BUSINE

SS FINANCE
ASSIGNMENT
TOPIC: COMPUTATION OF COST OF
CAPITAL FOR SUN
PHARMACEUTICAL INDUSTRIES
LTD.

CLASS:4A-BBA
GROUP MEMBERS:
1)P.Uday Kiran-20BBAR0792
2)H.L Sharadhi-20BBAR0517
3)Mourya K.V-20BBAR0520
4)K.Ridhi Nanjappa-20BBAR0518
5) Dechamma Codavathi-20BBAR0515

CHAPTER 1:

INTRODUCTION TO THE COMPANY

About Sun Pharma:

Sun Pharmaceutical Industries Ltd. (Sun Pharma) is the fourth largest specialty
generic pharmaceutical company in the world with global revenues of over US$
4.5 billion. Supported by more than 40 manufacturing facilities, we provide high-
quality, affordable medicines, trusted by healthcare professionals and patients, to
more than 100 countries across the globe.

History and Evolution:

Sun Pharmaceuticals was founded by Dilip Shanghvi in 1983 in Vapi , Gujarat,
with five products to treat psychiatry ailments. Cardiology products were
introduced in 1987 followed by gastroenterology products in 1989. Today it is
ranked No.1 by prescriptions with 9 different classes of doctors in India and a
market leader in cardiology, gastroenterology, ortho, dialectology, dermatology,
urology, and vitamins / minerals / nutrients.

The 2014 acquisition of Ranbaxy made Sun Pharma the largest pharma company
in India, the largest Indian pharma company in the US, and the 4th largest specialty
generic company globally.
Over 72% of Sun Pharma sales are from markets outside India, primarily in the
United States. The US is the single largest market, accounting for about 30% of the
company's turnover in all, formulations or finished dosage forms, account for 93%
of the turnover. Manufacturing is across 44 global locations in India, the US, Asia,
Africa, Australia and Europe. In the United States, the company markets a large
basket of generics, with a strong pipeline awaiting approval from the U.S. Food
and Drug Administration (FDA).Sun Pharma was listed on the stock exchange in
1994 in an issue oversubscribed 55 times. The founding family continues to hold a
majority stake in the company.

International Operations:

From humble beginnings in 1983, Sun Pharma has grown to become one of the
largest generic pharmaceutical companies worldwide. We are the largest
pharmaceutical company in India.
In the US, we are among the top 10 generic pharmaceutical companies and are
ranked second by prescriptions in the generic dermatology market.
We are the largest Indian company in emerging markets with a presence in over 80
markets. Brazil, Mexico, Russia, Romania and South Africa are some of our key
emerging markets.
We are present across all major markets in Western Europe, Canada, Australia,
New Zealand, Japan and China among others.
Our presence in emerging markets and the developing world enables our teams to
cross-sell and build brands with ease.
Key People:

KAL SUNDARAM CEO

ISRAEL MAKOV NON-EXECUTIVE DIRECTOR
DILIP SHANGHVI MANAGING DIRECTOR &
FOUNDER
SAILESH DESAI EXECUTIVE DIRECTOR
MR.AALOK SHANGHVI VICE PRESIDENT

Products manufactured:
We produce a comprehensive, diverse and highly complementary portfolio of
generic and specialty medicines targeting a wide spectrum of chronic and acute
treatments. Our product portfolio includes generics, branded generics, speciality,
difficult-to-make technology intensive products, over-the-counter (OTC), anti-
retroviral (ARVs), Active Pharmaceutical Ingredients (APIs) and intermediates.
Our presence in more than 100 countries helps us in being responsive to local
treatment needs while continually improving our global product offering.

1) Speciality Medications

2) Generic Medications
3) Over-the-Counter Medications
4) Active Pharmaceutical Ingredients
Market Share:
Sun Pharma is the largest pharmaceutical company in the domestic market with
8.17% market share and strong positioning in the high-growth chronic segments. It
offers a complete therapy basket, with products in neuro-psychiatry, cardiology,
diabetology, gastroenterology, pain/analgesics, gynaecology, ophthalmology,
urology, dermatology, respiratory, anti-infectives, and other segments.

CHAPTER 2: DESCRIPTION OF SOURCES OF

FINANCE BY THE COMPANY

(I) Unsecured External Commercial Borrowings (ECBs) has 1 loan aggregating

of USD 50 Million (March 31, 2020 : USD 175 Million) equivalent to
`3,657.4 Million (March 31, 2020 : `13,200.3 Million) and 1 loan of JPY
Nil(March 31, 2020: JPY 5,317.5 Million) equivalent to `Nil (March 31,
2020 : `3,699.9 Million). For the ECB loans outstanding as at March 31,
2021, the terms of repayment for borrowings are as follows:

(a) USD Nil (March 31, 2020 : USD 100 Million) equivalent to `Nil (March 31,
2020 : `7,543.0 Million). The loan, originally taken on June 04, 2013 and
was repayable in 3 instalments viz. first instalments of USD 30 Million is
due on June 01, 2020, second instalments of USD 30 Million is due on
 December 1, 2020 and last instalments of USD 40 Million is due on
December 1, 2021. Two instalments of USD 30 Million and one instalments
of USD 40 Million has been repaid during the year.
(b) USD Nil (March 31, 2020 : USD 25 Million) equivalent to `Nil (March 31,
2020 : `1,885.8 Million). The loan, originally taken on September 20, 2012
and was repayable in 2 equal instalments of USD 25 Million each. The first
instalments of USD 25 Million had been repaid during year ended Mar 31,
2020, second instalments of USD 25 Million is repaid during the year.
(c) USD 50 Million (March 31, 2020 : USD 50 Million) equivalent to `3,657.4
Million (March 31, 2020 : `3,771.5 Million). The loan was taken on October
03, 2018 and is repayable in 2 equal instalments of USD 25 Million each.
The first instalments of USD 25 Million is due on October 1, 2021 and last
instalment of USD 25 Million is due on October 3, 2022. (d) JPY Nil
(March 31, 2020 : JPY 5317.5 Million) equivalent to `Nil (March 31, 2020 :
`3,699.9 Million). The loan was taken on August 11, 2015 in USD. The
currency of the loan was changed to JPY on August 8, 2019. The loan was
due for repayment on February 08, 2022. The loan has been repaid during
the year.

(II) Secured term loan from department of biotechnology of `75.7 Million

(March 31, 2020 : `108.2 Million) has been secured by hypothecation of
movable assets of the Company. The loan is repayable in 10 equal half yearly
instalments commencing from December 14, 2020.

(II) Unsecured loan from related party of `44,427.3 Million (March 31, 2020 :
`Nil). The loan is repayable by Mar 31, 2026. The loan has been availed at
6.50%. The Company has not defaulted on repayment of loan and interest
payment thereon during the year. The aforementioned unsecured ECBs are
 availed from various banks at floating rate linked to Libor (0.66% as at
March 31, 2021) and secured loan from department of biotechnology have
been availed at a range from 2% to 3%

CHAPTER 3: CALCULATION OF SPECIFIC COSTS

OF THE SOURCES OF FINANCE AND WACC FOR
THE CAPITAL STRUCTURE

Debt= 1844.7( in INR million)

Equity= 2399.3( in INR million)

Calculation of cost of debt:

kdb= 9.5%
Assumed tax rate= 25%

kda= kdb(1-t)
kda=0.095*0.75
kda= 0.07125
kda= 7.125%
Calculation of cost of Equity:

EPS=8.92( in INR million)

market price =883.6( in INR)

ke= EPS/MP

ke= 8.92/ 883.6

ke= 0.010095
ke= 1.0095

Calculation of working cost of capital:

sources Amount(in proportion Specific cost Weighted

INR million) cost
Equity 2399.3 0.5653 0.07125 0.0403
Debt 1844.7 0.4346 0.0101 0.0044

WACC = 0.0447
WACC= 4.47%

Therefore, the cost of working capital of Sun pharmaceuticals limited is

4.47 %