Contents

     

Overview of Pharmaceutical Industry Contribution of Pharmaceutical Industry to Indian GDP Dr. Reddys Labs Dr. Reddys Position in Indian Market Financial Analysis Future Scenario

Overview of Pharmaceutical Industry in India

The Pharmaceutical Industry in India is one of the largest in the world. It ranks 4th in the world, pertaining to the volume of sales. The estimated worth of the Indian Pharmaceutical Industry is US$ 6 billion. In 2008, the domestic pharmaceuticals market in India was expected to be US$ 10.76 billion and this is likely to increase at a compound annual growth rate of 9.9 per cent until 2010 and subsequently at 9.5 per cent till the year 2015.

 

The Indian Pharmaceutical Industry is one of the biggest producers of the active Pharmaceutical ingredients (API) in the international arena.

Contribution of Pharmaceutical Industry to Indian GDP

The Indian Pharmaceuticals Industry includes small scaled, medium scaled, large scaled players, which totals nearly 300 different companies. There are several other small units operating in the domestic sector. The sales of the Indian Pharmaceutical Industry would be worth US$ 43 billion within the next decade. The Pharmaceuticals Industry in India produces around 20% to 24% of the global generic drugs.

Dr. Reddys Labs

Established in 1984, Dr. Reddys Laboratories (NYSE: RDY) is an emerging global pharmaceutical company. Dr.Reddys products are marketed globally, with a focus on India, US, Europe and Russia. Dr. Reddys conducts research in the areas of metabolic disorders, cardiovascular indications, anti-infective and inflammation The company has 60 active pharmaceutical ingredients to manufacture drugs, critical care products, diagnostic kits and biotechnology products. The company has 6 FDA plants that produce active pharma ingredients and 7 FDA inspected and ISO 9001 and ISO 14001 certified plants.

Dr. Reddys Position in Indian Market

Dr Reddy's Laboratories remained on top with consolidated net sales of Rs 5,283 crore during the nine months ended December 2009 as against Rs 4,862 crore in the same period of last year indicating a relatively lower growth of 8.7 per cent. Dr. Reddys forayed into the rural markets in FY09 with launch of an exclusive portfolio of products targeted at the needs of people in rural India. Adjusted EBITDA of Rs. 15,828 million is highest among pharmaceutical companies in India in the year 2009-10. In 2009-10, share of revenue from the international businesses stood at 82%, with 18% coming from India.

Financial Analysis

Consolidated revenues are at Rs. 19.0 billion ($424 million) in Q3 FY11 versus Rs. 17.3 billion ($386 million) in Q3 FY10, year-on-year growth of 10%. Revenues from Global Generics for Q3 FY11 are at Rs. 13.6 bn ($303 mn), year-on-year growth of 16%. Revenues from PSAI are at Rs. 5.0 billion ($111 million) in Q3 FY11, year-on-year decline of 5%. EBITDA of Rs. 4.0 billion ($90 million) in Q3 FY11, is at 21% of revenues with year-on-year growth of 10%.

Profit before Tax for Q3 FY11 is at Rs. 2.9 billion ($64 million), year-on-year adjusted growth of 11%*. Profit after Tax for Q3 FY11 is at Rs. 2.7 billion ($61 million), is at 14% of revenues with year-on-year adjusted growth of 19%. During the quarter, the company launched 42 new generic products, filed 21 new product registrations and filed 9 DMFs globally.

Analysis of Common Size Statements

Dr. Reddys has very high proprietary ratio of 89% . Suggesting it is over capitalized. But by analyzing Total net worth & share capital we can see that total share capital is very less compare to retained earnings. Third Party view: For Banks/creditors/bond holder its very safe company to invest, as the Company has huge surplus which can be used to pay debt. Investors Low risk apatite investors may want to invest in the company as they have lesser risk. Risk adverse investor might choose Dr. Reddys compare to CIPLA as it has high net worth & low Debt compare to CIPLA. Low capital gearing mean lesser risk & lesser Returns as well.

Asset Allocation


Dr. Reddys Net Fixed Assets are 20.5 % compare to CIPLAs 37.7%. Dr.Reddys has Net Current Asset of around 40% compare to CIPLAS 53%. Dr Reddy has investments of around 31% compare to CIPLAs 1.5%

Equity Share capital constitute only 1.43% of Total Asset Size in case of Reddys & 2.94% for CIPLA.

Total Net worth is 89% in case of Dr. Reddys & 82 % in case of CIPLA. Total debt form around 11% for Dr. Reddys & 18% for CIPLA.

PROFITABILITY RATIOS
2008

2010 24.76 350.30 15.87 1.86 50.11

Profit margin Return on asset Return on equity Asset turnover Earning per share

17.42 286.12 10.55 1.97 28.26

LIQUIDITY RATIOS
2008

2010
1.49 1.45 3.54 5.39

Current ratio Quick ratio Debtor turnover Inventory turnover

1.82 1.94 3.42 5.90

SOLVENCY RATIO
2008

2010
0.10 250.76

Debt to Equity ratio Interest cover

0.10 85.79

CAPITAL MARKET RATIO

Dividend yield Book value

3.75 286.12

11.25 350.30

Future Scenario

India's Domestic Pharmaceutical Market

Company Total Pharma Market Cipla Ranbaxy

Size ($ Billion) 6.9 .36 .34

Market Share (%)Growth Rate (%) 100.0 5.3 5.0 4.3 3.9 3.6 9.9 13.4 11.5 -1.2 11.7 6.8

Glaxo Smithkline.29 Piramal Healthcare Zydus Cadila .27 .24

According to a study by FICCI-Ernst & Young India will open a probable US$ 8 billion market for MNCs selling expensive drugs by 2015 The study also says that the domestic pharmaceuticals market is likely to reach US$ 20 billion by 2015 The Minister of Commerce estimates that US$ 6.31 billion will be invested in the domestic pharmaceutical sector Public spending on healthcare is likely to raise from 7 per cent of GDP in 2007 to 13 per cent of GDP by 2015 Dr Reddy's Laboratories has tied up with GlaxoSmithKline to develop and market generics and formulations in upcoming markets overseas

Presented by Group 4
Vivin Varghese Karthik Kutty Rohan K John Abhinandan Bose Vineeth M George Bobby Kurian Rohini Abhirup Sen Abhimanyu Kumar Vinay Jay Kumar

Thank You