FANGARI QAIF NAVID AKHTAR

19PGP170

SECTION C

CF Assignment

FINANCIAL ANALYSIS
(FY: 2018-19)
Business overview:

Zydus Wellness Ltd is engaged in the business of manufacturing, buying and selling of all types of
health food products, low fat, low cholesterol including table margarine, cheese, butter and substitute
products. The product range of the company includes Functional Health Foods and Dietary Products-
Sugar Free Gold is the largest selling aspartame based low calorie sugar substitute in India.

Financial results:

The standalone and consolidated financial performance of the Company, for the Financial Year
ended on March 31, 2019 are summarized below:

Assessing current Financing Choices:

a) Borrowings- Issue of Secured Non-Convertible Debentures (“NCDs”):

During the year under review, Zydus Wellness raised funds through private placement of
15,000 9.14% Secured, Listed Rated Redeemable Non-Convertible Debentures in 3 (three)
tranches, namely Tranche 1, Tranche 2 and Tranche 3, of the face value of Rs.10 Lakhs each,
for Rs.500 Crores in each tranche, aggregating to Rs.1,500 Crores, having maturity periods of
3 years, 4 years and 5 years respectively.
 b) Equity- Shares issued

During the year under review, the Company has issued and allotted 1,85,92,055 Equity Shares
of face value of Rs.10/- each. Upon allotment of the above equity shares, the Issued,
Subscribed and Paid-up equity share capital of the Company stands increased to
Rs.57,66,41,440/- (Rupees Fifty Seven Crores Sixty Six Lakh Forty One Thousand Four Hundred
Forty Only) divided into 5,76,64,144 (Five Crores Seventy Six Lakh Sixty Four Thousand One
Hundred Forty Four) equity shares.

I) Detailed description of current Financing

a) Issue of Secured Non-Convertible Debentures (“NCDs”):
The Company has issued Secured Redeemable Non-Convertible Debentures (NCDs) of Rs.
1,50,000 lakh, which are repayable in three equal yearly instalments starting from January
16, 2022. These NCDs are secured by way of charge on specific brands. The asset cover of the
said NCDs as on March 31, 2019 exceeds hundred percent of the principal amount of the NCDs.
The Company has created Debenture Redemption Reserve of 37,500 lakh representing 25%
of the value of debentures outstanding out of profits of the Company available for payment
of dividend

The said NCDs carrying interest rate 9.14% (payable semi-annually) were issued and allotted
on January 16, 2019 to the identified investors from whom valid online bidding was received.

Indebtedness of the Company including interest outstanding / accrued but not due for
payment:

Maturities of financial liabilities

The tables below analyse the company’s financial liabilities into relevant maturity groupings
based on their contractual maturities for all non-derivative financial liabilities. The amounts
disclosed in the table are the contractual undiscounted cash flows. Balances due within 12
months equal their carrying balances as the impact of discounting is not significant.
b) Shares issued

During the year under review, the Company has issued and allotted 1,85,92,055 Equity Shares
of face value of Rs.10/- each at a price of Rs.1,385/- (including a premium of Rs.1,375/-) per
equity share. The shares were issued and allotted by way of preferential issue under Chapter
VII of Securities and Exchange Board of India (Issue of Securities and Disclosure Requirements)
Regulations, 2018 (“SEBI ICDR”) on January 29, 2019.

Shareholding pattern as at March 31,2019:

The proceeds from issuing of above shares amounted to Rs.2,55,641 lakhs. After issue of
preferential shares market value of Zydus Wellness observed a positive trend.

Cash flow from Financing activities as at March 31,2019:

II) Breakdown into dept and equity
The consolidated debt of the Company as on March 31, 2019 stood at Rs.15,693 million,
against Rs.250 million last year. Debt-equity ratio was 0.46 as on March 31, 2019 as against
0.04 as on March 31, 2018. Increase in debt-equity ratio was on account of a change in the
Company’s capital structure due to the issuance of fresh equity of Rs.2,575 cr (including share
premium) and also funds borrowed in the form of nonconvertible debentures of Rs.1,500 cr,
which were used to fund the acquisition of Heinz India Private Ltd.

Debt/Equity
0.5
0.45
0.4
0.35
0.3
Ratios

0.25
0.2
0.15
0.1
0.05
0
2015 2016 2017 2018 2019
Year

Assessing Investment decision:

a) Acquisition of Shares of Heinz India Private Limited:

During the year under review, your company had entered into a Share Purchase Agreement
jointly with Cadila Healthcare Limited to acquire 100% shareholding of Heinz India Private
Limited, (Heinz). The Company along with its wholly owned entity Zydus Wellness - Sikkim,
paid a consideration amount of Rs.4,667.36 Crores (which includes payment towards cash and
bank balance of Rs.125 Crores in Heinz and acquired 100% shareholding of Heinz as under:

Goodwill amounting to Rs.3,79,692 lakh arising on the acquisition of HIPL represents the
excess of the cost of acquisition over the Group’s interest in the net fair value of the
identifiable assets and liabilities of HIPL recognised.
Examining firm’s financial transition:

Zydus Wellness is a strong and emerging player in the health and wellness space in India and is
currently Growth stage of its corporate life cycle which is justified by the financial and investment
choices company Is making. The year 2018-19 was successful as the Company completed the
acquisition of Heinz India Private Ltd. (“Heinz India”), the subsidiary of Kraft Heinz, on January 30,
2019. Acquisition of iconic brands like Complan, Glucon-D and Nycil was an ideal addition to the
Company’s portfolio, supporting the Company’s aspiration to grow in the consumer wellness space by
providing multiple choices to consumers and emerge as one among the leading FMCG companies
within India.

Though there are certain financial and operational risks associated with company such as Risk of
fluctuations in prices of key inputs, Risk of competition and price pressure, A slowdown in the
economy could impact the industry and Risk of litigation related to quality of products, intellectual
properties and other litigation.

Net Sales
400
350
336.37
300
267.52 264.15 254.61
Rs in Crores

250 253.59
213.01 219.11 225.19
200 203.25 208.13

150
100
50
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year

But the planned growth will create enhanced infrastructure and expand the Company’s distribution
network with a combined strength of 5 manufacturing facilities, 1800 distributors and more than 2
million customer touchpoints. The closure of this acquisition represents a new exciting chapter as the
Company embarks on a transformation journey into a leading wellness player.