22 September 2014
SUN PHARMACEUTICAL INDUSTRIES FY14
Sun Pharmaceutical Industries (SUNP) FY14 annual report analysis
highlights good growth and healthy free cash flows adjusted for the
Protonix settlement. Consolidated tax rate for SUNP remained low
at 15.3% in FY14. Contingent liabilities continued to increase from
INR9.4b in FY13 to INR14.3b in FY14 due to income-tax disputes.
Further, SUNP’s decision to close down Caraco’s manufacturing
facility at Detroit might result in impairment of goodwill (Caraco
FY14: INR7.3b). SUNP increased its investments in subsidiaries from
INR30.2b to INR61.4b in FY14, some in loss-making subsidiaries.
Accelerating performance backed by healthy cash flows:
Revenue grew 42% YoY to INR160b in FY14 (FY13: INR113b),
while PAT grew by 4.1% YoY to INR38.8b (FY13: INR34.8b),
primarily due to Protonix liability of INR25.2b during FY14. SUNP
generated healthy free cash flows of INR30.5b in FY14.
Sun Pharma-Ranbaxy merger: A landmark transaction:
SUNP all-
stock transaction valuing Ranbaxy (RBXY) for USD4b is expected
to be completed by December 2014. The two companies
combined will emerge as the world’s fifth largest specialty
generics pharma company. Post-deal closure, the merged entity
targets to generate synergy benefits of USD250m by the third
year. SUNP has a credible track record of successful turnarounds.
Tax rate remains low; contingent liabilities continue to rise:
SUNP’s consolidated tax rate remains low at 15.3% in FY14 (FY13:
19.6%) due to lower tax rate for subsidiaries - Sun Pharma
Laboratories (SPLL) (adjusted for amortization) (5%) and SPGF
(0%). Contingent liabilities continued to increase from INR9.4b in
FY13 to INR14.3b in FY14 on account of income tax demands.
Investment in subsidiaries rises:
Investment in subsidiaries
doubled to INR61.4b in FY14 (FY13: INR30.2b) mainly due to
investment in Sun Pharma Global Inc, BVI. Further, SUNP
invested INR8.1b in Alkaloida (a loss-making subsidiary since past
four years). Nogad Holdings, 100% wholly-owned subsidiary,
incorporated in Mauritius during FY14, has capital/networth of
INR205.3b at FY14-end. Sun Pharma Global FZE profits jumped
~4x in FY14 (over FY13) with PAT higher than turnover in FY14.
Decision to close Caraco unit; Caraco has goodwill of INR7.3b;
goodwill on account of Taro doubles to INR11.4b:
SUNP had
goodwill of INR7.3b on account of Caraco at FY14-end. It has
announced the intention to close down Caraco’s Detroit
manufacturing facility in FY15, which might result in goodwill
impairment. Taro’s goodwill more than doubled to INR11.4b
mainly on Taro’s buy-back of equity, as stated by management.
A
NNUAL
R
EPORT
T
HREADBARE
the
ART
of annual report analysis

SUNP continued to accelerate
with 42% revenue growth and
healthy cash flows

rate remained low at 15%;
Tax
contingent liabilities
continued to rise
Investment in subsidiaries doubles in
FY14; certain subsidiaries show stark
changes in net worth/PAT
Stock Info
Bloomberg
CMP (INR)
Equity Shares (m)
52-Week Range (INR)
M.Cap. (INR b)/(USD b)
1,6,12 Rel. Perf. (%)
SUNP IN
797
2,071.2
877/545
1,651.4/27.1
-10/14/6
Financial summary (INR b)
Y/E Mar
Sales
EBITDA
Rep. PAT
Rep.EPS (INR)
Adj. PAT
Core EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
E: MOSL Estimates
2015E
180.4
79.6
63.5
30.6
55.8
26.9
14.8
115.1
26.3
36.1
14.7
2016E
205.5
89.4
73.1
35.3
66.5
32.1
19.2
144.5
24.7
35.2
15.1
2017E
231.5
96.8
81.9
39.6
76.7
37.0
15.3
177.1
23.0
31.6
16.3
Shareholding pattern (%)
As on
Promoter
DII
FII
Others
Jun-14
63.7
5.1
23.0
8.3
Mar-14
63.7
5.6
22.5
8.3
Jun-13
63.7
3.2
22.8
10.3
Note: FII Includes depository receipts
Auditor’s name
Deloitte Haskins & Sells LLP
ART
will present a threadbare portrait of annual reports - statistical, strategic and structured. We believe
ART's
wide canvas - from accounting and auditing issues to
operating performance to management insights to governance matters - will help readers paint a clearer picture of the stock's investment worthiness.
Ashish Gupta
(Ashish.Gupta@MotilalOswal.com); +91 22 3982 5544
Investors are advised to refer through disclosures made at the end of the Research Report.

ART|
Sun Pharma FY14
ART #1
ACCOUNTING/AUDITING OBSERVATIONS
Caraco plant closure may trigger goodwill impairment; significant increase
in goodwill during FY14 due to Taro
Goodwill on consolidation
of Taro increased from
INR4.9b in FY13 to
INR11.4b in FY14
SUNP’s goodwill on consolidation increased significantly from INR11.3b in FY13
to INR18.3b in FY14; ~10% of FY14 networth (FY13: 7.6%). The increase is
primarily due to goodwill on consolidation from Taro increasing from INR4.9b in
FY13 to INR11.4b in FY14. As stated by the management, part of this increase is
due to buy-back of shares by Taro and some part of the increase is due to
exchange fluctuation.
According to the management, part of the goodwill increase in Taro can be
explained by SUNP’s beneficial ownership increasing from 65.89% to 68.87%.
SUNP’s ownership increased in Taro due to buy-back of shares by Taro
representing 4.4% of its outstanding equity share capital.
Further, SUNP announced the intention to close down Caraco’s Detroit
manufacturing facility in FY15. SUNP had goodwill on consolidation of INR7.3b
on account of Caraco at FY14-end. Thus, it is likely that some amount of
goodwill may be impaired.
SUNP announced closure of
its Detroit manufacturing
facility of Caraco. Goodwill
on consolidation on Caraco
of INR7.3b
Taro's goodwill increases significantly in FY14 (INR b)
Particulars
Goodwill
Caraco Pharmaceutical Laboratories Ltd
TKS Farmaceutica Ltda
Taro Pharmaceutical Industries Ltd
Other subsidiaries
Less: Capital reserve
Alkaloida Chemical Company Zrt
TOTAL
FY11
5.0
0.4
3.2
0.0
0.9
7.7
FY12
6.0
0.4
4.6
0.1
FY13
6.8
0.4
4.9
0.1
FY14
7.3
0.4
11.4
0.1
0.9
0.9
0.9
10.2
11.3
18.3
Source: Company Annual Report, MOSL
SUNP’s goodwill on account
of Caraco may be impaired
Goodwill on consolidation, as a percentage of networth, increases to 10% in FY14
Goodwill (INR b)
Goodwill as % of networth
9.9%
8.1%
7.7
FY11
8.4%
7.6%
10.2
FY12
11.3
FY13
18.3
FY14
Source: Company Annual Report, MOSL
Merger of SPGF results in lower tax rate for FY14; standalone networth
increases by INR28b on scheme of arrangement
SUNP spun off the therapeutic and investment business undertaking of Sun
Pharma Global FZE (SPGF), a wholly-owned subsidiary of the company, into the
standalone entity without any consideration from May 1, 2013.
2
22 September 2014

ART|
Sun Pharma FY14
Lower tax rate due to
merger of SPGF
Hence, all assets and liabilities of the said undertaking of SPGF were
taken over
at carrying values
and INR28.1b was recognized as capital reserve. However,
total networth of SPGF at March 31, 2013 was only INR10.1b. Hence, we cannot
comprehend the higher capital reserve recognized by the company. Adjusted for
capital reserve, networth would have been INR43.9b in FY14 (reported networth
INR72b).
Further, SPGF had to pay USD550m as settlement for Protonix litigation
payment. Thus, the merger of SPGF undertaking with the standalone entity
resulted in significant tax savings for the standalone entity as SPGF operates in a
tax free zone.
SUNP’s lower tax rate in FY14 primarily due to merger of SPGF and lower tax rate at subsidiaries (INR b)
Particulars
PBT
Provision for tax
Effective tax rate (%)
FY11
14.5
0.7
4.8
Standalone
FY12
FY13
17.3
6.6
0.3
1.5
1.6
22.1
FY14
-28.0
0.3
NA
FY11
5.9
0.6
10.0
Subsidiary (Derived)
FY12
FY13
16.3
36.6
2.8
7.0
17.5
19.1
Consolidated
FY14
FY11
FY12
FY13
FY14
73.8
20.4
33.6
43.2
45.8
6.7
1.3
3.1
8.5
7.0
9.1
6.3
9.3
19.6
15.3
Source: Company Annual Report, MOSL
Capital reserve increases standalone networth on merger; no impact on consolidated
entity (INR b)
Particulars
Opening net worth
Add/(Less): Profit for the year
Less: Dividend (including tax)
Add: Capital reserve on merger of SPGF
Add: Foreign currency translation reserve
Closing net worth
Standalone
Subsidiary
(derived)
Consolidated
77.9
72.0
149.9
-28.3
59.7
31.4
-3.6
0.0
-3.6
28.1
-28.1
0.0
0.0
7.6
7.6
74.1
111.2
185.2
Source: Company Annual Report, MOSL
Stark changes in subsidiaries PAT/networth during FY14
Certain subsidiaries showed significant changes in networth/PAT. The reason for
such changes during the year was unknown.
Certain subsidiaries show stark changes in networth/PAT (INR b)
Particulars
Sun Pharma Global (FZE)
Sun Pharma Global Inc
Caraco Pharmaceutical
Laboratories Ltd
Alkaloida Chemical Company
Zrt
Sun Pharma Laboratories
Limited
Mutual Pharmaceutical
Company, Inc
Nogad Holdings
Capital
FY13
0.2
6.9
11.6
4.8
0.4
-
-
FY14
0.2
47.3
13.1
5.3
0.4
5.2
205.3
Reserves &
Turnover
Surplus
FY13 FY14 FY13 FY14
9.9
36.8
-5.6
-3.6
68.8
159.2
-6.9
1.2
20.4
0.0
27.9
1.3
31.6
0.0
46.7
1.0
39.5
17.7
-
PBT
FY13
8.1
0.6
0.0
-1.3
-1.4
0.6
-
FY14
31.7
150.8
-0.8
-1.1
3.5
9.6
0.0
PAT
FY13
8.1
0.6
0.1
-1.3
-2.2
0.3
-
FY14
PAT higher than turnover despite
demerger of undertaking
Holding investment company –
150.8
Significant infusion by parent
Closing down Detroit
-0.5
manufacturing operations
31.7
-1.1 Loss in FY14; infusion of INR8.1b
Significant jump in operating
performance
Doxycycline Hyclate results in
6.0
superior performance
0.0 New subsidiary during FY14
Source: Company Annual Report, MOSL
2.5
Remarks
183.5 185.9 27.4
3.6
-
6.6
0.0
1.8
-
22 September 2014
3

ART|
Sun Pharma FY14
ART #2
KEY FINANCIAL INSIGHTS
Accelerating performance backed by healthy cash flows
Consolidated revenue,
EBITDA and PAT for FY14
grew by 42%, 43% and
12% respectively
Consolidated revenue for FY14 grew 42% YoY to INR160b (FY13: INR113b), while
PAT grew by 12% YoY to INR38.8b (FY13: INR34.8b).
EBITDA margin increased marginally to 44% (FY13: 43%), while the PAT margin
dipped to 24% in FY14 (FY13: 31%) due to the charge of Protonix patent
infringement litigation of INR25.2b. PAT margin, excluding exceptional item, is
40%.
SUNP generated healthy free cash flows of INR30.5b (FY13: INR8.7b) primarily
due to no acquisitions during the year.
During 1QFY15, SUNP announced the acquisition of Ranbaxy Laboratories
(India’s leading company in sales) in one of India’s largest M&A transactions.
The deal, an all-stock transaction valued at USD4b, is expected to be completed
by December 2014.
In India, the merger will lead to SUNP becoming the largest pharmaceutical
company, with over 9% market share, enhancing value share across product
offerings and market territories.
Huge revenue and PAT growth over the years (INR b)
Particulars
Net revenue (Operations)
EBITDA
PBT (Before exceptional items)
Exceptional items
PBT (After exceptional items)
PAT
EBITDA margin (%)
PAT margin (%)
FY11
57.3
19.6
20.4
0.0
20.4
19.1
34
33
FY12
FY13
FY14
80.2
113.0
160.8
32.0
49.0
70.0
33.6
49.1
71.0
0.0
-5.8
-25.2
33.6
43.2
45.8
30.4
34.8
38.8
40
43
44
38
31
24
Source: Company Annual Report, MOSL
SUNP able to maintain and
enhance healthy free
cash flows of INR30.5b
(FY13: INR8.7b)
Healthy free cash flows during FY14 despite Protonix litigation (INR b)
Particulars
EBITDA (excluding exceptional items)
Other adjustments
Operating profit before w/cap changes
Inventories
Trade receivables
Loans and advances and other assets
Trade payables
Other liabilities and provisions
Cash generated from operations
Net income tax paid
Cash flow from operating activities
Capex
Investment in subsidiaries
Free cash flows
FY12
FY13
FY14
32.0
49.0
44.8
2.6
-4.2
0.5
34.7
44.7
45.4
-6.0
-3.9
-5.5
-9.3
-5.0
2.2
-1.0
-0.5
-21.0
3.0
0.7
2.7
3.2
8.3
23.6
24.6
44.3
47.5
-2.3
-10.7
-7.9
22.3
33.6
39.6
-7.1
-8.5
-9.1
-2.7
-16.4
0.0
12.5
8.7
30.5
Source: Company Annual Report, MOSL
22 September 2014
4

ART|
Sun Pharma FY14
Contingent liabilities continue to rise; thus, income tax advances increases
Income tax disputed
liabilities continue to
increase from INR7.6b to
INR12.1b contributed by
both parent and
subsidiaries
Contingent liabilities increased from INR9.4b in FY13 to INR14.3b in FY14 as
income tax demands increased from INR7.6b to INR12.1b. Hence, contingent
liabilities, as a percentage of net worth, increased from 6.3% in FY13 to 7.7% in
FY14.
The increase in income-tax demands is both at the standalone and subsidiary
level. Overall, contingent liabilities at the subsidiary level increased from
INR5.8b to INR8.7b.
Interestingly, despite no current tax at the standalone level (on account of loss),
SUNP paid a tax of INR1.5b in FY14. We believe the higher tax payment is due to
protest money for income-tax demands against the company.
Income tax demands pull up contingent liabilities significantly (INR b)
Particulars
Income tax disputed liabilities
Excise duty disputed liabilities
Claims against the company not
acknowledged as debts
Guarantees given by bankers on
behalf of SUNP
Other demands
TOTAL
FY11
0.3
0.3
0.0
0.2
0.2
1.0
Standalone
FY12
FY13
2.1
2.8
0.3
0.3
0.0
0.2
0.2
2.9
0.0
0.2
0.2
3.6
FY14
4.9
0.1
0.0
0.4
0.2
5.6
Subsidiary (Derived)
FY11
FY12
FY13
FY14
2.3
3.0
4.9
7.2
0.0
0.0
0.1
0.5
0.8
0.0
2.2
5.3
0.8
0.1
-0.2
3.7
0.6
0.3
-0.1
5.8
0.8
FY11
2.6
0.3
0.8
Consolidated
FY12
FY13
5.1
7.6
0.3
0.5
0.8
0.7
FY14
12.1
0.6
0.8
0.3
0.2
0.3
0.6
0.7
-0.1
2.4
0.0
0.1
0.1
8.7
6.3
6.6
9.4
14.3
Source: Company Annual Report, MOSL
Higher income tax paid in standalone is partly as protest for income tax demands (INR b)
Particulars
FY11
FY12
FY13
FY14
Consolidated income tax expense (current tax)
0.9
4.1
8.1
8.1
Consolidated income tax paid
0.7
2.3
10.7
7.9
Standalone income tax expense (current tax)
0.6
0.2
1.1
0.0
Standalone income tax paid
0.7
1.4
1.7
1.5
Note: Consolidated income tax is lower due to provision for tax. Under standalone entity, there is no
provision for tax; Source: Company Annual Report, MOSL
Contingent liabilities, as a percentage of networth, inch up further
Contingent liabilities and demand (INR b)
Contingent liabilities as a % of networth
7.7%
6.6%
5.4%
6.3
FY11
6.6
FY12
9.4
FY13
14.3
FY14
6.3%
Source: Company Annual Report, MOSL
Investment in subsidiaries more than doubles in FY14, some in loss-making
ones
Investment in subsidiaries increased significantly from INR30.2b in FY13 to
INR61.4b in FY14. Majority of the increase is on account of Sun Pharma Global
Inc, BVI investment jumping from INR17b in FY13 to INR42.5b in FY14.
5
22 September 2014

ART|
Sun Pharma FY14
Major investments in FY14
are in Sun Pharma Global
Inc BVI and Alkaloida of
INR25.5b and INR8.1b
respectively
During FY14, SUNP also invested INR8.1b in Alkaloida Chemical Company Zrt.
However, the increase in net worth amounts to INR5.4b only. Further, Alkaloida
reported a loss of INR1.1b in FY14 and cumulatively in the past four years made
a loss of INR4.1b, on a turnover of INR4b.
Investment in subsidiaries more than doubles to INR61b (INR b)
Particulars
FY11
FY12
FY13
FY14
Equity shares (A)
10.0
10.0
10.4
10.0
Sun Pharma Global Inc, BVI
9.6
9.6
9.6
9.6
Caraco Pharmaceutical Laboratories Ltd
0.3
0.3
0.3
0.3
Other subsidiaries
0.1
0.1
0.5
0.1
Preference shares (B)
-
3.8
17.0
50.9
Sun Pharma Global Inc, BVI
-
3.8
17.0
42.5
Alkaloida Chemical Company Zrt
-
-
-
8.1
Sun Pharma Laboratories Ltd
-
-
-
0.4
Loans and advances (C)
0.1
0.1
2.8
0.4
Skisen Labs Pvt Ltd
-
-
-
0.4
Sun Pharma Drugs Pvt Ltd *
-
-
1.9
0.0
Sun Pharma Medication Pvt Ltd *
-
-
0.8
0.0
Other subsidiaries
0.1
0.1
0.1
0.1
Total (A+B+C)
10.1
13.9
30.2
61.4
* - Amalgamated into SPLL, a wholly-owned subsidiary; Source: Company Annual Report, MOSL
Despite INR8b infusion, Alkaloida's networth increases by only INR5.4b in FY14; losses
continue unabated (INR b)
Particulars
Share capital
Reserves and surplus
Net worth
Turnover
Loss
FY11
1.7
-1.1
0.6
0.9
-0.6
FY12
FY13
FY14
Total
4.5
4.8
5.3
-2.2
-3.6
1.2
2.3
1.1
6.5
0.8
1.3
1.0
4.0
-1.1
-1.3
-1.1
-4.1
Source: Company Annual Report, MOSL
Equity investments in unassociated entities continue, no break-up available
In our view, SUNP is likely to
see some acquisitions in the
medium term as investment
in unassociated entities rise
SUNP’s equity investment in unassociated entities (other than subsidiaries, JVs
and associates) increased to INR6.1b in FY14 (FY13: INR4.6b). Of these, majority
of the investments are listed on certain stock exchanges (quoted).
Against the book value of quoted investments of INR4.9b (including INR0.6b in
bonds/debentures), market value of such investments stood at INR7.7b.
Equity investments (long-term) in unassociated entities increase (INR b)
Particulars
Quoted
In Equity Instruments
In Debentures
In Bonds
In Zero Percent-Notes
Unquoted
In Equity Instruments
In Deposits
In Mutual Funds
In Others
Total
FY11
1.1
0.4
0.1
1.0
0.2
0.0
0.7
0.0
3.5
FY12
1.4
0.3
0.4
0.0
FY13
4.2
0.3
0.4
0.0
FY14
4.3
0.3
0.4
0.0
0.2
0.4
1.8
0.5
0.5
0.0
3.0
5.3
1.0
0.1
0.1
0.2
5.9
11.1
7.9
Source: Company Annual Report, MOSL
22 September 2014
6

ART|
Sun Pharma FY14
Debtors more than six month overdue rise despite overall debtors declining
Overall receivables dip despite higher revenue; debtors six
month overdue rise marginally (INR b)
Receivables more than six months overdue
20.8
27.1
Other debtors
22.0
20.1
2.3
1.8
2.7
FY12
2.0
FY13
2.7
FY14
FY11
FY12
FY13
13.7
FY14
Debtors more than six month overdue stable despite a fall in
overall receivables (%)
Trade receivables six months overdue as % of revenue
Net Trade Receivables as % of revenue
25.9
3.3
24.0
11.5
18.1
10.2
1.3
FY11
25.1
19.4
1.7
Source: Company Annual Report, MOSL
Source: Company Annual Report, MOSL
Inventory and debtor days improve especially at subsidiary level (in days)
Particulars
Standalone
Inventory days
Receivable days
Payable days
Subsidiaries (derived)
Inventory days
Receivable days
Payable days
Consolidated
Inventory days
Receivable days
Payable days
FY12
217
57
116
726
90
317
FY13
307
109
155
489
69
246
FY14
306
77
127
417
51
207
398
411
374
73
77
56
187
207
176
Source: Company Annual Report, MOSL
Cash conversion cycle improves marginally on lower inventory days in subsidiaries (in
days)
Standalone
499
Subsidiaries(derived)
Consolidated
312
284
158
FY12
FY13
281
261
261
256
254
FY14
Source: Company Annual Report, MOSL
22 September 2014
7

ART|
Sun Pharma FY14
Average yield on investments remains low
Interest and dividend income (INR b)
8.8
4.4
3.5
5.9
FY14
Yield on investments (%)
5.0
5.8
FY12
FY13
Source: Company Annual Report, MOSL
R&D expenditure, as a percentage of sales, highest in 5 years
Expenditure on R&D (INR b)
R&D expenditure as % of revenue (%)
6.5%
6.2%
5.8%
5.5%
4.4
FY12
7.0
FY13
10.4
FY14
3.3
FY11
Source: Company Annual Report, MOSL
Peer comparison
Revenue growth (%): SUNP growth way ahead despite a higher base
FY13
41% 42%
36%
25%
20%
13%
Cipla
Dr. Reddy's
Glenmark
Lupin
17%
FY14
21%
14%
22%
18%
21%
Sun Pharma
Cadila
Source: Company Annual Report, MOSL
22 September 2014
8

ART|
Sun Pharma FY14
PAT margin (%): SUNP has superior margins
31
24
19
11 12
14
13
15
13
9
Cipla
Dr. Reddy's
Glenmark
Lupin
14
17
FY13
FY14
Sun Pharma
Cadila
Note: SUNP FY14 profit margins are lower because of Protonix liability of INR25.2b, adjusted for the
same PAT margins are 40%; Source: Company Annual Report, MOSL
Legal and professional charges (as percentage of revenue) high for SUNP and LPC
Legal and professional charges (INR b) FY13
Legal charges as a % of revenue (%) FY13
Legal and professional charges (INR b) FY14
Legal charges as a % of revenue (%) FY14
3.8
3.1
4.2
4.9
3.4
3.1
3.0
3.8
2.8
2.5
3.0
3.7
2.4
1.9
2.0 1.9
Cipla
2.2
1.9
1.2
1.6
1.3
0.7
1.4
0.8
Sun Pharma
Lupin
Dr. Reddys
Cadila
Glenmark
Source: Company Annual Report, MOSL
Tax rate lowest for SUNP and Cadila
Effective tax rate (%) FY13
Effective tax rate (%) FY14
26.0
24.6
30.0
34.0
19.6
15.3
14.3
11.2
22.6
19.1
21.7
15.1
Sun Pharma
Cadila
Dr. Reddys
Glenmark
Cipla
Lupin
Source: Company Annual Report, MOSL
Other financial highlights
SUNP has disclosed
investment-related
commitments (non-capex)
of INR2.8b at FY14 end
SUNP has disclosed
investment-related commitments
(non-capex) of INR2.8b in
the consolidated financial statements. No further details are available.
Further, it has
realized INR2.7b in FY14 from investments in erstwhile
partnership firms.
Details are not available why these payments were received
during FY14, as the firms were sold in FY13.
During FY14, SUNP, through its subsidiaries, purchased trademarks of
~INR900m.
EBITDA for the year includes INR434m towards product settlement expense.
22 September 2014
9

ART|
Sun Pharma FY14
ART #3
MANAGEMENT DISCUSSION ANALYSIS HIGHLIGHTS
Well charted strategy offers growth visibility
SUNP’s FY14 annual report provides good visibility on the key pillars of growth
which include enhancing its pipeline of complex/specialty products for the US
and successfully turning around Ranbaxy’s operations.
Future focus will be on building a differentiated product basket, foraying into
products that yield stable and consistent cash flows.
Simultaneously, company continues to be on the lookout for value enhancing
inorganic opportunities in the US.
It has 134 ANDAs pending for approval with the USFDA. This pipeline is expected
to be one of the key drivers of future growth.
SUNP, along with its subsidiaries, has 10 USFDA approved formulation facilities.
Of these, five are in the US, two in India and one each in Canada, Israel and
Hungary. This is one of the largest USFDA approved manufacturing
infrastructure among Indian companies.
Company’s patents, together with those of Taro, have reached 573 filings and
346 were granted patents as of March 31, 2014.
Acquisition of Ranbaxy
SUNP is in the process of acquiring RBXY for USD4b in an all-stock deal:
Post deal closure, the merged entity targets to generate synergy benefits of
USD250m by the third year, driven by a combination of revenue, procurement,
supply chain and other cost synergies.
SUNP believes its ability to juggle different businesses and multiple cultures is
likely to help achieve the transformation at RBXY.
It plans to leverage complementary functional strengths to achieve revenue
growth and gains through both revenue enhancement and cost efficiencies. This
will translate into higher margins, greater market share and more operating
profits.
Subsidiaries snapshot
Ramping up DUSA
Since the acquisition of DUSA (USA) in December 2012, efforts are made by
SUNP to expand its operations.
DUSA’s drug-device combination for treating Actinic Keratosis (AK) has the
potential to improve its market share in the US AK market.
Company is improving its penetration with dermatologists by increasing the
coverage of these specialists and the usage of products in AK treatment.
Caraco
For FY14, Caraco performed well, aided by the distribution of SUNP’s portfolio in
the US and addition of URL and DUSA businesses.
While Caraco continues to distribute SUNP’s products in the US, as a part of its
manufacturing consolidation, SUNP has the intention to close its Detroit facility.
The products manufactured in Detroit are being transferred to other units to
avoid market shortage. The impact of this closure on SUNP’s overall revenues
will be negligible.
22 September 2014
10

ART|
Sun Pharma FY14
ART #4
GOVERNANCE MATTERS
Managerial remuneration, as percentage of profits, remains low
SUNP has not formed any Remuneration Committee of Directors. The whole-
time directors' remuneration is approved by the board within the overall limit
fixed by shareholders at their meetings.
Overall managerial remuneration increased from INR103m in FY13 to INR221m
in FY14; 0.6% of FY14 PBT (FY13: 0.3%).
The amount of managerial remuneration paid to Mr Israel Makov is not
disclosed in the annual report.
Managerial remuneration as percentage of profit remains low (INR m)
Particulars
FY11
FY12
FY13
FY14
Mr Dilip S Shanghvi
30
82
10
104
Mr Sudhir V Valia
25
61
52
88
Mr S Kalyanasundaram
20
25
-
-
Mr Sailesh T Desai
8
8
9
9
Apprenticeship stipend/Remuneration
Mr Aalok Shanghvi
9
40
33
19
Ms Vidhi Shanghvi
1
-
0
1
Total
93
216
103
221
Managerial remuneration as % of profits
0.5
0.7
0.3
0.6
Note: Mr Dilip Shanghvi's FY13 managerial remuneration is low in FY13 due to excess provision in FY12;
Source: Company Annual Report, MOSL
Independent directors same since the past four years
Names of independent directors
Mr S Mohanchand Dadha
Mr Hasmukh S Shah
Mr Keki M Mistry
Mr Ashwin S Dani
Ms. Rekha Sethi (Additional Director) *
* - Ms Rekha Sethi was appointed as Additional Independent Director from February 13, 2014; Source:
Company Annual Report, MOSL
22 September 2014
11

Disclosures
This research report has been prepared by 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
ART|
Sun Pharma FY14
report is for personal information of the select recipient 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 significant percentage of the companies covered by our Research Department Our research professionals provide important 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 participate in the solicitation of 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 market information. Our research professionals are paid in part based on the
profitability of MOSt which include earnings from investment banking and other business. 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 o the foregoing, among other things, may give rise to real or potential conflicts of interest . MOSt and
its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (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.
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.
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/or its affiliates and/or employees may have interests/positions, financial or otherwise 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.
Disclosure of Interest Statement
Analyst ownership of the stock
SUN PHARMACEUTICAL INDUSTRIES
No
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.
Regional Disclosures (outside India)
For U.K.
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.
This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity to
which this document relates is only available to investment professionals and will be engaged in only with such persons.
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.
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:
Anosh Koppikar
Kadambari Balachandran
Email:anosh.Koppikar@motilaloswal.com
Email : kadambari.balachandran@motilaloswal.com
Contact(+65)68189232
Contact: (+65) 68189233 / 65249115
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
For U.S.
For Singapore
Motilal Oswal Securities Ltd
22 September 2014
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
12