PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

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1 BUY CMP Target Price CIPLA LIMITED Result Update (PARENT BASIS): Q2 FY15 NOVEMBER 18 th,2014 ISIN: INE059A01026 Index Details Stock Data Sector Pharmaceuticals BSE Code Face Value wk. High / Low (Rs.) / Volume (2wk. Avg.) Market Cap (Rs. in mn.) Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY14A FY15E FY16E Net Sales EBITDA Net Profit EPS P/E Shareholding Pattern (%) 1 Year Comparative Graph CIPLA LTD S&P BSE SENSEX SYNOPSIS Cipla Ltd laid foundations for the Indian pharmaceutical industry back in 1935 with the vision to make India self-reliant in healthcare and is one of the largest exporters of pharmaceutical products from India and has a strong presence in over 170 countries. Revenue for the 2 nd quarter of FY15 rose by 6.06% y-oy to Rs million from Rs million, when compared with the prior year period. In Q2 FY15, Net profit stood at Rs million against Rs million in the corresponding quarter ending of previous year. Consolidated domestic revenues grew by 20.5% to Rs mn during Q2 FY14-15, from Rs mn during Q2 FY The Company has signed a definitive agreement with its existing Iranian distributor for setting up a manufacturing facility in Iran. Cipla Ltd has reported that Medispray Laboratories Private Limited, a wholly owned subsidiary of the Company approved the acquisition of two manufacturing undertakings. The consideration for the above two transactions are Rs million and Rs million respectively. The company has signed a non-exclusive licensing agreement with Gilead Sciences, Inc. for manufacturing and distribution of Sofosbuvir mono, Ledipasvir mono for the treatment of hepatitis C. Cipla signed an agreement with Salix Pharmaceuticals, Inc., a US-based speciality pharmaceutical company. Net Sales and Operating profit of the company are expected to grow at a CAGR of 12% and 3% over 2013 to 2016E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Cipla Ltd Lupin Ltd Sun Pharmaceuticals Industries Ltd Dr. Reddy's Laboratories Ltd

2 QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q2 FY15, Cipla Ltd is an extensive range of pharmaceutical and personal care products have brought health and Rs. In million SEP-14 SEP-13 % Change happiness to millions of people the world over Revenue combining technology and quality with affordability, The company presence in over 170 countries, portfolio includes 2000 products in 65 therapeutic categories with one quality standard globally. Reported its financial results for the quarter ended 30 th Sept, PAT EPS EBITDA (10.63) (10.63) (6.54) The company s Revenue for the 2 nd quarter of FY15 rose by 6.06% to Rs million from Rs million, when compared with the prior year period. Net profit stood at Rs million against Rs million in the corresponding quarter ending of previous year. Reported earnings per share of the company stood at Rs a share during the quarter compared to Rs over previous year period. Profit before interest, depreciation and tax is Rs million as against Rs million in the corresponding period of the previous year. Break up of Expenditure Break up of Expenditure Rs. In Millions Q2 FY15 Q2 FY14 Cost of Material Consumed Other Expenditure Depreciation & Amortization Expense Purchase of Stock in Trade Employee Benefit Expenses

3 Latets Updates The Company has signed a definitive agreement with its existing Iranian distributor for setting up a manufacturing facility in Iran. The total contribution from the Company over the next 3 years will include machinery, equipment, technical know-how and is expected to be approximately INR 225 crore for a 75% stake. Cipla reported that India Ratings & Research Private Limited, a Fitch Group Company have affirmed the Long- Term Issuer Rating of IND AAA to the Company and IND A1+ rating to the Company s Rs. 10 billion Commercial Paper/Short Term Debt Programme. Further, India Ratings & Research Private Limited has assigned IND AAA rating to the Company s proposed Rs. 20 billion NCD programme. Medro pharmaceuticals (Pty) Ltd a subsidiary company of Cipla Medrpro reported that it has entered into collaboration with Teva Pharmaceuticals (pty). Cipla Ltd has reported that Medispray Laboratories Private Limited, a wholly owned subsidiary of the Company approved the acquisition of two manufacturing undertakings. A significant portion of the capacities of the two undertakings are dedicated for the manufacture of Cipla's products. The consideration for the above two transactions are Rs million and Rs million respectively. The company aims to build a strong presence in Kenya. In line with it s global strategy, Cipla continues to retain ownership of its marketing authorisations and trademarks for its products in Kenya and will continue to invest further in developing the Kenya market. Cipla has signed an agreement with Salix Pharmaceuticals, Inc., a US-based speciality pharmaceutical company. Under the agreement, Cipla has granted Salix exclusive rights under certain patent applications in the Rifaximin Complexes patent family controlled by Cipla. The company has signed a non-exclusive licensing agreement with Gilead Sciences, Inc. for manufacturing and distribution of Sofosbuvir mono, Ledipasvir mono, the fixed-dose combination of Ledipasvir/Sofosbuvir with each other and the combination of Sofosbuvir or Ledipasvir with other active substances, for the treatment of hepatitis C. Cipla, reported that the commercial collaboration with S&D Pharma in the Czech Republic and Slovakia. This collaboration will enable Cipla to focus on its core therapy areas, while S&D Pharma will be the key partner for generics.

4 Operational highlights (CONSOLIDATED) o The Group has posted a net profit after tax, minority interest and Share of Profit / Loss of Associates of Rs million for the quarter ended Sept 30, 2014 where as the same was at Rs million for the quarter ended Sept 30, o Total Income is Rs million for the quarter ended Sept 30, 2014 where as the same was at Rs million for the quarter ended Sept 30, Domestic business: Domestic revenues grew by 20.5% to Rs mn during Q2 FY14-15, from Rs mn during Q2 FY The growth in domestic revenues was largely on account of growth in Pediatrics, Respiratory, Spectracare and Urology therapies. International business: During Q2 FY15, exports of formulations grew by 0.04% to Rs mn from Rs mn in corresponding quarter of previous year. Exports of APIs marginally declined to Rs mn during Q2 FY15 from Rs mn during Q2 FY14. COMPANY PROFILE Cipla is incorporated by Khwaja Abdul Hamied in 1935; he set up The Chemical, Industrial & Pharmaceutical Laboratories, which came to be popularly known as Cipla. On August 17, 1935, Cipla was registered as a public limited company with an authorized capital of Rs 6 lakhs. Cipla has over 34 state-of-the-art manufacturing units which have been approved by various Ministries of Health and Regulatory Authorities like USFDA, WHO, MCC-South Africa, MHRAUK, TGA-Australia among others. With over 2000 products in 65 therapeutic areas, Cipla s product portfolio comprises of Active Pharmaceutical Ingredients (APIs), Formulations for Human and Animal Healthcare and OTC products. Cipla has the technological prowess of manufacturing products in most dosage forms across therapeutic categories, which offers the company a unique competitive advantage. The Company s R&D centre primarily focuses towards developing innovative products and drug delivery systems and has given the country and the world many Firsts. This includes the revolutionary HIV/AIDS cocktail for less than a Dollar a Day.

5 Cipla is one of the largest exporters of pharmaceutical products from India and has a strong presence in over 170 countries. The company s portfolio includes 2000 products in 65 therapeutic categories with one quality standard globally. Cipla s turnover in FY 14 was 1.67 billion USD. As part of its international business, Cipla enters into strategic alliances and agency arrangements for product registration, development and distribution of its products. It also provides technological consultancy services for pharmaceutical projects in developed markets, particularly the U.S. and Europe. In addition, the company also maintains long-standing relationships with non-governmental organizations and institutions outside India. Cipla has earned a name for maintaining world-class quality across all its products and services. With the dedication of its 20,000 employees, Cipla continues to support, improve and save millions of lives with its high-quality drugs and innovative devices and is focused towards its commitment that None shall be denied.

6 FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31, E CIPLA LTD. FY-13A FY-14A FY-15E FY-16E SOURCES OF FUNDS Shareholder's Funds Share Capital Reserves and Surplus Sub Total - Net worth Non Current Liabilities Long Term Borrowing Deferred Tax Liabilities Other Long term Liabilities Long Term Provisions Sub Total - Non Current Liabilities Current Liabilities Short Term Borrowings Trade Payables Other Current Liabilities Short Term Provisions Sub Total - Current Liabilities Total Liabilities (1+2+3) APPLICATION OF FUNDS Non-Current Assets Fixed Assets Tangible assets Intangible assets Capital Work in Progress Intangible assets under development a) Sub Total - Fixed Assets b) Non Current Investments c) Long Term loans and advances d) Other Non-current investments Sub Total - Non Current Assets Current Assets Current Investment Inventories Trade receivables Cash and Bank Balances Short-terms loans & advances Other current assets Sub Total - Current Assets Total Assets (1+2)

7 Annual Profit & Loss Statement for the period of 2013 to 2016E Value(Rs.in.mn) FY13A FY14A FY15E FY16E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 31 MAR, 2014 to 31 DEC, 2014E Value(Rs.in.mn) 31-Mar Jun Sep Dec-14E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS

8 Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts

9 OUTLOOK AND CONCLUSION At the current market price of Rs , the stock P/E ratio is at x FY15E and x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs and Rs respectively. Net Sales and Operating profit of the company are expected to grow at a CAGR of 12% and 3% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at x for FY15E and x for FY16E. Price to Book Value of the stock is expected to be at 4.25 x and 3.78 x respectively for FY15E and FY16E. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment. INDUSTRY OVERVIEW The market size of the global pharmaceutical industry is estimated to reach US$ 1.2 trillion by 2017 growing at a Compound Annual Growth Rate (CAGR) of 3-6% and the emerging markets are likely to be the key growth drivers. Several factors like economic growth, demographic changes, transition in community health and policy responses and focus on healthcare funding are expected to lead to double-digit growth in the pharmerging markets. On the other hand, economic and healthcare austerity measures and the savings realized from the growing availability of generic drugs, following their patent expiry, may see developed markets record low single-digit growth GLOBAL GENERICS A shift of the global spending mix towards generic over the next five years has been forecasted, a move primarily driven by the pharmerging markets, despite branded drugs continuing to form almost two-thirds of global spending in the developed markets. It is estimated that the generic spending on medicines will grow from US$ 261 billion in 2012 to US$ billion by 2017 globally. Global generic spending is likely to reach 36% of total spending by 2017, as against 27% in INDIAN PHARMACEUTICAL SECTOR The Indian pharmaceutical market is estimated to reach US$ billion by 2017 compared to US$ 14 billion in 2012, establishing India as the 11th largest market by 2017, compared to its 13th position in 2012.

10 Crisp facts Ranked thirteenth in terms of value in the global pharmaceutical industry in 2012 Fourth largest among the pharmerging markets in terms of market size in 2012 Projected to grow at a CAGR of 11-14% during One of the key exporters to the US and other markets - the highest number of US FDA approved manufacturing facilities outside USA. Indian pharmaceutical companies received over 150 ANDA approvals from US FDA during 2013, accounting for approximately 38% of the total approvals. The Indian pharmaceutical industry received foreign direct investments (FDI) worth around US$ billion during April, 2000 to September, Exports The pharmaceutical exports from India during stood at US$ 14.6 billion, witnessing an increase of US$ 1.4 billion from Indian pharmaceutical sector exports are likely to reach US$ 25 billion by Demand drivers Rising spend on healthcare: Total annual healthcare spending is expected to more than double to US$ billion, growing at an average annual rate of 15.8% during Healthcare spending is estimated to be around 0.5% of GDP in Growing health insurance coverage: The Indian government plans to bring 80% of India s population under health insurance cover under its Health Insurance Vision This will lead to higher volumes for the pharmaceuticals industry. Growing incidence of chronic diseases: Chronic therapies have grown at a faster pace than that of traditional acute therapies over the past four years. Their contribution in the Indian pharmaceutical market escalated from 27% in 2010 to 30% in Lifestyle changes, rapid urbanization and increasing affluence are factors which are expected to drive it further. Rapid urbanisation: An increase in urban population from 31% to 40% or more by 2030 will see better accessibility, with which will come with rapid urbanisation and the growth of the pharmaceutical industry. Industry concerns Regulatory challenges

11 The Indian pharmaceutical market has its own set of regulatory challenges in the form of: o Government-mandated price controls o Delay in new product approvals o Delay in clinical trial approvals o Uncertainties over FDI policy These concerns act as a deterrent to the growth of the industry. Manufacturing quality India is attracting greater scrutiny from the US FDA in relation to cgmp compliance, owing to the fact that it is the largest drugs supplier to the US. Indian companies will have to conform to standards at par with the global benchmarks. This will involve continuous improvement in systems and processes and training of the workforce to ensure compliance to such standards. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

12 Firstcall India Equity Research: C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods B. Anil Kumar Auto, IT & FMCG M. Vinayak Rao Diversified C. Bhagya Lakshmi Diversified B. Vasanthi Diversified G. Amarender Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO s, QIP s, F.P.O s,takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai Tel. : / / Telefax : info@firstcallindiaequity.com