Ajanta Pharma: Promising growth trajectory

Ajanta Pharma

Initiating Coverage | Sector: Healthcare

Ajanta Pharma

Buy

BSE Sensex

29,586

S&P CNX

9,154

CMP: INR1,760

TP: INR2,028 (+15%)

Promising growth trajectory

Key drivers intact for superior growth, despite aberration in short term

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

Avg. Val, INR m

Free float (%)

AJP IN

88.5

2,150/1,312

-6/-13/5

154

2.3

179.0

24.0



Financial Snapshot (INR b)

Y/E March

2017E 2018E 2019E

Sales

20.1 22.6 27.5

EBITDA

6.8

7.7

9.4

5.0

5.6

7.0

EPS (INR)

56.0 63.8 79.6

EPS Gr. (%)

18.9 13.8 24.9

BV/Sh. (INR)

179.5 233.0 299.9

P/E (x)

30.6 26.9 21.5

P/BV (x)

9.6

7.4

5.7

EV/EBITDA (x)

22.2 19.4 15.6

EV/Sales (x)

7.5

6.6

5.3

RoE (%)

35.9 30.9 29.9

RoCE (%)

33.9 29.6 28.9

Shareholding pattern (%)

As On

Dec-16 Sep-16 Dec-15

Promoter

73.8

DII

2.0

2.3

4.0

FII

10.4

10.2

6.8

Others

13.8

13.7

15.4

FII Includes depository receipts



Ajanta Pharma

Key drivers intact

for superior growth

Ajanta Pharma (AJP) is a specialty pharmaceuticals company engaged in

the development, manufacture and marketing of finished dosages. It

started with repacking of products in 1973, and moved from OTC products

to prescription-based products for the Indian market. It has established

itself as a strong specialty player in the domestic market in Ophthalmology,

Dermatology and Cardiology. In addition, it has strong presence in the

international markets of Africa and Asia, and continues to build a strong

foundation for the US market.

We expect AJP to be on a high-growth path in the US market, led by a

healthy product pipeline and annual filings of ~12-15 ANDAs over next 2-3

years, subject to subsequent approvals. From INR40m in FY15, US revenues

are expected to reach INR1.9b by FY17.

Over FY11-16, AJP delivered a phenomenal 30% CAGR in domestic

formulations sales, as against industry CAGR of 14-15%. We believe that

AJP’s good pace of product launches, leading position in some products

and improving MR efficiency should help it to outperform, despite industry

growth lowering to 11-12%.

AJP has made good strides in the Africa and Asia markets, is one of the

leading companies in the anti-malaria business in East Africa, and has

outperformed industry growth in branded generics in the Franco Africa and

Asia regions. Although a brief pause is expected over the near term, we

believe the long-term drivers remain intact to support sustainable growth.

We expect AJP to deliver an 18% CAGR in sales and a 19% CAGR in earnings

over FY17-20E, led by a 46% CAGR in US sales and a 20.4% CAGR in

domestic formulations sales.

We value AJP at a premium compared to P/E multiple of 20-21x for mid-

cap pharma companies, at 25x FY19E earnings, on the back of its proven

superior track record in terms of revenue growth and profitability. We also

note that peers with a higher exposure to the US market are facing pricing

pressure in the base business, with some also facing regulatory headwinds.

AJP has a very low US base business and minimal regulatory risks over the

medium term. We thus initiate coverage on AJP with a Buy rating and a

target price of INR2,028.

US business to be the driving force behind overall growth



tushar.manudhane@motilaloswal.com

Please click here for Video Link

Tushar Manudhane

91 22 3010 2498



With product filings, manufacturing capacity and front end in place, we

expect AJP to perform strongly in the US. It has cumulative ANDA filings of

32, with 14 of these awaiting approvals (including two para IV filings).

Around 12-15 ANDAs are anticipated to be filed from FY18 on annualized

basis. Given the reduction in the time required for approvals and the

company’s aggressive filings, we expect reasonable growth in US sales over

next 3-4 years, subject to final approvals.

17 March 2017

Ajanta Pharma

Stock Performance (1-year)



We expect US sales CAGR FY17-20E of 46% to USD90m. Based on management’s

guidance, we have factored in average revenue of USD2-3m per ANDA per

annum. Given AJP’s performance in products like g-Zegerid and g-Abilify, there

could be potential for garnering more than USD5-8m per ANDA in some

products, which would further drive revenue growth.

AJP witnessed strong growth in the domestic formulations business, with a focus

on Ophthalmology, Cardiology and Dermatology. The company has launched

130+ products, which are first to market in the domestic formulations space.

Aggressive launches and improving MR productivity had led to superior growth

for AJP until FY15. However, product-specific issues moderated growth in FY16.

With smoothening of the base effect, we expect AJP to deliver 20.4% CAGR over

FY16-20E. A healthy launch pipeline and increased prescription share in

Ophthalmology, superior growth of base molecules in Cardiology, shift in market

share mix from cosmetology to prescription-based treatment in Dermatology,

and new product launches in the pain segment are likely to drive overall

domestic formulations revenue growth for AJP over next 2-3 years.

After exhibiting robust growth in the anti-malaria business in Africa (partly on

the back of loss of business by one competitor), we expect the base effect to

kick in. Also, with a marginal increase in funding to procure anti-malaria drugs,

we expect modest growth in anti-malaria sales over the medium term.

Currency headwinds impacted the branded generics business in Anglo Africa and

Asia. However, we expect a gradual recovery in these businesses.

In our view, the long-term growth is intact with a good revival expected from

FY19, led by strong growth in US, better-than-industry growth in domestic

formulations, and gradual revival in branded generics in Asia and Africa.

AJP has enough levers in place to drive earnings growth over next 4-5 years. It

has a proven superior track record in terms of revenue growth and profitability.

We note that peers with higher exposure to the US market are facing pricing

pressure in the base business; some peers are also facing regulatory headwinds.

AJP has low US base business and minimal regulatory risks over the medium

term. Also, after the 18.5% correction in the stock price since September 2016,

we believe AJP offers an attractive investment opportunity. Consequently, we

initiate coverage on AJP with a Buy rating and a target price of INR2,028.

Delay in ANDA approvals would result in slower growth in the US business,

impacting overall revenue growth. Lower-than-expected revenue from products

post final approval in the US market would also impact overall revenue growth.

Faster-than-expected re-entry of competitors in the anti-malaria business in

Africa may lead to some market share loss.

Delay in approvals from the DCGI/state governments for the domestic

formulations business may affect the launch trajectory and thus sales.

Late recovery in the economic environment may delay revival in the branded

generics business in Asia.

Therapy-specific strategy to drive growth in domestic formulations



We expect moderate growth in Africa and Asia



Valuation



Risks



17 March 2017

Ajanta Pharma

AJP business transformation till date

1979 -

First manufacturing facility set up at Chikalthana..

1983 -

Facility set up in Paithan Aurangabad and has approvals from USFDA and WHO prequalification.

1996 -

Set up in Mauritius, Goodland to cater the African markets and has been compliant with WHO cGMP guidelines.

2009

- Facility set up in Chitegaon to meet the requirements of Emerging markets.

2009 -

Facility set up in Waluj, Aurangabad. This facility is AJP’s API facility mainly for captive consumption.

2014 -

Facility set up in Dahej, Gujarat. Specially constructed to cater requirements of USA, WHO and Emerging markets.

2017 -

Facility set up in Guwahati, Assam to cater to Indian and emerging markets.

1992 -

Entered the

international market

Today

AJP has 354 product

registrations in Asia market

and therapeutic segments

like Cardio, Pain, MED, GI,

antibiotic, Derma, Anti

Histamine

AJP has 1,183 product

registrations in Africa- market

and therapeutic segments

like, Anti-malaria,

Multivitamin, Cardio,

antibiotic, Gynaec, MED, Pain

2007 -

Set up R&D facility

in Mumbai

Today

AJP has ~750 scientists

working on innovative

products for developing

formulations The R&D

expenditure has grown at

CAGR of 42% over last 3

years. In FY 17, the R&D

expenses as a % of sales

would be close to 7%.

2013

- Entered the US market

Today

Total ANDAs filed till date – 32

Final approval received till date – 16

Intend to file 12 to 15 annually for next 2 to 3 year.

There has been a substantial growth in the US

market in the past year at CAGR of 46%.

2020 E

- The Company has come

up with new facilities which will

soon be operational. Having said

that we expect the domestic

business to grow at CAGR of

18.6% (FY17E –FY20E) and US

business by 46.4% and launch of

new products to be added to the

vast pool of product range.

17 March 2017

Ajanta Pharma

AJP story till date in charts

Exhibit 1: Robust revenue growth over FY07-17E

Revenue (INR b)

Revenue composition - FY17E

Domestic

Formulation

32%

10%

Asia

19%

2.7

3.2

3.5

4.1

5.0

6.9

9.4

12.2

14.9

17.4

20.1

ROW

Africa

38%

Source: MOSL, Company

Exhibit 2: 1,559bp increase in EBITDA margin over past 10 years

EBITDA margin (%)

31.0

18.1

18.4

19.3

19.8

16.9

21.0

24.6

34.8

34.2

33.7

Source: MOSL, Company

Exhibit 3: Revenue growth, coupled with improved EBITDA margin, led to increase in RoE

ROE (%)

33.6

20.9

22.9

19.5

21.7

23.0

34.2

49.0

45.6

41.4

35.9

Source: MOSL, Company

17 March 2017

Ajanta Pharma

We expect US sales to remain on high-growth trajectory

g-Relpax to be interesting opportunity in FY18

AJP has received tentative approvals for two products. However, as these are Para III

filings, the USFDA’s final approval and the launch for these products are expected

after patent expiry.

The following products have tentative approvals:



g-Relpax (Eletriptan Hydrobromide):

For the 12 months ended June 2016,

Relpax had sales of USD250m. Besides AJP, at present Teva, Apotex and Mylan

have tentative approvals for g-Relpax. The patent on Relpax will expire on 29

August 2017. AJP has para-III filing on this product. Based on tentative approvals

and DMF filings, we expect 4-5 competitors for AJP. Assuming 70% price erosion

and a 5-6 player market, we expect the company to gain ~USD15m (annualized)

from this opportunity.



g-Viagra (Sildenafil Citrate):

Currently, only Teva has final approval for this

product, and it is expected to launch a generic version in December 2017. There

are at least nine other generic manufacturers that have filed for g-Viagra. AJP

has filed para III on the same. The patent would expire in April 2020. The current

market size for this product is ~USD1.2b. Considering multiple generics, we

expect 90% price erosion and 5% market share, resulting in annual sales of

USD6m post patent expiry.

Based on approved products, we expect US revenues to be strong at USD29m in

FY17 from USD2.7m in FY16. Considering 14 ANDAs pending for approval and four

products yet to be commercialized, we expect growth from new launches to remain

impressive in FY18 as well. However, increased competition in existing products,

which has led to significant price erosion, may partially offset growth in US revenue

in FY18. Accordingly, we expect US revenue to be USD34m for FY18.

Exhibit 4: We expect US sales CAGR of 46.4% over FY17-20E

US sales (USD m)

62.6

34.0

90.3

28.8

0.7

FY 15

2.7

FY 16

FY17E

FY18E

FY19E

FY20E

Source: MOSL, Company

17 March 2017

Ajanta Pharma

AJP – increasing filing pace over next 2-3 years

Management has guided for aggressive ANDA filings of ~12-15 products, which

would be a mix of complex, para IV and vanilla filings from FY18. With a change in

the review procedure at the USFDA (which has shortened the timeline for

approvals), we expect FY19 and FY20 to see healthy launches, resulting in a sharp

revival in US revenue for the company. We expect US sales CAGR of 46% over FY17-

20E to USD90m. Based on management guidance, we have factored in average

revenue of USD2-3m per ANDA per annum over next 2-3 years. Given AJP’s

performance in products like g-Zegerid and g-Abilify, there could be potential of

garnering more than USD5-8m per ANDA, which would drive revenue growth

further.

Reasonable market share gain in some products over next two years

Post product development, AJP started ANDA filings from FY13. In FY13, it filed 14

ANDAs, and cumulative filing at the end of 9MFY17 stood at 32. While product

development and subsequent filing continue for future growth, AJP has started

getting good business from approved products. Till date, AJP has 19 approvals and

commercialized 12 products. From the commercialized products, it has been able to

garner revenue to the tune of INR1.4b for 9MFY17.

Exhibit 5: Approval pace increased in FY16 and FY17

Cumulative filed

Cumulative approvals

FY14

FY15

FY16

9MFY17

Source: Company, MOSL

FY13

There has been good scale-up in the US business from INR40m in FY15 to INR1.4b in

9MFY17 on the back of launches and superior execution, resulting in considerable

market share accumulation in some products.

The major products driving revenue for AJP are g-Zegerid, g-Abilify, g-Axert and g-

Risperdal.

17 March 2017

Ajanta Pharma

Exhibit 6: Since launch in June 2016

Ajanta's share (%) in g-Zegerid

11.6

7.2

0.0

0.7

Valeant

Pharma

57%

12.2

12.3

13.9

14.4

Exhibit 7: …AJP has gained market share of 14% in g-Zegerid

Dr. Reddy's

lab

19%

Ajanta

Pharma

14%

Endo

Mckesson

Int.

Others

Exhibit 8: Despite delay in approval, superior execution …

Ajanta's share (%) in g-Abilify

7.9

10.1

Exhibit 9: …led to 10% market share in g-abilify

TORRENT

PHARMAC

APOTEX

CORP

AJANTA

PHARMA

10%

Others

13%

CAMBER

PHARMA

17%

TEVA USA

16%

1.9

0.0

AMNEAL

PHARMA

13%

OTSUKA

AMERICA

15%

Exhibit 10: Since its launch in Jan-2015…

Ajanta's share (%) in g-Risperdal

32.0

24.0

16.0

8.0

0.0

Exhibit 11: …AJP has gained 26% market share in g-Risperdal

ZYDUS

PHARMA

28%

SOLCO

HEALTHCAR

18%

Others

MYLAN

19%

AJANTA

PHARMA

26%

Exhibit 12: Since launch in Jun-2016…

75.0

60.0

45.0

30.0

15.0

0.0

Ajanta's share (%) in g-Axert

Exhibit 13: …AJP has gained 65% market share in g-Axert

JANSSEN

PATRIOT PHARMA

PHARMA

10%

TEVA USA

MYLAN

19%

AJANTA

PHARMA

65%

Source: MOSL, Bloomberg

17 March 2017

Ajanta Pharma

Exhibit 14: Approved ANDA list

Generic Name

Duloxetine Hydrochloride

Amlodipine And Olmesartan Medoxomil

Lansoprazole

Aripiprazole

Olanzapine

Omeprazole And Sodium Bicarbonate

Voriconazole

Zolmitriptan

Almotriptan Malate

Irbesartan

Memantine Hydrochloride

Montelukast Sodium

Risperidone

Levetiracetam

Brand Name

Cymbalta

Azor

Prevacid

Abilify Maintena Kit

Zyprexa

Zegerid

Vfend

Zomig

Axert

Avalide, Avapro

Namenda

Singulair

Risperdal

Keppra

Date of Approval

6-Jan-17

28-Oct-16

14-Oct-16

12-Sep-16

30-Aug-16

27-Jul-16

15-Jul-16

24-May-16

20-May-16

3-Mar-16

10-Dec-15

30-Nov-15

31-Jul-15

24-Aug-11

14-Jun-11

No. of other companies having final approval

Source: MOSL, Company

USFDA inspection update

USFDA inspection history

Paithan formulation plant

- Re-inspected in Feb-17 and was issued with 1 observation

- Was re-inspected in Mar-15 and was issued 0 observations. Received EIR in Jul-15

- Was re-inspected in Sep-12 and was issued form 483 with 1 observation. Received EIR in Feb-13

- Was inspected in May-08 and had 0 observations. Received EIR in Aug-08

Source: MOSL, Company

17 March 2017

Ajanta Pharma

Therapy-specific strategy to drive growth in domestic

formulations

AJP has been able to consistently deliver growth better than the industry in its

domestic formulation business for at least five years now. Revenue in the domestic

formulations segment grew at a CAGR of 23.6% to INR5.3b in FY16. About 94% of its

business is in branded generics space. The share of branded generics business has

been rising consistently (at 93.4% at the end of FY16). With a further reduction in

the institutional business and increased traction in branded sales, the share is

expected to inch up toward 98% by FY17.

Exhibit 15: We expect AJP to continue to outperform industry

Domestic Formulation Sales (INR m)

11470

9277

4800

5270

6216

7566

2260

2927

3850

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

FY20E

Source: MOSL, Company

Exhibit 16: Share of branded generics to continue to rise (%)

Branded as a % of Domestic formulation sales

93.4

87.1

81.6

77.0

82.9

96.6

FY12

FY13

FY14

FY15

FY16

FY17E

Source: MOSL, Company

AJP had focused on three major therapies – ophthalmology, cardiology and

dermatology. However, the proportion of these categories as a percentage of

domestic formulation sales has changed, with the share of ophthalmology rising, of

dermatology falling and of cardiology remaining same.

17 March 2017

Ajanta Pharma

Exhibit 18: … to lead to its higher share in overall domestic

formulation segment

Others

Institutional

Sales

Ophthalmology

25%

Exhibit 17: Better growth in cardiology…

Institutional

Sales

23%

Cardiology

21%

Others

Ophthalmology

20%

Dermatology

28%

Source: MOSL, Bloomberg

Cardiology

40%

Dermatology

23%

Source: MOSL, Bloomberg

Exhibit 19: AJP continues to outperform industry growth (%)

IPM

Ajanta

Note: Growth on MAT basis; Source: MOSL, Company

Although AJP has been doing better than the industry, there has been a downward

trend in terms of YoY revenue growth, mainly attributed to product-related issues in

dermatology and a considerable base in ophthalmology.

Ophthalmology: We expect AJP to grow better than industry on back of

superior execution

Our channel check indicates that AJP has more MRs (~850-870) compared to peers

like Allergen, Alcon and Sun Pharma (MR strength of about 380, 270 and 250,

respectively).

Ophthalmology formed ~25% of branded formulation sales and grew by 22% on

MAT ending December 2016 basis. The domestic ophthalmology market size is

~INR20b, where AJP has a market share of 7%, which is decent given the fragmented

nature of the market. The key brands in the ophthalmology segment are Softdrops,

Olopat and Apdrops. All the three brands are among the top 5 in their respective

base molecule category, with a CAGR of 11.5%, 12.6% and 50%, respectively over

the past three years. In case of Apdrops, over the past three years, AJP’s CAGR has

been better than the base molecule.

17 March 2017

Ajanta Pharma

Exhibit 20: Apdrops had superior growth compared to that of base molecule as well as therapy

January 2017

Key brands Revenue

(INR m)

CAGR over 3 years

Base

Brand

Base

molecule

Ajanta's

share in

Base molecule

molecule Therapy

contributi

Base

growth

base

Ajanta

Therapy

value growth (%)

on to

molecule

(yoy, %)

molecule

growth (%)

therapy

(%)

5.8

4.9

8.9

5.6

16.1

11.5

13.1

11.4 Carboxy Methyl Cellulose

1.7

15.0

12.8

10.2

8.9

22.7

20.0

2.2

9.7

12.6

50.0

14.9

15.0

11.4

Olopatadine Eye Drops

Moxifoloxacin + Ketorolac

Source: Industry, MOSL

Soft Drops

Olopat

Apdrops

180

100

230

Exhibit 21: Top brands in Ophthalmology segment

Key brands Base molecule

Soft Drops Carboxy Methyl Cellulose

Olopat

Apdrops

Olopatadine Eye Drops

Moxifoloxacin + Ketorolac

Remarks



It is used to treat dry eye condition to create artificial tears. Though it is an old molecule, there is

no substitute available.

It is used to treat Allergic eye condition. Though it an old molecule there is no better substitute

Moxifloxcin is relatively new generation molecule. Available substitute are Tobramycin,

gatifloxacin.

Source: Industry, MOSL



According to our channel checks, overall superior growth of the ophthalmology

portfolio is attributed to the higher number of ophthalmologists that the

company deals with, as well as a considerable number of launches.

The strategy implemented by MNC pharma companies like Allergen and Alcon

has been to tap only tier 1 (top) ophthalmologists – the trend is of tier 2/3

ophthalmologists usually following prescriptions of tier 1 ophthalmologists, as

per our industry channel checks. This categorization (tier 1/2/3) is based on the

number of patients catered by the ophthalmologists (tier 1 ophthalmologists

cater to the highest number of patients). On the other hand, AJP approaches

ophthalmologists across tiers.

AJP launched ~75-80 products in last 10 years, which is much higher than peers.

Although the hit ratio of AJP might be lower, its strong launch trajectory drives

overall revenue growth for AJP.

Exhibit 22: Increased share of prescription to improve productivity in Ophthalmology

No. of MRs

MR Productivity (INRm per MR)

2.5

1.5

1.8

2.1

3.0

0.6

770

FY12

0.8

770

FY13

1.0

870

FY14

1.3

870

FY15

870

FY16

870

FY17E

870

FY18E

870

FY19E

870

FY20E

Source: Industry, MOSL

AJP has guided to maintain current MR strength over next 2-3 years. The company’s

MR productivity is expected to improve from INR0.6m per MR in FY12 to INR1.8m in

17 March 2017

Ajanta Pharma

FY17. Despite this improvement, it is still relatively less than peers, implying enough

scope for improvement.

Ophthalmology therapy growth is expected to be ~15% over next two years, led by

volume growth due to changing lifestyle and price hike of 5-6%. We expect AJP to

grow better than the industry at 18-19% over next 2-3 years on the back of

aggressive launches and increased share of prescription from doctors.

Exhibit 23: AJP outperforms industry on aggressive launches and higher number of

ophthalmologists

Industry

IPM (%)

Ajanta (%)

Note: Growth on MAT basis; Source: Company, MOSL

Cardiology: Better growth in base molecule to drive growth for AJP

AJP has grown fastest in terms of five-year CAGR in cardiology therapy. AJP sales

grew at a CAGR of 43% over FY12-16 to INR2b. The key group brands driving growth

in the cardiology segment are MetXL, Atorfit and Rosufit. This group constitutes

about 75% of total cardiology sales for AJP.

Exhibit 24: Better timing and marketing effort led AJP to have higher growth than

industry

Cardiology

IPM (%)

Ajanta (%)

Source: MOSL, Company

In MetXL, Atorfit and Rosufit group of brands, AJP has been able to record much

faster growth than in base molecule. Specifically, in some molecules (which has

Clopidogrel-based combination like Atorfit, Rosufit and Rosutar Gold), AJP has been

ahead of competitors due to procedural delays for other companies. There was a

notification in 2012-13 about requiring an approval for Clopidogrel by the DCGI

before using it in a combination, which effectively meant conducting a clinical study

to evaluate safety efficacy and tolerability of the combination drug. AJP had

17 March 2017

Ajanta Pharma

received an approval before the notification. However, it delayed the launch for

peers by six months. This led good traction from this molecule for AJP. With many

combinations of cardiovascular therapy under NLEM having an adverse impact on

pricing, drying up of global pipeline of new molecules and the lengthened process of

approval for new combinations, we expect volume growth (largely from existing

monotherapies and combinations, and fewer new product launches) to drive

cardiovascular therapy growth in India. Given the changing lifestyle resulting in an

increase in the number of patient population, industry experts estimate

cardiovascular therapy CAGR of 15-18% over next 2-3 years.

Exhibit 25: All key brands growing faster than base molecule as well as therapy (%)

Key brands

Revenue

(INR m)

Met XL

Met XL AM

Atorfit CV

Rosufit CV

Rosutor Gold

Cinod

770

190

500

210

160

140

Ajanta's

growth

(YoY)

14.9

26.7

13.6

31.3

77.7

27.2

January 2017

Base

molecule

value

growth

5.0

9.2

0.1

26.7

9.2

42.6

Therapy

growth

12.0

CAGR over 3 years

Base molecule

Brand

Base

share in

molecule

Base

Ajanta

Therapy

base

contribution

molecule

molecule to therapy

16.3

3.5

16.3

7.4

12.5 Metoprolol

10.6

1.0

23.9

9.1

12.5 Metoprolol+Amlopodine

3.7

10.2

27.7

10.6

12.5 Atorvastatin + Clopidogrel

1.8

8.9

5.5

8.5

1.0

2.0

51.8

0.0

91.3

28.9

9.1

66.9

12.5 Rosuvastatin + Clopidogrel

12.5

Aspirin + Rosuvastatin +

Clopidogrel

12.5 Cilnidipine

Source: Industry, MOSL

The number of MRs of AJP in cardiology therapy is ~870. Our channel check

indicates that its MR strength is in line with peers. AJP has added ~100MRs in FY14,

and since then has maintained this strength. AJP has guided for maintaining the

same for next 2-3 years.

Exhibit 26: Higher traction in existing products to drive productivity in cardiology for AJP

No. of MRs

870

MR Productivity (INRm per MR)

870

2.8

870

3.5

870

4.3

870

5.4

770

0.6

770

0.9

1.2

1.8

2.3

Source: Industry, MOSL

MR productivity improved from INR 0.6m per MR in FY12 to INR 2.3m in FY16; it is

expected to be INR3.0m per MR in FY17. This is partly on account of better launch

timing of products and partly due to better marketing effort.

We expect AJP to continue outperforming overall industry therapy growth as base

molecule combinations in which AJP has presence are expected to grow at a

17 March 2017

Ajanta Pharma

superior rate, and also as the company continues to maintain its market share, have

new product launches and better marketing effort.

Dermatology: New product launches and increased share in existing

products to drive growth

The dermatology segment formed 23% of domestic formulation sales in 9MFY17.

AJP’s dermatology segment growth was impacted due to a slowdown in sales of the

Melacare range of products. Sales of the Melacare range of product (which form

about 35-40% of the dermatology segment) were hit due to industry-wide stoppage

of steroid-based Hydroquinone-Mometasone-Tretinoin drugs. As a result, AJP’s

dermatology therapy growth reduced to 2.5% YoY in FY16. With a new base now,

AJP has started showing a recovery in growth and exhibited 16.8% YoY growth for

9MFY17.

Exhibit 27: Muted performance in Melacare brand led AJP to grow at lower rate than IPM

Dermatology

IPM (%)

Ajanta (%)

Note: Growth on MAT basis; Source: : Industry, MOSL

Exhibit 28: New products and increased share in existing ones to drive productivity

No. of MRs

MR Productivity (INRm per MR)

2.3

1.4

1.6

1.9

2.7

0.8

770

1.0

1.1

770

870

Source: Industry, MOSL

AJP has ~870 MRs in the dermatology segment. MR productivity has improved from

INR0.8m per MR in FY12 to INR1.7m by FY17.

There is enough scope of innovation possible in derma treatment (which is currently

at high cost) with a shift in the share of cosmetics to prescription-based treatment.

Industry experts expect dermatology therapy CAGR of 18-19%. We expect AJP to

grow in line with industry.

17 March 2017

Ajanta Pharma

Base effect to impact growth in Africa business

AJP’s Africa business revenue grew strongly to INR6.9b over FY12-16, led by a sharp

45% CAGR in its institutional anti-malaria business.

Exhibit 29: High base to result in moderate revenue growth over next 2-3 years

Africa (INR m)

8818

9895

6920

2227

2720

3680

4510

7336

8030

Source: MOSL, Company

The institutional anti-malaria business forms about 57% of the Africa business.

Region-wise, AJP has institutional anti-malaria business in East Africa. Artemesinin-

based artemether and Lumifrantine combination, and dispersible version of the

same, are the major products supplied by AJP. Global fund and USAID are the major

customers of AJP in the antimalarial business.

Growth in the antimalarial business was led by a healthy increase in procurement by

global fund and a reasonable gain in market share with its competitor, Ipca Lab,

losing business due to regulatory hurdles.

The tender for anti-malaria drugs for FY18 is expected to be awarded by global fund

in the near term. As highlighted in the industry scenario below, the incidence of

malaria-based patient pool has been reducing due to ease in availability of

medicines. However, demand for medicine remains high and subject to availability

of fund from government, public and private fund.

Industry scenario

As per the UNITAID report, the global market for antimalarial medicines is estimated

to be 1.3b antimalarial treatment courses per year and is expected to grow to 1.4b

treatments by 2018. Artemesinin-based combination therapy (ACT)-based

treatment currently comprises roughly only one-third of this market, and its share is

expected to increase going forward. Within ACT-based treatment, AL (Artemether-

Lumifrantine) would continue to dominate the market over the medium term.

There are three major sources of funding health systems, prevention and treatment:

government of endemic countries, global fund and USAID. Total funding for malaria

control and elimination in 2015 was estimated at USD2.9b, having increased by

USD0.06b since 2010. This total represents just 46% of the GTS 2020 milestone of

USD6.4b on annualized basis.

17 March 2017

Ajanta Pharma

Exhibit 30: Share of funding of Govt. of

endemic countries

Treatment,

Prevention, 6

Exhibit 31: Share of funding of Global

Fund

Treatment,

Health

systems, 24

Exhibit 32: Share of funding of USAID

Treatment,

Health

systems, 15

Health

systems, 88

Prevention,

Source: Industry

Specifically, through global fund, the number of ACT procured from manufacturers

increased from 187m in 2010 to a peak of 393m in 2013, but subsequently fell to

311m in 2015.

Exhibit 33: ACT treatment courses delivered (m)

500

375

250

125

2010

2011

2012

2013

2014

2015

Source: Industry, MOSL

Public expenditure

Public expenditure-AMFm/GF

Private sector-AMFm/GF

Industry experts suggest a marginal increase in funds available with global fund for

procuring medicines to treat malaria in 2017. Thus, volume-based demand remains

stable. Also, re-entry of Ipca Lab in tender to be awarded by global fund is subject to

time taken by it to implement remediation measures and subsequent clearance by

USFDA post re-inspection, as well as time taken by global fund to award the

business. We assume loss of business to Ipca Lab to continue this year as well, as we

anticipate it to take longer period to clear the regulatory issue. Thus, we expect anti-

malaria tender business to remain stable for AJP in FY18.

Branded generics form remaining part of the Africa business. AJP has majority of

branded generics business from West Africa. AJP has products in the antibiotic, anti-

infective and CVS segments with 400 MRs driving branded business for AJP. AJP is

fourth largest pharma company in terms of sales in franco Africa. AJP has exhibited

15% CAGR compared to industry growth of 5-7% in past five years. AJP has launched

30-40 products which were driving growth for the company. Eomic growth of

countries like Nigeria, Algeria and Gabon is highly sensitive to oil prices. With

stability in the economic scenario, management has guided for a gradual recovery in

the branded generics business over the medium term.

17 March 2017

Ajanta Pharma

We expect gradual revival in Asia business

AJP’s Asia sales reached INR4.6b (CAGR of 23.2% over FY12-16). The company

focused on branded generics in ophthalmology, dermatology and cardiology in

South East Asia and premium antibiotic and cardiology in Middle East Asia. There

are about 350MRs driving the Asia business of AJP.

Exhibit 34: After YoY decline in FY17, we expect a slow pick-up in growth from FY18

Asia (INR m)

4610

3820

3110

2004

2390

3688

3872

4260

4899

Source: MOSL, Company

Specifically, in Phillipines, AJP is in top20 pharma companies and has exhibited

fastest growth in that market. AJP has delivered CAGR of 28% over six years

compared to industry growth of 4-5%. This is on the back of product launches and

increased traction in existing products.

FY17 performance is expected to be muted on the back of currency headwinds and

currency repatriation issues. With stability in currency and easing of repatriation

issues, we expect a recovery in growth in Asia region going forward.

17 March 2017

Ajanta Pharma

Strong performance over FY12-16, expect growth to pick

up from FY19

AJP delivered a commendable 28% CAGR in revenue over FY11-16 to INR17.3b,

driven by both domestic formulations (CAGR of 25.5%) and exports (CAGR of 32%).

Exhibit 35: US and domestic formulations to drive revenue over FY17-20E

Revenue

36.1

23.1

36.7

29.8

22.7

16.8

15.2

19.9

20.3

11.9

22.4

27.3

33.2

22.5

YoY Gr. (%)

6.8

9.3

12.1

14.8

17.3

Source: MOSL, Company

Exhibit 36: Share of US revenue to increase from nil (FY12) to 19% (FY20E)

FY12

33%

Asia

30%

FY17E

32%

10%

Asia

19%

FY20E

35%

19%

Asia

15%

ROW

Africa

34%

Africa

38%

ROW

Africa

31%

Source: Company, MOSL

With Africa and Asia as focus geographies for exports and cardiology, as well as

dermatology and ophthalmology as the focus therapies in domestic formulations,

AJP has made a considerable progress in both the segments. The proportion of

domestic formulations and exports in total sales has remained stable over FY11-16.

Within exports, Africa sales grew at a CAGR of 33% (led by a strong institutional anti-

malaria business) and Asia sales at a CAGR of 23.9%. Product launches in branded

generics and a higher share in existing products led to strong growth in Asia.

YoY growth in overall revenue has been on a downtrend since FY14, largely due to

product-specific issues in domestic formulations and currency headwinds in Asia.

We expect the growth rate to reach a trough in FY18, and expect a revival from

FY19. This is on the back of strong growth in US sales and sustained outperformance

in the domestic formulations market.

17 March 2017

Ajanta Pharma

After exhibiting strong 53.4% YoY growth in FY16, we expect Africa sales to remain

stable at a high base. With volume off-take in institutional anti-malaria business

expected to increase marginally and low probability of intensification of

competition, we expect the institutional anti-malaria business to remain stable. We

expect branded generics business in Africa to record a CAGR of 15.5%, driving

overall Africa sales CAGR to 10.5% over FY17E-19E.

We expect Asia sales growth to be the lowest in FY17E, and expect it to recover

FY18 onward. With currency headwinds easing and forex availability improving, we

expect a gradual improvement in the business scenario in Asia, leading to a 10%

CAGR in Asia sales over FY17-20E.

Thus, we expect overall revenue to grow at a CAGR of 18.6%, from INR17.2b in FY16

to INR33.2b in FY20.

Gross margin expanded 991bp over FY12-16, led by a superior product mix. EBITDA

margin expanded further by 1,285bp during the same period, aided by improved

operating efficiency.

Exhibit 37: 1,285bp rise in EBITDA margin in FY12-16; expect it to be stable at higher levels

EBITDA margin (%)

31.0

34.8

Gross margin (%)

21.0

24.6

34.2

33.7

34.0

34.2

34.3

Source: MOSL, Company

With a new tender to be awarded in the Africa anti-malaria business, we expect

margins of the Africa business to contract to some extent (as it is expected to be a

three-year contract, we assume companies would bid at lower rates to get higher

volumes). We expect the impact of margin contraction in the Africa segment to be

offset by an increase in the share of higher-margin US business and a gradual

improvement in Asia business. Thus, we expect gross and EBITDA margin to remain

stable over next 2-3 years.

17 March 2017

Ajanta Pharma

Exhibit 38: R&D spend as % of sales to remain stable over next 2-3 years

R&D spent (INR m)

5.5

3.9

R&D Spent as percentage of sales

6.1

4.4

7.1

7.3

374

370

530

660

1,060

1,407

1,602

2,009

2,444

Source: MOSL, Company

AJP has been increasing R&D spend toward product development, largely for the US

market. We expect this to increase at a CAGR of 22% to INR2.4b until FY20E.

Although R&D spend is increasing on an absolute basis, it is expected to remain

stable as % of sales at ~7-7.5%.

Exhibit 39: Ongoing capex to suppress return ratios over medium term

RONW (%)

49.0

33.6

34.2

39.9

22.2

25.7

40.5

45.6

41.4

38.6

ROCE (%)

35.9

34.0

30.9

29.6

29.9

28.9

29.0

28.3

Source: MOSL, Company

AJP has been delivering a phenomenal return on capital employed over the past five

years. After touching a peak of 32% in FY15, the return on capital employed has

been declining, despite a 28.4% CAGR in earnings. This is largely on account of

considerable capex allocation by AJP toward the US market, which is yet to get

utilized optimally. With ongoing capex at Guwahati for building a formulations

facility to cater to India and emerging markets, we expect the return on capital

employed to remain stable over next 2-3 years.



In our base case, we factor in revenue and PAT CAGR FY17-20E of 18% and 19%

to INR33.4b and INR8.7b, respectively, led by increased business from the US

and domestic formulations. We expect the EBITDA margin to remain stable as

improved EBITDA margin from the US business may get offset by gradually

contracting margin from the anti-malaria business of Africa.

In our bear case, sales and PAT CAGR would reduce to 13% and 14%, led by

lesser business from already approved products and delays in new approvals.

Accordingly, FY19E EPS would be INR71.6, and the price target would be

INR1,576, implying limited downside.

17 March 2017

Ajanta Pharma



In our bull case, sales and PAT CAGR would be 20.5% and 21.8% to INR35.1b and

INR8.9b, respectively, led by increased business from approved products,

resulting in strong business from the US market. Accordingly, FY19E EPS would

be INR85.5, and the price target would be INR2,137, implying upside of 25%

from current levels.

Exhibit 40: Sensitivity analysis

Revenue

EBITDA

EBITDA margin (%)

PBT

Tax rate (%)

PAT

EPS

Multiple

Target price

% Return

Bear Case

25,427

8,518

33.5

8,025

21.0

6,340

71.6

22.0

1,576

(8.0)

Base Case

27,516

9,410

34.2

8,917

21.0

7,044

79.6

25.0

2,028

16.5

Bull Case

30,052

10,067

34.3

9,574

21.0

7,563

85.5

25.0

2,137

24.7

17 March 2017

Ajanta Pharma

Valuation



AJP has been a re-rating candidate over the past five years on back of its

sustained outperformance versus industry in domestic formulations segment,

healthy growth in exports and strong expansion in the EBITDA margin, which

together led to an improvement in the return ratios. The P/E multiple increased

from 10x 1-year forward earnings in FY13 to a peak of 35x in September 2016.

The stock price has corrected 18% since September 2016, probably due to a

decline in Asia sales and moderate growth in the Africa business in 9MFY17

(after growing at 21% and 54%, respectively, in FY16).

We consider this to be aberration, and the long-term growth story is intact with

a good recovery expected in growth FY19 onwards, led by strong growth in US

sales, better-than-industry growth in domestic formulations, and gradual revival

in growth in branded generics of the Asia and Africa segments. The high base of

the Africa business and moderate growth in the anti-malaria business due to

marginal increase in funding by global fund may affect overall growth in FY18.

However, as the share of the high-growth US business rises and steady growth

in domestic formulations continues, we expect a healthy recovery from FY19.

There are enough levers in place to drive higher growth in earnings over next 4-

5 years, proven superior track record in terms of revenue growth as well as

profitability. Given the scenario, wherein, peers having considerable exposure to

US market have pricing pressure on base business and some peers business

stuck due to regulatory hurdle, AJP has very low base business and minimal

regulatory risk over medium term. We thus value AJP at a premium to P/E

multiple of 20-21x for mid-cap pharma companies, at 25x FY19 earnings. We

thus initiate coverage on AJP with a

Buy

rating and a price target of INR2,028.

Delay in ANDA approvals would result in slower growth in the US business,

impacting overall revenue growth. Lower-than-expected revenue from products

post final approval in the US market would also impact overall revenue growth.

Faster-than-expected re-entry of competitors in the anti-malaria business in

Africa may lead to some market share loss.

Delay in approvals from the DCGI/state governments for the domestic

formulations business may affect the launch trajectory and thus sales.

Late recovery in the economic environment may delay revival in the branded

generics business in Asia.

EBITDA margin (%)

FY17E FY18E FY19E

33.7

34.0

34.2

18.3

18.4

19.0

15.7

17.6

18.4

31.5

31.6

33.0

13.1

14.8

15.8

20.0

21.5

23.0

23.9

26.0

27.0

20.5

21.0

22.0

PAT

FY18E

5,639

10,251

1,298

4,745

1,722

5,268

12,912

1,995

P/E (x)

RoE (%)

FY19E FY17E FY18E FY19E FY17E FY18E

7,044 30.6

26.9

21.5

35.9

30.9

11,959 24.9

23.0

19.7

24.4

22.0

1,580 25.2

17.9

15.2

15.0

18.1

5,919 32.2

29.0

23.3

27.5

24.2

2,211 20.6

14.7

11.5

12.0

14.9

6,611 26.4

22.0

17.4

24.8

24.7

15,799 23.4

17.4

14.7

26.0

29.2

2,907 18.7

16.2

11.2

19.9

16.6

Key risks



Exhibit 41: Peer comparison (INR m)

FY17E

20,101

60,046

11,138

19,244

15,753

32,337

59,458

14,336

Sales

FY18E

22,563

69,056

13,171

21,756

18,203

36,835

69,120

16,762

FY19E

27,516

81,713

15,063

25,556

21,244

42,967

80,136

24,012

FY17E

4,957

9,487

917

4,234

1,233

4,377

9,608

1,593

FY19E

29.9

21.7

19.7

23.2

15.8

25.3

29.6

18.4

Ajanta

Alkem

Indoco

Natco

Unichem

Alembic

Torrent

Granules

17 March 2017

Ajanta Pharma

About Ajanta Pharma



Ajanta Pharma (AJP) is a specialty pharmaceuticals company engaged in the

development, manufacture and marketing of finished dosages. It started with

repacking of generic products in 1973, and moved from OTC products to

prescription-based products for the Indian market.

It has established itself as a strong specialty player in the domestic market in

Ophthalmology, Dermatology and Cardiology.

In addition, it has strong presence into the international markets of Africa and

Asia, and continues to build a strong foundation for the US market.

Key personnel at AJP

Yogesh Agrawal – Managing Director

Mr Agrawal joined AJP in 1996 as management trainee and grew up the ranks to

become Managing Director. He spearheads AJP’s foray in regulated market and

emerging international market. Under his leadership, AJP has transformed research

and manufacturing capabilities, setting up state-of-art facilities that meet stringent

regulatory requirements.

Rajesh Agrawal – Joint Managing Director

Mr Agrawal joined AJP in 1999 and transformed the domestic formulations business

to be one of the best performing market for the company. His keen focus on new

products and strategizing has made Ajanta a leading player in the segments of

cardiology, dermatology and ophthalmology in a very short period. Most of the new

product launches, being first of its kind in the Indian market, are credited to his

business acumen. He has also replicated this success in the Philippines, where

Ajanta Pharma Philippines features among the fastest growing companies in that

country for over three years.

17 March 2017

Ajanta Pharma

Financials and valuations

Income statement and balance sheet

Y/E March

Total Income from Operations

Change (%)

Raw Materials

Employees Cost

R&D expenses

Other Expenses

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT bef. EO Exp.

EO Items

PBT after EO Exp.

Total Tax

Tax Rate (%)

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

FY12

6,855

36.3

2,300

938

374

1,804

5,416

79.0

1,439

21.0

319

1,120

154

1,028

-37

991

137

13.8

854

886

85.8

12.9

FY13

9,369

36.7

3,026

1,232

370

2,436

7,064

75.4

2,305

24.6

342

1,964

191

1,828

647

35.4

1,182

33.4

12.6

FY14

12,160

29.8

3,455

1,570

530

2,841

8,396

69.0

3,764

31.0

439

3,325

137

3,375

960

28.4

2,415

104.4

19.9

FY15

14,852

22.1

3,654

2,006

660

3,363

9,683

65.2

5,169

34.8

516

4,652

168

4,761

-85

4,677

1,462

31.3

3,215

3,273

35.5

22.0

FY16

17,429

17.4

4,138

2,570

1,060

3,700

11,468

65.8

5,961

34.2

451

5,511

166

5,628

1,460

25.9

4,168

27.3

23.9

FY17E

20,101

15.3

4,261

2,975

1,407

4,675

13,319

66.3

6,782

33.7

568

6,214

281

6,438

1,481

23.0

4,957

18.9

24.7

FY18E

22,563

12.2

4,738

3,384

1,602

5,167

14,892

66.0

7,672

34.0

710

6,961

316

7,230

1,591

22.0

5,639

13.8

25.0

FY19E

27,516

21.9

5,806

4,210

2,009

6,081

18,105

65.8

9,410

34.2

832

8,578

385

8,917

1,873

21.0

7,044

24.9

25.6

(INR Million)

FY20E

33,485

21.7

7,099

5,190

2,444

7,266

21,999

65.7

11,485

34.3

954

10,531

469

10,953

2,191

20.0

8,763

24.4

26.2

Consolidated - Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Total Loans

Deferred Tax Liabilities

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Capital WIP

Total Investments

Curr. Assets, Loans&Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability & Prov.

Account Payables

Other Current Liabilities

Provisions

Net Current Assets

Appl. of Funds

E: MOSL Estimates

FY12

118

2,862

2,980

1,996

171

5,148

3,780

1,319

2,461

3,917

1,678

1,410

115

714

1,341

1,013

174

154

2,577

5,148

FY13

118

3,816

3,934

1,248

237

5,419

4,385

1,659

2,726

125

4,247

1,476

1,505

462

804

1,763

1,317

217

229

2,484

5,419

FY14

177

5,756

5,933

1,305

230

7,468

4,903

2,109

2,794

936

635

5,130

1,554

2,022

604

949

2,026

1,245

325

455

3,104

7,468

FY15

177

8,234

8,411

724

152

9,286

5,499

2,618

2,881

1,702

595

6,286

1,590

2,588

1,368

740

2,177

1,298

188

691

4,108

9,286

FY16

177

11,544

11,721

929

200

12,850

7,242

2,726

4,516

2,398

664

7,237

2,046

3,724

550

918

1,965

1,650

176

139

5,272

12,850

FY17E

177

15,698

15,875

929

200

17,004

10,560

3,294

7,266

1,880

664

9,473

2,376

4,294

1,744

1,058

2,279

1,916

203

161

7,194

17,004

FY18E

177

20,436

20,613

929

200

21,742

13,514

4,004

9,510

1,826

664

12,292

2,657

4,820

3,627

1,188

2,550

2,142

227

180

9,742

21,742

FY19E

177

26,346

26,523

929

200

27,652

16,475

4,836

11,638

1,865

664

16,587

3,230

5,878

6,030

1,449

3,102

2,604

277

220

13,485

27,652

FY20E

177

33,670

33,847

929

200

34,976

19,467

5,791

13,676

1,873

664

22,533

3,924

7,154

9,692

1,763

3,770

3,164

338

268

18,763

34,976

17 March 2017

Ajanta Pharma

Financials and valuations

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Fixed Asset Turnover (x)

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Leverage Ratio (x)

Current Ratio

Interest Cover Ratio

Net Debt/Equity

FY03

0.3

1.4

16.1

0.0

FY12

10.0

13.6

33.7

1.0

12.0

FY13

13.4

17.2

44.5

1.7

14.5

FY14

27.3

32.3

67.1

4.0

17.0

FY15

37.0

42.8

95.1

6.0

18.2

46.3

40.0

18.0

10.2

29.2

0.3

19.9

45.6

40.5

58.6

2.7

1.6

2.9

78.6

-0.1

FY16

47.1

52.2

132.5

8.0

18.4

36.4

32.8

12.9

8.7

25.5

0.5

3.4

41.4

38.6

54.9

2.4

1.4

3.7

112.7

0.0

FY17E

56.0

62.5

179.5

8.4

16.2

30.6

27.4

9.5

7.5

22.2

0.5

20.1

35.9

34.0

43.6

1.9

1.2

4.2

107.9

-0.1

FY18E

63.8

71.8

233.0

9.4

16.0

26.9

23.9

7.4

6.6

19.4

0.5

28.4

30.9

29.6

38.3

1.7

1.0

4.8

146.9

-0.2

FY19E

79.6

89.1

299.9

11.8

16.1

21.5

19.2

5.7

5.3

15.6

0.7

36.2

29.9

28.9

39.0

1.7

1.0

5.3

184.6

-0.2

FY20E

99.1

109.9

382.7

15.0

16.4

17.3

15.6

4.5

4.3

12.4

0.9

52.9

29.0

28.3

40.3

1.7

1.0

6.0

226.6

-0.3

0.0

0.6

1.9

9.4

10.9

1.0

0.5

153

115

5.4

1.2

0.8

0.1

1.2

33.6

22.2

21.8

1.8

1.3

2.9

7.3

0.6

0.1

14.8

34.2

25.7

26.2

2.1

1.7

2.4

10.3

0.2

2.8

49.0

39.9

47.4

2.5

1.6

2.5

38.1

0.0

Consolidated - Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

Others

CF from Investments

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

FY03

138

-185

115

-65

-26

-133

-160

-110

139

FY12

910

319

154

-174

-545

663

704

-598

105

-576

-151

-68

-128

-1

115

FY13

1,635

342

191

-331

386

2,223

120

2,343

-1,037

1,306

-950

-748

-195

-102

-1,045

348

115

462

FY14

3,299

439

-1,683

2,142

-18

2,124

-1,878

246

-1,781

-87

-171

-201

142

462

604

FY15

4,560

516

-1,461

-817

2,858

-64

2,794

-1,036

1,759

-45

102

-979

-581

-60

-411

-1,052

764

604

1,368

FY16

5,474

451

-1,614

-1,235

3,125

139

3,264

-2,962

302

-69

135

-2,896

206

-49

-1,343

-1,186

-818

1,368

550

FY17E

6,438

568

-224

-1,481

-727

4,574

-2,800

1,774

281

-2,519

-58

-803

-861

1,195

550

1,744

FY18E

7,230

710

-268

-1,591

-666

5,415

-2,900

2,515

316

-2,584

-47

-901

-949

1,883

1,744

3,627

(INR million)

FY19E

FY20E

8,917

10,953

832

954

-339

-422

-1,873

-2,191

-1,340

-1,616

6,198

7,678

6,198

7,678

-3,000

3,198

4,678

385

469

-2,615

-2,531

-46

-1,134

-1,439

-1,180

-1,485

2,403

3,662

3,627

6,030

9,692

17 March 2017

Ajanta Pharma

NOTES

17 March 2017

REPORT GALLERY

RECENT INITIATING COVERAGE REPORTS

Disclosures

This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company (ies) and/sector(s), if any, covered in the report and may be distributed by it and/or its

affiliated company(ies). This report is for personal information of the selected recipient/s and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or

inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to

you solely for your general information and should not be reproduced or redistributed to any other person in any form. This report does not constitute a personal recommendation or take into account the particular investment

objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek

professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for

future performance, future returns are not guaranteed and a loss of original capital may occur.

MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a some

companies covered by our Research Department. Our research professionals may provide input into our investment banking and other business selection processes. Investors should assume that MOSt and/or its affiliates are

seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may educate investors

on investments in such business . The research professionals responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other parties for the purpose of gathering, applying and

interpreting information. Our research professionals are paid on twin parameters of performance & profitability of MOSt.

MOSt generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, MOSt

generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or affiliates

may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment

decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoingamong other things, may give rise to real or potential conflicts of interest.

MOSt and its affiliated company(ies), their directors and employees and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies

mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an

advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing

whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the affiliates of MOSt even though there might exist an inherent

conflict of interest in some of the stocks mentioned in the research report Reports based on technical and derivative analysis center on studying charts company's price movement, outstanding positions and trading volume, as

opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamental analysis. In addition MOST has different business segments / Divisions with independent research

separated by Chinese walls catering to different set of customers having various objectives, risk profiles, investment horizon, etc, and therefore may at times have different contrary views on stocks sectors and markets.

Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or employees from,

any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of its affiliates or employees free

and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is based on publicly available data or other

sources believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt’s interpretation of the data, information and/or opinions provided by that third party either publicly or through a

subscription service, and such use and interpretation have not been reviewed by the third party. This Report is not intended to be a complete statement or summary of the securities, markets or developments referred to in the

document. While we would endeavor to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that

may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. MOSt or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the

implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.

This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on this report or for

any necessary explanation of its contents.

Most and it’s associates may have managed or co-managed public offering of securities, may have received compensation for investment banking or merchant banking or brokerage services, may have received any compensation

for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months.

Most and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report.

Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report

MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities mentioned in this

report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.

Motilal Oswal Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. SEBI Reg. No. INH000000412

Pending Regulatory inspections against Motilal Oswal Securities Limited:

SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold inquiry and

adjudge violation of SEBI Regulations; MOSL replied to the Show Cause Notice whereby SEBI granted us an opportunity of Inspection of Documents. Since all the documents requested by us were not covered we have requested to

SEBI vide our letter dated June 23, 2015 to provide pending list of documents for inspection.

List of associate companies of Motilal Oswal Securities Limited -Click

here to access detailed report

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or

indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research receive

compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues

Disclosure of Interest Statement

Analyst ownership of the stock

Served as an officer, director or employee

Ajantata Pharma

A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which

would subject MOSt& its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures

Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has

an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Kong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to

SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities,

products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in

Hong Kong.

For U.S

Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a

registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the

absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons.

This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This

document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be

engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by

the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal

Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore,

may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

For Singapore

Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a

subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the

Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.

In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:

Varun Kumar

Varun.kumar@motilaloswal.com

Contact : (+65) 68189232

Office Address:21 (Suite 31),16 CollyerQuay,Singapore 04931

13 December 2016

Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025

Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com

Motilal Oswal Securities Ltd