>AVENTIS PHARMA LIMITED (PPFAS)

■ Aventis Pharma Ltd. (APL) is the Indian subsidiary of the global pharmaceutical giant Sanofi-Aventis S.A. The parent ranks amongst the top 3 pharmaceutical companies of the world & holds about 50% in Aventis Pharma Ltd. Sanofi-Aventis lends strong support to Aventis Pharma, in terms of new product introductions in the Indian domestic markets from its product basket & easy access to its strong & rich product pipeline. The parent has also looked at increasing its stake in the Indian subsidiary.

■ APL has transformed itself into a company catering to the chronic & critical-care therapeutic segments. It has several products that are market leaders within their respective segments & have grown at double digits over the years. APL is also achieving better results on the exports front year after year. We believe these products to continue their growth momentum & help the company to achieve higher profitability going forward.

■ With consistently growing brands in its product basket & new product launches every year, the company generates huge cash flows. As of December 2008, APL has net cash balance of Rs. 4,973.7 Mn. on its Balance Sheet, translating to Rs. 216.0 per share. This free cash can be used by the company for suitable acquisitions within the Indian pharma space. Over the years, APL has maintained a constant dividend payout in the range of 20-25%.

Valuations
We expect the company to achieve 8 - 10% CAGR growth in its top-line & bottom-line over the next couple of years. Besides, cash rich & debt free status adds to the defensive nature of the stock. At CMP of Rs. 1,110.0, the scrip trades at 14.3x CY09E & 12.9x CY10E earnings. We initiate coverage on the stock with an ACCUMULATE rating.

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