EXECUTIVE SUMMARY

Fundamental analysis involves analyzing the underlying forces that affect the well
being of the economy, industry groups, and companies. Most often, the aim of
company analysis is to derive a stock's current fair value and forecast future value. If
fair value is not equal to the current stock price, fundamental analysts believe that the
stock is either over or under valued and the market price will ultimately gravitate
towards fair value. By believing that prices do not accurately reflect all
available information, fundamental analysts look to capitalize on perceived price
discrepancies.
In this project an attempt has been made to analyzed financial performance of Sun
Pharmaceuticals Industries limited.
Earlier part of the report gives information about Indian economy and Industry
scenario
And the later part of the project gives information about company financial
performance and ratios analysis.
This study will help us to determine the financial health of a company.

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INDIAN ECONOMY

Indian Economy has covered a long ground since it was liberalized in 1991. Today,
India has the fourth largest economy in terms of purchasing power parity (PPP)
behind only the USA, China, and Japan. It is slated to overtake Japan and
become the third major economic power in the next ten years. India is also one of
the few markets in the world which offers high prospects for growth and earning
potential in practically all areas of business. Indian economic growth has been
among the fastest in the world in the recent Years.

India was a highly protected, semi-socialist autarkic economy till 1991. There
were numerous structural and bureaucratic impediments in setting up a new
business and Foreign investment was not welcomed. The opening up of the Indian
economy in 1991, Unleashed the latent entrepreneurial talent of the Indian and in less
than two decades India has established itself as the next economic superpower of the
world.

Now in mid 2009, the global economy is showing incipient signs of stabilization, of
course not recovery. The pace of decline in economic activity in several major
advanced economies has slowed, frozen credit markets have thawed and equity
markets have begun to recover. Recent months have witnessed industrial activity
reviving in a number of emerging market economies (EMEs) such as China, Korea,
Brazil and India. Notwithstanding some positive signs, the path and the time horizon
for global recovery remain uncertain. Consumption demand remains subdued as
unemployment levels have raised. Business and consumer confidence are yet to show
definitive signs of revival. Global trade, according to the International Monetary

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 Fund (IMF), is projected to shrink by over 12 per cent in 2009; private capital flows
are also expected to decline. The continuing process of balance sheet adjustment by
both households and businesses is inhibiting recovery in many economies. Reflecting
these several uncertainties, the IMF, in its latest World Economic Outlook (WEO)
update released in July 2009, has further revised downwards the global growth
forecast for 2009 to (-)1.4 per cent from its April 2009 forecast of (-)1.3 per cent.
The crisis, which affected the global financial system and engulfed most countries of
the world, had all the ingredients for a severe disruption of the world economy on the
scale of the Great Depression. However, it was mitigated by bold, large and decisive
actions taken in concert by governments and central banks in each country, and
which came to be increasingly co-ordinate across countries. Consequently, while the
financial sector appears to be stabilizing, economic recession in the real sector
persists.

The Indian economy experienced a significant slowdown in 2008-09 in comparison

with the robust growth performance in the preceding five years, largely due to the
knock-on effect of the global financial crisis. The worst hit has been the export
sector, which has been recording negative growth since October 2008. This, in turn,
impacted the manufacturing sector. Investment demand was also dented by the
decline in corporate profitability and increased uncertainties about future prospects.
Private consumption decelerated significantly. The services sector, which has been
the main driver of growth for more than a decade, also slowed down. The financial
sector, however, remained relatively unaffected despite the severe stress caused by
the global deleveraging process, which triggered capital outflows in the second half
of 2008-09.

Global Outlook:
The deterioration in the global outlook that started in September 2008 continued in

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 the second quarter of 2009, although some tentative signs of stabilization have begun
to emerge. Reflecting the continued decline, the IMF in its July Update of the World
Economic Outlook (WEO) has projected that the global economy will shrink by 1.4
per cent in 2009, a shade more than the contraction of 1.3 per cent projected earlier
in April 2009. The global economy is, however, projected to recover and expand by
2.5 per cent in 2010 (Table 1). Projections by other international agencies such as the
World Bank also do not hold any promise of recovery in 2009.

Table 1: Global GDP Growth (%)

Country/Region 2009 2010

US (-) 2.6 0.8
UK (-) 4.2 0.2
Euro Area (-) 4.8 (-) 0.3
Japan (-) 6.0 1.7
China 7.5 8.5
India 5.4 6.5
World (-)1.4 2.5
Source: IMF World Economic Outlook, July 8, 2009.

In the US, real GDP declined at an annual rate of 5.5 per cent in Q1 of 2009, driven
mainly by a decline in consumption and exports. The IMF’s July WEO Update has
projected real GDP of the US to shrink by 2.6 per cent in 2009, a slight improvement
from a contraction of 2.8 per cent projected in the April WEO. The main
macroeconomic indicators continued to be adverse in Q2 of 2009 with the
unemployment rate increasing to 9.5 per cent in June 2009 accompanied by a dip in
wage growth, industrial production, capacity utilization and consumer sentiment.

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 Retail sales and consumption continued to be weak as households were still engaged
in repairing their balance sheets ruptured by the fall in asset prices. The below trend
growth is likely to persist for some more time. Consequently, spare capacity and
unemployment are expected to rise

Domestic Outlook

The Indian economy grew by 6.7 per cent in 2008-09 according to the revised
estimates of the Central Statistical Organization (CSO) – better than most analysts
had expected, but lower than the growth of 9.0 per cent in 2007-08. The deceleration
in GDP growth was particularly pronounced during the second half of 2008-09,
largely due to the adverse impact of the global economic crisis.

Table 2: Real GDP Growth (%)

Activity Financial Year Quarterly Quarterly Quarterly Quarterly
Growth Growth Growth Growth
2007- 2008-
08 09 Q1 Q2 Q3 Q4
(Apr-Jun) (Jul-Sep) (Oct-Dec) (Jan-
Mar)
Agriculture 4.9 1.6 3.0 2.7 (-) 0.8 2.7
Industry 7.4 2.6 5.1 4.8 1.6 (-) 0.5
Services 10.8 9.4 10.0 9.8 9.5 8.4
Overall 9.0 6.7 7.8 7.7 5.8 5.8
GDP

Source: Central Statistical Organization (CSO).

Agriculture
The agriculture sector, which recorded an average annual growth rate of 4.9 per cent
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 during 2003-08, expanded only by 1.6 per cent during 2008-09. In 2008-09, food
grains production was 233.9 million tons, up from 230.8 million tons last year. This
was also an all-time high. Allied activities – horticulture, floriculture, forestry,
livestock and fisheries – which account for a substantial share in agriculture
remained buoyant. However, the production of commercial crops such as major
oilseeds, cotton, jute and sugarcane was lower. Looking ahead to the current year,
the progress of the south-west monsoon has been slow and halting. By July 22, 2009,
monsoon rainfall was 19 per cent below normal in the country as a whole. At a
disaggregated level, rainfall was deficient/scanty in 19 of the 36 meteorological sub-
divisions. While kharif sowing has picked up in July, the delayed monsoon can
impact agricultural output. Although the share of agriculture and allied activities in
GDP has declined over the years and is currently at 17.5 per cent, good agricultural
performance is critical not only because it employs over 55 per cent of the labour
force but also for ensuring stability in food prices.

Industry
Industrial sector growth decelerated significantly to 2.6 per cent in 2008-09 from 8.5
per cent in the previous year due largely to negligible/negative growth during four
months in the second half of the year. This pushed down the growth rate of the index
of industrial production (IIP) to an abysmally low of 0.4 per cent during the second
half of 2008-09 from 5.0 per cent in the first half. During April-May 2009, however,
industrial growth turned positive with IIP increasing by 1.9 per cent. While growth in
the basic, intermediate and consumer durable goods sectors picked up, the capital
goods and consumer non-durable sectors showed negative growth. The core
infrastructure sector, with a weight of 26.7 per cent in the IIP, recorded a higher
growth of 4.8 per cent during April-June 2009, up from 3.5 per cent in the
corresponding period in the previous year. The leading indicators of industrial
production, both quantitative and qualitative, suggest that the recent downturn has

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 been arrested and a pick-up is on the way forward, albeit with some lag.

Services
the performance of the services sector during April-May 2009 presents a mixed but
predictable picture. Trade-related services such as cargo handled at major sea and
airports, as also passengers handled at international terminals continue to show
deceleration/negative growth. Domestic activity-related services such as
communication and construction are showing signs of upturn.

INDIAN PHARMACEUTICAL INDUSTRY

Indian pharmaceutical sector has an estimated market value of about US $10 billion.
It's at 4th rank in terms of total pharmaceutical production and 13th in terms
of value. It is growing at an average rate of 7.2 % and is expected to grow to US $
14 billion by 2011.

Over the last two years the pharmaceutical market value has increased to about US $
355 million because of the launch of new products. According to an estimate, 3900

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 new generic products have been launched in the past two years. These have been by
and large launched by big brands in the pharmacy sector.

With the Product Patent Act, which came into action in January 2005, this
industry is able to attract big MNCs to India. Earlier these big firms had
apprehensions in launching new drugs in the Indian market.
At present, a large number of Indian pharmaceuticals companies are looking for tie-
ups with foreign firms for in-license drugs. GlaxoSmithKline is among the top
choices for the firms that wish to launch their product in India, but do not have any
branch over here.

Contract research and pharmaceutical outsourcing are the new avenues in the
Pharmaceutical market. Contract manufacturing is growing at a very fast pace
and is estimated to grow to US $ 30billion, whereas contract research is estimated to
reach US $ 6-10 billion.

Indian multinational companies like Dr. Reddy’s Lab, Sun Pharmaceuticals Ltd,
Cipla, Ranbaxy, etc have created awareness about the Indian market prospects in the
international pharmaceutical market.

Approvals given by Foods and Drugs Administration (FDA) and ANDA

(Abbreviated New Drug Application)/DMF (Drug Master File) have played an
important role in making India a cost-effective and high quality product
manufacturer. Furthermore, the changes that took place in the patent law,
change of process patent to product patent, have helped in reducing the risk of
loss for intellectual property.

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 According to industry estimates, generics are estimated to witness a revenue CAGR
of 9% over 2008-2013 to US$ 135bn. It is expected that the emerging markets will
continue to expand while the matured generics markets slow down further. Volume
growth of 10-11%, coupled with 4-5% growth from new product launches and 7-8%
price erosion in existing products would be the key components of growth.

Key growth drivers are an ageing world population, rising healthcare spending and
increasing acceptance for generics. As we move towards 2050, the world population
in the age group of 40-59 and 60+ are estimated to jump from 1.4bn to 2.3bn and
0.7bn to 1.9bn respectively. This would put further pressure on the spiraling
healthcare spending of the developed countries which has been growing faster than
the GDP. The government of these countries would have no choice but to increase
generic penetration. Generics are also gaining increasing acceptance from regulated
markets. A case in point is Japan which has a generic penetration target of 30% in
volume by 2012 from 5% (US$ 3bn) currently.

➢ We have witnessed a series of acquisitions/partnerships announced in the

emerging markets lately.
➢ Acquisition in these markets has picked up steam starting in 2008 when
innovators realized the need to be in these markets for sustainability.
➢ Large pharmacy companies like Pfizer have announced a greater need to be
present in emerging markets. GlaxoSmithKline and Dr Reddy’s recently formed
a strategic alliance to develop and market over 100 products in emerging
markets. We expect more such deals to be signed between generics and
innovators for the emerging markets.

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 TARGETTING EMERGING MARKETS:
➢ The slowing US and EU markets are forcing pharmacy companies to look at
emerging markets led by BRICS (Brazil, Russia, India, China and South Africa)
more seriously for growth.
➢ These markets have strong growth potential (estimated to witness a CAGR of
12-15% over 2009-2014) driven by increasing per capita spend, lower
penetration of modern medicines, increasing insurance penetration and
improving lifestyle. These markets are branded in nature and therefore offer
higher margins but have strong entry barriers in the form of doctor relationship
and brand recalls

Increasing innovator – generic acquisitions/ partnerships:

➢ Acquisition of Ranbaxy by Daiichi Sankyo in 2008 is a case in point where
synergies can be leveraged between an innovator and a generic company.
➢ Recent announcements between Pfizer-Eurobond Parma and Claris Life science
and the latest alliance between GSK and Dr Reddy’s for over 100 products in the
emerging markets highlight the need for partnership models in pharma.
➢ We believe more acquisitions particularly in the emerging markets, would
unfold over the next few years. We are also seeing generic companies building

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 pipelines for proprietary products which could hit the market in 2012-13.

SWOT ANALYSIS OF PHARMA SECTOR

STRENGTHS: ➢ Low healthcare expenditure

➢ Cost effective technology ➢ Production of duplicate drugs
➢ Strong and well-developed
manufacturing base
➢ Clinical research and trials
➢ Knowledge based, low- cost
manpower in science & technology
➢ Proficiency in path-breaking OPPORTUNITIES
research ➢ Incredible export potential
➢ High-quality formulations and ➢ Increasing health consciousness
drugs ➢ New innovative therapeutic
➢ High standards of purity products
➢ World-class process development ➢ Globalization
labs ➢ Drug delivery system management
➢ Increased incomes
WEAKNESSES ➢ Production of generic drugs
➢ Low Indian share in world ➢ Contract manufacturing
pharmaceutical market (about 2%) ➢ Clinical trials & research
➢ Lack of strategic planning ➢ Drug molecules
➢ Fragmented capacities
➢ Low R&D investments THREATS
➢ Absence of association between ➢ Small number of discoveries
institutes and industry ➢ Competition from MNCs
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➢ Transformation of process patent to methods
product patent (TRIPS) ➢ Non-tariff barriers imposed by
➢ Outdated Sales and marketing developed countries

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 FUTURE SCENARIO

The dream of Indian pharmaceutical companies for marking their presence globally
and competing with the pharmaceutical companies from the developed countries like
Europe, Japan, and United States is now coming true.

The new patent regime has led many multinational pharmaceutical companies to
look at India as an attractive destination not only for R&D but also for contract
manufacturing, Conduct of clinical trials and generic drug research. With market
value of about US$ 45billion in 2005, the generic sector is expected to grow to US$
100 billion in the next few years.

The Indian companies are using the revenue generated from generic drug sales
to Promote drug discovery projects and new delivery technologies. Contract
research in India is also growing at the rate of 20-25% per year and was valued at
US$ 10-120million In 2005. India is holding a major share in world's contract
research business activity and It continues to expand its presence.

Clinical Research Outsourcing (CRO), a budding industry valued over US$ 118
million Per year in India, is estimated to grow to US$ 380 million by 2010, as MNCs
are entering the market with ambitious plans. By revising its R&D policies the
government is trying to boost R&D in domestic pharma industry. It is giving tax
exemption for a period of ten years and relieving customs and excise duties of all
the drugs and material imported or exported for clinical trials to promote
innovative R&D.

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 THE FUTURE OF INDIAN PHARMACEUTICAL SECTOR IS VERY
BRIGHT BECAUSE OF THE FOLLOWING FACTORS :

➢ Clinical trials in India cost US$ 25 million each, whereas in US they

cost between US$ 300-350 million each.
➢ Indian pharmaceutical companies are spending 30-50% less on custom
synthesis services as compared to its global costs.
➢ In India investigational new drug stage costs around US$ 10-15
million, which is almost 1/10th of its cost in US (US$ 100-150million).

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 CHALLENGES: PHARMA SECTOR

➢ Attracting and retaining skilled workforce.

➢ Controlling operating costs.
➢ Generic competition.
➢ Fake drugs.
➢ Pricing pressure & shrinking margins.
➢ Managing regulatory Compliance.
➢ Sustaining growth in global market.
➢ Intellectual Property Protection
➢ Realizing tangible value from strategic alliances, joint ventures (JVs) and
partnering arrangements

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 ANALYSIS OF COMPANY
Overview:
The methods used to analyze securities and make investment decisions fall into two
very broad categories: fundamental analysis and technical analysis. Fundamental
analysis involves analyzing the characteristics of a company in order to estimate its
value. Technical analysis takes a completely different approach; it doesn't care one
bit about the "value" of a company or a commodity. Technicians (sometimes called
chartists) are only interested in the price movements in the market.
Despite all the fancy and exotic tools it employs, technical analysis really just studies
supply and demand in a market in an attempt to determine what direction, or trend,
will continue in the future. In other words, technical analysis attempts to understand
the emotions in the market by studying the market itself, as opposed to its
components. If you understand the benefits and limitations of technical analysis, it
can give you a new set of tools or skills that will enable you to be a better trader or
investor.

What Is Fundamental Analysis?

Fundamental analysis is the cornerstone of investing. In fact, some would say that
you aren't really investing if you aren't performing fundamental analysis.Because the
subject is so broad, however, it's tough to know where to start. There are an endless
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 number of investment strategies that are very different from each other, yet almost all
use the fundamentals.

The goal of this tutorial is to provide a foundation for understanding fundamental

analysis. It's geared primarily at new investors who don't know a balance sheet from
an income statement.While you may not be a "stock-picker extraordinaire" by the
end of this tutorial, you will have a much more solid grasp of the language and
concepts behind security analysis and be able to use this to further your knowledge in
other areas without feeling totally lost.
The biggest part of fundamental analysis involves delving into the financial
statements. Also known as quantitative analysis, this involves looking at revenue,
expenses, assets, liabilities and all the other financial aspects of a company.
Fundamental analysts look at this information to gain insight on a company's future
performance. A good part of this report will be about the balance sheet, income
statement, cash flow statement and how they all fit together.

What Is Technical Analysis?

Technical analysis is a method of evaluating securities by analyzing the statistics
generated by market activity, such as past prices and volume. Technical analysts do
not attempt to measure a security's intrinsic value, but instead use charts and other
tools to identify patterns that can suggest future activity.
Just as there are many investment styles on the fundamental side, there are also many
different types of technical traders. Some rely on chart patterns, others use technical
indicators and oscillators, and most use some combination of the two. In any case,
technical analysts' exclusive use of historical price and volume data is what separates
them from their fundamental counterparts. Unlike fundamental analysts, technical
analysts don't care whether a stock is undervalued - the only thing that matters is a
security's past trading data and what information this data can provide about where

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 the security might move in the future.

The field of technical analysis is based on three assumptions:

1. The market discounts everything.
2. Price moves in trends.
3. History tends to repeat itself.
Technical analysis can be used on any security with historical trading data. This
includes stocks, futures and commodities, fixed-income securities, forex, etc. In this
tutorial, we'll usually analyze stocks in our examples, but keep in mind that these
concepts can be applied to any type of security. In fact, technical analysis is more
frequently associated with commodities and forex, where the participants are
predominantly traders.

Fundamental Vs. Technical Analysis:

Technical analysis and fundamental analysis are the two main schools of thought in
the financial markets. As we've mentioned, technical analysis looks at the price
movement of a security and uses this data to predict its future price movements.
Fundamental analysis, on the other hand, looks at economic factors, known as
fundamentals. Let's get into the details of how these two approaches differ, the
criticisms against technical analysis and how technical and fundamental analysis can
be used together to analyze securities.

The Differences
Charts vs. Financial Statements
At the most basic level, a technical analyst approaches a security from the charts,
while a fundamental analyst starts with the financial statements.
By looking at the balance sheet, cash flow statement and income statement, a
fundamental analyst tries to determine a company's value. In financial terms, an
analyst attempts to measure a company's intrinsic value. In this approach, investment
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 decisions are fairly easy to make - if the price of a stock trades below its intrinsic
value, it's a good investment.
Technical traders, on the other hand, believe there is no reason to analyze a
company's fundamentals because these are all accounted for in the stock's price.
Technicians believe that all the information they need about a stock can be found in
its charts.

Time Horizon
Fundamental analysis takes a relatively long-term approach to analyzing the market
compared to technical analysis. While technical analysis can be used on a timeframe
of weeks, days or even minutes, fundamental analysis often looks at data over a
number of years.

The different timeframes that these two approaches use is a result of the nature of the
investing style to which they each adhere. It can take a long time for a company's
value to be reflected in the market, so when a fundamental analyst estimates intrinsic
value, a gain is not realized until the stock's market price rises to its "correct" value.
This type of investing is called value investing and assumes that the short-term
market is wrong, but that the price of a particular stock will correct itself over the
long run. This "long run" can represent a timeframe of as long as several years, in
some cases.
Furthermore, the numbers that a fundamentalist analyzes are only released over long
periods of time. Financial statements are filed quarterly and changes in earnings per
share don't emerge on a daily basis like price and volume information. Also
remember that fundamentals are the actual characteristics of a business. New
management can't implement sweeping changes overnight and it takes time to create
new products, marketing campaigns, supply chains, etc. Part of the reason that
fundamental analysts use a long-term timeframe, therefore, is because the data they

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 use to analyze a stock is generated much more slowly than the price and volume data
used by technical analysts.

Trading Versus Investing:

Not only is technical analysis more short term in nature that fundamental analysis,
but the goals of a purchase (or sale) of a stock are usually different for each
approach. In general, technical analysis is used for a trade, whereas fundamental
analysis is used to make an investment. Investors buy assets they believe can increase
in value, while traders buy assets they believe they can sell to somebody else at a
greater price. The line between a trade and an investment can be blurry, but it does
characterize a difference between the two schools.

The Critics
Some critics see technical analysis as a form of black magic. Don't be surprised to
see them question the validity of the discipline to the point where they mock its
supporters. In fact, technical analysis has only recently begun to enjoy some
mainstream credibility. While most analysts on Wall Street focus on the fundamental
side, just about any major brokerage now employs technical analysts as well.

EFFICIENT MARKET THEORY:

Much of the criticism of technical analysis has its roots in academic theory -
specifically the efficient market hypothesis (EMH). This theory says that the market's
price is always the correct one - any past trading information is already reflected in
the price of the stock and, therefore, any analysis to find undervalued securities is
useless.

There are three versions of EMH. In the first, called weak form efficiency, all past
price information is already included in the current price. According to weak form
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 efficiency, technical analysis can't predict future movements because all past
information has already been accounted for and, therefore, analyzing the stock's past
price movements will provide no insight into its future movements. In the second,
semi-strong form efficiency, fundamental analysis is also claimed to be of little use
in finding investment opportunities. The third is strong form efficiency, which states
that all information in the market is accounted for in a stock's price and neither
technical nor fundamental analysis can provide investors with an edge.
There is no right answer as to who is correct. There are arguments to be made on
both sides and, therefore, it's up to you to do the homework and determine your own
philosophy.

Can They Co-Exist?

Although technical analysis and fundamental analysis are seen by many as polar
opposites - the oil and water of investing - many market participants have
experienced great success by combining the two. For example, some fundamental
analysts use technical analysis techniques to figure out the best time to enter into an
undervalued security. Oftentimes, this situation occurs when the security is severely
oversold. By timing entry into a security, the gains on the investment can be greatly
improved.

Alternatively, some technical traders might look at fundamentals to add strength to a

technical signal. For example, if a sell signal is given through technical patterns and
indicators, a technical trader might look to reaffirm his or her decision by looking at
some key fundamental data. Oftentimes, having both the fundamentals and technicals
on your side can provide the best-case scenario for a trade.

While mixing some of the components of technical and fundamental analysis is not

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 well received by the most devoted groups in each school, there are certainly benefits
to at least understanding both schools of thought.

Here I have done only fundamental analysis of Sun pharmaceuticals ltd.

SUN PHARMACEUTICALS INDUSTRIES LIMITED

Company profile:
Sun Pharmaceuticals Industries Ltd. is an international speciality pharma company,
with a presence in 30 markets. Sun Pharma also make active pharmaceutical
ingredients. In branded markets, Sun pharma products are prescribed in chronic
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 therapy areas like cardiology, psychiatry, neurology, gastroenterology, diabetology
and respiratory.

Sun Pharma came into existence as a startup with just 5 products in 1983. In the time
since, Sun pharma have crossed several milestones to emerge as an important
speciality pharma company with technically complex products in global markets, and
a leading pharma company in India.

In India, Sun Pharma have reached leadership in each of the therapy areas that they
operate in, and are rated among the leading companies by key customers.
Strengthening market share and keeping this customer focus remains a high priority
area for the company.

In the post-1996 years, Sun Pharma have used a combination of internal growth and
acquisitions to drive growth; important mergers were those of the US, Detroit based
Caraco Pharm Labs, ICN Hungary (now called Alkaloida Chemical Company
Exclusive Group), and that of the internationally approved plants at Halol, India as
well as Bryan, Ohio, US and Cranbury, NJ, US.

Sun Pharma has shifted work related to new molecules and drug delivery systems to
a company, SPARC, which is listed on the Indian stock exchange.

Key Milestones post 1996:

1997 :

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 Acquisition of Tamil Nadu Dadha Pharmaceuticals Ltd.

1998:
Brand buyout : Brands from Natco Pharma

1999 :
Acquisition of Milmet Labs

2000:
Acquisition of Pradeep Drug Company Ltd

2004 :

Sun Pharma increased stake in Caraco to 66%. By 2007, this stake has reached 75%
on a diluted basis.
The formulation site in Halol, India (the erstwhile MJ Pharma site) received approval
from USFDA, UK MHRA, South African MCC, Brazilian ANVISA and Columbian
INVIMA
Sun Pharma acquires a Cephalosporin Actives manufacturer, Phlox Pharma, with
European approval for cefuroxime axetil amorphous. By 2007, a formulations facility
to make sterile and non sterile formulations have been built, and the API and non-
sterile sections have been approved by the USFDA.

2005:
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 Sun Pharma buys a plant in Bryan, Ohio, US and the business of ICN, Hungary from
Valeant Pharma.
Sun Pharma acquires the intellectual property and assets of Able Labs from the US
District Bankruptcy court in New Jersey in December 2005.
Dilip Shanghvi, the CMD, receives the E&Y Entrepreneur of the Year award in
healthcare and life sciences for 2005.
Sun Pharma is selected by Forbes amongst the best 200 companies (sales less than
USD 1 billion) in Asia. This is the fourth time in 5 years that the company has been
selected.

2006:

Announced the demerger of innovative business with pipelines, people, equipment

and funding, into a new company.

2007:

Completed the demerger of the innovative business, with requisite legal and
regulatory approvals. SPARC ltd, the new company, is listed on the stock exchanges
in India, the first pure research company to be so listed.
In May 2007, we, along with our subsidiaries, signed definitive agreements to
acquire Taro Pharmaceutical Industries Ltd., (TAROF, Pink Sheets), a multinational
generic manufacturer with established subsidiaries, manufacturing and products
across the U.S., Israel, Canada for $454 mill. This all-cash deal is subject to Taro
shareholder approval and requisite regulatory clearances

2008:

In November 2008, Sun Pharma along with subsidiaries, acquired 100% ownership
of Chattem Chemicals, Inc.,a narcotic raw material importer and manufacturer of
controlled substances with a approved facility in Tennessee. This will offer vertical
integration for our controlled substance dosage form business in the US.
25
SUN PHARMACEUTICALS INDUSTRIES LIMITED
Fundamental Analysis:

SHAREHOLDING PATTERN AT SUN PHARHARMACEUTICALS LTD. AS

ON 31ST MARCH, 2009 :
Table -3
Type Of Shareholder %
Of
Shar
es
Promoters and group 63.7
1
Mutual Funds or UTI 3.52
Financial Institutions or banks 2.29
FII 18.1
Corporates/HNIs 5.89
Retail Investors 6.49
Total 100

26
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Gragh: 1

CONSISTANT PERFORMANCE IN DOMESTIC MARKET:

1. Sun Pharma is the sixth largest company in India (in terms of prescription
sales) with a market share of 3.5%. Sun has witnessed a revenue CAGR of 28% over
FY05-FY09, driven by its focus on chronic space, vertical integration and strong
doctor relationships. Sun’s efforts have translated into a top 3 position in over 50%
of its strong 450 brands. Sun is No.1 in key therapeutics like Psychiatry, Neurology,
Cardiology, Ophthalmology, Diabetology and Orthopedics. These segments are not
easy to penetrate.
2. Despite a high base, Sun’s strong performance in the domestic market is
likely to continue, driven by new product launches and volume growth in existing
products.

27
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Graph 2:

SUN PHARMA PERFORMANCE FROM JUN 04 TO JUN 09 :

Graph 3:

28
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 SUNPHARMA

3000
STOCK PRICE

2500
2000
1500 Series1
1000
500
0
Apr-98

Apr-99

Apr-00

Apr-01

Apr-02

Apr-04

Apr-06

Apr-07

Apr-08
Apr-03

Apr-05
MONTH

Reason for stock price hike in June 1999 to Jan 2000-

1) The Company has merged its wholly owned export subsidiary Sun Pharma
Exports with itself. Sun Pharma merged its 99.28% subsidiary - Sun
Pharmaceuticals Exports.
2) Sun Pharmaceutical Industries Ltd has approved the merger of the ailing Pradeep
Drug Company Ltd.
3) The company, ranked 5th by domestic prescription product sales, has been
consistently adding to market share from 2.47% in November 2000 to 2.78% in
November 2001 (ORG Retail Chemist Audit, November 2000 and 2001). Forbes
Global, the prestigious international magazine recently rated Sun Pharma among the
best 200 global companies for 2002.

29
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Reason for stock price hike in April 2004
Sun Pharmaceutical Industries purchased additional stake in Caraco enhancing it’s
holding to 63.14%

Reason for stock price hike in 2007

1) Sun Pharmaceutical acquires Taro for 4 million

KEY FACTORS IN SUN PHARMA’S PERFORMANCE:

DESPITE CORACO’S SETBACK, US SALES TO GROW FROM SUN’S

OWN FILINGS:

1. Sun’s subsidiary in the US, Caraco’s 33 products was recently seized by the US FDA
for non compliance of cGMP requirements for a sustained period. The US FDA also
mentioned that these products would not be allowed to be distributed in the US till the
time Caraco’s facility comes up to the US FDA standards. The recent action is a
significant setback as the 33 products accounted for a major chunk of Caraco’s own
manufactured products having sales of US$ 112mn in FY09. In addition, Caraco’s 25
ANDAs pending approval would not be considered for approval as well.
2. Despite the setback on Caraco, Sun’s own filings will drive growth for the US
market. Caraco is a facility specializing in oral solids (tablets) while complex
products are from Sun’s facilities in India, which have all clearance from the US
FDA. Sun and Caraco together have 108 ANDAs awaiting approval, of which Sun
alone has 83 ANDAs, including filings from its Cranbury facility. These filings
include products for controlled substances a US$ 6bn opportunity with limited
competition due to the nature of the products. Sun is looking at vertical integration in

30
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 this area which would be a key differentiator.

Graph 4:

LAUNCH OF TECHNICALLY COMPLEX PRODUCTS HAS ENSURED

CONTINUING CASH FLOW BEYOND THE LIMITED PERIOD:
1. Sun’s forte has been the launch of technically complex products in the US, which not
only generate cash flows during the exclusivity period, but beyond that as well. Sun
has a mix of products, both blockbuster (Pantoprazole-US$ 2.3bn) and small size
products (Ethyol-US$ 80mn), but these have witnessed limited competition due to
the complex nature of products.
2. Generic Ultracet, launched in Dec ’05, is still a market with three other generics apart
from the innovator. Generic Protonix, launched at risk with a 180-day exclusivity,
has generated sales of US$ 340mn, while generic Ethyol launched at risk with 180-
day exclusivity is estimated to have generated US$ 25mn with no generic
competition. Protonix patent expiry is in Dec ’10 while Ethyol’s patent expiry is only
in July ’12.

31
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 3. Sun has refiled its ANDA for generic Effexor XR with the US FDA based on
Osmotica’s product. Sun has not been sued by Wyeth and is now awaiting approval
from the US FDA. Sun is confident of generating some revenue from the US$ 2.6bn
opportunity during the exclusivity period starting July ‘10. Effexor XR is not a part
of our estimates
4. While there are no other big opportunities visible currently, we believe that each of
these existing opportunities have the potential to generate sustainable cash flows in
the near future.
TARO ACQUISITION STILL PENDING:
➢ Sun has been unable to close the proposed US$ 454mn acquisition of Taro
announced in May 2007. There has been a series of allegations/counter allegations
from both the parties, but the issues remain unresolved. After the failure of both
parties to settle out of court, the verdict will be presented by the Supreme Court of
Israel. Sun had a favourable verdict from the lower court, but it was challenged by
Taro in the Supreme Court. Sun has so far infused US$ 105mn for a 36% stake and
22% voting rights

Table 4:

ACQUIRES ASSETS WITH AN AIM TO GENERATE HIGH ROI

32
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 ➢ Sun Pharma has historically shown interest in acquiring distressed assets, which
could emerge as a strategic fit or as an entry point in key markets for the company.
Sun’s key acquisition includes Caraco in 1997, which then was loss-making and had
a turnover of US$ 0.8mn. Sun’s technology transfer resulted in a turnaround in
Caraco’s operations in 2003. For FY09, Caraco reported sales of US$ 317mn with a
profitability of US$ 21mn.
➢ Sun’s other strategic acquisition includes a plant in Hungary (Alkaloida Chemicals)
which makes controlled substance APIs for entry into the US$ 6bn controlled
substances market in the US which has significant entry barriers. It later acquired
manufacturing assets of Able Labs for the manufacture of controlled substances from
the US Bankruptcy Court of the District of New Jersey for US$ 23mn.
➢ Sun strengthened its position in the controlled substances space by acquiring
Chattem Labs, a narcotic raw material importer and manufacturer of controlled
substances with a facility in Tennessee.

KEY RISKS TO SUN PHARMAEUTICALS:

DELAY IN ANDA approvals for launch in US MARKET:

➢ Since Coraco’s facility faces a warning letter , its 25 pending ANDAs are likely to
be considered for approvals. Sun’s ANDA (83 pending approvals) are therefore
crucial for driving growth in US. If the ANDA approvals are delayed , the economic
benefit may not be realized at its highest potential as the dalay may cause company’s
approval to be behind the competition.
Further negative news flow on Coraco,s US FDA status
➢ As Coraco’s own manufactured products have been seized by US FDA , it wil not
able to distribute these products in the US till the the facility does not meet the US
FDA cGMP requirements. While our US numbers for Sun Pharma are conservative ,
any further negative news from US FDA could have asignificany negative fallout.

33
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 AUDITED TARO NUMBERS ARE AT SIGNIFICANT DEVIATION:
➢ Taro is in process of restating its historic financials . Its current financials are baesd
on the management estimates and may change when audited numbers are reported.If
these numbers are at a significant deviation, particularly on the lower side , it may
result in a drag in probability of Sun’s operations.

Financial Analysis: Table 5

Profit and Loss Rs. In millions

Particulars Mar 2009 Mar 2008 Mar 2007 Mar 2006 Mar 2005
No. of Months 12 12 12 12 12
Gross Sales 39254.50 32107.60 23027.50 17429.20 12638.60
Sales 28336.50 24273.50 17221.30 13530.10 10443.50
Job Work / Contract
0 0 0 0 0
receipts
Prcessing Charges / Service
0 0 0 0 0
Income
Others operational income 10918.00 7834.10 5806.20 3899.10 2195.10
Less :Inter divisional
0 0 0 0 0
transfers
Less: Sales Returns 0 0 0 0 0
Less: Excise 639.00 617.10 568.60 613.70 487.30
Net Sales 38615.50 31490.50 22458.90 16815.50 12151.30
EXPENDITURE :
Increase/Decrease in Stock -286.80 -202.50 -387.00 -572.30 4.50
Opening Balances

34
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Work In Progress 1278.80 1045.10 908.80 489.70 428.60
Finished Goods 805.40 865.30 587.50 434.30 499.90
Shares, Units and Bonds 0 0 0 0 0
Other 0.00 0.00 27.10 0.00 0.00
Less :
Work In Progress 1357.10 1278.80 1045.10 908.80 489.70
Finished Goods 964.90 805.40 865.30 587.50 434.30
Shares, Units and Bonds 0 0 0 0 0
Other 49.00 28.70 0.00 0.00 0.00
Raw Materials Consumed 18974.40 15441.20 11993.90 8881.30 5559.40
Opening Raw Materials 1489.20 1296.00 1066.40 907.80 685.40
Purchases Raw Materials 6835.20 6247.50 5139.10 9039.90 5781.80
Closing Raw Materials 2056.70 1680.50 1296.00 1066.40 907.80
Other Direct Purchases /
12706.70 9578.20 7084.40 0 0
Brought in cost
Others 0.00 0.00 0.00 0.00 0.00
Power & Fuel Cost 504.40 373.60 310.90 255.50 144.80
Employee Cost 1448.40 1202.00 989.20 820.10 827.80
Other Manufacturing
2475.70 1938.50 1991.20 1524.80 620.60
Expenses
General and Administration
546.50 886.00 699.50 489.50 646.20
Expenses
Selling and Distribution
3052.30 1898.00 1430.50 1207.70 721.30
Expenses
Miscellaneous Expenses 179.10 146.80 171.00 158.90 380.70
Less: Pre-operative
0 0 0 0 0
Expenses Capitalized
Total Expenditure 26894.00 21683.60 17199.20 12765.50 8905.30
Operating Profit (Excl OI) 11721.50 9806.90 5259.70 4050.00 3246.00
Other Income 1848.90 1326.80 1696.40 1356.40 431.80
Interest 1186.60 1119.10 1123.00 943.00 117.60
Dividend 0 0 13.80 0 0
Profits on sale of FA 0 0 110.40 0.20 1.60
Profits on sale of
263.70 129.50 52.00 109.30 68.50
Investments
Forex Exchange Gains 0 0 0 0 0
Other 398.60 78.20 397.20 303.90 244.10
Operating Profit 13570.40 11133.70 6956.10 5406.40 3677.80
Interest 27.70 50.60 88.00 112.30 114.70
PBDT 13542.70 11083.10 6868.10 5294.10 3563.10
Depreciation 588.60 561.10 462.70 407.30 328.30
Profit Before Taxation &
12954.10 10522.00 6405.40 4886.80 3234.80
Exceptional Items
35
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Exceptional Income /
0 0 0 0 0
Expenses
Profit Before Tax 12954.10 10522.00 6405.40 4886.80 3234.80
Provision for Tax 301.20 381.60 116.10 273.90 177.70
Current Income Tax 241.00 330.90 56.30 73.80 65.30
Deferred Tax 44.80 36.20 48.80 191.40 112.40
Fringe Benefit tax 15.40 14.50 11.00 8.70 0
Others 0.00 0.00 0.00 0.00 0.00
Profits After Tax 12652.90 10140.40 6289.30 4612.90 3057.10
Appropriations 23940.80 16848.80 10192.00 7207.40 4964.70
General Reserve 0 0 0 0 0
Proposed Equity Dividend 2847.90 2174.70 1300.10 1023.00 695.70
Preference Dividend 0 0.50 0.80 0.80 0.80
Corporate Dividend Tax 484.00 372.00 182.50 143.60 99.10
Statutory Reserve 0 0 0 0 0
Other Appropriation -117.00 13.70 0.20 136.80 74.60
Profit & Loss Balance C/F 16225.90 11287.90 6708.40 3903.20 2594.50
Equity Dividend % 275.00 210.00 135.00 110.00 75.00
Earnings Per Share 61.10 48.96 32.52 24.84 16.48
Book Value per share 248.72 203.15 126.58 78.80 59.51

Balance sheet : table 6 : Rs. In Million

Particulars Mar 2009 Mar 2008 Mar 2007 Mar 2006 Mar 2005
SOURCES OF
FUNDS
Share Capital 1035.60 1035.60 980.70 942.70 941.60
Equity - Paid Up 1035.60 1035.60 967.00 928.70 927.60
Adjustments to Equitys 0 0 0 0 0
Preference Capital Paid
0.00 0.00 13.70 14.00 14.00
Up
Unclassified Shares
0 0 0 0 0
Paid Up
Face Value 5.00 5.00 5.00 5.00 5.00
Total Reserve 50478.60 41040.60 23514.20 13706.70 10112.80
Securities Premium 15099.10 15099.10 5165.90 156.50 0
Capital Reserves 259.10 259.10 259.10 259.10 267.20
Profit & Loss Account
16225.90 11287.90 6708.40 3903.20 2594.50
Balance
General Reserves 18740.00 14240.00 11240.00 9247.30 7110.60
Debenture Redemption 0 0 0 0 0

36
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Reserve
Capital Redemption
154.50 154.50 140.80 140.60 140.50
Reserve
Exchange Fluctuation
0 0 0 0 0
reserve
Statutory Reserves 0 0 0 0 0
Other Reserves 0.00 0.00 0.00 0.00 0.00
Revaluation reserve 0.00 0.00 0.00 0.00 0.00
Shareholder's Funds 51514.20 42076.20 24494.90 14649.40 11054.50
Secured Loans 236.00 228.80 203.90 182.30 139.20
Non Convertible
0 0 0 0 0
Debentures
Term Loans - Banks 236.00 228.80 203.90 182.30 139.20
Term Loans -
0.00 0.00 0.00 0.00 0.00
Institutions
Working Capital Loans
0.00 0.00 0.00 0.00 0.00
- Bank
Deferred Credit 0 0 0 0 0
Hire Purchase /
0 0 0 0 0
Financial Lease
Other Secured 0.00 0.00 0.00 0.00 0.00
Unsecured Loans 0 796.40 10477.60 17275.90 18007.30
Fixed Deposits - Public 0.00 0.00 0.00 0.00 306.20
Commercial Paper 0 0 0 0 0
Deferred Tax Loan 0 0 0 0 2.40
Other Unsecured Loan 0.00 796.40 10477.60 17275.90 17698.70
Total Debts 236.00 1025.20 10681.50 17458.20 18146.50
Total Liabilities 51750.20 43101.40 35176.40 32107.60 29201.00
APPLICATION OF
FUNDS :
Gross Block 10619.00 9350.30 8387.00 7442.60 6120.50
Less: Accumulated
3626.40 3049.90 2494.10 2080.70 1729.00
Depreciation
Net Block 6992.60 6300.40 5892.90 5361.90 4391.50
Capital Work in
759.50 334.30 319.10 308.00 479.40
Progress
Pre-operative Expenses
0 0 0 0 0
pending
Investments 26945.90 18435.70 10574.90 7796.20 9852.40

Quoted Equity 0.00 0.00 0.00 0.00 0.00

Unquoted Equity 1.00 3.10 3.10 3.60 3.10
37
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Units 8488.50 1015.00 1180.00 1250.00 6162.00
Other Investments 18456.40 17417.60 9391.80 6542.60 3687.30
Market Value of
1500.40 6031.90 4440.60 4905.30 3041.70
Quoted Investements
Current Assets, Loans
& Advances
Inventories 4867.40 3896.30 3333.80 2634.10 1866.20
Raw Materials 2056.70 1489.20 1155.80 950.50 829.70
Work-in Progress 1357.10 1278.80 1045.10 908.80 489.70
Finished Goods 964.90 805.40 865.30 587.50 434.30
Stores and Spare 133.50 131.60 127.40 71.40 34.40
Other Inventory 355.20 191.30 140.20 115.90 78.10
Sundry Debtors 6800.30 10554.40 5648.70 2564.70 2349.70
Debtors more than Six
620.80 589.70 421.80 427.20 259.30
months
Debtors Others 6243.10 10055.80 5291.50 2172.40 2111.80
Less : Provisions for
63.60 91.10 64.60 34.90 21.40
Doubtful Debts
Cash and Bank 12654.70 10724.20 12026.80 12308.20 8900.30
Other Current Assets 512.60 257.80 327.00 175.50 45.00
Loans and Advances 3286.50 3618.70 3086.80 4890.20 4384.10
Total Current Assets 28121.50 29051.40 24423.10 22572.70 17545.30
Less : C. L. and
Provisions
Current Liabilities 5730.90 7263.10 4863.40 1661.80 1370.10
Sundry Creditors 4777.90 6464.80 3759.70 769.60 642.30
Acceptances 0 0 0 0 0
Bank Overdraft / Short
0 0 0 0 0
term credit
Unclaimed Dividend 19.50 14.40 29.50 7.40 6.20
Interest Accrued But
0 17.60 20.80 33.10 23.70
Not Due
Other Liabilities 933.50 766.30 1053.40 851.70 697.90
Provisions 4164.20 2627.90 77.00 1225.00 844.50
Proposed Equity
2847.90 2174.70 0 1023.00 695.70
Dividend
Provision for Corporate
484.00 369.60 0 143.60 97.70
Dividend Tax
Provision for Tax 743.80 1.00 0.80 0 0
Other Provisions 88.50 82.60 76.20 58.40 51.10
Total Current Liabilities 9895.10 9891.00 4940.40 2886.80 2214.60

38
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Net Current Assets 18226.40 19160.40 19482.70 19685.90 15330.70
Deferred Tax Assets 58.30 64.80 44.40 26.80 26.40
Deferred Tax Liability 1232.50 1194.20 1137.60 1071.20 879.40
Deferred Tax Assets /
-1174.20 -1129.40 -1093.20 -1044.40 -853.00
Liabilities
Total Assets 51750.20 43101.40 35176.40 32107.60 29201.00
Contingent Liabilities 1022.20 731.50 1113.10 686.80 567.00
➢ Financial Analysis:
➢ Sun Pharma reported 22 % increase on Y-o-Y basis from March 2008 to
March
2009.
➢ Company reported increase in PAT by 24.7 % as compared to last year.
➢ Due to increased PAT and no. of shareholders remaining same EPS has
increased
by nearly 25 % on Y-o-Y basis from March 2008- March 2009
➢ Company has returned all its unsecured debts thus pushing down debt to
equity
ratio in order to able company to access for more debts as and when required
by the company.
➢ Size of balance sheet has increased significantly by Rs. 8649 million i.e.
20 % increase as compared to last year due to increase in reserves.
➢ Company’s debtors have decreased as compared to last year denoting
better administration and debtor collection by company even in recessionary
situations.

39
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Cash Flow Statement:

Table 7 (Rs.in Millions)

Particulars Mar 2009 Mar 2008 Mar 2007 Mar 2006 Mar 2005
Profit Before Tax 12954.00 10522.00 6405.40 4886.80 3234.80
Adjustment -1413.50 -197.10 -969.20 -590.30 233.20
Depreciation 588.50 561.10 462.70 407.30 328.30
Impairment 0 0 0 0 0
Interest Expeses 27.70 50.60 88.00 112.30 114.80
Profit/Loss on sale of Fixed Assets 5.60 1.00 -110.20 0.60 6.70
Profit/Loss on sale of Investments -263.70 -129.50 -52.00 -109.30 -68.50
Dividend Received 0 0 -13.80 0 0
Interest Income -1187.30 -1119.60 -1123.30 -943.50 -219.50
Diminution in the value / Write off of
0 0 0 0 0
Investments
Transferred from Revaluation Reserve 0 0 0 0 0
Effect of Exchange Rate Change -621.80 418.70 -267.20 -91.60 15.30
Net Prior Year Adjustments 0 0 0 0 0
Provision & Written Off 28.00 -5.80 15.30 12.40 39.00
Excess of cost over fair value of
0 0 0 0 0
investments
Taxes Paid 0 0 0 0 0
Taxes refunded 0 0 0 0 0

40
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Baddebts irrecoverables written off 9.50 0 0 21.60 19.00
Provision for doubtful debts &
0 26.40 31.30 0 0
advances
Misc. Expenses written off 0 0 0 0 0
Other Adjustments 0 0 0 -0.10 -1.90
Changes In working Capital 1075.50 -3612.00 -776.00 -1034.70 -1170.80
Trade & Other receivables 3609.40 -5715.00 -3064.90 -626.20 -1071.60
Inventories -971.10 -562.50 -699.70 -767.90 -251.70
Loans & Advances 0 0 0 0 0
Investments 0 0 0 0 0
Trade & Other payables -1562.80 2665.50 2988.60 359.40 152.50
Other 0 0 0 0 0
Cash Flow after changes in Working
12616.00 6712.90 4660.20 3261.80 2297.20
Capital
Interest Paid 0 0 0 0 0
Tax Paid -8.90 451.60 154.60 153.50 99.10
Other Direct Expenses paid 0 0 0 0 0
Extra & Other Item 0 0 0 0 0
Cash Flow from Operating Activites 12624.90 6261.30 4505.60 3108.30 2198.10
Cash Flow from Investing Activities -6603.70 -7434.90 -1125.80 1607.60 -8634.40
Purchase of Fixed Assets -1739.90 -991.60 -1407.80 -1241.50 -1275.20
Sale of Fixed Assets 47.60 2.10 188.50 17.60 37.00
Profit/Loss on sale of Fixed Assets 0 0 0 0 0
Profit/Loss on sale of Investments 0 0 0 0 0
-
Purchase of Investment -37665.50 -21158.70 -19709.80 -17714.60
62945.10
Sale of Investments 56828.30 29934.30 18431.40 21989.50 13517.60
Investment in Subsidiaries 0 0 0 0 0
Dividend Income 0 0 13.80 0 0
Interest Income 844.90 1044.00 1076.30 652.40 125.70
Increase/ Decrease in Loans 0 0 0 0 0
Loans & advances given to
0 0 0 0 0
subsidiaries / partnership firms etc.
Advances for capital expenditure 0 0 0 0 0
Intercorporate deposits 360.50 486.70 1735.80 -100.60 -3324.90
Other Investment Activities 0 -244.90 -5.10 0 0
Cash Flow from Financing Activites -3256.70 -60.60 -3604.80 -1308.00 14578.90
Increase / (Decrease) in Loan Funds -796.40 24.90 -887.90 42.90 -66.60
Proceeds from Long Term Borrowings 7.20 0 0 0 0
Repayment of Long Term Borrowings 0 0 0 0 0
Proceeds from Debenture / Bonds 0 0 0 0 16015.80
Repayment of Debenture / Bonds 0 0 0 -136.70 -125.60
Short Term Loans 0 0 0 -308.80 -410.30
41
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Increase / (Decrease) in Preference
0 0 0 0 0
Capital
Proceeds from Prefernce Shares
0 0 0 0 0
Capital
Redemtion of Prefernce Shares Capital 0 -13.70 -0.20 -0.10 -140.50
proceeds from Shares Warrants 0 0 0 0 0
Proceeds from Issue of Equity Share
0 0 0 0 0
Capital
Buy Back of Equity Shares Capital 0 0 0 0 0
Equity Dividend Paid -2069.60 -18.00 -2628.70 -793.00 -624.70
Preference Dividend 0 0 0 0 0
Interest Paid -45.30 -53.80 -88.00 -112.30 -69.20
Changes in working capital borrowings 0 0 0 0 0
Loans (to) / from subsidiaries 0 0 0 0 0
Net inc/dec in cash / Export credit
0 0 0 0 0
facilities and other short term loans
Income tax on dividend paid -352.60 0 0 0 0
Expenses on issue of shares 0 0 0 0 0
Other Financial Activities 0 0 0 0 0
Net Cash Inflow / Outflow 2764.50 -1234.20 -225.00 3407.90 8142.60
Opening Cash & Cash Equivalents 9773.10 12084.80 12309.80 8900.30 757.50
Cash & Cash Equivalent on
0 0 0 0 0.20
Amalgamation / Take over / Merger
Cash & Cash Equivalent of
0 0 0 0 0
Subsidiaries under liquidations
Effect of Foreign Exchange
0 0 0 0 0
Fluctuations
Closing Cash & Cash Equivalent 12537.60 10850.60 12084.80 12308.20 8900.30

➢ Cash flow from operating activities has increased significantly amounting

double as compared to last year indicates higher operational efficiency and increased
operating activities to generate higher returns for company.

42
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 ➢ Cash flow from investing activities shows outflow of funds indicating that
company has invested in different investment avenues as valuations were
downgraded during the year because of global recessionary conditions.
➢ Financial activities showing significant cash outflow as company has
repaid all its unsecured loans becoming debt free company.

43
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Ratio: Table 8: Rs.
In Millions

Par Ma Ma Ma Ma Ma
Ope
ticu r 20 r 20 r 20 r 20 r 20
rati
Ear 61.1 48.9 32.5 24.8 16.4
ona
ning
DP lars 0913.7
0 0810.5
6 07
2
6.75 06
4
5.50 05
8
3.75
sl &
S(R
Boo 5248. 0203. 126. 78.8 59.5
Fin
Per
ks)
PE 72
18.2 15
25.1 58
32.4 034.8 128.6
anci
Sha
NA
R(x
Per 1 5 1 8 0
al
re
)V/S
for
RO 24.4 23.5 17.8 14.3 10.4
Rat
(Rs)
hare
ma
A
RO 524.5 324.1 825.6 731.4 727.6
ios
(Rs)
nce
(%)
E
RO 6
25.0 0
24.5 8
18.4 9
15.5 6
11.4
Rat
(%)
CE
Ass 91.21 31.22 61.46 71.76 71.62
ios
(%)
et
Sale 3.93 3.62 2.91 2.57 2.25
Tur
s/Fi
Wor 0.46 0.60 0.85 1.13 1.21
nov
xed
king
Effi
er(x
Ass
Cap
cien
Fixe 25.4 27.6 34.3 38.9 44.3
)ital/
et(x
dcy
Rec 4
80.6 2
92.1 7
65.0 1
51.4 9
52.4
)Inve
Sale
Rat
Cap
eiva 840.7 041.1 947.3 647.1 750.2
s(x)
ios
ital/
ble
ntor
Pay 475.9 088.0 048.4 220.3 631.9
Sale
day
y
able
Gro 1 3 4 0 2
s(x)
sNet
Day
day
wth 22.6 40.2 33.5 38.3 28.6
sCor
Rat
Sale 3
21.8 1
60.0 6
28.6 8
47.0 4
14.5
io
es
EBI 922.7 662.8 629.8 049.2 112.5
Gro
EBI
T
PA 924.7 261.2 936.3 550.8 417.8
wth
TD
Gro
T
EPS 824.8 350.5 430.9 950.7 7-
(%)
A
wth
Gro
Fin 0 5 2 3 41.0
Gro
(%)
wth
anci
Tot 0.00 0.02 0.44 1.19 61.64
wth
(%)
al
Cur 4.91 4.00 5.02 13.5 12.8
(%)
Sta
Deb
rent
Qui 4.06 3.46 4.34 8
12.0 1
11.4
bilit
t/Eq
Rati
ck
Inte 468. 208. 73.7 044.5 429.2
y
uity
o(x)
Rati
rest
Tot 66
0.00 94
0.00 9
0.05 20.11 00.21
Rat
(x)
o(x)
Cov
al
ios
er(x
Deb
)
t/M
cap(
x)

KEY FINDINGS

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SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Analysis of Key Ratios:

Current Ratio: This ratio is to ascertain whether a company's short-term

assets (cash, cash equivalents, marketable securities, receivables and inventory)
are readily available to pay off its short-term liabilities (notes payable, current
portion of term debt, payables, accrued expenses and taxes). In theory, the
higher the current ratio, the better is the Company.
In this case, the ratio has increased from 4.0 to 4.99. This is due to increase in current
liability.
Quick Ratio
(Cash + AR) / Total Current Liabilities
This is a slightly more conservative measure of liquidity because it uses only
your available cash and accounts receivable in the equation.Also called Acid-Test
Ratio, this is very similar to your current ratio but it includes only those current
assets that can be most readily used to pay bills today: cash and accounts receivable.
The quick ratio excludes inventory, which must first be sold and the cash
collected before it can be used to pay liabilities. It also excludes current assets like
prepaid expenses, which are never converted to cash. They are simply assets you
paid for in advance.
In general, company should try to maintain a quick ratio of 1 to 1, which means you

45
SUN PHARMACEUTICALS INDUSTRIES LIMITED
 have $1 worth of cash and accounts receivable for every $1 dollar
of total current liabilities.
In this case, the ratio has increased from 3.46 to 4.06 This is due to increase in
current liability.

Debt / Equity Ratio: Debt equity ratio has become zero as company has paid off all
the debts. It was 0.02% last year.

Interest Coverage Ratio: Interest Coverage Ratio also shows an upward trend. It
has increased from 208% to 468% during the period from 2008 to 2009. This
is a healthy indicator and evidently illustrates that company will be able to pay
interest which is very miniscule on the secured borrowings very easily even if profits
do not grow at the expected rate.

Working Capital Cycle

Receivable Days:
Days in Period (usually 365) / Sales/Receivables Ratio
Average time in days that your receivables are outstanding. Measures your
control of your credit and collections. Greater the days, greater probability for
delinquencies.
Receivable days are decreased from 92 days to 80 days, shows increasing control
over credit and collections by company.
Payable days:
Days in Period (usually 365) / Sales/Payables Ratio
Average time in days that your Payables are outstanding. Measures your
credibility with suppliers.

Inventory Days:
Days in period (91) / COGS / Inventory Ratio
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SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Average length of time units are in inventory.

EPS (Earnings per Share): Earnings per share are generally considered to be
the single most important variable in determining a share's price. It is also a
major component of the price-to-earnings valuation ratio. Earnings per Share have
increased from Rs. 48.96 Per share to Rs.61.10 per share from 2008 to 2009. Due
to higher Profit after tax and strong future trends I feel the EPS will surely continue
to increase.

ROE (Return on Equity Capital): The return on equity measures the profitability
of equity funds invested in the firm. It is regarded as a very important measure
because it reflects the productivity of the ownership.
The return on shareholder’s equity is quite good as it has increased from 24.1% to
24.56 % and it shows an upward trend, this has increased due to increase in
the Profits.

ROCE (Return on Capital Employed): ROCE should always be higher than

the rate at which the company borrows; otherwise any increase in borrowing will
reduce shareholders' earnings. It has increased from 24.53% to 25.09 % this shows
that capital employed is optimally used.

P/E (Price Earnings ratio): In general, a stock with a high P/E ratio
suggests that investors are expecting higher earnings growth in the future compared
to the overall market, as investors are paying more for today's earnings in
anticipation of future earnings growth. Hence, as a generalization, stocks with
this characteristic are considered to be growth stocks. Conversely, a stock with a
low P/E ratio suggests that investors have more modest expectations for its future
growth compared to the market as a whole.

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SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Assets Turnover
Net Sales / Net Assets
This ratio measures your productive use of your fixed assets—the amount of
sales generated for every dollar’s worth of assets. It is calculated by dividing
sales in dollars by assets in dollars. Asset turnover measures your company’s
efficiency at using its assets in generating sales or revenue; the higher the number the
better. It also indicates pricing strategy: companies with low profit margins tend to
have high asset turnover; those with high profit margins have low asset
turnover. Largely depreciated fixed assets or a labor-intensive operation may
distort this ratio

KEY FINDINGS AT SUN PHARMACEUTICALS:

Sustainable competitive advantage: Most linear cost structure in the industry,

strong product filings in key markets, which includes a range of complex products.

Financial structure : Sun Pharma is a debt-free company

Earnings visibility : Likely to improve as more limited competition products are

launched and Caraco’s warning letter status is withdrawn by the US FDA.

Future event triggers: Launch of limited competition products in the US and

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SUN PHARMACEUTICALS INDUSTRIES LIMITED
 withdrawal of Caraco’s warning letter by the US FDA

Expected price momentum: Stock could remain weak in the near term till the time
clarity emerges on resumption of Caraco operations

OBSERVATION OF THE STUDY

➢ From the Above analysis it is viable to hold the shares of Sun

Pharmaceuticals Industries Ltd for Short-run. If planning for Long-run you can buy
the shares.

➢ Consistency in domestic market share to be maintained. Sun continues to

gain market share in domestic market through new launches and and strong doctor

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SUN PHARMACEUTICALS INDUSTRIES LIMITED
 coverage despite having a high base and non recurring sales in Q4FY09

➢ Difficult to manufacture generics ensure generics ensure continuing cash

flows beyond the limited period: sun has been able to identify products which are
difficult to manufacture and enjoy limited competition for a significant period after
the exclusivity has got over. Generic Protonix and Ethyol are two such products
currently in the market while the sun waiting approval for generic Effexor XR, a US$
2.6 bn opportunity with two competing players.

➢ However there are three main obstacles in the way of Successful analysis:
inadequacies
or incorrectness of data, future uncertainties, and irrational market behavior.
This may prove my analysis wrong.

ABBREVIATION

PPP- Purchasing Power Parity.

GDP- Gross Domestic Product.
NCE- New Chemical Entity.
FDA- Foods and Drugs Administration.
50
SUN PHARMACEUTICALS INDUSTRIES LIMITED
ANDA- Abbreviated New Drug Application.
NDDS- Novel Drug Delivery System.
DMF- Drug Master File.
DPCO- Drug Price Control Order.
CRAMS- Contract Manufacturing and Research
CRO- Clinical Research Outsourcing.
OTC- Over the Counter.
NPPA- National Pharmaceutical Pricing Authority.
R&D- Research and Development.
NDDR- New Drug Discovery Research.

BIBLIOGHRAPHY
Book:
Title: Investment Analysis and Portfolio Management

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SUN PHARMACEUTICALS INDUSTRIES LIMITED
 Author: Prasanna Chandra
Publisher: Tata McGraw Hill Publication. (2ndedition)

Magazines/Journals:

Title: Indian Industry – A Monthly Review

Date of issue: June, 2009
Publisher: ICFAI University Press

Websites:
www.sunpharmaceuticals.com
www.myiris.com
www.equitymaster.com
www.jgsfinancial.com
www.investopedia.com
www.businessworld.com
www.rbi.org.in
www.nseindia.com
www.ibef.org
www.businessstandard.com
www.timesofindia.com

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