Background of the company

Sun Pharmaceutical Industries Ltd is a multinational pharmaceutical company

incorporated in 1983 as a partnership firm by Mr. DilipShanghvi& his family.
Headquartered in Vadodara, Gujarat, Sun manufactures and sells APIs (Active
Pharmaceutical Ingredients) and pharmaceutical formulations. It has a highly
complementary and diverse portfolio of generic and specialty products that target
various segments like cardiology, neurology, ophthalmology, oncology, psychiatry and
various others.
Sun Pharma commands 8.2% share of the Indian pharmaceutical market, with
continued leadership in the high-growth chronic segments and specialisation in
technically complex products. It has a strong sales force of 9,700+, which reaches
400,000+ doctors across the country.
Overall revenues growing by about 13% to ₹323 Billion. Key growth drivers include
India, our global specialty business, coupled with growth in the rest of the worldand API
business.

US Business
 9th largest generics company in the US with a strong pipeline
 (98 ANDAs and 5 NDAs awaiting approval)
 Presence in generics, specialty and branded segments with 538 approved
products.
 FY20 sales: `105,425 Million
Indian branded generic Business
 No.1 company in the Indian pharmaceutical market
 Ranked No. 1 across 11 classes of doctors
 Leading position in high growth chronic therapies
 FY20 sales: `97,102 Million
Emerging Market
 Presence in ~80 countries across Africa, Americas, Asia and Eastern and Central
Europe
 Key focus geographies include Russia, Romania, Brazil, Mexico, South Africa,
and complementary and affiliated markets
 FY20 sales: `55,044 Million
API Business
 Backward integration provides cost competitiveness and supply reliability
 Portfolio of 323 approved DMF/CEP products
 FY20 sales: `19,159 Million
Global Consumer healthcare business
 Among the top 10 consumer healthcare companies in India
 Operates in 20+ countries
Rest of the world
 Presence across majority of markets in Western Europe, Canada, Japan,
Australia and New Zealand
  Products include differentiated offerings for hospitals, injectables and genericsfor
retail market
 Portfolio of long-listed products servicing the Japanese market
 FY20 sales: `45,210 Million

Global Pharmaceutical Industry

The global pharmaceutical market, estimated at US$1.2 Trillion in 2019, is expected to

expand at a Compounded Annual Growth Rate (CAGR) of 3-6% to US$1.5-1.6 Trillion
by 2024.

Indian Pharma

India is the largest provider of generic drugs globally. Indian pharmaceutical sector
supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic
demand in the US and 25 per cent of all medicine in the UK.
India enjoys an important position in the global pharmaceuticals sector. The country
also has a large pool of scientists and engineers with a potential to steer the industry
ahead to greater heights. Presently, over 80 per cent of the antiretroviral drugs used
globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by
Indian pharmaceutical firms.

Market Size

Indian pharmaceutical sector is expected to grow to US$ 100 billion, while medical
device market is expected to grow US$ 25 billion by 2025. Pharmaceuticals export from
India stood at US$ 20.70 billion in FY20. Pharmaceutical export include bulk drugs,
intermediates, drug formulations, biologicals, Ayush and herbal products and surgical.
India's biotechnology industry comprising biopharmaceuticals, bio-services, bio-
agriculture, bio-industry, and bioinformatics is expected grow at an average growth rate
of around 30 per cent a y-o-y to reach US$ 100 billion by 2025.
India’s domestic pharmaceutical market turnover reached Rs 1.4 lakh crore (US$ 20.03
billion) in 2019, up 9.8 per cent y-o-y from Rs 129,015 crore (US$ 18.12 billion) in 2018.

Investments and Recent Developments

The Union Cabinet has given its nod for the amendment of existing Foreign Direct
Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 per
cent under the automatic route for manufacturing of medical devices subject to certain
conditions.
The drugs and pharmaceuticals sector attracted cumulative FDI inflow worth US$ 16.50
billion between April 2000 and March 2020 according to the data released by
Department for Promotion of Industry and Internal Trade (DPIIT).
Government Initiatives

Some of the initiatives taken by the Government to promote the pharmaceutical sector
in India are as follows:

 India plans to set up a nearly Rs 1 lakh crore (US$ 1.3 billion) fund to provide boost to companies to
manufacture pharmaceutical ingredients domestically by 2023.
 In November 2019, the Cabinet approved extension/renewal of extant Pharmaceuticals Purchase Policy
(PPP) with the same terms and conditions while adding one additional product namely, Alcoholic Hand
Disinfectant (AHD) to the existing list of 103 medicines till the final closure/strategic disinvestment of Pharma
CPSUs.
 Under Budget 2020-21, Rs 65,012 crore (US$ 9.30 billion) has been allocated to the Ministry of Health and
Family Welfare is. The Government has allocated Rs 34,115 crore (US$ 4.88 billion) towards the National
Health Mission under which rural and urban people will get benefited.
 Rs 6,400 crore (US$ 915.72 million) has been allocated to health insurance scheme Ayushman Bharat –
Pradhan Mantri Jan Arogya Yojana (AB-PMJAY).
 As per Economic Survey 2019-20, Government expenditure (as a percentage of GDP) increased to 1.6 per
cent in FY20 from 1.2 per cent in FY15 on health.
 The National Health Protection Scheme is the largest Government funded healthcare programme in the
world, which is expected to benefit 100 million poor families in the country by providing a cover of up to Rs 5
lakh (US$ 7,723.2) per family per year for secondary and tertiary care hospitalisation. The programme was
announced in Union Budget 2018-19.
 The Government of India is planning to set up an electronic platform to regulate online pharmacies under a
new policy to stop any misuse due to easy availability.
 Government of India unveiled 'Pharma Vision 2020' to make India a global leader in end-to-end drug
manufacture. Approval time for new facilities has been reduced to boost investment.

Road Ahead

Medicine spending in India is projected to grow 9-12 per cent over the next five years,
leading India to become one of the top 10 countries in terms of medicine spending.
Going forward, better growth in domestic sales would also depend on the ability of
companies to align their product portfolio towards chronic therapies for diseases such
as such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers, which are
on the rise.
The Indian Government has taken many steps to reduce costs and bring down
healthcare expenses. Speedy introduction of generic drugs into the market has
remained in focus and is expected to benefit the Indian pharmaceutical companies. In
addition, the thrust on rural health programmes, lifesaving drugs and preventive
vaccines also augurs well for the pharmaceutical companies.
SWOT
Strength
• Global presence – 4th
largest global specialty
generics company - 9th
largest generics company in
the US
- 2nd largest by
prescriptions in the US
dermatology segment
- Largest pharma company
in India by market share
- Enjoys No. 1 ranking
with 11 different classes
of doctors in India
- Amongst the largest
Indian
pharmaceutical
companies in
emerging markets
- Largest Indian
pharmaceutical
company in Japan
• Strong R&D skillsets to
develop technologically
complex products in the
generic and specialty
space
• Ability to drive growth
and profitability through a
pragmatic mix of organic
and inorganic initiatives
- A strong balance sheet
imparts ability to undertake
inorganic initiatives without any
significant leverage
Opportunity
Global efforts to reduce
healthcare costs augur well for
companies like Sun Pharma
who have the ability to supply
high-quality pharmaceutical
products at affordable prices
• Favourable macroeconomic
parameters for India and
emerging markets are likely
to ensure reasonable
volume growth for
pharmaceutical products in
these markets
• Contribution of specialty
products is expected to
increase in developed
markets over medium to
long-term. Sun Pharma has
already commercialised
many of its specialty
products in developed
markets, and hence will be
able to get the benefits of
this expanding opportunity
Threats and Weakness
• The outbreak of the
COVID-19 pandemic
across the world and
subsequent disruption in
economic activities is likely
to impact GDP across
countries and may
indirectly also impact
pharmaceutical
consumption
• Challenging US generics
pricing environment driven by
customer consolidation and
higher competitive intensity,
on account of faster pace of
generic drug approvals by the
USFDA
• Significant volatility in the
forex market, especially for
emerging market currencies,
may adversely impact
reported growth of these
markets, even though they
may be recording growth in
local currency terms
• Governments across the
world try to control their
healthcare budgets, which
may lead to government-
mandated price controls on
pharmaceutical products
Ability to supply high-quality
products at affordable prices
across the world
Growing penetration of generics
in Japan and opening of the
China market, present a good
long-term opportunity for Indian
companies, including Sun
Pharma
The specialty initiative entails
high upfront investments for
long-term benefits, thus
impacting short-term profitability

Shareholding pattern

 Promoters pledge reduced to 10.35% of holdings in Jun 2020 qtr.

 Promoters holding marginally changed to 54.69% as of Jun 2020 qtr.
 FII/FPI holding marginally changed to 12.7% as of Jun 2020 qtr.
 Mutual Funds holding marginally changed to 10.52% as of Jun 2020 qtr.
 Number of Mutual Funds holding stock is unchanged at 43 in Jun 2020 qtr.
 Institutional Investors holding marginally changed to 32.81% as of Jun 2020 qtr.
Capital structure:

It’s financing patterns, the capital structure and a comparative Cost of capital.

Dividend Policy:

Its dividend policy, if any, reasons for the prevailing dividend policy.

Risk & Return

Risk-Return analysis from the investment point of view. (through historical stock
performance)