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AJANTA PHARMAAN ANALYSIS OF THE

COMPANY

Ajanta pharma is a speciality pharmaceutical company in


development manufacturing and marketing of quality finished
dosages in domestic and international markets. Estabished in
1973 by three Agarwal brothers (Mannalal.Purushotham and
Madhsudhan) headquarters in Mumbai ,India, company is
committed to serve health care worldwide producing high quality
affordable medicines to patients in different parts of the world.

Ajanta"a products are sold over 40 countries.co-operates with 5


state of the art manufacturing facilities that produce high quality
pharmaceutical products. it's focus is on commercialising unique
genetic products and processing synergistic combination products
in the therapeutic areas of anti malarial, cardiovascular,
dermatology, Musculoskuletal and ophthalmology with primary
focus on New product innovation and introduction. It has been
consistently identifying unmet medical needs and introducing many
first-to-market products to cater to those needs. Its products
provide patients complacence and convenience over existing
therapeutic options gaining first mover advantages in its respective
segment. Ajanta has extensive presence in many countries in Asia,
Africa and Latin America and not only in US with customised
product portfolio to suit the needs of each country.(more than 40
countries). The company is having factories in Maharashtra and
Gujarat .and has a top class Research and Development unit
called ADVENT in Mumbai for formulations and active
pharmaceutical ingredient synthesis of different dosage forms,
working continually for innovative products for various markets
across the globe. They have top class warehouses in Mumbai,
Aurangabad and many other places.And a unique quality control
section to ensure best international quality for its products.

This four decade old company started outdoing institutional


business, selling anti-malarial drugs to the government. Only a
decade ago Ajanta changed its focus and started concentrating on
branded formulations in a heavily crowding market. Ajanta took the
approach of launching new drugs in the country. Today of the 175
plus drugs that it markets in the country, about 125 are first time
launch and new drugs delivery system.(NDDS) and this decision
has paid off very well .branded formulations have grown at 34%
annually in the last ten years.

What makes the company special? It took a second generation of


Agarwals to change the future of Ajanta which, from being missed
as debt has seen a 65 gold growth in market value todate
yesteryear Bollywood superstar Jeetendra has appeared in only
one television commercial to enclose a product that was 1990's for
a popular over- the - counter(OTC) energised capsule for men
called 30 PLUS and it was sold like hot cakes but later it was
sold to Dabur in 2011.
The company which was trading at Rs 24 per share on BSE with
negligible interest from investors and reeling under a debt burden
of Rs 130 crore upto 2001-2002, found its antidote in the new
generation of Agarwals :Mannalals sons -Yogesh and Rajesh.
Company faced a tough situation with creditors and debtors But
the brothers changed the company's trajectory by focussing on the
speciality generic drug market and pulling an end to the company's
legacy business which included OTC drug sales and supplying to
Government Health Agencies in India and other countries.A risky
move but it paid off very well..Ajanta closed FY 2015 with a
considerable net sales of Rs.1481crore and a net profit of
Rs.310crores (a compounded annual sale growth rate of CAGR of
57% for four years since 2011. Net sales recorded a CAGR of 31%
for the same period a very encouraging growth. It's market value
currently stands at around Rs.13500 crore. This is a 65 fold growth
in 15 years- unbelievable but true. A small player in the market full
of giants such as Sun Pharma,Cipla,Ranbaxy and such others,
started concentrating on first' of-its kind generic drugs and caught
the attention of analysts and investors and showed excellent
opportunity for investment as they poised for rapid growth and the
trading shot upto Rs1554 on the stock market by 2014-15. Ajanta's
return on investment stood at an impressive 43% while return on
capital was at 52%.It reported one of the highest earnings before
interest, tax ,depreciation and amortization.(EBITDA) margin
among its listed Pharma section at 34%, achieved all this with a
small presence in US market which is the golden goose. A third of
its sales comes from India and rest of the emerging countries in
Asia and Africa.It's products are sold in more than 45 countries
including Iraq ,Nigeria, Cameroon and the Philippines. This
turnaround was brought in by Agarwals by changing their strategy
and focussing only on speciality generic drugs, identifying the right
segments, products and markets and taking a risk to borrow
further so that they could invest in R &D. They concentrated on
speciality brands (medicines that can only be prescribed by
Specialist Doctors and not by General Physicians)
in four areas -ophthalmology, dermatology cardiovascular and
pain management where the competition was less intense and of
course needed funds and SBI and Exim Bank agreed to extend
loan facility with the companies strategies and funds in place,
Company has since built a Rs. 418 crore business in India and is
ranked 36 out of top 300 Indian companies. Today it stands net
debt free with a Cash Reserve of Rs.100 crore. First to market
products are zgalifloxin,an eye solution Mer XL 'a -Cardiovascular
drug, antibiotics anti malarial and orthopaedic drugs. The first
Indian generic drug maker to secure prequalification from WHO for
its anti-malarial drug. UNICEF too procured such drugs from
Ajanta. In internal markets, it has registered 1445 brands and is in
the process of registering another 1609 brands all of which are the
unique contribution of the dedicated R & D centre & a worldwide
marketing team. In terms of manufacturing capacity, it has plants in
Mumbai, Aurangabad and one in Mauritius. One Aurangabad unit
is approved by (USFDA) UNITED STATES FOOD & DRUG
ADMINISTRATION and the UK Medicine & Healthcare Product
Regulatory Agency and also commenced a facility in DAHEJ,SEZ
Dahej SEZ Zone in Gujarat and its production to start by 2017,
and another plant in SALVI, Gujarat is also in the pipeline. The
prospect of strong growth comes with certain challenges, most
important being consistently meeting USFDA standards but Co.is
well equipped with a strong R & D to take care of these
challenges. .Another challenge is about its cost of its essential
medicines controlled by Govt.but with focus on niche therapies in
domestic formulations and a calculated approach in the export
market, Ajanta remains an interesting Pharma company with high
growth rates, strong margins, commendable return ratios and
lighter balance sheet.

The change in stratergy catapilated Ajantas margin from 14% in


2005 to 36.5%. as on date.Going ahead,gross profit margins are
likely to sustain 70-72% levels though EBDITA margins are
expected to come down from 31% in FY 2014 to 28% level by
2017 on a/c of the commencement of new facilities.
Company has cosistenly improved its ROCE from 8.5% in 2005 to
54.50% as of now,its focus in niche therapies and exports to Africa
Asian countries are expected to help it maintain its momentum.
Revenues are likely to grow by 22% CAGR by 2017 and PAT by
25%.
Valuation-Companies momentum has created an expectation in
the market. Revenue has compounded at 23.50% in the last
decade while earnings by 57% in the same period. The stock
trades at 36 times earnings.

FUTURE PROJECTIONS are that the company revenue to grow


@ a CAGR of 19% during by and to touch Rs.2072 crore..Exports
are expected to grow @ 17.30% to Rs1309 crore , around 63% of
the estimated turnover EBITDA margin to sustain @ 32-34%
revenue growth.
Ajanta Pharma is committed to patient care since inception, accelerating
its growth over the years with the desire to fulfill its mission A
COMMITMENT TO SERVICING GLOBAL HEALTHCARE NEEDS with
Empathy, Innovation and Technology and this is the secret of the
company's success

Balance Sheet Anayisis...Ajanta Phrama... (Amounts in Crores)

Sl. Particulars 2014 2015 2016

01 Sales 1109 1356 1551

02 Operating Profit 345 472 515

03 Net Profit 220 306 414

04 Share Capital 18 18 18

05 Reserves & Surplus 519 768 1018

06 Share Holding
Promotors 74% 74% 74%
General Public 13% 13% 13%
Foreign Investors 10% 10% 10%
MF/FII/n BKG/others 3% 3% 3%

07 EPS 62 35 47**
(Face Value of the share reduced from Rs.5 to Rs.2.00 in 2014)

08 CAGR
Revenue 22.53%
Net Profit 32.00%
EPS 32.00%

09 OPM 31% 35% 33%

10 GPM 31% 36% 36%

11 NPM 19% 22% 25%

12 Return on Capital 49% 54% 56%

13 Return on Net worth 41% 38%


40%

OPM-Operating Profit Margin=Operating Profit/Net sales


2014 2015
2016
(345/1109) (472/1356)
(515/1551)

NPM Net Profit Margin =Net Profit/Sales

(220/1109) (306/1356)
(414/1551)

EPS-Earnings Per Share=Net Profit by number of shares

(13640/220) (10710/306)
(19458/414)

Return on Equity-==Net Profit/Equity + Reserves)


Company has witnessed consistent rise in ROCE in the past five
years. Companies approach in concentrating on branded
formulations of new drugs
Has worked out very well for its growth ,a come a long way to
become a specialist even in Cardiovassscular medicines.
Between 2015 to 2016
Sales turnover has increased from 1356.20 cr to 1551.76
Operating profit has increased from 472.56 cr to 515.85
PBDT > from 494.30 cr to 594.00cr
PBT > from 444.88cr to 551.32cr
Tax paid is 136.84 cr & 136.84cr
Dividend declared is 300% Dividend Yield is around 39%
Average return on equity is @ 38%

Net profit growth by 38%, sales growth by 25 % market cap


growth by 54% EPS, its growth share in the market is excellent.
Sale price performance is excellent, as on date a Rs.2.00 face
value share is quoted at Rs.1547.00 and expected to touch
Rs.1780.00and one of the top
50 prefered shares in the market. Market cap is Rs.13575.95
cr. Book value is @ Rs.136.45
Focus on select generics has rewarded Ajanta with healthy
margins and now entry into US & EU markets is likely to be the
key growth driver for the company. A debt equity ratio of 0.6
will support its ambitious capex plan of Rs.390 cr in the next
two years & Rs.1000 cr to its topline .

Free Cash Flow-is a measure which is ignored by many


investors.FCF represents the cash that a company is able to
generate after spending the money required to maintain or
expand its property, plant & equipment(PPE) called capital
expenditure(capex) Company has maintained good FCF-Rs.750
cr in 2014,Rs.1550 cr in 2015 & Rs.1750 cr in 2016.The current
ratios
for 2014 is 1.75,for 2015 -2.5 & for 2016 it is 2.75 (expected
ideal CR is 1:1.5) Interest coverage ratio > than 1.5 and the
overall performance of the company is on the growing trend.

The company manufactures tablets, dry powder, Jelly, Liquid,


,Ayurvedic, active pharma ingredients, eye drops,ointments etc
etc., & the list goes on..

To name a few of them:


Dospin for reduction of BP
Alorvaslalin for hypertension
Benzalkonium chloriocin / ceflaxil for infections
Chopidiagrel for anty platelet agent-blood clot prevention
Norflaxin/Latonopost/Gate DX for eye care
Guaimburo-for chest congestion
Haloperidol- a tranquiliser for schizopheria
Lafulidine for ulcer
Strptomicin for fever
Lacom T for allergies and so the names goes on...

To sum up ,we can analyse that innovation is the key to success


and determination, dedication & hard work ,has paid very well
for Ajanta Pharma to grow to great heights & become a role
model.