Analysis of a Company on Parameters of

Business Model and Financial Ratios

Kaustubh Barve
MET MMS A
ROLL NO 11
(Company Name : Lupin Ltd.)











COMPANY BACKGROUND

An innovation led transnational pharmaceutical company based in Mumbai
Was founded in 1968 with a vision to fight life threatening infectious diseases and to
manufacture drugs of the highest social priority
The Company produces a wide range of quality, affordable generic and branded formulations
and APIs (Active Pharmaceutical Ingredients) for the developed and developing markets of
the world.
2nd largest Indian pharma company by market capitalization and the 14th largest generic
pharmaceutical company globally
SWOT ANALYSIS

Strengths
World-wide leader in Cephalosporin and Anti TB drugs
Considerable presence in market for drugs against Asthma, Pediatrics, Diabetes, and CNS
Fastest growing generic player in USA and Japan
Wide global footprint as it is present in over 70 countries
Weaknesses
High dependence on global formulation business with 84% revenue coming from US market
Forecasting done on technological level is less
Opportunities
Increased health awareness among people
Emerging technological trends in drug delivery
Increasing prevalence of TB in developing countries
Threats
Price regulation by government reduces the pricing ability of company
Exists in a highly competitive sector with around 20000 unorganized and 300 large organized
players
Soaring cost of discovering novel products


UNDERSTANDING OF LUPINS BUSINESS MODEL

Economies of Scale
The company derives its revenues chiefly by resorting to the economies of scale, i.e. mass production
of medicines
Depth in product offerings
Apart from Anti-TB and Cephalosporin segments, The company today has a significant market share
in key markets in the Cardiovascular (prils and statins), Diabetology, Asthma, Pediatrics, CNS, GI,
Anti-Infectives and NSAIDs therapy segment.
This helps them to gain better visibility with the doctor/patient community and strengthens the
companys position over distributor channel
Product Differentiation through value added R & D
Lupins Research Program covers the entire pharma value chain including Generics Research, Process
Research, Pharmaceutical Research, Advanced Drug Delivery Systems (ADDS), Research Intellectual
Property Management, Novel Drug Discovery and Development (NDDD) & Biotechnology Research

Geographical Expansion into new markets
The company focuses on constantly improving its therapeutic mix, This enables Lupin easy entry into
new markets, thereby building upon its brand equity and widening its growth prospects
Backward Integration
Lupin are developing strong backend capabilities, which would give them a strong competitive
advantage in a crowded market. The contribution of API to sales is declining and they are increasingly
using their API capacities for captive consumption and to file their own finished products

Cost Effective Strategies
Lupin believe in launching the common protocol therapies at cost-effective prices to tackle
competitive threats in existing as well as new markets


KEY FINANCIAL RATIOS - ANALYSIS AND INTERPRETATION

EV/EBITDA
Lupin Ltd. shows a EV/EBITDA ratio of 13.30 This is higher than the average of its peer group which
is 12.22 indicating good earnings in relation to competitors.
Current Ratio
Lupins average current ratio over the last 5 financial years has been 1.52 times which indicates that
the Company has been maintaining sufficient cash to meet its short term obligations
Debt to Equity Ratio
Lupins average long term debt to equity ratio over the last 5 financial years has been 0.08 times
which indicates that the Company is operating with a very low level of debt and is well placed to meet
its obligations.
Interest Coverage Ratio
Lupins average interest coverage ratio over the last 5 financial years has been 34.63 times which
indicates that the Company has been generating enough for the shareholders after servicing its debt
obligations.
Earnings Per Share
Lupins earnings per share for FY14 came in at Rs.40.8, translating to a price-to-earnings multiple of
24.3 times





CORPORATE ACTIONS:

Share Capital as on April 25, 2014
Share Capital Issued, subscribed and paid up Rs. 893,868,110/- comprising 448,434,055 equity
shares of Rs. 2/- each
Dividend Policy
Lupin announced that the Board of Directors of the Company at its meeting held on 07 May 2014,
have recommended final dividend @ 150% i.e. Rs 3 per equity share of the face value of Rs 2 each
for the year ended 31 March 2014
Thus, the total dividend for the year ended 31 March 2014 would be Rs 6 per equity share (declared
and paid interim dividend of Rs 3 in Feb 2014)
At the current share price of Rs 990.20 this results in a dividend yield of 0.6%
The company has a good dividend track report and has consistently declared dividends for the last 10
years
Bonus Policy
The only bonus issue that Lupin had announced was in 2006 in the ratio of 1:1.The share has been
quoting ex-bonus from August 11, 2006.
Rights Issues
Lupin has not announced any rights issues till today.
Stock Split
Lupin had last split the face value of its shares from Rs 10 to Rs 2 in 2010.The share has been quoting
on an ex-split basis from August 27, 2010.
RECOMMENDATIONS:

Buoyed by a strong traction in the US and European businesses, Lupin has reported a 20% growth in
the net sales and a 243 basis points expansion in the OPM during Q4FY2014. This led the adjusted
net profit to jump by 15% to Rs553 crore during the quarter, despite a steep rise in the effective tax
rate
From its vertically integrated business model it is evident that Lupin has the following attributes:
sustainable business models
optimum geographic mix
ability to withstand regulatory risks
This make the stock of Lupin very attractive in the long as well as short term perspective.
Thus due to its consistently superior performance in the generic space, a strong product pipeline and a
healthy growth visibility; coupled with strong fundamentals and good technical indicators I would
give Lupin a BUY recommendation at the current market price of Rs.990.20