MOSL: Morning India (19/September/17)-1. Aurobindo Pharma (FY17-ART)-2. Divis Lab-3. Metals Weekly

​MOrning India (19/September/17): 1. Aurobindo Pharma (FY17-ART); 2. Divis Lab; 3. Metals Weekly

Today’s top research idea

• Aurobindo Pharma FY17: Securitisation of trade receivable drives cash flow

• Aurobindo Pharma's FY17 annual report highlights a year of moderating growth. EBITDA grew 8% to INR34.3b. PAT grew faster at 12% to INR23b, aided by lower finance charges. R&D expenses at INR5.9b (3.9% of sales) remained the lowest among peers.

• FCF turned positive at INR15.4b (FY16: negative INR2.3b), despite high capex at INR16.8b, primarily on account of securitization of trade receivables without recourse of INR64.2b (42.5% of sales). Trade receivables securitized as at year-end stands at INR18.3b; of this, INR7.4b stands as receivable from bank.

• Gross debt (adj.) declined to INR35.5b (FY16: INR51.9b). Rising capital intensity and declining leverage led to a decline in RoE to 18% (FY16: 20%). Related-party transactions stood at INR5.3b (FY16: INR4.4b), primarily comprising of purchases of INR5.2b, 8.1% of raw material cost (FY16: INR4.3b, 7.1% of raw material cost).

Piping hot news

Govt may cut spending as tax inflows fall

• ​The government could be forced to cut spending on key infrastructure such as railways and highways as lower-than-expected tax collections and sluggish growth have upset its Budget calculations, two Finance Ministry officials said.