2020

Key Financial Ratios for Sun Pharmaceuticals

Price Ratios
Mar’20 Mar’19 Mar’18 Mar’17 Mar’16

Price to Price Per Share /

Earnings Earning Per 12.55 28.9 27.77 10.12 10.28
Ratio (P/E) Share

PE Ratio is a measurement of the payback period of the investment. A sudden drop of PE ratio in 2020
by 16.35% is actually an indicator of economy decline, leading to lower demand of stocks in other words
tracking a bearish market for the stocks of Sun Pharmaceuticals limited. Conversely, there was a bullish
market for stocks of Sun Pharmaceutical limited in 2019 more prominently due to lower regulations in
US markets and paying off the debt of Sun pharmaceuticals limited specially reducing unsecured loans
and thereby, improving the creditability of company and creating a bullish market and eventually
improving the PE Ration in 2018 & 2019

Price to Price Per Share /

Book Ratio Book Value per 1.87 2.78 3.12 4.5 5.98
(P/B) Share

Price to book value ratio is to compare market price of stock with book value of stock. In 2016 and
2017, company showed an overvalued growth stocks by displaying negative ROE and high Price to Book
value ratio (PB Ratio).

Profitability Ratios
NET INCOME 3211.14 816.6 305.64 -22.84 -1073.36
TOTAL ASSETS 38410.33 37714.13 36791.81 33869.27 34189.93

Return on
Assets ROA 8.360094797 2.165236213 0.83072836 -0.067435761 -3.139403912
(ROA)

ROA is an indicator of profitability of assets of company in generating revenue. Sun Pharma has a
negative profitability indicator in 2016 & 2017 which has turned positive in 2018 and showed an upward
trend since then. 2020 has seen the highest hit due to increase in net income from 816.6 Crore in 2019
to an agile escalation in 2020 to 3211.14 Crore.
 NET INCOME 3211.14 816.6 305.64 -22.84 -1073.36

AVG.ESH 24396.22 22843.61 22322.61 21012.47 21483.09

Return on
Equity ROE
(ROE)
13.16244894 3.57474147 1.369194731 -0.108697359 -4.996301742

ROE is return on funds invested by shareholder to its Equity Shareholder Funds. ROE is the financial
indicator of profitability, we can neatly conclude that Sun Pharma bearing a negative ROE in 2016 and
2017 had severe profitability issue which was aggressively turned over by the management. It turned
positive in 2018 and minimal increase by 2.21 times in 2019 and an aggressive turn over in 2020 most
prominently due to increase in profit margins owing to COVID impact.

To finally conclude, it should be ensured to simultaneously compare ROA as well as ROE. Although being
different but together it would provide a clear picture of effectiveness of management. ROA being
sound then debt levels are reasonable and a strong ROE is a rock solid signal depicting a good job by
managers for generating returns from shareholders' investments.

Return on EBIT/Capital
Capital Employed (Total
13.45 10.12 6.68 0.9 -4.23
Employed Assets - Current
(ROCE) Liabilities)

ROCE measures profitability of company and efficient usage of the capital employed. Sun Pharma had a
negative ROCE in 2015-16 which has been turned over to positive and steady increase in the same. If we
analyses further, the expense for last 5 years have remained more or less similar however revenue
generation has steeply increased specific in 2020, this could be one of the vital reasons for agile growth
in ROCE.

Net Profit Net Income /

25.62 7.92 3.39 -0.29 -14.09
Margin Net Sales

Net Profit Margin is a standard financial indicator which states net profit that can be generated from
revenue/turnover. It states the pricing of every product and how well cost is controlled. A negative net
profit margin of Sun Pharma has seen a turn around by 2020. It had a whooping increase of 17.7% from
18-19 to 19-20 especially due to industry players rationalizing cost structures by optimizing R&D
spending, portfolio streamlining and manufacturing networks which improved gross margins as well,
change in regulations and generic approval was an added benefit to Sun Pharma, which, being a
specialty generic company with newly launched specialty products in 18-19.

Liquidity Ratios
Current
Current
Assets / Current 0.88 0.79 0.71 0.78 0.68
Ratio
Liabilities

Current Ratio is a liquidity test of company to pay short term obligation. Sun Pharma very well
maintained a constant increasing current ratio indicates a company is "growing into" its capacity.
Specially Sun Pharma, there was drop in 2018 and regained in 2019 due to increase in current assets by
3026.99 crore in one year.

(Current Assets -
 Inventory) /
Quick Ratio Current Liabilities 1.39 1.18 1.29 0.79 0.76
    

Quick ratio doesn’t consider inventory also as an instant liquidity option and thus by deducting inventory
from current Assets thereby narrowing down to quick ratio which are extremely liquid. A steady increase
in quick ratio indicates company wouldn’t be struggling to pay immediate debts. 2016 displayed an
extreme dip in quick ratio which gradually scooted by 2020.

Debt Ratios
Debt to Total Equity /
Equity Shareholder 0.24 0.26 0.3 0.23 0.26
Ratios Equity Fund

Debt Equity ratio calculates the company's financial leverage. A Low Debt-Equity is an indicator of lower
financing from outsiders as compared to funding through equity. Sun Pharma has a Debt-Equity less
than 0.5 which means most of the company assets are financed by debt indicating a good health of
company.

Interest
EBIT / Interest
Coverage 8.97 4.58 4.17 0.92 -0.88
Expense
Ratio

Sun Pharma being a loss making company in 2016 and 2017 was not earning enough to cover its interest
expense in respective years and it shoots suddenly to profit making in 2018 of 305.68 Crores leading to a
better interest coverage ratio in following years.
 Efficiency Ratios
Asset
Sales / Avg.
Turnover 0.42 0.36 0.31 0.3 0.28
Total Assets
Ratio

Inventory Cost of Goods

Turnover Sold / Avg. 4.76 3.69 4.22 3.38 3.63
Ratio Inventory