Independent Equity Research

Enhancing investment decisions

Business Prospects
Financial Performance
Management Evaluation
Corporate Governance

In-depth analysis of the fundamentals and valuation

Panacea Biotec
Limited

Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making
process Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade)

Fundamental Grade
CRISILs Fundamental Grade represents an overall assessment of the fundamentals of the company graded in relation to
other listed equity securities in India. The grade facilitates easy comparison of fundamentals between companies, irrespective
of the size or the industry they operate in. The grading factors in the following:
Business Prospects: Business prospects factors in Industry prospects and companys future financial performance
Management Evaluation: Factors such as track record of the management, strategy are taken into consideration
Corporate Governance: Assessment of adequacy of corporate governance structure and disclosure norms
The grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals)
CRISIL Fundamental Grade
5/5
4/5
3/5
2/5
1/5

Assessment
Excellent fundamentals
Superior fundamentals
Good fundamentals
Moderate fundamentals
Poor fundamentals

Valuation Grade
CRISILs Valuation Grade represents an assessment of the potential value in the company stock for an equity investor over a
12 month period. The grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market
price (CMP)) to grade 1 (strong downside from the CMP).
CRISIL Valuation Grade
5/5
4/5
3/5
2/5
1/5

Assessment
Strong upside (>25% from CMP)
Upside (10-25% from CMP)
Align (+-10% from CMP)
Downside (negative 10-25% from CMP)
Strong downside (<-25% from CMP)

Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias
the grading recommendation of the company.

Disclaimer:
This Company-commissioned Report (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 are 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 assumes 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 authorized 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.

Independent Research Report Panacea Biotec Limited

Industry:
Date:

CFV matrix
Excellent
Fundamentals

Increased demand for Pentavalent to supplement growth in vaccines segment

Panaceas vaccines segment is expected to grow on account of increased demand for its
combination vaccine pentavalent or EasyFive - due to increasing acceptability of the
vaccine by many countries. The Global Alliance for Vaccines and Immunisation (GAVI)
has been propagating the inclusion of pentavalent vaccines in the countries immunisation
programme by 2012. GAVI has also proposed a US$165 mn grant to the Indian
government for immunising 18 mn newborns with pentavalent vaccines which, if accepted,
will lead to additional business from India. Panacea is in the process of servicing
UNICEFs US$ 222 mn award for pentavalent vaccines.

4
3
2
1

Poor
Fundamentals

Strong
Downside

New launches in India and entry into regulated markets to drive formulations growth
Panacea has consistently launched new formulations over the past few years. Over FY0810, Panaceas revenues from new formulation products grew at a CAGR of 35%. It plans
to launch around six new formulations in the domestic market every quarter. In FY10, the
company launched 16 products and is expected to launch at least 24 new products in
FY11. Approvals for three products are pending from the USA and Germany, and remain
key monitorables. We are positive about Panaceas plans for the regulated markets but
prefer to be conservative in our estimates for now. We have not included revenues from
the regulated markets in our projections since the approvals are pending. We will revise
our estimates upward once the approvals come through.

Fundamental Grade

Delhi-based Panacea Biotec (Panacea) is a leading manufacturer of vaccines and a small

player in pharmaceutical formulations. It is the largest Indian supplier of polio vaccines to
UNICEF. Increased acceptance of combination vaccines and new formulation launches
supported by indigenous R&D will drive Panacea ahead. We assign Panacea a
fundamental grade of 3/5, indicating that its fundamentals are good relative to other
listed securities.

Pharmaceuticals
October 7, 2010

Valuation Grade
Strong
Upside

Remedy, steady, go

Fundamental grade of '3/5' indicates good fundamentals

Valuation grade of '3/5' indicates aligned market price

Key stock statistics

NSE Ticker

PANACEA

Fair value (Rs per share)

208

Current market price (as on 6 October,

2010)

201

Shares outstanding (Mn)

61.2

Key risks: Product quality and high exposure to foreign exchange

1) The vaccines business is classified in the sensitive list of the World Health Organisation
(WHO). Hence, companies have to strictly adhere to high quality standards. 2) Panacea
earns a large amount of revenues in US dollars, which are susceptible to foreign exchange
fluctuations. In FY08, the company hedged US$148 mn at a strike price of Rs 40, due to
which it booked a hedging loss of Rs 1.7 bn in FY09.

Market cap (Rs Mn)

Beta

0.94

Revenues to grow at a three-year CAGR of 13%, margins and RoE to expand

We expect revenues to grow at a three-year CAGR of 13% to Rs 13.2 bn in FY13,
primarily supported by strong growth in formulations and vaccines. EBITDA margins are
expected to improve to 20.5% by FY13 from 15.2% in FY10 on account of improving
product mix. RoE is expected to improve to 16% in FY13.

Free float (%)

20%

Valuation the current market price is aligned with fair value

We have used the discounted cash flow method to value Panacea and arrived at a fair
value of Rs 208 per share, at an implied P/E of 12.9x FY11 and 11.1x FY12 earnings. We
initiate coverage on Panacea with a valuation grade of 3/5, indicating that the market
price is aligned with the fair value.
Key forecast(consolidated financials)

12,310

Face Value (Rs per share)

Enterprise value (Rs Mn)

19,610

52-week range (Rs) (H/L)

247/127

P/E on EPS estimate (FY11E)

13.1

Average daily volumes

60,165

Share price movement

2000
1800
1600
1400
1200
1000
800
600
400
200
0

2,334

2,500

2,718

683

941

1,095

1,283

EPS-Rs

(8.1)

10.2

15.4

17.9

21.0

(160.8)

204.1

25.7

16.3

17.2

(25.4)

16.5

13.1

11.2

9.6

Analytical contact

P/BV (x)

2.2

1.6

2.0

1.7

1.5

Sudhir Nair (Head)

RoCE(%)

13.8

5.2

11.1

11.5

12.4

Charulata Gaidhani

+91 22 3342 3587

RoE(%)

(8.3)

10.4

14.1

16.2

16.3

Suresh Guruprasad

+91 22 3342 3531

8.4

12.9

8.4

7.4

6.3

Email: clientservicing@crisil.com

+91 22 3342 3561

EPS growth (%)

PE (x)

EV/EBITDA (x)

Panacea Biotec

Aug-10

1,381

(540)

Apr-10

2,375

Adj Net income

Nov-09

EBITDA

Jun-09

13,239

Jan-09

FY13E

12,175

Aug-08

FY12E

11,095

Mar-08

FY11E

9,073

Oct-07

FY10

7,929

May-07

FY09

Operating income

Jan-07

(Rs Mn)

S&P CNX NIFTY

-Indexed to 100

+91 22 3342 4526

Source: Company, CRISIL Equities

CRISIL Equities

Panacea Biotec Limited

Parameter

Vaccines

Formulations

Revenue contribution (FY10)

73%

27%

Revenue contribution (FY13)

68%

32%

Product / service offering

Oral polio, hepatitis B and recombinant vaccines

Pharmaceutical formulations in the therapies of

diabetes, CVS, nephrology, pain management,
respiratory and paediatrics

Geographic presence (revenue share)

Domestic 55%, exports 45%

Domestic 95%, exports 5%

Market position

WHO pre-qualified supplier of vaccines to UNICEF.

At least two products in each therapy are amongst

Largest supplier of polio vaccines in India

the top five rankers in the respective segment

Industry growth expectations

End market

10-13%
UNICEF, PAHO, hospitals, medical practitioners

13-15%
Patients undertaking treatment in the therapy areas

catering to immunisation
Sales growth (FY06-FY10 4-yr
CAGR)
Sales forecast (FY10-FY13 3-yr
CAGR) (organic growth)
Demand drivers

13%

17%

11%

20%

1.

Global spend on immunisation

1) Demand for formulations in the focus therapy

2.

Government of Indias expenditure on

areas of the company

immunisation
3.
Key competitors
Margin drivers

Out-of-pocket expenditure on immunisation

Serum Institute, Bharat Immunologicals, Cadila

RPG Life Sciences, Glenmark, Cipla and other

Healthcare, GlaxoSmithkline, Shantha Biotech

majors

Product mix in vaccines; increasing sales from the

Product position in the segment

high-margin pentavalent vaccines

Key risks

1.

Major fluctuations in foreign exchange

2.

Product quality of vaccines manufactured

Delay in receipt of USFDA approval

Source: Company, CRISIL Equities

CRISIL Equities

Panacea Biotec Limited

Grading Rationale
Indias second largest vaccine player gets booster dose
While Panaceas revenues grew at a CAGR of 19% between 1997 and 2010, growth
was disappointing during FY07-10 period (2% CAGR). The appreciation of the Indian

Panacea is Indias third

largest
biopharmaceutical
company and second largest
vaccine manufacturer in India

rupee applied the brakes in FY08, and consequently Panacea reported flat revenues.
In FY09, revenues de-grew by 6% due to the change in the Central governments
policy of not procuring polio vaccines from WHO pre-qualified suppliers. The decision
was later reversed and business was restored in FY10.
We now expect Panacea to accelerate its growth on the back of:

It is one of the two WHO pre-qualified pentavalent vaccine manufacturers in

UNICEFs
coverage
has
doubled from 40 countries in
2005 to 82 countries in 2009

India. We expect Panacea to benefit from the enhanced global demand for
pentavalent vaccines and new product launches, thus increasing the
contribution of combination vaccines to revenues from 13% in FY10 to 30% in
FY13.

The formulations segment is set to grow due to new product launches in India,
entry into new geographies in general and regulated markets of the USA and
Europe in particular.

Chart 1: Panacea is second largest vaccine

Chart 2: Combination vaccines and formulations drive

manufacturer in India
9000

future growth
Rs. Mn
14000

8500

8000

Vaccine
Revenues in
Rs. Mn

6687

7000

12000

6000

10000

5000

8000

4000

6000

3342

3000

4947

4443

5048
3142

4000
1689

2000
1000
0

2000

2287

744
FY09

Serum Institute

Panacea Biotec

Shantha Biotech

Haffkeine

Source: BioSpectrum ABLE Industry Survey 2010, CRISIL Equities

Polio Vaccines

5046

2417
1152
FY10

3677

5046

4228

2649

3047

3504

FY11E

FY12E

FY13E

Pharmaceutical Formulations

Combination Vaccines

Source: Company, CRISIL Equities

Leading vaccine supplier to UNICEF, to further strengthen ties

Total number of
WHO pre-qualified

India is the largest offshore supplier of vaccines to UNICEF, with supplies from
Panacea comprising over 50% of UNICEFs total vaccine procurement.

Vaccine

Year

suppliers globally

Oral Polio

2003

Panaceas business with UNICEF started in 2003 with the WHO pre-qualification for

Hepatitis B

2006

polio vaccines. Progressively, Panacea strengthened its relationship with UNICEF with

Ecovac4 (DTP +

2007

2007

2008

HepB)
EasyFour (DTP +

supplies of combination vaccines (Ecovac4, EasyFour), particularly pentavalent

vaccine (EasyFive).

Hib)
EasyFive (DTP +
HepB + Hib)

CRISIL Equities

Panacea Biotec Limited

The market for vaccines is evergreen

Chart 3: Panacea is Indias largest vaccine supplier to

UNICEF

Paediatric vaccines used for the immunisation of children

$ mn
250

up to five years of age is a continuing activity

Globally the WHO, United Nations Childrens Fund

(UNICEF), Pan American Health Organisation (PAHO)
and Global Alliance for Vaccines and Immunisation
(GAVI) lead the immunisation programmes

200

150

100

Increased out-of-pocket spends on immunisation have

grown the private sector vaccines market to Rs 5 bn (as
per ABLE)

50

0
2005
Panacea Biotec

2006

Shantha Biotechnics

2008
Serum Institute

2009
Haffkeine Bio pharmaceutical

Source: UNICEF Supplies Annual Report, CRISIL Equities

Pentavalent vaccines to drive segments growth

The recently launched pentavalent vaccines command a high premium in the market
as the vaccines market typically offers better value to the latest product. Panacea was
the first to launch pentavalent vaccines in India, with a WHO pre-qualification in June
Panaceas EasyFive is a
combination
vaccine
protecting against (diphtheria,
tetanus, pertussis, influenza
type b and hepatitis B)

2008. The demand for this vaccine has picked up globally too, with Panacea servicing
UNICEF awards for the international markets. The growth in pentavalent vaccines is on
account of:

Increase in global demand for pentavalent vaccines from 35 mn doses in CY08

to 100 mn doses in CY10; GAVI has been propagating the inclusion of
pentavalent vaccines in the countries immunisation programme by 2012.

In August 2009, GAVI has proposed a US$165 mn grant to the Indian

government for immunising 18 mn newborns across 10 states in India. As per
the management, the Indian government is expected to adopt the pentavalent
vaccine in its routine immunisation programme by FY12.

FY11 will be the first full year of servicing UNICEFs US$ 222 mn award for pentavalent
vaccines.

New vaccine launches will further boost revenues

New products, under clinical trials and likely to be launched in FY12 and FY13, will
further drive growth of the combination vaccines segment. Panaceas hexavalent
Panaceas
EasySix
is
expected to be launched by
FY12

vaccine (EasySix) is under phase III of clinical trials. The company expects to launch it
locally by end-FY12 and globally by FY13. We expect the revenues of the combination
vaccines segment to jump 186% to Rs 3.2 bn in FY11, after that we expect an annual
growth of 15%. We have been extremely conservative in our estimates due to the risk
of products not reaching the market. However, if Panacea is successful in completing
its trials and launching EasySix on schedule, we would revise our estimates upward.

CRISIL Equities

Panacea Biotec Limited

Combination vaccines - Pentavalent snapshot

Estimated industry size

100 mn doses valued at US$ 280 mn annually

Usage of Pentavalent

Pentavalent vaccine provides immunisation from five diseases at the

vaccine

same time (diphtheria, tetanus, pertussis, influenza type b and hepatitis

B)

Demand drivers
Indian industry background

Number of newborns (66 mn globally and 25 mn in India every year)

More countries adopting the usage of combination vaccines

GSK and Novartis developed the patented pentavalent vaccine and

Indian manufacturers have developed the product through a

received USFDA approval in 2002

different process as India did not have product patents until 2005.
However, the Indian players cannot supply it in the USA and
Europe.

Currently, Indian players can supply in ~175 countries excluding the

In the USA and Europe the patents will expire in 2013 and 2016,

USA and Europe

respectively, after which the Indian players can supply there
Pentavalent vaccine

Panacea Biotec and Shantha Biotech. There are only four suppliers

manufacturers in India

globally approved by WHO to supply the vaccine to UNICEF

UNICEF contracts of

August 2008: US$34.2 mn (for 2008 and 2009)

Pentavalent

Panacea: US$222 mn (75 mn doses for 2010-12)

Shantha Biotech: US$340 mn (cancelled in August 2010)

Source: Company, CRISIL Equities

Temporary shortage of pentavalent vaccine may benefit Panacea

In India, there are only two players accredited by WHO offering pentavalent Panacea
and Shantha Biotechnics (Shantha). In August 2010, the WHO de-listed Shanthas
Being the only other supplier
of pentavalent to UNICEF,
Panacea has good chances of
bagging incremental business

pentavalent vaccine Shan5 on account of quality issues, nullifying the USA$ 340 mn
contract. This has created a temporary shortage of the vaccine and UNICEF has not
floated a re-tender. It would take Shantha at least another 12-18 months to be eligible
to supply its pentavalent vaccine Shan5. Panacea, being the only other Indian player,
stands to gain from Shanthas loss.

Dependence on polio vaccines to reduce

The increase in supply of pentavalent vaccines and new launches of combination
vaccines are expected to reduce Panaceas dependence on its historical revenuedriver - polio vaccines. We expect Panaceas dependence on polio vaccines to reduce
from 57% in FY10 to 34% in FY13.
Although the GPEI may come
to an end, immunisation
against polio will continue at
the current levels

Panacea has been Indias largest supplier of polio vaccines to UNICEF since 2003,
and an active contributor to WHOs Global Polio Eradication Initiative (GPEI). The
contract with UNICEF states that the immunisation for polio will continue for three
consecutive years after zero cases of polio are reported. Even if GPEI is discontinued
by WHO, polio (poliomyelitis) is unlikely to be completely eradicated. Hence, there will
always be a market for polio vaccines.

CRISIL Equities

Panacea Biotec Limited

Panacea has carved out a

niche
through
product
differentiation and achieved
ranks within top five in the
respective segments

New products and geographies to drive growth in formulations

Panacea is a small but niche player in the formulations space with focus on pain
management, nephrology, diabetics, cardio vascular, respiratory and paediatrics.
Panacea has a comparatively small basket of 85 products, which it plans to widen
going forward.
Panaceas CriticalCare and DiaCare divisions have been the top performers in
formulations. While CriticalCares revenues grew at CAGR of 24% over FY05-10, those
of DiaCare grew at a CAGR of 14% during the same period.

Chart 4: CriticalCare and DiaCare consistent in

Chart 5: Major brand rankings with therapy market size

growth
700

Division
Pain
Management

Revenues in Rs.mn

600

NIMULID TABS 100 MG

WILLGO

500

Resp &
Pediatrics

400
300

Diabetes &
Cardio

200

0
FY05

FY06

CrticalCARE

DiaCARE

FY07

FY08
ProCARE

FY09
OncoTrust

Source: CRISIL Research

100.6
47.0

Nephrology

Rank
2
5

Market size
(Rs.mn)
1420
1420

NIMULID SUSP

31.9

160

NIMULID MD

61.5

1420

314.4

1306

GLIZID TOTAL

15.7

69

GLIZID TABS MR 30 MG

16.0

104

GLIZID TAB 40 MG
GLIZID TAB MR 60 MG
GLIZID TAB 80 MG
FOSBAIT
MYCEPT
MYCEPT-S
PANGRAF
PANIMUN BIORAL
SIROPAN

24.8
19.8
53.7
10.6
49.5
7.3
58.4
15.9
1.5

2
3
2
1
1
3
1
1
4

89
187
237
18
52
42
112
34
45

GLIZID-M

Diabetes &
Cardio

100

Revenue
(Rs.mn)

Brand

Source: Company, CRISIL Equities

Consistent new product launches: Panacea has consistently launched new

formulations over the past few years. Over FY08-10, Panaceas revenues from new
formulation products grew at a CAGR of 35%. It plans to launch around six new
formulations in the domestic market every quarter. In FY10, the company launched 16
products and is expected to launch at least 24 new products in FY11.
Number of new product
launches

Q2FY09

Vaccines

Q3FY09

Q4FY09

Q1FY10

Q2FY10

Q3FY10

Q4FY10

Q1FY11

Formulations
Nephrology

Diabetes + cardio

Pain management

Resp & pediatrics

1
2

Oncology
Value India (rural)

Total

CRISIL Equities

1
1
3
1

1
0

Panacea Biotec Limited

Panacea is expected
enter Germany in FY11

to

Increased focus on exports of patented formulations

Recently, the company has increased focus on exporting formulations (patented drugs)
primarily to the US and Europe. These drugs are already ranked among the top 5 in
India for respective therapies.
Panaceas plans for the regulated markets
Therapy area

Target

(drug name)

countries

Status

Expected
launch date

Nephrology (Cyclosporin)

The USA

USFDA approval expected soon. All

Late CY10

Gastroenterology

The USA

Phase II-b in the USA

(Euphorbia)

and

Phase III in Germany (approval from

Pain management

Germany

Germany would open the doors to rest

trials completed

(Nimisulide)

Early FY12

of Europe)

Source: Company, CRISIL Equities

In Germany, Panacea has entered into an agreement with the UCB Group, a major
biopharma consulting firm. In the USA, Panacea is in the advanced stage of identifying
distributors. As per the management, incremental revenues are expected to be Rs 33.5 bn from each of the new drug launches.
We are positive on the future plans of Panacea. However, the USFDA approval for
Cyclosporin and the completion of trials in Germany and the USA remain the key
monitorables for the performance of the formulations segment, and have not been
factored into our projections. Any positive progress on the aforesaid will entail an
upward revision of our estimates.

Gastro intestinal formulation is the first oral treatment for piles in India
Panaceas agri-based product ThankGod (Euphorbia), launched three years ago, is
the only oral cure for first and second degree piles in India, developed in collaboration
with the Punjab University and a German agency. Our interaction with industry sources
Oral cure for piles to be
launched in Germany and the
USA over FY11-12

revealed that Panaceas piles oral treatment is effective but underpenetrated as

surgery remains the preferred option. However, there is an increase in usage amongst
patients who cannot undergo surgery. We expect ThankGod to be launched in the
USA by FY12.

Strong research and development activities

Panacea has strong research and development capabilities in both vaccines and
formulations segments. R&D spend has increased from 5% of sales in FY06 to 8% in
FY10. While 70% of Panaceas vaccine research is through re-engineering, 30% is
innovative. Panaceas combination vaccines EasyFour and EasyFive are a result of
indigenous R&D.
Future development activities include:
Panacea has been regularly
sowing seeds of need-based
innovation in both vaccines
and formulations fields

CRISIL Equities

Adult vaccines have a larger market size than that for children (up to five
years). The company is currently researching on Japanese Encephalitis, Dengi
Fever and Anthrax.

Panacea Biotec Limited

Pneumococcal vaccine, used for the prevention of pneumonia amongst

infants. The vaccine is in demand in the international markets, as there are
121 mn infants globally not protected from the disease.

Formulations: At least six new drugs/variants every quarter.

Panacea has historically succeeded in launching new products in vaccines and

formulations (many products have achieved the top five position in respective
therapies) through strong R&D capabilities. Going forward, we are confident of
Panacea launching newer products, which will help sustain its growth rates.
Chart 6: Surviving infants not vaccinated (2008)

Chart 7: Panacea invests in R&D for future launches

%
100
90

18
34

80
70

93

92

82

30

700

8%
7%
6%

500

50
40

9%

600
71

60

Rs mn
800

5%

400

4%

300

66

3%

200

20

29

10

Pneumococcal

Rotavirus

0
DTP, BCG, Polio, Measles
Hepatatis B
Vaccinated

Source: GAVI, CRISIL Equities

Hib

2%

100

1%
0%

FY05

FY06

FY07

R & D Spend

Not vaccinated

FY08

FY09

FY10

% to sales (RHS)

Source: Company, CRISIL Equities

Hospitals to strengthen R&D

In order to strengthen its research activities, Panacea plans to set up two hospitals in
Panacea to invest Rs 1 bn in
hospitals in Gurgaon

Gurgaon, one through its subsidiary Umkal Medical Institute Pvt. Ltd (Umkal) and one
through its subsidiary Best on Health in its proposed SEZ. The company has procured
2.54 acres land under Umkal in 2010, which can accommodate a 200-bed hospital. It is
expected to take two-three years for the hospitals to be set up and the company is in
the process of tying up funds for the same. Hence, we have not factored it into our
projections. The second hospital will be a part of the proposed SEZ project and is
expected to take five-seven years for completion. The hospitals will not only help in
clinical trials but also facilitate the research process.

CRISIL Equities

Panacea Biotec Limited

Financial Outlook
Revenues to grow at a three-year CAGR of 13%
We expect revenues to grow at a three-year CAGR at 13% to Rs 13.2 bn in FY13,
driven by 11% CAGR in the vaccines segment and 20% CAGR in pharmaceutical

Vaccines to grow at CAGR of 11%

and formulations at a CAGR of 20%

formulations. We expect Panacea to resume its growth track on account of:

Vaccines: Panacea commenced the supply of pentavalent to UNICEF in 3QFY10.
FY11 will be the first full year of servicing the EasyFive award, with an increase in
contribution of combination vaccines from 13% in FY10 to 27% in FY13.
Formulations: Revenues are expected to get a boost from entry into the regulated
markets and intensity of new launches has increased during the last two years. Most of
the growth is expected in FY11 (30%) on account of significant new product launches
in FY10.
For FY11, the company has guided revenues of Rs 11.2 bn with EBITDA margin of
21%.

Chart 8: Segmental revenue growth trend

Chart 9: Vaccines high margins, but margins

declined in FY10 on account of adverse product mix
50%

Rs mn
10000

45%

9000

40%

8000

EBIT margin %

7000
6000
5000
4000
3000

35%
30%
25%
20%
15%

2000

10%

1000

5%

Source: CRISIL Equities

FY13E

Formulations

FY12E

FY10

FY11E

Vaccines

FY09

FY08

FY07

0%
FY06

FY07

FY08

Vaccines

FY09

FY10

Formulations

Source: CRISIL Equities

Changes in product mix to increase profitability

We expect a 535 bps expansion in EBITDA margins to 20.5% in FY13 due to the
increased contribution from the high-margin pentavalent vaccines and formulations
Larger orders and increase in
overages of tOPV resulted in a 20%
drop in EBIT margins in FY10

segment. The vaccines segment has enjoyed better profitability with EBIT margin of
~40% compared to formulations where EBIT margins are ~18%. However, in FY10
EBIT margins of the vaccines segment took a sharp 20% drop, due to the change in
the composition of trivalent oral polio vaccine (tOPV) and larger orders for tOPV during
FY10.
tOPV dominated the product mix in FY10
Panaceas vaccine business has an in-built volatility as 68% of the business is from
UNICEF. UNICEF places orders of the vaccines as per their requirements ~two-three
months in advance. Polio vaccines are of four types based on the virus category
namely mOPV1, mOPV3, bOPV and tOPV. Amongst the four, tOPV earns the lowest
margins compared to other polio vaccines, and EasyFive earns the maximum

CRISIL Equities

Panacea Biotec Limited

margins. In FY10, majority of Panaceas vaccine business was from tOPV, in view of
UNICEFs requirements during that period.
Chart 10: tOPV business leads to reduced margins
Rs mn
1400
1200

(%)
51.3
45.5

45.8

50

42.3

1000

40

31.6

800

60

28.0
23.3

600

20.9

30
20

400

10

200
0

0
Q2FY09

Q3FY09

Q4FY09

Q1FY10

Q2FY10

Q3FY10

Q4FY10

Q1FY11

TOPV

EASYFIVE

MOPV 1

MOPV 3

BOPV

Vaccines EBIT margin (RHS)

Source : CRISIL Equities

Increased overage for tOPV reduced EBIT margins

Bulk virus is a key raw material that goes into the polio vaccine. WHO changed the
composition of tOPV to include a higher quantity of the virus (overage) thereby
increasing the raw material consumption from 35.7% to 52.2% and putting a pressure
on margins. Currently, the overage usage has come down to 45% as Panacea was
successful in proving to WHO that its vaccine is as effective even with lower overage.
Recently, there have been recommendations from researchers relating to the efficacy
of the tOPV vaccine that it be replaced by mOPV1, mOPV3 and bOPV (higher
margins) for immunisation.
We expect a 581 bps increase in the overall EBITDA margins in FY11 to ~21%. The
FCCB redemption and expected repayment of debt over FY12-15 will gradually reduce
the debt from Rs. 8.5 bn in FY11 to Rs.6.8 bn in FY13, leading to lower interest costs.
The adjusted net margins (after adjusting for forex gains) will thus expand from 2.0% in
FY10 to 9.7% in FY13.

Improved profitability to increase RoE, but not to historic levels

We expect PAT margins to expand from 2.0% in FY10 (after adjusting for forex gains)
to 9.7% in FY13. The adjusted EPS is expected to grow from Rs 2.7 in FY10 to Rs 17.9
in FY13. This will lead to an increase in RoE from 10.4% in FY10 to around 16.1% by
FY13.

CRISIL Equities

10

Panacea Biotec Limited

Chart 11: Change in revenue mix to improve margins

Chart 12: PAT and RoE

Rs Bn

Rs mn
14000

35.0%

12000

30.0%

10000

25.0%

8000

20.0%

6000

15.0%

4000

10.0%

2000

5.0%

Formulations

16%
14%

1.0

12%
10%

0.5

8%
0.0
FY08

FY10

FY11E

FY12E

6%
4%
2%
0%

-1.0

EBITDA margins(RHS)

Source: CRISIL Equities

FY09

-0.5

FY13E

FY12E

FY11E

FY10

FY09

FY08

FY07

Vaccines

18%

1.5

0.0%

20%

2.0

Net Profit

Adj Net profit

Adj ROE (RHS)

Source: CRISIL Equities

Hedging has caused significant losses in past, but management is

more prudent now
In FY08, Panacea entered into derivative transactions valued at US$142mn at an
average strike price of Rs 39.5, resulting in a provision for forex losses of Rs1,709 mn
in FY09 and a forex gain of Rs 635 mn in FY10. The contracts are due to expire in
October 2010 and January 2011. Due to the provision, it reported a net loss in FY09.
Going forward, Panacea has taken a policy decision of limiting its exposure to 60% of
imports and not taking positions for more than six months, with a weekly review of the
same.

FCCB redemption of US$36.8 mn in February 2011

Debt-equity to come down on
account of FCCB redemption and
repayment of foreign currency
loans

Panacea has FCCBs worth US$36.8 mn (Rs 1,652 mn) at a conversion price of
Rs357.6/share, which is significantly out of the money with the current market price of
Rs 201. The FCCBs are due to be redeemed in February 2011. The company plans to
raise debt to finance the redemption,

Equity buyback in July 2010

Panacea bought back 5.6 mn shares at an average price of Rs195/share in September
2010, comprising ~10% of Panaceas equity. The maximum price approved by the
board was Rs 229/share.

CRISIL Equities

11

Panacea Biotec Limited

Key Risks
Quality issues in the manufacturing of vaccines can impact revenues
and profitability
Panaceas business carries the risk of quality issues in the manufacturing of vaccines,
which can impact its revenues and profitability. Majority of Panaceas vaccines are in
the High priority list of the WHO in terms of quality assurance, which poses a risk to
the business. However, there are no cases relating to the quality of Panaceas
vaccines in the past two decades.

Fluctuations
profitability

in

foreign

exchange

(Re-US$

rate)

can

impact

With almost 68% of Panaceas revenues earned in US dollars, Panacea faces a risk of
fluctuations in foreign currency, mainly Re-US$. A study of the long- term business
cycle of the company depicts a risk towards appreciation of the US dollar. CRISIL
Research estimates the Re-US$ rate at Rs 45.5 for FY11, which has been factored into
our projections.

GOI accepting vaccines from non-WHO suppliers can impact

revenues
In 2008, the Government of India decided to accept vaccine supplies from non-WHO
suppliers resulting in reduction in price realisations coupled with deterioration in quality.
Panacea decided to stay out of the Indian market then, marginally impacting revenues.
The decision was later taken back and restored to WHO suppliers. Although the
reversal of the decision benefited Panacea, any future instance of accepting vaccines
from non-WHO suppliers can impact revenues.
Chart 13: GOI expenditure on immunisation
Rs crs
1050
1000
950
900
850
800
750
700
FY2007

FY2008

FY2009

FY2010

FY2011E

Source: Ministry of Health and Family Welfare

CRISIL Equities

12

Panacea Biotec Limited

Management Evaluation
CRISIL Equities fundamental grading methodology includes a broad assessment of
management quality apart from other key factors such as industry and business
prospects, and financial performance. Overall, we believe management is relatively
good with a moderate risk appetite.

Strong management with good experience and vision

Experienced promoters with an
excellent vision and focus on
business development

Panacea is headed by promoters Mr Soshil Kumar Jain (Chairman) and his sons Mr
Ravindra Jain (Managing Director), Dr. Rajesh Jain (Joint Managing Director) and Mr
Sandeep Jain (Joint Managing Director), who have over 23 years of experience each in
the vaccines industry. Dr. Rajesh Jain is a doctorate in Innovation in Management
from the Punjab University. The promoters have sound business knowledge and have
achieved a leadership position in the vaccines business. The management has initiated
a number of projects in the development of new vaccines and formulations, which
when commercialised will fall into the pipeline.
Pipeline for FY11-13
FY11

FY12

FY13

Tender for Polio

ThankGod - US

Tender for 'EasyFive'

Cyclosporin USA

SitCom USA

ThankGod- Germany

EasySix- WHO

SitCom Germany
Funding for Hospitals
Source: Company, CRISIL Equities

Management has successfully garnered business from UNICEF

The management has been successful in the innovation of new products and has
consistently obtained WHO pre-qualification for its vaccines. It has consistently bagged
orders from UNICEF for the past 25 years, which gives stability in revenues with
relatively lower competition. The company has benefitted by the first-mover advantage
in introducing new vaccines for supplying to UNICEF.

Second line of management has good domain expertise

Panacea has a professional, highly experienced second line of management, who have
been with the company for more than five years. The second line has considerable
exposure to the pharmaceutical industry. The promoters also have a long-term
succession planning whereby family members and professionals will be given different
businesses to manage and the baton is expected to be passed on to the best
performer over the next 10 years.

CRISIL Equities

13

Panacea Biotec Limited

Corporate Governance
Overall, corporate governance at
Panacea Biotec presents good
practices supported by strong
board

CRISILs fundamental grading methodology includes a broad assessment of corporate

governance and management quality, apart from other key factors such as industry
and business prospects, and financial performance. In this context, CRISIL Equities
analyses shareholding structure, board composition, typical board processes,
disclosure standards and related-party transactions. Any qualifications by regulators or
auditors also serve as useful inputs while assessing a companys corporate
governance.

Corporate governance
The overall corporate governance at Panacea is good as the company has an
experienced board, and its processes and structures conform to professional
standards.
Board composition: Panaceas board comprises 11 members, of whom six are
independent and non-executive directors. The structure of the board exceeds the
requirements of Clause 49 of the Listing Agreement with the stock exchanges. The
company has a broad-based board, comprising professionals from the pharmaceuticals
industry.
Processes: The company has various committees audit, remuneration and investors
grievance - in place to support corporate governance practices. The company's
disclosures are transparent to analyse various business aspects of the company.
CRISIL Equities assesses from its interactions with independent directors of the
company that the quality of agenda papers and the level of discussions at the board
meetings are good.
The companys quality of disclosure is considered good, given the level of information
and details furnished in annual reports, website and other publicly available
information. We feel that the independent directors are well aware of the business of
the company and are actively involved in all the major decisions, reflecting well on the
company's corporate governance practices. The audit committee is chaired by an
independent director, Mr Sunil Kapoor, and it meets at timely and regular intervals.

Inter-corporate transactions at arms length

Panaceas group operations are spread across 10 subsidiaries and its joint venture
Chiron Panacea Vaccines Pvt. Ltd. The company also imports raw materials at
government approved prices through its associate PanEra. Panacea has given one of
its plants on lease to PanEra, as the technology belongs to PanEra, for which it
receives lease rent. The inter-corporate loans and advances are at market rates. As
per the audit report and interaction with independent directors, the inter-corporate
transactions are at an arms length.

CRISIL Equities

14

Panacea Biotec Limited

Valuation Grading
We assign a fair value of Rs 208
per share to Panacea Biotec and
initiate coverage with a valuation
grade of 3/5

Grade: 3/5

We have used the discounted cash flow (DCF) method to value Panacea Biotec.
Based on this method, we arrive at a fair value of Rs 208 per share. The stock currently
trades at Rs 201 per share. Consequently, we initiate coverage on Panacea Biotec with
a valuation grade of 3/5, indicating that the current market price is aligned with the
fair value.
At the current market price of Rs 201 per share, the stock trades at 13.1x and 11.2x of
its estimated EPS of Rs 15.4 (FY11) and Rs 17.9 (FY12) respectively. The implied P/E
based on the DCF valuation is 13.5x FY11 and 11.6x FY12 earnings. This is a 36%
discount to peers in the pharmaceutical industry. We believe that this discount is
justified as most of the peers have a higher RoE and lesser volatility of earnings.
Chart 14: One-year forward PE band chart
35

During FY04-FY08, the P/E

consistently expanded due to high
revenue and PAT growth. Average
one year forward P/E was 17x

30
25
20
15
10

Current valuations are yet to

reach the historical highs on
account of sudden earning
volatility withnessed in FY08-10

6-Oct-10

12-Apr-10

5-Oct-09

31-Mar-09

19-Sep-08

18-Mar-08

19-Sep-07

21-Mar-07

18-Sep-06

22-Mar-06

19-Sep-05

22-Mar-05

21-Sep-04

26-Mar-04

29-Sep-03

1-Apr-03

Source: NSE

Key events that can impact the fair value

The company is set to launch its Thank God piles drug in both Germany and the USA,
and is set to launch the generic Cyclosporine in the USA. The clinical trials are on and
the company expects the USFDA approval early FY12 it has already tied-up with a
marketing partner for Germany and is in the process of identifying a partner in the USA.
Should the company successfully launch the drugs, there can be significant upside to
our estimates and thereby its fair value. However, these are event-driven and are
difficult to predict, particularly given that the company has no prior experience in the
regulated markets.

CRISIL Equities

15

Panacea Biotec Limited

Key DCF assumptions

We have considered the discounted value of the firms estimated free cash
flow from FY12 to FY16.

We have included capital expenditure of Rs 500 mn annually from FY11-13

and a maintenance capex of Rs 200 mn per annum thereafter.

We have assumed a terminal growth rate of 4% beyond the explicit forecast

period until FY16.

WACC computation
Calculation of WACC

Explicit WACC

Terminal WACC

13.4%

13.4%

After tax Cost of Debt

6.7%

6.7%

Debt equity used for WACC

50%

25%

10.05%

11.73%

Cost of Equity

WACC
Source: CRISIL Equities

Sensitivity analysis to terminal WACC and terminal growth rate

Terminal growth rate

CRISIL Equities

2.0%

3.0%

4.0%

5.0%

6.0%

11.5%

165

188

217

254

305

12.0%

153

173

198

230

272

11.7%

159

181

208

243

290

13.5%

122

136

153

174

201

14.5%

106

118

131

148

168

16

Panacea Biotec Limited

Peer group comparison

Market
Name

CMP

cap

Revenues
FY10

PANACEA BIOTEC
CIPLA LTD
SUN PHARMACEUTICAL INDUS

FY11

PAT Margins
FY12

FY10

FY11

P/E (x)
FY12

FY10

FY11

P/BV
FY12

FY10

FY11

ROE (%)
FY12

FY10

FY11

FY12

201

12

9001

11008

12080

9%

8%

9%

16.5

13.1

11.2

1.6

2.0

1.7

10.4

14.1

16.2

329.35

264.4

53595

61705.2

69807.6

20%

19%

19%

24.0

22.6

19.5

4.5

3.9

3.4

18.4

18.4

18.4
17.9

2054.85

423.3

39040

47640.27

53983.28

35%

34%

33%

31.5

26.7

23.6

5.4

4.6

4.0

18.4

18.4

DR. REDDY'S LABORATORIES

1548

261.8

70175

78532.38

90569.21

5%

14%

15%

74.3

23.7

19.5

6.9

5.3

4.2

24.2

24.2

24.2

CADILA HEALTHCARE LTD

693.8

142.1

35741

43509.58

51297.58

14%

15%

15%

28.1

22.1

18.0

8.7

6.6

5.1

33.5

33.5

31.4

RANBAXY LABORATORIES LTD

597.6

251.4

75970

84442.83

92698.08

4%

13%

11%

84.7

24.2

23.0

5.8

4.7

4.1

21.9

21.9

18.7

GLENMARK
PHARMACEUTICALS LTD

315.15

85.1

25006

29677.79

34194.23

13%

16%

16%

25.3

17.7

15.0

3.6

3.0

2.5

18.0

18.0

17.6

1131.95

65.9

35754

41230.41

48415.47

16%

13%

14%

10.9

12.4

9.9

3.4

2.7

2.1

24.4

24.4

24.0

BIOCON LTD

399.95

80.0

20364

27391.12

31006.13

14%

12%

13%

26.5

23.4

20.5

4.6

3.9

3.5

18.1

18.1

18.0

STRIDES ARCOLAB LTD

427.85

24.7

13048

15457.5

20174

8%

8%

10%

20.3

12.3

8.7

2.2

1.9

1.5

13.5

13.5

15.6

1114

33.2

7723

8817.75

10025.25

18%

19%

20%

24.2

19.9

17.3

3.7

3.2

2.8

16.0

16.0

16.3

AUROBINDO PHARMA LTD

PFIZER LIMITED

Source: Industry sources, CRISIL Equities

CRISIL Equities

17

Panacea Biotec Limited

Company Overview
Incorporated in 1984, Panacea Biotec is promoted by Mr. Soshil Kumar Jain for the
manufacturing of vaccines and pharmaceutical formulations. The company went public
in 1995 with an IPO at Rs 60 per share. In February 2003, the equity shares were split
from Rs 10 to Re 1 per share.
Year

Milestones

1984

Incorporated Panacea Drug (P) Ltd

1988

Established vaccines plant at New Delhi as Raducura Pharma

1989

Established pharmaceutical formulations plant at New Delhi under Panacea Drug (P)
Ltd

1993

Merged Radicura Pharma and Panacea Drug (P) Ltd into Panacea Biotec Ltd

1995

IPO of equity shares at Rs.60/- per share of Rs. 180 mn

1995

Set up state-of-the-art drug delivery R&D centre at Lalru, Punjab

1997

First product patent received

2001

Tie up with European MNC for R&D

2002

In-licensing agreement with Biotechnology Consortium of India for development

and commercialisation of Anthrax vaccine

2004

Commissioning of recombinant vaccine plant

In-licensing agreement with National Institute of Immunology, New Delhi, for

Set up marketing joint venture with Chiron Vaccines (Novartis), UK

Collaboration with Cambridge Biostability, UK for thermostat vaccines

Japanese Encephalitis Candidate Vaccine

2005

In-licensing agreement with National Institute of Health, USA for hair growth hormone

2006

Set up WHO cGMP compliant pharmaceutical formulations plant at Baddi,

Collaboration with The Netherlands Vaccines Institute for manufacturing and

Himachal Pradesh
marketing of Inactivated Polio Vaccine (IPV) and a number of IPV based
combination vaccines in India and abroad

Collaboration with PT BioFarma, Indonesia for manufacturing and marketing of

Set up R&D centre at New Delhi

Received WHO pre-qualification certification for supply of recombinant vaccines to

Collaboration with National Research Development Corporation (NRDC) for

Set up vaccine plant at Baddi, Himachal Pradesh

Collaboration with Punjab University for development of new chemical entities

Received WHO pre-qualification certification for pentavalent vaccine EasyFive

measles vaccine

UN agencies.(Ecovac)
technology transfer for Foot and Mouth vaccine
2007

(NCEs) in psychiatry
2008

Source: Company, CRISIL Equities

The Panacea group of companies

Company

Relation

Best on Health

Subsidiary

Umkal Medical Institute Pvt. Ltd

Subsidiary

Panacea Biotec FZE

Subsidiary

Panacea Biotec GmBH

Subsidiary

Rees Investments

Subsidiary

PanEra Biotec Pvt. Ltd

Associate

Source: Company, CRISIL Equities

CRISIL Equities

18

Panacea Biotec Limited

Panacea Biotec has its manufacturing facilities at New Delhi, Lalru in Punjab and Baddi
in Himachal Pradesh. The company also has five R&D centres with 300 scientists, who
conduct R&D in the areas of vaccines, biopharmaceuticals, drug delivery projects and
drug discovery for small molecules.
Segment

Location

Accreditations

Vaccines

New Delhi

WHO pre-qualified supplier for oral polio,

Formulations

New Delhi

Vaccines

Baddi, Himachal Pradesh

WHO cGMP compliant

Formulations

Baddi, Himachal Pradesh

USFDA, ANVISA Brazil, Upper Bavaria Germany,

recombinant and combination vaccines

TG Australia, and other agencies for Jordan, Syria,

Ukraine, Yemen

CRISIL Equities

Vaccines

Lalru, Punjab

Formulations

Lalru, Punjab

WHO pre-qualified supplier for hepatitis B

19

Panacea Biotec Limited

Business Overview
Panacea Biotec is engaged in the manufacturing and marketing of vaccines and
pharmaceutical formulations. The company conducts business in three segments
namely vaccines, formulations and R&D.
The vaccines portfolio comprises oral polio vaccines, hepatitis B, recombinant vaccines
and pentavalent vaccines. Panacea Biotec is a WHO pre-qualified supplier of vaccines
to UNICEF and PAHO. The company participates in the tenders floated by the two
organisations and receives bulk orders for vaccines through awards for a period of
three years. Panacea Biotec is the largest supplier of polio vaccines and is one of the
two manufacturers of pentavalent vaccines in India.

Chart 15: Vaccines are a major contributor to revenues

Chart 16: Polio vaccine comprises 75% of segmental

revenues

Easyfive
18%

Formulations
27%

Vaccines
73%

Chiron Panacea
(JV)
4%

Polio Vaccines
78%

Source: CRISIL Equities

Source: CRISIL Equities

Panacea Biotecs polio vaccines are supplied in India and are considered deemed
exports. The combination and pentavalent vaccines are mainly supplied to the
international markets. The company also sells its combination vaccines in India through
its joint venture Chiron Vaccines, UK.
The formulations business is divided into six divisions as illustrated in the chart below.

The pharmaceutical formulations of the company are mainly sold in the domestic
market.

CRISIL Equities

20

Panacea Biotec Limited

Annexure: Financials
Income Statement
(Rs Mn)

FY09

FY10

FY11E

FY12E

FY13E

Net sales

7,882

9,001

11,008

12,080

13,136

Operating Income

7,929

9,073

11,095

12,175

13,239

EBITDA

2,375

1,381

2,334

2,500

2,718

714

676

728

780

833

2,622

(209)

517

442

373

217

173

166

183

199

(745)

1,088

1,255

1,460

1,711

PAT

(540)

683

941

1,095

1,283

Adjusted PAT (ex-forex gains/losses)

1,490

182

941

1,095

1,283

67

67

61

61

61

(8.1)

10.2

15.4

17.9

21.0

FY09

FY10

FY11E

FY12E

FY13E

Depreciation
Interest
Other Income
PBT

No. of shares
Earnings per share (EPS)
Balance Sheet
(Rs Mn)
Equity capital (FV - Re. 1)

67

67

61

61

61

Reserves and surplus

6,030

7,004

6,197

7,221

8,418

Debt

7,018

7,035

8,542

7,813

6,813

Current Liabilities and Provisions

3,560

2,033

2,209

2,401

2,580

335

710

710

710

710

17,008

16,849

17,720

18,207

18,583

Net Fixed Assets

6,718

6,816

6,788

6,708

6,575

Capital WIP

1,129

974

674

374

74

743

844

844

844

844

Deferred Tax Liability/(Asset)

Minority Interest
Capital Employed

Intangible assets
Investments
Loans and advances

701

727

727

727

727

1,237

1,365

1,669

1,832

1,992
4,715

Inventory

4,513

4,577

4,408

4,670

Receivables

1,220

1,076

1,368

1,501

1,632

748

470

1,242

1,552

2,024

17,008

16,849

17,720

18,207

18,583

Cash & Bank Balance

Applications of Funds
Source: Company, CRISIL Equities estimates

CRISIL Equities

21

Panacea Biotec Limited

Cash Flow
(Rs Mn)

FY09

FY10

FY11E

FY12E

FY13E

Pre-tax profit

(745)

1,088

1,255

1,460

1,711

Total tax paid

(55)

(29)

(314)

(365)

(428)

Depreciation

714

676

728

780

833

(302)

(1,575)

(251)

(365)

(158)

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)

(389)

159

1,418

1,510

1,958

(2,579)

(720)

(400)

(400)

(400)

(548)

(26)

(3,127)

(746)

(400)

(400)

(400)

30

(1,120)

3,036

18

1,507

(729)

(1,001)
(86)

(3)

(20)

(57)

(72)

Others (incl extraordinaries)

(316)

281

(576)

Cash flow from financing activities

2,717

309

(246)

(801)

(1,087)

Change in cash position

(798)

(278)

772

310

472

Opening Cash

1,547

748

470

1,242

1,552

748

470

1,242

1,552

2,024

FY09

FY10

FY11E

FY12E

FY13E

(6.3)

14.4

22.3

9.7

8.7

8.1

(41.9)

69.0

7.1

8.7

(160.8)

204.1

25.7

16.3

17.2

EBITDA Margin (%)

29.9

15.2

21.0

20.5

20.5

PAT Margin (%)

(6.8)

7.5

8.5

9.0

9.7

Adj PAT Margin (%)

18.8

2.0

8.5

9.0

9.7

Closing Cash
Ratios
Growth ratios
Sales growth (%)
EBITDA growth (%)
EPS growth (%)
Profitability Ratios

Return on Capital Employed (RoCE) (%)

13.8

5.2

11.1

11.5

12.4

Return on equity (RoE) (%)

(8.3)

10.4

14.1

16.2

16.3

Dividend and Earnings

Dividend per share (Rs)
Dividend payout ratio (%)
Dividend yield (%)

0.0

0.3

0.8

1.0

1.2

-0.4

2.4

5.2

5.6

5.7

0.0

0.2

0.4

0.5

0.6

-8.1

10.2

15.4

17.9

21.0

Asset Turnover (Sales/GFA)

1.1x

1.0x

1.2x

1.2x

1.2x

Asset Turnover (Sales/NFA)

1.4x

1.3x

1.6x

1.8x

2.0x

Sales/Working Capital

2.4x

2.2x

2.2x

2.2x

2.3x

Earnings Per Share (Rs)

Efficiency ratios

Financial stability
Net Debt-equity

1.0

0.9

1.2

0.9

0.6

Interest Coverage

0.6

-3.4

3.1

3.9

5.1

Current Ratio

2.2

3.7

3.9

4.0

4.0

Valuation Multiples
Price-earnings

-25.4x

16.5x

13.1x

11.2x

9.6x

Price-book

2.2x

1.6x

2.0x

1.7x

1.5x

EV/EBITDA

8.4x

12.9x

8.4x

7.4x

6.3x

Source: Company, CRISIL Equities estimates

CRISIL Equities

22

Panacea Biotec Limited

Focus Charts
Volatility in revenues due to external factors

International supplies on the rise

Rs.mn

Rs bn
7

0.2

4000

0.1

3000

2000

-0.1

1000

-0.2

Sales

EBITDA margin(RHS)

FY10

5000

FY09

0.3

FY08

0.4

6000

FY07

7000

FY06

0.5

FY05

8000

FY04

0.6

FY03

9000

FY02

0.7

FY01

10000

6
5

3.71

5.80

2.80

1
0

1.48
0.31
FY08

Sales growth

Source: CRISIL Equities

3.40

FY09
International Supplies

FY10
Supplies to India

Source: CRISIL Equities

Movement in non-promoter holding

Non-promoter holding (%)
Institutions
Mutual Funds/UTI
Banks, FIs, insurance companies

Mar 2009

Jun 2009

Sep 2009

Dec 2009

Mar 2010

Jun 2010

17.29

16.82

17.15

16.96

16.33

13.79

2.29

2.98

3.73

3.59

0.61

0.04

0.03

0.05

0.05

0.05

0.05

0.04

0.03

0.05

0.05

0.05

0.05

16.25

14.5

14.12

13.18

12.68

13.13

Insurance companies
Financial institutions & banks
Central & state government
FIIs
Venture capital funds
Foreign venture capital
Others
Non-institutions

14.72

14.46

14.13

14.31

14.95

17.48

Corporate bodies

10.3

10.31

9.76

9.32

9.62

11.15

Individuals

4.37

4.05

4.3

4.4

4.8

5.74

Nominal investment up to Rs 1 lakh

3.95

3.63

4.1

4.2

4.6

5.54

Nominal investment over Rs 1 lakh

0.42

0.42

0.2

0.2

0.2

0.2

Others

0.04

0.09

0.06

0.59

0.51

0.59

Mar 2009

Jun 2009

Sep 2009

Dec 2009

Mar 2010

Jun 2010

1.8

1.8

1.25

1.25

1.25

1.25

3.85

3.85

6.14

6.14

1.56

1.56

1.56

1.56

1.56

1.1

Source: Prowess

Movement in institutional holding

Name of institution (%)
Clsa (Mauritius) Ltd
Daivi Ventures
Gain Premium Ltd

1.56

HSBC Global Investment Funds A/C HSBC

Global Investment Funds Mauritius

2.96

1.5

Matterhorn Ventures

3.85

3.85

Serum Institute Of India Ltd

6.26

6.26

6.26

6.26

6.26

6.81

Somerset Emerging Opportunities Fund

2.69

2.69

2.47

2.47

2.34

2.34

2.43

2.43

2.43

2.43

Transportation Infrastructure And Energy

Investments
Source: Prowess

CRISIL Equities

23

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