Amrutanjan Health Care Ltd.

| BSE Scrip Code: 590006

Pharmaceuticals September 13, 2012

Equity Statistics Business Summary

Current Market Price Rs. 791.2 Amrutanjan Health Care Ltd. (Amrutanjan) is engaged in the
manufacture and sale of OTC (over-the-counter) healthcare products.
52 Week High/Low Rs. 881.00/610.10
A well-known brand in the South Indian market, Amrutanjan’s
Market Capitalisation Rs. Crores 231.03 products primarily focus on pain management, congestion management
Free Float Rs. Crores 110.77 and personal hygiene under the brands ‘Kick Out Pain’, ‘Relief’ and
Dividend Yield % 1.90 ‘Purity’, respectively.
One Year Regression Beta Times 0.12 The company’s products consist of balms, creams, reusable gel pad and
BSE Volumes Trend - Average = 45.37 Thousand roll-on for relief from headache, joint spray, body ache and cough &
congestion. The company also offers food products in the form of
1000
snacks and fruit juices.
800
600 The company has two plants for its OTC division located in Tamil
Nadu and Andhra Pradesh and one plant for its Pharmaessense
400 Chemistry Services Division, located in Tamil Nadu. In May 2011, this
200 division was transferred to a wholly owned subsidiary viz, Amrutanjan
Pharmaessense Private Limited. The Pharmaessense R&D division
0
introduced 11 new products in FY11 and 9 new products were
estimated to be introduced in FY12 (refers to the period April 1 to
March 31).
Relative Returns
150 The company’s R&D department is recognized by Department for
Scientific & Industrial Research (DSIR) and focuses on development of
100 new products and improvement in the existing products. The company
also undertakes collection and extensive research of consumer insights
50
for improving its existing products or launching new products.
0
In FY11, Amrutanjan diversified into non-carbonated beverages
Amrutanjan Sensex industry by acquiring Siva’s Soft Drink Pvt Ltd. (SSD), which owns the
Fruitnik brand of fruit juices, a known brand in Tamil Nadu. As on
Returns 1M 3M 6M 1 Yr March 31, 2011, Amrutanjan held the entire stake of SSD and had
Absolute 3% 2% 4% -2% investments of Rs.25.7 cr in SSD.
Rel. to Sensex 0% -5% 2% -10% In FY12, the company reported net sales of Rs.142.6 crore and a net
Shareholding Pattern profit of Rs.9.6 crore. KAL is currently trading at 24.1 times FY12 EPS
100%
and 2.4 times FY12 adjusted book value.
Board of Directors
80% Person Role Qualification
60% S.Sambhu Prasad Chairman & MD B.Tech, M.B.A
40% D.Seetharama Rao NED B.E.
20% Dr.Pasumarthi NED -
0%
Dr H.B.N Shetty NED, Independent MA., M.L., Ph.D
Sep `11 Dec `11 Mar `12 Jun `12 A.Satish Kumar NED, Independent M.B.A
Source: Annual Report and CARE Research
Promoter DII FII Others Note: MD: Managing Director, WTD: Whole time Director ED:
Executive Director, NED: Non Executive Director,

Source: BSE and CARE Research

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Background
Amrutanjan was established as a patent medicine business in Mumbai in 1893 by Sri. K Nageswara Rao Pantulu. The
headquarters was shifted to Chennai in 1914. In a recent development in February 2012, Mr Sambhu Prasad, MD, was re-
designated as the Chairman and MD of the company. Furthermore, the board approved the merger of SSD with Amrutanjan.

As Amrutanjan is offering OTC products under the rubefacient category, the marketing and distribution aspects will be key
to expand the reach of Amrutanjan’s products. The company’s products are sold through a strong distribution network, well
supported by over 3.5 lakh retailers and 1,750 stockists as on March 31, 2011.

Other than SSD, Amrutanjan has a subsidiary by the name of Holistic Beauty Care Ltd., for which there was no commercial
operation in FY11. The company plans to exit from another subsidiary, i.e. Data Quest Infotech & Enterprises Ltd. (DQI), in
which Amrutanjan held Rs.3 cr of investments as on March 31, 2011. Amrutanjan has also granted loans & advances of
Rs.17.1 cr to DQI as on March 31, 2011.

Amrutanjan bought back 106,937 fully paid up equity shares of Rs.10 each at a tender offer at a price of Rs.900 per share
through a share buyback program, which was completed in July 2011. On completion, the company’s share capital was
reduced to Rs.2.9 cr as on March 31, 2012 from Rs.3.0 cr as on March 31, 2011. The board of directors recommended a final
dividend of Rs.10 per share for FY12. In August 2012, the company’s board of directors approved sub-division of the
existing equity share of nominal value of Rs.10 into two equity shares of nominal value of Rs.5 each.
Business overview
With the addition of the Fruitnik brand during the year, Amrutanjan operates in three business segments namely OTC
products, chemicals and beverages. It derived 80% of the revenue from OTC products and 14% of the revenue from the
beverages segment in FY12. The company earns its revenues majorly from the domestic market.

The company generally earns an EBITDA margin of 11-15% wherein the key expense is towards consumption of materials.
Amrutanjan has incurred significant cash outgo for advertising and marketing programs, which are crucial in case of fast-
moving OTC products. On a consolidated basis, the company spent Rs.9.8 cr in FY12 for advertisement as against Rs.7 cr in
FY11, reflecting the importance attached to branding initiatives.

Net Sales of the company went up from Rs.105.4 crore in FY 11 to Rs.142.6 crore in FY12, registering a growth of 35.3%,
whereas PAT came down to Rs.9.63 crore from Rs.10.21 crore in the same period.
Strengths and growth drivers
 Amrutanjan has a longstanding track record of operations and an established brand name
 The marketing and distribution networks are effective, which are necessary in case of fast-moving OTC product segment
Risk and concerns
 The company is exposed to raw material price volatility and rising input costs, such as the increasing manpower costs and
purchase costs of materials
 The segments in which Amrutanjan is present are intensely competitive
 Also key to the profitability of Amrutanjan will be the performance of the newly-added beverages segment
Future strategy and expansion plans
The company aggressively pursues marketing and advertising communications, which is necessary for any FMCG/OTC
based brand to retain its market share. Also the company undertakes diversifications such as the entry into the beverages
segments and plans to strengthen its distribution networks.
Industry outlook
The Indian Pharmaceutical Industry (IPI) is amongst the largest in the world and has grown to a total market size of
Rs.117,860 crore (around US$26 bn) in FY2011E (Source: Dept of Pharmaceuticals/CARE Research estimates) backed by
robust growth in terms of healthcare infrastructure development, technology base and a wide range of products. Total market
size includes the domestic market, the export and the import markets. The IPI is now the third-largest in the world in terms
of volume and 14th-largest in terms of value thereby accounting for around 10% of world’s production by volume and 2% by
value due to lower prices. The industry now produces about 500 bulk drugs (Active Pharmaceutical Ingredients-API) and
almost the entire range of formulations related to all major therapeutic groups requiring complex manufacturing technologies.
The domestic formulations market constitutes the single-largest chunk of the IPI (approximately 80% of the IPI) and serves
all major therapeutic segments meeting all domestic requirements. It is primarily dominated by branded generic drugs. This is
supported by availability of strong scientific and technical manpower backed by pioneering work done in process
development.

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The bulk drugs industry has grown at a CAGR (Compounded Annual Growth Rate) of 15% over 2005-2010 (Source: Bulk
Drugs Manufacture Association, India). With the growing presence of generic products in the innovator companies’ portfolio
the demand for quality APIs at cheaper rates has increased so as to face the rising price erosion in the generic market. Also
the presence of Indian CRAMS (Contract Research and Manufacturing Services) has increased among the drug innovators
which will further boost the exports of bulk drugs.

Peer comparison Year ended March 31, 2012

Income statement (Rs. crore) Amrutanjan Panchsheel KDL
Total income 147.4 29.8 55.7
Net sales 142.6 29.8 53.9
EBITDA 20.5 3.2 3.1
Ordinary PAT 9.9 2.3 0.5
Adjusted PAT 9.6 2.3 0.5
Per share data (Rs.)
Adjusted BVPS 332.6 27.5 40.7
Diluted EPS* 32.8 4.6 0.3
Growth (Y-o-Y) (%)
Growth in Total income 33.1 12.2 (33.4)
Growth in Net sales 35.3 12.1 (34.9)
Growth in EBITDA 57.9 41.6 24.9
Growth in Adjusted PAT (5.9) 160.2 (41.1)
Growth in EPS* 5.0 161.1 (41.9)
Profitability ratio (%)
EBITDA margin 14.3 10.7 5.8
Adjusted PAT margin 6.5 7.7 1.0
Valuation ratios (Times)
Price/EPS (P/E) 24.1 3.7 16.2
Price/Book value (P/BV) 2.4 0.6 0.1
Enterprise value (EV)/EBITDA 11.5 2.7 6.7
Source: BSE, Capitaline and CARE Research
Note: KAL: Kerala Ayurveda Ltd; Panchsheel: Panchsheel Organics Ltd., KDL: KDL Biotech Ltd.
Note: Panchsheel and KDL are based on abridged financials

Quarterly financials Quarter ended June 30, 2012

Income statement (Rs. crore) Q1FY13 Q4FY12 Q3FY12 Q2FY12 Q1FY12
Total income 14.9 32.8 37.5 33.5 15.5
Net sales 14.2 31.6 36.4 32.4 14.7
EBITDA 2.7 11.5 13.9 12.4 3.2
Ordinary PAT 0.3 4.7 4.3 3.5 0.2
Adjusted PAT 0.3 4.9 4.3 3.5 0.2
Growth (Q-o-Q) (%)
Growth in net sales (55.2) (13.0) 12.4 120.8
Profitability ratio (%)
EBITDA margin 18.8 36.5 38.1 38.3 21.8
Adjusted PAT margin 2.0 14.9 11.5 10.5 1.3
Source: BSE, Capitaline and CARE Research

3 Initiative of the BSE Investors’ Protection Fund

Financial analysis
 In FY12, Amrutanjan Healthcare reported net sales of Rs.142.6 crore – up 35.3% y-o-y whereas the PAT came down to
Rs9.6 crore from Rs10.2 crore during the same period.
 Raw materials and packaging form the largest portion of cost for Amrutanjan . In FY12, raw materials cost as a percentage
of net sales was at around 43%. The other major expenses include Employee cost and Advertisement expenses.
 The company reported EBITDA margins and adjusted PAT margins of 14.3% and 6.5%, respectively in FY12.
 The total debt as on March 31, 2012 was at Rs.20.28 crore compared to an networth of Rs.96.46 crore.
 Operating cash flows for the company has been positive in each of the last four years (i.e. period considered for analysis).
 The company has not paid dividend for the past five years ended FY12.
Annual financial statistics FY08 FY09 FY10 FY11 FY12
Income statement (Rs. crore)
Total income 76.2 202.5 99.6 110.8 147.4
Net sales 74.6 90.7 89.8 105.4 142.6
EBITDA 11.4 10.3 12.2 13.0 20.5
Depreciation and amortisation 2.1 1.6 1.3 1.8 3.4
EBIT 9.3 8.7 10.9 11.1 17.1
Interest 1.0 0.4 0.3 0.6 3.1
PBT 8.7 123.1 18.6 15.4 16.1
Ordinary PAT 5.0 92.4 11.5 10.2 9.9
Adjusted PAT 5.0 13.8 10.2 10.2 9.6
Balance sheet (Rs. crore)
Adjusted networth 26.1 93.3 96.6 82.2 96.5
Total debt 8.5 0.6 1.4 30.8 20.3
Cash and bank 2.8 67.8 24.1 24.4 15.2
Investments 0.1 0.1 45.6 42.4 28.6
Net fixed assets (incl. CWIP) 22.7 18.7 22.7 35.0 52.7
Net current assets (excl. cash, cash equivalents) 13.1 10.5 8.4 15.1 23.8
Per share data (Rs.)
Adjusted BVPS 80.3 287.5 297.5 253.3 332.6
Diluted EPS* 14.5 288.2 35.3 31.3 32.8
DPS - - - - -
Growth (Y-o-Y) (%)
Growth in total income 165.7 (50.8) 11.2 33.1
Growth in net sales 21.6 (1.0) 17.4 35.3
Growth in EBITDA (9.7) 18.9 6.1 57.9
Growth in adjusted PAT 174.9 (25.7) (0.3) (5.9)
Growth in EPS* NM (87.7) (11.4) 5.0
Key financial ratio
EBITDA margin (%) 15.3 11.3 13.6 12.3 14.3
Adjusted PAT margin (%) 6.6 6.8 10.3 9.2 6.5
RoCE (%) NM 3.8 5.5 9.2
RoE (%) 154.8 12.1 11.4 11.1
Gross debt - equity (times) 0.3 0.0 0.0 0.4 0.2
Net debt - equity (times) 0.2 (0.7) (0.2) 0.1 0.1
Interest coverage (times) 9.5 21.3 42.0 19.5 5.5
Current ratio (times) 2.6 6.6 2.9 2.9 2.7
Inventory days 55.5 49.0 52.6 53.4
Receivable days 41.9 47.1 38.3 37.8
Source: BSE, Capitaline and CARE Research

4 Initiative of the BSE Investors’ Protection Fund

 DISCLOSURES

 Each member of the team involved in the preparation of this grading report, hereby affirms that there exists no
conflict of interest that can bias the grading recommendation of the company.
 This report has been sponsored by the BSE Investors’ Protection Fund.

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