September 20, 2011
CRISIL reaffirms ratings on Sun Pharmaceutical Industries Limited
Rs.400 Million Commercial Paper Programme CRISIL A1+ (Withdrawn)
Rs.860 Million Cash Credit CRISIL AAA/Stable (Reaffirmed)
Rs.480 Million Pre-shipment Credit CRISIL A1+ (Reaffirmed)
Rs.155 Million Letter of Credit CRISIL A1+ (Reaffirmed)
Rs.60 Million Bank Guarantee CRISIL A1+ (Reaffirmed)
Rs.265 Million Letter of Credit/Bank Guarantee CRISIL A1+ (Reaffirmed)

CRISIL has reaffirmed its ratings on Sun Pharmaceutical Industries Ltd’s (Sun Pharma’s) bank facilities at ‘CRISIL AAA/Stable/CRISIL A1+’. CRISIL has also withdrawn its rating on Sun Pharma’s commercial paper programme on the company’s request. Sun Pharma has not issued the commercial papers, as its cash accruals and bank balances have been adequately supporting its liquidity.

The ratings continue to reflect Sun Pharma’s established position in the fast-growing chronic therapeutic segments in the Indian market, strong profitability, and healthy financial risk profile. These rating strengths are partially offset by the intensifying pricing pressure, and legal and regulatory risks faced by Sun Pharma in the regulated generics market.

Sun Pharma has a strong market position in the fast-growing cardiology, neurology, gastroenterology, and diabetology segments in India. These segments account for over 70 per cent of the company’s domestic formulation sales. In the domestic formulation market, Sun Pharma is India’s fifth-largest player, with a market share of 3.74 per cent as per ORG-IMS, May 2011. After acquiring Taro Pharmaceuticals Industries, Sun Pharma’s revenues from its US operations increased by 104 per cent year-on-year in 2010-11 (refers to financial year, April 1 to March 31) to around Rs.22.5 billion; the acquisition strengthened Sun Pharma’s position in the US market. CRISIL’s ratings also reflect Sun Pharma strong financial risk profile marked by high operating profit margin of about 34 per cent for 2010-11, limited debt levels, and large cash balance and marketable securities of around Rs.44 billion (as on March 31, 2011).

However, Sun Pharma faces intense competition and pricing pressure in the regulated generics markets, such as the US, because of the increasingly aggressive defence tactics of innovator companies through introduction of authorised generics, especially for blockbuster drugs going off patent. Furthermore, generic players are affected by severe price erosions because of the commodity-like market for their products, along with intense competition and significant government pressures to reduce prices, in regulated markets.

Outlook: Stable
CRISIL believes that Sun Pharma will maintain its strong position in the Indian market, sustain growth in its share in the international generics markets, and maintain its high profitability, over the medium term. The outlook may be revised to ‘Negative’ if Sun Pharma undertakes larger-than-expected debt-funded acquisition programme, vitiating its currently healthy capital structure, or if adverse regulatory changes disrupts its US operations.

About the Company
Sun Pharma is one of India’s fast-growing pharmaceutical companies, with a leading position in the high-value cardiovascular and neuro-psychiatry segments. In keeping with its strategy of focusing on speciality segments, the company has undertaken a number of mergers and acquisitions. These have helped broaden its therapeutic coverage into segments such as oncology, gynaecology, ophthalmology, and paediatrics. The company has a limited exposure to the price-sensitive bulk drugs market.

For 2010-11, Sun Pharma reported a net profit of Rs.19.07 billion on net sales of Rs.58.06 billion, against a net profit of Rs.13.47 billion on net sales of Rs.38.86 billion for the previous year, on consolidated basis. For the three months ended June 30, 2011, the company reported a net profit of Rs.5.65 billion on net sales of Rs.16.36 billion, against a net profit of Rs.5.78 billion on net sales of Rs.13.65 billion for the corresponding period of the previous year.

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Communications and Brand Management
CRISIL Limited
Tel: +91-22- 3342 1818

Pawan Agrawal
Director - CRISIL Ratings
Tel: +91-22-3342 3301

Sudip Sural
Head - CRISIL Ratings
Tel: +91-11-4250 5100

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Last updated: March 31, 2011

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September 20, 2011

Sun Pharmaceutical Industries Ltd’s