Aurobindo Pharma. Institutional Equities. Initiating Coverage. US Business To Drive Growth BUY

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Initiating Coverage Institutional Equities Aurobindo Pharma 7 April 16 Reuters: ARBN.BO; Bloomberg: ARBP IN US Business To Drive Growth Aurobindo Pharma (APL) has gradually transformed itself from an API (active pharmaceutical ingredient) player to an established formulations player in the generic space. There are multiple growth levers in place with the change in business mix led by increased focus on formulations. The major thrust comes from US market on the back of growth expected from the huge ANDA (abbreviated new drug application) pipeline in injectables, controlled substances and oral solids space, break-even expected in acquired product portfolio of Actavis in Europe in FY16 which is likely to contribute to higher single-digit margins in FY18, and reduction in debt led by free cash flow generation over the next two years. We believe APL s valuation at 15x FY18E EPS does not adequately reflect its financial as well as business transformation from an API player to a formidable player in formulations and there is scope for a further re-rating as the leverage declines over the course of next two years. We have assigned Buy rating to APL with a target price of Rs894, valuing the stock at 18x FY18E EPS of Rs49.7. Change in business mix: APL s business mix significantly improved over the past three years, with the contribution from formulations segment rising from 55% in FY12 to 78% in FY15 and we expect this mix to continue in the near future. Interestingly, the quality of earnings also improved significantly, with the contribution from low-margin ARV (anti-retroviral) segment - which accounted for 17% in FY12 - plunging to 8% in FY15 (in 9MFY16 it was 8%), while we expect it to be around 7% in FY18E. Growth led by US business: We expect APL s revenues to post a 15% CAGR over FY15- FY18E, with the US business to be key earnings growth driver. The contribution from US business rose from 25% in FY13 to 39% in FY15, while we expect it to further improve to 42% in FY18. We expect the growth momentum to be led by US business which is likely to post a 24% CAGR over FY15-FY18E led by the change in product mix with major focus on injectables, controlled substances and complex generics. The major thrust is expected from the huge ANDA pipeline which is awaiting approval from USFDA (US Food and Drug Administration). Currently, there are around 159 ANDAs (other than tentative approvals - highest among industry peers in India) awaiting approval. Natrol acquisition to further aid US business: APL acquired Natrol which provides the company a ready platform to foray into branded nutraceutical and dietary supplement business having a portfolio of dietary supplements, sports nutrition, functional foods, vitamins, minerals and weight-loss products. Break-even in acquired product portfolio of Actavis: APL had acquired the loss-making Actavis European product portfolio. It is on track to achieve break-even in FY16E and has already posted positive EBITDA for two consecutive quarters (2QFY16 and 3QFY16). The company managed to bring down EBITDA loss to euromn from euro15mn in FY15 and euro23mn in January 14 and its guidance of euro3mn-euro4mn EBITDA for FY16. We expect the business to post high singledigit margins in FY18 led by cost savings from the transfer of products to Indian units for manufacturing. FCF generation-led debt reduction: We expect FCF generation of around Rs22.8bn in the next two years as a result of the ramp-up in US sales and margin improvement in Europe. As a result, we expect the net debt-to-equity ratio to decline from.8x in FY15 to.1x in FY18E. APL s net debt stood at US$662mn as of 9MFY16-end. Y/E March (Rsmn) FY14 FY15 FY16E FY17E FY18E Revenues 8,873 121,5 14,78 163,46 184,9 YoY (%) 39.9 49.9 15.6 16.7 12.8 EBITDA 21,195 25,636 32,48 38,376 44,746 EBITDA (%) 26.2 21.2 22.9 23.5 24.3 Reported PAT 11,729 15,758 19,364 24,569 29,12 YoY (%) 299.1 34.4 22.9 26.9 18.1 Adj. PAT 13,333 15,758 19,364 24,569 29,12 YoY (%) 353.7 18.2 22.9 26.9 18.1 Fully DEPS.1 27. 33.2 42.1 49.7 Adj. EPS 22.9 27. 33.2 42.1 49.7 RoE (%) 36.9 35.4 31.8 29.9 26.8 RoCE (%) 26.1 25.4 26. 27.7 28.2 P/E (x) 32.6 27.6 22.5 17.7 15. EV/EBITDA (x) 22.2 18.5 14.7 12.. BUY Sector: Pharmaceuticals CMP: Rs746 Target Price: Rs894 Upside: % Sumit Singhania sumit.s@nirmalbang.com +91-22-3926 8111 Key Data Current Shares O/S (mn) 585.2 Mkt Cap (Rsbn/US$bn) 436.4/6.6 52 Wk H / L (Rs) 892/582 Daily Vol. (3M NSE Avg.) 2,912,549 Share holding (%) 1QFY16 2QFY16 3QFY16 Promoter 5.8 5.8 5.8 FII 29.5 28.9 28.8 DII 6.3 6.1 6.5 Corporate 1.4 1.8 1.7 General Public 12. 12.4 12.3 One-Year Indexed Stock Performance 15 14 1 1 1 9 8 7 6 5 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Price Performance (%) AUROBINDO PHARMA Nifty 5 1 M 6 M 1 Yr Aurobindo Pharma 6.4.2 9.7 Nifty Index.9 (7.6) (12.8) Source: Bloomberg

Exhibit 1: Business mix in FY12 FY12 Change in business mix APL s business mix significantly improved over the past three years, as the share of formulations business steadily increased over the past few years. The contribution from formulations segment rose from 56% in FY12 to 78% in FY15 (in 9MFY16 it was 8%). Interestingly, the quality of earnings also improved significantly, with the contribution from low-margin ARV (anti-retroviral) segment - which accounted for 17% in FY12 - plunging to 8% in FY15 (in 9MFY16 it was 8%), while we expect it to be around 7% in FY18E. The share of API business - which stood at 44% in FY12 - came down to 22% in FY15 as the focus is more on formulations. Exhibit 2: Business mix in FY15 FY15 22 44 56 78 Formulations API Growth to be led by US business Formulations API APL has significantly transformed itself from an API player to a formidable formulations player led by the growth in US formulations business. In this transformation journey, APL significantly benefited from vertical integration, which means that most of its ANDAs were backed by own DMF (drug master files). Growth in US business over FY12-FY13 was affected by USFDA problems at its plant with an import alert on Unit VI and warning letter issued on Unit III, which were subsequently resolved in FY13. Despite being a late entrant in the formulations business in US and bugged by USFDA problems in the past, the company has come a long way and now has a significant exposure to US formulations market with the contribution rising from 25% in FY13 to 39% in FY15 (in 9MFY16 it was 44%), while we expect it to further improve to 42% in FY18.We also believe that this is going to be the key driving force for earnings growth of the company. We expect the growth momentum to continue and believe the US business will post a 24% CAGR over FY15-FY18E led by the change in product mix and major focus on injectables, controlled substances and complex generics. Exhibit 3: US revenue growth (Rsmn) (%) 6, 94.1 5, 4,,,,.4 (.5) 48.1 42. 9 7 5 - FY11 FY12 FY13 FY14 FY15 US Growth () 2 Aurobindo Pharma

US business growth backed by huge ANDA pipeline One of the key features of APL s growth in US formulations space in the past couple of years is the huge basket of ANDA filings which the company filed in the past couple of years, beginning from FY. Since FY, APL has filed almost 24 products till date, representing almost 62% of its total cumulative filings of 387 products till December 15. From FY13 to FY15, the company filed 137 products so as to utilise the benefits of expedited review process for ANDA approvals under the new GDUFA (Generic Drug User Fee Act) guidelines. APL filed 11 more products in 9MFY16. Exhibit 4: ANDA filings (Nos) 8 7 67 6 5 4 46 19 25 48 19 4 11 FY8 FY9 FY FY11 FY12 FY13 FY14 FY15 9MFY16 Pick-up in ANDA approvals in FY16 APL is one of the key beneficiaries under GDUFA as the final approval rate increased significantly. APL, which had increased its filing pace so as to gain from the expedited review process, is enjoying the fruits as the company secured more than 35 approvals in YTD FY16 compared to the previous two years (it got only approvals in FY14 and 1 approval in FY15). The company currently has 27 TADs (target action dates) till August 16. This will lead to more product approvals in the near future. Exhibit 5: Final approval for ANDAs (Nos) 4 35 36 32 26 25 19 16 18 17 15 5 FY8 FY9 FY FY11 FY12 FY13 FY14 FY15 9MFY16 1 3 Aurobindo Pharma

APL has highest pending ANDAs among Indian peers As can be seen from the exhibit below, APL had around 189 ANDAs awaiting approval (including tentative approvals) as of December 15-end, which is the highest among Indian peers. Exhibit 6: ANDAs awaiting approvals (Nos) 18 16 14 1 8 6 4 189 165 158 156 63 27 23 Aurobindo Cadila Lupin Sun Pharma Glenmark Alkem IPCA Exhibit 7: Unit-wise ANDA filings (as of end-december 15) Unit Type Delivery form Filed Approved (incl. TAs or tentative Under review approvals) Unit-III NPNC Oral 119 112 7 Unit-IV NPNC Injectables 67 21 46 Unit-VI B Cephs. Oral 11 11 - Unit-VII (SEZ) NPNC Oral 143 55 88 Unit-XII SSP Oral and injectables 19 19 - Aurolife USA NPNC/ controlled substances Oral 26 16 Auronext Penem Injectables 2-2 Total 387 228 159 Exhibit 8: Unit-wise USFDA inspection status Unit Type Delivery form Last Inspection Remarks Unit-III NPNC Oral January 16 No 483 issued, EIR awaited. Unit-IV NPNC Injectables September 14 EIR received. Unit-VI B Cephs. Oral December 14 EIR received. Unit-VII (SEZ) NPNC Oral January 16 Unit-XII SSP Oral and injectables July 15 483 issued with four observations and the company has responded to it. 483 issued and the company has responded to it. Aurolife USA NPNC/ controlled substances Oral July 15 NAI (no action indicated). Auronext Penem Injectables September 15 Total Source: Company, FDA Zilla, Nirmal Bang Institutional Equities Research 483 issued and the company has responded to it. 4 Aurobindo Pharma

Injectables market is key growth driver of US business The US injectables market is dominated by two to three players who account for a major portion of injectables market. The entry barriers are high as injectables involve a complex manufacturing process. The pricing also remains strong in injectables space owing to shortage as other players have ran into USFDArelated problems. APL introduced its injectables portfolio at the end of FY12 through its distribution and marketing company, AuroMedics. AuroMedics is experiencing significant USFDA activity in the review of filed ANDAs. It garnered revenues of US$67.mn in FY15 and US$58.5mn in 9MFY16. Under injectables segment including ophthalmics, a total of 79 products were filed out of which 31 have been approved and the remaining 48 are awaiting approval. APL has got around approvals for injectables in 9MFY16, for which only five products have been launched so far. The company is planning to launch four products in 4QFY16. On injectable filings front, the company is planning to file around 15 odd products in FY17. APL is expecting around 15 approvals in FY17. We expect the approval pace to continue over the next two years and this will drive US formulations revenues. APL will also continue to benefit from shortages. Going forward, several complex products are under development, namely hormonal, oncology products and Microsphere which the company is expected to file in the next few quarters. Controlled substances APL sells controlled substances through its US subsidiary, Aurolife, which has a manufacturing facility in US and focuses on institutional business. Controlled substances are in a relatively lower competition space, with quota allocation from Directorate Enforcement Agency (DEA) and requirement of a manufacturing base being key entry barriers. Also, contracts (from Veteran Administration) are long-term in nature, spanning across three years and thereby ensure revenue visibility. APL currently has 26 filings from this facility, of which have been approved. Natrol acquisition to further aid US business APL acquired US-based Natrol which provides a branded nutraceutical and dietary supplement platform. With this acquisition, APL entered the growing US nutraceuticals market. On the valuation front, APL acquired Natrol for US$132.5mn at 1.3x EV/sales and around 9x EV/EBITDA. The company has a portfolio of dietary supplements, sports nutrition, functional foods, vitamins, minerals and weight-loss products. APL also gets access to Natrol s manufacturing base in Chatsworth California. The company garnered revenues of US$97mn with margins of around 14% in FY14. The acquisition was completed in December 14. As per industry reports, the nutraceuticals market is currently estimated at around US$bn-US$35bn and is estimated to grow to US$55bn in. The company is planning to increase the penetration of products in OTC segment, improve plant capacity utilisation and thereby improve its margins. At the time of the acquisition, the capacity utilisation level at Natrol manufacturing site was % and now it is at 4%-42%. The company has also introduced six new products in the market. APL can also gain from Natrol s diversified presence in US via its extensive distribution network chain incorporating retail pharmacy chains and specialty health food stores. Break-even in acquired product portfolio of Actavis APL had acquired the commercial operations of Actavis in seven west European countries (France, Italy, Spain, Portugal, Germany, Netherlands and Belgium). The acquisition expanded APL s front-end operations in five segments (generics, prescription products, OTC products, hospital products and generics tenders) to around 1, products and an additional pipeline of more than products. The acquired portfolio registered sales of euro3mn in 13 (up % YoY) with gross margin in mid-s and EBITDA loss of around euromn. APL paid around euromn for the acquisition. APL, which acquired the loss-making Actavis European product portfolio, is on course of achieving breakeven by the end of FY16. It is on track to break-even as it has already achieved positive EBITDA for two consecutive quarters (2QFY16 and 3QFY16). The company managed to bring down EBITDA loss to euromn from euro15mn in FY15 and euro23mn in January 14 and its guidance of euro3mn-euro4mn EBITDA for FY16. 5 Aurobindo Pharma

To further trim down losses, APL is looking to transfer products from the acquired product portfolio of Actavis to its Indian manufacturing sites so as to save on costs. Over the next 24 months, APL is targeting to shift 5% of its Actavis product portfolio to India. The company has transferred around 28 products till date to its Indian manufacturing sites. Going forward, it has given guidance of a higher single-digit margin for European business by FY18, which could be led by gross margin improvement (led by cost savings in products transferred to India for manufacturing) and launch of new products. ARV business focuses on higher margin The share of low-margin ARV business in overall revenue mix declined from 17% in FY12 to 8% in FY15 and we expect it to fall to 7% in FY18E. The key focus of APL in ARV segment is on triple combination products which have higher margin compared to ARV business margin. The company highlighted that for Dolutegravir currently, the registration part is going on and sales are likely to begin in FY17. World Health Organisation or WHO announced this drug as a first-line reserve drug in its 15 HIV treatment guidelines. APL is developing a triple combination drug containing Dolutegravir. The margin in this product will be higher than ARV business margin and the company has also gone for backward integration in this product. Overall share of API in revenues to remain muted The share of API business in revenues, which stood at 44% in FY12, came down to 22% in FY15. Going forward, we don t expect the share to improve as the main focus of the company will be on formulations business. Major consumption of APIs will be in-house as APL looks to further strengthen and derive the benefits of vertical integration in formulations business. In overall API space, we expect the contribution from low-margin SSPs and Cephalosporin to come down and the share of high-margin non-betalactum to increase. Exhibit 9: API filings API filings FY FY11 FY12 FY13 FY14 YTD US 145 154 16 172 181 188 Europe 1,36 1,271 1,395 1,443 1,54 1,557 CIS 81 86 97 9 6 112 RoW 295 426 52 565 627 669 Total 1,557 1,937 2,154 2,289 2,418 2,526 Improvement in margins led by US and Europe We expect the margins to improve by14bps over FY16-FY18E from 22.9% in FY16 to 24.3% in FY18E led by improvement in overall business mix with a higher share of US business and margin contribution from the acquired European portfolio of Actavis. Exhibit : EBITDA margin (%) 25 21.7 18.3 26.2 21.2 22.9 23.5 24.3 15 11. 13.6 5 FY FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 6 Aurobindo Pharma

Free cash flow generation-led debt reduction Over the past few years, APL made significant capex to build manufacturing facilities and acquire business. The current outstanding debt is around US$6mn.The company repaid US$5mn of debt in 3QFY16 (around US$7mn YTD FY16). We expect the net debt/equity ratio to decline from.8x in FY15 to.1x in FY18E, primarily driven by free cash flow (FCF) generation to the tune of Rs22.8bn over the next two years, driven by improved operating performance and stable working capital requirement. Exhibit 11: Declining gearing level (%) 1.4 1.2 1.1 1.3 1.2 1..9 1..8.8.6.5.4.3.2.1 - FY FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E Return ratios We have factored in gradual reduction of the current high level of debt on the back of improvement in cash flow. This leads to moderation of Return on Equity (RoE) from 35.4% in FY15 to 26.8% in FY18E. Consequently, Return on Capital Employed (RoCE) is expected to rise from 25.4% in FY15 to 28.2% in FY18E. Exhibit 12: Return ratios (%) 4 35 25 15 5 36.6 36.9 35.4 31.8 29.9 26.9 28.2 26.1 25.4 26. 27.7 26.8 11.9 15.1 12.9 8.3 9.3 5.8 FY FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 RoE (%) RoCE (%) 7 Aurobindo Pharma

Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Institutional Equities Valuation APL stock historically traded at a lower valuation (five-year average of 12x) owing to high contribution from low-margin API sales in overall business, a highly leveraged balance sheet, poor margins and return ratios, and the overhang from USFDA issues on two of its units. With most of these problems resolved, we expect the valuation gap with larger-cap peers to narrow and expect a further re-rating of the stock led by: a) FCF generation and consequent reduction in debt level (expect net D/E ratio at.1x in FY18 versus.8x in FY15), and b) Strong growth visibility (22% EPS CAGR likely over FY15-FY18E). At the current market price of Rs746, APL stock trades at 15x FY18E one-year forward earnings which does not adequately reflect its financial as well as business transformation from an API player to a formidable player in formulations and there is scope for a further re-rating as the leverage declines over the course of next two years. We have assigned Buy rating to APL with a target price of Rs894, valuing the stock at 18x FY18E EPS of Rs49.7. Exhibit 13: P/E trend (x) 35 25 15 5 Exhibit 14: Valuation table P/E Average P/E SD+1 SD-1 Source: Bloomberg, Nirmal Bang Institutional Equities Research Company name PE (x) EV/EBITDA (x) P/BV (x) RoE (%) RoCE (%) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Cadila.9 19.8 16.6 14.1 13.7 11.5 5.9 4.8 3.9 31.7 26.7 25.9 27. 23.4 24.1 Cipla 22.7 17.6 14.3 14.1 11.4 9.3 3.3 2.8 2.4 15.4 17.2 17.9 17.7.2 21.6 Divis Labs 24.1.6 16.9 18.1 15.3 12.8 6.3 5.3 4.4 28.5 28. 28.5 33.4 33. 33.6 Glenmark Pharma 28.5 15.6 13.1 15.4. 8.5 4.5 3.5 2.8 19. 25. 23.3 18.5 26.5 27.6 Lupin 31.6 22.9 19.9.9 15.5 13.2 6.3 5.2 4.3 21.7 24.8 23.6 23.8 25.7 27.7 Natco Pharma 5.8 33.8 28.3 29.8 22.2 18.7 5.7 4.9 4.2 14.1 16.3 16.9 15.7 18.5 19.8 Strides 32.7 16.8 14.4 19.5 12.9.6 3.2 2.7 2.3 14. 17.4 17.3.6 11.8 13.2 Sun Pharma 36.3 24.3.4 22.4 16.3 14.2 6.5 5.3 4.3 18.7 23.2 22.6 12.1 16.7 17.5 Aurobindo Pharma 22.5 17.7 15. 14.7 12.. 6.2 4.6 3.6 31.8 29.9 26.8 26. 27.7 28.2 Source: Bloomberg, Nirmal Bang Institutional Equities Research 8 Aurobindo Pharma

Company overview Aurobindo Pharma, headquartered in Hyderabad, India, manufactures generic pharmaceuticals and active pharmaceutical ingredients (API) and markets its products in more than 125 countries. The formulations segment contributed 78% and the remaining 22% came from generic segment. The company s robust product portfolio is spread over six major therapeutic/product areas encompassing antibiotics, anti-retrovirals, CVS, CNS, gastroenterologicals, anti-diabetics and anti-allergics. Aurobindo Pharma s strength in manufacturing is vertical integration of its APIs for its finished dosages. The company s strong manufacturing capabilities are supported by a robust research and development set-up. The manufacturing facilities are approved by several leading regulatory agencies like USFDA, UKMHRA, World Health Organisation (WHO) and ANVISA Brazil. In January 14, the company acquired Actavis western European operations in seven countries to strengthen its European business platform. At the end of 14, the company made another acquisition and acquired the nutritional supplement maker Natrol Inc, thereby foraying into the growing nutraceutical segment. 9 Aurobindo Pharma

Financials Exhibit 15: Income statement Y/E March (Rsmn) FY14 FY15 FY16E FY17E FY18E Net sales (incl. other oper. income) 8,873 121,5 14,78 163,46 184,9 % growth 39.9 49.9 15.6 16.7 12.8 Raw material costs (36,6) (55,56) (65,918) (75,992) (84,263) Staff costs (8,319) (13,23) (15,469) (18,24) (,333) Other expenses (15,299) (27,49) (26,643) (31,15) (34,968) Total expenditure (59,678) (95,569) (8,) (125,31) (139,563) EBITDA 21,195 25,636 32,48 38,376 44,746 % growth 17. 21. 25. 19.7 16.6 EBITDA margin (%) 26.2 21.2 22.9 23.5 24.3 Other income 357 967 548 631 78 Interest costs (1,71) (1,599) (1,132) (839) (632) Forex exchange (loss)/gains (2,31) - (1,) - - Gross profit 18,451 25,5,464 38,168 44,822 % growth 196.2 35.5 21.8 25.3 17.4 Depreciation (3,125) (3,326) (4,76) (5,436) (6,166) Profit before tax 15,325 21,679 25,759 32,732 38,656 % growth 9.6 41.5 18.8 27.1 18.1 Exceptional items - - - - - Tax (3,635) (5,966) (6,44) (8,183) (9,664) Effective tax rate (%) 23.7 27.5 25. 25. 25. Minority interest 37.8 45. 45... Net profit 11,729 15,758 19,364 24,569 29,12 % growth 299.1 34.4 22.9 26.9 18.1 Adj. profit 13,333 15,758 19,364 24,569 29,12 % growth 353.7 18.2 22.9 26.9 18.1 Exhibit 17: Balance sheet Y/E March (Rsmn) FY14 FY15 FY16E FY17E FY18E Equity 291 292 584 584 584 Reserves 37,2 51,267 69,659 93,548 121,878 Net worth 37,51 51,559 7,243 94,132 122,462 Short-term loans 23,546 25,21 22,621 17,221 11,821 Long-term loans 14,146 19,49 16,4 12,7,746 Total loans 37,691 44,511 39,31 29,951 22,567 Deferred tax liability 2,54 2,58 2,58 2,58 2,58 Minority interest 257 258 214 196 176 Liabilities 77,53 98,386 111,544 126,334 147,263 Gross block 41,8 54,461 64,461 74,461 84,461 Depreciation 14,613 17,45 22,111 27,546 33,712 Net block 27,217 37,56 42,351 46,915 5,749 Capital work-in-progress 3,97 4,196 3,896 3,596 3,296 Long-term Investments 198 198 198 198 198 Inventories 23,675 36,113 4,296 47,7 53, Debtors 26,366 35,392 4,296 47,7 53, Cash 1,786 4,691 5,95 3,924 11,343 Other current assets 12,559 11,451 13,735 15,972 17,976 Total current assets 64,386 87,647 99,423 113,9 135,359 Creditors 13,512,511 23,794 27,757 31,812 Other current liabilities 3,882,,529,529,529 Total current liabilities 17,394,712 34,323 38,286 42,342 Net current assets 46,992 56,935 65, 75,624 93,18 Total assets 77,53 98,386 111,544 126,334 147,263 Exhibit 16: Cash flow Y/E March (Rsmn) FY14 FY15 FY16E FY17E FY18E EBIT 18,7 22,3 27,342 32,94 38,58 (Inc.)/dec in working capital (,591) (8,417) (8,89) (11,696) (9,975) Cash flow from operations 7,479 13,893 19,253 21,244 28,65 Other income 357 967 548 631 78 Depreciation 3,125 3,326 4,76 5,436 6,166 Interest paid (-) (3,2) (1,599) (2,132) (839) (632) Tax paid (-) (3,44) (4,956) (6,44) (8,183) (9,664) Dividends paid (-) (596) (1,85) (351) (68) (68) Extra-ordinary items 1,55 (6) - - - Net cash from operations 4,88 9,721 15,584 17,68 24,53 Capital expenditure (-) (3,741) (7,459) (9,7) (9,7) (9,7) Net cash after capex 1,139 2,262 5,884 7,98 14,83 Inc./(dec.) in short-term borrowing 1,714 (473) (2,4) (5,4) (5,4) Inc./(dec.) in long-term borrowing 961 3,881 (3,8) (3,68) (1,984) Inc./(dec.) in FCCBs - - - - - Inc./(dec.) in borrowings 2,675 3,48 (5,48) (9,8) (7,384) (Inc.)/dec. in investments (4,483) (6,77) - - - Equity issue/(buyback) 35 68 - - Cash from financial activities (1,774) (3,295) (5,48) (9,8) (7,384) Others 336 143 - - - Opening cash balance 2,85 5,581 4,691 5,95 3,924 Closing cash balance 1,786 4,691 5,95 3,924 11,343 Change in cash balance (299) (89) 44 (1,172) 7,419 Exhibit 18: Key ratios Y/E March FY14 FY15 FY16E FY17E FY18E Per share (Rs) Reported EPS.1 27. 33.2 42.1 49.7 Adjusted EPS 22.9 27. 33.2 42.1 49.7 DPS 1.5 2.2 1. 1. 1. BV/share 64.3 88.3 1.3 161.2 9.7 Dividend payout (%) 3.5 5.4 1.2 1.2 1.2 Performance ratios (%) RoE 36.9 35.4 31.8 29.9 26.8 RoCE 26.1 25.4 26. 27.7 28.2 Valuation ratios (x) P/E 32.6 27.6 22.5 17.7 15. P/BV 11.6 8.4 6.2 4.6 3.6 EV/net sales 5.8 3.9 3.4 2.8 2.4 EV/EBITDA 22.2 18.5 14.7 12.. Efficiency ratios Asset turnover (x) 1.8 2.1 2. 2.1 2.1 Working capital/sales (x).19.6.6.7.5 Receivable days 119 7 5 5 5 Inventory days 7 9 5 5 5 Payable days 137 136 132 133 138 Aurobindo Pharma

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