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ASSIGNMENT ON FINANCIAL MANAGEMENT

ON

Submitted By Submitted To

Pankaj Anand Rai Ms.Ritu Sharma Pooja P. 15-01-2009

Introduction
Cipla was incorporated in 1935, in the name of Chemical Industrial and Pharmaceutical Laboratories. The name was changed to the acronym ‘Cipla’ in 1984. Over the last 6 decades Cipla has set up plants at five locations, mainly concentrated in Maharashtra. The Hamied brothers, sons of the founder, late Dr K A Hamied, manage Cipla. Dr Y K Hamied, with a doctorate in Organic Chemistry from Cambridge, is the Chairman and Managing Director. He himself heads the research division, which has around 200 people. His brother, M K Hamied, looks after marketing. Cipla has four plants located at Patalaganga, Kurkumbh, Mumbai in Maharashtra and one at Bangalore in Karnataka. All plants make bulk drugs as well as formulations and have secured FDA (USA)/ MCA (UK) for most of its plants. Cipla has crossed the USD 1 billion mark in terms of turnover for the year 2007-08. While domestic sales grew by more than 13%, export sales posted a growth of about 23% for the quarter. Total sales for the year 2007-08 has increased by 16% which has been in line with the estimates.

Background

Cipla was officially opened on September 22, 1937 when the first products were ready for the market. The Sunday Standard wrote: "The birth of Cipla which was launched into the world by Dr. K.A. Hamied will be a red letter day in the annals of Bombay Industries. The first city in India can now boast of a concern, which will supersede all existing firms in the magnitude of its operations. India has lagged behind in the march of science but she is now awakening from her lethargy. The new company has mapped out an ambitious programme and with intelligent direction and skillful production bids fair to establish a great reputation in the East. "

Business
Cipla occupies the third position in the domestic formulations market and commands a market share of 4.74 per cent. Cipla currently markets over 350 products and is the market leader in the generic segment consisting of more than 100 products. The company has strong presence in antiasthmatic, antibiotics, cardiovascular, anti-AIDS and anticancer areas. Cipla was the first one to enter into the competitive generics business and has occupied the leadership position in this segment. Cipla is the market leader in anti asthmatic inhaler segment with over 70 per cent market share. This segment is growing rapidly mainly due to increase in pollution leading to a spurt in the number of asthma cases in patients. One of its major products, Asthalin inhaler has annual sales of more than Rs 30 crore. The company offers full range of inhalers, rotahalers and spacers that have gained excellent acceptance among the asthma patients. The company has introduced CFCfree, environment-friendly Budecort inhalers for the first time in India. The CFC- free products have a huge export potential .The inhaler therapy is preferred to tablets since the dose required is about 1/ 10 of the oral dose. Moreover, the drug directly goes to the lung and gives instantaneous relief to the patient. Cipla will be maintaining a leadership position due to the entire range of inhalers and with the advantage of economies of scale. Cipla has presence in niche segments such as cardiovascular, anti-AIDS, and anticancer. The company has several products in each of these segments that will help it maintain a steady growth in the long run. Cipla is building a strong presence in the anti-AIDS segment and is offering the entire range of products. The company has reduced the prices of anti-AIDS drug five times in the domestic market through technological advancements. The company's recent offer to

supply the cocktail of drugs consisting of Lamivudine, Nevirapine and Stavudine at US $ 350 per patient per year to Medicins Sans Frontieres (MSF) has given it an international recognition. Cipla has ambitious plans to supply anti-AIDS drugs at concessional prices to African countries at a fraction of international price ranging from US $ 5000-8000 charged by MNCs. The company manufactures the entire range of anti-AIDS drugs namely: Lamivudine, Zidovudine, Navirapine, Didanosine and Stavudine. Cipla has introduced more than 100 new products in the generic segment. The company has also introduced branded products in anti-epilepsy, antiAIDS, psychiatry, Obesity and NSAIDS segments. These products are likely to contribute significantly in the current year and will help the company to improve the market share. Apart from the anti-aids products, some of the new products launched by the company are Silagra (Sildenafil citrate) for erectile dysfunction, Venlor(Venlafaxine) an anti-depressant, Obestat (Sibutramine) for obesity and Rofixx(Rofecoxib) a Cox-2 inhibitor for acute and chronic pain.

FINANCIALS :
CAPITAL STRUCTURE:
A mix of a company's long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds. Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered to be part of the capital structure.

Capital Structure of Cipla : Year After Year (2000-2007)

From

To

Class Of Share

Authorized Paid Up Paid Up Face Issued Capital Capital Shares (Nos) Value

Paid Up capital

2007 2006 2005 2004 2003 2002 2001 2000

2008 2007 2006 2005 2004 2003 2002 2001

Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share

175.00 175.00 175.00 65.00 65.00 65.00 65.00 65.00

155.66 155.66 60.17 60.17 60.17 60.17 60.17 60.17

777291357 777291357 299870233 299870233 59972349 59972349 59972349 59972349

2 2 2 2 10 10 10 10

155.46 155.46 59.97 59.97 59.97 59.97 59.97 59.97

The aspect that stands out in Cipla's financial statements is the high profit margins over the last five years. The operating profit margins ranged around 27 per cent, while the net profit margins have been around 17 per cent during the last few years.

CIPLA: BALANCE SHEET AS ON 31 March 2008

Profit and loss account:

Ratios:
Year- 2007
= 668.03/3438.24 = .1942 or 19.42%

Net Profit margin
Profit After tax /sales

Year-2008
= 701.43/3997.9 = .1755 or 17.55%

GROSS PROFIT MARGIN
Gross profit/Sales

Year-2007
= 814.93/3438.24 =.2370 or 23.7%

Year-2008
=850.05/3997.90 =.2126 or 21.26%

Total Assets Turnover
Sales/Total Assets

Year-2007
= 4413.74/3438.24 = 1.28 Times

Year-2008
= 5733.21/3997.90 = 1.43 Times

Debt/Equity Ratio Year-2007
=123.56/3236.27 = .038

Year -2008
= 580.53/3755.82 = .154

Working capital turnover
Sales/Net current Assets

Year-2007
=3438.24/1893.42 =1.816

Year-2008
=3997.90/2496.27 = 1.60

Return on Investments(ROI)
EBIT/Net Assets

Year-2007
= 814.93/1893.42 =.43

Year-2008
= 850.05/2496.27 = .34

Return on Equity(ROE)
PAT/ Net worth(Equity)

Year-2007
=668.03/3236.27 =.206 or 20.6% (Rupees in )

Year-2008
= 701.43/3755.82 = .1867or 18.67%

Leverage Calculation:

Degree of Operating Leverage (DOL)
DFL = 1+ Interest /PBT

Year-2007
= 1+(6.95/807.98) = 1.0086

Year-2008
= 1+ (11.69/838.36) = 1.014

CIPLA- MAIN COMPETITORS: Dr. Reddy's Labs
One of India's top drug makers, Dr. Reddy's Laboratories develops and manufactures generic and branded pharmaceuticals and bulk pharmaceutical ingredients. Its stable of products includes ulcer medicines (Omez is a leading seller), antibiotics, antidepressants (generic version of Eli Lilly's Prozac), pain relievers, and cardiovascular drugs. Dr. Reddy's Laboratories is building up its biotech business and is expanding its drug discovery research arm. The firm operates in more than 100 countries. Its branded drugs are sold only in Asia, Eastern Europe, Latin America, and other emerging markets. Its generic drugs are sold in North America and Western Europe.

GlaxoSmithKline
GlaxoSmithKline (GSK) is One of the top five pharmaceutical firms in the world, GSK's top sellers include central nervous system therapies, respiratory drugs, and anti- infectives. The company's top product is asthma medication Advair, which combines two of the company's other products, Flovent and Serevent, to form a single, twice-daily treatment. Other bestsellers include herpes treatment Valtrex, epilepsy treatment Lamictal, antidepressants Paxil and Wellbutrin, migraine therapy Imitrex, and antibiotic Augmentin. The company's consumer products include Tums for sour stomachs and dental care products Aquafresh and Sensodyne.

SUN Pharmaceuticals:
SUN Pharma are an international speciality pharma company, with a presence in 30 markets. also makes active pharmaceutical ingredients. In branded markets, products are prescribed in chronic therapy areas like cardiology, psychiatry, neurology, gastroenterology, diabetology and respiratory. Sun Pharma came into existence as a startup with just 5 products in 1983. In the time since, it has crossed several milestones to emerge as an important speciality pharma company with technically complex products in global markets, and a leading pharma company in India. In India, they have reached leadership in each of the therapy areas that they operate in, and are rated among the leading companies by key customers. Strengthening market share and keeping this customer focus remains a high priority area for the company. In the post-1996 years, Company has used a combination of internal growth and acquisitions to drive growth; important mergers were those of the US, Detroit based Caraco Pharm Labs, ICN Hungary (now called Alkaloida Chemical Company Exclusive Group), and that of the internationally approved plants at Halol, India as well as Bryan, Ohio, US and Cranbury, NJ, US.

Lupin ltd.
Lupin Pharmaceuticals, Inc. is the U.S. wholly owned subsidiary of Lupin Limited, which is among the top six pharmaceutical companies in India. Through our sales and marketing headquarters in Baltimore, MD, Lupin Pharmaceuticals, Inc. is dedicated to delivering high-

quality, branded and generic medications trusted by healthcare professionals and patients across geographies. Lupin Limited, headquartered in Mumbai, India, is strongly research focused. It has a program for developing New Chemical Entities. The company has a state-of-the-art R&D center in Pune and is a leading global player in Anti-TB, Cephalosporins (anti-infectives) and Cardiovascular drugs (ACE-inhibitors and cholestrol reducing agents) and has a notable presence in the areas of diabetes, anti-inflammatory and respiratory therapy. We are building on our parent company’s strengths of vertical integration in discovery research, process chemistry, active pharmaceutical ingredient production, formulation development and regulatory filings. Lupin Pharmaceuticals, Inc. is committed to achieving its vision and mission of becoming an innovation led transnational pharmaceutical company.

COMPETITIORS PERFORMANCE
LastPric Company Sun Pharma Cipla GlaxoSmithKlin e Ranbaxy Labs Dr Reddys Labs Divis Labs Glenmark Lupin Piramal Health e 1,119.55 187.95 1,150.40 217.90 475.95 1,167.25 257.75 588.70 220.60 MarketCa p. (Rs. cr.) 23,187.72 14,609.19 9,744.24 8,150.98 8,016.38 7,557.77 6,457.15 4,874.05 4,610.83 SalesTurnove r 1,662.56 4,226.81 1,570.30 4,026.60 3,301.98 1,033.19 1,372.69 2,543.69 1,930.02 NetProfi t 628.93 700.48 537.66 617.72 475.22 353.56 389.02 443.38 301.48 TotalAsset s 4,310.14 4,336.35 1,366.67 6,041.42 5,274.09 960.07 1,552.79 2,282.60 1,520.76

CIPLA & COMPETITORS RATIOS COMPARISON
COMPANY RETURN ON EQUITY
CIPLA

RETURN ON ASSETS
19.2% 18.67%

DR. REDDY’S LAB

3.83%

10.32%

GLAXO- SMITHCLINE

17.5%

42.35%

LUPIN LTD.

10.31%

37.92%

SUN PHARMACEUTICALS

17.70%

38.30%

Mutual Funds Holding - Cipla
Scheme Name
Reliance Tax Saver (ELSS) Fund (G) Reliance Equity Fund - Retail Plan (G) 3,035,661 Fidelity Equity Fund (G) 3,020,153 No. of shares

3,931,417

Reliance Equity Advantg. Fund

1,853,322

HAREHOLDING PATTERN:
Mar-08
17.93

ndian promoters

oreign promoters

21.45

1.34 11.71 18.33

Public corporate

1.14

23.84

3.56 777291357

Stock Prices for Cipla as on 15-01-09

CONDITION
Open Day High Day Low Previous Close 52-Week high 52-Week low P/E Market Cap (Rs cr) Volume

BSE
185.5 185.5 181.05 187.8 243.55 146.4 20.76 14146.86 95150

NSE
187.5 187.5 180.55 187.95 244.95 145 20.75 14142.97 1173467

BIBLIOGRAPHY:

WWW.CIPLA.COM WWW.MONEYCONTROL.COM WWW.FINANCE SCHOLAR.COM WWW.EQUITYMASTER.COM WWW.GOOGLEIMAGES.COM WWW.SCRIBD.COM