GICS Industry : Pharmaceuticals l Sub Industry : Pharmaceuticals l Website : www.cipla.

com

Cipla Ltd
Key Stock Indicators
NSE Ticker : Bloomberg Ticker : Face value / Share: Div. Yield (%): CIPLA CIPLA:IN 2.0 0.5 CMP (as on 06 Dec 2010Rs/share): 52-week range up to 06 Dec 2010 (Rs)(H/L): Market Cap as on 30 Nov 2010 (Rs mn): Enterprise Value as on 30 Nov 2010 (Rs mn): Div. Yield (%): 0.0 370.0 370.25/302.90 297,081 296,511 Shares outstanding (mn) : Free Float (%) : Average daily volumes (12 months) : Beta (2 year) : 802.9 63.2 1,371,330 0.5

Cipla Ltd (Cipla), established in 1935, is one of the largest players in the domestic formulation market, with a market share of around 5.0%. The company is the market leader in key therapeutic areas such as respiratory care, anti-viral and urological. Exports contribute ~54% of the total sales for the company

Key Financial Indicators

Revenue (Rs mn) EBITDA ma rgins (%) PAT (Rs mn) PAT ma rgins (%) Gea ring (x) EPS (Rs /s ha re) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x)
n.m. : Not meaningful

KEY HIGHLIGHTS
Amongst the larger players in the domestic formulations market In 2009-10, as per ORG-IMS, Cipla remained the leader in the domestic market, as on 31st March 2010 with a market share of 5.38 per cent. The domestic business has shown a double digit growth of CAGR 11% between FY06-10 on account of a strong brand value and good distribution network in India Growing exports The companys world class manufacturing facilities approved by US FDA, MHRA UK, TGA Australia etc have played a critical role in enabling the company realize its global ambitions with exports growing at a CAGR of 17% between FY06-10 and its contribution to overall sales have grown from 48% in FY 06 to 54% in FY 10 Supply tie-ups with global players in regulated markets It is amongst the first few generics to adopt a partnership model for the regulated markets of US and Europe. In the US, Cipla has entered into partnership for 118 products with 22 partners. The number of partners has increased from 17 to 22 over the last 12 months. Further it has 60 partners in European market to sell ~400 drugs.

Mar-08 42,620.9 21.1 7,010.4 16.4 0.2 9.0 24.4 4.6 19.9 20.1 19.6

Mar-09 53,009.3 25.1 7,710.2 14.5 0.2 9.9 22.2 3.9 23.8 19.1 13.5

Mar-10 56,717.4 25.9 10,757.0 19.0 13.4 27.6 5.0 24.4 21.0 20.2

Shareholding (As on September 30, 2010)

DII 18% Others 30%

KEY RISKS

Drug Price Control Order (DPCO) continues to challenge the Indian pharmaceutical industry Exports are subjected to fluctuations in rupee value. Exports for FY 10 was 54% of revenues for FY 10 Consolidation in the global generic space can have an adverse impact on the upside from the partnership model adopted by the company.

FII 15%

Promoter 37%

Indexed price chart

(index) 140 ('000) 5000 4000 3000 2000 1000 0
Dec-09 Jun-10 Oct-10 Mar-10 May-10 Nov-10 Apr-10 Feb-10 Jul-10 Aug-10 Sep-10 Jan-10

Stock Performances vis--vis market

Returns (%) YTD Ci pl a Ltd NIFTY
Note: 1) YTD returns are since April 1, 2010 to Dec 06, 2010. 2) 1-m, 3-m and 12-m returns are up to Dec 06, 2010.

120

1-m 6 -4

3-m 19 7

12-m 6 16

100 80 60 40 20 0

9 13

Volumes (RHS)

Cipla Ltd

NIFTY

CRISIL COMPANY REPORT | 1

Cipla Ltd
BACKGROUND
Cipla, established in 1935, was the brainchild of Mr. Khwaja Hamied. It is one of the largest players in the domestic formulation market, with a market share of around 5% contributing 46% of the total turnover in FY10. The company is the market leader in key therapeutic areas such as respiratory care, anti-viral and urological. Ciplas distribution network in India comprises a field force of around 5,100 employees and 42 exclusive and dedicated sales depots, as well as approximately 2,300 stockists and 160,000 chemists. The company has a wide geographical presence in over 170 countries globally, and derived 56% of its FY10 revenues from exports. The key exporting regions include Africa (34%), North, Central and South America (26%), Europe (17%) with Australia and Middle East contributing the rest It is amongst the first few generics to adopt a partnership model for the regulated markets. It has 22/60 partners for the US/EU markets and sells ~140/400 drugs through such tie-ups in these markets. The company launched several new product in FY09-10 some of which were: Antiflu (first oral drug for bird flu), Clearnoz NS (saline spray for dry nose), Junior Lanzol (acid controller liquid for children) and Prandial (novel drug for diabetes)

COMPETITIVE POSITION
Peer Comparison

Revenue (Rs mn) EBITDA ma rgins (%) PAT (Rs mn) PAT ma rgi ns (%) Gea ring (x) EPS (Rs /s ha re) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x)
n.m: Not meaningful

Cipla Ltd Mar-10 56,717.4 25.9 10,757.0 19.0 13.4 27.6 5.0 24.4 21.0 20.2

Dr.Reddys Laboratories Ltd Mar-10 73,293.0 23.8 3,515.0 4.8 0.5 20.8 87.9 9.8 14.6 13.0 18.2

Ranbaxy Sun Pharmaceutical Laboratories Ltd Industries Ltd Dec-09 Mar-10 76,240.6 40,519.8 8.2 34.9 755.6 13,469.8 1.0 33.2 2.0 1.8 65.0 311.7 7.0 13.2 1.3 9.9 19.3 4.3 19.0 41.5 6.2

Lupin Ltd Mar-10 48,408.6 20.4 6,915.3 14.3 0.5 77.8 6.6 2.2 29.6 43.1 5.6

Cadila Healthcare Ltd Mar-10 36,863.0 23.2 5,298.0 14.4 1.0 38.8 19.8 9.8 33.1 62.9 13.3

FINANCIAL PROFILE
Strong top-line growth in the last 2 years with margin expansion

Key Financial Indicators Units Revenue Rs mil li on Rs mil li on Per cent Per cent Per cent Ti mes Per cent Per cent EBITDA ma rgins Per cent PAT PAT ma rgi ns EBITDA growth PAT growth Gea ring RoCE RoE

Mar-08
42,620.9 21.1 7,010.4 16.4 18.5 5.6 5.0 0.2 19.9 20.1

Mar-09
53,009.3 25.1 7,710.2 14.5 24.4 47.9 10.0 0.2 23.8 19.1

Mar-10
56,717.4 25.9 10,757.0 19.0 7.0 10.5 39.5 0.0 24.4 21.0

Cipla registered a strong top line growth of over 15% CAGR between FY08-10 with the top line growing from Rs 42.6 bn in FY08 to Rs 56.7 bn in FY10. This was accompanied by margin expansion with operating margins expanding by ~480 basis points from 21.1% in FY08 to 25.9% in FY10.

Revenue growth Per cent

INDUSTRY PROFILE
Formulations The pharmaceutical formulations market includes the domestic and the export market. The domestic market accounts for approximately 61 per cent of total formulation sales. The share of exports has steadily risen from 30 per cent in 2005-06 to around 39 per cent (market size: $5.2 billion in 2009-10) in 2009-10. The domestic formulations market has expanded at a CAGR of 14-15 per cent over the last three years and reached a size of Rs 417 billion in 2009-10. This was primarily driven by robust growth witnessed in the anti-diabetic, cardiovascular, gynecology, respiratory and Neuro/CNS segments. In 2009-10, the lifestyle diseases segment grew by nearly 25 per cent as compared to the overall industry growth of 17.7 per cent. In the domestic market, lifestyle segments such as anti-diabetic, cardiovascular and gastrointestinal have emerged as chief growth drivers over the last 3-4 years. Acute segments, mainly anti-infectives, have continued to expand at a steady rate due to inadequate sanitary and hygiene conditions. The domestic market is concentrated at the top with the top ten players controlling about 38 per cent of the total formulations sales. Within exports, entry barriers are significantly higher in the regulated markets as compared to semi-regulated markets due to stringent regulatory norms in the regulated market.

CRISIL COMPANY REPORT | 2

Cipla Ltd
ANNUAL RESULTS
Income Statement (Rs million ) Net Sales Operating Income EBITDA EBITDA Margin Depreciation Interest Other Income PBT PAT PAT Margin No. of shares (Mn No.) Earnings per share (EPS) Cash flow (Rs million ) Pre-tax profit Total tax paid Depreciation Change in working capital Cash flow from operating activities Capital Expenditure Investments and others Cash flow from investing activities Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Others (incl extraordinaries) Cash flow from financing activities Change in cash position Opening cash Closing cash
n.m : Not meaningful;

Mar-08 40,103.8 42,620.9 8,991.5 21.1 1,306.8 -486.7 208.3 8,379.7 7,010.4 16.4 777.3 9.0

Mar-09 49,606.0 53,009.3 13,301.7 25.1 1,706.0 2,842.2 214.9 8,955.2 7,710.2 14.5 777.3 9.9

Mar-10 53,595.2 56,717.4 14,692.1 25.9 1,896.6 886.9 283.6 13,192.0 10,757.0 19.0 802.9 13.4

Balance sheet (Rs million ) Equity share capital Reserves and surplus Tangible net worth Deferred tax liablity:|asset| Long-term debt Short-term-debt Total debt Current liabilities Total provisions Total liabilities Gross block Net fixed assets Investments Current assets Receivables Inventories Cash Total assets Ratio

Mar-08 1,554.6 35,907.4 37,462.0 1,491.5 51.7 5,753.6 5,805.3 8,309.2 2,010.6 55,078.6 21,928.2 18,855.1 2,490.3 33,733.2 14,064.9 11,204.9 797.0 55,078.6

Mar-09 1,554.6 41,833.7 43,388.3 1,641.5 734.8 8,667.6 9,402.4 10,128.7 1,967.1 66,528.0 26,843.2 23,498.4 1,517.4 41,512.2 18,528.6 13,983.2 533.9 66,528.0

Mar-10 1,605.8 57,410.2 59,016.0 1,791.5 46.6 4.1 50.7 9,979.7 2,163.7 73,001.6 28,864.7 26,864.4 3,117.6 43,019.6 15,666.3 15,125.8 620.6 73,001.6

Mar-08 8,379.7 -1,004.3 1,306.8 -5,014.2 3,668.0 -5,639.0 -1,305.7 -6,944.7 0.0 4,569.7 -1,818.8 0.0 2,750.9 -525.8 1,322.8 797.0

Mar-09 8,968.4 -1,095.0 1,706.0 -6,266.1 3,313.3 -6,349.3 972.9 -5,376.4 0.0 3,597.1 -1,818.8 21.7 1,800.0 -263.1 797.0 533.9

Mar-10 12,192.2 -2,285.0 1,896.6 -1,373.1 10,430.7 -5,262.6 -1,600.2 -6,862.8 6,691.0 -9,351.7 -1,872.5 1,052.0 -3,481.2 86.7 533.9 620.6

Revenue growth (%) EBITDA growth(%) PAT growth(%) EBITDA margins(%) Tax rate (%) PAT margins (%) Dividend payout (%) Return on Equity (%) Return on capital employed (%) Gearing (x) Interest coverage (x) Debt/EBITDA (x) Asset turnover (x) Current ratio (x) Gross current assets (days)

Mar-08 18.5 5.6 5.0 21.1 12.0 16.4 22.2 20.1 19.9 0.2 0.0 0.6 2.1 2.2 277

Mar-09 24.4 47.9 10.0 25.1 12.2 14.5 20.2 19.1 23.8 0.2 4.7 0.7 2.2 2.0 279

Mar-10 7.0 10.5 39.5 25.9 17.3 19.0 14.9 21.0 24.4 0.0 16.6 0.0 2.0 3.7 269

QUARTERLY RESULTS
Profit and loss account (Rs million) No of Months Revenue EBITDA Interes t Depreci a tion PBT PAT Sep-10 3 163,199.0 38,320.0 28.0 6,391.0 26,301.0 26,301.0 100.0 23.5 0.0 3.9 16.1 16.1 % of Rev Sep-09 % of Rev 3 145,570.0 39,366.0 836.0 4,781.0 27,574.0 27,574.0 100.0 27.0 0.6 3.3 18.9 18.9 Jun-10 3 149,651.0 36,735.0 11.0 5,482.0 25,742.0 25,742.0 100.0 24.5 0.0 3.7 17.2 17.2 % of Rev Sep-10 % of Rev 6 312,850.0 75,055.0 39.0 11,873.0 52,043.0 52,043.0 100.0 24.0 0.0 3.8 16.6 16.6 Sep-09 6 284,161.0 74,715.0 1,883.0 9,362.0 51,745.0 51,745.0 100.0 26.3 0.7 3.3 18.2 18.2 % of Rev

CRISIL COMPANY REPORT | 3

Cipla Ltd
FOCUS CHARTS & TABLES

Rs mn 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

Quarterly sales & y-o-y growth

Per cent 35 30 25 20 15 10 5 0

Rs mn 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Dec-07

Quarterly PAT & y-o-y growth

Per cent 100 80 60 40 20 0 -20 -40 Sep-10

Sep-10 Jun-10

Dec-08

Dec-09

Sep-08

Sep-09

Jun-08

Jun-09

Mar-08

Mar-09

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

Jun-10

Sales

Sales growth y-o-y (RHS)

Sep-10

Net Profit

Net profit growth y-o-y (RHS)

Rs/share 4 3.5 3 2.5 2 1.5 1 0.5 0

EPS

Per cent 30 25 20 15 10 5 0

Movement in operating and net margins

Sep-08

Dec-07

Dec-08

Sep-09

Mar-08

Mar-09

Dec-09
NPM

Jun-08

Jun-09

Mar-10

Sep-08

Sep-09

Dec-07

Dec-08

Mar-09

Dec-09

Mar-10

Sep-10

Jun-09

Jun-10

OPM

Shareholding Pattern (Per cent) Dec 10 Mar 2010 Promoter 36.8 36.8 FII 17.4 16.8 DII 16.7 16.6 Others 29.2 29.8

Jun 2010 36.8 16.2 17.5 29.6

Sep 2010 36.8 15.2 18.3 29.8

Board of Directors Director Name Yus uf Khwa ja Ha mi ed (Dr.) Mus ta fa Khwa ja Ha mi ed (Mr.) Ama r Moha ns i ngh Lul l a (Mr.) Va s a nt Chi nta ma n Kotwa l (Mr.) Ha ns ra j Sha ms under Ma ncha nda (Dr.) Ra gha va n Ra nga cha ri Pa nka j Ba bubha i Pa tel (Mr.) Ra mes h Ama rcha nd Shroff (Mr.) S. Ra dha kri s hna n (Mr.)

Designation Executi ve Cha irma n & Ma na gi ng Di rector, Promoter-Di rector Jt.Ma na ging Di rector, PromoterDi rector Jt.Ma na ging Di rector, Wholeti me Di rector Non-Executi ve Di rector Non-Executi ve Di rector Non-Executi ve Di rector Non-Executi ve Di rector Non-Executi ve Di rector Whol etime Director

Additional Disclosure This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT). Disclaimer This report is based on data publicly available or from sources considered reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / report is subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers / users of this report. This report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any purpose. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this report. For information please contact 'Client Servicing' at +91-22-33423561, or via e-mail: clientservicing@crisil.com.

CRISIL COMPANY REPORT | 4

Mar-10

Jun-10