Aurobindo Pharma - The Smart Investor

Exhibit 24: Debt levels, FCF and Capex
(` cr)
2,500
2,000
1,500
1,000
500
0
1,373
2,078
1,908
Source: Company, Angel Research
2,333
2,155
2,004
Aurobindo Pharma | Initiating Coverage
APL has also commercialised its NJ facility, which it acquired from Sandoz in
2006. Through this facility APL is targeting the institutional business in the US. It is
necessary to have a local production unit to run the institutional business. APL has
begun filings of controlled substances from the unit, which is expected to contribute
from FY2013 onwards. Overall, we expect Unit VII SEZ and the NJ facility to scale
up and witness ramp up in capacity utilisation in FY2012 driven by supply
agreements, US and ARV segment leading to an improvement in margins.
Thus, with most of the facilities in place, we expect APL to incur moderate capex of
`568cr over the next two years.
Debt concerns receding
In view of APL’s aggressive capex, its net debt/equity increased to 1.8x in FY2009,
which was much higher than the industry average of 0.4x. However, in FY2010,
with overall improvement in business profitability (OPM expansion), the company’s
net debt/equity improved to 1.1x. Going ahead, in FY2012, we expect net
debt/equity to further improve to 0.6x on the back of debt repayments, decline in
capex and improvement in profitability.
APL has outstanding FCCB of US $139.2mn repayable in May 2011 with the
conversion price at 25-43% premium over the current price. We expect APL to
repay its outstanding FCCBs through internal accruals and debt resulting in outflow
of `938cr.
Exhibit 23: FCCB details
Maturity Date
Issued
(US$ mn)
Converted/
Bought back
O/s US
$mn
October 18, 2010 16
YTM
(%)
Exch Rate
(`/US $)
Amt Payable
(` cr)
Breakeven
price (`)
August 8, 2010 60.0 60.0 - 40.0 - - -
May 10, 2011 150.0 43.8 106.2 46.3 46.0 715 1,615
May 17, 2011 50.0 17.0 33.0 46.9 46.0 223 1,406
Total 260.0 120.8 139.2
Source: Company, Angel Research
1,766
FY2006 FY2008 FY2010 FY2012E
Debt Net Debt Equity
2.0
1.6
1.2
0.8
0.4
0.0
(x)
(` cr)
600
450
300
150
0
(150)
(300)
(450)
(237)
253
(326)
345
(48)
244
(343)
479
29
400
938
288 280
247
198
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E
FCF Capex