Chirag Rajendra Shah

K. J. Somaiya Institute of Management

Studies & Research, Mumbai.

Cipla Ltd.
Equity Research Report

COMPANY INFORMATION:
Cipla is a global pharmaceutical company focused on responsible and sustainable growth through
deep & wide portfolio and strong customer relationships across their home markets of India, South
Africa, US and other key regulated and emerging markets. Its strengths in the respiratory, anti-
retroviral, urology, cardiology and CNS segments are well-known. Its 46 manufacturing facilities
around the world produce 50+ dosage forms and 1,500+ products using cutting-edge technology
platforms to cater to Its 80+ markets. Cipla is ranked 3rd largest in pharma in India (IQVIA MAT
Mar’19) and 3rd largest in the pharma private market in South Africa (IQVIA MAT Mar’19). For over
eight decades, making a difference to patients has inspired every aspect of Cipla’s work. Its
paradigm-changing offer of a triple anti-retroviral therapy in HIV/AIDS at less than a dollar a day in
Africa in 2001 is widely acknowledged as having contributed to bringing inclusiveness, accessibility
and affordability to the centre of the movement. A responsible corporate citizen, Cipla’s
humanitarian approach to healthcare in pursuit of its purpose of ‘Caring for Life’ and deep-rooted
community links wherever it is present make it a partner of choice to global health bodies, peers and
all stakeholders. The company has a diversified product portfolio spread across various segments like
anti-infective, cardiac, gynaecology and gastrointestinal, with considerable market share in niche
segments like anti retro viral (HIV/AIDS) and respiratory in countries like South Africa and India
respectively. The company commenced exporting products in 1964 and currently, has presence in
more than 150 countries across the globe (spread in 5 continents). Cipla has 44 state-of-the-art
manufacturing facilities for API and formulations across the states of Maharashtra, Goa, Madhya
Pradesh, Karnataka, Himachal Pradesh and Sikkim. It also undertakes manufacturing/marketing
outside India of various drug products through 3 CARE Ratings Limited Press Release in-licensing
agreements with 180 global partners. The company’s manufacturing facilities have approvals from
all the major regulators including India’s Central Drugs Standard Control Organisation, USA’s Food
and Drug Administration (FDA), UK’s Medicines and Healthcare Products Regulatory Agency (MHRA),
World Health Organisation (WHO), South Africa’s Medicines Control Council (MCC) and Brazil’s
National Health Surveillance Agency (ANVISA).

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Founded: 1935
Industry Name: Pharmaceuticals
House Name: Public Sector REGISTERED CORPORATE OFFICE:
Traded as-
Address:
BSE: Cipla500087
House, Peninsula Business Park, 
NSE: Ganpatrao
CIPLA Kadam Marg, 
ISIN: Lower Parel, Mumbai-400013
INE059A01026
Tel. No.:
Headquarters: +91 22 24826000
Mumbai, India.
Fax: +91 22 24826120
Email:  investor.relations@cipla.com
Website: https://www.cipla.com/

HISTORY:
Cipla was founded by Khwaja Abdul Hamied as 'The Chemical, Industrial
& Pharmaceutical Laboratories' in 1935 in Mumbai. The name of the Company was changed to 'Cipla
Limited' on 20 July 1984. In the year 1985, US FDA approved the company's bulk drug manufacturing
facilities. Led by the founder's son Yusuf Hamied, a Cambridge-educated chemist, the company
provided generic AIDS and other drugs to treat poor people in the developing world. In 1995, Cipla
launched Deferiprone, the world's first oral iron chelator. In 2001, Cipla offered medicines
(antiretrovirals) for HIV treatment at a fractional cost (less than $350 per year per patient).
In 2013 Cipla acquired the South African company Cipla-Medpro, kept it as a subsidiary, and changed
its name to Cipla Medpro South Africa Limited. At the time of the acquisition Cipla-Medpro had been
a distribution partner for Cipla and was South Africa's third biggest pharmaceutical company. The
company had been founded in 2002 and was known as Enaleni Pharmaceuticals Ltd.  In 2005, Enaleni
bought all the shares of Cipla-Medpro, which had been a joint venture between Cipla and Medpro
Pharmaceuticals, a South African generics company, and in 2008 it changed its name to Cipla-
Medpro.

Global view of Pharmaceutical Industry

As per the research, the global pharmaceutical industries will be worth USD 1.57 trillion by 2023. The
growth in this market is predicted on the basis of various factors like market drivers, current and
upcoming trends, current growth pattern, and market challenges. North America is expected to
retain its leading position in the global pharmaceuticals market with market share of 45.33% in 2023
improving on its market share compared to 2017. Europe on the contrary is expected to see a
decline in its market share compared to 2017 and be worth 20.24% of global pharma industry in
2023. Asia Pacific pharmaceuticals market is expected to retain its second position with a market
share of 24.07% in 2023. Latin America and Middle East and Africa (MEA) are expected to retain
7.53% and 2.96% market share of global pharmaceuticals market in 2023.

This growth is fuelled by the growing and ageing population in key markets. As per World Population
Prospects by United Nations, the worldwide population is likely to cross 9.3 billion by 2050 and
around 21% of this population is expected to be aged 60 and above. Apart from ageing and rising
population the improvements in purchasing power and access to quality healthcare and

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pharmaceuticals to poor and middle-class families worldwide also is driving the growth of global
pharma industry. Another aspect which is leading this growth is rising focus of pharmaceuticals
companies to tap the rare and speciality diseases market. Innovations in advanced biologics, nucleic
acid therapeutics, cell therapies and bioelectronics & implantables has attracted investments in the
industry by even non-pharma companies like Facebook, Qualcomm etc. which is also driving the
global pharmaceuticals industry growth.

Pharmaceutical Industry in India:

India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry 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 UK.
India enjoys an important position in the global pharmaceuticals sector. The country also has a large
pool of scientists and engineers who have the potential to steer the industry ahead to an even
higher level. Presently over 80 per cent of the antiretroviral drugs used globally to combat AIDS
(Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.

Indian pharmaceutical sector is expected to grow to US$ 100 billion and medical device market
expected to grow US$ 25 billion by 2025. Pharmaceuticals exports from India stood at US$ 19.14
billion in FY19 and US$ 13.69 billion in FY20 (up to January 2020). Pharmaceutical exports include
bulk drugs, intermediates, drug formulations, biologicals, Ayush & herbal products and surgicals.
Indian companies received 304 Abbreviated New Drug Application (ANDA) approvals from the US
Food and Drug Administration (USFDA) in 2017 and received a total of 415 product approvals in 2018
and 73 tentative approvals. The country accounts for around 30 per cent (by volume) and about 10
per cent (value) in the US$ 70-80 billion US generics market.
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 year
and reach US$ 100 billion by 2025.
India’s domestic pharmaceutical market turnover reached Rs 1.4 lakh crore (US$ 20.03 billion) in
2019, growing 9.8 per cent year-on-year (in Rs) from Rs 129,015 crore (US$ 18.12 billion) in 2018.

GLOBAL REACH:
 North America – Contributes to 21% of the revenue
 Key Highlights
 Launch and ramp-up of differentiated products (gPulmicort, gVoltaren,
gIsuprel,gSensipar)

 Emerging markets – Contributes to 11% of the revenue

 Key Highlights
 De-growth largely attributable to geopolitical challenges in Middle East markets and
currency movements

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  Continued to maintain strong leadership position across key Emerging markets
 Presence in 52 countries including direct to market models in 13 countries
 Continued leadership position in Respiratory in Sri Lanka
 Continued leadership position in Respiratory in Nepal
 Continued leadership position in ARV in Myanmar
 Biosimilars franchise in the EM: Added Peg-filgrastim for Australia, New Zealand,
Colombia and Malaysia

 API – Contributes to 4% of the revenue

 Key Highlights
 Manufactured more than 200 generic and complex APIs with presence in more than 60
countries in Europe, North America, Latin America and Asia Pacific
 Strong contribution from key accounts and top 5 products; sales ramp-up in Oncology
APIs

 SAGA (South Africa, Sub-Saharan Africa, Global Access) – Contributes to

20% of the revenue
 Key Highlights
 SAGA Region has witnessed lower tender sale during FY 18-19
 South Africa business grew at more than three times the market at 10.4%1 in the private
market
 Expanded offering to the patients in South Africa beyond medicines, acquired 30% stake
in Brandmed, a connected health solutions company

 Europe – Contributes to 4% of the revenue

 Key Highlights
 Strong ramp-up in key respiratory products
 Fluticasone Propionate Salmaterol (FPSM) market share ramping up steadily

 India – Contributes to 38% of the revenue

 Key Highlights
 Chronic therapies: Cipla became the 2nd biggest player growing over 18% vs market
growth of 13%
 Stands as market leader in Respiratory & Urology

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COMPANY MANAGEMENT:
Board of Directors:
Name Designation
Dr. Y. K. Hamied Non-Executive Chairman
Mr. M. K. Hamied Non-Executive Vice-Chairman
Ms. Samina Hamied Executive Vice-Chairperson
Managing Director & Global Chief
Mr. Umang Vohra
Executive Officer
Mr. S. Radhakrishnan Non-Executive Director
Mr. Ashok Sinha Independent Director
Dr. Peter Mugyenyi Independent Director
Mr. Adil Zainulbhai Independent Director
Ms. Punita Lal Independent Director
Ms. Naina Lal Kidwai Independent Director

Key Management Personnel:

Name Designation
Umang Vohra Managing Director & Global Chief Executive Officer
Kedar Upadhye Global Chief Financial Officer
President, Chief Technology Officer, Manufacturing
Geena Malhotra
Operations & Respiratory CoE
Dr. Ranjana Pathak President, Medical Affairs and Pharmacovigilance &
Global Head – Quality
Dr. Raju Mistry President & Global Chief People Officer
Nikhil Chopra Executive Vice President & CEO - India Business
Paul Miller Chief Executive Officer - Cipla South Africa
Pradeep Bhadauria President and Chief Scientific Officer
Swapn Malpani Executive Vice President, Global Head - Supply Chain &
Procurement

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FINANCIALS OF THE COMPANY:
Balance Sheet
Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
1 1 16 161. 161.
Equity Share Capital 60.59 60.68 0.90 02 14
10,6 11,3 12,38 14,068. 14,851.
Reserves 28.65 55.54 2.76 17 14
1,7 5,2 4,11 4,098. 4,316.
Borrowings 03.33 01.92 2.66 05 23
3,2 4,9 4,38 5,652. 5,653.
Other Liabilities 80.54 33.17 0.75 93 81
15,7 21,6 21,03 23,980. 24,982.
Total 73.11 51.31 7.07 17 32

Net Block 6,829.64 9,368.32 9,491.98 9,950.17 9,608.36

Capital Work in
Progress 580.90 2,060.87 1,682.98 981.33 676.18
Investments 639.78 758.69 973.01 1,258.84 2,554.14
Other Assets 7,722.79 9,463.43 8,889.10 11,789.83 12,143.64
Total 15,773.11 21,651.31 21,037.07 23,980.17 24,982.32

Working Capital 4,442.25 4,530.26 4,508.35 6,136.90 6,489.83

Debtors 1,997.72 2,356.27 2,563.05 3,102.45 4,150.72
Inventory 3,780.62 3,808.05 3,485.28 4,044.70 3,964.83
 
Debtor Days 64.27 62.37 64.99 74.72 92.59
Inventory Turnover 3.00 3.62 4.13 3.75 4.13
 
Return on Equity 11% 12% 8% 10% 10%
Return on Capital Emp 15% 13% 8% 10% 12%

Profit & Loss Account

Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Sales 11,345.44 13,790.10 14,394.29 15,155.71 16,362.41

Expenses 9,183.74 11,310.43 11,918.50 12,406.85 13,265.10

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Operating Profit 2,161.70 2,479.67 2,475.79 2,748.86 3,097.31

Other Income 165.55 208.21 228.69 357.65 476.57

Depreciation 504.71 754.22 1,322.93 1,322.82 1,326.31

Interest 168.29 206.63 159.38 114.23 168.43

Profit before tax 1,654.25 1,727.03 1,222.17 1,669.46 2,079.14

Tax 400.03 331.59 179.76 250.11 569.53

Net profit 1,180.77 1,359.99 1,006.39 1,410.53 1,527.70

EPS 14.70 16.93 12.51 17.52 18.96

Price to earning 48.45 30.24 47.40 31.13 27.89

Price 712.45 511.95 592.95 545.45 528.90

   
RATIOS:  
Dividend Payout 13.60% 11.81% 15.99% 17.12% 15.82%
OPM 19.05% 17.98% 17.20% 18.14% 18.93%

Cash Flow Statement:

Narration Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Cash from Operating Activity 1,173.43 1,740.81 2,381.76 1,462.76 1,691.14
Cash from Investing Activity -949.71 -4,532.56 -1,303.88 -834.17 -1,687.52
Cash from Financing Activity 164.78 3,104.06 -1,325.68 -385.48 -348.72
Net Cash Flow 388.50 312.31 -247.80 243.11 -345.10

SHARE HOLDING PATTERN:

Share holding pattern:
Standalone Sep-19 Mar-19 Dec-18 Sep-18
Promoters 36.68 36.7 36.7 36.74
Pledged 0 0 0 0
FII/FPI 23.63 25.96 25.24 25.62
Total DII 23.49 21.21 21.73 21.47
Fin.Insts 0.39 0.35 0.34 0.25
Insurance Co 3.79 3.4 2.49 2.1

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MF 13.24 10.27 10.9 10.99
Others DIIs 6.07 7.19 8 8.13
Others 16.2 16.13 16.34 16.17
Total 100 100 100.01 100

DIVIDEND & RIGHTS:

Dividend:
Announcement Effective Dividend Dividend
Date Date Type (%)
20-02-20 19-03-20 Interim 150
21-02-20 19-03-20 Special 50
22-05-19 31-07-19 Final 150
22-05-18 13-08-18 Final 150
25-05-17 26-07-17 Final 100
24-05-16 12-09-16 Final 100
29-05-15 11-08-15 Final 100

Bonus:
Announcement Ex-Bonus
Bonus Ratio Record Date
Date Date
11-02-06 3:02 25-04-06 24-04-06
07-10-99 2:01 05-11-99 18-10-99
24-03-94 5:01 26-04-94 04-04-94
30-09-92 1:01 06-11-92 06-10-92
11-10-88 1:01 01-12-88 -
23-08-86 1:01 30-11--0001 -
23-08-80 1:01 30-11--0001 -

Split:

Announcement Ex-Split
Old FV New FV
Date Date
       
23-03-04 10 2 11-05-04
29-07-94 100 10 29-07-94

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Rights Issue:

Announcement Ex-Rights
Rights Ratio Face Value Premium Record Date
Date Date

03-05-95 4:50 0 660 02-03-95 03-02-95

RATIOS:
  Mar-19 Mar-18 Mar-17 Mar-16 Mar-15
Basic EPS (Rs.) 18.97 17.53 12.52 16.93 14.71

Diluted EPS (Rs.) 18.93 17.5 12.5 16.89 14.66

Cash EPS (Rs.) 35.2 34.06 29.4 26.76 21.91

Book Value 190.45 181.12 161.37 147.7 136.51

[ExclRevalReserve]/Share
(Rs.)

Book Value 190.45 181.12 161.37 147.7 136.62

[InclRevalReserve]/Share
(Rs.)

Revenue from 203.08 188.25 178.92 171.65 141.3

Operations/Share (Rs.)

PBDIT/Share (Rs.) 44.36 39.55 33.62 33.46 28.98

PBIT/Share (Rs.) 27.9 23.12 17.17 24.07 22.7

PBT/Share (Rs.) 25.81 20.74 15.19 21.5 20.6

Net Profit/Share (Rs.) 18.74 17.63 12.96 17.37 15.62

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Profitability Ratios:
25

20

15

10
Mar-19
5 Mar-18
Mar-17
0 Mar-16
(%
)
(%
)
(%
)
(%
) %) Mar-15
y s(
gin gin it ed et
ar ar qu loy As
s
M M /E p
DI
T fi t r th l Em on
PB ro wo ita rn
tP t
ap tu
Ne Ne C Re
on on
rn rn
tu tu
Re Re

Liquidity Ratios:
  Mar-19 Mar-18 Mar-17 Mar-16 Mar-15
Current Ratio 3.29 2.82 2.61 1.14 1.95
(X)
Quick Ratio 2.24 1.77 1.58 0.65 0.98
(X)
Inventory 4.13 3.75 4.13 3.62 3
Turnover
Ratio (X)
Dividend 18.59 13.41 19.23 13.3 13.6
Payout Ratio
(NP) (%)
Dividend 9.95 6.92 8.31 8.55 9.52
Payout Ratio
(CP) (%)
Earnings 81.41 86.59 80.77 86.7 86.4
Retention
Ratio (%)
Cash 90.05 93.08 91.69 91.45 90.48
Earnings
Retention
Ratio (%)

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Valuation Ratio:
  Mar-19 Mar-18 Mar-17 Mar-16 Mar-15
Enterprise 46,675.09 47,221.87 51,577.15 45,820.39 58,423.78
Value (Cr.)
EV/Net 2.85 3.12 3.58 3.32 5.15
Operating
Revenue (X)
EV/EBITDA (X) 13.06 14.83 19.07 17.05 25.1

MarketCap/Net 2.61 2.89 3.31 2.98 5.03

Operating
Revenue (X)
Retention 81.4 86.58 80.76 86.69 86.39
Ratios (%)
Price/BV (X) 2.84 3.07 3.8 3.57 5.3
Price/Net 2.61 2.89 3.31 2.98 5.03
Operating
Revenue
Earnings Yield 0.04 0.03 0.02 0.03 0.02

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14

12

10

8 ROE
ROCE
6

0
Mar-19 Mar-18 Mar-17 Mar-16 Mar-15

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Peer Comparison:

PEER COMPANIES IN THE INDUSTRY:

1. Sun Pharma
2. Dr Reddys Labs
3. Divis Labs
4. Torrent Pharma
5. Aurobindo Pharma
6. Lupin
7. Abbott India
8. Cadila Health
9. Alkem Lab
10. GlaxoSmithKline
11. Pfizer
12. Ipca Labs
13. Sanofi India
14. Alembic Pharma
15. Ajanta Pharma

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 16. Natco Pharma
17. Glenmark
18. AstraZeneca
19. Procter&Gamble
20. Jubilant Life
21. JB Chemicals
22. Laurus Labs
23. FDC
24. Granules India
25. Strides Pharma

TECHNICALS:

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OPINION-
The COVID 19 outbreak has also presented Indian pharmaceutical companies an opportunity to
become a preferred alternate hub for manufacturing APIs and intermediates. Having recognised this
opportunity and declaring Indian pharma’s dependence on Chinese APIs a threat to national
security, the central government has approved a slew of measures to promote manufacturing of
APIs and KSMs within the country.  This includes approval of Rs 3,000 crores project to set up three
bulk drug parks in coordination with three states, as well as a 20 per cent financial incentive for the
next six years for manufacturers to make 53 critical bulk drugs, which are in turn used to make
medicines. The scheme is expected to reduce manufacturing cost of bulk drugs in the country and
dependency on other countries for bulk drugs. This incentive from the central government and the
lessons from COVID-19 are with a hope to change the global footprint of Indian pharmaceutical

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companies and more importantly, reduce dependence of the domestic pharma companies on a
single supplier like China.

As the coronavirus now takes a large toll across countries, the scientific community have been
watching with optimism, the action of anti-viral Oseltamivir, anti-retroviral (ARV- for HIV/AIDS
medicines) Lopinavir and Ritonavir and anti-malarial drugs chloroquine and hydroxychloroquine.
Hyderabad-based CSIR-Indian Institute of Chemical Technology (IICT) has tied up with
pharmaceutical giant Cipla to work on development of anti-viral drugs to contain COVID-19. The
company is doubling production of these therapies. Cipla already distributes Swiss company Roche’s
anti-inflammatory drug Actemra in India, which can be used in patients with severe lung problems.
Cipla has an upper hand in respiratory, anti-flu and HIV drugs as all three are believed to be effective
in the present situation. Cipla is both fast-tracking development of these drugs with government
laboratories, and repurposing its wide portfolio of respiratory, asthma, anti-virals and HIV drugs to
meet challenges arising from COVID-19 in India. It will be interesting to see how the stock performs
in the long run.

My Recommendation-
Bullish / Buy / Long

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