Professional Documents
Culture Documents
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Chapter 1 - Introduction
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The Indian Pharmaceutical Industry today is in the front rank of India’s science-based industries
with wide ranging capabilities in the complex field of drug manufacture and technology. A highly
organized sector, the Indian Pharma Industry is estimated to be worth $ 4.5 billion, growing at about
8 to 9 percent annually. It ranks very high in the third world, in terms of technology, quality and
range of medicines manufactured. From simple headache pills to sophisticated antibiotics and
complex cardiac compounds, almost every type of medicine is now made indigenously.
Playing a key role in promoting and sustaining development in the vital field of medicines, Indian
Pharma Industry boasts of quality producers and many units approved by regulatory authorities in
USA and UK. International companies associated with this sector have stimulated, assisted and
spearheaded this dynamic development in the past 53 years and helped to put India on the
The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs,
drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles.
There are about 250 large units and about 8000 Small Scale Units, which form the core of the
pharmaceutical industry in India (including 5 Central Public Sector Units). These units produce the
complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients
and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of
pharmaceutical formulations.
2
ADVANTAGE INDIA
1.
Competent workforce: India has a pool of personnel with high managerial and technical
competence as also skilled workforce. It has an educated work force and English is commonly
2. Cost-effective chemical synthesis: Its track record of development, particularly in the area of
improved cost-beneficial chemical synthesis for various drug molecules is excellent. It provides a
3. Legal & Financial Framework: India has a 53 year old democracyand hence has a solid legal
framework and strong financial markets. There is already an established international industry and
business community.
4. Information & Technology: It has a good network of world-class educational institutions and
5. Globalizations: The country is committed to a free market economy and globalization. Above all,
6. Consolidation: For the first time in many years, the international pharmaceutical industry is
finding great opportunities in India. The process of consolidation, which has become a generalized
phenomenon in the world pharmaceutical industry, has started taking place in India.
3
SWOT Analysis
Strengths
• Cost Competitiveness
• Rich Biodiversity
Weaknesses
worldwide basis.
• Production of spurious and low quality drugs tarnishes the image of industry at
brands of medicines that fall under the Narcotics Drugs and Psychotropic
Substances (NDPS) Act, 1985.Under a clause of this Act, the retailer has to sign
the consignment note provided by the stockist. The police check this note
regularly to prevent these medicines getting diverted to the drug mafia and they
can arrest the retailer if the signatures are under suspect. To protest against this
clause, the retailers have stopped stocking these medicines, some of which is life
saving.
4
Opportunities
Threats
patent office.
• Drug Price Control Order puts unrealistic ceilings on product prices and
surplus.
• The new MRP based excise duty regime threatens the existence of many small
scale pharma units, especially in the states of Andhra Pradesh and Maharashtra,
that were involved in contract manufacturing for the larger, established players.
These companies are now shifting their manufacturing from these states to states like J&K
Identified Problem
The economy worldwide is facing severe recession and the current recession is very severe and
prolonged one after second world war. The share market all along the world is down to a significant
level compared to the levels it was before the current world wide recession. There is pressure on all
the industry due to liquidity crunch. The stock prices are reduced to an extent more than 50% over
past 12 months. Raising capital required for the business expansion has almost stopped with share
market crash. The working capital required for the operations dried up as banks are not willing to
lend as the banks are risk awesome and future of the economy is blink.
The capital market returns are negative since Jan 2008. The market capitalization of several firms
are beaten down to as much as more than 50%. There is continued down trend in the market and
returns are uncertain and investment in the capital market are at greater risk which was never seen
There is need for investors to asses the risk associated with there investments under current market
scenario, and to decide on continued investing and to take fresh investment decisions or reallocate
The objectives of the present studies are to find out past performance of top Indian pharmaceutical
companies. To identify and group them in to stable and performers and under performers. The
objective assessment is carried out through ratio analysis for the period of 2004 to 2008.
Deliverables
Identifying performers and under performers among the top Indian pharmaceutical companies and
classifying them for investment decisions.
6
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Chapter 2 – Literature Survey
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A ratio: Is the mathematical relationship between two quantities in the form of a fraction or
percentage.
Ratio analysis: is essentially concerned with the calculation of relationships which after proper
identification and interpretation may provide information about the operations and state of affairs of
a business enterprise.
The analysis is used to provide indicators of past performance in terms of critical success factors of
a business. This assistance in decision-making reduces reliance on guesswork and intuition and
Types of Ratios
A: Liquidity Ratios
• Liquidity refers to the ability of a firm to meet its short-term financial obligations when and as
• The main concern of liquidity ratio is to measure the ability of the firms to meet their short-term
maturing obligations. Failure to do this will result in the total failure of the business, as it would
Current Ratio
The Current Ratio expresses the relationship between the firm’s current assets and its current
liabilities.
Current assets normally includes cash, marketable securities, accounts receivable and inventories.
Current liabilities consist of accounts payable, short term notes payable, short-term loans, current
maturities of long term debt, accrued income taxes and other accrued expenses (wages).
The rule of thumb says that the current ratio should be at least 2, that is the current assets should
Quick Ratio
Measures assets that are quickly converted into cash and they are compared with current liabilities.
This ratio realizes that some of current assets are not easily convertible to cash e.g. inventories.
The quick ratio, also referred to as acid test ratio, examines the ability of the business to cover its
short-term obligations from its “quick” assets only (i.e. it ignores stock). The quick ratio is
calculated as follows
Clearly this ratio will be lower than the current ratio, but the difference between the two (the gap)
If a business does not use its assets effectively, investors in the business would rather take their
money and place it somewhere else. In order for the assets to be used effectively, the business needs
a high turnover.
8
Unless the business continues to generate high turnover, assets will be idle as it is impossible to
buy and sell fixed assets continuously as turnover changes. Activity ratios are therefore used to
The average collection period measures the quality of debtors since it indicates the speed of their
collection.
• The shorter the average collection period, the better the quality of debtors, as a short collection
• The average collection period should be compared against the firm’s credit terms and policy to
• An excessively long collection period implies a very liberal and inefficient credit and collection
performance.
The delay in collection of cash impairs the firm’s liquidity. On the other hand, too low a collection
period is not necessarily favourable, rather it may indicate a very restrictive credit and collection
policy which may curtail sales and hence adversely affect profit.
Inventory Turnover
This ratio measures the stock in relation to turnover in order to determine how often the stock turns
It indicates the efficiency of the firm in selling its product. It is calculated by dividing he cost of
• The total asset turnover indicates the efficiency with which the firm uses all its assets to generate
sales.
• Generally, the higher the firm’s total asset turnover, the more efficiently its assets have been
utilised.
The fixed assets turnover ratio measures the efficiency with which the firm has been using its fixed
It is calculated by dividing the firm’s sales by its net fixed assets as follows:
• Generally, high fixed assets turnovers are preferred since they indicate a better efficiency in fixed
assets utilisation.
• The ratios indicate the degree to which the activities of a firm are supported by creditors’ funds
as opposed to owners.
10
• The relationship of owner’s equity to borrowed funds is an important indicator of financial
strength.
• The debt requires fixed interest payments and repayment of the loan and legal action can be
taken if any amounts due are not paid at the appointed time. A relatively high proportion of
funds contributed by the owners indicates a cushion (surplus) which shields creditors against
The greater the proportion of equity funds, the greater the degree of financial strength. Financial
leverage will be to the advantage of the ordinary shareholders as long as the rate of earnings on
The following ratios can be used to identify the financial strength and risk of the business.
Equity Ratio
• A high equity ratio reflects a strong financial structure of the company. A relatively low equity
ratio reflects a more speculative situation because of the effect of high leverage and the greater
Debt Ratio
This is the measure of financial strength that reflects the proportion of capital which has been
creditors the security they require. The company would therefore find it relatively difficult to raise
additional financial support from external sources if it wished to take that route. The higher the debt
ratio the more difficult it becomes for the firm to raise debt.
This ratio indicates the extent to which debt is covered by shareholders’ funds. It reflects the relative
position of the equity holders and the lenders and indicates the company’s policy on the mix of
This ratio measure the extent to which earnings can decline without causing financial losses to the
• The times interest earned shows how many times the business can pay its interest bills from
profit earned.
• Present and prospective loan creditors such as bondholders, are vitally interested to know how
adequate the interest payments on their loans are covered by the earnings available for such
payments.
• Owners, managers and directors are also interested in the ability of the business to service the
Profitability is the ability of a business to earn profit over a period of time. Without profit, there is
• A company should earn profits to survive and grow over a long period of time.
• Profits are essential, but it would be wrong to assume that every action initiated by management
Profitability is a result of a larger number of policies and decisions. The profitability ratios show the
combined effects of liquidity, asset management (activity) and debt management (gearing) on
operating results. The overall measure of success of a business is the profitability which results from
• It can also be useful to compare the gross profit margin across similar businesses although there
This is a widely used measure of performance and is comparable across companies in similar
industries. The fact that a business works on a very low margin need not cause alarm because there
are some sectors in the industry that work on a basis of high turnover and low margins, for examples
What is more important in any trend is the margin and whether it compares well with similar
businesses.
13
Income is earned by using the assets of a business productively. The more efficient the production,
the more profitable the business. The rate of return on total assets indicates the degree of efficiency
with which management has used the assets of the enterprise during an accounting period. This is an
Investors have placed funds with the managers of the business. The managers used the funds to
purchase assets which will be used to generate returns. If the return is not better than the investors
can achieve elsewhere, they will instruct the managers to sell the assets and they will invest
elsewhere. The managers lose their jobs and the business liquidates.
This ratio shows the profit attributable to the amount invested by the owners of the business. It also
shows potential investors into the business what they might hope to receive as a return. The
stockholders’ equity includes share capital, share premium, distributable and non-distributable
Whatever income remains in the business after all prior claims, other than owners claims (i.e.
ordinary dividends) have been paid, will belong to the ordinary shareholders who can then make a
decision as to how much of this income they wish to remove from the business in the form of a
dividend, and how much they wish to retain in the business. The shareholders are particularly
14
interested in knowing how much has been earned during the financial year on each of the shares
held by them. For this reason, an earning per share figure must be calculated. Clearly then, the
These ratios indicate the relationship of the firm’s share price to dividends and earnings. Note that
when we refer to the share price, we are talking about the Market value and not the Nominal value
For this reason, it is difficult to perform these ratios on unlisted companies as the market price for
their shares is not freely available. One would first have to value the shares of the business before
calculating the ratios. Market value ratios are strong indicators of what investors think of the firm’s
The dividend yield ratio indicates the return that investors are obtaining on their investment in the
form of dividends. This yield is usually fairly low as the investors are also receiving capital growth
on their investment in the form of an increased share price. It is interesting to note that there is
strong correlation between dividend yields and market prices. Invariably, the higher the dividend,
the higher the market value of the share. The dividend yield ratio compares the dividend per share
dividend per share increased while at the same time, the price of a share dropped.
This is fairly unusual because share prices usually increase when dividends increase. However there
could be number of reasons why this has happened, either due to the economy or to
mismanagement, leading to a loss of faith in the stock market or in this particular stock.
Normally a very high dividend yield signals potential financial difficulties and possible dividend
payout cut. The dividend per share is merely the total dividend divided by the number of shares
issued. The price per share is the market price of the share at the end of the financial year.
• P/E ratio is a useful indicator of what premium or discount investors are prepared to pay or
• The higher the price in relation to earnings, the higher the P/E ratio which indicates the higher
the premium an investor is prepared to pay for the share. This occurs because the investor is
1. High P/E generally reflects lower risk and/or higher growth prospects for earnings.
2. The above ratio shows that the shares were traded at a much higher premium in 2000 than were
in 2002. In 2000 the price was 26.8 times higher than earnings while in 2002, the price was only
12 times higher.
Dividend Cover
16
• This ratio measures the extent of earnings that are being paid out in the form of dividends, i.e.
how many times the dividends paid are covered by earnings (similar to times interest earned
• A higher cover would indicate that a larger percentage of earnings are being retained and re-
invested in the business while a lower dividend cover would indicate the converse.
This ratio looks at the dividend payment in relation to net income and can be calculated as follows:
Note: 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.
17
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Chapter 3 – Methodology
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Type of Project:
The current study is of descriptive and would have secondary data collection from various sources
Computation of various finical ratios such as profitability, liquidity, efficiency, gearing, investment
using standers known formulas and techniques and plotting the rations to find the spread among the
companies studied to identify those who have ratios which are well with in acceptable range for
better performance and those who would require improvements in the ratios.
18
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Chapter 4 – Data Analysis and Interpretations
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LIQUIDITY RATIO:
Liquidity refers to the ability of a firm to meet its short-term financial obligations when and as they
fall due. The main concern of liquidity ratio is to measure the ability of the firms to meet their short-
term maturing obligations. Failure to do this will result in the total failure of the business, as it
Current Ratio 2004 Current Ratio 2005 Current Ratio 2006 Current Ratio 2007 Current Ratio 2008
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
a
IP n
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Quick Ratio
2004 2005 2006 2007 2008
Sun Pharma 0.51 0.77 0.68 0.98 0.97
Cipla 0.67 0.69 0.92 1.03 1.05
GSK 0.40 0.29 0.21 0.15 0.13
DRL 1.22 0.72 0.76 0.96 0.70
Ranbaxy 0.40 0.53 0.60 0.65 0.55
Divis 0.99 1.00 0.69 1.12 0.96
Lupin 0.60 0.67 0.76 0.94 0.95
Piramal 0.59 0.39 0.49 0.70 0.63
Glenmark 1.32 2.48 1.78 1.60 1.58
Cadila 0.56 0.18 0.28 0.24 0.34
Biocon 0.80 0.69 0.83 1.09 0.34
Avantis 0.54 0.86 0.59 0.32 0.36
Pfizer 0.52 0.46 0.44 0.39 0.36
Matrix 0.56 0.43 0.54 0.60 0.55
Aztra 0.60 0.34 0.72 0.52 0.66
Torrent 0.37 0.37 0.56 0.78 0.66
Wyetn 0.63 0.28 0.65 0.28 0.28
Aurobindo 2.10 1.60 1.55 1.48 1.49
Novatis 0.71 0.40 0.33 0.50 0.32
Wockhardt 0.65 0.49 0.58 0.62 0.79
Dishman 0.87 1.35 1.23 0.94 1.04
IPCA 1.11 1.15 0.86 0.71 0.87
FDC 0.71 0.79 0.59 0.54 0.29
Abbot 0.27 0.31 0.39 0.48 0.55
Merck 0.65 0.65 0.64 0.34 0.51
Quick Ratio 2004 Quick Ratio 2005 Quick Ratio 2006 Quick Ratio 2007 Quick Ratio 2008
3.00
2.50
2.00
1.50
1.00
0.50
0.00
a
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Inventory Turnover
2004 2005 2006 2007 2008
Sun Pharma 3.12 3.68 3.91 4.11 4.51
Cipla 2.18 2.00 2.04 2.26 2.45
GSK 3.52 3.58 3.85 3.59 4.04
DRL 3.24 2.78 2.53 3.40 3.00
Ranbaxy 2.63 2.26 2.25 2.30 2.51
Divis 2.06 1.71 1.31 1.91 2.03
Lupin 3.56 3.34 3.56 3.35 2.84
Piramal 3.98 3.02 3.61 4.24 4.45
Glenmark 2.19 2.30 2.07 1.92 2.24
Cadila 3.99 3.32 3.39 2.56 2.73
Biocon 3.90 5.96 4.62 3.80 2.73
Avantis 4.70 4.30 3.80 3.60 3.24
Pfizer 3.45 4.26 4.21 3.81 3.86
Matrix 2.73 2.43 2.72 2.39 2.29
Aztra 2.19 3.52 4.75 4.42 5.93
Torrent 2.67 2.00 2.36 2.70 2.99
Wyetn 2.57 2.69 3.01 2.98 3.83
Aurobindo 3.78 2.72 3.01 2.83 2.73
Novatis 5.78 4.52 5.22 4.58 4.49
Wockhardt 4.52 4.87 3.57 3.06 2.91
Dishman 1.73 1.61 1.86 2.11 2.14
IPCA 2.77 2.65 2.79 2.64 2.79
FDC 3.59 3.87 3.09 2.96 3.45
Abbot 9.13 7.65 7.22 5.68 5.58
Merck 5.14 5.80 5.61 5.28 5.05
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
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Average Collection Period
2004 2005 2006 2007 2008
Sun Pharma 47.34 68.23 49.26 45.47 115.11
Cipla 93.01 88.19 98.92 101.97 114.11
GSK 20.69 18.17 13.97 11.97 7.54
DRL 93.94 95.77 97.96 94.06 88.91
Ranbaxy 43.93 71.72 76.54 82.22 71.93
Divis 87.58 94.39 95.95 81.73 71.48
Lupin 65.86 72.07 74.47 79.34 79.19
Piramal 43.20 33.48 45.00 49.11 54.84
Glenmark 125.24 125.35 176.02 172.45 151.80
Cadila 52.27 33.76 50.64 53.96 56.63
Biocon 79.33 92.66 103.22 110.37 56.63
Avantis 28.06 42.97 21.16 25.99 21.76
Pfizer 40.00 43.17 44.10 33.76 21.64
Matrix 57.58 73.93 85.74 94.03 124.43
Aztra 39.32 40.88 48.07 56.32 55.89
Torrent 32.97 41.24 57.55 64.66 73.72
Wyetn 34.70 21.44 25.06 22.61 23.57
Aurobindo 126.49 145.52 142.34 110.00 118.80
Novatis 47.47 28.76 24.46 25.73 23.61
Wockhardt 71.54 58.62 65.35 78.71 92.15
Dishman 107.15 138.46 116.12 137.84 105.14
IPCA 74.34 77.11 66.09 66.07 84.00
FDC 36.32 48.04 19.01 16.79 13.79
Abbot 14.23 13.43 15.04 16.06 16.10
Merck 58.03 45.83 48.46 23.99 31.65
Average Collection Period 2004 Average Collection Period 2005 Average Collection Period 2006
Average Collection Period 2007 Average Collection Period 2008
200.00
180.00
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
Dishman
Divis
Avantis
Sun Pharma
Lupin
Ranbaxy
Glenmark
Aurobindo
Piramal
Pfizer
Biocon
DRL
Torrent
Cipla
Cadila
Novatis
Aztra
Matrix
Wyetn
Abbot
Wockhardt
FDC
GSK
IPCA
Merck
23
Total Asset Turnover 2004 Total Asset Turnover 2005 Total Asset Turnover 2006
Total Asset Turnover 2007 Total Asset Turnover 2008
6.00
5.00
4.00
3.00
2.00
1.00
0.00
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Debt Ratio
2004 2005 2006 2007 2008
Sun Pharma 1.77 3.38 3.01 2.77 2.05
Cipla 0.91 0.84 0.84 0.97 1.02
GSK 1.59 2.05 2.30 2.89 3.62
DRL 1.73 0.28 1.98 1.98 2.03
Ranbaxy 1.23 1.02 1.16 1.64 1.73
Divis 0.81 0.82 0.97 0.91 0.96
Lupin 0.87 0.89 1.19 1.11 1.07
Piramal 0.90 0.89 1.08 1.08 1.10
Glenmark 0.98 1.18 1.54 1.47 1.25
Cadila 0.95 1.00 1.08 1.01 1.28
Biocon 1.75 1.71 1.68 0.95 1.28
Avantis 1.03 1.21 1.35 1.62 1.78
Pfizer 1.43 1.57 1.47 1.76 2.76
Matrix 0.87 1.04 1.34 1.35 1.11
Aztra 0.97 1.23 1.38 1.22 1.39
Torrent 0.88 1.28 0.98 0.97 1.13
Wyetn 1.45 1.83 1.54 2.07 2.24
Aurobindo 1.15 1.21 1.23 1.53 1.31
Novatis 1.70 2.15 2.99 3.25 3.78
Wockhardt 1.76 2.63 2.25 1.63 1.54
Dishman 0.92 0.99 1.48 1.33 1.46
IPCA 0.90 0.89 0.87 0.91 1.01
FDC 1.25 1.16 1.37 1.21 1.32
Abbot 2.02 2.09 2.03 1.37 1.05
Merck 1.26 1.83 2.10 3.73 3.89
Debt Ratio 2004 Debt Ratio 2005 Debt Ratio 2006 Debt Ratio 2007 Debt Ratio 2008
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
a
IP n
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Debt-to-Equity
2004 2005 2006 2007 2008
Sun Pharma 1.06 2.36 1.92 1.29 0.76
Cipla 0.58 0.57 0.73 0.71 0.78
GSK 0.53 0.48 0.42 0.52 0.53
DRL 0.83 0.83 1.06 0.79 0.81
Ranbaxy 0.48 0.44 0.85 1.71 1.63
Divis 0.90 0.86 0.97 1.00 0.83
Lupin 1.03 1.14 1.68 1.38 1.22
Piramal 1.13 0.95 0.81 1.03 1.00
Glenmark 1.04 2.11 2.78 2.42 1.14
Cadila 1.12 0.62 0.69 0.35 0.90
Biocon 0.85 0.75 0.82 0.84 0.90
Avantis 0.60 0.77 0.67 0.58 0.70
Pfizer 0.55 0.53 0.45 0.52 0.65
Matrix 1.22 0.55 0.74 0.83 1.03
Aztra 0.51 0.25 0.59 0.28 0.45
Torrent 0.56 1.07 1.07 1.11 1.04
Wyetn 0.72 0.51 0.57 0.52 0.49
Aurobindo 1.55 1.74 1.90 2.66 2.00
Novatis 0.60 0.61 0.62 0.79 0.71
Wockhardt 1.16 1.84 1.59 1.30 1.35
Dishman 2.06 1.41 2.36 1.63 1.34
IPCA 1.09 1.24 1.07 0.95 1.06
FDC 0.75 0.71 0.79 0.78 0.74
Abbot 0.36 0.58 0.62 0.58 0.41
Merck 0.58 0.68 0.70 0.78 0.84
Debt-to-Equity 2004 Debt-to-Equity 2005 Debt-to-Equity 2006 Debt-to-Equity 2007 Debt-to-Equity 2008
3.00
2.50
2.00
1.50
1.00
0.50
0.00
a
IP n
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len l
a
Pi n
N do
Bi l a
A on
oc tis
ur tn
W t
To a
M t
Ra RL
D rdt
CA
ck
SK
G ama
C
i
n
m
o
a
ar
pl
ax
pi
ztr
iv
nt
di
iz
A ye
m
rre
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FD
W ova
in
oc
ar
at
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Ci
a
D
va
nb
G
ish
kh
ob
Ph
A
r
n
Su
26
Gross Profit Margin 2004 Gross Profit Margin 2005 Gross Profit Margin 2006
Gross Profit Margin 2007 Gross Profit Margin 2008
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Dishman
Divis
Avantis
Ranbaxy
Sun Pharma
Lupin
Glenmark
Aurobindo
Piramal
Pfizer
Biocon
DRL
Torrent
Novatis
Cipla
Cadila
Aztra
Matrix
Wyetn
Wockhardt
Abbot
FDC
GSK
IPCA
Merck
-10.00%
27
Operating Profit Margin 2004 Gross Profit Margin 2005 Gross Profit Margin 2006
Gross Profit Margin 2007 Gross Profit Margin 2008
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Dishman
Avantis
Divis
Lupin
Glenmark
Sun Pharma
Ranbaxy
Aurobindo
Piramal
Pfizer
Biocon
DRL
Torrent
Cipla
Novatis
Cadila
Aztra
Wyetn
Matrix
Abbot
Wockhardt
FDC
GSK
IPCA
Merck
-10.00%
-20.00%
-30.00%
-40.00%
29
Net Profit Margin 2004 Net Profit Margin 2005 Net Profit Margin 2006
Net Profit Margin 2007 Net Profit Margin 2008
40.00%
30.00%
20.00%
10.00%
0.00%
Dishman
Ranbaxy
Sun Pharma
Lupin
Glenmark
Divis
Avantis
Aurobindo
Pfizer
Piramal
Biocon
DRL
Torrent
Novatis
Cipla
Cadila
Aztra
Matrix
Wyetn
Abbot
Wockhardt
IPCA
FDC
GSK
Merck
-10.00%
-20.00%
-30.00%
-40.00%
-50.00%
31
200.00%
150.00%
100.00%
50.00%
0.00%
a
IP n
is
y
is
Ca k
ri x
M er
Pi in
a
Bi l a
len l
N do
A on
ur t n
oc tis
W t
To a
Ra RL
M t
D r dt
CA
ck
SK
G ma
C
n
m
o
a
ar
ax
pl
ztr
iv
nt
p
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di
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m
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bb
FD
W va
in
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ar
at
er
Ci
Lu
a
D
va
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ra
G
Pf
ish
kh
ob
A
Ph
o
n
-50.00%
Su
33
Return on Equity (ROE) 2004 Return on Equity (ROE) 2005 Return on Equity (ROE) 2006
Return on Equity (ROE) 2007 Return on Equity (ROE) 2008
80.00%
60.00%
40.00%
20.00% dc
0.00%
Dishman
Divis
Ranbaxy
Lupin
Avantis
Sun Pharma
Aurobindo
Glenmark
Pfizer
Piramal
Biocon
DRL
Torrent
Novatis
Cipla
Cadila
Aztra
Matrix
Wyetn
Abbot
Wockhardt
IPCA
FDC
GSK
Merck
-20.00%
-40.00%
-60.00%
35
Adjusted Earnings per Share 2004 Adjusted Earnings per Share 2005 Adjusted Earnings per Share 2006
Adjusted Earnings per Share 2007 Adjusted Earnings per Share 2008
300.000
250.000
200.000
150.000
100.000
50.000
0.000
Dishman
Ranbaxy
Divis
Avantis
Sun Pharma
Lupin
Aurobindo
Glenmark
Piramal
Pfizer
Biocon
DRL
Torrent
Cadila
Matrix
Wyetn
Novatis
Cipla
Aztra
Wockhardt
Abbot
FDC
IPCA
GSK
Merck
(50.000)
(100.000)
(150.000)
36
Price/Earnings Ratio
2004 2005 2006 2007 2008
Sun Pharma 23.32 28.63 33.60 31.18 24.98
Cipla 22.93 18.74 32.32 27.46 23.77
GSK 26.76 19.06 24.84 17.12 14.88
DRL 26.33 79.99 48.57 10.30 20.11
Ranbaxy 22.00 36.65 79.60 34.88 27.41
Divis 29.02 19.18 34.32 20.68 23.07
Lupin 29.02 25.69 24.51 16.39 9.23
Piramal
Glenmark 20.27 52.91 55.58 53.62 31.26
Cadila 21.66 22.21 18.02 20.66 13.66
Biocon 38.83 23.55 33.37 30.70 8.55
Avantis 16.82 19.18 28.47 16.75 12.54
Pfizer 42.98 38.05 46.12 21.29 5.92
Matrix 13.48 18.01 23.73 27.08
Aztra 31.29 21.14
Torrent 10.78 17.70 27.91 14.66 7.66
Wyetn 11.18 12.74
Aurobindo 14.87 44.33 48.24 16.01 5.49
Novatis
Wockhardt 21.52 19.03 23.20 20.39 13.63
Dishman 29.62 29.61 28.83 24.74 36.00
IPCA 10.16 9.50 13.52 12.38 10.95
FDC 15.88 16.06 13.48 9.30 8.31
Abbot
Merck 8.17
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
a
IP n
Pf s
y
Ca rk
rix
Lu s
M er
len l
Pi n
N do
a
B i la
oc ti s
A on
ur tn
W nt
To a
M t
D r dt
Ra RL
CA
ck
SK
G ama
C
i
m
o
a
ax
pl
pi
ztr
nt
iv
di
iz
a
A ye
bb
FD
rre
W ova
in
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ar
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Ci
a
D
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A
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37
38
PROFITABILITY RATIO:
Financial Ratio Formula Measurements
Measures rate of
Operating profit before
return earned through
Return on Total income tax + interest
operating total assets
Assets expense/ Average total
provided by both
assets
creditors and owners
Operating profit &
Return on extraordinary items after Measures rate of
ordinary income tax minus return earned on
shareholders’ Preference dividends / assets provided by
equity Average ordinary owners
shareholders’ equity
Gross Profit Profitability of trading
Gross Profit / Net Sales
Margin and mark-up
Measures net
Operating profit after income
Profit Margin profitability of each
tax / Net Sales Revenue
rupees of sales
39
LIQUIDITY RATIO:
---------------------------------------------------------------------------------------------------------------------------
Chapter 7 -- Conclusions
--------------------------------------------------------------------------------------------------------------------------------
Among the companies studied the quick ratio was at comfortable level for all the companies except
Glenmark (1.58, Aurobindo 1.48) for the year 2008 show that the Indian pharmaceutical companies
are better solvent.
The asset to turnover ratio of GloxoSmithklin (4,.78), Pfizer (4.3), Novatis (5.04), are the top 3
three and have better asset utilization compared to Dishman (0.78), matrix (0.66), Cipla (1.03),
Aurobindo (1.06), Divis (1.08) and these companies could improve the financials by better asset
utilization.
Dept to equity ratio of Aurobino (2.0), Ranbaxy (1.63) are highly leveraged and those of Abbot
(0.41), Wyeth (0.49), Aztra (0.45) GloxoSmithkline (0.53) are least leveraged.
The net profit margin of Sun pharmaceuticals (30.88%), GloxoSmithkline (32.94%), and Divis
(32.91%) are most profitability ratio and those of Matrix (-43.85%), Abbot (8.55%), Ranbaxy
(12.2%), Aurobindo (11.78%), IPCA (12.14%) have low profit margin in the operation.
The retun on equty is higher for Pfizer (53.2%), Divis (40.63%), GloxoSmithkline (43.65%) are
giving high return on equity and those of Matrix (-43.07%), Dr. Reddy’s (10.28%), Dishman
(13.58%) are much lower.
46
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Reference
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