A REPORT ON

PORTFOLIO MANAGEMENT, LIVE TRADING,

EQUITY RESEARCH, FUNDAMENTAL ANALYSIS

By:

ABHISHEK SINGH
1719PGDM3534

Aditya Birla Sun Life Insurance Pvt. Ltd

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 REPORT
ON
PORTFOLIO MANAGEMENT, LIVE TRADING, EQUITY
RESEARCH, FUNDAMENTAL ANALYSIS

By:
Abhishek Singh
1719PGDM3534

Aditya Birla Sun Life Insurance Pvt. Ltd

A report submitted in partial fulfilment of the

requirements of PGDM Program of ITM Business School,
Navi Mumbai.

SUBMITTED TO:

FACULTY GUIDE COMPANY GUIDE

Prof. Rama Devi Mantha Mr. Nikesh Ruparel

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 TABLE OF CONTENTS

1. Authorisation……………...............….…………………….................04
2. Acknowledgement………………… ..................................……………………….05
3. Executive Summary……………………………………… .................. ………….06
4. Objectives of the Report………….………………………………… ................ 07
5. Research Methodology and Design………………………………………..08
6. Sample design and Limitations of the Study……………..…………09
7. Introduction to Company…………………………………………………......10
8. Competitors…………………………………………………………………………...13

10. Introduction to the Equity………………………….…………………………..17

11. Fundamental Analysis………………………………………………………….…18
12. Introduction to Pharmas Sector
…………………….…...……….…….…...24
13. Birla Sunlife Insurance products………………....……………………….34
14. Live Trading …....…………………………….…………………....…....37
15. Profit Making……………………...………………………….…………………….39
16. Technical Analysis & Stock filtering for intraday trading……...42
17. Introduction to Project………………………...……………….45
18. Fundamental analysis of FMCG Sector………………....……49
19. Portfolio creation and Fund allocation………………………...54
20. Conclusion…………………………………………………………………….…………56
21. Sources………………………………………………………………………………...57

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AUTHORISATION
This is to certify that this is a bonafide report submitted in partial fulfilment of
the requirements of PGDM program (Class of 2017-19) of ITM Business School,
Navi Mumbai.
This report document titled “A PROJECT REPORT ON PORTFOLIO
MANAGEMENT AND EQUITY RESEARCH” is a submission of work done by
Abhishek Singh as part of the completion of the Summer Internship Program at
Aditya Birla Capital & Birla Sunlife Insurance Company under the guidance
of Mr. Nikesh Ruparel, Sr. Business Mentor of Aditya Birla
Capital; Birla Sunlife Insurance Company.

This report has been formally submitted to PROF. RAMA DEVI MANTHA,
ITM BUSINESS SCHOOL, NAVI MUMBAI.

ABHISHEK SINGH
1719PGDM3534
DATE: 24/08/2018
PLACE: MUMBAI

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 ACKNOWLEDGEMENT
I would like to take this opportunity for extending my gratitude towards Aditya Birla Capital
& Birla Sunlife Insurance Company for providing me the chance to undertake this internship
study and allowing me to explore the expertise area of Financial Analysis which was entirely
new to me and which will surely prove to be very beneficial to me in my future assignments,
my studies and my career ahead.
No job is a single man’s work as there are different factors, situations and people combine
together to form the background for the accomplishment of any task.
I sincerely extend my gratitude to my company guide, Mr. Nikesh Ruparel (Sr. Business
Mentor), Aditya Birla Capital & Birla Sunlife Insurance Company who played a pivotal role
in the learning and experience during my Internship. His constant monitoring, guidance and
expert knowledge in the operation and finance domain helped me in enhancing my knowledge
and outlook towards the corporate.
I would also like to mention the unconditional help put forth by the entire team member at
Aditya Birla Capital & Birla Sunlife Insurance Company, Mumbai. I am deeply grateful, to my
faculty guide Prof. Rama Devi Mantha for his invaluable suggestions, comments, feedback
and support throughout the internship.
My heartfelt thanks towards all those people who have helped me in the preparation of this
project, which has been a wonderful learning experience, without any of the above people, this
project would not have seen the light of the day.

Abhishek Singh
(1719PGDM3534)

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 EXECUTIVE SUMMARY
This project is aimed to perform equity research on the stocks of the personal care segments.
The research is based on finding out the opportunities for an investor where he could gain
maximum advantage by maximising the returns.
It is obvious that with the growth of any company their shareholders are also benefited as they are
provided with a healthy dividend for their investment and also with capital appreciation.

Talking about Indian economy, it has gained the title of one of the fastest growing economies
of the world. Even there are companies like Tata, Reliance etc. Who are expanding their
operations in rest of the world.
Indians are now realising that the equity market has the potential of providing better returns as
compared to traditional modes of investment i.e. in banks, post office, gold and properties.
Today also most people are unaware about equity valuation and they just invest on basis of
their sentiments or from guidance of their friends, relatives or some stock broker against some
brokerage.
Valuation of equity starts with analysis of various sectors and finding out a particular sector in
which you would like to invest your funds. In case the sector is performing well proceed with
analysis of performance of various companies in that particular sector.
The analysis of company is done to check its performance and its financial positions till date.
Technical analysis is done in order to obtain the correct price to invest in that particular stock
so that best returns could be obtained.
This report begins with fundamental analysis of large cap companies of personal care segment.
After the analysis of these companies, stock price is estimated using relative valuation method. The
market price and the PE ratio has been taken to calculate the EPS. After the target price is calculated
with the help of sector PE and EPS and finally the difference was taken between the target price
and market price to arrive at the best performing company.

After the selection of stocks on the basis of their performance, a portfolio is created comprising
of personal care stocks for capital appreciation. Funds are invested in them based on their
rankings. NAV is calculated and is monitored on the daily basis.
At the end, conclusions and recommendations are drawn based on the derived result.

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Objectives of the Report: -
To provide an overview of the sector and analyse the stocks of that sector.

To study about the some of the major players in which has good investment opportunities.

To identify the growing and best performing companies in that particulars segment.
To identify the top line and the bottom line of the companies selected under Pharmaceuticals
sector and the factors that affect them to justify the current investment in the selected stocks.
To monitor and analyse the trends in movement and performance of stocks

To suggest the increment or decrement in investment in a particular stock.

The ultimate objective of this research is fundamental and technical analysis of stocks in
Pharmaceuticals sectors.

The report will be beneficial for the investors to know about the growth prospects of Indian
economy and the Pharmaceuticals sector. Investors will understand the various factors
affecting Pharmaceuticals sector and the impact of growth of Pharmaceuticals sector. This
report will be beneficial in tracking the past performance of the companies dealing and the
estimated future share price, so that the investors can invest in a better option.

This report will be of great use to Birla Sunlife Wealth Management Team as they could direct
their funds wisely in order to gain maximum advantage in terms of their investment.

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Research Methodology and Design: -

The project is on the equity research analysis of the Pharmaceuticals sectors. Hence the
complete study is based on the information and the news available about the sector i.e.
secondary data by various modes. The research is completely based on the Fundamental and
Technical analysis of the companies.
Secondary data was basically collected from various sources such as Economic times, Money
Control, companies’ website through internet.
Though, primary data collection for preparing this project was not possible due to time and
money constraints. Therefore, secondary data has been used in the report preparation.
The research on the sector and the companies in those sectors is explained in the later part of
the report.
The stocks were individually analysed and then measured whether it would give best returns if
the funds were invested in those particular stocks.
While working on this project, daily stock market prices were being tracked and also the annual
reports of the particular companies were the basis for judging the company’s performance in
the past year.
Internet was a major source of information gathering while performing the research as data
was collected from various websites.
The knowledge thus gained from preliminary study forms the basis for future detailed
descriptive research. In the exploratory study, the various technical indicators that are
important for analysing stocks were actually identified and important ones were short listed.

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Sample Design
The sample of the stocks for the purpose of collecting primary data and secondary data has
been selected on the basis of random sampling. The stocks are chosen in an unbiased manner
and each stock is chosen in an independent manner of the other stock chosen. The stocks are
chosen from Pharmaceuticals sector.

Limitations of the Study: -

o The study is being conducted purely to understand Equity analysis for Aditya
Birla Capital and Its Investors.
o The study is limited to the companies having equity.

o The Study is restricted to Large Cap Stocks under Pharmaceuticals Sector.

o The study is limited to the companies listed on BSE and NSE NIFTY 50.

o There is a Constraint with regard to time allocated for the Research Study i.e.
for the period of 14 weeks.

o Suggestions and conclusion are based on limited Data and few fundamental
Analysis techniques only.

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Aditya Birla Group

The Aditya Birla Group is an Indian multinational conglomerate, headquartered in Worli,

Mumbai, India. It operates I 40 countries with more than 120000 employees worldwide. The group
was founded by Seth Shiv Narayan Birla in 1857. The group interests in sectors such as viscose
staple fibre, metals, cement (largest in India), viscose filament yarn, branded apparel, carbon black,
chemicals, fertilisers, insulators, financial services, telecom, BPO and IT service.

The group had a revenue of approximately US$43 billion in year 2015. It is the third-largest
Indian private sector conglomerate behind Tata Group with revenue of just over US$100 billion
and RIL with revenue of US$74 billion. Anchored by an extraordinary force of over 120,000
employees, belonging to 42 nationalities, the Aditya Birla Group operates in 36 countries
across the globe. About 50 per cent of its revenues flow from its overseas operations. The
Group operates in 36 countries- Australia, Austria, Bangladesh, Brazil, Canada, China, Egypt,
France, Germany, Hungary, India, Indonesia, Italy, Ivory Coast, Japan, Korea, Laos,
Luxembourg, Malaysia, Myanmar, Philippines, Poland, Russia, Singapore, South Africa,
Spain, Sri Lanka, Sweden, Switzerland, Tanzania, Thailand, Turkey, UAE, UK, USA, And
Vietnam.

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SUN LIFE FINANCIAL, INC

Sun Life Financial, Inc. is a Canada-based financial services company known primarily as a
life insurance company. It is one of the largest life insurance companies in the world, and also
one of the oldest with a history spanning back to 1865. It had expanded to Central and
South America, The United States, The United Kingdom, West Indies, Japan, China, India,
North Africa and other international markets.
Sun Life Financial has a presence in investment management with over CAD $891 billion in
assets under management operating in a number of countries. Sun Life ranks number 277 on
the Forbes Global 2000 list for 2016 as well as on the Fortune 500 list.

BIRLA SUNLIFE INSURANCE

Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between the Indian
conglomerate Aditya Birla Group, and Sun Life Financial Inc., an international financial

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services organisations from Canada. BSLI has a customer base of over two and half million
policy holders.
Birla Sun Life Insurance Company Limited was founded in 2000. The company is based in
Mumbai, India. It is a joint venture between Indian Aditya Birla Group and Canadian Sun Life
Financial Inc. In April 2016, Sun Life Financial increased their stake in Birla Sun Life
Insurance to 49%.
BSLI has contributed to the growth and development of The Indian Life Insurance Industry
and currently is one of the leading life insurance companies in the country. BSLI is the first
Indian insurance company to introduce "free look period", by which consumer can return the
policy to an insurance company within this period after receiving the policy, “free look period”
was later made mandatory by Insurance Regulatory and Development Authority of India for
all other life insurance companies in 2013. Additionally, BSLI pioneered the launch of unit
linked plan. BSLI has a policy of disclosing their portfolio on a monthly basis. On 5 February
2015, Birla Sun Life Insurance signed an it outsourcing deal with International Business
Machines Corporation (IBM) with a view to leveraging mobility and cloud solutions developed
by IBM research and the IBM India software lab.

As of September 2017, total AUM of ABSLI stood at Rs. 357,314 million. ABSLI recorded a
gross premium income of Rs. 24,331 million in H1 FY 2017-18 and registering a year on year
growth of 21% in First Year Premium and posted a net profit of Rs. 70 Crore. ABSLI has a
nation-wide distribution presence through 433 branches, 6 bank assurance partners, 7
distribution channels, over 80,000 direct selling agents, other Corporate Agents and Brokers
and through its website. The company has over 8,000 employees and more than 16 lac active
customers.
The Company offers a complete range of protection solutions to help secure your family's
future and provide financial support for your child's education, wealth with protection
solutions, health and wellness solutions, retirement solutions and savings with protection
solutions to help you stay financially secure in the future with small disciplined savings at
regular intervals. ABSLI puts people's need first and aims to protect what is dear to the
customer, with assurance. While, Life Insurance cannot prevent risk, it can definitely
compensate financial losses arising from risk.

Vision
To be a premium global conglomerate, with a clear focus on each of the business.

Mission
To deliver superior value to their customers, shareholders, employees, and society at large.

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Competitors: -

Aviva Life Insurance:

Aviva Life Insurance Company India Pvt. Limited is a joint venture between Aviva of UK and
Dabur, one of India's leading producers of traditional healthcare products. Aviva holds a 26 per
cent stake in the joint venture and the Dabur group holds the balance 74 per cent share.

Bajaj Allianz:
Bajaj Allianz is a joint venture between Allianz AG one of the world's largest insurance
companies, and Bajaj Auto, one of the biggest 2 and 3-wheeler manufacturers in the world.
Bajaj Allianz is into both life insurance and general insurance. Allianz Group is one of the
world's leading insurers and financial services providers. Founded in 1890 in Berlin, Allianz is
now present in over 70 countries.

HDFC Standard Life Insurance Co. Ltd:

It is a joint venture between HDFC Ltd., India’s largest housing finance institution and
Standard Life Assurance Company, Europe's largest mutual life insurance company. It was the
first life insurance company to be granted a certificate of registration by the IRDA on the 23rd
of October 2000.

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ING Vysya Life Insurance Company Limited:

It is a joint venture between Vysya Bank and ING Group of Holland, the world's 4th largest
financial services group, with presence across50 countries, and a heritage of over 150 years.

Kotak Mahindra Old Mutual Life Insurance Ltd:

It is a joint venture between Kotak Mahindra Bank Ltd. (KMBL), and Old Mutual plc. Kotak
Mahindra is one of India's leading financial institutions and offers a range of financial services
such as commercial banking.

Life Insurance Corporation of India:

(LIC) is an autonomous body authorized to run the life insurance business in India with its
Head Office at Mumbai. It has been established by an act of the Parliament and started
functioning from 1/9/1956.

ICICI Prudential Life Insurance:

ICICI Prudential life insurance is a part of ICICI Bank.

Max New York Life Insurance Company Limited

It is a joint venture between Max India Limited, a multi-business corporate, and New York
Life International, a global expert in life insurance. New York Life is a Fortune 100 company
that has over 160 years of experience in the life insurance business.

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MetLife India Insurance Co. Pvt Ltd

It is a joint venture between MetLife Group and its Indian Partners. The Indian partners include
J&K Bank, Dhanalakshmi Bank, Karnataka Bank, Karvy Consultants, Geojit Securities,
Way2Wealth, and Mini Muthoothu.

Reliance Life Insurance Company

It is a part of Reliance Capital Ltd. of the Reliance- Anil Dhirubhai Ambani Group. The
company acquired 100 per cent shareholding in AMP Sanmar Life Insurance Company in
August 2005. Taking over AMP Sanmar Life provided Reliance Life Insurance a readymade
infrastructure and a portfolio.

SBI Life Insurance

It is a joint venture between the State Bank of India and Cardiff SA of France. SBI Life
Insurance is registered with an authorized capital of Rs 500 crore and a paid-up capital of Rs
350 cores.

Tata AIG Life Insurance Company

It is a joint venture between Tata Group and American International Group, Inc. (AIG). Tata
Group is one of the oldest and leading business groups of India. Tata Group has had a long
association with India's insurance sector having been the largest insurance company in India
prior to the nationalization of insurance. The Late Sir Dorab Tata was the founder Chairman
of New India Assurance Co. Ltd., a group company incorporated way back in 1919.

Shriram Life Insurance Company

It is a joint venture between the Chennai-based Shriram Group and the South African insurance
major Sanlam. The company launched its operation in India in December 2005.

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SWOT ANALYSIS

STRENGTHS-
➢
Multi-channel distribution and one of the largest distribution networks in India.
➢
Implementing Six-Sigma process.
➢
Customer centric products and services.
➢
Superior investment and risk management framework
➢
Company has maximum number of MDRT as well as good number of HNI advisors.
➢
Training process of the company is very strong.
➢
Different plan for different peoples.
➢
According to the change in surrounding environment like changes in customer requirement

WEAKNESSES-
➢
Company does not penetrate on the rural market at a time.
➢
There is no plan for the low-income group.
➢
Fees for the advisor is high than the other company

OPPORTUNITIES-
➢
Insurance market is very big, where company can expand its horizon in insurance
industry
➢
Though good investment and insurance it is easy to top Indian customers.
➢
The huge insurance market (77%) is left so company has opportunity to expand our
products.
➢
To associate with the more number of HNI.

THREATS-
➢
OLD HABITS DIE HARD’: It’s still difficult task to win the confidence of public
towards private company.
➢
The company is facing major threats from LIC-which is an only government
company.
➢
Plans for all income groups are not available which can create adverse effect later on
the market share of the company.

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INTRODUCTION TO EQUTIY
WHAT IS EQUITY?
In finance in general, you can think of equity as one’s degree ownership in any asset after all
debts associated with that asset are paid off. For example, a car or house with no outstanding
debt is considered entirely the owner's equity because he or she can readily sell the item for
cash, and pocket the resultant sum. Stocks are equity because they represent ownership in a
firm, though ownership of shares in a public company generally does not come with
accompanying liabilities.
If your business goes bankrupt and you have to liquidate, the amount of money remaining (if
any) after the business repays its creditors is called “ownership equity”, or risk capital or liable
capital.

WHAT ARE EQUITY SHARE?

An equity share, commonly referred to as ordinary share also represents the form of fractional
or part ownership in which a shareholder, as a fractional owner, undertakes the maximum
entrepreneurial risk associated with a business venture. The holders of such shares are members
of the company and have voting rights. Equity shareholders are paid dividend after paying it to
the preference shareholders.
The rate of dividend on these shares depends upon the profits of the company. They may be
paid a higher rate of dividend or they may not get anything. These shareholders take more risk
as compared to preference shareholders.
Equity capital is paid after meeting all other claims including that of preference shareholders.
They take risk both regarding dividend and return of capital. Equity share capital cannot be
redeemed during the life time of the company.

Equity Investments
An equity investment generally refers to the buying and holding of shares of stock on a stock
market by individuals and firms in anticipation of income from dividends and capital gains. It
is also sometime refers to acquisition of equity participation in private company or private
company or new business start-up. When investment is in any start up, it is referred to as
venture capital investing and is generally understood to be higher risk as compared to a listed
firm.

How to make investments in equity shares?

Investors can buy equity shares of a company from security market that is from primary market or
secondary. The primary market deals with issue of fresh securities. It deals in government as well
as corporate securities that helps them to raise capital in order to meet fund requirements to
undertake their operations. Investors can buy shares of a company through Initial Public

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Offering (IPO) when a company decides to raise capital for the first time. Once the shares are
issued to the general public it is listed and traded in secondary market. Stock Exchanges acts
as a facilitator of trading of these shares. Interested person can buy shares of the company of
his choice from an existing shareholder who is willing to sell his shares through these stock
exchanges.

Reasons for investment in equity in particular

Equities have the potential to raise the value in multiples. It provides the necessary growth to
your investment. Researches in the past have proved that some shares have in long terms have
provided far superior returns as compared to any other investment. But you cannot say that all
equity investments could provide higher returns. Equities have higher risk in investment. One
need to analyse well before investment.
Purpose of equity research is to study companies, analyse financials and look at quantitative
and qualitative aspects mainly for the reason of decisions regarding investment or not. To be
able to value equity, we need to analyse the stock, which could be done by: -

➢ FUNDAMENTAL ANALYSIS
➢ Technical Analysis

Fundamental Analysis
It is a method of evaluating a security that entails attempting to measure its intrinsic value by
examining related economic, financial, and other qualitative and other quantitative factors.
Fundamental analysts have the responsibilities to study everything that can affect the security’s
value, including macroeconomic factors such as economy as a whole and entire industry and
company specific factors like its financial status and its entire management.
In this technique, real data is used to obtain the security’s value. Although most analysts use
this technique to value the stocks, this method of valuation can be used for just about any type
of security.
It observes number of elements that influences the stock price which includes sales, price to
earnings ratio (P/E) ratio, profits, earning per share (EPS) as well as macroeconomic as well
as macroeconomic and industry specific factors.

The end goal of performing the fundamental analysis is to produce a value that an investor can
compare with the security’s current price, with the aim of figuring out what sort of position to
take with the security’s current price, with the aim of figuring out what sort of position to take
with the security meaning if it is under-priced he should buy and if it is overpriced he can short
sell.
In fundamental analysis business’ financial statements, its management and competitive
advantage, its competitors and markets. When analysing a stock two approaches – bottom up
analysis and top down analysis. Fundamental analysis is performed on the historical and
present data but with the goal of making financial forecasts. The objective of which is-
➢
To determine the value of the stock and and obtain its probable price.
➢
To make a projection of its business performance.
➢
To evaluate its management and make projected decisions.

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Fundamental analysis includes-
➢
Economic analysis
➢
Industry analysis
➢
Company analysis

On the basis of this the true intrinsic value of the share is determined. This is taken to be
the true value of the shares. If the intrinsic value of the share is higher than the market
price it is wise to buy the share, in case it is equal to the market price it is advisable to
hold the share and if it is less than the market price then sell the share.

Types of Fundamental Analysis

Quantitative factors – related to quality or character of something often opposed to its size or
quantity.
Qualitative factors – capable of being measured in terms of numeric value.

Qualitative factors
THE INDUSTRY
Each industry has difference in terms of of its customers base, market share among firms,
industry wise growth, competition, regulation and business cycles. Learning about how the
industry works will give an investor a deeper understanding of a company’s financial health.

Market share
Analysing the market share of any company enables to know the volume the business. Suppose a
company possess 75% of the market share, it shows that it a great control of market and is one of
the giant market player. Market share is also vital because company is able to gain economies of
scale and is able to absorb high fixed cost in case of capital intensive industry.

Customers
There are firms which deal with few customers, while few deals with millions. It is said that if
company relies on fewer customers for larger portion of its sales because in case of loss of any
customer could cause dramatically fall in revenue.

Industry growth
To examine the company’s growth potential of the firm, examine the amount of customers in
the overall market that will grow. In some markets there is a zero growth rate which needs
careful consideration. Every year if a company wants to grow, it must add new sets of
customers to its customer list. Eg- Automobile industry can only grow if there is addition of
new customers in their list every year.

Qualitative Factors
Before dividing into company’s financial statements, let’s take a look at some of the qualitative
aspects of the company. The list of these factors includes-

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Business Model
What the company does is the most important question. This is referred to as business model
of the company. What are the various sources of revenue for the company is also the most
important question? To get the overview of the company’s business model, its annual report or
company’s website can be considered.

Competitive Advantage
The company can grow in long term only if it is able to survive the competition from other
players in the industry. Powerful competitive advantages such as Jio enjoy a great growth rate
and profits. When a company achieve competitive advantage, it shareholders can be well
rewarded for decades.

Management
A company relies on its management for its overall growth. Few believe that the management
is the most important aspect for investing in a company. Even the best business models have
failed in the past in case they are not well executed by the management.

Management Discussion and Analysis(MD&A)

This can be seen at the beginning of the annual report. It is said that MD&A is considered as
the commentary of the management’s outlook. Sometimes the content is worthy, or other is
boilerplate. One way is to compare what management said in the past years with what they are
saying in the present. Have the earlier formed strategies actually been implemented? You can
view the last five years of MD&A.

Past Performance
Another good check the management’s capabilities is to check and see the performance of
executives in the recent past years. Identify the companies they have worked in the past and do
a search on those companies and their performance.

Quantitative factors
Quantitative factors include analysis of financial statements of companies which helps in
understanding the financial strength of the company which includes:

Ratio Analysis
Ratios, by themselves, are not an end but only one of the means of understanding the financial
health of a business entity. Ratio analysis is not capable of providing precise answers to all the
problems faced by any business unit. Ratio analysis is basically a technique of:

1. Establishing meaningful relationship between significant variables of financial

statements and
2. Interpreting the relationships to form judgment regarding the financial affairs of the
unit.

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Comparison with Past:

Ratios may be interpreted by making comparison over a period of time i.e. the same ratio be
studied over a period of years of the same unit. It will highlight the significant trend revealing
use, decline or stability of the phenomenon. Average value of the ratio for the past number of
years can serve as a standard against which current performance may be measured. While
interpreting ratios from comparison over a period of time one should be careful about the
changes which might have taken place during the time. For example, price index; changes in
managerial policies or changes in accounting practices etc.

Comparison with Projections:

In a business unit where system of budgetary control and forecast is in existence, projected
financial statements are usually drawn. Ratios calculated based on such projected financial
statements shall act as the standards with which the ratios calculated from the present financial
statements shall be compared. Variances shall be calculated and analysed by reasons and
persons. It shall enable to take corrective action wherever required.

Inter-firm or Inter-Industry Comparison:

Ratios of one unit may be compared with the ratios of another identical unit or with the industry
average at the same point of time. Such comparison is useful for evaluating relative financial
position of the unit vis-à-vis other units or industry. While making such comparison, care must
be taken regarding the difference of accounting methods, policies, procedures and terminology
being followed by different units.

Few important ratios: -

Price-to-Earnings Ratio (P/E)

The price-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current
share price relative to its per-share earnings. The price-earnings ratio is also sometimes known
as the price multiple or the earnings multiple.

The formula: P/E Ratio = Price per Share / Earnings Per Share

What it means: Think of the price-to-earnings ratio as the price you'll pay for $1 of earnings.
A very, very general rule of thumb is that shares trading at a "low" P/E are a value, though the
definition of "low" varies from industry to industry.

Earnings Per Share (EPS)

Earnings per share (EPS) is the portion of the company’s distributable profit which is
allocated to each outstanding equity share (common share). Earnings per share is a very good
indicator of the profitability of any organization, and it is one of the most widely used measures
of profitability.

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The formula- Earnings per share = (Net Profit after Taxes – Preference Dividends) / Number
of Equity Shares

What it means: EPS when calculated over a number of years indicates whether the earning
power of the company has improved or deteriorated. Investors usually look for companies with
steadily increasing earnings per share.

PEG Ratio

The PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the
relative trade-off between the price of a stock, the earnings generated per share (EPS), and the
company's expected growth. In general, the P/E ratio is higher for a company with a higher
growth rate. "The P/E ratio of any company that's fairly priced will equal its growth rate", i.e.,
a fairly valued company will have its PEG equal to 1.

The formula: PEG Ratio = (P/E Ratio) / Projected Annual Growth in Earnings per
Share
What it means: The PEG ratio uses the basic format of the P/E ratio for a numerator and then
divides by the potential growth for EPS, which you'll have to estimate. The two ratios may seem
to be very similar but the PEG ratio is able to take into account future earnings growth. A very
generally rule of thumb is that any PEG ratio below 1.0 is considered to be a good value.

Profit Margin

Net profit margin is the percentage of revenue left after all expenses have been deducted from
sales. The measurement reveals the amount of profit that a business can extract from its total
sales. The net sales part of the equation is gross sales minus all sales deductions, such as sales
allowances.

The formula: Profit Margin = Net Income / Sales

What it means: Profit margin calculates how much of a company's total sales flow through to
the bottom line. As you can probably tell, higher profits are better for shareholders, as is a high
(and/or increasing) profit margin.

Current Ratio

The current ratio is a liquidity ratio that measures a company's ability to pay short-term and
long-term obligations. To gauge this ability, the current ratio considers the current total assets
of a company (both liquid and illiquid) relative to that company's current total liabilities.

The formula: Current Ratio = Current Assets / Current Liabilities

What it means: The current ratio measures a company's ability to pay its short-term liabilities
with its short-term assets. If the ratio is over 1.0, the firm has more short-term assets than short-
term debts. But if the current ratio is less than 1.0, the opposite is true and the company could
be vulnerable to unexpected bumps in the economy or business climate.

22 | P a g e
Debt to Equity Ratio

The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion
of shareholders' equity and debt used to finance a company's assets. Closely related
to leveraging, the ratio is also known as risk, gearing or leverage.

The formula: Debt-to-Equity Ratio = Total Liabilities / Total Shareholder Equity

What it means: Total liabilities and total shareholder equity are both found on the
balance sheet. The debt-to-equity ratio measures the relationship between the amount
of capital that has been borrowed (i.e. debt) and the amount of capital contributed by
shareholders (i.e. equity). Generally speaking, as a firm's debt-to-equity ratio
increases, it becomes more risky because if it becomes unable to meet its debt
obligations, it will be forced into bankruptcy.

Inventory Turnover Ratio

Inventory Turnover is a measure of the number of times inventory is sold and

replaced in a time period.

The formula: Inventory Turnover Ratio = Costs of Goods Sold / Average Inventory

What it means: If the company you're analysing holds has inventory, you want that
company to be selling it as fast as possible, not stockpiling it. The inventory turnover
ratio measures this efficiency in cycling inventory. By dividing costs of goods sold
(COGS) by the average amount of inventory the company held during the period, you
can discern how fast the company has to replenish its shelves. Generally, a high
inventory turnover ratio indicates that the firm is selling inventory (thereby having to
spend money to make new inventory) relatively quickly.

Debtor Turnover Ratio

Ratio of net credit sales to average trade debtors is called debtors turnover ratio. It is
also known as receivables turnover ratio. This ratio is expressed in times.

The formula: - Receivables turnover ratio = Annual net credit sales / Average
accounts receivable
What it means; No business can afford to make cash sales only thus extending
credit to the customers is a necessary evil. But care must be taken to collect book
debts quickly and within the period of credit allowed. Otherwise chances of debts
becoming bad and unrealizable will increase. How effective or efficient is the credit
collection? To provide answer debtors turnover ratio or receivable turnover ratio is
calculated.

Number of Days to Working Capital Ratio

No of days working to capital is an accounting and finance term used to describe how
many days it takes for a company to convert its working capital into revenue. It can be

23 | P a g e
used in ratio and fundamental analysis. When utilizing any ratio, it is important to
consider how the
company compares to similar companies in the same industry.

The formula: (Average working capital *365) / No of working days

What it means: Working capital is a measure of liquidity, and days working capital is a
measure that helps to quantify this liquidity. The more days a company has of working capital,
the more time it takes to convert that working capital into sales. In other words, a high number
is indicative of an inefficient company and vice versa.

Introduction to Pharmaceuticals Sector

India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry
supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic
demand in the US and 25 per cent of all medicine in UK.

India enjoys an important position in the global pharmaceuticals sector. The country also has
a large pool of scientists and engineers who have the potential to steer the industry ahead to
an even higher level. Presently over 80 per cent of the antiretroviral drugs used globally to
combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian
pharmaceutical firms.

Market Size
The pharmaceutical sector was valued at US$ 33 billion in 2017. The country’s
pharmaceutical industry is expected to expand at a CAGR of 22.4 per cent over 2015–20 to
reach US$ 55 billion. India’s pharmaceutical exports stood at US$ 17.27 billion in 2017-18
and are expected to reach US$ 20 billion by 2020.

Indian companies received 304 Abbreviated New Drug Application (ANDA) approvals from
the US Food and Drug Administration (USFDA) in 2017. The country accounts for around
30 per cent (by volume) and about 10 per cent (value) in the US$ 70-80 billion US generics
market.

India's biotechnology industry comprising bio-pharmaceuticals, bio-services, bio-agriculture,

bio-industry and bioinformatics is expected grow at an average growth rate of around 30 per
cent a year and reach US$ 100 billion by 2025. Biopharma, comprising vaccines, therapeutics
and diagnostics, is the largest sub-sector contributing nearly 62 per cent of the total revenues
at Rs 12,600 crore (US$ 1.89 billion).

Investments
The Union Cabinet has given its nod for the amendment of the existing Foreign Direct
Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 per cent
under the automatic route for manufacturing of medical devices subject to certain conditions.

The drugs and pharmaceuticals sector attracted cumulative FDI inflows worth US$ 15.59
billion between April 2000 and December 2017, according to data released by the
Department of Industrial Policy and Promotion (DIPP).

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Some of the recent developments/investments in the Indian pharmaceutical sector are as
follows:

In 2017, Indian pharmaceutical sector witnessed 46 merger & acquisition (M&A) deals worth
US$ 1.47 billion.
The exports of Indian pharmaceutical industry to the US will get a boost, as branded drugs
worth US$ 55 billion will become off-patent during 2017-2019.

Government Initiatives
Some of the initiatives taken by the government to promote the pharmaceutical sector in India
are as follows:

The National Health Protection Scheme is largest government funded healthcare programme
in the world, which is expected to benefit 100 million poor families in the country by
providing a cover of up to Rs 5 lakh (US$ 7,723.2) per family per year for secondary and
tertiary care hospitalisation. The programme was announced in Union Budget 2018-19.
In March 2018, the Drug Controller General of India (DCGI) announced its plans to start a
single-window facility to provide consents, approvals and other information. The move is
aimed at giving a push to the Make in India initiative.
The Government of India is planning to set up an electronic platform to regulate online
pharmacies under a new policy, in order to stop any misuse due to easy availability.
The Government of India unveiled 'Pharma Vision 2020' aimed at making India a global
leader in end-to-end drug manufacture. Approval time for new facilities has been reduced to
boost investments.
The government introduced mechanisms such as the Drug Price Control Order and the
National Pharmaceutical Pricing Authority to deal with the issue of affordability and
availability of medicines.

Road Ahead
Medicine spending in India is expected to increase at 9-12 per cent CAGR between 2018-22
to US$ 26-30 billion, driven by increasing consumer spending, rapid urbanisation, and raising
healthcare insurance among others.

Going forward, better growth in domestic sales would also depend on the ability of
companies to align their product portfolio towards chronic therapies for diseases such as such
as cardiovascular, anti-diabetes, anti-depressants and anti-cancers that are on the rise.

The Indian government has taken many steps to reduce costs and bring down healthcare
expenses. Speedy introduction of generic drugs into the market has remained in focus and is
expected to benefit the Indian pharmaceutical companies. In addition, the thrust on rural
health programmes, lifesaving drugs and preventive vaccines also augurs well for the
pharmaceutical companies.

Exchange Rate Used: INR 1 = US$ 0.0155 as on March 30, 2018

Few positives about Pharmaceutical sector:

25 | P a g e
The pharmaceutical industry has been an easy target for critics over the years. There is a
perception that "Big Pharma" is strictly out for profit and that pharmaceutical companies will
stop at nothing to line the pockets of their shareholders. The reality is this: Many of these
drugs are saving lives and helping people live happier, healthier lives.

• Better Health Outcomes

According to the U.S. Bureau of Labour Statistics, the pharmaceutical industry develops and
produces products that help treat a variety of diseases, saving millions of lives and helping
people suffering from diseases and illnesses to recover and lead more productive lives. The
pharmaceutical industry develops drugs that treat every type of condition imaginable, such as
influenza, sexually transmitted diseases, cardiovascular disease, diabetes, hepatitis,
Parkinson's disease and cancer, to name a few. Many of these are devastating and life-altering
diseases, and these products help keep patients alive longer.

• Cost
While some may view the cost of pharmaceutical drugs as a negative aspect of the industry,
you can also see cost as a benefit. According to the Pharmaceutical Research and
Manufacturers of America (PhRMA), the market share of generic pharmaceuticals was
between 42 and 58 percent in 2006. What this means is generic drugs are increasingly
available to patients, which drives down costs. Most reports in the media discuss the high
cost of drugs and lack of access for certain patients, but the reality is that drugs today are
cheaper and more accessible than ever before due to increased competition in the
marketplace. Additionally, economic development in countries like India and China are
driving down global prices for pharmaceutical products even more.

Weak areas of FMCG sector:

1.Global pharmaceutical industry growth moderates. As always, an overarching issue will

be the performance of the global pharmaceutical industry, which is expected to see positive
growth but at moderating levels in 2017 and beyond. Total spending on medicines is forecast
to reach $1.5 trillion by 2021, up 33% from 2016 levels, but down from recent high growth
rates in 2014 and 2015, according to a recent analysis by QuintilesIMS. Medicine spending
will grow at a 4% to 7% compound annual growth rate (CAGR) during the next five years
(2016–2021), down from the nearly 9% growth level seen in 2014 and 2015. The short-term
rise in growth in 2014 and 2015 was driven by new medicines in hepatitis and cancer that
contributed strongly to growth but will have a reduced impact through 2021. On a volume
basis, the total volume of medicines consumed globally will increase by about 3% annually
through 2021, only modestly faster than population and demographic shifts. Issues of pricing,
market-access pressures, lower volume growth in emerging markets, and further generic-drug
incursion will contribute to the lower rate of growth, according to the analysis.

2.US pharmaceutical market growth slows. The US is the largest pharmaceutical market
globally, and so the performance of the US market is crucial for overall industry
performance. Single-digit spending growth is forecast for the US market, according to the
QuintilesIMS report. The US market growth rate will decline by half, from 12% in 2015 to
6% to 7% in 2016 with a 6% to 9% growth forecast through 2021 on an invoice-price basis.
The decline reflects the end of hepatitis C treatment-driven growth and greater impact of
patent expiries—including the introduction of biosimilars—following a period in which

26 | P a g e
fewer brands faced new generic competition, according to the QuintilesIM study. Despite the
slowing growth, the US will account for 53% of forecasted global pharmaceutical industry
growth of $367 billion through 2021 (at ex-manufacturers' pricing and constant-dollar basis.

US growth in 2014 and 2015 also was driven by historically high price increases for both
brand drugs and generics on an invoice-price basis before the impact of off-invoice discounts
and rebates. After adjusting for price concessions by manufacturers, US spending growth is
estimated to be more than 2 percentage points lower through 2021 and 4 percentage points
lower in 2016—a 4% to 7% CAGR on a net-price basis.

3. US healthcare policy reforms. US healthcare reform is an overarching issue for the US

market, and given the country's position as the number one market globally, for the global
pharmaceutical industry. The Patient Protection and Affordable Care Act (ACA), signed into
law in March 2010, provided for healthcare reform in the US. The future of current US
healthcare policy is now under review with various scenarios for repeal and replacement of
the ACA under Congressional consideration as well as legislative efforts to maintain current
policy. Healthcare policy is a top priority for the new Presidential administration, and how it
will play out in 2017 will be a key issue for the pharmaceutical industry.

4. Biosimilars showdown. A key US Supreme Court decision regarding biosimilars in the

US is on tap for 2017. In January 2017, the US Supreme Court agreed to review a case, a
dispute involving Amgen and Novartis’ Sandoz, regarding the interpretation of notification
requirements under the Biologics Price Competition and Innovation Act of 2009 (BPCIA),
which set the US regulatory pathway for biosimilars. The case deals with Sandoz’s Zarxio
(filgrastim-sndz), which was approved as the first biosimilar in the US in March 2015 and is
a biosimilar to the reference product of Amgen’s Neupogen (fligrastim). A federal appeals
court had earlier ruled that a 180-day notification required under the BPCIA by a biosimilar
developer to the innovator company follows US Food and Drug Administration approval.
Sandoz is arguing that the notification should be able to occur earlier in the development
process. The US Supreme Court will hear the case later this year, which will have
implications for biosimilar launches in the US.

5. Innovation outlook: a rebound or not in new drug approvals. A key issue in 2017 is
whether the pharmaceutical industry will rebound from a recent low in new drug
approvals. In 2016, the US Food and Drug Administration’s Center for Drug Evaluation and
Research approved 22 new molecular entities (NMEs), which was a 51% drop compared
with the 45 NMEs approved in 2015 and the lowest total on NME approvals since 2010 when
21 NMEs were approved. From 2011 to 2015, NME approvals had been on an upward
trajectory (with the exception of 2013) with 30 NMEs approved in 2011 and 39 in 2012. The
exception was in 2013, which had a decline to 27 NMEs, but levels jumped again to 41
NMEs in 2014 and peaked at a recent high of 45 approvals in 2015. For the pharmaceutical
industry, the key question is whether NME approvals will rebound in 2017.

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6. Slowing growth in emerging markets. Emerging markets have been a strong contributor
to overall pharmaceutical industry growth, but lower economic growth in emerging markets
is resulting in slower growth in pharmaceutical industry growth in those markets. Leading
pharmerging markets, defined by QuintilesIMS as low-income countries with high
pharmaceutical growth, have seen real growth in gross domestic product slow from 1-4
percentage points over the past decade, according to the firm’s study. This has triggered a
corresponding reduction in medicine volume growth, from an average of 7% annually over
the past five years to 4% forecast through 2021. China, in particular, will see a decline in
annual volume growth from 17% to 4% over the same period. Overall, volume growth
continues to be driven by non-original products (i.e., generics) that account for 91% of the
volume in pharmerging markets. The outlook for spending growth across these markets is
expected to moderate from 10% CAGR over the past five years to 6% to 9% through 2021.

7. Venture capital: The flow of venture capital funding is an important measure for the
health of the emerging pharma sector, so what might be expected in 2017? Overall, across all
industries, Investment in venture capital-backed companies based in the US ended 2016 on a
weak note, as quarterly deals and dollars fell for the second-consecutive quarter, according to
the MoneyTree Report from PricewaterhouseCoopers LLP (PwC) and CB Insights. In the US
market, deals and dollars dropped 16% and 20%, respectively in 2016, compared to the
previous year. Globally, the trend was similar, with global deals and dollars declining 10%
and 23%, respectively in 2016, compared to full-year 2015. The US full-year funding total in
2016 of $58.6 billion represented a 20% drop from 2015 while cumulative deals of 4,520 fell
16%. In this overall environment, the key issue is how investors’ appetites will translate to
the biopharmaceutical/life-sciences sector.

8. Patient-centric healthcare intensifies. Cited by PwC in a recent analysis of key

healthcare trends for 2017, the study asserted that patients will increasingly become a
strategic partner for pharmaceutical companies. “Facing increasingly challenging
reimbursement and regulatory environments, as well as new trends in consumerism,
pharmaceutical companies will likely better engage with patients to justify prices, show
value, and satisfy calls by regulator,” noted PwC in the recent analysis.

9. Easing into value-based payments. Another important issue to watch for in 2017,
according to PwC, involves the role of value-based systems. “To date, new programs and
payment models have largely involved upside risk for healthcare providers,” according to the
PwC analysis. “But this will begin to change... as the training wheels for these risk-based
arrangements are eased off.”

10. New technologies’ impact on pharma. An ongoing issue for the pharmaceutical industry
is how new technologies, particularly digital-related technologies, will impact drug
development and commercialization. The PwC report notes emerging technologies in
healthcare as a whole, such as artificial intelligence and 3D printing and their impacts on

28 | P a g e
business models, operations, workforce needs and cybersecurity risks as well as the positive
impact of a digitized supply chain in reducing manufacturing costs.

Future prospects for Pharmaceutical sector:

Indian pharmaceutical industry is likely to witness moderation in growth in the next three
years mainly due to decline in revenues from the US, its largest overseas market, and
increased competition, according to ICRA.

Already, 21 leading players' overall aggregate revenues grew only by 7.4 per cent in FY 2017
as against 10.1 per cent posted in FY 2016, the rating agency said.

The growth trajectory for Indian pharma industry is likely to be moderate on the back of
slowing growth from the US, increased competition leading to price erosion, generic adoption
reaching saturation levels and regulatory overhang along with base effect catching up, ICRA
said.

For the period between FY 2018 to FY 2020, ICRA said the industry is projected to grow at
7-10 per cent after mid to high double digit growth over the last five years.

Commenting on the situation “The growth momentum is likely to face further pressure going
forward, led by limited near term first to file (FTF) generic opportunities and pricing pressure
on generic base business".

Revenue growth from US during FY 2012-17 period for ICRA's sample set experienced a
CAGR of 19.3 per cent.

However, growth from the US has come down from 14.4 per cent in FY 2016 to 4 per cent in
FY 2017, with the fourth quarter of FY 2017 registering negative growth despite
consolidation and currency benefits.

"Besides, increased regulatory scrutiny and consolidation of supply chain in the US market
resulting in pricing pressures along with increased R&D expenses will also have an impact on
profitability of Indian pharmaceutical companies."

On the domestic front, ICRA said continued regulatory interventions will put some pressure
in near term, though long term growth prospects remain healthy, given increasing
penetration, accessibility and continued new launches by players.

In spite of these ongoing challenges, several Indian pharma companies have ramped up their
R&D spend, targeting pipeline of speciality drugs, niche molecules and complex therapies,
ICRA said.

29 | P a g e
The credit metrics of leading pharmaceutical companies are expected to remain stable in view
of steady growth prospects in regulated markets and relatively strong balance sheets, it added.

Threats
The threats of the pharmaceutical industry, the external industry components that could create
an opportunity for the industry (or factions of the industry) to decline, atrophy or lose some
competitive edge. The external industry components should be environmental factors or
aspects outside the industry’s control, yet reflective of the business marketplace. For
example, the pharmaceutical industry’s threats could include increased government
regulation, a declining economy, increasing research and development (R&D) costs or a
decrease in the global population.

Top Players in Pharmaceutical sector

1. Sun Pharmaceutical Rs 1,55,716 Crore

2. Lupin Ltd Rs 68,031 Crore

3. Dr. Reddy's Laboratories Rs 49,293 Crore

4. Cipla Rs 47,319 Crore

5. Aurobindo Pharma Rs 41,283 Crore

6. Cadila Healthcare Rs 31,631 Crore

7. Piramal Enterprise Rs 30,975 Crore

8. Glenmark Pharmaceuticals Rs 25,302 Crore

9. Torrent Pharmaceuticals Rs 22,742 Crore

Pharmaceutical Sector in India:

Indian pharmaceutical industry Overview and Analysis 2018 PDF PPT is now here ready for
you to have a glance. The Indian pharmaceuticals market is the next biggest concerning
quantity and thirteenth largest concerning value, according to a report by Equity Master.
India is the biggest provider of generic medications internationally using all the Indian
generics accounting for 20 percent of global exports concerning volume. Naturally,

30 | P a g e
consolidation is now a significant feature of the Indian pharmaceutical marketplace as the
business is extremely fragmented.

India enjoys a significant position in the worldwide pharmaceuticals sector. The nation also
has a huge pool of engineers and scientists having the capability to steer the business forward
to a much greater degree. Currently over 80 percent of these antiretroviral drugs used
worldwide to fight AIDS (Acquired Immune Deficiency Syndrome) are provided by Indian
pharmaceutical companies.

Important Points:

• The pharmaceutical industry in India ranks 3rd in the world terms of volume and 14th
in terms of value. India’s cost of production is nearly 33 per cent lower than that of
the US.
• Labour costs are 50–55 per cent cheaper than in Western countries. The cost of setting
up a production plant in India is 40 per cent lower than in Western countries.

• Cost-efficiency continues to create opportunities for Indian companies in emerging

markets & Africa.
• India has a skilled workforce as well as high managerial & technical competence in
comparison to its peers in Asia.
• India has the 2nd largest number of USFDA-approved manufacturing plants outside
the US.
• India has 2,633 FDA-approved drug products. India has over 546 USFDA-approved
company sites, the highest number outside the US.

Growing per capita sales of pharmaceuticals in India offers ample opportunities for players in
this market. Per capita sales of pharmaceuticals expanded at a CAGR of 17.6 per cent to US$
33 in 2016.

Economic prosperity would improve affordability for generic drugs in the market & improve
per capita sales of pharmaceuticals in India. The UN-backed Medicines Patent Pool has
signed six sub-licences with Aurobindo, Cipla, Desano, Emcure, Hetero Labs and Laurus
Labs, allowing them to make generic anti-AIDS medicine TenofovirAlafenamide (TAF) for
112 developing countries.

Present Indian Pharma Industry Scenario

The Indian pharma industry, which is expected to grow over 15 per cent per annum between
2015 and 2020, will outperform the global pharma industry, which is set to grow at an annual
rate of 5 per cent between the same period!. The market is expected to grow to US$ 55 billion
by 2020, thereby emerging as the sixth largest pharmaceutical market globally by absolute

31 | P a g e
size, as stated by Mr Arun Singh, Indian Ambassador to the US. Branded generics dominate
the pharmaceuticals market, constituting nearly 80 per cent of the market share (in terms of
revenues). The sector is expected to generate 58,000 additional job opportunities by the year
2025. *

India’s pharmaceutical exports stood at US$ 16.4 billion in 2016-17 and are expected to grow
by 30 per cent over the next three years to reach US$ 20 billion by 2020, according to the
Pharmaceuticals Export Promotion Council of India (PHARMEXCIL).

Indian companies & Approvals:

Indian companies received 55 Abbreviated New Drug Application (ANDA) approvals and 16
tentative approvals from the US Food and Drug Administration (USFDA) in Q1 of 2017. The
USFDA approvals are expected to cross 700 ANDA in 2017, thereby recording a year-on-
year growth of 17 per cent. The country accounts for around 30 per cent (by volume) and
about 10 per cent (value) in the US$ 70-80 billion US generics market.

India’s biotechnology industry comprising bio-pharmaceuticals, bio-services, bio-agriculture,

bio-industry and bioinformatics is expected grow at an average growth rate of around 30 per
cent a year and reach US$ 100 billion by 2025. Biopharma, comprising vaccines, therapeutics
and diagnostics, is the largest sub-sector contributing nearly 62 per cent of the total revenues
at Rs 12,600 crore (US$ 1.89 billion).

Indian Pharma Industry Investments:

The Union Cabinet has given its nod for the amendment of the existing Foreign Direct
Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 per cent
under the automatic route for manufacturing of medical devices subject to certain conditions.

The drugs and pharmaceuticals sector attracted cumulative FDI inflows worth US$ 14.71
billion between April 2000 and March 2017, according to data released by the Department of
Industrial Policy and Promotion (DIPP).

Major investments in Indian pharmaceutical Sector:

Indian pharmaceutical firm, Eric Lifesciences Pvt Ltd, has launched its initial public offering
(IPO) worth Rs 2,000 crore (US$ 311 million) in June 2017.

Indian pharmaceutical company, Cadila Healthcare Ltd, is planning to raise Rs 1,000 crore
(US$ 155 million) via a qualified institutional placement (QIP) of shares shortly.

32 | P a g e
Capital International Group, a private equity fund, has acquired a three per cent stake in Intas
Pharmaceuticals Ltd from ChrysCapital Llc for a consideration of US$ 107 million, thereby
valuing Intas Pharma at approximatively US$ 3.5 billion.

Aurobindo Pharma Ltd, has acquired four biosimilar products from Swiss firm TL
Biopharmaceutical AG, which will require TL Biopharmaceutical to supply all the
developmental data for four molecules, which will be developed, commercialised and
marketed by Aurobindo Pharma

Piramal Enterprises Ltd acquired a portfolio of spasticity and pain management drugs from
UK-based specialty biopharmaceutical company Mallinckrodt Pharmaceuticals, in an all-cash
deal for Rs1,160 crore (US$ 171 million).

Aurobindo Pharma has bought Portugal based Generis Farmaceutica SA, a generic drug
company, for EUR 135 million (US$ 144 million).

Sun Pharmaceutical Industries Ltd, India’s largest drug maker, has entered into an agreement
with Switzerland-based Novartis AG, to acquire the latter’s branded cancer drug Odomzo for
around US$ 175 million.

Kedaara Capital Advisors LLP, a private equity (PE) firm, plans to invest Rs 430 crore (US$
64.5 million) to acquire a minority stake in Hyderabad-based diagnostics chain Vijaya
Diagnostic Centre Pvt Ltd.

Sun Pharmaceuticals Industries Limited plans to acquire 85.1 per cent stake in Russian
company Biosintez for US$ 24 million for increasing its presence in Russia through local
manufacturing capability.

Abbott Laboratories, a global drug maker based in US, plans to set up an innovation and
development center (I&D) in Mumbai, which will help in developing new drug formulations,
new indications, dosing, packaging and other differentiated offerings for Abott’s global
branded generics business.

Indian Government in Indian Pharma Sector:

The Indian government has taken many steps to reduce costs and bring down healthcare
expenses. Speedy introduction of generic drugs into the market has remained in focus and is
expected to benefit the Indian pharmaceutical companies. In addition, the thrust on rural
health programme, lifesaving drugs and preventive vaccines also augurs well for the
pharmaceutical companies.

The implementation of the Goods and Services Tax (GST) is expected to be a game-changer
for the Indian Pharmaceuticals industry. It will lead to tax-neutral inter-state transactions

33 | P a g e
between two dealers, thereby reducing the dependency on multiple states and increasing the
focus on regional hubs. It is expected to result in an efficient supply chain management,
which is expected to reduce its cost considerably. The cost of technology and investment is
expected to reduce on account of tax credit which can be availed now on the duties levied on
import of costly machinery and equipment.

Pharma Vision 2020:

Some of the initiatives taken by the government to promote the pharmaceutical sector in India
are as follows:

The Government of India unveiled ‘Pharma Vision 2020’ aimed at making India a global
leader in end-to-end drug manufacture. Approval time for new facilities has been reduced to
boost investments.

The government introduced mechanisms such as the Drug Price Control Order and the
National Pharmaceutical Pricing Authority to deal with the issue of affordability and
availability of medicines.

Mr Ananth Kumar, Union Minister of Chemicals and Petrochemicals, has announced setting
up of chemical hubs across the country, early environment clearances in existing clusters,
adequate infrastructure, and establishment of a Central Institute of Chemical Engineering and
Technology.

Future Indian pharmaceutical market:

The Indian pharmaceutical market size is expected to grow to US$ 100 billion by 2025,
driven by increasing consumer spending, rapid urbanisation, and raising healthcare insurance
among others.

Going forward, better growth in domestic sales would also depend on the ability of
companies to align their product portfolio towards chronic therapies for diseases such as such
as cardiovascular, anti-diabetes, anti-depressants and anti-cancers that are on the rise.

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Premium Frequency Annual, Semi-annual, Quarterly, Monthly

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MONEY BACK PLAN – A savings plan that gives you periodic payouts and a lump
sum at maturity and additions to your investments every year while providing financial
security to your loved ones.

Benefits of BSLI Money back Plan

1. Survival Benefit: You will receive 20% of Monthly Base Premiums paid, on the 5, 10 and
15 Policy anniversary.

2. Maturity Benefit: On maturity after 20 years, you will receive All Monthly Base
Premiums paid + All Bachat Additions earned + Loyalty Addition - All Survival
Benefits paid.
3. Death Benefit: In the event of an untimely demise of the life insured, the
nominee shall receive All Monthly Base Premiums paid (or Sum Assured, if higher)
+ All Bachat Additions earned + Loyalty Addition - All Survival Benefits paid.

Your surrender benefits include All Monthly Base Premiums paid from the second year onwards
multiplied by the surrender factor (following table) + After 10 policy year, all Bachat Additions
earned + After the 15 policy year, Loyalty Addition earned (less all Survival)

GUARANTEED MILESTONE PLAN – Aditya Birla Sun Life Insurance Guaranteed

Milestone Plan that recognizes the value of family's happiness. Now, protection for your
family is guaranteed, even in your absence.

Key features of the plan

• Fully guaranteed benefits on death or maturity.

• Guaranteed Additions that boost your corpus year on year.
• Flexibility to cover your spouse also by choosing Joint Life Protection.

• Flexibility to choose the policy term.

• Flexibility to enhance your insurance cover with appropriate rider options.

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LIVE TRADING

What is live trading?

Online trading is basically the act of buying and selling financial products through an online
trading platform. These platforms are normally provided by internet based brokers and are
available to every single person who wishes to try to make money from the market.
INDEX
An index is an indicator or measure of something, and in finance, it typically refers to a statistical
measure of change in a securities market. In the case of financial markets, stock and bond market
indices consist of a hypothetical portfolio of securities representing a particular market or a segment
of it. (You cannot invest directly in an index.) The S&P 500 and the US Aggregate Bond Index are
common benchmarks for the American stock and bond markets, respectively. In reference to
mortgages, it refers to a benchmark interest rate created by a third party. Each index related to the
stock and bond markets has its own calculation methodology. In most cases, the relative change of
an index is more important than the actual numeric value representing the index. For example, if
the Financial Times Stock Exchange (FTSE) 100 is at 6,670.40, that number tells investors the
index is nearly seven times its base level of 1,000.
However, to assess how the index has changed from the previous day, investors must look at
the amount the index has fallen, often expressed as a percentage.
Relationship between Trading Indices, Mutual Funds and Exchange-Traded Funds
When putting together mutual funds and exchange-traded funds (ETFs), fund sponsors attempt
to create portfolios mirroring the components of a certain index. This allows an investor to buy
a security likely to rise and fall in tandem with the stock market as a whole or with a segment
of the market.
Indexes are also often used to as benchmarks against which to measure the performance of
mutual funds and ETFs. For instance, many mutual funds compare their returns to the return

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in the Standard & Poor's 500 to give investors a sense of how much more or less the managers
are earning on their money than they would make in an index fund.
Examples of Trading Indices
The Standard & Poor's 500 is one of the world's best known indices and one of the most
commonly used benchmarks for the stock market. It includes 70% of the total stocks traded
in the United States. Conversely, the Dow Jones Industrial Average (DJIA) is also a very
well-known index, but it only represents stock values from 30 of the nation's publicly traded
companies. Other prominent indices include the DJ Wilshire 5000; the MSCI EAFE, which
includes foreign stocks based in Europe, Australasia and the Far East; and the Lehman
Brothers Aggregate Bond Index.

Index Funds
Because you cannot invest directly in an index, index funds are created to track their
performance. These funds incorporate securities that closely mimic those found in an index,
thereby allowing an investor to bet on its performance, for a fee. An example of a popular
index fund is the Vanguard S&P 500 ETF, which closely mirrors the S&P 500 index.
Some of the important indices in India are:
Benchmark indices – BSE Sensex and NSE Nifty
Sectoral indices like BSE Bankex and CNX IT
Market capitalization-based indices like the BSE Small cap and BSE Midcap
Broad-market indices like BSE 100 and BSE 500.
The trading in the internship is mostly in Nifty 50. And for sectoral fund analysis, sector wise
indexes have been taken. The trading is being done on TRADE TIGER by SHAREKHAN.

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WAYS OF MAKING PROFIT IN STOCK MARKET: -
1. First way is a basic Buy sell situation in which we buy the stock at a lower pricing
predicting that its price will increase in future and sell it at a higher price to make profit.

2. In second case we do SHORT SELLING. Short selling is the sale of a security that
is not owned by the seller or that the seller has borrowed. Short selling is motivated
by the belief that a security's price will decline, enabling it to be bought back at a lower
price to make a profit. In simple words we sell the share at a higher price predicting
that it will decline in the future and buy it at a lower price to make profit.

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STOCK FILTERING FOR INTRADAY TRADING: -

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This process gives the list of BEARISH (growing) stocks and BULLISH (declining) stocks.

We take top 5 stocks of both for analysis and trading.

TRADING BASED ON SUPPLY AND DEMAND ZONE: -

After opening the chart of a stock in any brokerage interface, we use the following steps to
see the demand and supply zone: -
STEPS TO IDENTIFY DEMAND ZONE: -

1. Start with the current price on the chart.

2. Look left and down until you find origin of a strong rally in the prices.
3. Draw proximal and distal lines and extend them forward.
4. Proximal line is drawn at the top of the candle body.
5. Distal line is drawn at the bottom of the candle body.
6. Time period will be set for 30 days, 5 minutes for long term investment trading
and daily, 5 minutes for intraday trading.
7. In demand zone we buy the stock and sell it further at a higher price for making profit.

BUYING ENTERIES: -

1. Limit entry
2. Zonal entry
3. Confirmation entry

STEPS TO IDENTIFY SUPPLY ZONE: -

1. Start with the current price on the chart.

2. Look left and up until you find the origin of a strong drop in the price.
3. Draw proximal and distal line and extend them.

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CANDLE STICK IN TRADING
It shows the growth or decline of a particular stock for a particular time period.

• BOLLINGER BAND: -
Bollinger bands are one of the most popular technical indicators for traders in any financial
market, whether investors are trading stocks, bonds or foreign exchange (FX). Many traders
use Bollinger Bands to determine overbought and oversold levels, selling when a price
touches the upper Bollinger Band and buying when it hits the lower Bollinger Band. In range-
bound markets, this technique works well, as prices travel between the two bands like balls
bouncing off the walls of a racquetball court. However, Bollinger Bands don't always give
accurate buy and sell signals.

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 STEPS: - Steps vary with different types of trading platforms, we will follow the
steps in TRADETIGER –

1. Double click on the share on which you want to invest.

2. A window will open showing the graphical representation of the stock and its values.
3. Go to the corner and click the small symbol square, a small window will pop up.

4. Select Bollinger band in it and give the time period according to your investment
plan. For example- 1 week or 1 month
5. By clicking ok, you will have two graphical lines above and below the stock price line.

6. The above line shows the highest limit of the share price to which it went for
the particular time period. We sell the stock when the candle stick goes above
it.
7. Shift + DJ shows the candle sticks of the share price.

8. The below line shows the lowest limit of the share price in the particular time period
that you have given.

9. We buy the stock when the candle stick goes below that.

As John Bollinger was first to acknowledge: "tags of the bands are just that – tags, not signals.
A tag of the upper Bollinger Band is not in and of itself a sell signal. A tag of the lower
Bollinger Band is not in and of itself a buy signal." Price often can and does "walk the band."
In those markets, traders who continuously try to "sell the top" or "buy the bottom" are faced
with an excruciating series of stop-outs or worse, an ever-mounting floating loss as price
moves further and further away from the original entry.
There are more technical tools through which technical analysis done is in the stock market
but I have been kept to only these in the training, those analyses will be elaborated in advance
in the final report of the training. Further we’ll see how to do fundamental analysis.

PROJECT
Our project is concerned about the portfolio management through mutual fund of individuals
and company as a whole. For this we have to maintain index and in future company will help
us with calculation of NAV, we have to choose a particular sector.
As per the understanding I chose stocks of Pharmaceutical Sector for this project. As they
instructed to maintain the index of large capital and mid capital stocks of respective sectors,
we have to deal within it. After that we have to apply fundamental analysis and filter out the
stocks for the purpose of creating a portfolio of personal care stocks who are performing well.
Why Stocks Of Pharmaceutical Sector?
 
 Untouched rural market, Untapped opportunities, changing life style.

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 
Rising income levels
and higher disposable income, resulting in increase in purchasing
power of consumers
 
 Large domestic market with population of any age group.
 
High expenditure on goods

 
Rural demand etc.

LARGE CAP- 1000CR AND ABOVE (market capital)

MEDIUM CAP- MORE THAN 500CR AND LESS THAN 1000CR (market capital)

COMPANIES NAMES
• Sun Pharma
• Piramal Enter
• Cipla
• Biocon
• Cadila Health
• Lupin
• Dr. Reddy’s Lab
• Aurobindo Pharma
• Divis Lab
• Torrent Pharma
• Alkem Lab
• GlaxoSmithKline
• Glenmark
• Natco Pharma
• Abbott India
• Jubilant Life
• Pfizer
• Sanofi India
• Eris Life
• Sun Pharma Adv
• IPCA Labs
• Ajanta Pharma
• Alembic Pharma
• Wockhardt
• Dr. Lal Pathlabs

STEP 1: - Entering the Last Traded Price(LTP) of stocks on daily basis from a verified
source of information. In this case it was Moneycontrol and NSE.

STEP 2: - In this step, firstly No of Shares have been calculated. It has been calculated
by dividing the total market capital of that particular stock on the base date by Last

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Traded Price(LTP) on the base date. From the next day, multiply the calculated No of
Shares with the day’s LTP to get that day’s market capitalization value.

STEP 3: - In this step, we have calculated the weight of the particular stock in terms of market
capitalization by dividing the market value of particular stock with total market capitalization
value of all stocks under pharmaceutical sector.

STEP 4:- In this step we have calculated the percentage change in day’s weight in
comparison to previous day to monitor how much movement was there in the stock
of particular product during a day. It has been calculated by subtracting previous
day’s weight from current day’s weight and dividing the obtained value with previous
day’s weight and then calculate the total percentage change of all stocks on a
particular day.

STEP 5: - In this step we will calculate the index points for the products of
Pharmaceutical sector.

We have to maintain index starts from 1000 points, with change in individual day we
have to calculate the points of index.

Now after calculating the index points on a daily basis we will use the technique of
fundamental analysis on our stocks in order to create a portfolio of the stocks of
Pharmaceutical sector.

Fundamental analysis of FMCG Sector

STEP 1: - CALCULATION OF LONG TERM PRICE TARGET
We evaluated the long term price target (LTPT) by taking the closing price, price
earnings ratio and Earning per share of 6th April 2018 by considering it as a base for
categorizing companies and their further shortlisting. A trader needs to do the same
analysis every day for investing in particular stocks.

It has been calculated as follows-

• Record the last traded price of stocks from verified sources.

• Find out the Price Earnings ratio of various companies from sources like
Moneycontrol or from other trusted sources.
• Calculate the average PE of the particular industry.
• Calculate Earnings Per Share (EPS) of each stock using formula: - Price/PE Ratio.
• Multiply EPS of particular stock with average PE Ratio of industry in order to get the
Long Term Price Target(LTPT) of that stock to which an investor could target that his
share value would move up to that position.

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STEP 2: - CATEGORIZATION OF UNDERVALUED AND OVERVALUED STOCKS
After calculation of industry average PE ratio, the stocks whose PE Ratio is greater than
industry average PE ratio can be classified as overvalued stocks or growth pick and whose
PE ratio is lesser than the industry average PE ratio is classified as undervalued stocks or
value pick.

Undervalued Stocks or Value Pick: -

Cipla

Cadila Health

Aurobindo pharma

Lupin

Divis lab

Alkem lab

Glenmark

Natco pharma

Abbott india

Pfizer

Sanofi India

Ajanta pharma

Eris life

Alembic pharma

IPCA lab

Laurus lab

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Overvalued Stocks or Growth Pick: -
Piramal Enter
Dr. Reddy’s Lab
Torrent Pharma
GlaxoSmithKline
Jubilant Life
Dr. Lal Pathlab

STEP 3: -ANALYSIS OF TOPLINE AND BOTTOMLINE FACTORS FOR

VALUE PICK STOCKS OF THE SECTOR
In case of Pharmaceutical sector revenue and profit has been taken as the topline and
bottomline factors. In order to check which stock is doing well we have to monitor the topline
and bottomline factors of respective companies.

Since each company is performing well either with respect to revenue or profit in
comparison to previous year we’ll consider all of them for further analysis.

STEP 4: - ANALYSIS OF GROWTH PICK STOCKS ON THE BASIS OF PEG

RATIO

STOCK NAME PEG

Pirmal enter 2.3

Jubilant Iife 0.35

Dr.lal path lab 1.25

An idle stock would have a PEG ratio which would lie between 0 to 1. In this case,
Jubilant Life has PEG ratio 0.35 and rest other have either negative PEG ratio or greater
than 1 therefore we will reject others. Jubilant Life will only be considered for further
analysis.

STEP 5: - ANALYSIS OF SELECTED STOCKS ON THE BASIS OF

IMPORTANT RATIOS
We will find the important ratios for these stocks. These ratio includes operating
margin ratio, return on net worth ratio, return on long term fund ratio, fixed assets
turnover ratio, quick ratio, current ratio.

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STEP 6: - RANKING STOCKS ACCORDING TO RATIOS
We will allot points to the stocks on the basis of the values of above ratios. Following
steps are to be considered in order to rank the stocks: -
• Add the points allotted to each stock.
• Find the average of each stock.
• Stock with least average should be ranked first and it should continue in the
same order.

Portfolio Creation and Fund

Allocation
Purpose: - The main objective of fund creation is to provide the investors with a fund
that has less risk and assured returns for their investments and earn a rate of interest
which is more than the risk free rate of return.
Suppose Rs.10 crores have to be allotted to these stocks. We will allot the funds on the basis
of the ranks of particular stocks. Stock with highest rank will get the maximum amount of fund
and vica versa.

Net Asset Value (NAV) Calculation for portfolio

Firstly, for NAV calculation we need to calculate the number of units which we could buy with the
allotted funds for particular stocks. For this we will divide the allotted funds for particular stock
with the closing price on the date of purchase.

Multiplying the number of units with the closing price of the stock will fetch you the
present value of the allotted funds to the particular stock can be seen in the table.
Rupees 10 crs. which were allotted to the stocks on that day will now vary with the
change in the closing price of the particular stock on daily basis as number of units will
remain same which were bought initially and closing price will vary daily so as a result
their product i.e the current market value will increase or decrease accordingly.
NAV is simply calculated by dividing the total market value of all the stocks in the
portfolio with the total number of units bought with the allotted funds initially. As the
closing price goes up in comparison to the previous day the NAV of your portfolio will
rise and vica versa.

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CONCLUSION
At the end of report, we can conclude that index on the beginning of creation of portfolio for
example i.e, on 10-04-2018 was 1029.25 points while the value of NAV was 10 and till 23-
05-2018 index value is 1104.94 and NAV becomes 10.30 which means that the created
portfolio has given the return of 03% within the period of 1.5 months which fulfils the objective
of the fund creation i.e to provide the investors with a fund that provides with stable returns.
Hence, it can be said that the research and analysis proves to be successful to fulfil the purpose.

4.00%

3.00%

2.00%

1.00%

0.00%

-1.00%

-2.00%

Index value NAV

Comparison between the index and the NAV of the fund

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 SOURCES
• Moneycontrol
• BSE and NSE Sites
• Equitymaster
• Financial Management by I.M. Pandey
• Investopedia
https://www.investopedia.com/terms/s/shortselling.asp
http://www.livefinancialacademy.com/courses/introduction-financial-trading-online
https://www.investopedia.com/articles/trading/05/022205.asp
https://in.investing.com/indices/
https://www.lifeinscouncil.org/election/ListOfCouncilMembers
http://www.moneycontrol.com/stocksmarketsindia/
https://lifeinsurance.adityabirlacapital.com/about-us/company-profile.aspx
https://lifeinsurance.adityabirlacapital.com/about-us.aspx
http://www.moneycontrol.com/mutualfundindia/

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