Equity Research Report

Pharmaceutical Formulations
and Consumer Healthcare
NSE/BSE Mankind Pharma

Date: 18/09/2023 Current Price: $1734.05 Target Price: ₹1358.19 / -24.5%

Ticker: NSE:MANKIND Headquarters: New Delhi, India Recommendation: SELL
Analyst: Dikshant Jain
Report Summary and Highlights
Key Highlights We issue a SELL recommendation on Mankind Pharma based on a one-year
target price of ₹ 1358.19, offering a 24.5% downside from its closing price of ₹
1797.15 on September 14,2023. Our recommendation is primarily driven by:
Macroeconomic Outlook – According to the OECD's latest Economic
Outlook, the global economy has begun to strengthen, but the recovery will
be weak. The Economic Outlook anticipates a slowdown in global GDP
growth from 3.3% in 2022 to 2.7% in 2023, followed by an acceleration to
2.9% in 2024. This could be a reason of concern and given the current
inflation rate and key rates a proper decision cannot be made based on
macroeconomic outlook alone
Growth Drivers – The pharmaceutical market will develop significantly in
Market Profile the next five years due to four primary trends. First, rising diabetes
Closing Price ₹1797.15 incidence, an aging population, obesity, sedentary lifestyles, and innovative
Avg. Daily Volume 170,480 product offerings are likely to drive the anti-diabetic medications market at
Dil. Shares Outst.(MM) 400.6 a CAGR of 10% to 12%. Second, increased infectious diseases, need for
Market Cap. ₹712667.4 generics, and novel treatments, especially for antibiotic-resistant bacteria,
Dividend Yield 0% are expected to drive the anti-infective pharmaceuticals industry to rise by
Beta 0.45 8% to 10% CAGR. Thirdly, the global nutritionals market expects a 12% to
EV / Revenue 8x 15% CAGR due to increased interest in nutraceuticals and functional foods
EV/ EBITDA 36.2x and preventative healthcare. Finally, the gynecological pharmaceuticals
P/E 55.2x market will rise at 6% to 8% due to rising prevalence, women's health
awareness, and creative product development. The pharmaceutical market
P/BV 9.5X
is growing due to rising disease prevalence, an older population, rising
disposable incomes, and technological advances.
Valuation – Valuation methods indicate a current intrinsic value of
Mankind Pharma ₹1358.19 per share. Mankind Pharma offers a downside potential of 24.5%.
Portfolio value 10,00,000 This can be mainly attributed to the stock being overbought too much
Expected volatility(daily) 3.74% although it has a good future outlook. The HOLT CFROI of 15.54% explains
the reason behind the stock being overvalued.
Time(days) 1
Confidence interval 99% Main Risk factors – The main risk factors for Mankind Pharma stock
Z-value 2.33 include its high volatility which is also reflected in the VaR calculation.
Apart from this regulatory risk is also a major one.
VaR 87142

SHAREHOLDING PATTERN
Institutions Corporations (Private) Individuals/Insiders Public and Others

8%
25%

27%

40%
 Key Metrics:

Business Description
Mankind Pharma Limited is a pharmaceutical firm headquartered in India
and founded in 1995 by former pharma salesman Ramesh Juneja and his brother
Rajeev. The company recently went public and has 25 manufacturing facilities
across India.
The organization is involved in researching, producing, and promoting a
wide array of pharmaceutical formulations that cater to different acute and
chronic therapeutic fields alongside numerous consumer healthcare products.
The company's consumer healthcare sales are driven by VMS (74.53%),
antacids (13.39%), condoms (7.54%), emergency contraceptives (0.85%), acne
preparations (2.57%), and pregnancy tests (1.12%).
Mankind Pharma is the fourth-largest pharmaceutical company in India by
domestic sales and third-largest by sales volume. The company's revenue from
operations was INR 8,749 crore in the year ended March 31, 2023, up 12% year-
over-year.
The company possesses a diverse range of formulations across many
therapeutic domains, including but not limited to anti-infectives, cardiovascular,
gastrointestinal, vitamins/minerals/nutrients, respiratory, anti-diabetic,
dermatological, gynaecological, and pain/analgesics. The pharmaceutical
compound also encompasses other therapeutic domains such as urology,
ophthalmology, antiparasitic treatment, stomatology, antineoplastic and
immunomodulatory interventions, hepatoprotective measures, anti-malarial
remedies, blood-related treatments, hormonal interventions, antiviral
medications, sex stimulants and rejuvenators, anti-tuberculosis drugs,
parenteral interventions, and vaccinations.
The company's assortment of brands encompasses Nurokind, Telmikind,
Manforce (Rx), Gudcef, Moxikind, Amlokind, Glimestar, Asthakind, Codistar,
Candiforce, Mahacef, Dydroboon, Cefakind, Zenflox, Monticope, Dynaglipt, and
several others.
Industry Overview and Competitive Positioning

Mankind Pharma reported growing consolidated net profit quarter-over-

quarter. This bodes well for the company's finances and profitability.

Mankind Pharma is looking to bolster its presence in the consumer healthcare

business. This high-growing segment is expected fuel firm growth.

Mankind Pharma is India's third-largest pharmaceutical company by market

valuation. This gives the organization financial strength and a large consumer
base.

Strong industry fundamentals: Mankind Pharma has solid pharmaceutical

sector fundamentals: high profit margin, earnings quality, and low debt. The
corporation has little debt, great profit margins, and industry leading return
ratios.

Mankind Pharma's sales growth, operational cash yield, and interest funding are
at 5-year highs. This bodes well for the company's finances and cash flow.

The stock’s beta is negatively associated with Sensex, i.e., Mankind Pharma's
stock price moves against the Sensex due to its negative correlation. This makes
the stock low-risk investment.

Mankind Pharma trades above its peers. However, despite its strong
fundamentals, the stock trades at multiples much higher that the industry
average.

Strengths:

Strong emphasis on innovation and research and development: Mankind

Pharma has a team of R&D experts who have created several new and innovative
products, including the anti-diabetic drug Gluconorm and the anti-allergic drug
Fenistil. This emphasis on innovation has allowed the business to maintain its
competitive advantage.

Mankind Pharma conducts market research to develop new products and

marketing campaigns that are tailored to the requirements of its target
consumers. For instance, the company launched a campaign to promote the
importance of excellent oral hygiene among children.

Mankind Pharma has been able to adapt its business model to satisfy the ever-
evolving demands of the market. For instance, the company has expanded into
international markets and prioritized generic medications.

Mankind Pharma's revenue and profit have consistently increased over the past
few years, indicating a strong financial performance. Additionally, the company
is profitable and has a low debt load.

Mankind Pharma's management team is comprised of seasoned professionals

with a track record of success. Rajeev Juneja, the company's CEO, has been with
the company for over 20 years and has held several senior positions.

Weaknesses:

Mankind Pharma's products are subject to patent protection, which could lead
to revenue loss if competitors develop and sell generic versions. Mankind
Pharma has also been criticized for its lack of attention to domestic marketing
and branding. This could result in competitors gaining market share at it’s
expense

Exposure to regulatory risks: As the pharmaceutical industry is extensively

regulated, Mankind Pharma is exposed to regulatory risks. Any regulatory
alterations could have a negative impact on the company's operations.

Mankind Pharma is a pharmaceutical corporation with a strong emphasis on

innovation and customer-centricity. However, the company confronts obstacles
such as limited patent protection and a lack of emphasis on domestic marketing
 and branding.

The company is in a good competitive position and has a track record of

innovation and financial performance and is the third-largest pharmaceutical
company in India by market capitalization. However, the business confronts
competition from multinational pharmaceutical corporations with a larger
market share and greater resources. Mankind Pharma must continue to
prioritize innovation and marketing to preserve its competitive advantage.
Additionally, the company should consider expanding its concentration on
generic drugs, which are gaining popularity due to their lower prices.

Outlook for Business Segments:

 Anti-diabetic drugs:

Diabetes prevalence is driving the segment to increase at a CAGR of 10% to 12%

over the next five years. Diabetes is a chronic condition that affects millions
worldwide and is anticipated to rise. The aging population, rising obesity rate,
and sedentary lifestyle contribute to this.

The focus on preventative healthcare should also help anti-diabetic medications.

Prevention activities like screening and education are receiving more funding
from governments and healthcare professionals. These programs reduce
diabetes and the risk of other chronic diseases.

New and innovative products should also benefit the anti-diabetic medications
industry. The FDA has authorized several new anti-diabetic medications
recently. These new medications are safer and more effective than older ones.

 Anti-infective medications:

Due to increased infectious disease rates, anti-infective medications are

predicted to grow at 8% to 10% over the next five years. Infectious diseases
cause death and disability worldwide, and their prevalence is predicted to rise.
Antibiotic-resistant germs, new illnesses, and an aging population are primary
contributors.

The rising demand for generic medications should also boost anti-infective
drugs. Generic medications are cheaper than brand-name drugs and are
growing more popular as governments and healthcare providers cut
expenditures.

New and innovative products should also benefit the anti-infective medications
segment. The FDA has authorized several new anti-infective medications
recently. These new medications are safer and more effective than older ones.

 Nutritionals:

The increased demand for nutraceuticals and functional meals is predicted to

grow the nutritionals category by 12% to 15% over the next five years.
Nutraceuticals are foods or supplements with health advantages beyond
nutrition. Functional foods are improved with nutrients or other healthful
elements.

Nutraceuticals and functional foods are in demand due to greater understanding

of nutrition, an aging population, and chronic disease rates. Diet and nutrition
are increasingly sought to promote health.

The growing focus on preventive healthcare should also boost nutritionals.

Prevention activities like screening and education are receiving more funding
from governments and healthcare professionals. Nutraceuticals and functional
diets are promoted in these programs to lower chronic disease risk.

 Gynaecological drugs:

Due to increased gynaecological diseases, the market is predicted to rise 6% to

8% over the next five years. Gynaecological conditions impact women's
reproductive organs. These disorders can affect women of all ages and range
from minor to severe.
Global and macro industry, Sector trends and outlook:

Global GDP Outlook:

The expected global growth will slow from an estimated 3.5 percent in 2022 to
3.0 percent in 2023 and 2024. Even while the projection for 2023 is slightly
better than what was projected in the World Economic Outlook (WEO) for April
2023, it is still low by historical standards. The increase in policy rates by central
banks to combat inflation continues to have a negative impact on economic
growth. It is anticipated that global headline inflation will decrease from 8.7%
in 2022 to 6.8% in 2023 and 5.2 percent in 2024. Forecasts for inflation in 2024
have been upgraded, and underlying (core) inflation is expected to drop more
gradually.

In the majority of economies, maintaining financial stability while attaining

prolonged deflation remains the top goal. Therefore, central banks should
continue to prioritize reestablishing price stability while enhancing financial
oversight and risk management. Countries should quickly provide liquidity if
market tensions arise while reducing the chance of moral hazard. Additionally,
they must create budgetary buffers, with the makeup of the fiscal adjustment
assuring targeted assistance for the most defenseless. A smoother decrease in
inflation toward target levels and fiscal consolidation would be made possible
by improvements to the economy's supply side.

India’s GDP outlook:

India's real gross domestic product grew by 6.83 percent over the previous year
in 2022. In recent years, economic attention and focus have shifted in favor of
the developing economies of the BRIC nations—Brazil, Russia, India, and China.
Gross domestic product growth rates in the BRIC nations are significantly higher
than in nations with historically robust economies, such the US and Germany.
Inflation has risen sharply in recent years, which has hindered GDP growth. The
industry and service sectors in India are employing more people, in part because
of overseas outsourcing, which has been beneficial for the Indian economy.

Pharmaceutical Sector Globally:

The global Pharma market is projected to increase at a CAGR of 4.5–5% to reach

US$ 1,600–1,650 billion by Financial Year 2027 from an estimated US$ 1,288.83
billion in Financial Year 2022.

Key Drivers:

Aging population: Rapid population aging increases chronic diseases and

pharmaceutical usage.

Chronic diseases on the rise: Rapid urbanization, sedentary lifestyles, and

poor diets are increasing the incidence and prevalence of chronic diseases like
chronic respiratory disease, and cardiovascular disease worldwide.

Strong global generic market growth: Generics become more popular

worldwide due to global initiatives to lower healthcare prices, exacerbated by a
COVID-19-induced economic crisis, declining purchasing power, and financial
difficulties.

Health insurance coverage expansion: Basic health insurance coverage will

expand in some nations, benefits will be expanded in others, and private health
insurance will grow. Such as Ayushman Bharat –Pradhan Mantri Jan Arogya
Yojana (AB-PMJAY) health insurance scheme in India.

Pharmaceutical Sector in India:

The Indian generic drugs and economical vaccinations are known worldwide.
Over time, Indian Pharma has grown into the third-largest pharmaceutical
manufacturer. India is third in volume and fifteenth in value in the global
pharmaceutical sector. Pharmaceuticals comprise 1.72% of the nation's GDP.

The EY FICCI report predicts that the Indian pharmaceutical market would
reach US$ 130 billion by 2030 due to a growing consensus on providing patients
with new, innovative medications. In 2023, the global pharmaceutical market is
expected to exceed $1 trillion.

Pharmaceutical sales in India are expected to reach US$ 65 billion by 2024 and
US$ 130 billion by 2030. Official estimates put the Indian pharmaceutical market
at $50 billion, with exports contributing $25 billion. India exports 20% of
generic drugs. Indian pharmaceutical companies dominate US and EU
prescription medicine sales. India has the most FDA-approved plants outside US.

The Indian Economic Survey 2021 predicts a three-fold expansion in the home
market during the next decade. The Indian pharmaceutical market was worth
US$ 42 billion in 2021 and is expected to reach US$ 65 billion by 2024 and US$
120–130 billion by 2030. India's biotechnology sector includes
biopharmaceuticals, bioservices, bioagriculture, bioindustry, and
bioinformatics. The Indian biotechnology market was $70.2 billion in 2020 and
expected to reach $150 billion by 2025. Medical equipment sales in India
reached $10.36 billion in FY20. The market is expected to expand 37% to $50
billion from 2020 to 2025. As of August 2021, CARE Ratings expects India's
pharmaceutical business to increase 11% annually over the next two years,
reaching $60 billion.

India is a major pharmaceutical player and growing. India produces the most
generic pharmaceuticals, 20% of the global volume supply and 60% of
vaccination demand. The Indian pharmaceutical sector is worth $42 billion
globally. August 2021 saw 17.7% annual growth in the Indian pharmaceutical
sector, up from 13.7% in July 2020. India Ratings & Research expects FY22
pharmaceutical sales to expand over 12% YoY.

Key drivers:

Potential in the market for generics: India is the world's largest generic
medication supplier and has the second-most US FDA-approved factories
outside the US. India exports 20% of generic pharmaceuticals globally.

Demographic Factors: Population growth is predicted to increase the patient

pool by over 20% in the following decade (till 2030).

Access to Healthcare: Mckinsey predicts a $200 billion investment in medical

infrastructure over the next decade. Expect new business models to expand to
tier-2 and 3 cities. Over 160,000 hospital beds to be added annually throughout
the following decade.

Expansion in the Insurance Healthcare sector: a surge in the general public's

demand for healthcare insurance as a result of rising healthcare expenditures.
This, together with the rising elderly population

Investment in Healthcare sector: Greenfield projects are permitted to accept

100% FDI. Under the government strategy, foreign direct investment can make
up to a hundred percent of brownfield project investments. Demand expansion,
cost advantages, and governmental support have all played important roles in
attracting foreign direct investment (FDI).

Key Trends in Pharma:

Rise in exports: India accounts about 20% of worldwide generic drugs exports.
Drug and pharmaceutical exports accounted for 6.47% of overall exports in
March 2023, with an estimated US$ 2.48 billion.
Partnerships with Countries: Japanese firms are invited to invest in the Indian
pharmaceutical and medical device industry. The Pharmaceutical Traders
Association and Japan Federation of Medical Devices Associations can
collaborate to stabilize the global supply chain, particularly for APIs and medical
devices.

M&A: Mankind Pharma said Tuesday that it purchased Panacea Biotec's Indian
and Nepalese formulation brands. The sale of Domestic Formulation Brand
portfolio is part of the Company's strategy to become debt-free and focus on
pharmaceutical formulation exports in US and other foreign markets in addition
to vaccines. Dr. Reddy's Laboratories Ltd. partnered with MediCane Health in
April 2022 to launch medical cannabis products in Germany.

Incentives on orphan drugs: Increasing focus on orphan medications and rare

disorders. Pharmaceutical companies were encouraged to find medicines for
rare diseases by regulatory incentives.

Pricing and Market access: Pharmaceutical pricing and market access were
receiving attention. Governments and insurers sought strategies to lower
medicine prices and ensure patient access.

Key factors in the industry:

• Research and Development (R&D): Continuous investment in R&D is

critical for pharmaceutical companies. Developing innovative drugs
and therapies that address unmet medical needs is a key success factor.

• Regulatory Compliance: Strict adherence to regulatory requirements is

essential in the pharmaceutical industry. Companies must navigate
complex and evolving regulatory frameworks to ensure product safety
and efficacy.

• Intellectual Property Protection: Patents and intellectual property

rights are vital for protecting proprietary drug formulations. Securing
and defending these patents is crucial for maintaining a competitive
advantage.

• Sales and Marketing: Effective sales and marketing strategies are

essential for promoting pharmaceutical products to healthcare
professionals and consumers. Building strong relationships with
healthcare providers and effective direct-to-consumer advertising can
drive sales.

• Sales and Marketing: Effective sales and marketing strategies are

essential for promoting pharmaceutical products to healthcare
professionals and consumers. Building strong relationships with
healthcare providers and effective direct-to-consumer advertising can
drive sales.

• Mergers and Acquisitions: Strategic mergers and acquisitions can help

companies expand their product portfolios, access new markets, and
strengthen their position in the industry.

Porter’s 5 forces:

Threat of New Entrants: The pharmaceutical industry has high barriers to

entry due to the substantial capital required for R&D, regulatory hurdles, and
the need for an established distribution network. Existing companies benefit
from economies of scale, making it difficult for new entrants to compete.

Bargaining Power of Suppliers: Pharmaceutical companies rely on suppliers

for raw materials, active pharmaceutical ingredients (APIs), and manufacturing
equipment. Suppliers with unique or scarce resources may have some
bargaining power, but overall, the pharmaceutical industry has a relatively
lower supplier power compared to some other industries.
Bargaining Power of Buyers: Healthcare providers, government agencies, and
insurance companies are the major buyers of pharmaceutical products. They
often have substantial bargaining power, especially in price negotiations. The
availability of generic alternatives can also give buyers more options.

Threat of Substitutes: There is a moderate threat of substitutes in the

pharmaceutical industry. Generic drugs and alternative therapies can
sometimes replace branded pharmaceuticals, particularly when patents expire.
However, for certain conditions and specialty drugs, there may be fewer
substitutes.

Rivalry Among Existing Competitors: Competition among pharmaceutical

companies can be intense. The industry is characterized by numerous
companies vying for market share, especially in therapeutic areas with high
demand. Price competition, product innovation, and marketing efforts are
common battlegrounds.

It's important to note that the pharmaceutical industry is highly regulated and
subject to changes in healthcare policies and regulations, which can influence
the dynamics of these forces. Additionally, factors like intellectual property,
research capabilities, and market access strategies can further impact a
company's competitive position within the industry.

Government Initiatives:

• PM The Jan Aarogya Yojana (PM-JAY), Ayushman Bharat Yojana,

Pradhan Mantri Suraksha Bima Yojana, and Aam Aadmi Bima Yojana
(AABY) aim to offer health insurance to economically disadvantaged
individuals in India.

• To help consumers cover COVID-19 medical expenses, the Insurance

Regulatory Development Authority of India (IRDAI) has authorized two
basic health insurance policies: Corona Kavach and Corona Rakshak.

• SPI: The "Strengthening of Pharmaceutical Industry (SPI)" program,

funded by US$ 60.9 million (Rs. 500 crore), supports current pharma
clusters and MSMEs nationwide in enhancing productivity, quality, and
sustainability.

• The Ayushman Bharat Digital Mission (ABDM) allows citizens to link

their digital health records to their ABHA (Ayushman Bharat Health
Account) numbers. This enables continuous health records and
enhances clinical decision-making for healthcare professionals.

• PLI: The production-linked incentive (PLI) scheme in India aims to

boost production of important starting materials, medicinal
intermediates, and active pharmaceutical ingredients. US$ 932.66
million was awarded by the government.

• Budget 2023-24: The plan includes raising awareness, screening 7

crore individuals aged 0-40 in affected tribal communities, and giving
counseling through coordinated efforts. ICMR labs will receive
government support for research by public and private medical college
academics and private sector R&D teams.

• BIRAC: BIRAC promotes biotech research and innovation in India. The

council will fund biotech businesses for technology and product
development.
 Financial Analysis

Key Income Statement

items
100%
80%
60%
40%
20%
0%
-20% 2020 2021 2022 2023 2024E 2025E

Revenue Growth %
Operating Profit Growth %
Net Profit Growth %

Mankind Pharma shows strong top and bottom line numbers growing at a 5 year CAGR of
12.08% and Net profit at a 5 year CAGR of 16%, it shows the robust revenue and profit
making abilities of Mankind Pharma. However, as generic pharma companies increase
growth but inorganically opt for acquisitions of other companies. Mankind pharma acquired
Panacea Biotec firm that adds value to Mankind’s product portfolio and operations.
Leverage Ratios Analyzing the liquidity position of Mankind pharma, Mankind has a higher multiple of current
0.15 100.00 and quick ratio that is 2.32 and 1.52 compared to the industry median that is 1.79 and 1.08.
0.10 The projections of the current and quick ratio will continue to grow based on our
50.00
0.05 assumptions.
0.00 0.00
In terms of solvency position of Mankind Pharma, debt to equity ratio (year 2023) is
0.022 compared to industry median of 0.21 and interest coverage ratio of 40.65664515
compared to 11.12 industry median. It represents Mankind in a good financial position,
Debt/Equity
and to cover most of the long term obligations from funds generated from the operations.
Interest Coverage Ratio
Since 2019, the ROE and ROA have been increasing significantly, but lowered in 2021
due to Covid. In the following year, the acquisition of Panacea Biotec company. The ROE
and ROA have declined but more like to increase in the future.

Positive outlook for Mankind Pharma:

With a growing economy, share, and a $24.53 Billion Indian generic drug
industry expected to grow by 6.97 % CAGR, we believe Expedia Inc. can
capitalize on this opportunity for economic viability, solid financial standing,
and brand diversity. Mankind pharma is likely to invest in marketing, and
innovating the product line will help in to gain sustainable growth in a highly
competitive industry.
 VALUATION
Valuation Price Target: ₹ 1358.19
Average DCF Valuation 1513.94
A number of valuation methodologies were utilized in deriving a target price
Average Residual Income Valuation 1190.37
for Mankind including a 5 year DCF, a Relative Valuation (trading multiples)
Average Relative Valuation 1370.27
using Public Comparable Company Analysis and Residual Income Valuation.

DCF Model
Cost of Capital Calculation A Discounted Cash Flow Analysis was used to estimate the intrinsic Value of
Mankind Pharma due to the predictability of cash flows in relation to growth
WACC and profitability. The base case for this model was formulated using guidance
from historical performance, industry outlook, an assessment of Mankind’s
Rf 7.24% competitive positioning, and company guidance on acquisitions, revenue, and
EMRP 8.33% earnings growth.
No. of Shares Outstanding 400.6
Price Per share 1779 This model is driven by Free Cash Flow to the Firm as this represents cash that
MV of Equity 712667.4 is available for debt and equity holders and is calculated as EBIT minus taxes,
BV of Debt 771.4 plus D&A, minus CaPEx and change in Net Working Capital. The historical
E/V 99.89% horizon is five years (2019 to 2023), where we have seen steady sales growth
D/V 0.11% rates and margins, making FCF forecasts more predictable and reliable.
B_equity 0.44
Ke 10.90% Model Assumptions:
Kd 8.00%
Income Statement Assumptions: The revenue has been projected
WACC 10.89%
using the past 5-yr CAGR and the expected industry growth rate. The
expense assumptions like COGS, SG&A, Depreciation and Amortization
TV 683871.81
PV of TV 407771.43 have been projected using their average historical weights as a
EV 471110.23 percentage of revenue. The above figures have been used to arrive at
Net Debt -2276.84 EBIT.
Equity 473387.07
No. of Outstanding Shares 400.06 Capex and NWC Assumptions: The Capex has been estimated as a
Price per share 1183.29 percentage of Revenue. The Capex for FY24 onwards is expected to lie
between 500-600 Cr. It has been adjusted accordingly as a percentage
Sensitivity Analysis of projected revenue. As for the NWC it has been estimated using the
historical figures as a percentage of revenue.
WACC
Growth Rate 1183.29 10.39% 10.64% 10.89% 11.14% 11.39% Weighted Average Cost of Capital (WACC)
6.50% 1028.00 976.75 930.19 887.72 848.82
6.75% 1075.35 1019.19 968.41 922.29 880.22 As a common discount rate, we used the WACC as this metric represent
7.00% 1127.99 1066.11 1010.47 960.17 914.48 best the equity and debt holders interest. To calculate Cost of Equity,
7.25% 1186.86 1118.28 1056.98 1001.85 952.02 we utilized the traditional CAPM. For Beta estimation we have
7.50% 1253.12 1176.62 1108.67 1047.94 993.33 performed a linear regression and used the estimated coefficient as an
input into the Blume’s Method (Adjusted Beta = 0.33 + 0.67 * Estimated
Revenue % Change Growth Rate Beta). We have also employed a relative valuation methodology to
Base Case Scenario 0% 7.00% estimate the Beta using peers. The unlevered Beta is then levered back
Best Case Scenario 10% 9.00% according to Mankind’s Capital Structure. The average of these two beta
Worst Case Senario -10% 6.00% estimates has been taken in the CAPM model Beta. The Risk-free rate is
taken from the 10 Yr India Treasury Bond, while the Market risk
premium has been taken from Aswath Damodaran’s estimates. The cost
Min Diff Max
of debt has been estimated using Refinitiv Eikon. The Effective Tax Rate
Base Case Scenario 951.07 624.49 1575.57
has been used to arrive at the After-tax cost of Debt. The market value
Best Case Scenario 1619.77 3510.24 5130.01 of equity and debt have been taken to arrive at the WACC.
Worst Case Scenario 763.09 367.89 1130.99
Terminal Value
WACC 10.89% Using the Perpetuity Growth Method, we get a terminal value which repre- sents
Growth Rate 7.00% 85.6% of the total estimated Enterprise Value, making it a substantial number with
Tax Rate 25.00% more than 3/4 portion in our model. For this and various other reasons, we utilized
the relative multiple approach as well to combine our findings.
 Business Scenario Growth Rate
The growth rate estimated using ROIC and Reinvestment rate was coming out to be
Scenario 1
12.87% which is too large a number for the stable growth rate. So, we took the growth
Revenue % Change 0.00% Price/Share 1183.29 rate of 7% which is close to the GDP growth rate of India and less than the Risk-free rate.
Growth Rate 7.00%

Average DCF Valuation 1513.94

Sensitivity and Scenario Analysis

ROIC 66.00% 68.94% 70.60% 43.61% 45.92% As we never rely on one number due to the fact that with DCF modelling lots of
assumptions are involved, we conducted sensitivity analysis to get a range of potential
values, at which change in revenue growth and exit multiple (indus- try multiple) as well
Reinvestment Rate 19.23% 13.85% 43.72% 20.37%
as change in perp. Growth rate and WACC were most important.
Three different scenarios have also been utilized and a scenario and sensitivity analysis
Intrinsic Growth Rate 13.26% 9.78% 19.07% 9.35%
has been presented. The average of these three scenarios has been taken as the expected
value of Mankind’s stock.

Sensitivity And Scenaro Analysis

Worst Case Scenario 763.09 909.57 1130.99

Best Case Scenario 1619.77 2448.96 5130.01

Base Case Scenario 951.07 1183.29 1575.57

0.00 1000.00 2000.00 3000.00 4000.00 5000.00 6000.00

Residual Income Valuation

Residual income valuation is a method used to assess the intrinsic value of a
company's equity. It goes beyond traditional valuation techniques like discounted
cash flows. This approach calculates the value of a firm by considering its residual
income, which is the difference between its net income and a required rate of return
on shareholders' equity. By focusing on residual income, it takes into account the
firm's economic profit, emphasizing its ability to generate returns above the cost of
capital. This makes it a valuable tool for gauging a company's true financial
performance and its potential for creating shareholder wealth over the long term.

𝑅𝐼(𝑡) = 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑜𝑓 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟(𝑡) − 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 ∗ 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦(𝑡 − 1)

Model Assumption:
As there is no stable Dividend Payout Ratio observed. So, the retained earnings of
the current year (that is NI + Dividend of current year) are equal to the net income
of the current year, assuming dividends=0.

Terminal Value
The growth of the earnings is 7% for terminal value and cost of equity = 10.7%
Residual income 2028*(1+7%)/(10.7%-7%).
 Relative Valuation
For our comparable universe we tried to select companies who are similar to
Mankind, in terms of profitability, geographic area, size, product offerings,
customer base and capital structure or who compete with Mankind in some
segment.

Our universe of trading comps consists of Lupin, Torrent Pharma, Cipla, Sun Pharma
and Dr. Reddy’s Laboratories. To account for differences in capital structure, we have
used EV/EBITDA and EV/Revenue multiples as comparable pre-interest, pre-
depreciation and amortization cash flow figures. We also used a normalized P/E and
P/CF multiple approach to calculate the value of Mankind Pharmaceuticals by taking a
mean measure of values from each of the aforementioned multiples as computed from
the FY2023 results.

range from 3.79x to 2.97x and from 16.46x to 18.39x respectively from its mean to
median, a P/E multiple range from 35.8x to 27.3x, a P/B multiple range of 4.27x to 3.3x
and P/CF multiple range of 20.64x to 21.27x in 2023 has led to a relative value in the
range of ₹497 to ₹1370 per share, representing over 20% discount to its current share
price.

The ranges are displayed in the chart below, describing the extensive range of
possible values. The multiples in LTM 2023 data represent the smallest range
which make them a better estimator.

FOOTBALL FIELD ANALYSIS

P/B 335.51 1187.74

P/CF (dil.) 544.93 1089.…

P/E (normalized) 530.27

EV/EBITDA 589.65 1015.93

EV/Sales 282.27 1211.76

200.00 400.00 600.00 800.00 1000.00 1200.00 1400.00 1600.00 1800.00 2000.00 2200.00
 Investment Risks
Business Risks:

Regulatory risks:
Mankind is subject to extensive government regulations which are also subject to
change. If it fails to comply with the applicable regulations prescribed by the
governments and the relevant regulatory agencies, its business, financial condition,
cash flows and results of operations will be adversely affected.
It is also required to obtain, maintain or renew the statutory and regulatory approvals,
licenses, and registrations to operate its business.

Operational Risks:
The inability to accurately forecast demand for its products and managing inventory
may have an adverse effect on its business, financial condition, cash flows and
results of operations.

Brand Degradation Risk:

Failure to maintain and enhance, or any damage to, the brands, product image or reputation
could adversely affect the market recognition of, and trust in Mankind.

Economic Risk

Macroeconomic Outlook:
According to the OECD's latest Economic Outlook, the global economy has
begun to strengthen, but the recovery will be weak. The Economic
Outlook anticipates a slowdown in global GDP growth from 3.3% in 2022 to
2.7% in 2023, followed by an acceleration to 2.9% in 2024.

Exchange Rate Risk:

Although Mankind’s reporting currency is Indian Rupees, it transacts a portion
of the business in several other currencies, primarily in U.S. dollars. For the
Financial Years 2020, 2021 and 2022, its revenue from operations outside
India amounted to ₹764.02 million, ₹1,858.97 million and ₹1,868.07
million, respectively, representing 1.30%, 2.99% and 2.40%, respectively, of
the total revenue from operations.

Inflationary Risks:
Inflation rates in India have been volatile in recent years, and such volatility
may continue. In recent years, India has experienced consistently high inflation,
which has increased the price of, among other things, our rent, raw materials and
35000000 38.00%
wages. If this trend continues, Mankind be unable to accurately estimate or control
30000000
28.00%
the costs of production and this could have an adverse effect on its business
25000000
20000000 18.00%
and results of operations.
15000000
10000000
8.00%
Market Risks
-2.00%
5000000
0 -12.00%
Highly volatile stock price
The market price of Mankind is highly volatile with a historical daily
Standard Deviation of 3.74%. Changes in market behavior can influence its
share price. The 1-day VaR (99% confidence) is estimated to be ₹87,142 for
Mankind Pharma
a portfolio worth ₹10,00,000
Portfolio value 10,00,000
Expected volatility(daily) 3.74%
Time(days) 1
Confidence interval 99%
Z-value 2.33
VaR 87142
Appendix A:
Financial Statement Projections
Restated Reclassified Reclassified Reclassified Reclassified
For the Fiscal Period Ending 12 months 12 months 12 months 12 months 12 months Assumptions 12 months 13 months 12 months 14 months 12 months
Mar-31-2019 Mar-31-2020 Mar-31-2021 Mar-31-2022 Mar-31-2023 Mar-31-2024 Mar-31-2025 Mar-31-2026 Mar-31-2027 Mar-31-2028
Currency INR INR INR INR INR INR INR INR INR INR

Revenue 49,799.8 58,718.7 62,144.3 77,815.6 87,494.3 Growing at Past 5 yr CAGR 1,00,732.22 1,15,973.01 1,33,519.72 1,53,721.26 1,76,979.28
Other Revenue - - - - - - - - - -
Total Revenue 49,799.8 58,718.7 62,144.3 77,815.6 87,494.3 1,00,732.22 1,15,973.01 1,33,519.72 1,53,721.26 1,76,979.28

Cost Of Goods Sold 17,516.1 19,218.7 18,471.4 24,878.9 30,031.4 Past 5 yr average as a % of revenue 33024.47 38021.08 43773.66 50396.62 58021.63
Gross Profit 32,283.6 39,500.0 43,672.9 52,936.7 57,462.9 67,707.75 77,951.93 89,746.06 1,03,324.64 1,18,957.66

Selling General & Admin Exp. 14,709.2 16,082.1 18,194.7 20,934.2 23,125.6 Past 5 yr average as a % of revenue 27096.97 31196.74 35916.81 41351.02 47607.43
R & D Exp. - - - - -
Depreciation & Amort. 690.3 990.6 1,189.7 1,666.2 3,259.2 Past 5 yr average as a % of revenue 2186.68 2517.52 2898.42 3336.95 3841.83
Other Operating Expense/(Income) 8,189.7 7,721.8 8,385.5 12,013.9 15,195.3 Past 5 yr average as a % of revenue 14203.24 16352.19 18826.28 21674.70 24954.08

Other Operating Exp., Total 23,589.2 24,794.4 27,769.9 34,614.3 41,580.1 43,486.89 50,066.45 57,641.51 66,362.67 76,403.34

Operating Income 8,694.4 14,705.6 15,903.0 18,322.4 15,882.8 24,220.86 27,885.48 32,104.55 36,961.97 42,554.32

Interest Expense (403.1) (215.5) (193.0) (557.8) (402.7) Constant (402.7) (402.7) (402.7) (402.7) (402.7)
Interest and Invest. Income 59.3 171.8 387.3 129.3 127.7 Constant 127.7 127.7 127.7 127.7 127.7
Net Interest Exp. (343.8) (43.7) 194.2 (428.6) (275.1) (275.1) (275.1) (275.1) (275.1) (275.1)

Income/(Loss) from Affiliates 99.4 115.4 116.8 144.5 124.2 Constant 124.2 124.2 124.2 124.2 124.2
Currency Exchange Gains (Loss) (5.4) (10.3) 5.0 88.4 104.1 Constant 104.1 104.1 104.1 104.1 104.1
Other Non-Operating Inc. (Exp.) 11.8 49.4 51.2 486.0 536.4 Constant 536.4 536.4 536.4 536.4 536.4
EBT Excl. Unusual Items 8,456.3 14,816.4 16,270.2 18,612.8 16,372.4 24,710.49 28,375.11 32,594.18 37,451.60 43,043.95

Impairment of Goodwill - - - - (38.5) Cosidering no further impairment - - - - -

Gain (Loss) On Sale Of Invest. 295.8 (224.4) 628.6 1,129.5 374.3 Constant 374.3 374.3 374.3 374.3 374.3
Gain (Loss) On Sale Of Assets (6.2) 109.5 (30.4) (37.4) 16.6 Constant 16.6 16.6 16.6 16.6 16.6
Asset Writedown (6.5) (207.7) (38.9) (57.6) (97.1) Constant (97.1) (97.1) (97.1) (97.1) (97.1)
Insurance Settlements 6.6 6.7 9.4 13.6 43.1 Constant 43.1 43.1 43.1 43.1 43.1
Other Unusual Items - (123.1) 77.2 85.3 41.5 Constant 41.5 41.5 41.5 41.5 41.5
EBT Incl. Unusual Items 8,746.0 14,377.4 16,916.1 19,746.0 16,712.4 25,088.95 28,753.57 32,972.64 37,830.06 43,422.41

Income Tax Expense 2,641.2 3,815.9 3,985.8 5,216.4 3,615.6 Past 5 yr effective tax rate 6,272.24 7,188.39 8,243.16 9,457.52 10,855.60
Earnings from Cont. Ops. 6,104.8 10,561.4 12,930.4 14,529.6 13,096.8 18,816.72 21,565.18 24,729.48 28,372.55 32,566.81

Earnings of Discontinued Ops. - - - - - - - - - -

Extraord. Item & Account. Change - - - - - - - - - -
Net Income to Company 6,104.8 10,561.4 12,930.4 14,529.6 13,096.8 18,816.72 21,565.18 24,729.48 28,372.55 32,566.81

Minority Int. in Earnings (319.5) (257.2) (276.1) (194.8) (278.2) Constant (278.2) (278.2) (278.2) (278.2) (278.2)
Net Income 5,785.3 10,304.2 12,654.3 14,334.8 12,818.6 18,538.52 21,286.98 24,451.28 28,094.35 32,288.61

Balance Sheet Projections

Balance Sheet as of:
2019 2020 2021 2022 2023 Assumptions 2024 2025 2026 2027 2028
Currency INR Mn INR Mn INR Mn INR Mn INR Mn INR Mn INR Mn INR Mn INR Mn INR Mn
ASSETS
Cash And Equivalents 1,163.9 2,260.8 1,671.8 3,025.3 3,048.2 5 yr average as a % of revenue 3,273.80 3,769.12 4,339.39 4,995.94 5,751.83
Short Term Investments 246.2 1,938.0 5,311.3 1,023.1 1,413.1 5 yr average as a % of revenue 3,072.33 3,537.18 4,072.35 4,688.50 5,397.87
Trading Asset Securities 5,432.7 6,650.3 13,061.7 8,614.7 10,679.6 Balancing figure 22,730.58 37,480.41 55,161.88 76,218.60 1,01,161.22
Total Cash & ST Investments 6,842.8 10,849.1 20,044.8 12,663.2 15,140.9 29,076.71 44,786.71 63,573.62 85,903.04 1,12,310.91

Accounts Receivable 2,202.2 5,310.9 3,306.1 3,881.7 5,764.2 5 yr average as a % of revenue 6,117.11 7,042.63 8,108.18 9,334.94 10,747.32
Other Receivables 4.2 407.1 698.2 347.2 321.0 Constant 321.0 321.0 321.0 321.0 321.0
Notes Receivable 316.2 345.0 184.1 11.9 16.3 Constant 16.3 16.3 16.3 16.3 16.3
Total Receivables 2,522.6 6,063.0 4,188.4 4,240.8 6,101.6 6,454.47 7,379.99 8,445.54 9,672.31 11,084.68

Inventory 8,209.9 8,991.3 11,835.4 17,602.4 14,984.6 5 yr average as a % of revenue 18,250.72 21,012.06 24,191.18 27,851.31 32,065.21
Prepaid Exp. 80.6 95.0 369.4 1,360.1 331.6 Constant 331.6 331.6 331.6 331.6 331.6
Other Current Assets 2,325.2 2,223.7 2,628.3 8,201.7 6,720.1 6,226.47 7,168.53 8,253.13 9,501.83 10,939.46
Total Current Assets 19,981.2 28,222.1 39,066.3 44,068.2 43,278.7 60,339.98 80,678.89 1,04,795.08 1,33,260.08 1,66,731.87

Gross Property, Plant & Equipment 19,457.7 22,161.1 24,364.5 29,718.3 37,607.2 Call Transcript FY24 42,607.21 47,607.21 52,607.21 57,607.21 62,607.21
Accumulated Depreciation (2,668.3) (3,515.1) (4,447.7) (5,822.4) (7,437.3) From Projected Income Statement -9,623.98 -12,141.49 -15,039.91 -18,376.87 -22,218.70
Net Property, Plant & Equipment 16,789.4 18,646.0 19,916.9 23,895.9 30,169.9 32,983.24 35,465.72 37,567.30 39,230.35 40,388.52

Long-term Investments 2,156.6 1,643.9 2,097.3 2,403.9 3,577.6 In line with revenue 4,118.88 4,742.06 5,459.54 6,285.57 7,236.57
Goodwill 204.5 204.4 204.4 204.4 200.2 Constant 200.2 200.2 200.2 200.2 200.2
Other Intangibles 279.5 259.5 187.6 18,742.0 17,584.2 Constant 17,584.2 17,585.2 17,586.2 17,587.2 17,588.2
Loans Receivable Long-Term 0.7 1.0 0.7 0.3 - Constant - - - - -
Deferred Tax Assets, LT 288.9 479.4 490.1 392.9 297.8 Constant 297.8 297.8 297.8 297.8 297.8
Other Long-Term Assets 1,423.5 1,276.5 1,762.8 1,769.7 2,046.1 Constant 2,046.1 2,046.1 2,046.1 2,046.1 2,046.1
Total Assets 41,124.2 50,732.8 63,726.3 91,477.4 97,154.5 1,17,570.36 1,41,015.94 1,67,952.19 1,98,907.27 2,34,489.23

LIABILITIES
Accounts Payable 5,619.7 7,451.1 6,669.6 10,764.0 10,081.8 5 yr average as a % of revenue 12,100.34 13,931.13 16,038.91 18,465.59 21,259.44
Accrued Exp. 544.7 877.7 1,286.7 2,597.7 1,710.2 5 yr average as a % of revenue 2,004.98 2,308.34 2,657.59 3,059.68 3,522.61
Short-term Borrowings 2,415.4 468.6 1,973.0 8,051.5 1,150.2 Constant 1,150.2 1,150.2 1,150.2 1,150.2 1,150.2
Curr. Port. of LT Debt 35.8 244.4 185.0 242.5 244.7 In Proportion to Assets 58.79 70.51 83.98 99.45 117.24
Curr. Port. of Leases - 11.4 16.2 20.6 25.6 In Proportion to Assets - - - - -
Curr. Income Taxes Payable 10.8 656.2 110.8 150.9 462.6 Constant 462.6 462.6 462.6 462.6 462.6
Unearned Revenue, Current 62.9 43.1 148.3 1,394.3 1,662.3 Constant 1,662.3 1,662.3 1,662.3 1,662.3 1,662.3
Other Current Liabilities 1,551.3 2,754.8 3,144.1 3,013.2 3,294.0 Constant 3,294.0 3,294.0 3,294.0 3,294.0 3,294.0
Total Current Liabilities 10,240.6 12,507.3 13,533.9 26,234.6 18,631.4 20,733.21 22,879.07 25,349.57 28,193.83 31,468.39

Long-Term Debt 251.1 581.9 576.7 491.9 231.5 In Proportion to Assets 58.79 70.51 83.98 99.45 117.24
Long-Term Leases - 28.3 45.1 29.9 51.8 In Proportion to Assets - - - - -
Unearned Revenue, Non-Current 133.4 177.9 78.9 201.5 254.9 Constant 254.9 254.9 254.9 254.9 254.9
Pension & Other Post-Retire. Benefits 449.2 630.0 722.4 800.0 978.9 Constant 978.9 978.9 978.9 978.9 978.9
Def. Tax Liability, Non-Curr. 223.3 81.7 130.3 556.2 773.1 Constant 773.1 773.1 773.1 773.1 773.1
Other Non-Current Liabilities 10.0 10.0 10.0 - - Constant - - - - -
Total Liabilities 11,307.5 14,017.1 15,097.3 28,314.3 20,921.6 22,798.95 24,956.54 27,440.50 30,300.24 33,592.59

Common Stock 400.6 400.6 400.6 400.6 400.6 Constant 400.6 400.6 400.6 400.6 400.6
Additional Paid In Capital 421.2 421.2 421.2 421.2 421.2 Constant 421.2 421.2 421.2 421.2 421.2
Retained Earnings 36,453.6 43,032.0 55,412.5 69,729.3 82,499.4 From Income Statement 1,01,038.0 1,22,324.9 1,46,776.2 1,74,870.6 2,07,159.2
Treasury Stock - - - - - Constant - - - - -
Comprehensive Inc. and Other (9,044.9) (9,000.7) (9,014.2) (8,998.7) (8,969.0) Constant (8,969.0) (8,968.0) (8,967.0) (8,966.0) (8,965.0)
Total Common Equity 28,230.5 34,853.1 47,220.0 61,552.3 74,352.2 92,890.7 1,14,178.7 1,38,631.0 1,66,726.3 1,99,015.9

Minority Interest 1,586.2 1,862.6 1,408.9 1,610.8 1,880.7 Constant 1,880.7 1,880.7 1,880.7 1,880.7 1,880.7

Total Equity 29,816.7 36,715.7 48,628.9 63,163.1 76,232.9 94,771.4 1,16,059.4 1,40,511.7 1,68,607.0 2,00,896.6

Total Liabilities And Equity 41,124.2 50,732.8 63,726.3 91,477.4 97,154.5 1,17,570.38 1,41,015.94 1,67,952.19 1,98,907.27 2,34,489.23

Accounts receivable turnover 11.1 18.8 20.0 15.2

Accounts receivable Days 33.0 19.4 18.2 24.0

Inventory Turnover 2.1 1.6 1.4 2.0

Inventory Days 170.8 233.9 258.2 182.1

Payables Turnover 2.5 3.3 2.3 2.2

Payables Days 148.7 110.6 162.2 165.2

CCC 55.1 142.7 114.2 41.0

Appendix B:
DCF Model and Sensitivity Analysis
Cost of Capital Calculation
WACC

Rf 7.24%
EMRP 8.33%
No. of Shares Outstanding 400.6
Price Per share 1779
MV of Equity 712667.4
BV of Debt 771.4
E/V 99.89% WACC 10.89%
D/V 0.11% Growth Rate 7.00%
B_equity 0.44
Ke 10.90% Tax Rate 25.00%
Kd 8.00%
WACC 10.89%

Business Scenario

Scenario 1

Revenue % Change 0.00% Price/Share 1183.29

Growth Rate 7.00%

Average DCF Valuation 1513.94

DCF

1 2 3 4 5
2024 2025 2026 2027 2028
Revenue 100732.22 115973.01 133519.72 153721.26 176979.28
COGS 33024.47 38021.08 43773.66 50396.62 58021.63
Other Operating Expenses(including SG&A)
41387.22 47649.10 54858.41 63158.49 72714.37
Dep and Am 2186.68 2517.52 2898.42 3336.95 3841.83
EBIT 24133.86 27785.31 31989.23 36829.20 42401.45

NOPAT 18100.39 20838.98 23991.92 27621.90 31801.09

Add Dep and AM 2186.68 2517.52 2898.42 3336.95 3841.83
Less change in NWC 2703.20 3112.20 3583.08 4125.19 4749.34
Less Capex 6000.00 6000.00 6000.00 6000.00 6000.00
FCFF 11583.86 14244.30 17307.26 20833.65 24893.59
PV 10445.80 11582.92 12690.94 13775.87 14843.27
Sum of PV 63338.80

TV 683871.81
PV of TV 407771.43
EV 471110.23
Net Debt -2276.84
Equity 473387.07
No. of Outstanding Shares 400.06
Price per share 1183.29

Sensitivity Analysis
WACC
Growth Rate 1183.29 10.39% 10.64% 10.89% 11.14% 11.39%
6.50% 1028.00 976.75 930.19 887.72 848.82
6.75% 1075.35 1019.19 968.41 922.29 880.22
7.00% 1127.99 1066.11 1010.47 960.17 914.48
7.25% 1186.86 1118.28 1056.98 1001.85 952.02
7.50% 1253.12 1176.62 1108.67 1047.94 993.33
Appendix C:
ROIC, EVA, Growth Rate and HOLT CFROI

Reinvestment Rate Calculation

1 2 3 4 5
2019 2020 2021 2022 2023

Net Capex 1,856.7 1,270.8 3,979.1 6,274.0

Change in NWC 1,624.3 1,616.3 6,510.6 (647.2)

EBIT 27785.31 31989.23 36829.20 42401.45

NOPLAT 18100.39 20838.98 23991.92 27621.90

Reinvestment 3,480.9 2,887.2 10,489.6 5,626.8

Reinvestment Rate 19.23% 13.85% 43.72% 20.37%

Intrinsic Growth Rate 13.26% 9.78% 19.07% 9.35%

Average Growth Rate 12.87%

Economic Value Added

INR Mn
1 2 3 4 5
2019 2020 2021 2022 2023
EBIT 24133.86 27785.31 31989.23 36829.20 42401.45
Less: Taxes 6033.46 6946.33 7997.31 9207.30 10600.36
NOPLAT 18100.39 20838.98 23991.92 27621.90 31801.09

Average debt 2702.35 1334.57 2796.09 8836.40 1703.71

Average equity 29816.73 36715.71 48628.91 63163.12 76232.93
Average capital employed 32519.08 38050.29 51425.00 71999.52 77936.64
Cost of capital employed 3542.92 4145.54 5602.70 7844.28 8491.12

Economic Value Added 14557.47 16693.44 18389.22 19777.62 23309.97

ROIC

1 2 3 4 5
2019 2020 2021 2022 2023
Current assets
Inventories 8,209.9 8,991.3 11,835.4 17,602.4 14,984.6
Total receivables 2,202.2 5,310.9 3,306.1 3,881.7 5,764.2
Other current assets 2,325.2 2,223.7 2,628.3 8,201.7 6,720.1
Total current assets 12,737.3 16,526.0 17,769.8 29,685.7 27,468.9

Current liabilities
Total payables 5,619.7 7,451.1 6,669.6 10,764.0 10,081.8
Accrued expenses 544.7 877.7 1,286.7 2,597.7 1,710.2
Total current liabilities 6,164.4 8,328.8 7,956.3 13,361.7 11,792.0

Net working capital 6,572.9 8,197.2 9,813.5 16,324.0 15,676.9

Non-current assets
Property, Plant & Equipment 16,789.4 18,646.0 19,916.9 23,895.9 30,169.9
Long term investments 2,156.6 1,643.9 2,097.3 2,403.9 3,577.6
Intangible assets 483.9 463.9 392.0 18,946.5 17,784.4
Other fixed assets 1,423.5 1,276.5 1,762.8 1,769.7 2,046.1
Gross Block 20,853.4 22,030.3 24,169.1 47,016.1 53,578.0

Invested capital 27,426.3 30,227.5 33,982.5 63,340.1 69,254.9

NOPLAT 18100.39 20838.98 23991.92 27621.90 31801.09

ROIC 66.00% 68.94% 70.60% 43.61% 45.92%

HOLT CFROI

Amount CFROI 15.54% >WACC

Gross PPE exl Land and Construction in Progress
29147.41
Annual Depreciation Expense 3259.20
Asset Life 8.94

Inflation Adjustment for Gross Plant

Nominal Growth of PPE 18.09% Average Growth rate for past 5 yrs

9 8 7 6 5 4 3 2 1 0
Year-11 Year-10 Year-9 Year-8 Year-7 Year-6 Year-5 Year-4 Year-3 Year-2
Nominal Growth Rate 18.09% 18.09% 18.09% 18.09% 18.09% 18.09% 18.09% 18.09% 18.09% 18.09%
Asset Layers(Capex) 1521.35 1796.55 2121.53 2505.29 2958.47 3493.63 4125.59 4871.87 5753.14 6793.83
Inflation 6.67% 4.91% 4.95% 3.33% 3.94% 3.73% 6.62% 5.13% 6.70% 7.44%
Inflation Adjusted Gross Plant 2720.26 2636.17 2975.26 3049.41 3589.06 4044.77 5000.37 5384.55 6138.60 6793.83
Inflation Adjuted Gross Plant(Sum) 42332.29
Adjsuting for Asset life 42064.81
Inflation Adjustment Factor 1.45

Capitalizing Operating Leases Gross Cash Flow Monetary holding gain

Nominal Cost of Debt 8.00% Net Income 12818.59 Cash and equivalents 3048.21
Asset Life 9.00 Dep and Am 3259.20 Marketable Securities 12092.67
Rental Expense 204.30 Interest Expense -275.10 Accounts Receivable 5764.21
Capitalized Operating Lease 1276.24 Rental Expense 204.30 Accounts Payable 10081.77
Net Monetary Asset Holding Gains 620.42 Other current Liablities ex Debt 3293.99
Capitalized R&D 0 Total Exploration Expense 0.00 Net Monetary Assets 7529.33
Minority Interest 889.00 % change in GDP Deflator 0.08
Inflation-Adjusted Depreciating Assets Amount FIFO profits 3977.76 Monetary holding gain 620.42
Inflation Adjusted Gross Plant 42064.81 Inflation Adjusted Gross Cash Flow13538.64
Capitalized Operating Leases 1276.24
Capitalized R&D 0
Capitalized exploration expense 0
Intangibles included in depr assets 0
Inflation Adjusted Depreciating Assets 43341.05

Inflation Adjusted NWC 15,676.9

Construction In Progress 4931.9
Inflation Adjusted Land 3527.9

Inflation Adjusted Gross Investment 67477.71

Appendix D:
Three Statements
Income Statement Projections
Restated Reclassified
For the Fiscal Period Ending 12 months 12 months 12 months 12 months 12 months
Mar-31-2019 Mar-31-2020 Mar-31-2021 Mar-31-2022 Mar-31-2023
Currency INR INR INR INR INR

Revenue 49,799.8 58,718.7 62,144.3 77,815.6 87,494.3

Other Revenue - - - - -
Total Revenue 49,799.8 58,718.7 62,144.3 77,815.6 87,494.3

Cost Of Goods Sold 17,516.1 19,218.7 18,471.4 24,878.9 30,031.4

Gross Profit 32,283.6 39,500.0 43,672.9 52,936.7 57,462.9

Selling General & Admin Exp. 14,709.2 16,082.1 18,194.7 20,934.2 23,125.6
R & D Exp. - - - - -
Depreciation & Amort. 690.3 990.6 1,189.7 1,666.2 3,259.2
Other Operating Expense/(Income) 8,189.7 7,721.8 8,385.5 12,013.9 15,195.3

Other Operating Exp., Total 23,589.2 24,794.4 27,769.9 34,614.3 41,580.1

Operating Income 8,694.4 14,705.6 15,903.0 18,322.4 15,882.8

Interest Expense (403.1) (215.5) (193.0) (557.8) (402.7)

Interest and Invest. Income 59.3 171.8 387.3 129.3 127.7
Net Interest Exp. (343.8) (43.7) 194.2 (428.6) (275.1)

Income/(Loss) from Affiliates 99.4 115.4 116.8 144.5 124.2

Currency Exchange Gains (Loss) (5.4) (10.3) 5.0 88.4 104.1
Other Non-Operating Inc. (Exp.) 11.8 49.4 51.2 486.0 536.4
EBT Excl. Unusual Items 8,456.3 14,816.4 16,270.2 18,612.8 16,372.4

Impairment of Goodwill - - - - (38.5)

Gain (Loss) On Sale Of Invest. 295.8 (224.4) 628.6 1,129.5 374.3
Gain (Loss) On Sale Of Assets (6.2) 109.5 (30.4) (37.4) 16.6
Asset Writedown (6.5) (207.7) (38.9) (57.6) (97.1)
Insurance Settlements 6.6 6.7 9.4 13.6 43.1
Other Unusual Items - (123.1) 77.2 85.3 41.5
EBT Incl. Unusual Items 8,746.0 14,377.4 16,916.1 19,746.0 16,712.4

Income Tax Expense 2,641.2 3,815.9 3,985.8 5,216.4 3,615.6

Earnings from Cont. Ops. 6,104.8 10,561.4 12,930.4 14,529.6 13,096.8

Earnings of Discontinued Ops. - - - - -

Extraord. Item & Account. Change - - - - -
Net Income to Company 6,104.8 10,561.4 12,930.4 14,529.6 13,096.8

Minority Int. in Earnings (319.5) (257.2) (276.1) (194.8) (278.2)

Net Income 5,785.3 10,304.2 12,654.3 14,334.8 12,818.6

Balance Sheet Projections

Balance Sheet as of:
2019 2020 2021 2022 2023
Currency INR M n INR M n INR M n INR M n INR M n
ASSETS
Cash And Equivalents 1,163.9 2,260.8 1,671.8 3,025.3 3,048.2
Short Term Investments 246.2 1,938.0 5,311.3 1,023.1 1,413.1
Trading Asset Securities 5,432.7 6,650.3 13,061.7 8,614.7 10,679.6
Total Cash & ST Investments 6,842.8 10,849.1 20,044.8 12,663.2 15,140.9

Accounts Receivable 2,202.2 5,310.9 3,306.1 3,881.7 5,764.2

Other Receivables 4.2 407.1 698.2 347.2 321.0
Notes Receivable 316.2 345.0 184.1 11.9 16.3
Total Receivables 2,522.6 6,063.0 4,188.4 4,240.8 6,101.6

Inventory 8,209.9 8,991.3 11,835.4 17,602.4 14,984.6

Prepaid Exp. 80.6 95.0 369.4 1,360.1 331.6
Other Current Assets 2,325.2 2,223.7 2,628.3 8,201.7 6,720.1
Total Current Assets 19,981.2 28,222.1 39,066.3 44,068.2 43,278.7

Gross Property, Plant & Equipment 19,457.7 22,161.1 24,364.5 29,718.3 37,607.2
Accumulated Depreciation (2,668.3) (3,515.1) (4,447.7) (5,822.4) (7,437.3)
Net Property, Plant & Equipment 16,789.4 18,646.0 19,916.9 23,895.9 30,169.9

Long-term Investments 2,156.6 1,643.9 2,097.3 2,403.9 3,577.6

Goodwill 204.5 204.4 204.4 204.4 200.2
Other Intangibles 279.5 259.5 187.6 18,742.0 17,584.2
Loans Receivable Long-Term 0.7 1.0 0.7 0.3 -
Deferred Tax Assets, LT 288.9 479.4 490.1 392.9 297.8
Other Long-Term Assets 1,423.5 1,276.5 1,762.8 1,769.7 2,046.1
Total Assets 41,124.2 50,732.8 63,726.3 91,477.4 97,154.5

LIABILITIES
Accounts Payable 5,619.7 7,451.1 6,669.6 10,764.0 10,081.8
Accrued Exp. 544.7 877.7 1,286.7 2,597.7 1,710.2
Short-term Borrowings 2,415.4 468.6 1,973.0 8,051.5 1,150.2
Curr. Port. of LT Debt 35.8 244.4 185.0 242.5 244.7
Curr. Port. of Leases - 11.4 16.2 20.6 25.6
Curr. Income Taxes Payable 10.8 656.2 110.8 150.9 462.6
Unearned Revenue, Current 62.9 43.1 148.3 1,394.3 1,662.3
Other Current Liabilities 1,551.3 2,754.8 3,144.1 3,013.2 3,294.0
Total Current Liabilities 10,240.6 12,507.3 13,533.9 26,234.6 18,631.4

Long-Term Debt 251.1 581.9 576.7 491.9 231.5

Long-Term Leases - 28.3 45.1 29.9 51.8
Unearned Revenue, Non-Current 133.4 177.9 78.9 201.5 254.9
Pension & Other Post-Retire. Benefits 449.2 630.0 722.4 800.0 978.9
Def. Tax Liability, Non-Curr. 223.3 81.7 130.3 556.2 773.1
Other Non-Current Liabilities 10.0 10.0 10.0 - -
Total Liabilities 11,307.5 14,017.1 15,097.3 28,314.3 20,921.6

Common Stock 400.6 400.6 400.6 400.6 400.6

Additional Paid In Capital 421.2 421.2 421.2 421.2 421.2
Retained Earnings 36,453.6 43,032.0 55,412.5 69,729.3 82,499.4
Treasury Stock - - - - -
Comprehensive Inc. and Other (9,044.9) (9,000.7) (9,014.2) (8,998.7) (8,969.0)
Total Common Equity 28,230.5 34,853.1 47,220.0 61,552.3 74,352.2

Minority Interest 1,586.2 1,862.6 1,408.9 1,610.8 1,880.7

Total Equity 29,816.7 36,715.7 48,628.9 63,163.1 76,232.9

Total Liabilities And Equity 41,124.2 50,732.8 63,726.3 91,477.4 97,154.5

Cash Flow

For the Fisca l Re sta te d Re sta te d Re sta te d

Pe riod Ending 12 months 12 months 12 months 12 months 12 months
Ma r-31-2019 Ma r-31-2020 Ma r-31-2021 Ma r-31-2022 Ma r-31-2023
Currency INR INR INR INR INR

Ne t Income 5,785.3 10,304.2 12,654.3 14,334.8 12,818.6

Depreciation & Amort. 655.8 907.3 1,048.8 1,414.0 1,670.8
Amort. of Goodwill and Intangibles 5.9 55.7 105.6 202.3 1,537.3
De pre cia tion & Amort., Tota l 661.7 963.0 1,154.4 1,616.4 3,208.1

Other Amortization 28.7 27.6 35.3 49.8 51.1

(Gain) Loss From Sale Of Assets 6.2 (109.5) 30.4 37.4 (16.6)
(Gain) Loss On Sale Of Invest. (295.8) (350.6) (451.5) (1,049.5) (374.3)
Asset W ritedown & Restructuring Costs
231.6 905.8 38.9 (22.4) 135.6
Provision for Credit Losses 15.9 51.8 14.9 30.3 19.4
(Income) Loss on Equity Invest. (99.4) (115.4) (116.8) (144.5) (124.2)
Stock-Based Compensation - - - - 0.6
Provision & W rite-off of Bad debts 12.5 13.5 7.5 115.4 137.9
Other Operating Activities (245.5) 432.4 (1,048.7) 91.2 609.7
Change in Acc. Receivable 703.2 (3,088.3) 2,002.3 (659.5) (2,053.1)
Change In Inventories (305.0) (781.5) (2,844.0) (5,767.0) 2,617.8
Change in Acc. Payable (748.3) 1,831.4 (781.5) 4,198.5 (650.2)
Change in Other Net Operating Assets 252.7 637.6 676.9 (3,633.2) 1,752.8
Ca sh from Ops. 6,003.7 10,722.0 11,372.4 9,197.8 18,133.0

Capital Expenditure (2,976.8) (2,279.7) (3,054.1) (4,648.6) (7,890.2)

Sale of Property, Plant, and Equipment
588.9 112.4 7.4 31.5 60.5
Cash Acquisitions (2,450.5) - - - (38.3)
Divestitures - - - - -
Sale (Purchase) of Real Estate properties
6.9 138.9 - - -
Sale (Purchase) of Intangible assets - - (69.1) (18,806.6) (430.5)
Invest. in Marketable & Equity Securt.
337.9 (2,505.9) (9,477.6) 9,430.4 (2,366.4)
Net (Inc.) Dec. in Loans Originated/Sold
10.1 2.3 (3.2) (1.0) (4.1)
Other Investing Activities 40.0 140.4 374.5 302.8 127.7
Ca sh from Inve sting (4,443.4) (4,391.5) (12,222.1) (13,691.4) (10,541.3)

Short Term Debt Issued 109.7 138.8 1,267.8 12,723.3 10,947.3

Long-Term Debt Issued 3,529.5 610.4 4,521.6 58.6 38.5
Tota l De bt Issue d 3,639.2 749.2 5,789.4 12,781.9 10,985.8
Short Term Debt Repaid (1,874.8) (2,110.6) (177.0) (6,453.5) (17,641.5)
Long-Term Debt Repaid (3,305.3) (45.9) (4,518.9) (104.3) (322.2)
Tota l De bt Re pa id (5,180.1) (2,156.5) (4,695.9) (6,557.8) (17,963.8)

Common Dividends Paid (240.4) (3,024.4) - - -

Tota l Divide nds Pa id (240.4) (3,024.4) - - -

Special Dividend Paid - - - - -

Other Financing Activities (498.6) (837.9) (1,171.6) (177.9) (419.3)
Ca sh from Fina ncing (2,279.9) (5,269.7) (78.1) 6,046.2 (7,397.3)

Foreign Exchange Rate Adj. (0.2) 36.0 3.8 4.8 23.2

Misc. Cash Flow Adj. 528.5 - - - -
Ne t Cha nge in Ca sh (191.5) 1,096.9 (924.0) 1,557.3 217.6

Appendix E:
Residual Income Valuation
Appendix F:
Relative Valuation

FOOTBALL FIELD ANALYSIS

P/B 335.51 1187.74

P/CF (dil.) 544.93 1089…

P/E (normalized) 530.27

EV/EBITDA 589.65 1015.93

EV/Sales 282.27 1211.76

200.00 400.00 600.00 800.00 1000.00 1200.00 1400.00 1600.00 1800.00 2000.00 2200.00

Appendix G:
Financial Analysis