Financial Modeling

of Cipla
Corporate Bridge Consultancy Pvt.
Ltd.
Pranav Haldar
Goa Institute of Management
PGDM 2012-14
Financial Modeling of Cipla
July 1, 2013


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FINANCIAL MODELING OF CIPLA






SUMITTED TO
Dr. Abhishek Ranga
Faculty Guide




BY
Pranav Haldar 2012224






July 1, 2013

Financial Modeling of Cipla
July 1, 2013


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Contents
Acknowledgement .................................................................................................................................. 4
Executive Summary ................................................................................................................................. 5
Background ............................................................................................................................................. 6
Timeline................................................................................................................................................... 6
Financial Modeling - Industry Analysis.................................................................................................... 7
Financial Modeling - Historical Ratio Analysis ........................................................................................ 8
Financial Modeling - Financial Projections using Excel ........................................................................... 9
Financial Modeling - Professional Valuation using Excel ...................................................................... 10
Financial Modeling - Research Report .................................................................................................. 11
Appendix ............................................................................................................................................... 12
Industry Analysis Submission ................................................................................................................ 12
Historical Ratio Analysis Submission ..................................................................................................... 12
Financial Projection using Excel Submission ......................................................................................... 12
Professional Valuation using Excel Submission .................................................................................... 12
Research Report Submission ................................................................................................................ 12


Financial Modeling of Cipla
July 1, 2013


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Acknowledgement
I 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 24
th
April 2013 to 23
rd
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.
















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Executive Summary
The 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.













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Background

Summer Internship 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
by CFA 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-oriented projects 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

Module Milestones Timelines Type
1
Prepare Industry Report
24 April-5 May 2013
Assignment
Accounting Online Test
2
Historical Ratio Analysis
6 May-15 May 2013
Assignment
Corporate Finance Online Test
3
Financial Modeling of Cipla
16 May-30 May 2013
Assignment
Valuations Online Test
4
Financial Modeling with Valuations of Cipla
31 May-9 June 2013
Assignment
Financial Modeling Online Test
5 Cipla Final Recommendation Report 10 June-23 June 2013 Assignment





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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

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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 Analysis
ii. Vertical Analysis
iii. Solvency Ratios
iv. Turnover Ratios
v. Profitability Ratios
vi. Cash Flow Ratios












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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




















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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 value
ii. 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





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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



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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

Assignment 1.pdf

Historical Ratio Analysis Submission

Assignment 2 - Ratio
Analysis.xlsx
Assignment 2.pdf

Financial Projection using Excel Submission

Assignment 3 -
Financial Projections using Excel .xlsx

Professional Valuation using Excel Submission

Assignment 4 -
Valuation using Excel.xlsx

Research Report Submission

Assignment 5 -
Report Writing.pdf