Overview of Pharmaceutical Industry in Bangladesh

The Pharmaceutical sector, one of the most developed technology and knowledge-based sectors
within Bangladesh, has been transforming and evolving since the early 80s. Over the last 4
decades of painstaking effort, Bangladesh is now considered an emerging generic drug hub in the
region. According to the Bangladesh Association of Pharmaceutical Industries (BAPI) and
Directorate General of Drug Administration (DGDA), approximately 257 licensed
pharmaceutical manufacturers are operating in Bangladesh and about 150 are functional. These
manufacturing companies meet around 98% of local demand. Specialized products like vaccines,
anti-cancer products, and hormone drugs are imported to meet the remaining 2% of the demand.
80% of the drugs produced in Bangladesh are generic drugs, rest 20% are patented drugs.
According to the Director General of the Drug Administration (DGDA), the industry has 3,657
generics of allopathic medicine, 2,400 registered Homeopathic drugs, 6,389 registered Unani
Drugs, and 4,025 registered Ayurvedic drugs.

The domestic market of pharmaceutical products in Bangladesh has shown an increasing trend
over the past few years and the market size is BDT 205.12 billion as on 2018 (Source: IQVIA
Report). However, this number does not reflect the total market size because the IQVIA report
does not include homeopathic, Unani, ayurvedic, or herbal medicine information.
 Introduction of Renata Limited
Renata Limited (formerly Pfizer Limited) is one of the leading and fastest-growing
pharmaceutical and animal health product companies in Bangladesh. The company started its
operations in 1972 as Pfizer (Bangladesh) Limited. In 1993, Pfizer transferred the ownership of
its Bangladesh operations to local shareholders and the name of the company was changed to
Renata Limited.

The core businesses of Renata Limited are human pharmaceuticals and animal health products.
At present, with a market share of 4.97 percent, the company ranks 4th among the top
pharmaceutical manufacturing companies in Bangladesh. Renata Limited manufactures its
products in Bangladesh through 10 factories at 3 manufacturing sites. In addition, Renata
products are exported to Afghanistan, Belize, Cambodia, Ethiopia, Guyana, Honduras, Hong
Kong, Kenya, Malaysia, Myanmar, Nepal, Philippines, Sri Lanka, Thailand, the United
Kingdom, and Vietnam. The Company is listed on the Dhaka Stock Exchange with a market
capitalization of over USD $1 billion.

Renata has 19 depots across the country, through which the company can deliver medicines to
local and global customers. Some of the company’s most popular products are Maxpro,
Fenadine, Algin, Furosef, Orser, and Zithrin. Renata Limited had a net turnover of BDT 3,107
crore in the fiscal year 2021-22. The Company engaged 10,380 employees as at 30 June 2022
compared to 8,957 employees as at 30 June 2021, including doctors, chemists, microbiologists,
pharmacists, engineers, and others.

Renata’s Mission:To provide maximum value to our customers, and communities

where we live and work.

Renata’s Vision:To establish Renata permanently among the best of innovative

branded generic companies.
Achievements & Certifications of Renata Limited
 Renata Achieved ‘AAA’ Rating for Consecutive Three Years.
 ICMAB Best Corporate Award-2020
 TAX Payer Award Among Pharmaceutical & Chemical Industry.
 MHRA Certificate- Medicines and Healthcare products Regulatory Agency, UK has
issued a Certificate of GMP Compliance of a Manufacturer to Renata Limited.
 ANVISA Certificate- The Brazilian Health Regulatory Agency (ANVISA) has
issued a Certificate of GMP to Renata Limited.

Competitors of Renata Limited

 Square Pharmaceuticals Limited
 Incepta Pharmaceutical Limited
 Beximco Pharmaceuticals Limited
 Opsonin Pharma Limited
 Healthcare Pharmaceuticals Limited
 ACI Pharmaceuticals Limited
 Beacon Pharmaceuticals Limited
Methodology:In this research, we have collected data which are mostly online & used
the quantitative method for preparing. Gathering 10 years' information on the balance sheet and
financial statement of the company, we took information from our textbook to do ratio analysis.
After conjoining the ratio analysis step by step in proper order, we did graphical representations
of the comparison between the ten years' ratio calculation with the help of line charts and
Microsoft Excel.

Objectives of the Report:

1. Primary Objective: The primary objective of financial statement analysis of this report
is to understand and diagnose the information contained in financial statement with a
view to judge the profitability and financial soundness of the firm, and to make forecast
about future prospects of the firm.
2. Secondary objective: There are also some secondary objectives of this report, they are
following:
 To assess the earning capacity or profitability of the firm.
 To assess the short term as well as long term solvency position of the firm.
 To make forecasts about future prospects of the firm.
 To help in decision making and control.

Sources of Data: There are two types of data sources, they are:
1. Primary Data: There is no primary data used in this report.
2. Secondary Data: We have prepared this report mainly based on secondary data. We
have collected the required data from the website, the balance sheet, income statement,
and financial reports of Renata Limited.

For our report, we have compared 10 years of different ratios of Renata Limited for which we
did ratio analysis. We conducted the ratio analysis using data from ten years of ratios. These
ratios are:

Liquidity Ratios: Liquidity ratios are a measure of the ability of a company to pay off
its short-term liabilities. Liquidity ratios determine how quickly a company can convert
the assets and use them for meeting the dues that arise. The higher the ratio, the easier is
the ability to clear the debts and avoid defaulting on payments.
 Asset Managemen1`t Ratios: Turnover (asset management) ratios compare the
assets and sales of a company. Asset management ratios demonstrate the efficiency with
which a company generates income from its assets. The analysis of asset management
ratios shows how effectively and efficiently a company utilizes its assets to produce
revenue. They show how well a business can turn its resources into sales. Other names
for asset management ratios are asset efficiency ratios and asset turnover ratios.

Debt Ratios: The debt ratios measure the firm's ability to repay long-term debt by
indicating the percentage of a company's assets that are provided via debt. The debt ratio
measures the amount of leverage used by a company in terms of total debt to total assets.
The higher the ratio, the greater risk will be associated with the firm's operation.

Profitability Ratios: Profitability ratios assess a company's ability to earn profits

from its sales or operations, balance sheet assets, or shareholders' equity. Profitability
ratios indicate how efficiently a company generates profit and value for shareholders.
Higher ratio results are often more favorable, but these ratios provide much more
information when compared to results of similar companies, the company's own
historical performance, or the industry average.

Market Ratios: Market value ratios are used to assess a publicly traded company's
stock's current share price. Current and potential investors use these ratios to assess
whether a company's shares are overvalued or undervalued.

List of Variables: These are variables list that has been used in our report

Current Cost of goods Account

Current assets Inventory
liabilities sold Receivable

Net fixed
Sales Total assets Total liabilities EBIT
assets

Interest Market value Book value Shareholders'

Earnings per
expense per share per share equity
share
Gross Profit Profit after tax
 Liquidity Management:
 Current Ratio:Current ratio is an efficient tool to measure that the organization is
capable in meeting up its short-term debts or not. Current ratio basically assesses a firm's
liquidity because, if a firm is enough liquid and it has enough resources then it can pay back all
debts that need to cover for 12 months.

Formula: Current ratio = Current assets / Current liabilities

Year CR
2012 1.150637833
2013 0.7890910771
2014 1.015763084
2015 1.148032468
2016 1.38325136
2017 1.751626348
2018 2.217033298
2019 2.674693462
2020 2.526036714
2021 2.286756501

A general rule of thumb is to have a current ratio of 2.0. Although this will vary by business and
industry, a number above two may indicate a poor use of capital. A current ratio under two may
indicate an inability to pay current financial obligations with a measure of safety.
 Comment:From Renata’s current ratios, we can see that their current ratios between 2012 and
2017 were under 2.0 and these years' ratios may indicate an inability to pay current financial
obligations with a measure of safety. But from 2018 their current ratios have increased which is a
good sign for the company. Now, they have a bit more than 2.0 Tk. As current assets to pay its
1.0 Tk. liabilities.

 Quick Ratio:This ratio assesses the capacity of an organization to recover its current
liabilities by using the organization's quick assets. The asset which can be turned into cash
rapidly at an amount that is very close to is book value is known as quick asset. Quick ratio is
also known as Acid-test ratio and liquid ratio. If any quick ratio less than I mean that the firm
cannot pay back its current debts.

Formula: Acid test = (Current assets - Inventory) / Current liabilities

Year QR
2012 0.4600422434
2013 0.2907843512
2014 0.4862903313
2015 0.5505209973
2016 0.7136257906
2017 1.020465827
2018 1.377367514
2019 1.770151427
2020 1.68036746
2021 1.502944435
Quick Ratios below 0.50 indicate a risk of running out of working capital and a risk of not
meeting current obligations. While industries and businesses vary widely, 0.50 to 1.0 are
generally considered acceptable Quick Ratios.
Comment:The first three-year quick ratios were under .50 that time they had no proper amount
of working capital and they might fail to meet current obligations between 2015 and 2017 it
increased and they maintained properly QR and now they are also maintaining it above 1.0
which is better for them.
 Asset Management:
 Inventory Turnover:In the business, the sufficient volume of inventory is must, and
we can judge that enough inventories are being produced or not through the inventory turnover
ratio. This ratio shows that over a period. how many times the inventories are sold and renovated
in a business. A company with high inventory turnover ratio is assumed as strong one. When the
inventory level is extremely high then the ratio will be low which means the inventories are kept
alle in the warehouse so definitely it is bad for future growth.

Formula: Inventory turnover ratio = cost of goods sold / inventory

Year Inventory Turnover
2012 1.821881448
2013 1.624203748
2014 1.962851052
2015 1.939722056
2016 2.072450384
2017 2.458952187
2018 2.463498247
2019 2.652232618
2020 2.464176651
2021 3.0

Comment:From the above data, we can see that their inventory turnover ratios are slightly going
up and down not stable from 2012 to 2016 1 year up and down but from 2017 it increased, and
now it is 3.0 indicating that their inventory is sold 3 times in a year. We cannot get a clear picture
of whether is better or not because we don’t know the industry average but we can say they
performing well because their ratios are gradually increasing.
 Average Collection Period:It is the ratio by which we can know that within how
much days the firm collects its money from the sales, so it means that how much times a firm
takes to convert its accounts receivables into cash. If the ratio is lower, then it is good for the
organization as it indicates that the organization collects its receivables at the shortest possible
time. If an organization collects money quickly then can meet up the cash demand to operate the
business and also can reinvest more money thus more sales can be occurred.

Formula: Average Collection Period = Accounts receivable / Average daily Sale

Year Average Collection
Period
2012 40.11946969
2013 47.62599686
2014 44.53319291
2015 49.61392127
2016 52.15745816
2017 45.40498982
2018 43.80106279
2019 37.21723996
2020 38.424119
2021 35.27947604

Comments: From 2012 to 2014, the average collection period is going up and down but from
2014 to 2016 it increased gradually and from 2017 to 2021 it fall down. So, we can see that they
are performing better from last 5 years.
 Fixed Assets Turnover:It is the ratio where sales are compared with the fixed
assets of the firm. The ratio actually clarifies that the firm is capable enough to use its fixed
assets to earn revenues or not. In fixed asset turn over, normally investments on property, plant
and equipment are counted and the depreciations of these are subtracted. A high fixed asset
turnover is always appreciable as it signals towards the firm's high productivity. Higher fixed
asset turnover means the firm is utilizing its fixed assets and generating revenues from these. On
the other hand, low fixed asset is the signal that the firm is not productive, and the firm fails to
generate sales revenue by utilizing the fixed assets.
Formula: Fixed assets turnover ratio = Sales / Net fixed assets

Year Fixed Asset Turnover

2012 1.190709649
2013 1.021426611
2014 1.207680913
2015 1.334179422
2016 1.446698684
2017 1.544395459
2018 1.708364651
2019 1.872990376
2020 1.759790792
2021 1.712164737

Comments: From the above data we can see that, from 2012 to 2013 the fixed asset turnover is
going up and down but from 2014 to 2019 it is continuously increased. So, it’s a good sign for
them. But during the last 2 years, they are not performing efficiently than previous years. So,
they should focus on it.
 Total Asset Turnover:Total Asset Turnover judge that how much sales revenue is
gathered in against of each dollar of assets. Through this ratio, the effectiveness of asset
management of the firm is measured. Higher the ratio, higher the efficiency of the firm and the
vice versa.

Formula: Total assets turnover ratio = Sales / total assets

Year Total Asset Turnover

2012 0.7865796137
2013 0.6851136486
2014 0.7663593051
2015 0.7981867082
2016 0.847287988
2017 0.8851867578
2018 0.8939071409
2019 0.9181715615
2020 0.8319639605
2021 0.8507457167

Comments: Here, from 2012 to 2013 the total asset turnover is going up and down but from 2014
to 2019 it has gradually increased, during this year’s they have effectively used their total assets
but if we see last 2 years they are performing not efficiently cause they fall down.
 Debt Management:
 Debt Ratio:This ratio finds out that how much of the total asset is funded through debt.
So, it actually shows the dependency on debt in order to manage assets. If the ratio is higher,
then it means that the firm has higher debt, and it is more dependent to its creditors for necessary
financing. If the ratio is higher than one. it indicates excess debt over total assets and the vice
versa. Although higher debt is not a problem if interest payments are made on time, if it is not,
then definitely a significant risk for the firm.

Formula: Debt to total assets ratio = Total liabilities /total assets

Year Debt to total Asset

2012 0.4801149173
2013 0.5075175156
2014 0.4652308753
2015 0.4171526339
2016 0.3709511333
2017 0.3117249172
2018 0.2731406238
2019 0.2444698753
2020 0.2584004118
2021 0.2598070444

Comments: From the above data, we can see that their debt to total assets ratios are higher risky
first 2 years and fall down 2014 to 2021. In 2013 that year the firm higher riskier up but the
following years they focus their debt to total assets and reduced their debt per assets. So, lower
the debt to total assets ratios indicates good sign of the firm but the last 2 years it increased
compare the 2019. So, they should holds on.
 Time Interest Earned Ratio:Time Interest Earned ratio is a solvency ratio which
assesses that firm has the capacity or not to pay back all its loans. This ratio is also known as
interest coverage ratio. Through this ratio at can be judged that how many times a firm can face
its interest expenses that are due to the taken borrowings. If the ratio is higher, then it means that
the firm has the ability to payback its loans. On the other hand, if the ratio is less than I then it
means that the firm is not achieving much profit to meet up the debt obligations.

Formula: TIE Ratio = Earnings before interest tax/Interest Expense.

Year Time Interest Earned

2012 167.4203989
2013 69.58783468
2014 87.2583239
2015 190.444881
2016 11.84285306
2017 18.53662343
2018 20.91285599
2019 34.5634932
2020 26.85075009
2021 40.94521947

Comments: From the above data we can see that, the year of 2012&2015 has higher capacity to
pay back loans. In 2016 to 2021 the firm falls down their ability of interest expense due to taken
borrowing and before the years of ability. In 2012 & 2015 years the firm gains higher profit to
meet up the debt obligations.
 Profitability Management:
 Gross Profit Margin:This is the ratio of Net Income to Sales or Revenues. Through
the net profit margin, we asses that out of each dollar of sales how much is kept as earning
Higher the profit margin. Better the condition Formula: Net profit margin = Net profit /Saks of
the firm.

Formula: Gross Profit margin = Gross Profit / Sales

Year Gross Profit Margin

2012 52.81783836
2013 50.7071483
2014 51.21244093
2015 50.81263737
2016 50.9396754
2017 50.50619356
2018 50.23981952
2019 50.20016146
2020 47.72017876
2021 47.68910525

Comment:Here, from 2012 to 2021 the gross profit margin are going down but the year of 2015
to 2019 the gross profit margin nearly same of the year but last 2 years it less their worse and
they are not performing better. So, they have to increase their performance.
 Operating Profit Margin:Operating margin, also called the return on sales, is a
measurement of how many dollars of profit a company earns per dollar of sales after paying
operating expenses. It considers costs such as wages, overhead, and materials, but does not
include non-operating expenses like taxes or interest. As such, it can also be seen as a
measurement of how well a company is able to pay its non-operating expenses.

Formula:Operating Profit margin = Operating Profit / Sales

Year Operating Profit Margin

2012 28.3035533
2013 27.51144029
2014 26.2074961
2015 24.45425919
2016 25.58609326
2017 25.4026623
2018 24.85473236
2019 24.07836785
2020 24.70897682
2021 23.29900794

Commetns:There has been significance changes in making profit while earning per taka from
sales after paying operating expenses. Here, In 2012 firm has maximum operating profit but the
following year continuously fall down but the year of 2016 the firm about-turn operating profit
margin the previous years. So, the firm losing ability to earn significant amount of money from
sales after paying operating expenses worse previous year.
 Net Profit Margin:The net profit margin, or simply net margin, measures
how much net income or profit is generated as a percentage of revenue. It is the
ratio of net profits to revenues for a company or business segment. Net profit
margin is typically expressed as a percentage but can also be represented in
decimal form. The net profit margin illustrates how much of each dollar in revenue
collected by a company translates into profit.

Formula: Net Profit margin = Net Profit / Sales

Year Net profit margin
2012 16.26170113
2013 15.87415916
2014 15.40307197
2015 15.57835646
2016 15.61819038
2017 16.28169442
2018 17.18447945
2019 17.20616333
2020 17.08985252
2021 17.21252947
 Comments: The firm has been worse net profit margin since 2012 to 2016 and following two
years the firm raise their net margin but the increase amount of sales revenue are not immensely
better. However, the firm better the last year linked previous years and they need to better
perform and growth sales revenue.

 Return on Assets:It measures that the firm how efficiently uses is assets to
generate profits. This is also known as Return on Investment (ROI) as it tells that a
firm how effectively transforms its investments on profits. It is often expressed in
percentage. Higher ROA is always desired as it indicates that higher profit has
been made through fewer investments.

Formula: Return on total assets (ROA) = Net income / total assets

Year Return on Asset
2012 12.79112259
2013 10.8756031
2014 11.80428753
2015 12.43443706
2016 13.2331051
2017 14.4123403
2018 15.36132889
2019 15.79820985
2020 14.21814139
2021 14.64348572
 Commetns: Here, from 2012 to 2013 the return on asset is going up to down but since 2014 to
2019 it has been significance increased return on assets, during that years the firm efficiently
used their assets. Hence, the last two years the firm the firm performing worse because of
lockdown but performing better last year linked previous year.

 Return on Equity:Return on Equity is the ratio of net income to total

shareholder's equity. It measures that the firm how much earns from the
shareholders' equity. Increasing ROE indicates improved performance.

Formula: ROE= Net Income/Total Equity Capital

Year Return on Equity
2012 25.64887754
2013 22.99458103
2014 22.9915528
2015 22.10846107
2016 21.03668857
2017 20.93979669
2018 21.1338388
2019 20.91009919
2020 19.17226171
2021 19.7833357
 Commetns: Here, the return on equity has been significant decline and shareholder loses their
equity and dividend per share. Hence, the last year the firm turns increase return on equity but
it’s not very better. So, the firm should performing efficiently cause they are continuously worse.

Market Ratio:
 Price Earnings Ratio:This is the ratio of market value to EPS. Through this
ratio, the recent trading price of the firm is compared with its EPS. The P/E ratio
actually represents the expectation of investors about the firm. Higher P/E means
that investors have high expectations about the firm's future growth and that is why
they are interested to invest.

Formula: P/E ratio Market Price/EPS

Year P/E Ratio
2012 36.09
2013 31.63
2014 35.03
2015 37.42
2016 26.98
2017 43.48
2018 33.60
2019 26.64
2020 28.10
2021 28.22
 Market/Book Ratio:
Formula:
Year Market/Book Ratio
2012 4.12
2013 4.05
2014 5.60
2015 6.19
2016 5.65
2017 6.00
2018 5.28
2019 4.22
2020 5.05
2021 4.90