Business Valuation Report-30.01.2010

BusinessValuationReport 2010
BUSINESSVALUATIONREPORT
OF
ABCPHARMACEUTICALSPRIVATELIMITED
REGDOFFICE:1205,GLOBALBUSINESSPARK,
OKHLAINDUSTRIALAREA,
PHASEII,NEWDELHI
As on 30.01.2010
Prepared by:
NSGSK & Associates

1502/17, DLF Mega Plaza, Connaught Circus, New Delhi-110001
011-23418000-07, Fax No.011-23418008
E-mail: email@nssdk.in
Confidential and for private circulation only
Table of contents
S. No.
1.0
2.0
2.1
2.2
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.8.1
3.8.2
3.8.3
Particulars of the Report

Introduction
Sources of information
External sources of information
Internal sources of information
Analysis of the subject entity and related non financial information
About company
Mission and vision
History of the company
Manufacturing locations
Organisational structure
Management team
Shareholding pattern
Product profile of the company
Products
APIs
List of Products launched both in Domestic & International Market
4.0
4.1
4.2
4.3
4.4
5.0
5.1
5.2
5.3
5.3.1
5.3.2
5.3.3
5.4
5.5
5.5.1
5.5.2
5.5.3
6.0
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
7.0
Economic Environment
GDP Growth
Industrial Production in H2 FY 10
Bank credit
Stress on BOP
Key policies & regulations
National Pharmaceutical Policy 2002
An overview of pharmaceutical industry in India
Financial performance of pharmaceutical industry in India
Value of total pharmaceutical industry in last 5 years
Value of exports from India
Value of imports in India
Geographical markets and segment wise sale of the company
Strategy and future plans
API division
Products
Finished dosage formulation division
Business risk and their management of risk at ABCPL
Assets
Global and Environmental Risks
Human Resources
Products / Markets
Competition
Price Controls
Litigations
Regulatory Observations
Foreign Currency transactions and associated Risks
Economic and Financial Risks
Other Risks
Financial statements and information analysis
Page No.
4
6
6
6
8
8
8
8
9
9
9
10
11
11
12
Annex-1
Annex-2
13
13
14
15
15
16
16
17
18
18
19
19
20
20
20
21
21
22
22
22
22
22
22
23
23
23
23
23
23
25
7.1
7.2
8.0
8.1
8.2
8.3
9.0
10.
11.
Summarised balance sheets (both audited and projections)

Summarised profit & loss account (both audited and projections)
Valuation approaches and methods
Asset approach
Income approach
Market approach
Representation of the valuer
Conclusion
List of assumptions and limiting conditions
25
26
27
27
27
30
31
32
33
1.0
Introduction
1.1
ABC Pharmaceutical Private Limited (ABCPL) is the flagship company of the

Delhi based ABC Group. The Group is having interest in pharmaceutical and
drug manufacturing, retail chains, hospitals and diagnostic centres in Northern
India.
ABCPL is a professionally managed pharmaceutical company, manufacturing a
wide range of innovative specialty medicines for domestic and international
markets. ABCPL was established in March 2001. Its product portfolio consists of
pharmaceutical specialties in various dosage forms, herbal remedies,
diagnostics, generic drugs, active pharmaceutical ingredients (APIs). Some of
the products within these categories enjoy good positions in the Indian and
foreign markets. The Company is strategically focused on R&D and totally
committed to respond promptly to market needs by developing quality products
at affordable prices for the masses. With a strong base of 3 state-of-the-art
manufacturing units and one DSTC approved R&D centers, the company has
entered a dynamic phase of expansion into newer and faster growing therapeutic
segments such as anti-diabetics and Respiratory. ABCPL is a customer driven,
financially sound company, consistently enhancing value for its shareholders by
rewarding them with healthy dividends year after year. 47% of the Companys
revenue comes from exports to USA & Europe. To further enhance its strength in
foreign markets, ABCPL has also entered into joint venture and strategic tie ups
with key partners in USA etc.
1.2
Purpose of the engagement:

The purpose of the business valuation engagement is to ascertain its enterprise
value and value of its equity share (range) so that it can be used to raise
resource for its future expansion of its operations in South Asia, Africa and Latin
America through private equity investor/venture capitalist etc.
1.3
Premise of value:
ABCPL was promoted by Dr. A.B. Chaturvedi in the year 1991. The entire 100%
equity share capital of the company is being hold by Dr. A.B. Chaturvedi and his
family through investment companies promoted by him and entire shareholding
of ABCPL is free from all encumbrances and lien. Further promoters have all
rights to take all decisions with this respect.
1.4
Our opinion with respect to determination of enterprise value (EV) of the

company is based on going concern basis since the company is carrying out its
operations in a professional manner with an objective to achieve its targets of
4
becoming a prominent player in the pharma sector so that wealth can be created
for all its stakeholder including its employees, dealers, associates, promoters etc.
We have done the valuation of the company keeping in view the economic/noneconomic conditions and circumstances prevailing on the date of valuation i.e.
31st December 2009.
1.5
Standard of value:
We have used fair market value (FMV) as a standard of value for ascertaining
the EV of ABCPL. FMV is the price, expressed in terms of cash equivalents, at
which property would change hands between a hypothetical willing and able
buyer and a hypothetical willing and able seller, acting at arms length in an open
and unrestricted market, when neither is under compulsion to buy or sell and
when both have reasonable knowledge of the relevant facts.
1.6
Valuation approach:
We have considered the following valuation approaches for arriving at FMV of
ABCPL after considering the appropriate discounts and premiums for
determining or estimating the EV:
a. Asset-based approach
b. Market approach
c. Income approach
1.7
We have prepared this detail BV report on the basis of certain assumptions and
limiting conditions which are given below in details in Appendix-
1.8
We have only compiled and reviewed the financial information (both audited and
unaudited) provided to us by the management of the company and assumes no
responsibility for the financial information.
2.0
Sources of information
We have used information obtained by us both from the internal and external
sources in evaluating and for arriving at a FMV of the company, which are given
below:
2.1
External Sources of information:

Organisation of Pharmaceutical Producers of India.
Indian Drug Manufacturers Association
Bulk Drug Manufacturers Association
All India Small Scale Pharmaceutical Manufacturers Association
Federation of Indian Chambers of Commerce and Industry
Confederation of Indian Industry
Research Reports of Leading Brokerage Houses
Interviews of the few prominent wholesalers, doctors and Chemists in
Metro cities to understand the market position of the company products.
Analysis of the information available in public domain
Review of Government Policies and regulations
Comparable financial data from the available databases like
prowess/capital market etc.
MCA website
2.2
Internal sources of information:

The management of the company has provided us the following information:
Background of the company
Details about the promoters
Audited Financial statements of the company for the last 5 years i.e. from
1st April 2005 to 31st March 2009 and unaudited results upto 31st
December 2009 duly attested by the management. We have not carried
out any verification and certification and attestation of the financial
information provided to us and we assume no responsibility for their
accuracy, though we have reviewed the basis of preparation of the same
and cross checked with the various statutory records in a broad manner.
Internal audit report for the last 8 quarters i.e. upto 30th September 2009.
Business plan and financial projections of the company for the next 5
years i.e. from 2010 to 2015.
Income Tax/VAT Assessment orders for the last 3 years and details about
all the appeals and their present status made by the company with income
tax authorities, excise authorities and VAT authorities.
Shareholding pattern of the company
CMA data furnished with the bank and loan agreements.
Sales and marketing plan of the company
Future plans of the company and strategy to achieve the same
Data about its competitors both in domestic and international market
Interview of the top management team like Managing director and CEO,
marketing heads both domestic and international markets, R&D head,
Finance Head, production head, HR head etc.
Inspection and visit of all the 4 manufacturing locations and corporate
office of the company.
Review and inspection of the requisite statutory registrations like pollution
certificate, factory licenses, license from explosive department etc. and
their validity, long term supply agreement entered into with major raw
material suppliers and R&D laboratories for trials.
Review of the fixed asset register
Review of the secretarial records of the company
We have obtained all the relevant information and necessary clarifications
and explanation which we required for understanding of the various
information and data provided to us and which we believe was necessary
for carrying out this valuation exercise.
3.0
Analysis of the subject entity and related nonfinancial information
3.1
About Company
ABC Pharmaceutical Private Ltd. (ABCPL) is a company registered with
Registrar of Companies, Delhi & Haryana. ABCPL is one of Indias fastest
growing, professionally managed pharmaceutical company, manufacturing a
wide range of innovative specialty medicines for domestic and international
markets. ABCPL was established on 15th March 2001.
Its product portfolio consists of pharmaceutical specialties in various dosage
forms, herbal remedies, diagnostics, generic drugs, active pharmaceutical
ingredients (APIs). Some of the products within these categories enjoy good
positions in the Indian and foreign markets.
The Company is strategically focused on R&D and totally committed to respond
promptly to market needs by developing quality products at affordable prices for
the masses. With a strong base of 2 state-of-the-art manufacturing units and one
DSTC approved R&D centers, the company has entered a dynamic phase of
expansion into newer and faster growing therapeutic segments such as antidiabetics and Respiratory.
ABCPL is a customer driven, financially sound company, consistently enhancing
value for its shareholders by rewarding them with healthy dividends year after
year. 52% of the Companys revenue comes from exports to USA & Europe. To
further enhance its strength in foreign markets, ABCPL has also entered into joint
venture and strategic tie ups with key partners in USA etc.
3.2
Mission & Vision:

Integrity, Industry, Innovation these are the core values, which the mission of
ABCPL imbibes.
Over the years, ABC has persistently endeavoured to impart the highest quality
of life to its consumers and the hard-working field force of the organization.
3.3
History:
Incorporated - 1991 for manufacture of pharmaceutical formulations.

Started Parenteral Manufacturing facility at Manesar, Haryana, India - 1992.
First full year in Operations - 1994 - sales Rs. 0.5 million.
Established bulk drug and Intermediate facility at Ankaleshwar, Gujarat, India.
This facility is TGA approved, and certified for its environmental management
systems (ISO-14001). (Today its a US-FDA approved plant).
3.4
State of the art manufacturing facilities - cGMP, ISO 9001:2008 certified dosage
facility.
A wide distribution network, Indian & International.
Granted US Patent for its manufacturing process of Omeprazole.
Launched anti-cancer drug-Imatinib Mesylate 100 mg capsules under the brand
name - VEENAT, Process developed in-house.
Manufacturing Locations:
1. Plot No.B-12, Phase-II, Manesar,
Gurgaon, Haryana.
Bulk drug and formulations (R&D

Bulk drugs). Approved by US FDA
(for bulk drugs), WHO
2. Plot No. 105, Ankaleshwar Industrial Bulk drug and formulations (R&D
Park, Ankaleshwar,
Bulk drugs). Approved by DSTC
Gujarat.
approved R&D centre.
3.5
Organisational Structure:
BoardofDirectors
ManagingDirectors&CEO
ProductionHead
Ankaleshwar
Plant
3.6
Manesar
Plant
MarketingHead
Domestic
Market
CFO
HRHead
International
Market
Management Team:
Dr. A.B. Chaturvedi, aged 54 years, who is the Managing Director and CEO of
the company is an MBBS, MD (Medicines) and is a first generation entrepreneur
and is the founder of the ABC Group. He has wide interest and experience in
business.
Dr. Sushila Chaturvedi, Director, is a prominent gynaecologist and is running
her Nursing home in New Delhi.
Mr. Suresh Choudhary, Director, is a commerce graduate and an MBA from
IIM, Kolkata. He is the ex- President of FICCI (the Federation of Indian
Chambers of Commerce and Industry) and serving on the Board of several
Indian companies.
Mr. Dinesh Gupta, Director cum Chief Financial Officer, is a commerce graduate
and a member of the Institute of Chartered Accountants of India. He joined the
services of the Company in 2001. He has 18 years of experience in accounts and
finance including 12 years of experience in the pharma industry.
Mr. Bhupender Kumar Gupta, IAS, an independent professional Director,
joined the Indian Administrative Service in 1960. He held many posts in
Government of India and Government of Punjab. He was also Finance Secretary
and Chief Secretary to the Government of Punjab.
Mr. M.P. Tyagi, is an Engineer in Chemical Engineering and MBA from FMS,
New Delhi. He is the Production Head of the company and is responsible for the
plant operations at Manesar and Ankaleshwar.
Dr. Alok Sinha, Head Quality & Research & Development, is M.Sc, Ph.D.
(Chemistry) and having specialization in Industrial Chemicals and a fellow
member of the Institute of Pharma Chemicals from Horst, Holland. He has wide
experience of 34 years and is associated with the Company since 2004. He held
previously prestigious position in various organizations and was also associated
with Scientific and research activities.
Mr. Bijoy Krishna Murthty, Head Marketing, an MBA from IIM Ahmedabad and
is looking after the marketing operations of the company. He is associated with
the company since from 2002.
Mrs. Bimla Singh, Head HR is a graduate from Harward University and she is
looking after the HR in the company. She is associated with the company in
2006.
3.7
Share holding pattern:

S.No.
Name
i)
ii)
iii)
iv)
v)
Dr AB Chaturvedi
Dr. Sushila Chaturvedi
Mr. Mahesh Chaturvedi
Ms. Sarita Chaturvedi
Ala Mode Investments Pvt. Ltd.
ABC Advertising & Hospital Pvt.
Ltd.
Leaf Investments Pvt. Ltd.
ABC Securities Pvt. Ltd.
Total
vi)
vii)
viii)
10
Number of
Share holding (%)
Shares of
Rs.l0/-cach
367092
1.31%
200928
0.72%
200928
0.72%
200928
0.72%
1025540
3.66%
1044584
5000000
20000000
28040000
3.73%
17.83%
71.33%
100.00%
3.8
Products Profile of the Company:
3.8.1 Products:
"These products are not offered in countries where valid patents exist. However,
final responsibility with respect to third party's patent rights in a specific country
lies exclusively with the user."
The 3 distinct brands of ABC Pharmaceutical are a product of constant
innovation, expertise and dedication. The superior quality, effectiveness and
affordability are aspects that are in sync with the patient needs.
Recently, ABCPL became only the second company in India to receive DCGI
permission to market Ofloxacin, Once-Daily 400mg & 800mg formulations.
Hence, we expect significant growth for this brand in the coming year.
Top three brands of ABCPL are:
Doktor Mom
Doktor Mom is a purely herbal product. It comes in the form of syrup, rub and
lozenges (5 flavours- pineapple, strawberry, raspberry, lemon and orange).
Doktor Mom is widely marketed by ABCPL in USA through our own sales
representatives. Doktor Mom has been awarded "Most Trusted American Brand
Award" by Readers Digest in the cough and cold segment. This award was given
to ABCPL by Readers Digest for the last 5 consecutive years (2004, 05, 06, 07,
08). This is a household brand in USA.
Metrogyl
Metrogyl, ABCPL s biggest brand is the Metronidazole molecule. The company
has also introduced a plethora of variations to this brand for convenient patient
use. Some of the variations like palatable, suspended, large volume topical,
dental and combinations with norfloxacin also capture high prescription rate.
Metrogyl has been tried and tested since last 7 years and is still going strong.
This exhibits its excellent therapeutic value to its users. Metrogyl IV,is an
important brand extension of Metrogyl. Today Metrogyl IV is being exported to
several countries. This is a clear indication of the acceptance and trust in
Metrogyl IV of doctors.
OF
The Company has its presence in the antibiotic segment through OF, a brand of
the molecule Ofloxacin. OF is the third largest brand of the Company having
grossed sales of 10 crore in 2007-08.
11
3.8.2 Active Pharmaceutical Ingredients (API):
"These products are not offered in countries where valid patents exist.
However,final responsibility with respect to third party's patent rights in a specific
country lies exclusively with the user."
Ciprofloxacin Hydrochloride UPS

(U.S.DMF No. 17786)
Diclofenac Acid
(U.S.DMF No. 15366)
Diclofenac Potassium BP/EP

(Plant approved by FDA, U.S.A. - U.S.DMF No. 15074)
Diclofenac Sodium BP/EP/USP also Injectable Grade
Diclofenac Sodium BP/EP/USP

(Certicate of Suitability No. R1-CEP-1997-041-REV 00) dtd. 18th March, 2003
Metronidazale BP/EP/USP
(Plant approved by FDA, U.S.A. - U.S.DMF No. 3675)
3.8.3 List of the products launched in the domestic and international market are
enclosed as per Annexure-1 and Annexure-2.
12
4.0
Economic Environment:
In the past year, the Indian as well as the global economy has witnessed a very
high degree of uncertainty and volatility. The outlook for the global economy
continues to remain bleak. IMF has estimated that world economic growth will fall
to 0.5% in 2009, which is the lowest rate since World War II. The global economy
is expected to experience gradual recovery in 2010, when growth is estimated at
3%, as the impact of expansionary fiscal and monetary policies starts to set in.
It is inevitable that the fortunes of the Indian economy will be impacted by the
growth prospects of the world economy as export demand continues to fall, and
external financing becomes progressively constrained. However, there are some
inherent strength within the Indian economy, which have spawned the idea of its
'decoupling' from the global economy. While it is debatable whether economies
such as India will remain completely insulated from the negative growth
prospects of the global economy, there are some factors that might play a
mitigating role in the face of the spreading contagion.
o The presence of a large domestic population, along with the increase
in its per capita income.
o Further, a strong saving and investment rate.
The Indian economy registered around 9.0% growth during FY04-FY07 and this
growth rate gave rise to hopes of structural shift in economic growth.
Real GDP, which witnessed substantial moderation during Jan-Dec'08, is one of
the key indicators of an economy that is losing steam. During Jan-Dec'08, India's
GDP growth averaged 7.4% as compared with 9.2% during the corresponding
period of the previous year.
4.1
Real GDP to grow by 6.7% in FY10

D&B believes the economy would pick up in the medium to long term period,
when lagged effects of aggressive policy response by the Government and by
the RBI. D&B believes that the strong fundamentals of the Indian economy are a
key to early reversal. D&B expects GDP growth to bottom out during H1 FY10,
see a reversal by H2 FY10 and average at 6.7% for FY10.
13
D&B expects the industrial sector growth to average at 4.6% during FY09,
significantly lower than 8.1 % in FY08. Further, on account of improvement in
demand during H2 FY10, industrial sector growth is expected to improve and
average at 5.5% during FY10.
4.2
Industrial production to pick up in H2 FY10

D&B expects growth in industrial production to be around 3.5% during FY09 as
compared with 8.5% during FY08. However, industrial production is expected to
improve during H2 FY10 and register an average growth of 5.3% during FY10 on
account of:
Rise in domestic demand
Stability in export demand
14
Faster implementation of infrastructure projects that are in pipeline and increase in the
developmental expenditure by the Government in FY10.
4.3
Bank Credit to Moderate:

D&B forecasts the bank credit growth to moderate to around 21.5% by end of
FY09 and then to 20.0% by end of FY10.
4.4
Stress on External Balance Likely to Increase

D&B expects exports to be around US$ 178 bn in FY09, which is approximately
US$ 22 bn lower than the Government's target, owing to economic downturn
witnessed in India's key export markets. D&B, however, expects exports to
witness some revival during the second half of FY10, when the world economy
begins to stabilise. D&B expects exports to grow around 14% to US$ 203 bn
during FY10.
Imports, on the other hand, are expected to be around US$ 300 bn in FY09 and
are likely to increase further to US$ 353 bn in FY10, as demand will pick up in
the Indian economy during latter part of FY10. Imports are expected to grow at
17.7% during FY1 0, which is lower as compared to 25.0% (estimated) during
FY09.
D&B expects the trade deficit to increase to US$ 122 bn in FY09 and further to
US$ 150 bn in FY10, as growth in imports is expected to be greater than exports.
D&B expect the current account deficit to be around 2.2% of GDP in FY10 as
invisible receipts are expected to pick up once the external environment
stabilises by the latter half of FY10.
15
5.0
Key Policies & Regulations:

At present the following Acts and Rules made thereunder that govern the
manufacture, sale, import, export and clinical research of drugs and cosmetics
in India.
The Drugs and Cosmetics Act, 1940
The Pharmacy Act, 1948
The Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954
The Narcotic Drugs and Psychotropic Substances Act, 1985
The Medicinal and Toilet Preparations (Excise Duties) Act, 1956
The Drugs (Prices Control) Order 1995 (under the Essential Commodities
Act)
Some other laws:
There are some other laws which have a bearing on pharmaceutical
manufacture, distribution and sale in India. The important ones are given below:
1. The Industries (Development and Regulation) Act, 1951
2. The Trade and Merchandise Marks Act, 1958
3. The Indian Patent and Design Act, 1970
4. Factories Act
5.1
National Pharmaceutical Policy 2002:

Steps taken by Government:
Industrial licensing for the manufacture of all drugs and pharmaceuticals has
been abolished except manufacturing of bulk drugs by using certain
processes.
Reservation of 5 drugs for manufacture by the public sector only was
abolished in Feb.1999, thus opening them up for manufacture by the private
sector also.
Foreign investment through automatic route has been raised to 100%.
Automatic approval for Foreign Technology Agreements is being given in

the case of all bulk drugs, their intermediates and formulations.
Drugs and pharmaceuticals manufacturing units in the public sector are

being allowed to face competition including competition from imports.
Extending the facility of weighted deductions of 150% of the expenditure on
in-house research and development to cover as eligible expenditure, the
expenditure on filing patents, obtaining regulatory approvals and clinical
trials besides R&D in biotechnology.
Introduction of the Patents (Second Amendment) bill in the Parliament. It,
inter-alia, provides for the extension in the life of a patent to 20 years.
16
To qualify as R&D intensive company in India, the PRDC has suggested
following conditions (gold standards) :-
a.
b.
c.
d.
e.
5.2
Invest at least 5% of its turnover per annum in R&D,

Invest at least Rs.10 Crore per annum in innovative research including
new drug development, new delivery systems etc. in India,
Employ at least 100 research scientists in R&D in India,
Has been granted at least 10 patents for research done in India,
Own and operate manufacturing facilities in India
An Overview of Pharmaceuticals Industry in India
17
The Indian pharmaceutical industry, now an over Rs. 89,000 crores (US
$18 billion) industry.
The country now ranks 3rd worldwide by volume of production and 14th by
value thereby accounting for around 10% of worlds production by volume
and 1.5% by value.
Globally, it ranks 4th in terms of generics production and 17th in terms of
export value of bulk actives and dosage forms.
Indian exports are destined to more than 200 countries around the globe
including highly regulated markets of US, West Europe, Japan and
Australia.
The total employment is about 340,000 in the sector and an estimated
400,000 doctors and 300,000 chemists are serving an over 1 billion
customers market.
The Pharmaceutical sector is one of the major export revenue earners of
Indian economy. During 2007-08, Indian pharma exports were USD 7.24
billion, recording a growth of 8.34% in rupee terms and 21.91% in dollar terms
compared with the previous year.
India is a globally acknowledged source of high quality affordable generic
medicine with rich vendor base.
India has the highest number of USFDA approved plants outside USA.
India offers skilled scientists/ technicians/ management personnel at affordable
cost.
An estimated US$103 billion of generic products are at risk of loosing patents
by 2012. Even at a conservative estimate there is a huge opportunity for India.
In July 2008, GOI, has created the Department of Pharmaceuticals, to deal
with issues relating to policy, planning, development and regulation of
Pharmaceuticals Industries.
The following attributes constitute the basis of the technological strengths of
the Indian Pharmaceutical Industry:
a. Self-reliance displayed by the production of 70% of bulk drugs
and almost the entire requirement of formulations within the country.
b. Low cost of production.
c. Low R&D costs.
d.
e.
f.
g.
h.
5.3
Innovative Scientific manpower.

Excellent and world-class national laboratories specializing in
process development and development of cost effective technologies.
Increasing balance of trade in Pharma sector.
An efficient and cost effective source for procuring generic drugs
especially the drugs going off patent in the next few years.
An excellent centre for clinical trials in view of the diversity in population.
Financial Performance of the Pharmaceutical Industry:

Financial performance of the Drugs and Pharmaceutical Industry for the year 200809 is given in Table below. The figures given in the Table are on quarterly basis
showing the percentage increase/decrease with the same quarter of the previous
year.
Drugs and Pharmaceuticals: Growth and Profitability (for the quarter ending)
Particulars
Income
Net Sales
Total Expenses
Raw Material
Salaries & wages
Power & fuel
Depreciation
Interest Exp.
PBDIT
PAT
in %
June'07 Sept'07 Dec'07 Mar'08 June'08 Sep'08 Dec'08 Mar'09
15.5
18.5
18.1
13.9
18.5
14.4
9
11.8
12.2
20.8
19.5
15.7
22.1
15.2
10.6
14
15.3
20.5
16.5
14.8
22.8
23
28.7
21.9
16.5
23
15.3
15.2
19.9
16.5
13.6
15
19.2
19.1
19
20.5
22.5
21.3
16
18
62.2
17.4
7.2
0
-1.5
1.5
3
18
12.6
12.3
11.7
15.6
17
17.3
18.5
18.2
19.4
37.4
29
69.6
34.8
37
70.1
59
24.1
16.1
14.7
6.9
-3.7
-13.4
-52.4
-15.8
26.5
12.2
11.7
-2.1
-6.2
-27.6
-88.1
-49.8
Source: Center for Monitoring Indian Economy (CMIE)
Despite global recession and financial crises, the Drugs and

Pharmaceuticals sector could maintain its positive growth in sales volume.
The sectors profitability was affected with the expenses increasing at a
faster pace as compared to income.
The increase in expenditure was mainly on account of the increase in the raw
material cost, wages and salaries, depreciation and interest expenses.
With AS11 no longer mandatory, drug makers are not expected to report
MTM loss on their foreign exchange borrowings.
Domestic growth is also expected to remain healthy and the Governments
decision to open more Jan Aushadhis stores will support this trend.
5.3.1 The Value of Total Domestic Indian Pharmaceutical Market for the last 5
years:
Rs. in cr.
Retail Market at MRP

Generic plus companies
tracked by us
18
Apr'2005 Apr'2006 Apr'2007 Apr'2008 Apr'2009

MAT
MAT
MAT
MAT
MAT
24807
28692
32764
37619
41383
not
1985
2295
2621
3010
3311
Hosp & Institutional
(except Govt.)
sales
2977
744
496
2233
3443
861
574
2582
3932
983
655
2949
4514
1129
752
3386
4966
1242
828
3725
33242
38447
43904
50410
55454
Direct Doctor Purchase

Pharmaceutical OTC products
Diagnostics
Total Indian Pharmaceutical Mkt.
5.3.2 Exports
from India:
Year
Exports (INR) in Crore
Growth %
2002-03
12826
-
2003-04
15213
23.87
2004-05 2005-06
17857
22216
50.31%
93.90
2006-07 2007-08
26895
30759
140.69% 179.33%
Rs.InCr.
2008-09
38433
256.07%
5.3.3 Imports in India:

As per the D.G.C.I.S. statistics, imports of medicinal and pharmaceutical
products for the last three years have been as under:
Year
Amount
2005-06
Rs. 4515.2 crores
2006-07
Rs. 5866.37crores
2007-08
Rs. 673415 crores
2008-09
Rs. 8552 (Provisional)
19
5.4
Geographical markets of the company:
Segmentwise Revenue composition of Sales:
5.5
Strategy and Future Plans:
5.5.1 API division:

ABCPL continues to strive to develop niche products and capture niche markets
and efforts aimed at product registrations in some South American countries are
in an advanced stage of completion. The Division continues to concentrate on
20
high value, low volume specialty drugs, which result in reasonably good value
addition.
Status relating to filing of Drug Master Files is given below.
Therapeutic
segment
No. of Products
Filed
USA
Filed
Rest of
Total No. of
World
DMF Submitted
In
Filed
In
Filed
In
process
process
process
0
0
0
2
0
Benign
Prostatic
Hypertrophy
In
Process
0
Bronchodilator
Urinary
incontinence
Anxiolytics
Bone
resorption
inhibitor
1
1
0
0
1
1
0
0
0
0
0
1
2
2
0
1
0
2
1
0
0
2
1
0
0
0
1
0
0
4
3
0
Hyperphospha
-taemia
Antiparkinsoni
sm
TOTAL
14
5.5.2 Projects:
A new production block is being planned in the Manesar facility to expand the
number of products that could be produced at a time.
5.5.3 Finished Dosage Formulations Division:
In FY 2009-10, the company's application for abbreviated new drug application
(ANDA) in respect of Anastrazole 1 mg. and Granisetron 1 mg. tablets has been
approved by the US FDA authorities. The company is exploring various avenues
available to it for launching this product in USA and / or Europe.
21
6.0
Business Risks and their Management of Risks at ABCPL:

The company has a policy of evaluating various risks that the Company is prone
to from time to time. Wherever feasible, remedial measures are initiated and
suitable follow-up action is taken.
We have been provided a gist of the various risks involved in the conduct of the
affairs of the Company by the management, and how the Company proposes to
deal with these risks:
6.1
Assets:
All the fixed assets of the Company, including stocks of finished goods, raw
materials, packing materials and work-in-process are adequately insured, at
replacement values and employees are covered by health insurance.
6.2
Global and Environmental Risks:

The Company aims to keep itself insulated from these risks by entering into
strategic alliances with partners in other countries. In case of such tie-ups, the
cost of litigation and the cost of regulatory filings, wherever applicable, would be
to the account of the partner.
6.3
Human Resources
The Company believes in its human capital as one of the important assets and
therefore, has taken steps to retain talent by providing reasonably appreciable
avenues of growth, along with suitable compensation structures. The Company
has recently concluded a Employee Stock Option Plan.
6.4
Products / Markets:
While it is inevitable to depend on a single market, product or customer in certain
circumstances, efforts are made by the Company to reduce such dependence, to
the minimum. Invariably in such cases, attempts are made to widen the business
horizon and simultaneous efforts are made to enter niche markets and introduce
niche products.
6.5
Competition:
After the company's successful foray into oncology segment in 2003, several
companies have followed suit, resulting in severe competition at the market
place. However, the company has been able to neutralize the competition by
increasing its rapport with the medical profession and generally spreading the
knowledge about the company's products by organizing continuous knowledge
programs for the medical profession.
The company continues to pursue a very aggressive pricing policy for some of its
products, and continues its drug donation program.
Standards of manufacture and quality play a vital role in managing competition
and retaining and developing customer base, By maintaining its facilities at world
22
standards, and continuously upgrading them to suit international standards and
US FDA requirements, ABCPL is able to not only retain but widen its
international customer base. Regular audits are undertaken by customers and
the observations made in these audits are duly taken care of.
For the domestic markets, a majority of the products are made from the
manufacturing facilities located at tax-free zones and the Company has been
able to pass on at least a part of these benefits to the customers.
6.6
Price Controls:
The pharmaceutical industry in India is subject to price controls and the prices of
some products are determined by the Government. Though only some products
manufactured by ABCPL are likely to be a subject matter of price control
mechanism under the Indian law, nevertheless, governmental compulsions for
reduction in the prevailing prices remains a risk.
6.7
Litigations:
Efficient and effective management of the business reduces the risk that the
company's products face in terms of litigation. Being a company which is
enthused to launch new products, sometimes first time generic introductions in
the world, the company is aware of the risks that its products and activities are
subject to. Most of these risks are neutralized by a unique system of tie-ups
where the litigation risks are taken-up by the partner rather than the Company
itself. In addition, suitable product liability insurance is also obtained.
6.8
Regulatory Observations:
Regulatory approvals form the basic strength of the Company and utmost care is
taken to ensure that these approvals are valid, in full force and are renewed from
time to time. To this end, all observations made by the Regulatory Auditors and
Customer Auditors are taken seriously and immediate action is initiated to rectify
the lapses.
6.9
Foreign Currency transactions and associated Risks:

The company continues its policy of not hedging any of its import / export
transactions. It has been the company's experience that such a policy, over a
period of time, neutralizes the risks associated with foreign currency transactions.
6.10
Economic and Financial Risks:

The company is operating in an environment where, as of now, financial costs
are rising. The company is attempting to reduce the financial costs by contracting
new loans and swapping them with the old loans. Wherever possible, attempts
are made to enhance the product pricing to cover rising costs.
6.11
Other Risks:
In addition, the Company faces distribution, storage, contamination, counterfeit
and risks associated with patents and intellectual property rights which the
23
company faces. The company is in the process of evolving a strategic
mechanism which will enable it to deal with these risks in course of time.
24
7.0
Financial statement/information analysis
We have obtained the audited financial statements of the company for the
last 5 years i.e. 2005 to 2009. The company accounting year is 31st
December 2009.
The management has also provided us the financial projections for the
next 5 years.
Management has also provided us the historical data of the competitors

and companies of similar size.
The company has provided us the income tax returns along with
computation for the last 3 years. But we have not been provided us the
depreciation schedule as per Income Tax Act.
We have been informed and certified by the company that the financial
statements does not personal expenses of the promoters and their family
members.
We feel that the management has provided us all the relevant financial
information which is required to form an opinion about the valuation of the
company.
Summarised balance sheet both audited and projected is being given below:
ABCPL
Balance Sheet
Year ended 31 December
Sources of Funds
Rs in Cr.
2005
2006
Audited
2007
Equity Share Capital

Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
26.16
87.48
113.64
85.09
26.13
111.22
224.86
27.17
120.51
147.68
63.44
16.62
80.06
227.74
27.64
152.5
180.14
64.86
11.58
76.44
256.58
28.04
191.16
219.2
88.55
5.58
94.13
313.33
28.04
229.86
257.9
120.81
5.53
126.34
384.24
28.04
295.22
323.26
110.03
5.53
115.56
438.82
28.04
372.41
400.45
99.24
5.53
104.77
505.23
Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Total CA, Loans & Advances
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets
135.18
39.01
96.17
8.9
165.5
66.58
98.92
6.15
224.87
164.56
45.58
118.98
15.46
144.36
70.22
74.14
2.54
227.74
190.64
53.06
137.58
20.14
163.46
83.08
80.38
0
256.56
235.31
61.59
173.72
28.57
181.53
91.28
90.25
0
313.34
273.07
71.92
201.15
46.96
225.79
110.45
115.34
0
384.25
303.17
82.99
220.19
16.86
320.71
118.93
201.77
0.00
438.82
320.03
95.17
224.86
0.00
408.80
128.44
280.36
0.00
505.22
25
2008
2009
2010
Projections
2011
2012
2013
2014
28.04
461.80
489.84
88.46
5.53
93.99
583.83
28.04
564.25
592.29
77.68
5.53
83.21
675.49
28.04
680.65
708.69
66.89
5.53
72.42
781.11
340.03
107.93
232.11
0.00
491.27
139.55
351.72
0.00
583.83
370.03
121.55
248.48
0.00
579.23
152.22
427.01
0.00
675.49
400.03
136.61
263.42
0.00
683.79
166.10
517.69
0.00
781.11
Summarised profit and loss account both audited and projected is also given below:
ABCPL
Profit & Loss account
Year ened 31 December
Income
Export sale
Domestic Sale
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Preoperative Exp Capitalised
Total Expenses
Operating Profit
PBDIT
Interest
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
26
Rs in cr.
2005
Audited
2006
2007
2008
2009
2010
Projections
2011
2012
2013
2014
25.67
145.93
171.60
5.61
165.99
3.13
-0.85
168.27
35.32
134.80
170.12
7.63
162.49
19.84
1.60
183.93
52.89
141.44
194.33
8.45
185.88
15.90
6.25
208.03
82.89
154.86
237.75
6.87
230.88
13.01
4.05
247.94
99.12
176.81
275.93
4.10
271.83
9.35
7.10
288.28
125.00
192.32
317.32
4.72
312.60
10.75
8.98
332.34
145.00
211.98
356.98
5.30
351.68
12.10
8.24
372.02
190.00
202.68
392.68
5.83
386.85
13.31
8.19
408.34
225.00
206.95
431.95
6.42
425.53
14.64
9.01
449.18
260.00
215.15
475.15
7.06
468.09
16.10
9.91
494.10
69.45
6.41
18.57
75.08
7.74
23.49
83.36
10.13
25.30
96.42
11.02
30.48
101.31
15.24
37.17
116.51
17.53
39.03
131.07
19.72
40.98
143.13
21.69
43.03
157.45
23.86
45.18
173.19
26.24
47.44
4.33
39.59
3.50
3.96
24.52
4.39
4.68
23.36
5.02
5.65
28.17
6.31
6.98
38.86
8.92
8.03
44.69
10.26
9.03
50.28
11.54
9.93
55.30
12.69
10.93
60.83
13.96
12.02
66.92
15.36
0.00
141.85
0.00
139.18
0.00
151.85
0.00
178.05
0.00
208.48
0.00
236.04
0.00
262.61
0.00
285.78
0.00
312.21
0.00
341.17
23.29
26.42
13.40
13.02
5.84
7.32
-0.14
1.41
1.27
-0.88
1.56
24.91
44.75
8.03
36.72
6.64
3.61
26.47
-0.25
26.22
2.43
23.79
40.28
56.18
6.61
49.57
7.61
2.54
39.42
0.19
39.61
9.15
30.46
56.88
69.89
9.73
60.16
8.59
0.00
51.57
-1.65
49.92
9.86
40.05
70.45
79.80
15.05
64.75
10.35
0.00
54.40
-1.01
53.39
10.63
42.74
96.31
107.06
14.29
92.77
11.06
109.41
121.50
12.83
108.67
12.18
122.56
135.87
11.38
124.49
12.75
136.97
151.61
9.92
141.68
13.63
152.93
169.03
8.47
160.56
15.05
81.71
96.48
111.74
128.05
145.51
81.71
16.34
65.36
96.48
19.30
77.19
111.74
22.35
89.39
128.05
25.61
102.44
145.51
29.10
116.40
8.0
Valuation approaches and methods considered:

For the purpose of valuation of the Company, we have used all three recognized
valuation methods:
8.1
Asset Approach
Income approach (DCF method)
Market approach (Average P/E multiple of the listed companies reduced by
30% and price to sales multiple methods)
Asset Approach
The Asset Based approach considers the cost of replacement or liquidation value
of an asset as an indication of the fair market value of that asset.
Under this method realizable value of total assets and total liabilities as per latest
Audited Financial statement are considered for arriving at the net asset book
value of the company. No adjustments for contingent liabilities, which might
crystallize in future and no discount has been given on Sundry Debtors and Loan
and advances in view of the information from management that it may expects
such default in future since we are of opinion that the replacement value of the
assets will be much more than these discounts and contingent liabilities. Hence
we considered the net worth as per last audited balance sheet on 31.12.09 as
basis for calculation of per value share. Details are given below:
Net worth
No of shares
Value per share (in Rs.)
8.2
Rs in Cr.
257.9
28040000
92
Income Approach:
Under the Income approach, we have used the Discounted Cash Flow (DCF)
method. This method is also called the multiperiod income discounting model.
The discounted economic income method is based on the premise that a
financial investment is worth the sum of all of the future benefits it will provide to
its owner, each discounted to a PV at the discount rate that reflects the time
value of money and the degree of risk of receiving the benefits when and in the
amounts expected. It requires:
DCF analysis is based mainly on the following elements:
Projection of timing and amount of future expected cash flows;
A discount rate that reflects the cost of capital for the type of investment
and returns contemplated.
27
Projection of financial statements
Based on historical analysis of past five year (2005 to 2009), we have projected
the future free cash flows which will be available to the company. The detailed
workings are enclosed in the excel spreadsheet attached with this report.
(Annexure 3).
Discounted factor
The Discount Factor (also termed as the Discount Rate) is the most challenging
task in the mathematical calculation of Valuation. For calculating the Net Present
Value of cash flows the Discount Rate has been calculated by the Capital Asset
Price Model (Expanded CAPM), which is:
Discount rate = Risk Free Return Rate + (Market Return Risk Free Return) +
Risk attributable to the specific company
Cost of Equity (as per Modified CAPM):
6.90% GOI security bond matured on 2019 on 31.12.09
as per rates appearing in WDM in NSE.
Risk free rate
General equity risk premium

Times beta
10.00%
0.86
Equity risk premium

Equity risk premium attributable to the specific company
Cost of equity capital
Beta for Pharma & drug companies as per

Aswath Damodaran webiste
8.6% (Including company specific premium)
5.00%
20.5%
Computation of WACC
Capital conponents
Debt:
Term Loan
WC Loan
Unsecured Loan
Equity
Total
28
Amount
53.9162
55.93
5.53
28.04
143.4162
Cost in %
% of capital
Effective
Effective
components in rate of tax in rate of tax
capital structure the explicit in the
forecast
terminal
period
period
13.50%
12%
12%
21%
38%
39%
4%
20%
20%
20%
20%
0.33
0.33
0.33
Cost of
Capital
10.800%
9.600%
9.600%
20.500%
100%
Weighted
cost of
weighted
capital
4%
4%
0%
4%
12.2%
growth rate (g)
Free cash Flows of the Firm (FCFF)
Year ended 31 December
EBIT
Tax
NOPAT
Depreciation as per IT Act
(Increase)/Decrease in WC
CAPEX
Net FCF
Discounting @WACC
DCF
Terminal value
FCF
Less: Debts
Equity Value
No of shares
2%
2009
68.44
68.44
68.44
12%
2010
2011
2012
2013
2014
96.00
(19.20)
76.80
26.58
(14.51)
109.32
(21.86)
87.46
26.37
(19.07)
88.86
0.89
79.21
94.76
0.79
75.29
123.11
(24.62)
98.49
24.93
(17.80)
(20.00)
85.63
0.71
60.65
137.98
(27.60)
110.38
24.74
(21.78)
(30.00)
83.34
0.63
52.62
153.97
(30.79)
123.18
25.84
(18.17)
(30.00)
100.85
0.56
56.76
153.97
(50.81)
103.16
889.7845
0.50
446.42
770.95
115.3762
655.58
28040000
234
Terminal value=NOPAT*(1-g/r)/(WACC-g)
r= Return on equity
g= perpetuity growth
Based on the above factors, the value of equity per share is is determined as Rs.
234 per share
29
Rs in Cr.
2015
8.3
Market approach
Market Approach refers to the notion of arriving at the value of a company by
comparing it to the market value of similar companies. The comparison is based
on certain financial ratios or multiples, such as the price to book value, price to
earnings, price to sales, EV/EBITDA, etc., of the equity in question to those of its
peers. This type of approach, which is popular as a strategic tool in the financial
industry, is mainly statistical, based on historical data, and current market
sentiments.
We have calculated the value of equity by using the P/E multiple and price to
sales multiple method. Detailed working is given below:
P/E Ratio multiple
Name of the companies
Price on
31.12.09
205
187
145
478
115
AjantaPharma
NeulandLab
NatcoPharma
VenusRemedies
GranulesIndia
Total
Average P/E
Discount due to non listed company
EPS of ABCPL
Market value per share (in Rs.)
EPS
P/E
18.26
21.59
12.25
53.86
2.54
11.23
8.66
11.84
8.87
45.28
85.88
17.18
30%
15.24
183.25
Sales to Market Multiple

Sales
Multiple
Value of Equity
No of share
Rs in Cr
271.83
1.91 (as per Aswath Damodaran price
to sales multiple for India)
519.1953
28040000
185
By using the above two referred methods we have arrived the value of Rs. 183
per share and Rs 185 per share.
30
9.0
Representation of the Valuer

We are summarizing below the factors which guided us in carrying out this
business valuation engagement:
a. The analyses, opinions, and conclusion of value included in this valuation
report are subject to the specified assumptions and limiting conditions,
and these are the personal analyses, opinions, and conclusion of NSGSK
& Associates.
b. The economic and industry data included in the valuation report have
been obtained from various printed or electronic reference sources that we
believes to be reliable (any exceptions should be noted) and NSGSK &
Associates has not performed any corroborating procedures to
substantiate that data.
c. This valuation report is being made for the specific use of our client and
the valuation report is not intended to be and should not be used by
anyone other than our client or with his permission.
d. NSGSK & Associates has no obligation to update the report or the opinion
of value for information that comes to our attention or notice after the date
of the report.
e. NSGSK & Associates has done the valuation.
f. NSGSK & Associates confirm that:
The statements of fact presented in the report are correct to the best of
knowledge of NSGSK & Associates.
The reported analyses, opinion and conclusions are limited only by the
reported assumptions and limiting conditions.
NSGSK & Associates have no bias with respect to the subject of this
report or with this assignment.
NSGSK & Associates have no present or prospective interest in the
subject business or has no personal interest in the parties involved.
NSGSK & Associates fee is not contingent upon an action or event
resulting from the analyses, opinions or conclusions in, or the use of,
this report.
The valuation engagement was performed in accordance with the
Indian Institute of Chartered Accountants Business Valuation
Practise Standard.
NSGSK & Associates have necessary skills and competence to
perform the engagement to estimate value.
31
10.
Conclusion:
We hereby conclude that the value of the equity share of the company i.e.
ABCPL should be in the range of Rs 180 per shares to Rs 235 per shares on
31.12.09 and this value may increase or decrease on the basis of the market
conditions prevailed at the time of making the deal.
32
11.
List of Assumptions and Limiting Conditions

1.
The conclusion of value arrived at herein is valid only for the stated purpose as of the date of the valuation
and may not be used out of the context presented herein.
2.
Public information, estimates, industry and statistical information contained in this report have been obtained
from sources considered to be reliable. However, we independently did not verify such information and
make no representation as to the accuracy or completeness of such information obtained from or provided
by such sources.
3.
The company and its representatives warranted to us that the information supplied to us was complete and
accurate to the best of their knowledge and that the financial information properly reflects the business
conditions and operating results for the respective periods in accordance with generally accepted accounting
principles. Information supplied to us has been accepted as correct without any further verification. We have
not audited, reviewed, or compiled the financial information provided to us and, accordingly, we express no
audit opinion or any other form of assurance on this information.
4.
Financial information of the subject company is included solely to assist in the development of a value
conclusion presented in this report and should not be used to obtain credit or for other purpose. Because of
the limited purpose of the information presented, it may be incomplete and contain departures from
generally accepted accounting principles. We have not audited, reviewed or compiled this information and
express no assurance on it.
5.
We do not provide assurance on the achievability of the results forecasted by the client because events and
circumstances frequently do not occur as expected; differences between actual and expected results may
be material; and achievement of the forecasted results is dependent on actions, plans, and assumptions of
management.
6.
The conclusion of value arrived at herein is based on the assumption that the current level of management
expertise and effectiveness would continue to be maintained, and that the character and integrity of the
enterprise through any sale, reorganization, exchange, or diminution of the owners participation would not
be materially or significantly changed.
7.
Possession of this report, or a copy thereof, does not carry with it the right of publication of all or part of it nor
may it be used for any purpose by anyone other than those enumerated in this report without the written
consent of the DSGSK & Associates. This report and the conclusion of value arrived at herein are for the
exclusive use of our client for the sole and specific purposes as noted herein.
8.
The report and conclusion of value are not intended by the author and should not be construed by the
reader to be investment advice in any manner whatsoever. The conclusion of value represents the
considered opinion of DSGSK & Associates, based on information furnished to them by the client and other
sources.
9.
Neither all nor any part of the contents of this report (especially the conclusion of value, the identity of any
valuation specialist(s), or the firm with which such valuation specialists are connected or any reference to
any of their professional designations) should be disseminated to the public through advertising media,
public relations, news media, sales media, mail, direct transmittal, or any other means of communication
without the prior written consent and approval of DSGSK & Associates.
10. This valuation reflects facts and conditions existing or reasonable foreseeable at the valuation date.
Subsequent events have not been considered, and we have no obligation to update our report for such
events and conditions.
33
11. The analyst, by reason of this valuation, is not required to give further consultation, testimony, or be in
attendance in court with reference to the property in question unless arrangements have been previously
made.
12. Our engagement for this valuation consulting work does not include any procedures designed to discover
any defalcations or other irregularities, should any exist.
13. DSGSK & Associates is not an environmental consultant or auditor, and it takes no responsibility for any
actual or potential environmental liabilities. Any person entitled to rely on this report, wishing to know
whether such liabilities exist, or the scope and their effect on the value of the property, is encouraged to
obtain a professional environmental assessment. DSGSK & Associates does not conduct or provide
environmental assessments and has not performed one for the subject property.
14. DSGSK & Associates has not determined independently whether the client is subject to any present or
future liability relating to environmental matters nor the scope of any such liabilities. DSGSK & Associates
valuation takes no such liabilities into account, except as they have been reported to DSGSK & Associates
by the client or by an environmental consultant working for the client.
15. No change of any item in this valuation/conclusion report shall be made by anyone other than DSGSK &
Associates, and we shall have no responsibility for any such unauthorized change.
16. It is assumed that there is full compliance with all applicable central, state, and local environmental
regulations and laws unless noncompliance is stated, defined, and considered in the report.
17. If prospective financial information approved by management has been used in our work, we have not
examined or compiled the prospective financial information and therefore, do not express an audit opinion or
any other form of assurance on the prospective financial information or the related assumptions.
18. We have conducted interviews with the current management of the client concerning the past, present, and
prospective operating results of the company. Except as noted, we have relied on the representations of the
owners, management, and other third parties concerning the value and useful condition of all equipment,
real estate, investments used in the business, and any other assets or liabilities, except as specifically stated
to the contrary in this report.
19. We have made no investigation of title to property, and assume that the owners claim to the property is
valid. We have not attempted to confirm whether or not all assets of the business are free and clear of liens
and encumbrances or that the entity has good title to all assets.
34

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BusinessValuationReport 2010

NSGSK & Associates

Confidential and for private circulation only

Particulars of the Report

Confidential and for private circulation only

Summarised balance sheets (both audited and projections)

Confidential and for private circulation only

ABC Pharmaceutical Private Limited (ABCPL) is the flagship company of the

Purpose of the engagement:

Our opinion with respect to determination of enterprise value (EV) of the

Confidential and for private circulation only

External Sources of information:

Internal sources of information:

Confidential and for private circulation only

Confidential and for private circulation only

Analysis of the subject entity and related nonfinancial information

Mission & Vision:

Incorporated - 1991 for manufacture of pharmaceutical formulations.

Confidential and for private circulation only

Bulk drug and formulations (R&D

Confidential and for private circulation only

Share holding pattern:

Confidential and for private circulation only

Products Profile of the Company:

Confidential and for private circulation only

Ciprofloxacin Hydrochloride UPS

Diclofenac Potassium BP/EP

Diclofenac Sodium BP/EP/USP also Injectable Grade

Diclofenac Sodium BP/EP/USP

Confidential and for private circulation only

Real GDP to grow by 6.7% in FY10

Confidential and for private circulation only

Industrial production to pick up in H2 FY10

Confidential and for private circulation only

Bank Credit to Moderate:

Stress on External Balance Likely to Increase

Confidential and for private circulation only

Key Policies & Regulations:

National Pharmaceutical Policy 2002:

Automatic approval for Foreign Technology Agreements is being given in

Drugs and pharmaceuticals manufacturing units in the public sector are

Confidential and for private circulation only

Invest at least 5% of its turnover per annum in R&D,

An Overview of Pharmaceuticals Industry in India

Innovative Scientific manpower.

Financial Performance of the Pharmaceutical Industry:

Source: Center for Monitoring Indian Economy (CMIE)

Despite global recession and financial crises, the Drugs and

Retail Market at MRP

Apr'2005 Apr'2006 Apr'2007 Apr'2008 Apr'2009

Confidential and for private circulation only

Direct Doctor Purchase

5.3.3 Imports in India:

Confidential and for private circulation only

Geographical markets of the company:

Segmentwise Revenue composition of Sales:

Strategy and Future Plans:

5.5.1 API division:

Confidential and for private circulation only

Confidential and for private circulation only

Business Risks and their Management of Risks at ABCPL:

Global and Environmental Risks:

Confidential and for private circulation only