11 11 Mba Project New Report

8/6/2019 11 11 Mba Project New Report

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1---------------------------------- ------------------------------------------------------ -------------------------------------------------------

Chapter 1 - Introduction---------------------------------------------------------------------- --------------------------------------------------------------------------

Indian Pharmaceutical Industry

The Indian P harmac eut ical Ind ustry today i s in the fr ont rank of Indias science-based ind ustries

with wide ranging capa bilities in the complex field of dr ug man ufac tur e and technology. A highly

organiz ed sector, the Indian P harma Ind ustry is est ima ted to be wor th $ 4.5 billion, gr owing a t a bout

8 to 9 percent annually. I t rank s very high in the third w orld, in terms of technology, q uality and

range of medicin es manufac tur ed. Fr om simpl e headac he pills to so phisticated an ti biotics and

complex cardiac c ompounds, alm ost every type of medicin e is now mad e indig enous ly.

Playing a k ey r ole in pr omot ing and sust aining d evelo pment in the vital fi eld of medicin es, Indian

Pharma Ind ustry boasts of quality pr oducer s and many units appr oved by r egulatory a utho rities in

USA and UK. In terna tional c ompani es asso ciated wi th th is sector have stimulated, assisted and

s pear headed th is dynamic d evelo pment in the past 53 year s and helped to put India on the

pharmac eut ical map of the world.

The pharmac eut ical ind ustry in India m eets ar ound 70% of the country's demand f or bulk dr ugs,

dr ug in termediates , pharmac eutical f ormulations, chemical s, ta blets, capsu les, orals and inj ecti bles.

The r e ar e a bout 250 larg e units and a bout 8000 Small Scal e Uni ts , which f orm the cor e of the

pharmac eut ical ind ustry in India (incl uding 5 C entral P ublic S ector Uni ts) . These units pr oduce the

complete rang e of pharmac eutical f ormulations, i.e., medicin es r eady f or consumption by pa tients

and a bout 350 bulk dr ugs, i.e., chemical s having the rapeut ic val ue and use d f or pr oduction of

pharmac eut ical f ormulations.


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2

ADVANTAGE INDIA

1.

Competent workforce: India has a pool of per sonnel with high manag erial and technical

competence as also skilled workf orce. It has an educated work f orce and Engli sh is commonly

use d. Pr of ess ional servic es ar e easily availa ble.

2. Cost-effective chemical synthesis: Its track r ecord of develo pment, par ticularly in the ar ea of

impr oved cost-be neficial c hemical synthes is f or vari ous dr ug molecules is excellent. It pr ovides a

wide vari ety of bulk dr ugs and ex por ts so phisticated bulk dr ugs.

3. L egal & Financial Framework: India has a 53 y ear old democracyand hence has a solid legal

fram ework and str ong financial mark ets . The r e is alr eady an esta blishe d in terna tional ind ustry and

bus iness community.

4. Information & Technology: It has a good network of world-class educational in st itut ions and

esta blishe d str engths in Inf orma tion Te chnology.

5. G lobalizations: The country is commi tte d to a fr ee mark et economy and gl obaliza tion. A bove all,

it has a 70 milli on middl e class mark et, which is continuous ly gr owing.

6. Consolidation: For the fir st time in many y ear s, the interna tional pharmac eut ical ind ustry is

finding gr eat o ppor tunities in India. The pr ocess of consolida tion, w hich has become a generalized

phenomenon in the world pharmac eut ical ind ustry, has star ted taking plac e in India.


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3SWO T Analysis

S trengths

C ost Competitiveness W ell D evelo ped Ind ust ry wi th Str ong Man ufac turing Ba se Acc ess to pool of highly trained scientists , both in India and a br oad. S tr ong mark eting and di stri but ion network Ric h Biodiver sity C ompetencies in Chemistry and pr ocess develo pment.

W eaknesses

L ow inv estments in inn ovative R&D and lack of r esou rces to compete with MNC s f or New Dr ug Discovery R esearch and to commercializ e molecules on a

worldwid e basis.

Lack of str ong linkag es between ind ustry and acad emia. L ow medical ex penditur e and healthcar e s pend in the country Pr oduction of s purious and l ow quality dr ugs tarnishes the imag e of ind ustry a t home and a br oad.

S hor tage of medicin es containing p sychotr o pic subst anc es. The r e ar e 4000 such brand s of medicin es that fall under the Narc otics Dr ugs and P sychotr o pic

Subst anc es (NDPS ) Act, 1985.Und er a cla use of th is Act, the r etailer has to sign

the consignm ent note pr ovided by the stockist. The police check this note

r egularly to pr event these medicin es gett ing div er ted to the dr ug mafia and the y

can arr est the r etailer if the signa tur es ar e under sus pect. To pr otest again st this

clause , the r etailer s have sto pped stocking these medicin es, some of which is lif e

saving.


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4O pportunities

Significan t ex por t potential. Lic ensing d eals with MNC s f or NCE s and NDDS. Mark eting allianc es to sell MNC pr oducts in domest ic mark et. C ontrac t manufac turing arrang ements with MNC s P otential f or develo ping India a s a centr e f or interna tional clinical trials Nic he player in gl obal pharmac eut ical R&D. S u pply of generic dr ugs to develo ped mark ets.

Threats

Pr oduct patent r egime poses serious challenge to domest ic ind ustry unless it invests in r esearch and d evelo pment

R&D eff or ts of Indian p harmac eut ical c ompani es hamp er ed by lack of ena blingr egulatory r equir ement. For instanc e, r estrictions on animal test ing outdated

patent offic e.

Dr ug Pric e Contr ol Ord er puts unr ealistic ceilings on pr oduct pric es and pr ofita bility and pr events pharmac eut ical c ompani es fr om generating inv est i ble

surplus.

L owering of tariff pr otectionThe new MRP based excise duty r egime thr eatens the existence of many small

scale pharma units, es pecially in the states of And hra Prad esh and Ma harasht ra,

that wer e involved in c ontrac t manufac turing f or the larger, esta blishe d play er s.

These compani es ar e now shif ting the ir man ufac turing fr om these states to states lik e J&K

that enjoy tax holidays.


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5

Identified Problem

The economy w orldwid e is facing sever e r ecess ion and the curr ent r ecess ion is very sever e and pr olonged one af ter second world war. The shar e mark et all al ong the world is down to a significan t

level compar ed to the levels it was bef or e the curr ent world wid e r ecess ion. The r e is pr essu r e on all

the indust ry due to liquidity cr unch. The stock pric es ar e r educed to an exte nt mor e than 50% over

past 12 m onths . Rai sing capi tal r equir ed f or the bus iness ex pan sion has almost sto pped wi th shar e

mark et crash. The working capi tal r equir ed f or the o perations dried u p as bank s ar e not willing to

lend as the bank s ar e risk aw esome and f utu r e of the economy i s blink.

Need For S tudy

The capi tal mark et r eturns ar e negative since Jan 2008. The mark et capitaliza tion of several firm s

ar e beaten down to as much as mor e than 50%. The r e is continued down tr end in the mark et and

r eturns ar e uncer tain and inv estment in the capital mark et ar e at gr eater risk which was never see n

post word war II.

Ther e is need f or inv esto r s to asses the risk associa ted wi th ther e invest ments under curr ent mark et

scenari o, and to decide on continued inv est ing and to tak e fr esh invest ment decisions or r eallocate

the r e curr ent por tf olio.

O bjectives and S cope

The ob jectives of the pr ese nt studies ar e to find out past perf ormanc e of to p Indian p harmac eut ical

compani es. To identify and gr ou p the m in to sta ble and p erf ormer s and under perf ormer s. The

ob jective assess ment is carri ed out thr ough ratio analy sis f or the period of 2004 to 2008.

Deliverables

Identifying p erf ormer s and under perf ormer s among the to p Indian p harmac eut ical c ompani es andclass ifying the m f or invest ment decisions.


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6-------------------------------------------------------------------- ------------------------------------------------- --------

Chapter 2 Li teratur e Survey------------------------------------------------------------------------ ---------------------------------------------------------

A ratio : Is the mathe matical r elationsh ip between two quantities in the f orm of a frac tion or

percentage.

R atio analysis: is esse ntially c oncerned wi th the calculation of r elationsh ips which af ter pr o per

identifica tion and in terpr etation may pr ovide inf orma tion a bout the o perations and state of affair s of

a bus iness enterpri se.

The analy sis is use d to pr ovide indica tor s of pa st perf ormanc e in terms of cri tical success factor s of

a bus iness . Th is ass istanc e in decision-making r educes r elianc e on guess work and in tu ition and

esta blishes a basis f or sound judgement.

Types of Ratios

A: L iquidity Ratios

y Liquidity r ef er s to the a bility of a firm to meet its sho r t-te rm financial obliga tions when and

as the y fall d ue .

y The main c oncern of liquidity ra tio is to measur e the a bility of the firms to meet the ir sho r t-

term ma turing obliga tions. Fail ur e to do th is will r esu lt in the total fail ur e of the bus iness , as it

would be f orced in to liquida tion.


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7Cu rrent R atio

The Curr ent Ratio ex pr esses the r elationship between the firms curr ent assets and i ts curr ent

lia bilities.

Curr ent assets normally incl udes cash , mark eta ble securities, acc ounts r eceiva ble and inv entories.

Curr ent lia bilities consist of acc ounts paya ble, sho r t term n otes paya ble, sho r t-term l oans, curr ent

maturities of long term d ebt , accr ued inc ome taxes and othe r accr ued ex penses (wag es) .

The r ule of thu m b says that the curr ent ratio shou ld be at least 2, that is the current assets should

meet current liabilities at least twice.

Qu ick R atio

Measur es assets that ar e quickly c onver ted into cash and they ar e compar ed wi th curr ent lia bilities.

Th is ratio r ealizes that some of curr ent assets ar e not easily c onver ti ble to cash e.g. inv entories.

The quick ra tio, also r ef err ed to as acid test ratio, examines the a bility of the bus iness to cover its

sho r t-term obliga tions fr om its q uick a ssets only (i. e. it ignor es stock ). The quick ra tio is

calculated as f ollows

Clearly th is ratio will be lower than the curr ent ratio, but the diff er ence between the two (the gap)

will indica te the exte nt to which curr ent assets consist of stock.

B : Asset Management/Activity Ratios

If a bus iness does not use its assets eff ectively, inv esto r s in the business would ra the r tak e the ir

money and plac e it somewher e else. In order f or the assets to be use d eff ectively, the bus iness needs

a high turnover.


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8Unless the business continues to generate high turnover, a ssets will be idle as it is imposs i ble to

buy and sell fixed assets continuous ly a s turnover changes. Ac tivity ratios ar e ther ef or e use d to

assess how ac tive vari ous assets ar e in the bus iness .

Average C ollection Period

The average collection period m easur es the quality of debto r s since it indica tes the s peed of the ir

collection.

y The shor ter the average collection period, the bette r the quality of debto r s, as a sho r t

collection period impli es the pr ompt paym ent by debto r s.

y The average collection period shou ld be compar ed again st the firms cr edit terms and p olicy

to judge its cr edit and c ollection effici ency.

y An excess ively long collection period impli es a very li beral and in effici ent cr edit and

collection perf ormanc e.

The delay in c ollection of cash impair s the firms liquidity. On the othe r hand, too low a c ollection

period is not necessarily fav oura ble, ra ther it may indica te a very r estrictive cr edit and c ollection

policy w hich may c ur tail sales and hence adver sely aff ect pr ofit.

I nventory T u rnover

Th is ratio measur es the stock in r elation to turnover in order to determine how of ten the stock turns

over in the bus iness .

It indica tes the effici ency of the firm in selling i ts pr oduct. It is calculated by dividing he cost of

goods sold by the average inventory.


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9Total Assets T u rnover

Asset turnover is the r elationsh ip between sales and a ssets

y The firm shou ld manag e its assets effici ently to maximise sales.

y The total asset turnover indica tes the effici ency wi th which the firm uses all its assets to

generate sales.

y It is calculated by dividing the firms sales by its total assets .

y Generally, the higher the firms total asset turnover, the mor e effici ently its assets have been

utilised.

F ixed Asset T u rnover

The fixed assets turnover ra tio measur es the effici ency wi th which the firm has been using i ts fixed

assets to generate sales.

It is calculated by dividing the firms sales by its net fixed assets as f ollows:

y Generally, high fixed assets turnover s ar e pr ef err ed since the y indica te a better effici ency in fi xed

assets utilisation.

C: Financial L everage ( G earing) Ratios

y The ratios indica te the degr ee to which the activities of a firm ar e su ppor ted by cr editor s

f unds as o ppose d to owner s.


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10y The r elationsh ip of owners equity to borr owed f unds is an imp or tant indica tor of financial

str ength .

y The debt r equir es fixed inter est paym ents and r e paym ent of the loan and l egal ac tion can be

tak en if any am ounts due ar e not paid a t the appointed time. A r elatively high pr o por tion of f unds

contri buted by the owner s indica tes a cush ion (surplus) which sh ields cr editor s again st poss i ble

losses fr om default in paym ent.

The gr eater the pr o por tion of equity f unds, the gr eater the degr ee of financial str ength . Financial

leverage will be to the advan tage of the ordinary shar eho lder s as long as the rate of earning s on

capital employed is gr eater than the rate paya ble on borr owed f unds.

The f ollowing ra tios can be use d to identify the financial str ength and ri sk of the bus iness .

Equ ity R atio

The equity ra tio is calculated as f ollows:

y A high equity ratio r eflects a str ong financial str uctur e of the company. A r elatively low

equity ra tio r eflects a mor e s peculative situation because of the eff ect of high leverage and the

gr eater poss i bility of financial diffic ulty arising fr om excess ive debt burden.

D ebt R atio

Th is is the measur e of financial str ength that r eflects the pr o por tion of capi tal w hich has been f unded

by debt , incl uding pr ef er ence shar es.

Th is ratio is calculated as f ollows:


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11Wi th higher debt ratio (low equity ra tio), a v ery small c ush ion has develo ped thus not giving

cr editor s the security the y r equir e. The company w ould the r ef or e find i t r elatively diffic ult to raise

addi tional financial su ppor t fr om exte rnal sou rces if it wishe d to tak e that r oute . The higher the debt

ratio the mor e diffic ult it becomes f or the firm to raise debt .

D ebt to Equ ity ratio

Th is ratio indica tes the exte nt to which debt is cover ed by shar eho lder s f unds. It r eflects the r elative

pos ition of the equity holder s and the lender s and indica tes the company s policy on the mix of

capital f unds. The debt to equity ra tio is calculated as f ollows:

Times I nterest E arned R atio

Th is ratio measur e the extent to which earning s can d ecline without causing financial l osses to the

firm and cr eating an ina bility to meet the inter est cost .

y The times inter est earned shows how many times the bus iness can pay i ts inter est bills fr om

pr ofit earned.

y Pr esent and pr os pective loan cr editor s such as bondholder s, ar e vitally in ter este d to know

how adequate the inter est paym ents on the ir loans ar e cover ed by the earning s availa ble f or such

paym ents.

y Owner s, manag er s and dir ector s ar e also inter este d in the a bility of the bus iness to servic e

the fixed in ter est charg es on outst anding d ebt .

The ratio is calculated as f ollows:


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12D: Profitability Ratios

Pr ofita bility is the a bility of a bus iness to earn pr ofit over a p eriod of time. W ithout profit, there is

no cash and therefore profitability must be seen as a critical success factors.

y A company shou ld earn pr ofits to survive and gr ow over a l ong period of time.

y Pr ofits ar e esse ntial, but it would be wr ong to assume that every ac tion ini tiated by

manag ement of a c ompany shou ld be aim ed at maximizing pr ofits, irr es pective of social

conse quences.

Pr ofita bility is a r esu lt of a larg er num ber of policies and d ecisions. The pr ofita bility ratios show the

com bined eff ects of liquidity, a sset manag ement (activity) and d ebt manag ement (gearing ) on

o perating r esu lts . The overall m easur e of success of a bus iness is the pr ofita bility which r esu lts fr om

the eff ective use of its r esou rces.

G ross Profit Margin

y Normally the gr oss pr ofit has to rise pr o por tionately wi th sales.

y It can al so be usef ul to compar e the gr oss pr ofit margin acr oss similar bus inesses althou gh

the r e will of ten be good r easons f or any di s pari ty.

N et Profit Margin

Th is is a wid ely use d measur e of perf ormanc e and i s compara ble acr oss compani es in similar

industries. The fac t that a bus iness work s on a very low margin n eed not cause alarm because the r e

ar e some sector s in the industry that work on a basis of high turnover and l ow margin s, f or exampl es

su permark ets and m otorcar d ealer s.

What is mor e impor tant in any tr end is the margin and w hethe r it compar es well wi th similar

bus inesses .


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13

R et u rn on I nvestment ( RO I)

Income is earned by using the assets of a bus iness pr oductively. The mor e effici ent the pr oduction,

the mor e pr ofita ble the bus iness . The rate of r etu rn on total assets indica tes the degr ee of effici ency

with which manag ement has use d the assets of the enterpri se during an acc ounting p eriod. Th is is an

impor tan t ratio f or all r eader s of financial statements.

Investo r s have placed f unds with the manag er s of the bus iness . The manag er s use d the f unds to

purchase assets which will be use d to genera te r eturns. If the r etu rn is not better than the investo r s

can ac hieve else wher e, they will in str uct the manag er s to sell the assets and the y will inv est

else wher e. The manag er s lose the ir jobs and the business liquida tes .

R et u rn on Eq u ity ( RO E)

Th is ratio shows the pr ofit attri buta ble to the amount investe d by the owner s of the business . It also

shows pote ntial inv esto r s into the bus iness what the y mig ht ho pe to r eceive as a r eturn. The

stock holder s equity incl udes shar e capi tal, shar e pr emium, di stri buta ble and n on-distri buta ble

r eserves. The ratio is calculated as f ollows:

E arning Per Share ( E PS )

Whatever inc ome r emain s in the bus iness af ter all pri or claim s, othe r than owner s claims (i.e.

ordinary divid ends) have been paid, will belong to the ordinary shar eho lder s who can the n mak e a

decision as to how much of th is income they wish to r emove fr om the bus iness in the f orm of a

divid end, and how much they wish to r etain in the bus iness . The shar eho lder s ar e par ticularly


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14inter este d in kn owing how much has been earned during the financial y ear on each of the shar es

held by the m. For th is r eason, an earning p er shar e figur e must be calculated. Cl early the n, the

earning p er shar e calculation will be:

E : Market Value Ratios

These ratios indica te the r elationsh ip of the firms shar e price to divid ends and earning s. Note that

when we r ef er to the shar e pric e, we ar e talking a bout the Mark et value and n ot the Nominal val ue

as indica ted by the par val ue.

For this r eason, it is diffic ult to perf orm these ratios on unliste d compani es as the mark et price f or

the ir shar es is not fr eely availa ble. One would fir st have to value the shar es of the bus iness bef or e

calculating the ratios. Mark et value ratios ar e str ong indica tor s of what investo r s th ink of the firms

past perf ormanc e and f utu r e pr os pects.

D ividend Yield R atio

The divid end yi eld ra tio indica tes the r etu rn that investo r s ar e obtaining on the ir invest ment in the

f orm of divid ends. Th is yield is usually fairly l ow as the investo r s ar e also r eceiving capi tal gr owth

on the ir inv est ment in the f orm of an incr eased shar e pric e. It is inter est ing to note that the r e is

str ong c orr elation between divid end yi elds and mark et pric es. Invaria bly, the higher the divid end,

the higher the mark et value of the shar e. The divid end yi eld ra tio compar es the divid end per shar e

again st the pric e of the shar e and i s calculated as:


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15 Notice a healthy incr ease in the yield fr om 2000 to 2002. The main r eason f or this is that the

divid end per shar e incr eased while at the same time, the pric e of a shar e dr o pped.

Th is is fairly unusual because shar e pric es usually incr ease when divid ends incr ease. However the r e

could be num ber of r easons why this has happened, eithe r due to the economy or to

mismanag ement, leading to a loss of fai th in the stock mark et or in th is par ticular stock.

Normally a v ery high divid end yi eld signals potential financial diffic ulties and p oss i ble divid end

payout cut. The divid end per shar e is mer ely the total divid end divid ed by the num ber of shar es

issue d. The pric e per shar e is the mark et pric e of the shar e at the end of the financial y ear.

Price/ E arning R atio (P/ E ratio )

y P/E ra tio is a use f ul indica tor of what pr emium or discount investo r s ar e pr e par ed to pay or

r eceive f or the investment.

y The higher the pric e in r elation to earning s, the higher the P/E ra tio which indica tes the

higher the pr emium an inv esto r is pr e par ed to pay f or the shar e. Th is occur s because the investo r is

extr emely c onfident of the potential gr owth and earning s of the shar e.

The pric e-earning ra tio is calculated as f ollows:

1. High P/E g enerally r eflects lower risk and/ or higher gr owth pr os pects f or earning s.2. The a bove ratio shows that the shar es wer e traded at a much higher pr emium in 2000 than

wer e in 2002. In 2000 the pric e was 26.8 times higher than earning s while in 2002, the price was

only 12 times higher.

D ividend C over


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16y Th is ratio measur es the exte nt of earning s that ar e being paid out in the f orm of divid ends,

i.e. how many times the divid ends paid ar e cover ed by earning s (similar to times inter est earned

ratio discusse d a bove).

y A higher cover would indica te that a larg er percentage of earning s ar e being r etained and r e-

investe d in the business while a lower divid end c over would indica te the conver se.

D ividend pay-o u t ratio

Th is ratio look s at the divid end paym ent in r elation to net income and can be calculated as f ollows:

N ote: Even though the dividend yield has increased, the dividend payout ratio has reduced, showing

that a lower proportion of earnings were paid out as dividend. The ratio has only reduced slightly,

however, from 50.7% in 2000 to 49.4% in 2002. Generally, the low growth companies have higher

dividends payouts and high growth companies have lower dividend payouts.


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17----------------------------- ------------------------------------------------ ------------------------------------------------

Chapter 3 M etho dology---------------------------------------------------------------------------- -----------------------------------------------------

Type of Project:

The curr ent study is of descrip tive and w ould have secondary da ta collection fr om vari ous sou rces

es pecially fr om the annual r e por ts of to p Indian p harmac eut ical c ompani es.

Tools for data analysis :

Computation of vari ous finical ra tios such as pr ofita bility, liq uidity, effici ency, g earing, inv estment

using stander s known f ormulas and techniques and pl ott ing the rations to find the s pr ead am ong the

compani es studied to identify those who have ratios which ar e well wi th in acc e pta ble rang e f or

better perf ormanc e and those who would r equir e impr ovements in the ratios.


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18-----------------------------------------------------------------------------------------------------------------------------

Chapter 4 Data Analysis and Interpretations---------------------------------------------------------------------------------------------------------------------------------

L IQUIDITY RATI O :

Liquidity r ef er s to the a bility of a firm to meet its sho r t-te rm financial obliga tions when and a s they

fall d ue. The main c oncern of liquidity ratio is to measur e the a bility of the firms to meet the ir sho r t-

term ma turing obliga tions. Fail ur e to do th is will r esu lt in the total fail ur e of the bus iness , as it

would be f orced in to liquida tion.

Financial Ra tio Formula M easur ements

Curr ent Ratio Curr ent Assets / Curr ent lia bilities

A measur e of sho r t-termliquidity. Indica tes the a bility of entity to meet its shor t-term d ebts fr om its curr ent assets

Quick Ra tio Curr ent Assets less inventory/ Curr ent lia bilities

A mor e rigor ous measur e of sho r t-term liq uidity. Indica tes the a bility of the entity to meet unex pected demand s fr om liq uidcurr ent asses


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19Table 1 : Current ratio analysis

Company Nam e Curr ent Ratio 2004 2005 2006 2007 2008

Sun Pharma 1.12 1.38 1.34 1.92 1.32Cipla 1.44 1.55 1.87 1.96 1.86GSK 1.03 0.75 0.60 0.57 0.45DRL 1.84 1.20 1.31 1.35 1.16Ran baxy 0.97 1.11 1.24 1.28 1.06Divis 2.20 2.33 1.84 2.48 2.13Lu pin 1.19 1.33 1.41 1.69 1.88Piramal 1.19 1.11 1.06 1.33 1.13Glenmark 2.11 3.43 2.64 2.42 2.29Cadila 1.04 0.50 0.61 0.56 0.74Biocon 1.37 0.98 1.25 1.68 0.74Avan tis 1.10 1.65 1.32 0.92 1.17

Pfizer 1.14 0.88 0.87 0.85 0.78Matrix 1.30 0.96 1.05 1.16 1.26Aztra 1.63 0.70 1.21 0.85 0.94To rr ent 1.07 1.14 1.31 1.60 1.19Wy etn 1.52 0.68 1.05 0.65 0.57Aur obindo 3.22 2.74 2.53 2.74 2.70

Novatis 1.18 0.96 0.79 1.25 0.83Wock hard t 1.06 0.80 1.04 1.13 1.39Dishman 1.90 2.70 2.54 1.70 2.15IPCA 2.27 2.38 1.95 1.59 1.69FDC 1.47 1.56 1.66 1.82 1.12A bbot 0.51 0.79 0.97 1.36 1.26Merck 1.15 1.13 1.11 0.76 1.04

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

S u n P h a r m

a C i p

l a G S K D R

L R a

n b a x y

D i v i s

L u p i n P i r

a m a l

G l e n m

a r k C a

d i l a B i

o c o n A v

a n t i s

P f i z e r M a

t r i x A z t r a T o

r r e n t

W y e t n

A u r o b

i n d o

N o v a t

i s

W o c k h a r d

t

D i s h m

a n I P C

A F D

C A b

b o t

M e r c k

Curr ent Ratio 2004 C urr ent Ratio 2005 C urr ent Ratio 2006 C urr ent Ratio 2007 C urr ent Ratio 2008


20/42

20Quick Ra tio

2004 2005 2006 2007 2008Sun Pharma 0.51 0.77 0.68 0.98 0.97Cipla 0.67 0.69 0.92 1.03 1.05GSK 0.40 0.29 0.21 0.15 0.13

DRL 1.22 0.72 0.76 0.96 0.70Ran baxy 0.40 0.53 0.60 0.65 0.55Divis 0.99 1.00 0.69 1.12 0.96Lu pin 0.60 0.67 0.76 0.94 0.95Piramal 0.59 0.39 0.49 0.70 0.63Glenmark 1.32 2.48 1.78 1.60 1.58Cadila 0.56 0.18 0.28 0.24 0.34Biocon 0.80 0.69 0.83 1.09 0.34Avan tis 0.54 0.86 0.59 0.32 0.36Pfizer 0.52 0.46 0.44 0.39 0.36Matrix 0.56 0.43 0.54 0.60 0.55Aztra 0.60 0.34 0.72 0.52 0.66To rr ent 0.37 0.37 0.56 0.78 0.66Wy etn 0.63 0.28 0.65 0.28 0.28Aur obindo 2.10 1.60 1.55 1.48 1.49


0.00

0.50

1.00

1.50

2.00

2.50

3.00

S u n P h a r m

a C i p

l a G S K D R

L R a n

b a x y D i v

i s L u p

i n P i r a

m a l

G l e n m a

r k C a d

i l a B i o

c o n A v

a n t i s P f i z

e r M a

t r i x A z t r a T o r

r e n t

W y e t n

A u r o b

i n d o

N o v a t i

s

W o c k h

a r d t

D i s h m

a n I P C

A F D

C A b b o t

M e r c k

Quick Ra tio 2004 Q uick Ra tio 2005 Q uick Ra tio 2006 Q uick Ra tio 2007 Q uick Ra tio 2008


21/42

21

Inventory Tu rnover 2004 2005 2006 2007 2008

Sun Pharma 3.12 3.68 3.91 4.11 4.51Cipla 2.18 2.00 2.04 2.26 2.45

GSK 3.52 3.58 3.85 3.59 4.04DRL 3.24 2.78 2.53 3.40 3.00Ran baxy 2.63 2.26 2.25 2.30 2.51Divis 2.06 1.71 1.31 1.91 2.03Lu pin 3.56 3.34 3.56 3.35 2.84Piramal 3.98 3.02 3.61 4.24 4.45Glenmark 2.19 2.30 2.07 1.92 2.24Cadila 3.99 3.32 3.39 2.56 2.73Biocon 3.90 5.96 4.62 3.80 2.73Avan tis 4.70 4.30 3.80 3.60 3.24Pfizer 3.45 4.26 4.21 3.81 3.86Matrix 2.73 2.43 2.72 2.39 2.29Aztra 2.19 3.52 4.75 4.42 5.93To rr ent 2.67 2.00 2.36 2.70 2.99Wy etn 2.57 2.69 3.01 2.98 3.83Aur obindo 3.78 2.72 3.01 2.83 2.73


Av erage Collection Period

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

S u n P h a r m

a C i p

l a G S K D R

L R a n

b a x y D i v

i s L u p

i n P i r

a m a l

G l e n m a

r k C a d

i l a B i o

c o n A v

a n t i s

P f i z e r M a


r e n t

W y e t n

A u r o b

i n d o

N o v a t

i s

W o c k

h a r d t

D i s h m

a n I P C

A F D

C A b

b o t

M e r c k

Inventory Turnover 2004 Inv entory Turnover 2005 Inv entory Turnover 2006Inventory Turnover 2007 Inv entory Turnover 2008


22/42

222004 2005 2006 2007 2008

Sun Pharma 47.34 68.23 49.26 45.47 115.11Cipla 93.01 88.19 98.92 101.97 114.11GSK 20.69 18.17 13.97 11.97 7.54DRL 93.94 95.77 97.96 94.06 88.91

Ran baxy 43.93 71.72 76.54 82.22 71.93Divis 87.58 94.39 95.95 81.73 71.48Lu pin 65.86 72.07 74.47 79.34 79.19Piramal 43.20 33.48 45.00 49.11 54.84Glenmark 125.24 125.35 176.02 172.45 151.80Cadila 52.27 33.76 50.64 53.96 56.63Biocon 79.33 92.66 103.22 110.37 56.63Avan tis 28.06 42.97 21.16 25.99 21.76Pfizer 40.00 43.17 44.10 33.76 21.64Matrix 57.58 73.93 85.74 94.03 124.43Aztra 39.32 40.88 48.07 56.32 55.89To rr ent 32.97 41.24 57.55 64.66 73.72Wy etn 34.70 21.44 25.06 22.61 23.57Aur obindo 126.49 145.52 142.34 110.00 118.80


0.00

20.00

40.0060.00

80.00100.00

120.00

140.00160.00

180.00200.00

S u n

P h a r m a

C i p l a

G S K

D R L

R a n

b a x y

D i v i s

L u p i n

P i r a m a l

G l e n m a r k

C a d

i l a

B i o c o n

A v a n t i s

P f i z e r

M a t r i x

A z t r a

T o r r e n t

W y e

t n

A u r o

b i n d o

N o v a

t i s

W o c k

h a r

d t

D i s h m a n

I P C A

F D C

A b b o

t

M e r c

k

Avera e Collection Period 2004 Av era e Collection Period 2005 Av era e Collection Period 2006Avera e Collection Period 2007 Av era e Collection Period 2008


23/42

23

Tot al A sset Tu rnover 2004 2005 2006 2007 2008

Sun Pharma 1.47 1.43 1.76 1.76 1.57Cipla 1.19 1.15 1.09 1.09 1.03GSK 2.76 3.33 4.19 4.19 4.78DRL 1.40 0.19 1.33 1.33 1.40Ran baxy 2.07 1.52 1.30 1.30 1.40Divis 0.98 0.92 0.80 0.80 1.08Lu pin 1.24 1.11 1.28 1.28 1.35Piramal 1.65 1.51 1.30 1.30 1.44Glenmark 1.05 0.85 0.85 0.85 1.13Cadila 1.14 1.18 1.21 1.21 1.28Biocon 1.52 1.49 1.33 1.33 1.28Avan tis 2.13 2.10 2.25 2.25 2.40Pfizer 2.45 2.65 2.64 2.64 4.34

Matrix 1.32 1.04 1.12 1.12 0.66Aztra 1.84 2.29 2.52 2.52 2.65To rr ent 1.35 1.21 1.09 1.09 1.18Wy etn 1.65 1.73 1.74 1.74 2.93Aur obindo 1.06 0.80 0.84 0.84 1.06


0.00

1.00

2.00

3.00

4.00

5.00

6.00

S u n P h a r m

a C i p

l a G S K D R

L R a n

b a x y D i v

i s L u p

i n P i r

a m a l

G l e n m a

r k C a d

i l a B i o

c o n A v

a n t i s

P f i z e r M a


r e n t

W y e t n

A u r o b

i n d o

N o v a t

i s

W o c k

h a r d t

D i s h m

a n I P C

A F D

C A b

b o t

M e r c k

Total Asset Turnover 2004 Total Asset Turnover 2005 Total Asset Turnover 2006

Total Asset Turnover 2007 Total Asset Turnover 2008


24/42

24

Debt Ratio 2004 2005 2006 2007 2008

Sun Pharma 1.77 3.38 3.01 2.77 2.05Cipla 0.91 0.84 0.84 0.97 1.02GSK 1.59 2.05 2.30 2.89 3.62DRL 1.73 0.28 1.98 1.98 2.03Ran baxy 1.23 1.02 1.16 1.64 1.73Divis 0.81 0.82 0.97 0.91 0.96Lu pin 0.87 0.89 1.19 1.11 1.07Piramal 0.90 0.89 1.08 1.08 1.10Glenmark 0.98 1.18 1.54 1.47 1.25Cadila 0.95 1.00 1.08 1.01 1.28Biocon 1.75 1.71 1.68 0.95 1.28Avan tis 1.03 1.21 1.35 1.62 1.78Pfizer 1.43 1.57 1.47 1.76 2.76

Matrix 0.87 1.04 1.34 1.35 1.11Aztra 0.97 1.23 1.38 1.22 1.39To rr ent 0.88 1.28 0.98 0.97 1.13Wy etn 1.45 1.83 1.54 2.07 2.24Aur obindo 1.15 1.21 1.23 1.53 1.31


0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

S u n P h a r m

a C i p

l a G S K D R

L R a n

b a x y D i v

i s L u p

i n P i r

a m a l

G l e n m a

r k C a d

i l a B i

o c o n A v

a n t i s

P f i z e r M a


r e n t

W y e t n

A u r o b

i n d o

N o v a t

i s

W o c k h

a r d t

D i s h m

a n I P C

A F D

C A b

b o t

M e r c k

Debt Ratio 2004 D ebt Ratio 2005 D ebt Ratio 2006 D ebt Ratio 2007 D ebt Ratio 2008


25/42

25

Debt-to- Equity2004 2005 2006 2007 2008

Sun Pharma 1.06 2.36 1.92 1.29 0.76Cipla 0.58 0.57 0.73 0.71 0.78GSK 0.53 0.48 0.42 0.52 0.53DRL 0.83 0.83 1.06 0.79 0.81Ran baxy 0.48 0.44 0.85 1.71 1.63Divis 0.90 0.86 0.97 1.00 0.83Lu pin 1.03 1.14 1.68 1.38 1.22Piramal 1.13 0.95 0.81 1.03 1.00Glenmark 1.04 2.11 2.78 2.42 1.14Cadila 1.12 0.62 0.69 0.35 0.90Biocon 0.85 0.75 0.82 0.84 0.90Avan tis 0.60 0.77 0.67 0.58 0.70Pfizer 0.55 0.53 0.45 0.52 0.65Matrix 1.22 0.55 0.74 0.83 1.03

Aztra 0.51 0.25 0.59 0.28 0.45To rr ent 0.56 1.07 1.07 1.11 1.04Wy etn 0.72 0.51 0.57 0.52 0.49Aur obindo 1.55 1.74 1.90 2.66 2.00


0.00

0.50

1.00

1.50

2.00

2.50

3.00

S u n P h a r m

a C i p

l a G S K D R

L R a n

b a x y D i v

i s L u p

i n P i r

a m a l

G l e n m a

r k C a d

i l a B i o

c o n A v

a n t i s

P f i z e r M a


r e n t

W y e t n

A u r o b

i n d o

N o v a t

i s

W o c k h

a r d t

D i s h m

a n I P C

A F D

C A b

b o t

M e r c k

Debt-to- Equity 2004 D ebt-to- Equity 2005 D ebt-to- Equity 2006 D ebt-to- Equity 2007 D ebt-to- Equity 2008


26/42

26

Gr oss Pr ofit Margin2004 2005 2006 2007 2008

Sun Pharma 48.39% 44.67% 45.03% 44.20% 46.76%Cipla 35.64% 37.75% 38.88% 39.08% 37.49%GSK 39.50% 46.26% 51.68% 52.45% 53.88%DRL 50.92% 46.28% 47.48% 58.98% 47.15%Ran baxy 53.23% 48.66% 47.21% 47.46% 49.76%Divis 37.97% 39.11% 40.35% 44.75% 48.20%Lu pin 35.11% 29.51% 34.39% 38.14% 38.06%Piramal 45.89% 45.20% 44.52% 43.03% 43.55%Glenmark 52.11% 51.22% 50.30% 52.23% 56.50%Cadila 43.98% 44.77% 45.23% 47.05% 49.67%Biocon 37.84% 36.69% 32.32% 36.18% 49.67%Avan tis 40.49% 43.12% 40.36% 39.69% 38.35%Pfizer 43.57% 47.41% 44.00% 49.44% 64.04%Matrix 41.95% 37.70% 37.62% 34.98% -5.06%

Aztra 42.04% 48.92% 48.57% 47.39% 53.44%To rr ent 46.11% 44.41% 44.53% 45.48% 48.56%Wy etn 42.56% 44.10% 53.12% 55.15% 55.71%Aur obindo 24.51% 19.25% 19.91% 24.19% 26.50%

Novatis 43.67% 42.81% 45.12% 47.95% 49.39%Wock hard t 44.69% 50.88% 46.61% 43.38% 42.96%Dishman 38.50% 37.58% 34.61% 34.10% 32.29%IPCA 38.09% 37.26% 34.20% 37.91% 37.81%FDC 42.44% 37.35% 41.91% 36.42% 36.38%A bbot 46.89% 36.92% 29.79% 27.88% 28.93%Merck 35.03% 43.03% 43.04% 54.91% 48.25%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

S u n

P h a r m a

C i p l a

G S K

D R L

R a n

b a x y

D i v i s

L u p i n

P i r a m a l

G l e n m a r

k

C a d

i l a

B i o c o n

A v a n t

i s

P f i z e r

M a t r i x

A z t r a

T o r r e n t

W y e

t n

A u r o

b i n d o

N o v a

t i s

W o c k

h a r

d t

D i s h m a n

I P C A

F D C

A b b o

t

M e r c

k

Gr oss Pr ofit Margin 2004 Gr oss Pr ofit Margin 2005 Gr oss Pr ofit Margin 2006Gr oss Pr ofit Margin 2007 Gr oss Pr ofit Margin 2008


27/42

27

Operating Pr ofit Margin2004 2005 2006 2007 2008

Sun Pharma 30.09% 25.82% 26.67% 26.46% 32.03%Cipla 21.16% 21.94% 22.77% 22.55% 19.88%GSK 23.42% 32.09% 38.57% 41.26% 44.74%DRL 18.06% 3.97% 14.13% 35.34% 17.00%Ran baxy 24.31% 15.63% 5.44% 11.88% 17.34%Divis 27.01% 27.36% 27.92% 32.76% 36.60%Lu pin 17.26% 10.00% 15.68% 19.93% 20.87%Piramal 17.85% 15.30% 16.00% 15.56% 20.36%Glenmark 16.69% 19.82% 17.76% 23.92% 33.64%Cadila 15.97% 14.85% 15.98% 16.45% 17.66%Biocon 28.62% 28.27% 22.73% 19.99% 17.66%Avan tis 21.05% 29.41% 27.18% 26.34% 22.92%Pfizer 9.39% 14.10% 17.16% 22.73% 44.70%

Matrix 28.65% 25.42% 25.94% 15.51%

-

34.54%Aztra 20.59% 24.63% 27.93% 26.24% 31.45%To rr ent 19.05% 12.39% 13.21% 15.68% 19.27%Wy etn 22.64% 20.47% 30.23% 36.68% 34.55%Aur obindo 16.08% 7.44% 10.49% 14.78% 16.45%


-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

S u n

P h a r m a

C i p l a

G S K

D R L

R a n

b a x y

D i v i s

L u p i n

P i r a m a l

G l e n m a r

k

C a d

i l a

B i o c o n

A v a n t

i s

P f i z e r

M a t r i x

A z t r a

T o r r e n t

W y e

t n

A u r o

b i n d o

N o v a

t i s

W o c k

h a r

d t

D i s h m a n

I P C A

F D C

A b b o

t

M e r c

k

Operating Pr ofit Margin 2004 Gr oss Pr ofit Margin 2005 Gr oss Pr ofit Margin 2006

Gr oss Pr ofit Margin 2007 Gr oss Pr ofit Margin 2008


28/42

28

Net Pr ofit Margin2004 2005 2006 2007 2008


Matrix 21.17% 19.56% 21.37% 12.41%

-



-50.00%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

S u n

P h a r m a

C i p l a

G S K

D R L

R a n

b a x y

D i v i s

L u p i n

P i r a m

a l

G l e n m a r

k

C a d i l a

B i o c o n

A v a n t

i s

P f i z e r

M a t r i x

A z t r a

T o r r e n t

W y e

t n

A u r o

b i n d o

N o v a

t i s

W o c k

h a r d

t

D i s h m a n

I P C A

F D C

A b b

o t

M e r c k

Net Pr ofit Margin 2004 N et Pr ofit Margin 2005 N et Pr ofit Margin 2006

Net Pr ofit Margin 2007 N et Pr ofit Margin 2008


29/42

29

R eturn on Tot al A ssets (ROA ) 2004 2005 2006 2007 2008

Sun Pharma 39.10% 34.96% 44.27% 50.28% 48.56%Cipla 18.94% 19.61% 20.71% 19.35% 16.91%GSK 39.95% 72.74% 119.68% 133.39% 157.52%DRL 23.21% 0.85% 13.93% 50.00% 19.07%Ran baxy 41.46% 19.44% 6.91% 11.15% 17.10%Divis 17.71% 15.68% 13.82% 25.06% 35.54%Lu pin 10.36% 8.10% 13.90% 18.84% 20.79%Piramal 25.80% 16.90% 15.91% 13.98% 22.09%Glenmark 11.76% 10.38% 9.92% 14.81% 31.27%Cadila 13.17% 13.37% 15.27% 15.54% 16.58%Biocon 36.08% 38.38% 24.74% 14.38% 16.58%Avan tis 30.36% 40.61% 40.35% 44.99% 35.47%Pfizer 14.13% 24.06% 29.13% 44.97% 146.64%Matrix 27.98% 20.27% 23.88% 11.13% -28.78%

Aztra 24.23% 33.23% 46.84% 41.79% 53.74%To rr ent 18.41% 12.26% 10.34% 14.77% 18.89%Wy etn 30.86% 32.93% 43.08% 74.01% 69.78%Aur obindo 10.73% 2.43% 4.28% 11.91% 12.51%


-50.00%

0.00%

50.00%

100.00%

150.00%

200.00%

S u n P h a r m

a C i p

l a G S K D R

L R a n

b a x y D i v

i s L u p

i n P i r

a m a l

G l e n m

a r k C a d

i l a B i o

c o n A v

a n t i s

P f i z e r M a


r e n t

W y e t n

A u r o b

i n d o

N o v a t

i s

W o c k h a r d

t

D i s h m

a n I P C

A F D

C A b

b o t

M e r c k

R eturn on Tot al Assets (ROA) 2004 R eturn on Tot al Assets (ROA) 2005 R eturn on Tot al Assets (ROA) 2006R eturn on Tot al Assets (ROA) 2007 R eturn on Tot al Assets (ROA) 2008


30/42

30

R eturn on Equity (ROE ) 2004 2005 2006 2007 2008


Matrix 70.11% 20.87% 20.98% 10.18%

-



-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

S u n

P h a r m a

C i p l a

G S K

D R L

R a n

b a x y

D i v i s

L u p i n

P i r a m a l

G l e n m a r

k

C a d

i l a

B i o c o n

A v a n t

i s

P f i z e r

M a t r i x

A z t r a

T o r r e n t

W y e

t n

A u r o

b i n d o

N o v a

t i s

W o c k

h a r

d t

D i s h m a n

I P C A

F D C

A b b o

t

M e r c

k

R eturn on Equity (ROE ) 2004 R eturn on Equity (ROE ) 2005 R eturn on Equity (ROE ) 2006R eturn on Equity (ROE ) 2007 R eturn on Equity (ROE ) 2008

dc


31/42

31

Adjusted E arnings per S hare2004 2005 2006 2007 2008

Sun Pharma 55.889 32.589 50.880 65.949 98.407Cipla 51.157 68.262 101.324 42.971 46.277GSK 22.676 37.728 58.587 65.494 70.132

DRL 74.022 18.481 58.527 141.359 58.798Ra nb axy 42.719 27.152 10.863 20.178 31.997Divis 50.047 51.942 54.657 148.675 275.089Lu pi n 50.047 21.293 45.441 36.979 54.016Piramal 59.134 44.737 40.933 45.103 72.792Gle n mark 35.443 26.762 28.345 56.997 156.425Cadila 41.943 41.847 52.803 32.596 37.102Bioco n 24.932 34.616 26.700 31.672 100.670Ava nt is 42.579 64.464 67.768 73.513 61.003Pfizer 10.826 19.223 25.044 37.681 115.700Ma t rix 101.317 43.492 59.349 32.313 (94.709) Az t ra 49.160 51.520 86.120 97.480 122.920

Torrent

30.232 25.005 15.559 26.701 36.760Wye tn 24.177 19.428 30.559 40.726 35.823Au ro b in do 51.777 13.127 27.503 84.792 106.094Nova t is 58.210 35.757 60.488 51.990 57.566Wockhard t 36.736 38.670 43.640 39.028 39.084Dishma n 18.272 21.318 33.372 42.867 38.507IPCA 64.024 31.604 25.952 48.624 56.373FDC 68.135 28.195 36.243 33.413 33.855Abb o t 67.559 38.724 38.272 47.291 45.219Merck 23.511 43.173 46.922 82.444 40.819

(150.000)

(100.000)

(50.000)

0.000

50.000

100.000

150.000

200.000

250.000

300.000

S u n

P h a r m a

C i p l a

S K D R L

R a n

b a x y

D i v i s

L u p

i n

P i r a m a l

l e n m a r

k

C a d

i l a

B i o c o n

A v a n t

i s

P f i z e r

M a t r i x

A z t r a

T o r r e n t

W y e

t n

A u r o b

i n d o

N o v a t

i s

W o c

k h a r

d t

D i s h m a n

I P C A

F D C

A b b o t

M e r c k

Adjusted Earnings per Share 2004 Adjusted Earnings per Share 2005 Adjusted Earnings per Share 2006Adjusted Earnings per Share 2007 Adjusted Earnings per Share 2008


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32

Price/ E arnings Ratio2004 2005 2006 2007 2008

Sun Pharma 23.32 28.63 33.60 31.18 24.98Cipla 22.93 18.74 32.32 27.46 23.77GSK 26.76 19.06 24.84 17.12 14.88

DRL 26.33 79.99 48.57 10.30 20.11Ra nb axy 22.00 36.65 79.60 34.88 27.41Divis 29.02 19.18 34.32 20.68 23.07Lu pi n 29.02 25.69 24.51 16.39 9.23PiramalGle n mark 20.27 52.91 55.58 53.62 31.26Cadila 21.66 22.21 18.02 20.66 13.66Bioco n 38.83 23.55 33.37 30.70 8.55Ava nt is 16.82 19.18 28.47 16.75 12.54Pfizer 42.98 38.05 46.12 21.29 5.92Ma t rix 13.48 18.01 23.73 27.08Az t ra 31.29 21.14

Torrent

10.78 17.70 27.91 14.66 7.66Wye tn 11.18 12.74Au ro b in do 14.87 44.33 48.24 16.01 5.49Nova t isWockhard t 21.52 19.03 23.20 20.39 13.63Dishma n 29.62 29.61 28.83 24.74 36.00IPCA 10.16 9.50 13.52 12.38 10.95FDC 15.88 16.06 13.48 9.30 8.31Abb o t Merck 8.17

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

S u n P

h aa il a G S

K D R

L R a n

b a x D ii s L u p

i n P i

aa l

G l e n m

a ai l a

i o c o n A v

a n t i s

P f i z e r M a

t r i x A z

t r a T o r

r e n t

We t n

A u r o b i

n d o o v a

t i s

W o ch

a r d t

D i s h m

a n I P C

A F D

C A b

b o t M e

r c

Pr ice/Ear nings R atio 2004 P r ice/Ear nings R atio 2005 P r ice/Ear nings R atio 2006Pr ice/Ear nings R atio 2007 P r ice/Ear nings R atio 2008


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33


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34PROFITABILITY RATIO: Financial Ratio Formula Measurements

Return on Total Assets

Operating profit beforeincome tax + interestexpense/ Average totalassets

Measures rate of return earnedthrough operating

total assetsprovided by bothcreditors andowners

Return onordinaryshareholdersequity

Operating profit &extraordinary items after income tax minusPreference dividends /

Average ordinaryshareholders equity

Measures rate of return earned onassets provided byowners

Gross ProfitMargin Gross Profit / Net Sales

Profitability of trading and mark-

up

Profit MarginOperating profit after income tax / Net SalesRevenue

Measures netprofitability of eachrupees of sales


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35MAR K ET BA S ED FINANCIAL RATIO:

Financial Ratio Formula Measurements

Earnings per share

Operating profits after income tax less

Preference dividends /Weighted average number of ordinary shares issued

Measures profit

earned on eachordinary share

Price-earningsratio

Market price per ordinaryshare / Earnings per ordinary share

Measures theamount investorsare paying for arupees of earnings

Earning YieldEarnings per ordinaryshare / Market price per ordinary share

Measures thereturn to aninvestor purchasingshares at thecurrent marketprice.

Dividend Yield Annual dividend per ordinary share / Marketprice per ordinary share

Measures the rateof return toshareholders basedon current marketprice.

Dividend PayoutTotal dividend per ordinaryshare / Market price per ordinary share

Measures thepercentage of profits paid out toordinaryshareholders

Net AssetBacking (NTA)

Ordinary shareholdersequity / No of ordinaryshares

Measure the assetsbacking per share


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36LIQUIDITY RATIO:


Current Ratio Current Assets / Currentliabilities

A measure of short-term liquidity.

Indicates the abilityof entity to meet itsshort-term debtsfrom its currentassets

Quick RatioCurrent Assets lessinventory / Currentliabilities

A more rigorousmeasure of short-term liquidity.Indicates the abilityof the entity tomeet unexpecteddemands from

liquid currentasses


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37ASS ET MANAGEMENT/UTILI S ATION/ACTIVITY RATIO S :


Receivablesturnover

Net sales revenue / Average receivablesbalance

Measures theeffectiveness of

collections; used toevaluate whether receivablesbalance isexcessive

Averagecollection period

Average receivablesbalance x 365 / Net salesrevenue

Measures theaverage number of days taken by anentity to collect itsreceivables

Inventoryturnover

Cost of goods sold / Average inventory balance

Indicates theliquidity of inventory.Measures thenumber of timesinventory was soldon the averageduring the period

Total Assetturnover ratio

Net sales revenue / Average total assets

Measures theeffectiveness of anentity in using itsassets during theperiod.

Turnover of Fixed Assets Net Sales / Fixed Assets

Measure theefficiency of theusage of fixedassets ingenerating sales


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38GEARING/FINANCIAL S TABILITY RATIO:


Debt ratio Total Liabilities / Totalassets

Measurespercentage of

assets provided bycreditors andextent of usinggearing

Equity ratio or Proprietary ratio

Total shareholders equity/ Total assets

Measurespercentage of assets provided byshareholders andthe extent of usinggearing

Capitalizationratio

Total assets / Totalshareholders equity

The reciprocal of the equity ratio andthus measures thesame thing

Times interestearned

Operating profit beforeincome tax + Interestexpense / Interestexpense + Interestcapitalized

Measures theability of the entityto meet its interestpayments out of current profits.


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39CA SH S UFFICIENCY RATIO:


Cash flowadequacy

Cash fromoperations / Long-

term debt paid + Assets acquired +Dividends paid

Measures theentitys ability tocover its main cashrequirements

Long-term debtrepayment

Long-term debtrepayments / Cashfrom operations

Measures theentitys ability tocover its long-termdebt out of cashfrom operations

Dividend paymentDividends paid /Cash fromoperations

Measures theentitys ability tocover its dividendpayment

ReinvestmentNon-current assetpayments / Cashfrom operations

Measures theentitys ability topay for its non-current assets outof cash fromoperations

Debt coverageTotal long-termdebt / Cash fromoperations

Measures thepayback period for coverage of long-term debt.


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40CA SH FLOW EFFICIENCY RATIO:


Cash flow to salesCash fromoperations / Netsales revenue

Measures ability toconvert sales

revenue into cashflows

Operation index

Cash fromoperations /Operating profitafter income tax

An indexmeasuring therelationshipbetween profit fromoperations andoperating cashflows

Cash flow return

on assets

Cash fromoperation + Taxpaid + Interest paid/ Average totalassets

Measures theoperating cashflow return onassets beforeinterest and tax


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41--------------------------------------------------------------------------- ------------------------------------------------

Chapter 7 -- Conclusions----------------------------------------------------------------------------------------------------------------------------- ---

Among the compani es studied the quick ra tio was at comf or ta ble level f or all the compani es exce pt Glenmark (1.58, A ur obindo 1.48 ) f or the year 2008 show that the Indian p harmac eut ical c ompani es ar e better solvent.

The asset to turnover ra tio of Gloxo Smi thklin (4,.78 ), Pfiz er (4.3 ), Novatis (5.04 ), ar e the to p 3thr ee and have bette r asset utiliza tion compar ed to Dishman (0.78 ), ma trix (0.66 ), Cipla (1.03 ),Aur obindo (1.06 ), Divi s (1.08 ) and these compani es could impr ove the financial s by better asset utiliza tion.

De pt to equity ra tio of Aur obino (2.0), Ran baxy (1.63 ) ar e highly leverag ed and those of A bbot (0.41 ), Wy eth (0.49 ), Az tra (0.45 ) GloxoSmi thkline (0.53 ) ar e least leveraged.

The net pr ofit margin of Sun pharmac eut icals (30.88% ), Gloxo Smi thkline (32.94% ), and Divi s (32.91% ) ar e most pr ofita bility ra tio and those of Ma trix (-43.85% ), A bbot (8.55% ), Ran baxy(12.2% ), Aur obindo (11.78% ), IPCA (12.14% ) have low pr ofit margin in the o peration.

The r etun on equty is higher f or Pfiz er (53.2% ), Divi s (40.63% ), Gloxo Smi thkline (43.65% ) ar e giving high r eturn on equity and those of Ma trix (-43.07% ), Dr. R eddys (10.28% ), Dishman(13.58% ) ar e much lower.


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42--------------------------------- ------------------------------------ ------------------------------------- -----------------------

Refere n ce

--------------------------------------------------------------------------------------------------------------------------------

1. Prof. C. Jeevanadam, Sardar Vallabhbhai Institute of Textile Management,Coimbatore, Notes on Financial Statements, Short Term Programme on FinancialManagement at Bannari Amman Institute of Technology, Sathyamangalam on05.01.2005.

2. Principles of Accounting, Dr. Vinayagam, P. C. Mani, K. L. Nagarajan, KalyaniPublications, New Delhi, 2002.

3. Financial Management, Dr. R. S. Kulsherestha, Kalyani Publications, NewDelhi,2002

4. Dr. B. K. Behra, Class notes on Costing and Management,IIT -Delhi,2003

5. Corporate Finance: Theory and Practice By S. R. Vishwanath

6. The Indian Pharmaceutical Industry An Overview of Internal Efficienciesusing Data Envelopment Analysis - Haritha Saranga1 and B.V. Phani

7. Annual reports of Indian pharmaceutical companies and consolidated balancesheets published as a part of Annual reports.

8. Scrip report on Indian Pharmaceutical Industry.

9. Research reports published by various agencies and brokerage houses on IndianPharmaceutical Industries.

Documents

11 11 Mba Project New Report