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Analysis on Lupin’s Rubamin Acquisition

October 1, 2007

We reported that Lupin has acquired Rubamin Pharma.[RLL]

RLL is a research driven organization with 145 employees, of which 30% are involved in R&D. The company’s R&D capabilities encompass activities such as Product Development and Optimization, and NCE Development Support. This acquisition would provide Lupin access to RLL’s customer base of innovator and generic companies in the US and Europe and various technology platforms, which Lupin does not have. We believe that Lupin would be able to use this customer base, and technology platforms to leverage its own CRAMS initiatives. Lupin will also fill gaps, which RLL has in terms of scale-up and forward integration. Apart from this, we expect Lupin to initiate operational restructuring to reduce cost and improve profitability.

Currently, RLL has sales less than Rs500 mn and EBITDA margin lower than Lupin’s margin. However, ASK India expects sales of RLL to grow to Rs2.5- 3 bn in three years and significantly improve profitability. ASK maintains a BUY on Lupin with a price target of Rs 807. Fully diluted EPS expected for FY08 and FY09 are – Rs 36.9 and Rs 44.8.

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