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Natco Pharma: Manufacturing Affordable Medicines

Maram Srikanth; Palanisamy Saravanan; Gunta Srinivas

Product #:9B18N024
Supplier:Ivey
Discipline:Entrepreneurship, Finance, International Business
Setting:India, 2015
Details:Case (PDF) • 12 pages • 2018-11-23

Subjects:

Business managementEntrepreneurshipFinance and investingInternational business

Industries:

Fabrication and manufacturing

Geography:

IndiaAsia
Your Price:$9.71

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In 2015, the chief executive officer of Natco Pharma Limited, a commercial manufacturer of pharmaceutical drugs in India, needed to raise funds either through debt or equity to meet the company's capital expenditure and working capital requirements of ₹3.41 billion. The company could finance a loan at an interest rate of 12 per cent or raise funds through public deposits at an interest rate of 13 per cent. The company could also use equity to raise the requisite funds through either a rights offering or a seasoned equity offering. The chief executive officer needed to present his recommendation to the board of directors the following week. Which option should the company adopt?

Learning Objectives

This case is intended for graduate-level courses on corporate finance, accounting, or strategy. The case discusses the role of research and development in a pharmaceutical company in the context of capital structure and it emphasizes the qualitative evaluation of capital structure decisions. After working through the case and assignment questions, students will be able to do the following:
  • Assess a company’s proposal with regard to the mobilization of funds through debt or equity, with special emphasis on various alternatives within these routes.
  • Understand a company’s financing proposal from the perspective of qualified institutional buyers.
  • Appreciate the role of research and development in the pharmaceutical industry.
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Case Study: Natco Pharma: Manufacturing Affordable Medicines (English version) | Ivey Publishing