PROJECT REPORT

ON

Industrial Visit to Cipla, Sikkim

Submitted by:
Arnab Bhattacharjee (14DM052)
Astha Mehra (14DM054)
Avantika Mittal (14DM055)
Bhavika Sharma (14DM060)
Biprajit Goswami (14DM062)
Bunny Garg (14DM063)
Chaitali Batra (14DM064)
Saumyadeep Chakraborty (14DM188)
Sayan Ghosh (14DM190)

ACKNOWLEDGEMENT
We are highly thankful to Prof. Ashok Malhota, Chairperson, Centre for Business
Management for organizing the explicit visit to the Cipla manufacturing plant in Sikkim,
Gangtok.
A special token of thanks to Asst. Prof. Gagan Katiyar who continuously guiding and
mentoring us during the industrial visit and Asst. Prof. Eugene Reuben, Ms. Meenakshi
Bhat and Sir Vijay Kumar for their constant supervision as well as for providing necessary
arrangements during the industrial visit.
We would like to express special gratitude towards the employees and workers at Cipla
Sikkim for their hospitality and providing us with all the necessary information regarding the
manufacturing processes at the plant.
At last, we would also like to thank the tour operators for planning the trip and appreciate our
colleague in developing the project who willingly helped us with their abilities.

CONTENTS
Sl. No.
1
2

6
7

Particulars
INTRODUCTION
Indian Pharmaceutical Sector
OVERVIEW OF THE COMPANY
History
Milestones
Competitive Positioning
PRODUCT PROFILE
Pharmaceuticals
Animal Healthcare products
PLANT LAYOUT
General requirements
Manufacturing
Quality Control
Packaging
FINANCIAL STATUS
Profit and Loss account
Balance Sheet
Ratios
SUPPLY CHAIN PRACTICE FOR EFFICIENCY
Typical supply chain structure
PRODUCT PROMOTION AND DISTRIBUTION
STRATEGIES
Distribution in India
Replenishment Model

8
9
10
11

12

Forecasting Model
Sales force structure
Sales force selling practices
HR PRACTICES
MOST IMPORTANT OBSERVATION OF THE VISIT
Quality Assurance
LEARNING OUTCOME FROM THE VISIT
SETTING UP AN ENTERPRISE IN A TAX HOLIDAY
ZONE
Conditions to be satisfied
Amount of deduction general provisions
Period and rate of deduction
Transfer under a scheme of amalgamation or
demerger
REFERENCES

ii

Page
1
1
3
3
4
4
6
6
6
8
8
10
11
12
13
13
14
15
19
19
20
21
23
23
24
24
25
26
26
28
29
30
30
31
31
33

INTRODUCTION
Pharmaceutical is an aggregation of Active substances and basic pharmaceutical products and
Medicaments, vaccines and other preparations. It consists of the following categories:

Active Substances and Basic Pharmaceutical Products

This category includes production of medicinally active substances to be used for
their pharmacological properties in the manufacture of medicaments, processing of blood,
manufacture of chemically pure sugars, processing of glands and manufacture of extracts of
glands, etc.

Medicaments, Vaccines and Other Preparations

This category includes manufacture of pharmaceutical preparations: antisera and other
blood fractions, vaccines, diverse medicaments, including homeopathic preparations,
manufacture of chemical contraceptive products for external use and hormonal contraceptive
medicaments, dental fillings and bone reconstruction cements, medical impregnated wadding,
gauze, bandages, dressings, surgical gut string, etc.

Indian Pharmaceutical Sector

The Pharmaceutical industry in India is the world's third-largest in terms of volume.
According to Department of Pharmaceuticals of the Indian Ministry of Chemicals and
Fertilizers, the total turnover of India's pharmaceuticals industry between 2008 and
September 2009 was US$21.04 billion. While the domestic market was worth US$12.26
billion. The industry holds a market share of $14 billion in the United States.
According to India Brand Equity Foundation, the Indian pharmaceutical market is likely
to grow at a compound annual growth rate (CAGR) of 14-17 per cent in between 201216. India is now among the top five pharmaceutical emerging markets of the world.

Indian Pharmaceutical Industry has witnessed a robust growth over the past few years
moving on from a turnover of approx. US $ 1 billion in 1990 to over US $ 20 billion
in 2010of which the export turnover is approximately US $ 8 billion.
Indian Pharmaceutical market is valued at 72069 crores INR in 2013, however growth
has gone down to 9.8% from 16.6% in 2012.
In 2013, there were 4,655 pharmaceutical manufacturing plants in all of India,
employing over 345 thousand workers.
It has shown tremendous progress in terms of infrastructure development, technology
base creation and a wide range of products.
The country now ranks 3rd worldwide by volume of production and 10th by value
thereby accounting for around 10% of world's production by volume and 1.5% by
value.

Globally, it ranks 4th in terms of generics production and 17th in terms of export
value of bulk actives and dosage forms.
Indian exports are destined to more than 200 countries around the globe including
highly regulated markets of US, West Europe, Japan and Australia.
The Indian pharmaceuticals market is largely dominated by branded generics as they
make up around 80% of total sales.
Medicaments, vaccines and other preparations accounted for 82% of total market size
in 2012, while active substances and basic pharmaceutical products held the
remaining 18%, with this structure remaining constant throughout the review period.
India is the only country with largest number of US-FDA compliant plants (more than
100) outside USA.
There 793 WHO-GMP approved Pharma Plants, 153 European Directorate of Quality
Medicines (EDQM) approved plants with modern state of Art Technology.
India is capable of manufacturing low cost generic alternatives due to a number of
economic factors favoring the industry.

In 2013, there were 4,655 pharmaceutical manufacturing plants in all of India, employing
over 345 thousand workers.[The Top ten pharmaceutical companies in India according to
the sales revenue in 2012 as per the reports of Corporate Catalyst India (CCI) are as
follows:
S.No.

Company Name

Sales in INR
billion (2012)

Cipla

69.77

Ranbaxy Lab

76.86

Dr Reddy's Labs

66.86

Sun Pharma

40.15

Lupin Ltd

53.64

Aurobindo Pharma

42.84

Jubiliant Pharma

26.41

Cadila Health

31.52

Ipca Labs

23.52

10

Wockhardt
26.5
Top 10 pharmaceutical companies in India

OVERVIEW OF THE COMPANY

Cipla was established in 1935 with the vision of making India self-reliant and self-sufficient
in healthcare. Today, Cipla is one of the worlds largest generic pharmaceutical companies
with a presence in over 170 countries. Cipla is renowned for making affordable, world-class
medicines that meet the needs of patients across therapies. We also offer services like
consulting, commissioning, plant engineering, technical know-how transfer and support.
Corporate OfficeChairman Executive
Vice
ChairmanTurnover*
Approvals

Highlights

Cipla Ltd., Mumbai Central, Mumbai 400 008, India

Dr. Yusuf K. Hamied
Mr. M.K. Hamied
USD 1.5 billion
US FDA, WHO-Geneva, MHRA-UK, TGA-Australia, SUKL-Slovak
Republic, APVMA-Australia, MCC-South Africa, PIC-Germany,
Danish Medical Agency, ANVISA-Brazil, INVIMA- Colombia, NDAUganda, Department of Health-Canada and MOH-Saudi Arabia, among
others
One of the worlds largest generic companies.
Over 2,000 products, 65 therapeutic categories, over 40 dosage
forms.
34 state-of-the-art manufacturing facilities approved by major
international regulatory agencies.
Continuous innovation in R&D; over 20 world first

Table 2: Details about Cipla

The company has three manufacturing plants in India, in Goa, Bangalore and Sikkim. The
company is amongst the pioneers in the country in manufacturing prescription drugs at
cheaper prices, making them available for the masses. The company has a massive presence
across the world, and is amongst the leading exporters of pharmaceuticals and formulation
products to more than 170 countries, including the US, Latin America, the Middle East and
Europe.

History
Ciplas journey began in 1935 when Dr. K. A. Hamied, set up an enterprise with the vision to
make India self-sufficient in healthcare. Cipla has 34 state-of-the-art manufacturing facilities
that make Active Pharmaceutical Ingredients (APIs) and formulations, which have been
approved by major international Regulatory Agencies. It has over 2000 products in 65
therapeutic categories; with over 40 dosage forms, covering a wide spectrum of diseases

ranging from communicable, non-communicable, common and emerging diseases to even

rare
diseases.
It
has
a
strong
presence
in
over
170
countries.

Milestones

In 1939, Mahatma Gandhi visited Cipla and inspired our to make essential medicines
for the country, and strive for self-sufficiency. During World War II, when India was
dependent on imported medicines and there was an alarming shortage of life-saving
drugs, it manufactured them for the country.

In the 1960s, Cipla pioneered API manufacturing in the country and helped lay the
foundation for the bulk drug industry in India.

In 1978, Cipla pioneered inhalation therapy in India with the manufacture of MeteredDose Inhaler (MDI), at a time when the country stopped receiving imported supplies.
Today, Cipla has the worlds largest range of inhaled medication and devices.

In 1994, Cipla launched Deferiprone, the worlds first oral iron chelator which
revolutionized the treatment for thalassemia. For the first time patients with
thalassemia had an option that was affordable, painless and convenient.

In 2001, Cipla pioneered the access to HIV treatment by making antiretrovirals

(ARVs) available at less than a Dollar a Day'. The cost of treatment dramatically fell
from $12,000 per patient per year to $300 per patient per year. This caused a
revolution where HIV treatment became a reality for the world and millions of lives
could be saved.

In 2012, it made a breakthrough in reducing the prices of cancer drugs, thus making
world-class medicines affordable and accessible to cancer patients.

Competitive Positioning

Cipla held a negligible value share in consumer health in 2012, and ranked 56th. Its
presence in consumer health is low, as the company is primarily involved in
prescription medicines.

The companys value sales witnessed growth in 2012, reaching Rs54 million,
increasing from Rs50 million in 2011. This growth was because the company is one
of the only ones which manufacture OTC motion sickness remedies in India.

The company is in an emerging category in consumer health, as its product is one of

its kind in the Indian market, and OTC motion sickness remedies is still a niche
category in the country.

In consumer health the company has a narrow product portfolio. However, in

prescription medicines the company has a massive portfolio.

The company offers economically priced consumer health products and prescription
medicines in order to provide quality healthcare to the masses at low prices.

The company is an innovator, and consistently comes up with new drugs, especially
in prescription medicines.

PRODUCT PROFILE
Pharmaceuticals
The company is a leading domestic pharmaceutical major, has a product range comprising
antibiotics, anti-bacterial, anti-asthmatics, anthelmintics, anti-ulcerants, oncology,
corticosteroids, nutritional supplements and cardiovascular drugs. It is a leader in the antibacterial and anti-asthmatic segments and is the first player in Asia to launch non-CFC
metered dose inhaler. Formulations contribute 84.1% (mainly sold in the domestic market)
and bulk drugs 15.9% (mostly exported). Among Cipla`s prominent brands are Ciplox
(market share 7.3%), Norflox (5.5%), Novamox (3.8%) and Asthalin-Inh (9.7 per cent).
DPCO coverage of Cipla is around 40%.

Animal Health Care Products

Cipla is largest exporter of veterinary pharmaceutical products in India, with its products
available now in over 100 countries. The company covers pretty much all animal groups
from horses, canines and cats to livestock and poultry, and even aqua products but equine
and companion animal care products continue to be its focus areas.
Cipla offers companion animals (dogs and cats) a wide range of products, which can be
classified broadly into six categories. Below is a peek into each of these categories:
1) Deworming: This includes the Triworm range of dewormering tablets that are meant to
tackle ascarids, hookworms, tapeworms and whipworms in dogs and cats. Triworm-D and
Triworm-D XL tablets are for dogs, while Triworm-C is for cats.
2) Flea and tick control: This category includes the Fiprotec range of tonics, formulated for
the prevention and treatment of flea and tick infestations on canines as well as cats.
3)
Joint care: GCS-DOG powder, GCS-DOG OMEGA chews and GCS-DOG OMEGA
liquid help in managing the specific health requirements of dogs with degenerative joint
diseases, while GCS-CAT OMEGA gel does the same thing for cats.
4) Skin care: This category has the antiseptic Dermavet cream (which helps accelerate the
wound-healing process, whether the patient be a dog, cat or any other animal), Oticlear (earcleansing solution for dogs and cats), Efazol (skin and coat care solution for dogs, containing
Omega-3 and Omega-6 essential fatty acids, among other things), and the Cipla band
(cohesive bandages for dogs, cats and horses, which come in various sizes).
5)
Scheduled: This category contains the anti-inflammatory PETCAM oral suspension,
available in various sizes and for sundry animals.
6) Anxiety and stress: This one consists of the Calmeze range of anti-anxiety and -stress
pills, liquids and gels all meant to soothe the nerves of pets pooches and pussies.

In addition to the joint care, deworming, topical and scheduled categories, Cipla offers for its
equine consumers an additional category gastrointestinal. This includes the
EQUISYLLIUM fibre, which assists in the management of sand colic and sand-associated
diarrhoea.
The above list is only but a small sample of veterinary products from the stable of Cipla. Just
like the other hundreds of products manufactured by the companys plants that are approved
by international regulatory agencies, the ones for veterinary purposes are also affordable yet
world-class.
OTC: These include: child care products, eye care products, food supplements, health drinks,
life style products, nutraceuticals & tonics, skin care products, and oral hygiene products.
Flavour & Fragrance: Cipla manufactures a wide range of flavours, which are used in foods
and beverages, fruit juices, baked goods, and oral hygiene products. Cipla fragrances have
wide ranging applications such as in personal care products, laundry detergents and room
fresheners.
Products are available in 8 major formulations

Tablets- Ciplox500, Asthalin4, Theo Asthalin, AmlopressAP

Capsule- Urimax0.4,0.8, Velnar XR

Rotacap- Asthalin,Livolin,Aerocort,Cerobid

Aerosol- Asthalin,Aerocort

Hormonal Tablet and Capsule- Tibofen, Norloot-N, Danozen

Respule- Asthalin,Duolin,Budecort, Budesal

Eyedrop-Ciplox,Moxicit

Nasal Spray- Flomist, Metaspray, Furamist

Respiratory Solution- Asthalin,Budesal, Budecort

PLANT LAYOUT
The plant layout adheres to SCHEDULE M of central drugs standard control organization of
India and also the Current Good Manufacturing Practice (CGMPs) regulation for human
pharmaceuticals, enforced by the food and drugs administration of USA.
Schedule M specifies the general requirements of plant and equipments used for production
as well as on the area required for manufacture of various types of medicines such as oral
liquid preparations, tablets, powders, capsules. for e.g.- for capsules, a minimum area of
twenty-five square meters for basic installation and ten square meters for Ancillary area each
for penicillin and non-penicillin sections is recommended.

General requirements
Location and surroundings- The factory building(s) for manufacture of drugs shall be so
situated and shall have such measures as to avoid risk of contamination from external
environmental including open sewage, drain, public lavatory or any factory which product
disagreeable or obnoxious odour, fumes, excessive soot, dust, smoke, chemical or biological
emissions. 1.2. Building and premises.- The building(s) used for the factory shall be
designed, constructed, adapted and maintained to suit the manufacturing operations so as to
permit production of drugs under hygienic conditions. They shall conform to the conditions
laid down in the Factories Act, 1948 (63 of 1948)
The premises used for manufacturing, processing, warehousing, packaging labelling and
testing purposes shall be (I) compatible with other drug manufacturing operations that may be
carried out in the same or adjacent area / section; (ii) adequately provided with working space
to allow orderly and logical placement of equipment, materials and movement of personnel
so as to: (a) avoid the risk of mix-up between different categories of drugs or with raw
materials, intermediates and in-process material; (b) avoid the possibilities of contamination
and cross- contamination by providing suitable mechanism; (iii) designed / constructed /
maintained to prevent entry of insects, pests, birds, vermin, and rodents. Interior surface
(walls, floors and ceilings) shall be smooth and free from cracks, and permit easy cleaning,
painting and disinfection; (iv) air-conditioned, where prescribed for the operations and
dosage forms under production.
The production and dispensing areas shall be well lighted, effectively ventilated, with air
control facilities and may have proper Air Handling Units (wherever applicable) to maintain
conditions including temperature and, wherever necessary, humidity, as defined for the
relevant product. These conditions shall be appropriate to the category of drugs and nature of
the operation. These shall also be suitable to the comforts of the personnel working with
protective clothing, products handled, and operations undertaken within them in relation to
the external environment. These areas shall be regularly monitored for compliance with
required specifications; (v) provided with drainage system, as specified for the various
categories of products, which shall be of adequate size and so designed as to prevent back

flow and/or prevent insets and rodents entering the premises. Open channels shall be avoided
in manufacturing areas and, where provided, these shall be shallow to facilitate cleaning and
disinfection; (vi) The walls and floors of the areas where manufacture of drugs is carried out
shall be free from cracks and open joints to avoid accumulation of dust. These shall be
smooth, washable, covered and shall permit easy and effective cleaning and dis-infection.
The interior surfaces shall not shed particles. A periodical record of cleaning and painting of
the premises shall be maintained.
CGMP refers to the Current Good Manufacturing Practice regulations enforced by the US
Food and Drug Administration (FDA). CGMPs provide for systems that assure proper design,
monitoring, and control of manufacturing processes and facilities. Adherence to the CGMP
regulations assures the identity, strength, quality, and purity of drug products by requiring
that manufacturers of medications adequately control manufacturing operations. This
includes establishing strong quality management systems, obtaining appropriate quality raw
materials, establishing robust operating procedures, detecting and investigating product
quality deviations, and maintaining reliable testing laboratories. This formal system of
controls at a pharmaceutical company, if adequately put into practice, helps to prevent
instances of contamination, mix-ups, deviations, failures, and errors. This assures that drug
products meet their quality standards.
The CGMP requirements were established to be flexible in order to allow each manufacturer
to decide individually how to best implement the necessary controls by using scientifically
sound design, processing methods, and testing procedures. The flexibility in these regulations
allows companies to use modern technologies and innovative approaches to achieve higher
quality through continual improvement. Accordingly, the "C" in CGMP stands for "current,"
requiring companies to use technologies and systems that are up-to-date in order to comply
with the regulations. Systems and equipment that may have been "top-of-the-line" to prevent
contamination, mix-ups, and errors 10 or 20 years ago may be less than adequate by today's
standards

Manufacturing
Manufacturing process is as follows

Procurement

Testing

Dispensing

secondary
packaging

in process
testing

Manufacturing
and filling

finished
product testing

Batch release

Product
dispatch

Manufacturing Process
Major Instruments used in Production-

Compression Machine
Autoclave
Deduster
Metal Detector
Peristaltic pump, Blender, Shiftor, Rapid Mixer Granulator
Coating Machine
Diana Scan
Measuring Apparatus
DT Apparatus

Tablet Section

Rapid Mixer Granulator

Coating Machine
Tablet Counting Machine

Capsule Section

Filling Machine
Printing Machine
Polishing Machine
Counting Machine

10

Liquid Section

Homogenizer
Filter Press
Washing Machine
Automatic Labelling Machine

Quality Control
All type of testing done in the Quality control (QC) Department of Pharmaceutical industries
are necessary as they plays an important role in defining the quality of products manufactured
in the pharmaceutical Industries. These different types of testing cited that whether the raw
materials & the water used in the manufacturing of the Pharmaceutical products is right to
use or not. Also plays an important role in determination of the different components of drugs
in right concentration. HPLC technique is used most widely for the testing. This book gives a
practical illustration of most of the Pharmaceutical Q.C. techniques followed in the labs
including microbial limit tests, determination of total microbial count (TMC), total bacterial
count (TBC), total fungal count (TFC), serial dilutions, tests for specified microbes,
biochemical tests, chromatographic techniques (HPLC, Ion exchange chromatography, size
exclusion chromatography, affinity chromatography etc.)
Cipla Quality Control Department at Sikkim has 4 major Sections

Raw Materials section

Instrument Section
Finished Product Section
Stability Section

Steps Involved

The raw material which is bought from various companies is stored in the storage
Department.
Sampling- A small portion of the sample is taken for quality control and transferred to
the Raw Material section of QC department.
Assay- Analysis is done which involves physical as well as chemical tests.
After Assay is done the sample is transferred to the Instrument Section which
involves the use of instruments like Gas Chromatography, Liquid Chromatography,
High Performance Liquid Chromatography (HPLC), DT Apparatus etc.
If the sample passes the test it goes to the Finished Product section after production or
else it goes to the raw material section and the raw material is reversed.
After the final product is formed, it goes for packaging and thereafter it goes to the
Stability Section to check the stability of the product.

11

Cipla uses state-of-the-art technology, the most stringent operating procedures, a highly
motivated and technically competent team, highest standards of safety practices and
environmentally green and clean processes.
The Cipla Quality benchmark is achieved by strict adherence to the following:

The state-of-the-art manufacturing facilities is cGMP compliant (current Good

Manufacturing Practices) in conformity with national and international standards.
They are equipped with hi-tech sophisticated machineries to achieve a high level of
accuracy and precision.

The quality control laboratories have the latest high precision equipments that
build quality at every stage of processing including inputs. Ciplahas a dedicated pool
of talent who consistently ensure that the highest quality and safety standards are built
into the products.

Cipla constantly upgrade the manufacturing facilities and adapt the technological
innovations in facilities to consistently excel and produce high quality medicines at
an affordable price.

Packaging
Pharmaceutical packaging and Labelling- It has to be carried out for the purpose of the safety
of the pharmaceutical preparations in order to keep them free from contamination, hinder
microbial growth, and ensure product safety through the intended shelf life for the
pharmaceuticals. Packaging is a critical tool in the pharmaceutical industry for product
delivery and regulatory compliance, many pharmaceutical companies will do all their
packaging within a contamination free environment or Cleanroom.
Package labelling is any written, electronic, or graphical communication on the package or on
a separate but associated label.
Types

Blister packing
Strip Pack
Container Pack
Aerosol Packing

Purpose

Physical protection
Barrier Protection
Information Transmission
Marketing
Anti-Counterfeiting Packaging

12

FINANCIAL STATUS
There was no information given to us by the company officials of Cipla, Sikkim saying that it is
confidential information and they have no right to give such information to outsiders. But searching
on the internet, we found out some data relating to the same.

PROFIT & LOSS ACCOUNT

(Rs in Cr)

Mar' 14

Mar' 13

Mar' 12

Mar' 11

Mar' 10

9,380.29

8,202.42

6,977.50

6,331.09

5,605.69

3,844.67

3,149.40

2,959.21

2,997.58

2,503.45

Income :
Operating
Income
Expenses
Material
Consumed
Manufacturing
Expenses

191.84

211.17

211.32

183.65

351.82

Personnel
Expenses

1,284.75

969.28

728.21

540.33

318.87

Selling
Expenses

326.48

2,069.50

1,753.43

1,496.90

1,288.83

724.14

Cost Of Sales

7,390.76

6,083.28

5,395.64

5,010.39

4,224.76

Operating
Profit

1,989.53

2,119.14

1,581.86

1,320.70

1,380.93

Administrative
Expenses
Expenses
Capitalized

Other
Recurring
Income

280.28

229.13

148.3

91.64

94.21

Adjusted
PBDIT

2,269.81

2,348.27

1,730.16

1,412.34

1,475.14

Financial
Expenses

127.86

33.38

26.63

12.92

28.3

Depreciation

323.61

303.03

282.07

248.03

165.25

1,818.34

2,011.86

1,421.46

1,151.39

1,281.59

430

504.75

297.5

191

243.5

1,388.34

1,507.11

1,123.96

960.39

1,038.09

31.5

Other Write
offs
Adjusted PBT
Tax Charges
Adjusted PAT
Non Recurring
Items

13

Other Non
Cash
adjustments

11.9

Reported Net
Profit

1,388.34

1,507.11

1,123.96

960.39

1,081.49

Earnings
Before
Appropriation

5,657.84

4,617.37

3,421.89

2,659.46

2,036.32

133.29

133.29

134.53

188.09

160.58

27.29

27.29

26.05

36.72

26.67

5,497.26

4,456.79

3,261.31

2,434.65

1,849.07

Equity
Dividend
Preference
Dividend
Dividend Tax
Retained
Earnings

From the above table we can see that the company is doing pretty well. The earnings before
appropriation have increases every year and so do the retained earnings.
The investors trust this company and are happy investing in this. The current share price is
737.85 and has increased by 1.81%.

BALANCE SHEET
Mar'
14

Mar'
13

Mar'
12

Mar'
11

Mar'
10

160.58

160.58

160.58

160.58

160.58

Share
Application
Money

Preference
Share Capital

9,931.06

8,708.94

7,389.70

6,452.37

5,744.54

9.49

10

2.95

0.41

877.34

956.32

2.2

437.53

4.66

10,968.98

9,835.33

7,562.48

7,053.43

5,910.19

(Rs in Cr)

SOURCES OF
FUNDS
Owners'
Fund
Equity Share
Capital

Reserves &
Surplus
Loan Funds
Secured
Loans
Unsecured
Loans
Total
USES OF
FUNDS

14

Fixed
Assets
Gross Block

5,394.36

4,983.81

4,298.18

3,928.47

2,895.44

Less:
Revaluation
Reserve

8.97

Less:
Accumulated
Depreciation

1,870.17

1,565.52

1,295.52

1,060.82

884.27

Net Block

3,524.19

3,418.29

3,002.66

2,867.65

2,002.20

376.69

350.34

343.45

253.07

684.24

3,587.13

2,601.82

1,035.15

570.65

265.1

Current
Assets, Loans
& Advances

5,435.99

5,122.76

4,612.53

4,756.46

5,483.42

Less :
Current
Liabilities &
Provisions

1,955.02

1,657.88

1,431.31

1,394.40

2,524.77

Total Net
Current
Assets

3,480.97

3,464.88

3,181.22

3,362.06

2,958.65

Capital Workin-progress
Investments
Net Current
Assets

Miscellaneous
Expenses not
written

The company is having a large chunk of assets as well as sound owners funds which makes
the trustworthy relationship with the investors.

RATIOS
Mar'
14

Mar'
13

Mar'
12

Mar'
11

Mar'
10

Adjusted E P S
(Rs.)

17.29

18.77

14

11.96

12.93

Adjusted Cash
EPS (Rs.)

21.32

22.54

17.51

15.05

14.99

PER SHARE
RATIOS

15

Reported EPS
(Rs.)

17.29

18.77

14

11.96

13.47

Reported Cash
EPS (Rs.)

21.32

22.54

17.51

15.05

15.53

2.8

24.78

26.39

19.7

16.45

17.2

Book Value (Excl

Rev Res) Per
Share (Rs.)

125.69

110.47

94.04

82.36

73.55

Book Value (Incl

Rev Res) Per
Share (Rs.)

125.69

110.47

94.04

82.36

73.66

Net Operating
Income Per
Share (Rs.)

116.83

102.16

86.9

78.85

69.82

71.54

21.2

25.83

22.67

20.86

24.63

Gross Profit
Margin (%)

17.75

22.14

18.62

16.94

21.68

Net Profit Margin

(%)

14.37

17.87

15.77

14.95

18.97

Adjusted Cash
Margin (%)

17.72

21.46

19.73

18.81

21.11

Adjusted Return
On Net Worth
(%)

13.75

16.99

14.88

14.52

17.57

Reported Return
On Net Worth
(%)

13.75

16.99

14.88

14.52

18.31

Dividend Per
Share

Operating Profit
Per Share (Rs.)

Free Reserves
Per Share (Rs.)
PROFITABILITY
RATIOS
Operating Margin
(%)

16

Return On long
Term Funds (%)

19.28

23.05

19.17

17.59

22.16

Long Term Debt /

Equity

Total Debt/Equity

0.08

0.1

0.06

Owners fund as
% of total Source

92

90.18

99.83

93.75

99.91

0.9

0.94

0.95

0.97

1.94

Current Ratio

2.78

3.09

3.22

3.41

2.17

Current Ratio
(Inc. ST Loans)

1.92

1.95

3.18

2.59

2.17

1.5

1.68

1.95

2.06

1.57

3.74

3.5

3.82

3.36

4.18

11.56

10.65

14.28

23.4

17.31

9.37

8.87

11.42

18.6

15.01

Earning
Retention Ratio

88.44

89.35

85.72

76.6

81.97

Cash Earnings
Retention Ratio

90.63

91.13

88.58

81.4

84.44

0.51

0.53

0.01

0.36

LEVERAGE
RATIOS

Fixed Assets
Turnover Ratio
LIQUIDITY
RATIOS

Quick Ratio
Inventory
Turnover Ratio
PAYOUT
RATIOS

Dividend payout
Ratio (Net Profit)

Dividend payout
Ratio (Cash
Profit)

COVERAGE
RATIOS

Adjusted Cash
Flow Time Total
Debt

17

Financial Charges
Coverage Ratio

17.75

70.35

64.97

109.31

52.13

Fin. Charges
Cov.Ratio (Post
Tax)

14.39

55.23

53.8

94.53

45.05

42.67

41.94

42.24

49.53

47.94

5.82

54.9

54.79

53.43

53.98

54.54

53.16

39.71

38.68

41.02

43.85

0.57

0.55

0.48

0.43

0.34

94.44

94.44

94.44

94.44

94.44

COMPONENT
RATIOS

Material Cost
Component(%
earnings)

Selling Cost
Component

Exports as
percent of Total
Sales

Import Comp. in
Raw Mat.
Consumed

Long term assets

/ Total Assets

Bonus
Component In
Equity Capital
(%)

From the above ratio it is being seen that the company is paying a constant dividend
of Rs 2 per share.
The profit of the company has also declined as compared to the previous year.
Debt to equity ratio is also less than one so the company is in a sound position to
repay the debt.
The exports of the company have also increased as compared to the previous year
because of the decline in the rupee value from time to time.
The company is having less number of long term assets as compared to the total
assets.

18

SUPPLY CHAIN PRACTICE FOR EFFICIENCY

Based on the need of a drug in the market, found through market research, drugs are ordered
for manufacturing.
Drugs are ordered through authorized suppliers and most of raw materials are ordered after
auditing for quality is done by the suppliers themselves. This ensures that proper material is
used for the making of drugs.
To avoid contamination during supply, it is essential that drugs are supplied through proper
means. For this, CIPLA utilizes its own agency for safely supplying its various
manufacturing plants with the raw materials and also distributing the finished goods.

Typical Supply Chain Structure

19

PRODUCT PROMOTION AND DISTRIBUTION

STRATEGIES
Indian pharmaceutical industry is on a strong growth path with the total value of Indian
Pharma industry expected to reach almost $50 Billion by 2015-2016. Out of this close to 22
billion is expected to originate from the domestic formulation business. A key issue faced by
the industry is management of the supply chain. Supply chain in India is highly fragmented
with more than 550,000 retail pharmacies in the country. According to a report by bioplan
Associates, though the number of distributors have increased by 4 fold in the last three
decades, from 125,000 in 1978, the volume of prescriptions distributed have not increased
proportionally. Hence it is evident that though there is a growth in the number of distributors
and retail pharmacies, distribution is not very efficient. Also the rural markets remain highly
untapped.
Drug distribution in India has witnessed a paradigm shift. Before 1990, pharmaceutical
companies established their own depots and warehouses. Now they have been replaced by
clearing and forwarding agents (CFAs).

CFAs: These organizations are primarily responsible for maintaining storage of the
companys products and forwarding SKUs to the stockist on request. Most companies
keep 13 CFAs in each Indian state. On an average, a company may work with a total of
2535 CFAs. The CFAs are paid by the company yearly, once or twice, on a basis of the
percentage of total turnover of products.

Stockist: is the distributor, who can simultaneously handle more than one company
(usually, 515 depending on the city area), and may go up to even 3050 different
manufacturers. They pay for the products directly in the name of the pharmaceutical
company after 30 to 45 days.

The retail pharmacy obtains products from the stockist or substockist through whom it
finally reaches the consumers (patients).

20

Typical Distribution Channel in India for Pharmaceutical products

Distribution in India
CFA Operations
Large drug manufacturers will have CFAs in almost every state in India. CFAs majorly help
manufacturers in providing reach for its products. They majorly facilitate in by passing the
state sales tax (CST- 4%). CFAs are just created to avoid local state taxes (they hardly take 1
or 2% margin). Mostly CFAs serve a single company. CFAs follow a stock transfer model
from the manufacturer and all invoices sent to the stockists are on the name of the
manufacturer itself. Based on the demand for their products they decide on how many
stockists to maintain in each district and further in talukas.
Cost of the distribution from manufacturing plant till the stockist is borne by the
manufacturer. Price to Stockist (PTS), Price to Retailers (PTR) are the terms used in the
industry.
Sub stockists would get the stock from stockists and operate on 8% commission till they
establish themselves as a big player and qualify for getting a stockist license from
manufacturers. Retailers get 15 20% margins based on type of drugs, generic/branded/price
controlled and even more on counterfeit drugs.

21

Logistics providers transfer stock on per kilo basis, Rs. 5 per kilo etc. Logistics are managed
through cost effective means, local players who quotes lowest price. There are suppliers who
quote surprisingly low prices and operate by sending a person in public transport to deliver
the products.
Association of Druggists and Stockists in India
All India Organization of Chemists & Druggists (AIOCD) has over 5.5 Lac members from
retail chemists and pharma distributors/stockists. Stockist plays a very powerful role in the
pharma distribution in India. Companies cannot bypass stockists and sell directly to
institutions or retail chains. They may face a ban from the stockists and considering the
substitutes available for each molecule, companies cannot take the risk of losing the sales.
Retail Pharmacy Chains
Organized pharmacy retail sales in India are only 3% of the total sales. They can procure the
stock from the stockists registered in the association (AIOCD) only (Manufacturers would
not sell their products directly to retails chains). The remaining 97% market is completely
controlled by the stockists (There are many layers of stockists or distributors based on the
volume and region they operate in). Sales representatives do rarely come and talk with the
concerned distribution managers in the retail chains to sell their products.
Institutional Supplies
Institutional supplies are 7% of the total drug sales in India. Distribution for institutions
(divided into state funded, central funded & large hospitals) happen either through stockist or
directly from the company CFA . Companies bid for the tenders passed by these institutions
like major PSUs (Public Sector Units) including NTPC, BHEL etc.
Replenishment Model vs. Forecasting Model
For planning the distribution of drugs, Indian companies follow two models, 1)
Replenishment model (DRL) and 2) Forecast based model (Ranbaxy). Product sales are
monitored daily from the supply nodes and based on the demand and availability; products
are supplied in the replenishment model. In forecast based model, sales are forecasted based
on the previous sales and the plan for the present year and then products are supplied
periodically.
Replenishment model has its own disadvantages of keeping the track of the sales and
inventory daily and frequent supplies. Forecasting based model will work out best for the
company as sending the stock once a month or fortnight based on the stockist inventory will
be much easier for the company.
The main advantage of replenishment model is that the retailer and the stockists will be
happy, since his inventory space is saved and he can accommodate products from many
different companies

22

Replenishment Model

Forecasting Model

23

Sales Force Structure

Sales force structure for a pharmaceutical company

A large pharmaceutical company in India is usually divided into strategic business units
(SBUs) based on therapeutic areas like cardiology, urology etc. Sales force is structured
under each therapeutic area and managed by a national sales manager.

Sales Force Selling Practices

Sales force functions based on the therapeutic area.

Each representative has to make 10 visits to a doctor in a day, 240 visits in month.
The below image depicts a sample function of a Scientific Business Officer from
company

24

HR PRACTICES
Cipla has job opportunities across most functional areas. Some typical entry or junior
level job positions are:
Chemical analysts
Account executives
Account assistants
Book keepers
The company is an equal opportunities employer and tends strategic importance
towards recruitment,retention and training of best of the professionals in the industry.
The Company uses a consistent and non-discriminatory approach towards the
development of personal careers within the organization, through meritocracy driven
appraisals, consistent effort in motivation and structured approach towards managing
human resource.
The workers working there were:
1. Highly Skilled
2. Semi skilled
3. Unskilled

25

MOST IMPORTANT OBSERVATION OF

THE VISIT
Quality Assurance
The most important observation from the visit is undoubtedly the dedication and commitment
towards quality control and quality assurance mechanism at Cipla.
Ciplausesstate-of-the-art technology, expensive modern equipment, the most stringent
operating procedures, a highly motivated and technically competent team, highest standards
of safety practices and environmentally green and clean processes to maintain its quality
standards.
Cipla Quality Control Department at Sikkim has 4 major Sections-Raw Materials section,
Instrument Section, Finished Product Section and Stability Section.
Cipla uses the following procedure for quality assurance

The raw material which is bought from various vendors is stored in the storage
chambers.
Sampling- A small portion of the sample is taken for quality control and transferred to
the Raw Material section of QC department.
Acceptance range adopted by cipla is 100+/- 2 (i.e. 98 to 102)
Assay- Analysis is done which involves physical as well as chemical tests.
After Assay is done the sample is transferred to the Instrument Section which
involves the use of instruments like Gas Chromatography, Liquid Chromatography,
High Performance Liquid Chromatography (HPLC), DT Apparatus etc.
If the sample passes the test it goes to the Finished Product section after production or
else it goes to the raw material section and the raw material is reversed.
After the final product is formed, it goes for packaging and thereafter it goes to the
Stability Section to check the stability of the product.

The benchmark is achieved basis the strict adherence to the following practices:

The quality control laboratories have the latest high precision equipments that
build quality at every stage of processing including inputs. Cipla has a dedicated pool
of talent who consistently ensure that the highest quality and safety standards are built
into the products.
The state-of-the-art manufacturing facilities is cGMP compliant (current Good
Manufacturing Practices) in conformity with national and international standards.
They are equipped with hi-tech sophisticated machineries to achieve a high level of
accuracy and precision.

26

Cipla constantly upgrade the manufacturing facilities and adapt the technological
innovations in facilities to consistently excel and produce high quality medicines at an
affordable price.
Developing a new pharmaceutical quality system or modifying an existing one
requires careful assessment of size and complexities of the companys activities. Cipla
was able to do so by careful idea mapping and has been able to establish, implement,
and maintain a system that has not only allowed it to deliver its products with the
desired quality attributes but has also helped in developing effective monitoring and
control systems for specified process performance which in turn has established the
capability of processes.
These objectives collectively have been able to contribute towards a better end
product quality and better process understanding. Furthermore the technical aspects of
the process, peculiarity of the product design and problems during product life cycles
helped Cipla create a knowledge database and provided principles and examples of
tools for quality risk management and approach to identifying, scientifically
evaluating and controlling potential risks to quality. Quality risk management strategy
has helped Cipla identify attributes for measurement and analysis of state of control
with various approaches including statistical indicators.

All this has been possible because Cipla consistently demonstrated strict commitment toward
the quality objectives, performed quality audits periodically for appropriate improvement in
process performance and provided training to its staff effectively to identify and follow up
quality management systems. Although all this required adequate resource management,
effective communication between all levels of management and periodical review of the
quality system but it has finally paid off by achieving desired pharmaceutical quality system
governance.

27

LEARNING OUTCOME FROM THE VISIT

Developing a new pharmaceutical quality system or modifying an existing one requires
careful assessment of size and complexities of the companys activities. Cipla was able to do
so by careful idea mapping and has been able to establish, implement, and maintain a
system that has not only allowed it to deliver its products with the desired quality attributes
but has also helped in developing effective monitoring and control systems for specified
process performance which in turn has established the capability of processes. These
objectives collectively have been able to contribute towards a better end product quality and
better process understanding. Furthermore the technical aspects of the process, peculiarity of
the product design and problems during product life cycles helped Cipla create a knowledge
database and provided principles and examples of tools for quality risk management and
approach to identifying, scientifically evaluating and controlling potential risks to quality.
Quality risk management strategy has helped Cipla identify attributes for measurement and
analysis of state of control with various approaches including statistical indicators.
This all has been possible because Cipla consistently demonstrated strict commitment toward
the quality objectives, performed quality audits periodically for appropriate improvement in
process performance and provided training to its staff effectively to identify and follow up
quality management systems. Although all this required adequate resource management,
effective communication between all levels of management and periodical review of the
quality system but it has finally paid off by achieving desired pharmaceutical quality system
governance.

28

SETTING UP AN ENTERPRISE IN A TAX

HOLIDAY ZONE
Tax Holiday (Sections 10A, 10AA, 10B & 10BA)
Free

Trade Zone (FTZ) Special Provision

Established Undertaking in Free Trade Zone.

in

respect

of

newly

1. Conditions to be satisfied
2. Amount of Deduction-General Provisions
3. Period and Rate of Deduction
4. Transfer under a Scheme of Amalgamation or Demerger
FREE TRADE ZONE (FTZ)[ Section 10A]
(SPECIAL
PROVISION
IN
RESPECT
UNDERTAKINGS IN FREE TRADE ZONE)

OF

NEWLY

ESTABLISHED

1. CONDITIONS TO BE SATISFIED :
In order to get deduction, an undertaking must satisfy the following conditions :
It must begin manufacture or production in free trade zone :
It has begun or begins to manufacture or produce during the previous year
relevant to the assessment year
Condition 1:

(a) commencing on or after 1-4-1981, in any free trade zone; or

(b) commencing on or after 1-04-1994, in any software technology park or
electronic hardware technology park or;
(c) commencing on or after the 1-04-2001 in any special economic zone;

Conditions 2 : It should not be formed by splitting / reconstruction of business.:

It should not be formed by transfer of old machinery:
It is not formed by the transfer to a new business of machinery or plant
previously used for any purpose.
Conditions 3 :

1. 20% of second value machinery allowed : Where in the case of an

undertaking, any machinery or plant or any part thereof previously
used for any purpose is transferred to a new business and the total
value of the machinery or plant or part so transferred does not exceed
20% of the total value of the machinery or plant used in the business,
then, the condition specified therein shall be deemed to have been

29

complied with.
2. Imported Machinery allowed : Any machinery or plant which was
used outside India by any person other than the assessee shall not be
regarded as machinery or plant previously used for any purpose, if
the following conditions are fulfilled, namely :
1. such machinery or plant was not previously used in India
2. such machinery or plant is imported into India from any
county outside India ; and
3. No deduction on account of depreciation in respect of
such machinery or plant has been allowed or it allowable
under the provisions of the Act in computing the total income
of any person for any period prior to the date of the
installation of machinery or plant by the assessee.
(Value of imported machine can exceed 20% of the Total Value of Machine)
Sale construction should be remitted to India in convertible foreign
exchange.:
Conditions 4 :

Sale consideration should be remitted to India in convertible foreign

exchange, within a period of six months from the end of the previous year
or, within such further period as the competent authority may allow in this
behalf.
Report of Chartered Accountant :

Condition 5 :

Condition 6 :

The deduction under [this section] shall not be admissible for

any assessment year beginning on or after the 1st day of April, 2001, unless
the assessee furnishes in the prescribed Form 56 , along with the return of
income, the report of an Chartered Accountant, as defined in the Explanation
below sub-section (2) of section 288, certifying that the deduction has been
correctly claimed in accordance with the provisions of this section.
Return of income should be submitted in time.

2. AMOUNT OF DEDUCTION GENERAL PROVISIONS :

If the aforesaid conditions are satisfied, the deduction u/s 10A may be computed as under :

Profits of the business of eligible undertaking =

Export Turnover of eligible undertaking

_______________________________
Total Turnover of eligible undertaking

30

'Export Turnover'':
means the consideration of articles or things or
computer software received in, or brought into India by the assessee in convertible foreign
exchange in accordance with sub-section (3), but does not include
1. freight,
2. telecommunication charges or
3. insurance attributable to the delivery of the articles or things or computer
software outside India or
Expenses, if any, incurred in foreign exchange in providing the technical services outside
India
3. PERIOD AND RATE OF DEDUCTION :
Out of the total income of an assessee a deduction of 90% of such profits and gains as are
derived by an undertaking from the export of articles, or things or computer software shall be
allowed.
Rate of deduction for unit set up in Special Economic Zone on or after 1-4-2003 shall be as
follows for first 10 assessment years :
8 First 5 Years 100 % of profits and gains derived from the export of such articles or things
or computer software for a period of five consecutive assessment years beginning with
the assessment year relevant to the previous year in which the undertaking begins to
manufacture or produce such articles or things or computer software, as the case may be, and
thereafter,
8 Next 2 Years: 50% of such Profit and Gains is deductible for further 2 assessment years.
8 Next 3 Years : for the next three consecutive assessment years, so much of the amount not
exceeding 50% of the profit as is debited to the profit and loss account of the previous year in
respect of which the deduction is to be allowed and credited to a reserve account (to be called
the ''Special Economic Zone Re-investment Allowance Reserve Account'') to be created and
utilized for the purposes of the business of the assessee
4

TRANSFER UNDER A SCHEME OF AMALGAMATION OR DEMERGER :

In case an undertaking eligible for deduction under this section is transferred, before the
expiry of the specified period, to another Indian company in a scheme of amalgamation or
demerger
(a)

No deduction shall be admissible under this section to the amalgamating or the

demerged company for the previous year in which the amalgamation or demerger
takes place ; and

31

(b)
The provisions of this section shall apply to the amalgamated or the resulting
company as if the amalgamation or demerger had not taken place.

32

REFERENCES

www.dolcera.com
www.wikipedia.org
www.moneycontrol.com
Department of Pharmaceuticals (DoP)

33