Indian Pharma Capsule
Dig Deeper for Value
 Divide and conquer — Indian pharma is best viewed as distinct sub sectors
to better understand valuation opportunities. Each sub sector faces its own
pressures and has unique growth and valuation drivers. Innovator CRAMS is
gaining traction, while Generics are winding through an obstacle course of
regulatory and pricing hurdles. Given rapid evolution in the Indian market, we
see strong growth potential for MNC pharma and Hospital stocks,
although valuations remain challenging.
 Innovator CRAMS gaining traction — We expect Innovator CRAMS to rise as a
secular growth engine for Indian firms over 4-5 years. Deal flow has increased
and key players have executed accretive acquisitions overseas to gain scale.
 Generics obstacle course — New challenges emerge, even as older ones are
overcome – regulatory pressure on EU pricing and lack of consensus on
biogenerics are the latest. While consolidation continues, “Big buying Big”
should not change much. We reiterate the need for scale, reach and control
over front end.
 Plays on Indian healthcare — A stronger IPR law enhances MNCs' prospects,
rising income/literacy levels and changing disease mix in favour of chronic
ailments make hospitals attractive. Valuations, however, remain challenging.
 R&D emerging as a value driver — Glenmark has inked outlicensing deals
while DRL & Sun have spun off their innovative R&D effort. Many Indian firms
have larger and more advanced pipelines and we expect news flows on this
front to continue.
 Strategy — Ranbaxy, NPIL and Glenmark are our top buys. Initiate Buys on
Shasun & Dishman, upgrade Apollo (to Buy), Sun (to Hold) & downgrade
Matrix (to Sell).

Contents
Indian Pharma Capsule 3
Differentiate between sub sectors to find value 4
Valuation Snapshot & Key Recommendations 5
Innovator CRAMS – Gaining Traction 7
A generics obstacle course 11
Indian Healthcare – Throwing up Opportunities 17
Valuations 22
Global Valuation Snapshot 25
Indian Pharma – A Quant View 27
Company Initiations 28
Dishman Pharmaceuticals & Chemicals (DISH.BO) 29
Shasun Chemicals & Drugs (SHAS.BO) 46
Company Updates 61
Apollo Hospitals (APLH.BO) 62
Aurobindo (ARBN.BO) 68
Biocon (BION.BO) 72
Cadila Healthcare (CADI.BO) 76
Cipla (CIPL.BO) 81
Dr Reddy (REDY.BO) 87
Glaxosmithkline Pharmaceutical (GLAX.BO) 91
Glenmark Pharmaceuticals (GLEN.BO) 95
Jubilant Organosys (JUBO.BO) 101
Matrix Laboratories (MAXL.BO) 105
Nicholas Piramal India (NICH.BO) 114
Ranbaxy (RANB.BO) 118
Sun Pharmaceuticals (SUN.BO) 122
Wockhardt (WCKH.BO) 130
Appendix A-1 136