healthcare. Chronic therapiescontinued to dominate the market and outpaced acutetherapies in terms of growth.


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Operating Highlights

The year 2010-11 has been a special one for the Companyas it marched ahead to achieve the goal of $1 bn inconsolidated revenues by March 2011.

Four years ago when the Company set out to achieve the

billion, it added an important prefix to the goal and called itthe HealthyBillion as it looked at achieving the billiondollar mark with an overall improvement in business healthparametersgrowth, market share, productivity, marginsand returns and increase in value for all the stakeholders.

The Company ended the year on a high note as it enteredthe billion dollar league. Its a big leap, achieved through

an all-round effort in terms of strengthening existingbusinesses, building new capabilities and venturing intonew geographies.

Here is an account of the initiatives and achievements ofthe different business verticals in the Healthy Billion

year, 2010-11.


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India Formulations:

The Companys formulations business in India has been

one of the significant contributors to the Healthy Billion

with a dominant share in the overall business.

During the year 2010-11, the Companys brandedformulations business in India posted sales of Rs. 16,200mio., up by 19% from Rs. 13,625 mio., last year. TheCompany maintained its strong position in the Indianpharmaceuticals market with a market share of 3.73%(Source: IMS MAT March 2011).

During the year, the Company continued with its effortsand strategic initiatives towards increasing the market reach

and improving market share through portfolio expansion,new product introductions and increased marketpenetration. Last year, the Company had initiated astrategic expansion of the field force in the cardiology andrespiratory segments. This has yielded expected results asthe Company outpaced the market growth and strengthenedits market share in both these segments during the year.

During the financial year 2010-11, the Company made aforay into the new therapy segment of Hepatology with thelaunch of the super specialty divisionZydus Heptiza.


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Manufacturing Operations

Environment, Health and Safety:

The Companys mission of creating healthier communities

globally reflects its commitment towards conservation ofthe environment and compliance with all the requirementsrelated to Environment, Health and Safety (EHS).

The Company undertook various initiatives during the year

to adopt best environmental management practices andpromote awareness on EHS management. The Companylaunched the Zydus EHS portal for accessing the EHSdocuments, legal updates, forms, achievements, events anddevelopments in the field of EHS.The Company aspires to get the ISO 14064 certification forits environment friendly practices.

The Companys initiatives in ensuring Environment, Health

and Safety have been appreciated by several agencies. TheZydus Research Centre, the Companys NME research

facility near Ahmedabad was awarded the Gujarat StateSafety Award - Rotating Shield for Lowest DisablingInjury Index by the Gujarat Safety Council. Zyfine, the

Companys fine chemical manufacturing facility nearAhmedabad and the Companys API manufacturing facility

at Dabhasa were awarded the Certificate of Appreciation atthe State level by the Gujarat Safety Council for achieving10 lac accident free man hours during the year.


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Financial Analysis

Documents

Cadilla Project Report