Press Release

Cipla Limited
October 08, 2024

Facilities/Instruments Amount (₹ crore) Rating1 Rating Action

2,268.00
Long-term / short-term bank facilities CARE AAA; Stable / CARE A1+ Reaffirmed
(Enhanced from 2,220.00)
Details of instruments/facilities in Annexure-1.

Rationale and key rating drivers

Ratings assigned of bank facilities of Cipla Limited (Cipla) factor in the company’s strong business profile with a leading and
dominant share in multiple therapeutic segments, such as respiratory, urology, anti-infective, and cardiology in the domestic and
international markets. Ratings also consider the company’s vast product portfolio of over 1,500 products spanning multiple
therapeutic segments, and a healthy product pipeline consisting of respiratory products, peptide injectables, and other complex
assets. Ratings also factor in the continuous growth in its scale of operations and the improvement in its debt coverage indicators
in FY24 (refers to April 1 to March 31) and Q1FY25 (UA), the immense experience of its promoters in the pharmaceuticals industry,
and its strong liquidity position. However, ratings continue to reflect the regulatory risks associated with the geographies in which
Cipla operates. CARE Ratings Limited (CARE Ratings) continues to monitor the update regarding the pending litigation with
National Pharmaceutical Pricing Authority (NPPA) for pricing issue and the observations received from USFDA for Goa and
Pithampur manufacturing plants.

Rating sensitivities: Factors likely to lead to rating actions

Positive factors: Not applicable

Negative factors
• Declining operating profitability to below 15% either due to increased competition or regulatory issues.
• Weakening of financial and business profiles as a result of crystallisation of NPPA liability and/or untoward regulatory issues.
• Significantly deteriorating credit metrics because of large debt-funded capex or acquisitions resulting in net debt to profit
before interest, lease rentals, depreciation, and taxation (PBILDT) going beyond 0.75x on a sustained basis.

Analytical approach: Consolidated; CARE Ratings has analysed Cipla’s credit profile by considering the consolidated financial
statements owing to financial and operational linkages between the parent and subsidiaries and common management. The list
of entities consolidated is given in Annexure-6.

Outlook: Stable
The stable outlook reflects the expectation that the rated entity will maintain its strong business and financial profile in the medium
term.

Detailed description of key rating drivers:

Key strengths
Reputed brand with leading market position across therapies
Cipla is one of the leading pharmaceutical companies in India. Per the IQVIA MAT February 2024, the company is ranked third
largest in India and is ranked first in the pharma prescription market of South Africa. The company is second-largest Indian
exporter to emerging markets and the sixth-largest Indian exporter to Europe. It has a widespread presence across the globe
through subsidiaries/associates. The company has 21 brands (PY: 20) in top 300 India Pharma Market (IPM) brands and 22
brands with sales greater than ₹100 crore in IPM. Cipla leads in respiratory therapy with a market share of 24.60% in India
followed by urology and chronic segment, where the company in domestic market stands at second position with the market
share of 11.90% and 8.60%, respectively. The company has 11 brands (PY: 9) clocking ₹200 crore revenue.

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Complete definition of ratings assigned are available at www.careedge.in and other CARE Ratings Limited’s publications.

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Diversified product portfolio and geographical presence

The company features a broad range of products and a substantial global footprint with presence in 78 countries. Its diverse
portfolio includes therapies for respiratory issues, anti-infectives, cardiac conditions, urology, and gastro-intestinal health. The
company operates in both regulated and semi-regulated markets. In FY24, domestic sales represented 43% of total revenue,
followed by 30% from the US, 12% from Emerging Markets and Europe, and 12% from South Africa.

Continuous launch of new products with strong product pipeline

Cipla has five well-equipped research and development (R&D) facility with more than 1,600 dedicated employees. Driven by
strong research and development (R&D), Cipla has been launching new products every year. The company expended ₹1,571
crore on R&D, which comprises about 6% of its total operating income (TOI) of FY24. In FY24, the company has launched 101
new products across the world. The newly launched products cater to asthma, chronic pulmonary disease, acid refluxes, stomach
diseases, oncology, Influenza A & Influenza B, and anti-retroviral. It has also filed 12 abbreviated new drug applications (ANDAs)
(including one NDAs) and have received five approvals. The company has healthy product pipeline consisting of respiratory
products, peptide injectables, and other complex assets. CARE Ratings expects that Cipla will continue to maintain its dominant
position in the domestic and international pharmaceutical market supported by continuous launch of new products.

Accredited manufacturing facilities

Cipla has 46 state-of-the-art manufacturing facilities for API and formulations across six countries. The company has
manufacturing sites across India in Maharashtra, Goa, Madhya Pradesh, Karnataka, Himachal Pradesh, and Sikkim. Apart from
India the company has manufacturing plants in the US, South Africa, and China. It has manufacturing capacity to produce 28.34
bn tablets and capsules, 726.90 mn respules, 51.60 mn oral liquids,43.20 mn nasal spray, 129.10 mn aerosol pMDI,1.86 mn
lyophillsed injections, and 0.70 mn form fill seal eyedrops. The company’s manufacturing facilities have approvals from major
regulators including India’s Central Drugs Standard Control Organisation, US’s Food and Drug Administration (FDA), UK’s
Medicines and Healthcare Products Regulatory Agency (MHRA), World Health Organisation (WHO), South African Health Products
Regulatory Authority, National Medical Products Administration, China, Therapeutic Goods Administration, Australia, and Brazil’s
National Health Surveillance Agency (ANVISA).

Steady growth in operation with improving margins

The company has witnessed continuous growth in its revenue and operating margins over FY19-FY24. Its revenue from operation
has improved at compounded annual growth rate (CAGR) of ~9.50% from ₹16,405 crore in FY19 to ₹25,875 crore in FY24. In
FY24, the company has registered healthy revenue growth of over 13% to ₹25,875 crore from ₹22,818 crore reported in FY23.
In Q1FY25, the company registered revenue of ₹6,694 crore (Q1FY24: ₹6,329 crore) improved by ~6% Y-o-Y. Its operating
margins have also been steady and have improved over time. In FY24, company reported operating margins of 24.70%, which
improved by 232 bps from FY23. The improvement in margin is the result of product mix and rationalisation of cost and improved
operating efficiency.

Comfortable capital structure and debt coverage indicators

The company’s capital structure continued to remain comfortable as on March 31, 2024. Debt to equity ratio stood at 0.01x as
on March 31, 2023 (0.03x as on March 31, 2023). Overall gearing improved and was also below unity and stood at 0.02x as on
March 31, 2024, as against 0.04x as on March 31, 2023. At the back of healthy cash accruals, other debt risk metrics such as
total debt to gross cash accruals (TD/GCA) have improved in FY24 to 0.11x (against 0.23x in FY23), interest coverage parameters
(PBILDT/interest and PBIT/interest) also improved to 71.11x and 59.42x in FY24 (46.49x and 35.79x in FY23) considering the
increase in profitability. CARE Ratings expects that the company’s credit risk profile will continue to remain comfortable supported
by strong cash and liquid investments and no large debt-funded capex/acquisition.

Key weaknesses
Liability under NPPA
In 2003, the company received a notice of demand from the NPPA, Government of India, considering the alleged overcharging
in respect of certain drugs under the Drugs (Prices Control) Order, 1995. The matter was presented before jurisdictional powers.
It is currently subjudice, and basis the facts and legal advice on the matter, no provision (apart from ₹119.75 crore as on June
30, 2022) is made by the company in respect of the notices of demand aggregating to ₹3,707 crore as on March 31, 2024. The
materialisation of the liability and/or significant increase in the amount of the liability will remain a key rating monitorable. In its
analysis, CARE Ratings has factored in the scenario wherein if the liability materialises and the same has to be funded by debt,
even then the adjusted overall gearing remains comfortable at 0.17x as on March 31, 2025. Apart from the above, the company
has over ₹8,000 crore in the form of cash and liquid investments, which provides an adequate liquidity cushion.

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Acquisitions risk
With a robust cash flow, the company might develop strategic strengths in focused therapies and expand its geographical
presence. Post the large debt-funded acquisitions of US-based Invagen Pharmaceuticals Inc and Exelan Pharmaceuticals Inc in
FY16 for US$ 550 million, Cipla did not venture into large-size capex. However, significant outflow will remain a key credit
monitorable.

Regulatory risk
Cipla sells its products in 78 countries across the world with its production units spread across various locations. Also, the company
has entered in-licensing agreements with global partners across countries for manufacturing/marketing of drugs. Hence, the
company is required to comply with laws, rules and regulations and operate under strict regulatory environment in India and
abroad considering the nature of business. In recent years, the company’s Goa and Indore plants in India and InvaGen plant in
the US was inspected by US FDA. Upon inspection, Goa and Indore plant has received observations. CARE Ratings will continue
to monitor the developments with respect to the resolutions of US FDA observations. Moreover, CARE Ratings also observes that
other plants inspected by US FDA, where the company has not received observation or have received voluntary action indicated
(VAI) includes Kurkumbh and Patalganga in Maharashtra, a plant in China, and two plants in the US (InvaGen and Central Islip).

Liquidity: Strong
Cipla’s liquidity profile continued to remain healthy on the backdrop of significant liquid investments of over ₹8,000 crore as on
March 31, 2024. The company has no term debt repayments. The company continues to report healthy GCA of about ₹5,000
crore per annum. The company’s working capital utilisation is low which further adds to its financial flexibility. With overall gearing
at 0.03x as on March 31, 2024, and with the unutilised lines providing the additional cushion, CARE Ratings expects Cipla to have
comfortable liquidity position. The company’s current ratio also stood comfortable at 3.75x as on March 31, 2024.

Assumptions/Covenants: Not applicable

Environment, social, and governance (ESG) risks

For the pharma industry, the main factor of ESG affecting the sector is the social aspects such as product safety and quality,
human capital & development, and access to healthcare. Governance remains a universal concept affecting sectors and
geographies. Amongst the ESG factors, majority of the pharma companies seem to be focusing on product quality & safety and
regulatory compliance in governance. Since these companies have exposure to different geographies, each having its own
regulatory requirements which are continuously evolving, non-compliance with regulations or scrutiny process can result in
product withdrawals, recalls, regulatory action, declining sales, reputational damage, increased litigation and related expenses. It
might also result in regulatory ban on products/facilities (as in the recent cases of import alerts issued by the USFDA to top
pharma companies) and may impact a company’s future approvals from regulators such as USFDA.

In case of Cipla, to reduce the impacts of company’s operations on the environment, the company has implemented measures
across its manufacturing facilities to increase efficiency in consumption of resources. The company has replaced usage of furnace
oil with pressurised natural gas in the boilers, installed rooftop solar panels and solar trees for electricity generation, have replaced
polythene packaging with glue pasting for inner cartons in aerosol products and have also implemented ZLD treatment process,
which treats and reuse the liquid effluents and eliminates its discharge into surface water. The company has also undertaken
couple of projects as a part of technology and automation initiatives. For product quality and safety, the company has standard
operating procedures (SOP) and has a dedicated quality assurance team overseeing the compliance to the laid SOPs. The company
also assesses the quality standards of their vendors, suppliers and contract manufacturing organisations (CMOs) to verify their
adherence to the laid down internal SOPs and cGMP requirement. The company from time-to-time conducts product quality testing
in-house. The company’s manufacturing units are equipped with specialised quality control laboratories dedicated to testing
materials and drug products using advanced instruments. For the well-being of society at large, the company has its CSR strategy
and works towards enhancing community health, education, and skill development.

Applicable criteria
Definition of Default
Liquidity Analysis of Non-financial sector entities
Rating Outlook and Rating Watch
Manufacturing Companies
Pharmaceuticals
Financial Ratios – Non financial Sector
Short Term Instruments

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Consolidation

About the company and industry

Industry classification
Macroeconomic indicator Sector Industry Basic industry
Healthcare Healthcare Pharmaceuticals & biotechnology Pharmaceuticals

Incorporated in 1935, Cipla was promoted by the late Dr K A Hamied, and is currently spearheaded by Dr Y K Hamied. The
promoter group holds a 30.91% equity stake in the company as on June 30, 2024. It is engaged in manufacturing formulations
and APIs, with over 97% of the sales being contributed from the formulation segment in FY24. Cipla has a diversified product
portfolio of more than 1,500 different types of drugs catering to segments such as anti-infective, cardiac, gynaecology, and
gastrointestinal in 78 markets across the world.

Brief Consolidated
March 31, 2023 (A) March 31, 2024 (A) Q1FY25 (UA)
Financials (₹ crore)
Total operating income 22,818.19 25,875.02 6,693.94
PBILDT 5,092.04 6,391.98 1,715.80
PAT 2,832.89 4,153.72 1,175.46
Overall gearing (times) 0.04 0.02 -
Interest coverage (times) 46.49 71.11 95.58
A: Audited UA: Unaudited; Note: these are latest available financial results

Status of non-cooperation with previous CRA: Not applicable

Any other information: Not applicable

Rating history for last three years: Annexure-2

Detailed explanation of covenants of rated instrument / facility: Annexure-3

Complexity level of instruments rated: Annexure-4

Lender details: Annexure-5

Annexure-1: Details of instruments/facilities

Date of Rating
Maturity Size of the
Name of the Issuance Coupon Assigned
ISIN Date (DD- Issue
Instrument (DD-MM- Rate (%) and Rating
MM-YYYY) (₹ crore)
YYYY) Outlook
LT/ST Fund-
CARE AAA;
based/Non-fund-
- - - 277.00 Stable / CARE
based-
A1+
CC/WCDL/OD/LC/BG
LT/ST Fund-
CARE AAA;
based/Non-fund-
- - - 1991.00 Stable / CARE
based-
A1+
CC/WCDL/OD/LC/BG

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Annexure-2: Rating history for last three years

Current Ratings Rating History

Date(s) Date(s) Date(s) Date(s)

Name of the
and and and and
Sr. No. Instrument/Bank Amount
Rating(s) Rating(s) Rating(s) Rating(s)
Facilities Type Outstanding Rating
assigned assigned assigned assigned
(₹ crore)
in 2024- in 2023- in 2022- in 2021-
2025 2024 2023 2022
1)CARE 1)CARE 1)CARE
CARE
LT/ST Fund- AAA; AAA; AAA;
AAA;
based/Non-fund- Stable / Stable / Stable /
1 LT/ST 277.00 Stable / -
based- CARE A1+ CARE A1+ CARE A1+
CARE
CC/WCDL/OD/LC/BG (09-Oct- (27-Sep- (05-Oct-
A1+
23) 22) 21)
1)CARE 1)CARE 1)CARE
CARE
LT/ST Fund- AAA; AAA; AAA;
AAA;
based/Non-fund- Stable / Stable / Stable /
2 LT/ST 1991.00 Stable / -
based- CARE A1+ CARE A1+ CARE A1+
CARE
CC/WCDL/OD/LC/BG (09-Oct- (27-Sep- (05-Oct-
A1+
23) 22) 21)

LT: Long term; ST: Short term; LT/ST: Long term/Short term

Annexure-3: Detailed explanation of covenants of rated instruments/facilities: Not applicable

Annexure-4: Complexity level of instruments rated

Sr. No. Name of the Instrument Complexity Level

1 LT/ST Fund-based/Non-fund-based-CC/WCDL/OD/LC/BG Simple

Annexure-5: Lender details

To view lender-wise details of bank facilities please click here

Annexure-6: List of entities consolidated

Rationale for
Sr No Name of the entity Extent of consolidation
consolidation
1 Goldencross Pharma Ltd. Full Subsidiary
2 Meditab Specialities Ltd. Full Subsidiary
3 Cipla Medpro South Africa (Pty) Limited Full Subsidiary
4 Cipla Holding B.V. Full Subsidiary
5 Cipla Pharma and Life Sciences Limited Full Subsidiary
6 Cipla (EU) Limited Full Subsidiary
7 Saba Investment Limited Full Subsidiary
8 Jay Precision Pharmaceuticals Pvt. Ltd. Full Subsidiary
9 Cipla Health Ltd. Full Subsidiary
10 Cipla Pharmaceuticals Limited Full Subsidiary
11 Cipla Digital Health Limited Full Subsidiary
12 Cipla Australia Pty Limited Full Subsidiary
13 Medispray Laboratories Private Limited Full Subsidiary
14 Sitec Labs Ltd. Full Subsidiary
15 Meditab Holdings Limited Full Subsidiary
16 Cipla USA Inc. Full Subsidiary

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17 Cipla Kenya Ltd. Full Subsidiary

18 Cipla Malaysia Sdn. Bhd. Full Subsidiary
19 Cipla Europe NV Full Subsidiary
20 Cipla Quality Chemical Industries Limited Full Subsidiary
21 Actor Pharma (Pty) Limited Full Subsidiary
22 Mexico S.A. de CV Full Subsidiary
23 Cipla Dibcare Pty Ltd. Full Subsidiary
24 Cipla Medpro Manufacturing (Pty) Limited Full Subsidiary
25 Cipla-Medpro (Pty) Limited Full Subsidiary
26 Cipla-Medpro Distribution Centre (Pty) Ltd. Full Subsidiary
27 Cipla Medpro Holdings (Pty) Limited Full Subsidiary
28 Cipla Medpro Botswana (Pty) Limited Full Subsidiary
29 Cipla Select (Pty) Limited Full Subsidiary
30 Medpro Pharmaceutical (Pty) Ltd. Full Subsidiary
31 Breathe Free Lanka (Private) Ltd. Full Subsidiary
32 Cipla Medica Pharmaceutical and Chemical Industries Limited Full Subsidiary
33 Cipla Brasil Importadora E Distribuidora De Medicamentos Ltda Full Subsidiary
34 Cipla Maroc SA Full Subsidiary
35 Cipla Middle East Pharmaceuticals FZ-LLC Full Subsidiary
36 Cipla Philippines Inc. Full Subsidiary
37 InvaGen Pharmaceuticals Inc. Full Subsidiary
38 Exelan Pharmaceuticals Inc. Full Subsidiary
39 CIPLA Algérie Full Subsidiary
40 Cipla Technologies LLC Full Subsidiary
41 Cipla Gulf FZ-LLC Full Subsidiary
42 Mirren (Pty) Ltd Full Subsidiary
43 Madison Pharmaceuticals Inc. Full Subsidiary
44 Cipla Colombia SAS Full Subsidiary
45 Cipla (China) Pharmaceutical Co., Ltd. Full Subsidiary
46 Cipla (Jiangsu) Pharmaceutical Co., Ltd. Full Subsidiary
47 Cipla Therapeutics Inc. Full Subsidiary
48 Aspergen Inc Full Subsidiary
49 AMPSolar Power Systems Private Limited Proportionate Associate
50 GoAPPTIV Private Limited Proportionate Associate
51 AMP Energy Green Eleven Private Limited Proportionate Associate
52 Clean Max Auriga Power LLP Proportionate Associate
53 Achira Labs Private Limited Proportionate Associate
54 Stempeutics Research Pvt. Ltd. Proportionate Associate
55 Avenue Therapeutics Inc Proportionate Associate
56 Brandmed (pty) Ltd Proportionate Associate
57 Iconphygital Private Limited Proportionate Associate
58 Pactiv Healthcare Private Limited Proportionate Associate
59 MKC Biotherapeutics Inc Proportionate Associate
60 Cipla Health Employee Stock Option Trust Full Trust
61 The Cipla Empowerment Trust Full Trust

Note on complexity levels of rated instruments: CARE Ratings has classified instruments rated by it based on complexity.
Investors/market intermediaries/regulators or others are welcome to write to care@careedge.in for clarifications.

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About us:
Established in 1993, CARE Ratings is one of the leading credit rating agencies in India. Registered under the Securities and
Exchange Board of India, it has been acknowledged as an External Credit Assessment Institution by the RBI. With an equitable
position in the Indian capital market, CARE Ratings provides a wide array of credit rating services that help corporates raise capital
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and capital market instruments, including commercial papers, corporate bonds and debentures, and structured credit.

Disclaimer:
The ratings issued by CARE Ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to
sanction, renew, disburse, or recall the concerned bank facilities or to buy, sell, or hold any security. These ratings do not convey suitability or price for the investor.
The agency does not constitute an audit on the rated entity. CARE Ratings has based its ratings/outlook based on information obtained from reliable and credible
sources. CARE Ratings does not, however, guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions
and the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE Ratings have paid a credit rating fee,
based on the amount and type of bank facilities/instruments. CARE Ratings or its subsidiaries/associates may also be involved with other commercial transactions with
the entity. In case of partnership/proprietary concerns, the rating/outlook assigned by CARE Ratings is, inter-alia, based on the capital deployed by the
partners/proprietors and the current financial strength of the firm. The ratings/outlook may change in case of withdrawal of capital, or the unsecured loans brought
in by the partners/proprietors in addition to the financial performance and other relevant factors. CARE Ratings is not responsible for any errors and states that it has
no financial liability whatsoever to the users of the ratings of CARE Ratings. The ratings of CARE Ratings do not factor in any rating-related trigger clauses as per the
terms of the facilities/instruments, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and
triggered, the ratings may see volatility and sharp downgrades.

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