Aurobindo Pharmaceuticals Ltd was founded in 1986 by Mr. P.V. Ramprasad Reddy, Mr. K.

Nityananda Reddy
and a small group of highly committed professionals. The company commenced operations in 1988-89 with
a single unit manufacturing Semi-Synthetic Penicillin (SSP) at Pondicherry. It became a public company in
1992 and listed its shares in 1995. In addition to being the market leader in Semi-Synthetic Penicillin’s,
Aurobindo Pharma has a presence in key therapeutic segments such as neurosciences (CNS), cardiovascular
(CVS), anti-retroviral, anti-diabetics, gastroenterology and Anti-biotics. Currently, Auro Pharma stands as a
knowledge driven company manufacturing active pharmaceutical ingredients and formulation products. It
is R&D focused and has a multi-product portfolio with manufacturing facilities in several countries.

Mission :
To become the most valued Pharma partner to the World
Pharma fraternity by continuously researching, developing
and manufacturing a wide range of pharmaceutical
products that comply with the highest regulatory
standards.

Vision :
“To build a leading global generic
pharma company and become one of
the top 10 by 2020.”

Core strengths :
Scale, Diversity and Leadership
Operational Excellence
Service Delivery
Patient Focus

Successful Large Largest generic

Cost Global
innovation in diversified portfolio in
competitive leadership in
process product Antiretroviral
manufacturing anti-infective
chemistry portfolio drugs(ARVs)
 TIMELINE

• Auro Pharma incorporated

1986

• Commenced operations in Puducherry

1988-89

• Another plant opened in Hyderabad

1992-93

• Alliance formed with UK Pharma giant Glaxo

1997-98

• Auro goes public

1995

• Acquired 79% stake in Ranit Pharma Company.

2001-02 Amalgamated on 1st April 2002.

• Aurobindo made a strategic entry into the

2005-06 premium markets of USA & Europe

• Made various international joint ventures,

2007-18 acquisitions and alliances to strengthen business.
 GLOBAL PRESENCE

RANGE OF FORMULATIONS
 IS THERE TROUBLE AT INDIA’S PHARMA GIANT?
The trouble initially began in 2017 when Auro Pharma’s promoter Sumanth Kumar Reddy Mettu was accused of insider
trading. The accusation was pretty simple. It said that Mettu had traded in 40,000 Auro Pharma share option
derivatives in 2013, right before the announcement of the quarterly results, which had resulted in personal gains for
him. However, the case was disposed when Auro Pharma conclusively proved that they had already dealt with the
issue before SEBI even
conducted a probe into it.
Apparently, the
transaction went against
the code of conduct of
Auro Pharma and when
they found out about it,
they themselves imposed
a ₹5 lakh penalty on
Mettu. SEBI found this
penalty to be adequate
and hence dropped its
charges. However, this
wasn’t Auro Pharma’s last
encounter with insider
trading. 2 years later in
2019, the issue
represented itself when
SEBI imposed a ₹23 crores
fine on Auro for insider
trading. This probe dates
back to 2008-09, when
according to SEBI the
promoter PV Ramprasad
Reddy, his wife and other
related entities indulged
in trading of Auro scrips
before the announcement
of licensing and supply
agreements with
Pfizer to the public.
SEBI officials said
that the promoters
bought the shares
before announcing
the alliance using
unpublished price
sensitive
information, since
they were sure that
the prices will rise
after the
announcement.
Once the alliance
went through, they
offloaded their
promoter shares,
hence pocketing the
profits for
themselves.
Apart from the insider trading probes, Auro Pharma has also repeatedly been going through USFDA probes.
Most recently, The USFDA has made the following observations:
1. There’s a failure to thoroughly review any unexplained discrepancy and the failure of a batch or any
of its components to meet any of its specifications whether or not the batch has been already
distributed.
2. There are no written procedures for production and process controls designed to assure that the
drug products have identity, strength, quality, and purity they purport or are represented to possess.
3. Control procedures are not established which of those manufacturing processes that may be
responsible for causing variability in the characteristics of in-process material and the drug product.
4. Laboratory records do not include complete data derived from all tests, examinations and assay
necessary to assure compliance with established specifications and standards.
5. The responsibilities and procedures applicable to the quality control unit are not fully followed.

6. Equipment and utensils are not cleaned at appropriate intervals to prevent contamination that would
alter the safety, identity, strength, quality or purity of the drug product.
7. Written production and process control procedures are not followed in the execution of production
and process control functions.

After a fall of more than 20% on its shares following the USFDA observations, Auro provided a clarification
for the allegations. It said that none of the observations were regarding data integrity and it would most
definitely resolve the issues in the stipulated timeline. This clarification led to a 5% increase in the share
prices. However, soon after the probe, the
promoters created a pledge, making the
total pledged shares cross 58 lakhs. This
sent a wrong message to the investors.
Pledging is basically promoters keeping
their shares as a security against loans. It is not perceived positively because pledging implies 2 things. One
is that the company is in such bad financial position that promoters had nothing else to give as a security but
their shares. Secondly, it implies that the promoter’s own interest in the company can now potentially go
down. Considering that Auro had lost nearly 40% of its value during the last 6 months, it implied bad news
to investors. Another thing that added fuel to this fire was the CITU controversy soon after. CITU employees
went on a strike following tensions over inadequate salaries and work conditions. This strike soon escalated
into social unrested and police had to get involved. While the workers say that police only interrupted a
successful strike, the management says that the strike is just the labour union’s tactic to create a rift between
the management and the staff.
However, relief
came in soon
after the disaster.
Auro was quick to
resolve the
USFDA issue,
unlike its
counterpart Sun
Pharma and got
USFDA nod within
a month. Once
the nod came, the
production of the
drugs in question
commenced and
this is the 419th
drug they have
gotten approved.
Hence the drug
approval case
came to rest.
However, the
tides it created
can still be felt.
 SO WHAT NOW?
Recently, a
lot of Pharma
companies
have been on
the receiving
end of
USFDA’s
wrath. There
have been
probes into
Sun Pharma,
Lupin Pharma
and Cipla
Pharma too.
Hence, the
stock prices
for pharma
companies have been fluctuating, despite the boom in the sector’s profits. Looking at Auro Pharma, we see
that despite being India’s largest pharma company, the negative publicity and news have had an impact on
the share prices.

This graph clearly shows that in the past one year, the share prices of Auro Pharma have only gone down.
They have almost halved in value from the highest point of ₹838/share to the lowest point of ₹435/share,
despite an ROE of 19.01% and an ROCE of 18.45%. The P/E of Auro Pharma currently stands at 10.55, which
is the lowest amongst all its peers. It clearly indicates that the company is undervalued despite the highest
sales and profit figures in the industry. This is a clear indication of how dire the problem is. Though the
management agrees that it is a temporary fluctuation, permanent measures are necessary for the brand to
refurbish its image and make investors believe that Aurobindo Pharmaceuticals ltd is just as strong as it used
to be and the sales and profits are sustainable.