Valuation of Ranbaxy

8/2/2019 Valuation of Ranbaxy

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A

PROJECT REPORT

ONSTUDY ON VALUATION

OF

RANBEXY LABORETORIES LTD.

SUBMITTED TO

NARMADA COLLAGE OF MANAGEMENT, BHARUCH

AFFILIATED TO

GUJARAT TECHNOLOGICAL UNIVERSITY, AHMEDABAD

SUBMITTED BY

HARSHIT SUTHARROLL NO: 1048

MBA (3RD SEMESTER)

UNDER THE GUIDANCE OF

MS. CHETNA MAKWANA


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Company Profile.

Ranbaxy Laboratories Limited (Ranbaxy), India's largest pharmaceutical company, is an

integrated, research based, international pharmaceutical company, producing a wide

range of quality, affordable generic medicines, trusted by healthcare professionals and

patients across geographies. Ranbaxy today has a presence in 23 of the top 25

pharmaceutical markets of the world. The Company has a global footprint in 46

countries, world-class manufacturing facilities in 7 countries and serves customers in

over 125 countries.

In June 2008, Ranbaxy entered into an alliance with one of the largest Japanese

innovator companies, Daiichi Sankyo Company Ltd., to create an innovator and generic

pharmaceutical powerhouse. The combined entity now ranks among the top 20

pharmaceutical companies, globally. The transformational deal will place Ranbaxy in a

higher growth trajectory and it will emerge stronger in terms of its global reach and in its

capabilities in drug development and manufacturing.

Mission

Ranbaxy's mission is Enriching lives globally, with quality and affordable

pharmaceuticals.

Financials

Ranbaxy was incorporated in 1961 and went public in 1973. For the year 2010, the

Company recorded Global Sales of US $ 1868 Mn. The Company has a balanced mix

of revenues from emerging and developed markets that contribute 50% and 44%

respectively. In 2009, North America, the Company's largest market contributed sales of
http://en.wikipedia.org/wiki/File:Ranbaxy_Logo.svg


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US $ 660 Mn, followed by Europe garnering US $ 272 Mn and Asia clocking sales of US

$ 468 Mn.

Strategy

Ranbaxy is focused on increasing the momentum in the generics business in its key

markets through organic and inorganic growth routes. Growth is well spread across

geographies with focus on developed and emerging markets. It is the Companys

constant endeavour to provide a wide basket of generic and innovator products,

leveraging the unique Hybrid Business Model with Daiichi Sankyo. The Company will

also increasingly focus in high growth potential segments like Vaccines and

Biogenerics. These new areas will add significant depth to the existing product pipeline.

R&D

Ranbaxy views its R&D capabilities as a vital component of its business strategy that

will provide a sustainable, long-term competitive advantage. The Company has a pool

of over 1,200 R&D personnel engaged in path-breaking research.

Ranbaxy is among the few Indian pharmaceutical companies in India to have started its

research program in the late 70's, in support of its global ambitions. A first-of-its-kind

world class R&D centre was commissioned in 1994. Today, the Company has multi-

disciplinary R&D centers at Gurgaon, in India, with dedicated facilities for generics

research and innovative research. The R&D environment reflects its commitment to be

a leader in the generics space offering value added formulations and development of

NDA/ANDAs, based on its Novel Drug Delivery System (NDDS) research capability.

Ranbaxys first significant international success using the NDDS technology platform

came in September 1999, when the Company out-licensed its first once-a-day

formulation to a multinational company.


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In July 2010, Ranbaxys New Drug Discovery Research (NDDR) was transferred to

Daiichi Sankyo India Pharma Private Limited as part of the strategy to strengthen the

global Research and Development structure of the Daiichi Sankyo Group. While NDDR

will now become an integral part of Daiichi Sankyo Life Science Research Center in

India, based in Gurgaon, Ranbaxy will continue to independently develop and later

commercialise the anti-malarial new drug, Arterolane + PQP, which is currently in Phase

III trials. Ranbaxy will also explore the further development of late stage programs

developed by NDDR in the last few years, including the development programs in the

GSK collaboration. Within Ranbaxy, R&D of Generics will now get a sharper focus, as

the Company is increasingly working on more complex and specialist areas.

People

The Companys business philosophy based on delivering value to its stakeholders

constantly inspires its people to innovate, achieve excellence and set new global

benchmarks. Driven by the passion of its around 14,000 strong multicultural workforce

comprising of over 50 nationalities, Ranbaxy continues to aggressively pursue its

mission of 'Enriching lives globally, with quality and affordable pharmaceuticals'.


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Ranbaxy Laboratories Limited is a pharmaceutical company that was incorporated in

India in 1961. The company went public in 1973 and Japanese pharmaceutical

company Daiichi Sankyo gained majority control in 2008. Ranbaxy exports its products

to 125 countries with ground operations in 46 and manufacturing facilities in seven

countries

Formation

Ranbaxy was started by Ranbir Singh and Gurbax Singh in 1937 as a distributor for a

Japanese company Shionogi. The name Ranbaxy is a combination of the names of its

first owners Ranbir and Gurbax. Bhai Mohan Singh bought the company in 1952 from

his cousins Ranbir and Gurbax. After Bhai Mohan Singh's son Parvinder Singh joined

the company in 1967, the company saw an increase in scale.

Trading

In 1998, Ranbaxy entered the United States, the world's largest pharmaceuticals market

and now the biggest market for Ranbaxy, accounting for 28% of Ranbaxy's sales in

2005.

For the twelve months ending on 31 December 2005, the company's global sales were

at US $1,178 million with overseas markets accounting for 75% of global sales (USA:

28%, Europe: 17%, Brazil, Russia, and China: 29%). For the twelve months ending on

December 31, 2006, the company's global sales were at US $1,300 million.

Most of Ranbaxy's products are manufactured by license from foreign pharmaceutical

developers, though a significant percentage of their products are off-patent drugs that

are manufactured and distributed without licensing from the original manufacturerbecause the patents on such drugs have expired.
http://en.wikipedia.org/wiki/Pharmaceuticalhttp://en.wikipedia.org/wiki/Shionogihttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Shionogihttp://en.wikipedia.org/wiki/Pharmaceutical


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In December 2005, Ranbaxy's shares were hit hard by a patent ruling disallowing

production of its own version of Pfizer's cholesterol-cutting drug Lipitor, which has

annual sales of more than $10 billion. In June 2008, Ranbaxy settled the patent dispute

with Pfizer allowing them to sell Atorvastatin Calcium, the generic version of Lipitor and

Atorvastatin Calcium-Amylodipine Besylate, the generic version of Pfizer's Caduet(R) in

the US starting November 30, 2011. The settlement also resolved several other

disputes in other countries.

On 23 June 2006, Ranbaxy received from the United States Food & Drug

Administration a 180-day exclusivity period to sell simvastatin (Zocor) in the U.S. as a

generic drug at 80 mg strength. Ranbaxy competes with the maker of brand-name

Zocor, Merck & Co.; IVAX Corporation (which was acquired by and merged into TevaPharmaceutical Industries Ltd.), which has 180-day exclusivity at strengths other than

80 mg; and Dr. Reddy's Laboratories, also from India, whose authorized generic version

(licensed by Merck) is exempt from exclusivity.

In June 2008, Japan's Daiichi Sankyo Company agreed to take a majority (50.1%) stake

in Ranbaxy, with a deal valued at about $4.6 billion. Ranbaxy's Malvinder Singh

remained as CEO after the transaction.

On 16 September 2008, the Food and Drug Administration issued two Warning Letters

to Ranbaxy Laboratories Ltd. and an Import Alert for generic drugs produced by two

manufacturing plants in India. By February 25, 2009 the U.S. Food and Drug

Administration said it halted reviews of all drug applications including data developed at

Ranbaxy's Paonta Sahib plant in India because of a practice of falsified data and test

results in approved and pending drug applications. "Investigations revealed a pattern of

questionable data," the FDA said.

On December 1, 2011, Ranbaxy got the much-awaited approval from the US Food and

Drug Administration to launch the generic version of drug lipitor in the United States of

America after its patent got expired.
http://en.wikipedia.org/wiki/Pfizerhttp://en.wikipedia.org/wiki/Cholesterolhttp://en.wikipedia.org/wiki/Lipitorhttp://en.wikipedia.org/wiki/Food_%26_Drug_Administrationhttp://en.wikipedia.org/wiki/Food_%26_Drug_Administrationhttp://en.wikipedia.org/wiki/Simvastatinhttp://en.wikipedia.org/wiki/Generic_drughttp://en.wikipedia.org/wiki/Merck_%26_Co.http://en.wikipedia.org/wiki/Dr._Reddy%27s_Laboratorieshttp://en.wikipedia.org/wiki/Daiichi_Sankyohttp://en.wikipedia.org/wiki/United_States_of_Americahttp://en.wikipedia.org/wiki/United_States_of_Americahttp://en.wikipedia.org/wiki/United_States_of_Americahttp://en.wikipedia.org/wiki/United_States_of_Americahttp://en.wikipedia.org/wiki/Daiichi_Sankyohttp://en.wikipedia.org/wiki/Dr._Reddy%27s_Laboratorieshttp://en.wikipedia.org/wiki/Merck_%26_Co.http://en.wikipedia.org/wiki/Generic_drughttp://en.wikipedia.org/wiki/Simvastatinhttp://en.wikipedia.org/wiki/Food_%26_Drug_Administrationhttp://en.wikipedia.org/wiki/Food_%26_Drug_Administrationhttp://en.wikipedia.org/wiki/Lipitorhttp://en.wikipedia.org/wiki/Cholesterolhttp://en.wikipedia.org/wiki/Pfizer


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Acquisition

In June 2008, Daiichi-Sankyo acquired a 34.8% stake in Ranbaxy, for a value $2.4

billion. In November 2008, Daiichi-Sankyo completed the takeover of the company from

the founding Singh family in a deal worth $4.6 billion by acquiring a 63.92% stake in

Ranbaxy.
http://en.wikipedia.org/wiki/Daiichi-Sankyohttp://en.wikipedia.org/wiki/Ranbaxyhttp://en.wikipedia.org/wiki/Daiichi-Sankyohttp://en.wikipedia.org/wiki/Daiichi-Sankyohttp://en.wikipedia.org/wiki/Ranbaxyhttp://en.wikipedia.org/wiki/Daiichi-Sankyo


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COMPANY ANALYSIS

BALANCE SHEET:

Sources Of Funds Dec '10 Dec '09 Dec '08 Dec '07 Dec '06

Total Share Capital 210.52 210.21 210.19 186.54 186.34

Equity Share Capital 210.52 210.21 210.19 186.54 186.34

Share ApplicationMoney

6.6 175.85 175.66 1.18 0.88

Preference ShareCapital

0 0 0 0 0

Reserves 4,915.28 3,748.54 3,330.92 2,350.68 2,162.79

Revaluation Reserves 0 0 0 0 0

Networth 5,132.40 4,134.60 3,716.77 2,538.40 2,350.01

Secured Loans 195.39 175.83 162.07 365.07 224.29

Unsecured Loans 4,065.33 3,172.55 3,563.30 3,137.96 2,954.31

Total Debt 4,260.72 3,348.38 3,725.37 3,503.03 3,178.60

Total Liabilities 9,393.12 7,482.98 7,442.14 6,041.43 5,528.61

Application Of Funds Dec'10 Dec'09 Dec'08 Dec'07 Dec'06

Gross Block 2,857.63 2,620.92 2,386.75 2,261.48 2,133.57

Less: Accum.Depreciation

1,145.52 1,027.52 930.07 791.96 699.54

Net Block 1,712.11 1,593.40 1,456.68 1,469.52 1,434.03

Capital Work inProgress

330.18 414.92 428.77 327.42 301.88

Investments 3,804.44 3,833.69 3,618.03 3,237.55 2,679.95

Inventories 1,489.91 1,230.48 1,198.52 976.07 954.91

Sundry Debtors 1,292.63 1,534.65 1,024.54 882.91 1,013.75

Cash and Bank Balance 22.44 25.56 49.86 69.38 27.06

Total Current Assets 2,804.98 2,790.69 2,272.92 1,928.36 1,995.72

Loans and Advances 1,470.45 1,967.65 2,351.98 882.99 581.18

Fixed Deposits 2,689.85 728.56 1,885.08 111.07 44.09

Total CA, Loans &Advances

6,965.28 5,486.90 6,509.98 2,922.42 2,620.99

Deffered Credit 0 0 0 0 0


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Current Liabilities 2,491.08 3,082.89 3,840.11 1,177.35 985.57

Provisions 927.82 763.03 731.2 738.14 522.67

Total CL & Provisions 3,418.90 3,845.92 4,571.31 1,915.49 1,508.24

Net Current Assets 3,546.38 1,640.98 1,938.67 1,006.93 1,112.75

Miscellaneous Expenses 0 0 0 0 0

Total Assets 9,393.11 7,482.99 7,442.15 6,041.42 5,528.61

Contingent Liabilities 276.13 261.05 252.85 201 159.4

Book Value (Rs) 121.74 94.16 84.24 68.01 63.03

PROFIT AND LOSS ACCOUNT:

Percitulars Dec'10 Dec'09 Dec'08 Dec'07 Dec'06

Income

Sales Turnover 5,687.33 4,797.49 4,676.21 4,344.39 4,218.98

Excise Duty 40.96 15.9 24.17 51.37 53.86

Net Sales 5,646.37 4,781.59 4,652.04 4,293.02 4,165.12

Other Income 562.45 485.66 -1,587.64

551.13 -28.65

Stock Adjustments 161.43 33.96 115.59 40.66 44.7

Total Income 6,370.25 5,301.21 3,179.99 4,884.81 4,181.17

Expenditure

Raw Materials 2,181.22 1,916.58 2,049.30 1,861.17 1,708.23

Power & Fuel Cost 132.75 109.57 108.83 90.35 80.7

Employee Cost 608.28 582.5 472.65 420.04 328.45

Other ManufacturingExpenses

96.68 89.94 94.65 82.6 79.52

Selling and AdminExpenses

1,332.70 1,306.25 1,402.77 1,341.03 1,234.42

Miscellaneous Expenses 185.14 158.07 383.26 123.9 146.23

Preoperative ExpCapitalised

0 0 0 0 0

Total Expenses 4,536.77 4,162.91 4,511.46 3,919.09 3,577.55


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Perticulars Dec'10 Dec'09 Dec'08 Dec'07 Dec'06

Operating Profit 1,271.03 652.64 256.17 414.59 632.27

PBDIT 1,833.48 1,138.30 -

1,331.47

965.72 603.62

Interest 54.19 39.47 145.83 93.43 58.44

PBDT 1,779.29 1,098.83 -1,477.30

872.29 545.18

Depreciation 228.35 148.2 154.47 118.73 106.75

Other Written Off 0 0 0 0 0

Profit Before Tax 1,550.94 950.63 -1,631.77

753.56 438.43

Extra-ordinary items 21.88 111.42 17.76 35.46 19.34

PBT (Post Extra-ord Items) 1,572.82 1,062.05 -

1,614.01

789.02 457.77

Tax 415.48 488.86 -574.24 156.69 62.43

Reported Net Profit 1,148.73 571.98 -1,044.80

617.72 380.54

Total Value Addition 2,355.55 2,246.33 2,462.16 2,057.93 1,869.31

Preference Dividend 0 0 0 0 0

Equity Dividend 84.21 0 0 317.15 316.89

Corporate Dividend Tax 13.99 0 0 53.9 44.44

Per share data (annualised)

Shares in issue (lakhs) 4,210.41 4,204.17 4,203.70 3,730.71 3,726.87

Earning Per Share (Rs) 27.28 13.61 -24.85 16.56 10.21Equity Dividend (%) 40 0 0 170 170

Book Value (Rs) 121.74 94.16 84.24 68.01 63.03


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ASSETS BASE VALUATION OF THE COMPANY

2010:

VALUE OF THE COMPANY =

=

=2.070

2009:


=

= 1.87

2008:


=

= 3.53

Valuation of Ranbaxy

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