Strides Shasun: Robust outlook led by higher sales growth and improved asset utilization

Strides Shasun

Initiating Coverage | Sector: Healthcare

Strides Shasun

BSE Sensex

32,325

S&P CNX

10,066

CMP: INR1000

TP: INR1,300 (+30%)

Buy

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, INRm

Free float (%)

STR IN

89.4

1259/849

-1/-30/-27

94.7

1.5

433

68.9

Strides Shasun (STR) is a first generation, vertically integrated global pharmaceuticals

company, with business interests in differentiated pharma and branded generics. It

sells formulations in regulated markets (51% of FY17 sales), emerging markets (18% of

FY17 sales), and to global institutions (16% of FY17 sales). The API business, which

would soon largely be a part of Solara, constituted 15% of FY17 sales.

Making great strides

Robust outlook led by higher sales growth and improved asset utilization



Financial Snapshot (INR b)

Y/E Mar

FY17 FY18E FY19E

Sales

34.8 43.9 54.5

EBITDA

6.4

8.3 11.0

2.9

4.2

6.7

EPS (Rs)

32.3 47.4 74.8

EPS Gr (%)

108.2 46.9 57.9

BV/Sh (INR)

303.3 341.6 401.9

P/E (x)

31.0 21.1 13.4

P/BV (x)

3.3

2.9

2.5

RoE (%)

10.7 14.7 20.1

RoCE (%)

7.8

9.2 12.2

Shareholding pattern (%)

As On

Jun'17 Mar'17 Dec'16

Promoter

31.1

DII

14.3

12.9

11.4

FII

34.5

36.2

Others

20.1

21.6

21.3

FII Includes depository receipts



Strides Shasun

Making great strides

STR has rebuilt its R&D infrastructure, instituted a strong compliance culture

across the organization, backed by suitable IT investments, and integrated its

manufacturing operations to reduce external dependence. We believe it is now in

a position to begin reaping the benefits of the ~USD550m investments it has made

in focus geographies in the last three years.

Given the consistent compliance history of its API facilities and low cost

manufacturing, we expect the API business (through Solara) to deliver 23%

revenue CAGR over FY17-20 and 18-20% EBITDA margin.

Excluding the API business, we expect revenue to grow at a CAGR of 20% over

FY17-20 to INR52b, driven by 43% CAGR in the US business, 16% CAGR in the

Australia business, 15% CAGR in emerging markets and 15% CAGR in the

institutional business. Adjusted earnings of Strides Pharma are likely to grow at a

CAGR of 44%.

In the US, STR has 26 pending ANDAs and has guided 15-20 ANDA filings per year –

largely niche products – in the next 2-3 years. In Australia, dominated by a few

manufacturers and distributors, it is among the top-3 generic players. Its exclusive

agreement with the largest distributor and ongoing tie-ups with standalone

pharmacies stand it in good stead. In the institutional business, its backward

integration, local manufacturing for ARV/anti-malaria, and awareness drives on

Hep-C in conjunction with governments of developing nations give it an edge.

We value the STR’s pharma business at 18x FY19E earnings (industry average P/E

multiple for midcap pharma) and Solara at an EV of 13x FY19E EBITDA to arrive at

a price target of INR1,300. In addition to robust performance expected in the

pharma business, we believe there is significant value accretion potential in the

API business. We initiate coverage with a Buy rating.

Regulated market business – key growth driver



tushar.manudhane@motilaloswal.com

Please click here for Video Link

Tushar Manudhane

91 22 3010 2498



STR has 26 ANDAs pending for approval. The target approval dates are

within the next 6-10 months, providing visibility of higher approvals.

STR has guided 15-20 ANDA filings per year over next 2-3 years. With

reduced timeline for approval, we expect the strong pace of approvals to

continue over the next 2-3 years. STR made USD100m (annualized) from 18

products (commercialized). Based on product development capability, we

expect STR to have additional run rate of USD55m-60m per year over the

next 2-3 years.

STR has re-entered the Australia generic pharma market through the

acquisition of Aspen’s portfolio under Arrow Pharma. It has been working on

7 August 2017

Strides Shasun

Stock Performance (1-year)

three fronts to aid increase in sales growth and profitability. It is expanding its

generic product basket, securing supplies via tie-up with largest distributor, and

expanding reach by catering to standalone pharmacies also.



Overall, we expect STR to deliver 26% CAGR in regulated markets over FY17-20.

Backward integration, newer products to drive institutional business



Over the last couple of years, STR added anti-malaria products to its existing

ARV segment. Also, it is developing niche ARVs for medium-term growth. It also

added Sofosbuvir-based Hep-C products to its institutional portfolio.

In addition, STR has integrated manufacturing operations, which have not only

increased capacity but also helped secure supply of APIs for its formulations,

providing increased scope of business.

Largely inorganically, STR has expanded its reach from South India to Pan India;

in the Africa market, STR got access to East Africa, adding to its existing

presence in West and French Africa. We expect 14.8% CAGR in emerging market

sales to INR8b over FY17-20.

STR has proactively raised the bar of compliance at its facilities to reduce

regulatory risk. It has fully-integrated, compliant laboratories, with paperless

operations. It also has fully-integrated manufacturing equipment, with complete

control on operations and data management.

STR has improved compliance culture through open communication and

employee empowerment, thus reducing regulatory risk, considerably. Notably, it

has had four USFDA inspections in the recent past, with zero 483s.

With significant investments in R&D, reduced outsourcing of APIs, strong

compliance culture, increased automation, and presence in diversified markets,

we believe STR is poised to deliver strong return ratios through improved asset

turnover and higher share of better margin regulated market business.

We expect 20% CAGR in sales, 25% CAGR in EBITDA, and 44% CAGR in PAT of

Strides Pharma over FY17-20. Solara’s API business has niche portfolio and

superior margin compared to commodity business, hence, we ascribe 40%

premium multiple to 13x EV/EBITDA. We value STR on sum-of-the-parts (SOTP),

valuing the pharma business at 18x FY19E earnings (average midcap pharma P/E

multiple) and Solara at an EV of 13x FY19E EBITDA to arrive at price target of

INR1,300.

Branded generics the name of the game in emerging markets



Extensive efforts towards consistent compliance to reduce regulatory risk



Valuation and view



Exhibit 1: Comparative valuations (INR b)

MCap

INR b

117.8

165.5

99.9

112.0

212.3

89.9

FY17

20.0

20.7

31.0

60.1

58.6

34.8

Sales

FY18E FY19E

22.6

27.4

26.0

23.8

32.5

65.9

65.4

43.9

37.2

72.9

76.1

54.5

EBITDA margin (%)

FY17 FY18E FY19E

34.9

34.7

34.2

33.1

37.5

28.1

19.7

22.4

23.5

18.5

23.9

23.3

19.0

19.5

24.3

24.5

20.3

FY17

5.2

4.9

4.1

5.8

9.3

2.9

PAT

FY18E FY19E

5.8

7.0

6.0

4.2

3.9

7.3

9.6

4.2

4.8

8.8

12.1

6.7

P/E (x)

FY17 FY18E FY19E

24.1

21.3

17.7

35.3

34.8

27.5

25.1

19.8

23.0

31.0

26.5

15.6

22.4

21.1

21.3

12.9

17.8

13.4

RoE (%)

FY17 FY18E FY19E

37.7

32.2

29.9

32.9

25.0

24.3

23.0

19.0

20.4

18.1

19.5

19.6

25.3

22.4

24.2

10.7

14.7

20.1

Source: Company, MOS

Ajanta

Natco

Alembic

Jubilant

Torrent

Strides

7 August 2017

Strides Shasun

Current business description

Exhibit 2: Share of regulated markets maximum in FY17 revenue

Segment wise revenue

breakup for FY17

Regulated

Market

Institutional

Business

API

Emerging

Market



Within Regulated

market, US and

Australia are the key

markets.



STR’s strategy is to

develop and

commercialize

complex, low

competition generics

for

US market.



Re-entered

Australia

business

through

Arrow Pharma. Aims to

become market leader

in generic space by

increasing product

offerings and enhance

pharmacy coverage.



Within emerging

market, India and

Africa are the key

markets



STR’s approach to

these markets has

been through products

in branded generics

space.



In addition, acquisition

in past couple of years

in each market has

enabled STR to access

newer areas in these

markets, thereby

driving growth for STR.



Develops &

Manufactures drugs in

the Anti-retroviral,

Hep-C & Anti-Malarial

segments to supply to

Institutionally funded

aid projects and global

procurement agencies.



STR is developing next

gen products as per

donor agencies’

guidelines in ARVs and

anti-malaria segment

for future growth.



Agencies catered to –

UNITAID, CHAI &

PEPFAR



Key suppliers of

Ibuprofen, Ranitidine &

Gabapentin globally.



Has a strong API

manufacturing

capability with 2

USFDA approved

manufacturing facilities

in India.

Strides Shasun, with these

business segments would be

renamed as Strides Pharma

API business

would largely be

transferred to

Solara

Source: Company, MOSL

7 August 2017

Strides Shasun

Strides Pharma to deliver 25% EBITDA CAGR in FY17-20



Post demerger of API business into separate entity, Solara Active Pharma

Sciences (SAPS),

Strides Shasun would be renamed Strides Pharma.

Strides

Pharma would retain the formulations business (regulated markets, emerging

markets and institutional segment), and specialty API business.

Adjusting for API business, we expect 20% CAGR in sales, 25% CAGR in EBITDA

and 44% CAGR in PAT for

Strides Pharma

over FY17-20.

FY17

35,105

18.3

6,440

854

5,586

400

6,840

1,286

2,269

1,872

3,985

630

15.8

3,355

462

2,893

32.4

FY18E

39,585

19.1

7,579

733

6,846

350

7,929

967

1,853

1,898

5,146

813

15.8

4,333

476

3,857

43.2

FY19E

44,819

20.5

9,200

300

9,500

1,062

1,410

1,831

7,021

1,109

15.8

5,912

500

5,412

60.6

FY20E

51,981

20.8

10,801

300

11,101

1,011

1,240

1,907

8,664

1,369

15.8

7,296

525

6,771

75.8

Exhibit 3: P&L snapshot for Strides Pharma (INR m)

Strides Pharma

would have

formulation business from

regulated market,

institutional segment and

emerging market. It would

also have specialty API

business

Total sales

EBITDA margin (%)

Total EBITDA

EBITDA from API business

EBITDA excl API business

Forex gain and OOI

EBITDA incl forex gain and OOI

Other Income

Interest

Depreciation

PBT

Tax

Tax rate (%)

PAT

Minority Interest

PAT post MI (INR m)

EPS (INR)

Source: MOSL, Company

The strong growth trajectory would be led by 26% CAGR in regulated market sales

and 15% CAGR in institutional business sales.

Profit growth is likely to be higher due to:



Increase in share of high margin business from regulated markets.



Lower financial leverage and transfer of some debt to SAPS, resulting in lower

interest burden on Strides Pharma. Tax benefits to keep effective tax rate low.

SAPS would also have human API business from Sequent Scientific.

Highlights of the transaction are:



STR shareholders to get one share of SAPS for every six shares of STR.

Sequent Scientific shareholders to get one share of SAPS for every 25 shares of

Sequent Scientific.

Based on the swap ratio, STR shareholders would have 60% of SAPS and

Sequent Scientific shareholders would have 40% of SAPS.

The appointed date for the scheme of merger is October 01, 2017.

With this demerger, STR’s API sales would be shifted to SAPS. At the end of FY17,

API constituted 15% of STR’s sales.

STR has two manufacturing facilities for this business – one in Puducherry, India and

one in Cuddalore, India. These would also be shifted to SAPS in addition to three

facilities from Sequent Scientific.

7 August 2017

Strides Shasun

API business is a game changer

Compliance has become a critical parameter to select API supplier

Increasing regulatory hurdles have been adversely impacting business for many

pharmaceutical companies over the last 2-3 years. These hurdles could be in

formulation plants or API manufacturing plants.

Compliance-related issues with API suppliers not only impact the business of the

supplier, but also of the formulator. Delays in resolving regulatory hurdles could

adversely impact economic viability of the product for the formulator. Refiling ANDA

with alternate API supplier is a time-consuming exercise. Also, the formulator needs

to build confidence in new API supplier in terms of compliance.

Given this scenario, sound compliance history, in addition to low cost manufacturing

capability, has become an important parameter to select an API supplier. This would

not only lead to higher customer stickiness, but also enhance the ability of a

compliant API supplier to sell its products at premium. We believe STR, through

Solara, is in a sweet spot to grab the growing opportunity from API business.

Sound compliance history

We understand that both of STR’s API facilities (Puducherry and Cuddalore), which

would be transferred to Solara, have been inspected 4-5 times. Every inspection has

been successful, without any major observations. This helps assure formulators of

minimal regulatory risk at the API site and assured supply (as per contract).

Also, STR produces limited-competition API molecules, primarily Ibuprofen,

Ranitidine and Gabapentin.

Couple of attractive medium-term business opportunities

1. Consistent compliance, limited competition makes Ibuprofen an attractive

opportunity for US market

Only six companies manufacture 90-95% of the global Ibuprofen API requirement.

Of these, only five cater to the US market. In terms of volume, the global market is

30,000-32,000MT per annum, with stable demand; the US market is 10,000-

12,000MT per annum. Value-wise, the API market would be about USD150m in the

US. This product has multiple manufacturing issues, which have been resolved by

existing manufacturers. However, there is limited scope for new entrants, given low

economic viability and difficulty in resolving manufacturing issues.

The Ibuprofen API prices in US market have increased by at least 20% in the last one

year due to supply constraints with one or the other manufacturer. With limited

scope for capacity increase over 2-3 years and delayed entry of a sixth company in

the US market, we expect prices to rise by a further 8-10% over the next one year.

7 August 2017

Strides Shasun

2. Sevelamer API – another interesting opportunity

Sevelamer being a phosphate binding drug, there are multiple studies involved at

laboratory level for analysis. These studies require specialized analytical skills and

instruments, making Sevelamer a niche and complex API.

Very few formulators have captive API manufacturing for the US market. Some have

used STR’s API for ANDA filing and subsequent formulation sales post approval. We

expect gradual price erosion and phased entry of formulators for this product in the

US market, providing good business opportunity for API manufacturers such as STR.

The current market size for Renvela (Sevelamer Carbonate) is about USD1.9b, with

only one generic approval.

With more such molecules in its portfolio, we believe STR’s API business, which

would be transferred to Solara, is as attractive as its formulation piece.

Even the API molecules from Sequent’s portfolio are fairly stable ones in terms of

volume growth and enjoy higher EBITDA margins than commodity API business.

Solara

would have API

business from strides

Shasun and Sequent

Exhibit 4: Proforma Solara Financials

Solara Financials

Sales from Strides

Sales from sequent

Total sales

EBITDA margin (%)

EBITDA (m)

FY17

5,336

3,000

8,336

17.4

1,454

FY18E

4,313

3,600

7,913

18.6

1,471

FY19E

9,660

4,248

13,908

19.5

2,719

FY20E

10,433

5,013

15,445

18.8

2,910

Source: MOSL, Company

FY18 Solara financials includes only six months sales of API business from Strides.

API business from strides would be transferred to Solara post demerger on 1

October 2017.

7 August 2017

Strides Shasun

Time to reap benefits from regulated markets

STR has built strong geography-specific foundations in the last 1,000 days, which

should drive financial performance in regulated market business. The key

geographies STR is focusing on in regulated markets are US, Australia and EU.

US and Australia are the

focus market in regulated

space for STR

STR has been making progress on the following to create future value:



It has transformed from a partnership-driven B2B model including licensing

income to a fully-integrated manufacturing strategy.



In addition to creation of manufacturing base, STR has focused on R&D assets,

portfolio maximization, and backward integration.



M&A focus has added the EPS accretion parameter to future value creation.



Financial focus has shifted from just revenue maximization to improvement in

operating margins, earnings and cash flows.

STR has a portfolio of products across oral solids and topicals, including soft gel

capsules, hard gel capsules, tablets, liquids, creams, ointments, and modified and

extended release products.

Exhibit 5: We expect 26% CAGR in revenue from regulated market

Regulated market (INR b)

79.0

55.9

29.7

6.4

7.0

FY15

11.4

FY16

17.8

FY17

23.0

FY18E

33.2

15.0

30.7

FY19E

35.3

YoY Growth (%)

FY20E

Source: MOSL, Company

In FY17, regulated markets contributed revenue of INR17.7b, 51% of STR’s total

sales. We expect 26% CAGR in regulated market sales to INR35b. Revenue CAGR

over past three years was 52%. Growth has been largely driven by inorganic

measures, with the intent to build a base for future business opportunities.

We discuss in detail the businesses in each of the focus regulated markets.

7 August 2017

Strides Shasun

1. US business – aggressive product pipeline, strong compliance culture,

and favorable regulatory guidelines to drive growth

Many pharmaceutical companies having considerable business exposure to the US

market are faced with pricing pressure on account of consolidation and regulatory

hurdles at their manufacturing facilities. We believe STR is well placed to tide over

these issues and deliver strong growth over the next 2-3 years.

Exhibit 6: We expect 43% CAGR in US sales over FY17-20

US sales (US$m)

239

278

150

FY17

FY18E

FY19E

FY20E

Source: MOSL, Company

Post the sale of Agila Specialties in December 2013, STR has rebuilt its R&D base

from scratch by investing USD70m in the past three years. It now has two dedicated

R&D facilities, with 500+ headcount and capabilities in oral, topical, liquid, cream,

ointment, soft gel, tablet and modified release formats.

Exhibit 7: Current dosage profile of ANDAs for approval

Tablets / Capsules

Topical's

Modified Release

Others

Source: MOSL, Company

STR has filed 62 ANDAs till date, with 36 approvals. Of these, it has commercialized

18 products and has achieved annualized sales of USD100m against USD70m in

FY16.

Strong US ANDA pipeline over next 2-3 years

STR has 26 ANDAs pending for approval. Based on target approval date, STR expects

90% of products to have approval timeframe of 6-10 months.

7 August 2017

Strides Shasun

Exhibit 8: Good number of approvals can be expected based on target approval date

10 months

8 months

6 months

Out of GDUFA 1 (Cohort 1-3), 9 ANDAs pending

for approval

Out of GDUFA 1 (Cohort 5), 7 ANDAs pending

for approval

Out of Pre-GDUFA (Legacy), 3 ANDAs pending for approval

Out of GDUFA 1 (Cohort 4) , 7 ANDAs pending for approval

Expected time

remaining for

approvals,

based on target

approval date

26 ANDAs await approval, over next

6 to 10 months, on cumulative basis

Note: GDUFA – Generic Drug User Fee Act; Source: MOSL, Company

As STR was in the process of rebuilding R&D capabilities, the pace of ANDA filings

was gradual, with average filing of 6-7 ANDAs per annum over FY14-17.

Exhibit 9: ANDA filing run-rate to pick up aggressively

ANDA filed

ANDA approved

CY12

FY14

FY15

FY16

FY17

Source: MOSL, Company

Aggressive filing over the next 2-3 years

STR has guided 15-20 filings per year over the next 2-3 years, with focus on niche

and difficult-to-develop products. It has 21 products with an addressable market

size of USD2.6b as part of its current and/or future filings. Moreover, despite being

off-patent, these products have limited competition due to smaller market size

and/or complexity in terms of developing and manufacturing.

Favorable guidelines by USFDA to accelerate pace of approvals

USFDA has been putting considerable effort on reducing the time taken for approval

post submission of ANDAs by generic companies. It has already reduced the average

approval cycle from over 60 months pre-GDUFA to 10-40 months in GDUFA-I cohort.

This has been possible on the back of increased hiring by USFDA followed by training

and system development.

7 August 2017

Strides Shasun

Exhibit 10: Faster action expected on ANDAs as per GDUFA cohorts

Pre-

GDUFA

“Backlog”

FY13

“Year 1”

FY14

“Year 2”

FY15

“Year 3”

FY16

“Year 4”

FY17

“Year 5”



Take action

on 90% by

end of year



Expedite revenue of PIV



Maintain productivity to

extent possible given

hiring, training, programs

and system development

activity



Take action

on 60%

within 15

months of

submission



Take action

on 75%

within 15

months of

submission



Take action

on 90%

within 10

months of

submission

Source: USFDA, MOSL

USFDA would be starting GDUFA-II from October 2017, wherein the timeline for

approvals is expected to reduce to 8-10 months. USFDA would be taking action on

90% of the applications within 10 months of submission.

Advantage STR

With reduced timeline for approval and aggressive filings by STR, we expect

significant ramp up of revenue from the US market over the next 2-3 years.

It’s not just about g-Lovaza, approved product pipeline highlights STR’s

differentiated strategy

One interesting product over the medium term is

g-Lovaza.

Though it is genericized,

competition is limited and the market size is USD300m. We expect STR to garner

annual revenue of USD30m post approval, assuming 20% market share and 25%

price erosion.

Based on its other recent approvals, we believe STR has a good product selection

strategy, with more of limited-competition and complex generics.

7 August 2017

Strides Shasun

Exhibit 11: ANDA approvals over past two years

Brand

Symmetrel

Motrin IB

Namenda

Miralax

Zantac

Flagyl

Avodart

Soma

Tessalon

Active Ingredient

Approval

No. of

Market Size

Date

competitors

(US$m)

Amantadine Hydrochloride (Tab)

9-Jun-17

Amantadine Hydrochloride (Cap)

7-Jun-17

Ibuprofen OTC

30-May-17

520

Memantine Hydrochloride

23-May-17

Polyethylene Glycol 3350 (OTC)

24-Aug-16

260

Ranitidine Hydrochloride

22-Aug-16

125

Metronidazole

25-May-16

Dutasteride

20-Nov-15

470

Carisoprodol

12-Nov-15

Benzonatate

30-Jul-15

Note: Market size at the time of approval to STR; Source: MOSL, Company

Cetirizine Softgel Capsule is case in point

STR recently received final approval for Cetirizine Softgel Capsules, 10mg

(OTC). Cetirizine Softgel is used to temporarily relieve the following symptoms due

to hay fever or other upper respiratory allergies:



Runny nose



Sneezing



Itchy, watery eyes



Itching of nose or throat

The market size for this product is ~USD60m. Though the market size is small, there

is only one generic competitor. Being a limited-competition product, there would be

lesser price erosion. Hence, as STR establishes its brand for this product, it would

find considerable business potential, with good profitability. We expect annualized

sales of USD15m-18m. The scale-up would be gradual due to brand building

exercise.

Even Amantadine HCL (tablet) has limited competition, making it an attractive

opportunity for STR.

We expect US sales of STR to grow from USD95m to USD278m by FY20 on the back

of product launches and increased traction in existing products.

Highlighting STR’s market share (and market share trends) in a few products

Exhibit 12: Since it launched Methoxsalen in June 2014…

60.0

45.0

30.0

15.0

0.0

Oceanside

Pharm

47%

strides' share (%) in Methoxsalen

Exhibit 13: …STR has continued to gain share

Valeant Actavis

Pharma

Strides

Pharma

43%

Source: MOSL, Bloomberg

7 August 2017

Strides Shasun

Exhibit 14: Though commercialization was much later than

approval timeline…

strides' share (%) in Ergocalciferol

Strides

Pharma

65%

Breckenridg

11%

Exhibit 15: …STR gained significant traction, with 65%

market share in Ergocalciferol (Vitamin D2)

Barr Sun/Caraco

Phar

Bionpharm

22%

Source: MOSL, Bloomberg

Exhibit 16: Since it launched in November 2016…

16.0

12.0

8.0

4.0

0.0

strides' share (%) in Ranitidine

Exhibit 17: …STR has gained 15% market share in Ranitidine

(g-Zantac)

Strides

Pharma

15%

Dr.Reddy'S

Lab

Glenmark

Pharma

24%

Amneal

Pharma

45%

Source: MOSL, Bloomberg

Nostrum

Laborat

Pharmaceu

Assoc

Silarx

Sandoz Inc

Source: MOSL, Bloomberg

Exhibit 18: Though commercialization was much later than

approval timeline…

strides' share (%) in acarbose

25.0

20.0

15.0

10.0

5.0

0.0

Exhibit 19: …STR gained significant traction, with 20%

market share in Acarbose (g-Precose)

Actavis

Pharma Strides

Pharma

20%

Virtus

Pharma

64%

West-

War/Roxan

Alvogen Inc

Source: MOSL, Bloomberg

7 August 2017

Strides Shasun

Expect strong growth on aggressive filing and reduced timeline for approval



Even assuming USD5m per ANDA, which has been the average revenue from 18

commercialized products, we expect future approvals to add USD60m-75m to

annual US revenue. In addition, superior execution should enable STR to gain

market share in existing products.

In addition, STR has six para-IV opportunities, of which two are settled.

Exhibit 20: Settled para-IV opportunities

Generic Name

Brand Name

Probable business

Market Size Settled date of

of STR in 1st year Remark

launch

(US$m)

post launch



Multiple generics have tentative approvals for this

2000

Feb-19

20.0

product. Though current market size is huge,

opportunity is limited

201

Jan-20

18.1



Litigation on with multiple companies.

Source: MOSL, Company

fingolimod

Roflumilast

Gilenya

Daliresp

Conscious effort on regulatory compliance

STR has been working not only on product development and supporting

manufacturing base, but also on regulatory compliance.

There have been a number of instances in the past 2-3 years, where peers’ existing

business slowed down or even stopped due to regulatory issues. In addition,

slippages on the regulatory compliance front have also impacted ANDA approvals,

affecting future business.

Four of last five audits cleared with zero 483s

In contrast, STR has not only seen a pick-up in approvals in the recent past, but has

also had successful inspections. This has been possible on the back of technological

upgrades, increased awareness, open communication, and employee

empowerment. STR has fully integrated, compliant laboratory and established good

manufacturing practices, reducing regulatory risk considerably.

Exhibit 21: Inspection history - US FDA Inspection History

Consistent compliance track

record

Bangalore formulation, India



Inspected in May-17. Form 483 issued with 3 observations. Few product approvals already in

place post inspection.



Inspected in Jun-16. No form 483 issued



Inspected in Feb-16. Form 483 was issued. EIR issued in Jun-16



Inspected in Aug-14. Form 483 was issued. VAI status at closure of inspection



Inspected in Dec-13. Form 483 was issued. NAI status at closure of inspection



Inspected in Jul-11. No form 483 issued. NAI status at closure of inspection

Puducherry formulation, India



Inspected in May-17. No form 483 issued



Inspected in Feb-15. Form 483 was issued. VAI status at closure of inspection



Inspected in Nov-11. No form 483 issued. NAI status at closure of inspection



Inspected in Oct-09. No form 483 issued. NAI status at closure of inspection

Milan formulation, Italy



Inspected in May-15. No Form 483 was issued



Inspected in Jun-13. No form 483 issued

Perrigo API, India



Inspected in FY14. No Form 483 was issued

Chennai formulation, India



Inspected in Nov-16. No form 483 issued



Inspected in Jun-15. VAI Status on facility post inspection

Source: MOSL, Company

7 August 2017

Strides Shasun

2. Australia business – re-entry with renewed effort to accelerate growth

With the acquisition of Arrow Pharma in August 2015, STR re-entered the Australian

generic market. It has taken strategic steps to fast-track growth in Australia.

Exhibit 22: Structure of Australian generic pharma market

5 Companies supply 90% of generic

drug sold

3 Wholesalers distribute all PBS

drugs to Pharmacies

In addition, there are

5,250 standalone

pharmacies, 3000 are

organised and 2,240 are

in process of forming

virtual common platform

for procuring generic

drugs in cost effective

manner

Apotex

Mylan

Arrow

Sandoz

Amneal

Sigma

Symbion

API

Source: MOSL, Company

Generic drugs constitute just ~9% of the USD10.5b pharmaceuticals market

(2014).

Only five companies supply 90% of generic drugs sold in Australia; entry of new

generic drug manufacturers difficult

Generic drugs account for a small proportion of products sold in a pharmacy store.

Also, the pharmacy alliance negotiates with only wholesalers for availability of

generic drugs. Depending on the needs of the pharmacies, the wholesaler is more

interested in tying up for a basket of products from a manufacturer than in

negotiating for and procuring a particular or few products from a manufacturer. As a

result, the wholesaler is inclined to have business relationships with a few

manufacturers that are able to supply maximum number of products. It is difficult to

break the existing manufacturer-wholesaler relationships.

Even the unorganized pharmacies are in the process of forming virtual procurement

platforms, which would again make the entry of new manufacturers more difficult.

7 August 2017

Strides Shasun

Exhibit 23: STR’s four-pronged strategy to drive financial performance in Australia market

Basket of existing

products and

more in pipeline

Relationship with largest

pharmacy wholeseller in place

Key drivers for growth

in revenue and profit

Formation of virtual platform for

standalone pharmacy underway

Site transfer in progress for cost

rationalization

Source: MOSL, Company

STR has taken strategic initiatives to enhance product pipeline, assured off-take,

and customer base

STR intends to enhance its product portfolio through own R&D, acquisitions, as well

as in-licensing.

STR

acquired strategic stakes in Australia-based generic partners,

giving it

immediate access to 47 commercialized market authorizations, 22 pending approval

registrations, as well as a strong pipeline of 32 products.

STR has signed a

10-year exclusive distribution agreement with Sigma,

the largest

pharmacy wholesaler by market share in Australia. With this, STR has not only

improved sales of existing products but also introduced new products through the

same channel.

In addition to supplying medicines through the traditional route of wholesalers and

distributors, STR is

in the process of tapping standalone pharmacies

through

Pharmacy Alliance. STR has entered into a 10-year supply partnership and trading

platform with Pharmacy Alliance, Australia’s longest standing cooperative buying

group. The agreement guarantees Pharmacy Alliance members a market-leading

suite of products and services across the Arrow (now STR) generic range. Pharmacy

Alliance is also subsidiary of STR. Currently, out of 2,240 pharmacies, Pharmacy

Alliance caters to 600 stores, for which it handles administrative work. STR

continues its effort to take it to 1,000 pharmacies over the next 2-3 years.

Also, the shift of manufacturing to India would lead to improvement in profitability.

We expect STR to be on a strong growth trajectory in Australia in the next 2-3 years.

3. EU business – increasing reach, leveraging existing products

STR is leveraging its existing product portfolio in the US and Australia markets to

grow in the regulated markets of the European Union (EU).

STR already supplies generics to hospitals in the UK, which are approved by NHS. It

has a diversified portfolio of capsules, sachets and oral solids in different therapies.

STR also has key regulatory approvals including MHRA. Besides expanding its

product base, STR intends to grow this business by increasing its reach in the UK as

well as through strategic partnerships for own IP generics in the rest of Europe.

7 August 2017

Strides Shasun

Branded generics the focus in emerging markets

In the emerging market business, STR derives revenue largely from domestic

branded formulations and Africa branded formulations.

Exhibit 24: Better outlook in emerging markets on product launches and increased reach

Emerging market (INR b)

64.9

41.0

16.1

-16.3

4.6

FY15

3.8

FY16

6.3

FY17

-7.1

5.9

FY18E

6.8

FY19E

8.1

FY20E

18.2

YoY Growth (%)

Source: MOSL, Company

Africa – focus on branded generics, with ‘In Africa for Africa’ strategy

STR is a leading company in West and French Africa, and has had exposure to

branded as well as generic generics. It has been growing faster than industry in the

branded generic segment in the past 4-5 years.

Now, STR focuses only on branded generics and has divested six generic facilities in

Africa. The divested business used to generate annual revenue of USD21m and

EBITDA of USD1.4m. STR received USD16m cash for this business.

Also, it recently acquired 51% stake in Universal Corporation for USD11m.

About Universal Corporation

Universal Corporation is a manufacturing and marketing company, with

considerable business in East Africa and has supply contracts with donor agencies. It

is one of the two WHO-prequalified sites in Sub-Sahara Africa (other than South

Africa).

With the acquisition of Universal Corporation, STR has gained a strong foothold in

East Africa. It would be consolidating manufacturing of branded generic products at

Universal’s facility. The Universal Corporation facility would run on the hub-and-

spoke model, catering to branded generic markets across the Sub-Saharan region.

About Africa pharma market

The combination of economic strength and an expanding middle class is driving

demand for medicines in Africa. This coupled with better logistics, infrastructure and

healthcare capabilities is not only increasing demand for medicines, but also their

availability for patients. Prescription drugs, generics and OTC drugs are expected to

grow at a CAGR of 6%, 9% and 6%, respectively, over 2013-20.

August 2017

Strides Shasun

There have been measures by the government as well to support business activity

(like price controls and import restrictions to encourage domestic manufacturing,

and country-specific labeling to reduce counterfeiting and parallel imports).

STR has 250MRs catering to 30,000 doctors. It already has 750 product registrations

and has a strong pipeline of 500 product registrations.

STR would be utilizing the Universal facility for institutional business, given the

preference for local sourcing under donor-funded program. It is in the process of

shifting the institutional portfolio to the Universal facility.

We expect medium-term growth in Africa to be driven by new product launches and

improving productivity in West and French Africa, higher business from newer

territory (East Africa), and increased scope of institutional business.

India – working towards expanding reach and product offerings

From a regional player in South India till 2014, STR has expanded its reach to other

parts of India through both organic and inorganic means. Its flagship brand is

Renerve,

and it is among the top-5 in vitamins, minerals and nutrients involving

Methylcobalamin combinations.

STR made following acquisitions to strengthen market presence:



Acquired global rights of

Raricap

brand in FY15, which strengthened women’s

health portfolio.

Raricap

had annual sales of INR200m at the time of acquisition.



Acquired the CNS division of the erstwhile Ranbaxy from Sun Pharma in FY16; it

had annual sales of INR920m at the time of acquisition.



Acquired Johnson & Johnson’s brands portfolio in derma, anti-emetic and pain

management in FY16; it had annual sales of INR320m at the time of acquisition.

In terms of therapeutic category, STR now has products in CNS, Diabetes, CVS,

Women’s Health and Pain Management.

Post the acquisitions, integration of product portfolio, and rationalization of cost

and field force, STR has a sales force of 750 MRs and wide network catering to 3,500

stockists and 80,000 doctors.

We expect 1HFY18 performance in domestic formulations to be muted on account

of implementation of GST. However, as the effect of GST smoothens, we expect STR

to show gradual pick-up in growth and improvement in MR productivity.

On overall basis, we expect STR’s emerging market business to grow at a CAGR of

14.8% (adjusting for divested Africa generic sale) to INR8b, with better profitability

compared to previous years.

7 August 2017

Strides Shasun

Key levers in place for institutional segment

STR had sales of INR5.7b in institutional business segment and formed 16% of total

sales. It has made a few strategic moves in this segment in the last two years to

enhance sales and profitability.

Exhibit 26: We expect 15% CAGR in institutional business

revenue

Institutional business (INR b)

46.0

YoY Growth (%)

Exhibit 25: Higher product offering in institutional segment

Anti-Malaria

ARVs

Growth

drivers for

Insitutional

business

Sofosbovir

16.0

4.1

6.0

FY15

Source: MOSL, Company

FY16

FY17

5.7

-4.6

6.4

FY18E

7.3

FY19E

8.6

FY20E

12.0

15.0

18.0

Source: MOSL, Company

Before merger with Shasun, though STR was in the list of approved suppliers for

institutionally-funded projects and global procurement agencies, it was perceived as

a fringe player. It had limited formulations capacity and higher dependence on

external API. This led to moderate growth in this business.

The merger with Shasun has strengthened STR by not only adding formulations

capacity but also by enabling backward integration and securing API supply for its

products. Before the merger, STR was the only non-vertically-integrated company in

the business other than Aspen.

Collaborations and limited scope of re-entry of competitor to drive anti-

malaria business

STR started receiving orders from Global Fund to supply anti-malaria products from

2HFY15. The addition of anti-malaria products aided growth in institutional business.

This business has grown considerably due to superior execution and partly due to

regulatory issues faced by a competitor, Ipca Laboratories.

STR also collaborated with Medicines for Malaria Venture (MMV) for development

of rectal artesunate for pre-referral treatment of children with severe malaria.

7 August 2017

Strides Shasun

Industry scenario for Anti-Malaria

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

at 1.3b anti-malarial treatment courses per year and is expected to grow to 1.4b

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

comprises only about one-third of this market, and its share is expected to increase.

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

– governments 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.

Exhibit 27: Share of funding of

governments of endemic countries

Exhibit 28: Share of funding of Global

Fund

Treatment,

Health

systems, 24

Exhibit 29: Share of funding of USAID

Treatment,

Health

systems, 15

Prevention,

Health

systems, 88

Treatment,

Prevention,

Source: Industry

Specifically, through Global Fund, the number of ACTs procured from manufacturers

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

311m in 2015.

Exhibit 30: 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 Labs in tender to be awarded by Global Fund is subject

to the 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

7 August 2017

Strides Shasun

award the business. We assume loss of business to Ipca Labs to continue this year as

well, as we expect it to take longer to clear the regulatory issue.

We expect the anti-malaria tender business to remain stable for STR in FY18. Given

the regulatory hurdle for Ipca, we expect low probability for award of tender in

October-November 2017 for FY19 business, extending stable business for STR in

FY19, as well.

Focus on developing and manufacturing limited competition

products to increase ARV business over the medium term

Industry scenario for ARV

Increased ARV treatment to HIV infected adults in LMICs drive institutional ARV

business:

The anti-retrovirals (ARV) market to treat HIV infection in LMIC (low and

middle income countries) was about US$1.9b in 2015 in terms of value. ARV market

has grown at 12% CAGR over FY13-15. This is largely due to increase in number of

adult patients to be treated by ARVs. Approximately 14.4m adults received ART

(anti-retroviral therapy) in LMICs in 2015, up 13% yoy. Treatment coverage for

adults living with HIV/AIDS in LMICs increased from 41% at the end of 2014 to 46%

at the end of 2015. The number of adults on ART and ART coverage in LMICs is

expected to go to 22.5m by 2020, providing visibility of growth in ARV business.

TDF: Tenofovir Disoproxil

Fumarate, 3TC: Lamivudine,

EFV: Efavirenz.

In an effort to simplify antiretroviral therapy, the WHO’s 2013 guidelines reduced

the preferred regimens to a single option, TDF + 3TC (or FTC) + EFV, which could be

used across a range of populations as a single-pill once-daily regimen. In turn, LMICs

have made great strides towards simplifying their national treatment programs,

phasing out non-recommended drugs such as stavudine (d4T) in favor of Tenofovir-

based combinations. This progress is reflected in the consolidation of adult first-line

regimens from 2013 to 2015 around the preferred first-line regimen, Tenofovir

based combination, which represented ~72% of the adult first-line patients in GA

(Generic Accessible) LMICs in 2015, up ~from 39 percentage points in 2013.

Exhibit 32: TDF and EVF combination dominates first-line

treatment

TDF+3TC+EFV

TDF+FTC+EFV

11.6

AZT+3TC+NVP

Others

12.9

Exhibit 31: Expect 12.5% CAGR in adult patients over FY17-

LMIC Total Adults on ART(Actual/Projected) (mn)

Source: MOSL, Company

With countries ramping up TDF use in first-line treatment, EFV uptake also continues

to increase. As such, EFV600 is expected to be used among the majority of first-line

7 August 2017

Strides Shasun

patients in 2017, after which the NNRTI (class of ARV drugs) market may shift

towards new products such as lower-dose EFV (EFV400) and DTG. Both drugs are

expected to be more tolerable and more affordable than EFV600.

With increasing use of TDF in first-line, AZT’s share is expected to decline.

Tenofovir alafenamide fumarate (TAF), a potential alternative to TDF, is a tenofovir

prodrug that offers high antiviral efficacy and improved renal and bone safety

profile at much lower doses than TDF. As of August 2016, Gilead has received FDA

approval on three TAF-containing FDCs. Additionally, Gilead filed an NDA for the

TAF 25mg singles with the FDA, but only for the adult hepatitis B indication.

The first generically-available TAF FDC is likely to be launched in early-to-mid-2018.

With STR having tied up with Gilead for manufacturing and distributing Tenofovir

Alafenamide (TAF) in 112 countries, we expect good traction from this combination

post genericization.

Sofosbuvir-based drugs – huge Unmet need for HepC treatment; however,

improvement in diagnosis in developing countries remains the key

STR has entered into a licensing agreement to produce and distribute generic

Sovaldi and investigational single tablet regimen of ledipasvir/sofosbovir for

treatment of chronic Hepatitis C, for distribution to 91 developing countries

including India, Eqypt and Indonesia, which are high burden countries. STR is one of

the 13 companies with whom Gilead has signed licensing agreements.

Generic Sovaldi (Sofosbuvir) is another interesting opportunity for STR in the

institutional segment. There are 103m patients estimated to have Hepatitis C in 101

developing countries, indicating good business opportunity for STR. Of the 103m

patients, 40-50% are concentrated in Egypt, India, Indonesia and Bangladesh.

Gilead has been using different pricing strategies in different addressable markets.

In the US, Gilead sells at USD84,000 per treatment of 12 weeks with one pill a day. A

similar package is priced at USD51,000 in France and at USD900 in Egypt.

Though the opportunity looks sizable in terms of number of untreated patients, the

key constraint is lack of diagnostic systems for detecting Hepatitis C. At the same

time, public and policymaker awareness of the disease is limited, as is national and

international funding for Hepatitis C screening and treatment. We expect sales from

this opportunity to pick up only gradually.

We expect STR to deliver 15% CAGR in institutional sales to INR8.6b over FY17-20.

7 August 2017

Strides Shasun

SWOT analysis

4 August 2017

STRENGTH



R&D Driven

enables STR to develop low competition products which not only provides

visibility of higher growth, but also enhances sustainability of sales and superior margins

in US business



Fully Integrated Manufacturing Operations

leads to reduced dependency on out-

sourcing, lowers regulatory risk and increases scope of business, both, regulated market

and institutional business.



Strong Regulatory Compliance Structure

in terms of product quality and good

manufacturing practices considerably reduces scope of adverse impact on existing

business or new approvals due to regulatory hurdle.



Geographical diversification

into US, Australia, Africa and India reduces business

dependency on particular market

WEAKNESS



Current ANDA pipeline pending for approval is small compared to peers. STR has guided

for aggressive filing of 15-20 ANDAs per annum, largely low competition products over

next 3 years to not only fill product basket but also enhance business and margins.



Stringent pricing regulation in India may reduce scope of hike in prices and thereby

affect profitability.

OPPORTUNITIES



STR has been focusing on

Robust Niche Product

Pipeline like modified release, soft gel

capsules, topical and integrated products, build OTC franchise and Faster Pace of

Approval from USFDA provides strong opportunity from US market.



STR’s approach is in line with

Strong Demand for Complex

Generics wherein there is

limited competition due to complexity associated with development and/or

manufacturing operations.

THREATS



Delay in Regulatory Approval

may increase competition and thereby reduce

profitability of STR.



Higher Price Erosion

in US generics, either due to distributor level consolidation or

increased competition from supplier would impact STR’s performance as well.



Adverse Changes in Regulatory Norms

may impact outcome of strategies implemented

by STR.

Strides Shasun

Return ratios to double over FY17-20

STR’s revenue has grown at a CAGR of 38% to INR34.8b over FY14-17. This was led

by improvement in existing business as well as acquisitions. The major

acquisitions/mergers that aided revenue growth, specifically in FY16, are the merger

of Shasun Pharmaceuticals and the acquisition of Australia generics business from

Aspen. The full year benefit of the same was visibile in FY17.

Exhibit 33: Business from regulated market to drive overall revenue growth

Revenue from operations (INR bn)

138.6

62.4

Growth (%)

54.5

10.8

11.8

FY14

12.0

11.3

34.8

28.6

21.7

43.9

26.0

24.1

14.6

FY20E

FY15

FY16

FY17

FY18E

FY19E

Source: MOSL, Company

We expect 21.5% CAGR in sales, led by 26% CAGR in regulated market business and

25% CAGR in the API segment. Growth would be offset to some extent due to 15%

CAGR in institutional business and 8.4% CAGR in emerging market business.

Post the sale of Australia business in January 2012, gross margin declined from 49%

in CY12 to 33.7% in FY14. However, STR delivered sharp increase in gross margin

from 33.7% to 55.9% over FY14-17. This is mainly due increased share of high

margin products.

Exhibit 34: Superior product mix and increased cost efficiency to drive margins

Gross Margin(%)

53.3

33.7

55.9

47.5

EBITDA Margin(%)

56.1

56.4

56.6

16.6

FY14

19.1

FY15

14.5

FY16

18.5

FY17

19.0

FY18E

20.3

FY19E

20.6

FY20E

Source: MOSL, Company

However, EBITDA margin improved at lower rate of 190bp during the period due to

increased R&D spend, incremental cost associated with improving compliance, and

increased operating cost associated with some of the acquired facilities.

7 August 2017

Strides Shasun

STR has spent significant amounts on these three fronts to strengthen its R&D for

building its future product pipeline. It has invested in infrastructure, human

resources, as well as in developing capabilities. Cumulatively, STR has spent USD70m

over the last three years, largely towards setting up R&D facility, increasing R&D

headcount to 500+, and developing complex generics. These generics mainly relate

to topical and modified release drug substances.

Exhibit 35: R&D spend largely for products to be sold in regulated market

R&D spent (INR m)

1,750

1,361

525

592

757

1,984

2,112

FY14

FY15

FY16

FY17

FY18E

FY19E

FY20E

Source: MOSL, Company

With large part of the R&D spend incurred in the last three years, STR has guided

that R&D spend would be capped at USD30m per annum for the next 2-3 years. This

would not slow down or affect the pace of filing ANDAs for future growth.

STR’s net debt stands at INR21b. Till FY15, STR had a small amount of net debt.

However, mergers and acquisitions led to considerable increase in net debt. Though

net debt has increased, net-debt-to-equity ratio is comfortable at 0.8x.

Exhibit 36: Net debt to reduce through internal accruals

Net Debt (INR bn)

21.4

14.3

21.0

18.0

14.4

9.0

1.8

(0.9)

CY12

FY14

FY15

FY16

FY17

FY18E

FY19E

FY20E

Source: MOSL, Company

With STR having largely completed its capex and investment phase, the capex is

likely to be nominal and would be required for maintenance of facilities. The cash

generated from ongoing business would be largely used to repay debt and reduce

interest cost. STR intends to reduce debt by at least INR3b per annum over the next

three years to reduce financial leverage and thereby improve profitability.

7 August 2017

Strides Shasun

With the addition of new entities and improvement in profitability in existing

business, STR’s PAT multiplied 4x over FY14-17. Including API business, we expect

robust 42% CAGR in adjusted PAT over FY17-20 to INR8.2b, led by revenue growth,

improved operating efficiency, reduction in finance cost, and lower tax rate.

Exhibit 37: We expect 42% CAGR in adjusted PAT from continuing operations

Adj. PAT from continuing operations (INR bn)

6.7

4.2

2.9

0.7

FY14

1.0

FY15

1.4

8.2

FY16

FY17

FY18E

FY19E

FY20E

Note: The trend includes API business, which would be transferred to Solara; Source: MOSL, Company

We expect RoE to improve from 10.7% in FY17 to 21% by FY20.

Exhibit 38: We expect sharp improvement in return ratios

ROE

ROCE

14.7

9.4

1.4

2.7

4.3

4.9

7.3

10.7

7.3

6.5

7.8

9.2

12.2

13.7

20.1

21.0

Source: MOSL, Company

Exhibit 39: Free Cash Flow to equity to trend upward

19,572

Free Cash Flow to Equity (INR m)

1,636

3,982

-455

787

2,873

-5,927

Source: MOSL, Company

The free cash flow to equity (FCFE) has been volatile over FY14-17, largely due to

multiple corporate actions in terms of acquisition/divestment of business. We

expect FCFE to trend upward, despite decrease in net borrowings, due to better

operating cash flow and nominal maintenance capex going forward.

7 August 2017

Strides Shasun

Sensitivity analysis indicates limited downside



In our base case, we factor in 21.5% revenue CAGR to INR62b and 42% PAT

CAGR to INR8.2b over FY17-20, led by increased business from the US and

Australia. We expect EBITDA margin to expand 214bp over FY17-20 due to

increased share of high margin business and higher operating efficiency.

In our bull case, we factor in 26% revenue CAGR to INR70b and 49% PAT CAGR

to INR9.7b over FY17-20, led by faster pace of approvals and lower price erosion

from the US and superior execution in Australia. We expect EBITDA margin to

expand 288bp over FY17-20. The price target based on SOTP would be INR1,678,

implying 60% upside.

In our bear case, we factor in 17% revenue CAGR to INR56b and 33% PAT CAGR

to INR6.8b over FY17-20, led by delay in approvals and higher price erosion in

the US, and delay in ramping Australia business. We expect EBITDA margin to

expand 134bp over FY17-20. The price target on SOTP would be INR995,

implying limited downside.

Exhibit 40: Sensitivity analysis implies limited downside from current levels

Sensitivity Analysis

Revenue (INR m)

EBITDA (INR m)

EBITDA margin %

PBT (INR m)

Tax rate (%)

PAT (INR m)

EPS

Target Price

% Return

Bear Case

Base Case

Bull Case

49,104

9,428

19.2%

6,798

15.8

5,223

58.5

995

-9%

54,479

11,032

20.3%

8,537

15.8

6,687

74.8

1,300

30%

58,934

12,140

20.6%

9,756

15.8

7,714

86.3

1,678

60%

Source: MOSL, Company

7 August 2017

Strides Shasun

Valuation and view

We believe STR is set for strong earnings growth over the next 2-3 years. Over the

last three years, it has invested significantly to build pillars of future growth:



Integrated R&D capabilities

to develop complex generics for regulated markets



Vertical integration

of manufacturing facilities to reduce external dependency

for key raw materials



Strong compliance culture

to reduce regulatory risk



Increased automation

to improve efficiency and reduce compliance-related

errors



Presence in diversified markets

to reduce geography specific risk



Continued focus on branded generics

With significant part of the investments already made, we believe STR is poised for

strong improvement in return ratios. Including API business, we expect 21.5% sales

CAGR, 26% EBITDA CAGR, and 42% PAT CAGR over FY17-20.

We value STR on sum-of-the-parts (SOTP), valuing the pharma business at 18x FY19E

earnings (industry average P/E multiple for midcap pharma) and Solara at an EV of

13x FY19E EBITDA to arrive at a price target of INR1,300, implying 30% upside from

current levels. We believe there is significant value accretion in STR’s API business

on the back of niche APIs and sound compliance track record, which would drive

robust growth in sales and superior margins compared to commodity API business.

Hence, we ascribe 40% premium multiple to Solara at 13x EV/EBITDA. We initiate

coverage with a Buy rating.

Exhibit 41: Valuation snapshot

Particulars

Valuation of Strides Pharma

Strides Pharma PAT (INR m)

PE multiple (x)

Target Mkt Cap (INR m)

Valuation of Solara

API business EBITDA (INR m)

EV/EBITDA multiple

EV of API business

Net Debt of API business (INR m)

Stake of Strides Pharma (%)

Target Mkt Cap (INR m)

Total target Mkt Cap (INR m)

No. of shares

Target Price (INR)

% Upside

2,719

35,347

4500

18,508

115,922

89.4

1,300

30.0

Source: MOSL, Company

5,412

97,414

FY19

7 August 2017

Strides Shasun

Key risks



Delay in ANDA approval may result in lower growth in US business. Higher than

expected price erosion in approved products could put earnings at risk.

Higher than expected pricing pressure in Australia and India might result in

lower than expected growth in these markets.

Lower donor funding could impact growth in institutional business.

Exhibit 42: Comparative valuations (INR b)

MCap

INR b

117.8

165.5

99.9

112.0

212.3

89.9

FY17

20.0

20.7

31.0

60.1

58.6

34.8

Sales

FY18E FY19E

22.6

27.4

26.0

23.8

32.5

65.9

65.4

43.9

37.2

72.9

76.1

54.5

EBITDA margin (%)

FY17 FY18E FY19E

34.9

34.7

34.2

33.1

37.5

28.1

19.7

22.4

23.5

18.5

23.9

23.3

19.0

19.5

24.3

24.5

20.3

FY17

5.2

4.9

4.1

5.8

9.3

2.9

PAT

FY18E FY19E

5.8

7.0

6.0

4.2

3.9

7.3

9.6

4.2

4.8

8.8

12.1

6.7

P/E (x)

FY17 FY18E FY19E

24.1

21.3

17.7

35.3

34.8

27.5

25.1

19.8

23.0

31.0

26.5

15.6

22.4

21.1

21.3

12.9

17.8

13.4

RoE (%)

FY17 FY18E FY19E

37.7

32.2

29.9

32.9

25.0

24.3

23.0

19.0

20.4

18.1

19.5

19.6

25.3

22.4

24.2

10.7

14.7

20.1

Source: Company, MOSL

Ajanta

Natco

Alembic

Jubilant

Torrent

Strides

7 August 2017

Strides Shasun

Exhibit 43: STR has appreciated at 30% CAGR over the past nine years (adjusting for dividend)

1600

Completed Sale of

Agila

Announced special

dividend of INR500

per share

Acquisitons of Universal

Corp in Kenya

Acquires generic pharma

business from Aspen in

Australia for A$380m

JV with Vivimed for

US FDA formulations

Facility

1400

1200

1000

Announced

merger with

Shasun

Acquires US

FDA approved

Perrigo's API

Facility

Annnounced

Sale of Agila

MMV announces

collaborations with

CIPLA & Strides

800

600

Hives off

Commodity

API business

400

200

Sale of Ascent

Pharma

Ex-Dividend

Trading Price

Acquires 3 brands from

Moberg Pharma for $10m

Investment & Acquisition Phase for

STR Version 2.0

Source: MOSL, Company

7 August 2017

Strides Shasun

Manufacturing facilities and USFDA inspection update

Exhibit 44: Manufacturing facilities as per business segment

Business segment

Facility used to cater respective market

Bangalore FDF

Puducherry FDF

Regulated Market

SingaporeFDF *

Vivimed Chennai facility #

Perrigo API facility

Emerging market

Institutional business

Bangalore facility

Nairobi Kenya

Bangalore

Nairobi Kenya *

Source: MOSL, Company

7 August 2017

Strides Shasun

About Strides Shasun

Strides Shasun (STR) is a first generation, vertically integrated global

pharmaceuticals company, with business interests in differentiated pharma

generics, branded generics, and biopharma. It develops niche and complex products

for regulated and emerging markets.

Key personnel

Mr Arun Kumar – Founder & Chairman

Mr Kumar has founded and led Strides for 27 years. He has moved to a non-

executive position from May 18, 2017. He has been on the Board since the

company’s inception in 1990. He holds a degree in Commerce.

Mr Shashank Sinha – Managing Director

leadership positions at Godrej Consumer Products, Sara Lee Corporation, Reckitt

Benckiser plc, and Navis Capital Partners. He has a Bachelor’s Degree in Engineering

and received his MBA from the Indian Institute of Management, Lucknow.

Mr Badree Komandur – Executive Director and Group CFO

positions in IT and Engineering companies like Larsen & Tubro. He holds a Degree in

Commerce from the University of Madras and is a member of the Institute of

Chartered Accountants of India, the Institute of Company Secretaries of India, and

the Institute of Cost and Works Accountants of India.

Mr Ramaraju PVS – Chief Operating Officer

experience in the pharmaceutical industry, and specializes in Manufacturing,

Quality, Engineering, Sourcing, Warehouse, Distribution and Planning Functions.

Prior to joining Strides, he worked with organizations like Dr Reddy’s for over a

decade, USV, and Unichem. He is MTech in Pharma Chemistry from BITS, Pilani.

Mr Umesh Kale – Chief Quality Officer

Mr Umesh Kale has over 24 years of experience in the Pharma industry and has

been with Strides for more than 10 years. He is responsible for quality governance

of the entire organization. He specializes in Qualification, Process Validation, Aseptic

Processing, QMS and Automation. Before joining Strides, he worked with

organizations like Nicholas Piramal, FDC, Lupin, Dr Reddy’s and Ranbaxy. He is an

MPharm (gold medalist) from SGS Institute of Technology and Science, Indore.

7 August 2017

Strides Shasun

Financials and Valuations

Consolidated - Income Statement

Y/E March

Total Income from Operations

Change (%)

Raw Materials

Employees Cost

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 (%)

Minority Interest

Tax on dividend received from subsidiries

Reported PAT from Continuing Ops.

Adj. PAT from Continuing Ops.

Change (%)

Margin (%)

CY12

9,618

-62.3

4,918

1,203

2,490

8,612

89.5

1,006

10.5

309

697

795

342

245

7,001

7,246

112

1.5

7,123

230

-87.4

2.4

FY14

13,410

39.4

7,147

1,572

2,457

11,175

83.3

2,235

16.7

565

1,670

1,089

602

1,183

-266

918

409

44.5

2,837

-2,333

651

182.9

4.9

FY15

11,959

-10.8

5,605

1,721

2,345

9,670

80.9

2,288

19.1

640

1,648

474

386

1,560

-74

1,486

532

35.8

-6

944

1,007

54.7

8.4

FY16

28,622

139.3

15,023

3,577

5,883

24,483

85.5

4,139

14.5

1,313

2,827

1,682

921

2,066

-461

1,606

425

26.4

135

1,046

1,385

37.5

4.8

FY17

34,834

21.7

15,362

5,881

7,163

28,406

81.5

6,428

18.5

1,872

4,557

2,269

1,686

3,973

-1,002

2,971

470

15.8

462

2,039

2,883

108.2

8.3

FY18E

43,898

26.0

19,271

7,287

8,999

35,557

81.0

8,341

19.0

2,068

6,273

1,993

1,317

5,597

885

15.8

476

4,236

46.9

9.6

FY19E

54,479

24.1

23,753

8,880

10,814

43,447

79.8

11,032

20.3

2,171

8,861

1,686

1,362

8,537

1,350

15.8

500

6,687

57.9

12.3

(INR Million)

FY20E

62,414

14.6

27,088

10,111

12,358

49,557

79.4

12,857

20.6

2,247

10,610

1,527

1,311

10,393

1,644

15.8

525

8,225

23.0

13.2

Consolidated - Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Minority Interest

Total Loans

Deferred Tax Liabilities

Capital Employed

CY12

588

19,675

20,263

719

15,945

272

37,198

18,240

4,976

13,264

16,903

2,415

15,378

4,423

4,832

1,658

4,465

10,762

4,631

4,733

1,399

4,616

37,198

FY14

596

9,473

10,068

757

5,466

16,308

8,039

3,528

4,511

1,034

995

4,430

9,993

1,760

3,640

2,312

2,281

4,655

2,679

879

1,098

5,338

16,308

FY15

596

10,853

11,449

187

8,917

-54

20,500

9,437

3,792

5,645

1,368

1,712

6,300

9,668

2,077

3,900

1,469

2,223

4,194

2,065

1,268

861

5,474

20,500

FY16

894

25,685

26,579

502

38,025

126

65,232

28,578

5,104

23,474

9,267

2,942

13,085

25,462

6,131

10,330

3,116

5,885

8,998

7,754

950

294

16,464

65,232

FY17

894

26,210

27,104

1,640

42,232

557

71,532

32,901

6,976

25,925

9,670

2,045

15,897

27,335

7,380

9,971

3,295

6,690

9,340

7,465

1,445

430

17,995

71,531

FY18E

894

29,627

30,520

1,640

39,107

557

71,823

35,017

9,043

25,973

9,670

889

15,897

31,101

9,238

12,565

869

8,430

11,707

9,345

1,820

542

19,394

71,823

FY19E

894

35,019

35,913

1,640

35,832

557

73,941

36,304

11,214

25,089

9,670

754

14,997

37,781

11,287

15,593

438

10,462

14,350

11,418

2,259

673

23,431

73,941

(INR Million)

FY20E

894

41,653

42,546

1,640

32,057

557

76,799

37,515

13,462

24,053

9,670

759

14,997

43,703

12,875

17,865

978

11,986

16,383

13,024

2,588

771

27,321

76,799

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Goodwill on Consolidation

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

7 August 2017

Strides Shasun

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

CY12

2.6

6.0

226.8

1.3

1.9

FY14

7.3

13.6

112.7

336.8

-1,410.0

FY15

11.3

18.4

128.1

72.0

43,880.3

88.8

54.2

7.8

8.1

42.3

7.2

-17.6

9.4

7.3

10.8

1.3

0.6

119

2.3

3.5

0.1

FY16

15.5

30.2

297.5

4.8

49.1

64.5

33.1

3.4

4.3

30.0

0.5

8.4

7.3

6.5

7.3

1.0

0.4

132

2.8

1.7

0.8

FY17

32.3

53.2

303.3

3.7

19.3

31.0

18.8

3.3

3.7

20.0

0.4

-2.5

10.7

7.8

8.0

1.1

0.5

104

2.9

2.0

0.9

FY18E

47.4

70.5

341.6

7.6

19.3

21.1

14.2

2.9

15.3

0.8

29.9

14.7

9.2

10.1

1.3

0.6

104

2.7

3.1

0.7

FY19E

74.8

99.1

401.9

12.0

19.3

13.4

10.1

2.5

2.3

11.3

1.2

45.5

20.1

12.2

13.3

1.5

0.7

104

2.6

5.3

0.6

FY20E

92.1

117.2

476.2

14.7

19.3

10.9

8.5

2.1

1.9

9.4

1.5

74.4

21.0

13.7

15.2

1.7

0.8

104

2.7

6.9

0.4

0.1

-21.7

1.4

2.7

2.0

0.5

0.3

168

183

176

1.4

0.9

0.7

33.7

-82.3

4.3

4.9

4.4

1.7

0.8

2.1

1.5

-0.1

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

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

CY12

9,495

1,095

1,523

-888

-3,105

8,121

-6,732

1,389

-3,331

-1,942

11,054

-151

7,572

-7,877

-1,976

-137

-9,900

-940

2,597

1,657

FY14

28,899

1,539

1,835

-1,259

-2,607

28,407

-31,124

-2,717

-4,639

-7,356

47,935

-6,739

36,556

259

1,430

-2,192

-32,683

-33,185

654

1,657

2,312

FY15

9,920

640

163

-560

-959

9,205

-8,371

834

-2,406

-1,572

4,515

427

2,536

3,208

-381

-7,070

-4,213

-843

2,312

1,469

FY16

2,678

1,573

1,001

-770

-3,424

1,058

-341

717

750

312

-28,911

-28,565

12,264

18,822

-1,347

-251

29,495

1,647

1,469

3,116

FY17

3,973

1,872

584

-470

-1,352

4,606

-1,002

3,604

-3,828

-224

-2,812

1,686

-4,954

4,206

-2,269

-395

-13

1,529

179

3,116

3,295

FY18E

5,597

2,068

676

-885

-3,826

3,630

-960

2,670

1,317

357

-3,125

-1,993

-820

-476

-6,413

-2,427

3,295

869

(INR Million)

FY19E

8,537

2,171

324

-1,350

-4,467

5,214

-1,152

4,062

900

1,362

1,110

-3,275

-1,686

-1,294

-500

-6,755

-430

869

438

FY20E

10,393

2,247

217

-1,644

-3,350

7,864

-1,216

6,648

1,311

-3,775

-1,527

-1,592

-525

-7,419

540

438

978

7 August 2017

Strides Shasun

NOTES

August 2017

REPORT GALLERY

RECENT INITIATING COVERAGE REPORTS

Disclosures:

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock

broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed

public company, the details in respect of which are available on

www.motilaloswal.com.

MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock

Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Metropolitan Stock Exchange Of India Ltd. (MSE) for its stock broking activities & is Depository participant with Central Depository Services Limited

(CDSL) & National Securities Depository Limited (NSDL) and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are

available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf

Pending Regulatory Enquiries against Motilal Oswal Securities Limited by SEBI:

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 requested SEBI to provide all documents, records, investigation report relied upon by SEBI which were referred in Show Cause Notice and also sought personal

hearing. The matter is currently pending.

MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have beneficial ownership of 1% or more securities in

the subject company at the end of the month immediately preceding the date of publication of the Research Report.

MOSL and its associate company(ies), their directors and Research Analyst 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 associates of MOSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the

research report.

Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may have received any compensation from the subject company in

the past 12 months.

In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:

managed or co-managed public offering of securities from subject company of this research report,

received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,

received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.

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

MOSL 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. To enhance transparency, MOSL 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. MOSL and / or its affiliates do and seek to do business including investment banking with

companies covered in its research reports. As a result, the recipients of this report should be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research

Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

Terms & Conditions:

This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to,

copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOSL. The report is based on the facts, figures and information that are considered

true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not

been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice.

The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though

disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by virtue of their receiving this 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.

Company name

Disclosure of Interest Statement



Analyst ownership of the stock

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary

trading desk of MOSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to

subject company for which Research Team have expressed their views.

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 MOSL & 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 Hong 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:

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person

or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of

offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or

appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations

as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to

determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative

products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of

the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the

views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time

without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities

mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities

functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already

available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is

being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not

directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would

be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to

certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or

representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.

The

person accessing this information specifically agrees to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or

employees responsible for any such misuse and further agrees to hold MOSL 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.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring

Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:

na@motilaloswal.com,

Contact No.:022-30801085.

Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231;

MSE(F&O): INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset

Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth

management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities

Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products

Strides Shasun

1 August 2017