CIA -1

FINANCIAL MANAGEMENT
TEACHER : GAURAV DAWAR

NAME : VANSH ARORA

REG NO. : 23211143

CLASS: 2BBA B
 Financial and Capital Structure Analysis of FDC Ltd.

1.Introduction
FDC Ltd is an Indian pharmaceutical and consumer health company, established in
1936. They are known for manufacturing high quality products at affordable prices
with a strong focus on the Indian market.

Products: FDC Ltd manufactures and markets a wide range of pharmaceutical

and consumer health products, including oral rehydration salts (ORS),
analgesics, anti-inflammatory drugs, eye care products and nutrition Their well
known brands include Electral, Enerzal, Ziphy, Zocon, Vitkofol and Otec Acneo.

History: FDC Limited was founded in 1936 by Mr. Anand Chand Worker. The
company started with a limited distribution in the country and has since
become a leading player in the Indian pharmaceutical market.

Vision and Mission: FDC Ltd. Its vision is to "expand health literacy by
improving quality of life through innovative products and processes." Their
mission is "to be a human-centered organization, dedicated to innovating,
manufacturing, and marketing high-quality health care products that improve
the quality of life for, and benefit to, people around the world." they have the
shares too."

2.Purpose Of The Analysis

 1. Assess Financial Health: Assess the overall financial stability and performance
of FDC ltd. .
2. Capital Structure Analysis: Examine the capital structure including debt and
equity to understand the financial viability of the company.
3. Identify Strengths and Weaknesses: Highlight key strengths and weaknesses
of financial capital structures.
4. Ratio Analysis: Calculate and interpret 10 critical financial ratios to measure
cash flow, payouts, profitability, and efficiency.
5. Expansion Opportunities: Identify potential services, products, or services for
future growth and expansion.

10 RATIOS OF FDC COMPANY LTD.

Gross Profit ratio

Gross Profit Ratio=(Gross profit/Net Sales)×100

Gross Profit Margin= 105.05 /479.70×100=21.89%

recommendation - With a Gross Profit Margin of 21.89%, FDC Ltd demonstrates strong
profitability in its core operations, suggesting a positive outlook for potential investors.

Operating Profit ratio

Operating Profit Margin=(Operating Profit / net sales​)×100

Operating Profit Margin=(78.71/479.70)×100 ≈ 16.40 %

recommendation - FDC Ltd's Operating Profit Margin of approximately 16.40% signals a

healthy operational efficiency, and maintaining a focus on cost management and
revenue optimization is recommended for sustained profitability.

Net Profit ratio

Net Profit Margin=(Net Profit​/ Sales)×100

Net Profit Margin=(69.82/479.70)×100≈14.55 %

recommendation - With a Net Profit Margin of approximately 14.55%, FDC Ltd

demonstrates a healthy profitability, indicating effective cost management and potential
for sustained financial growth.

Return On Assets

ROA=( Net Profit/ ​Average Total Assets)×100

ROA=(69.82 /577.65 )×100≈12.08%

recommendation - With a calculated Return on Assets (ROA) of approximately 12.08%,

FDC Ltd demonstrates effective utilization of assets to generate profits, suggesting a
sound operational efficiency and financial performance.

Return on Equity

ROE=(Net Profit/ /​ Average Shareholders’ Equity)×100

ROE=(69.82 / 91.2 ) ×100≈ 76.5 %

recommendation - With a strong Return on Equity (ROE) of approximately 76.5%, FDC

Ltd demonstrates robust profitability and effective utilization of shareholders' equity,
making it an attractive investment opportunity.

Inventory Turnover Ratio

ITR = Cost of Goods Sold /​Average inventory

​ITR = 12444/6654.54 = 1.87

recommendation - With an Inventory Turnover Ratio (ITR) of 1.87 (calculated as Cost of

Goods Sold / Average Inventory), FDC Ltd may benefit from optimizing inventory
management to improve turnover efficiency and reduce holding costs.
 Current Ratio

Current Ratio=Current Assets / Current Liabilities

Current Ratio=1023.76 / 310.69 = 3.29

recommendation - With a strong current ratio of 3.29, FDC Ltd is well-positioned to

meet its short-term obligations, indicating robust liquidity and financial stability.

Quick Ratio

Quick Ratio= Current Assets−Inventory / current liabilities

​Quick Ratio= 1023.76-550/310.69 = 1.59

recommendation - With a Quick Ratio of 1.59, FDC Ltd demonstrates strong short-term
liquidity, indicating a robust ability to cover immediate financial obligations; therefore,
it is recommended to continue prudent financial management for sustained stability
and growth.

Debt-to-Equity Ratio

Debt-to-Equity Ratio=Total Debt / Shareholders’ Equity

Debt-to-Equity Ratio=27.67 /91.2 = 0.30

recommendation - With a Debt-to-Equity Ratio of 0.30, FDC Ltd exhibits a prudent

capital structure, indicating a balanced mix of debt and equity financing, providing
financial stability and growth opportunities.

Earnings Per Share

EPS=Net Profit/Number of Outstanding Shares

EPS=69.82 / 4.83 =14.45

recommendation - With a calculated Earnings Per Share (EPS) of 14.45, FDC Ltd
showcases strong profitability, and considering its positive financial ratios, it is
recommended to maintain strategic initiatives for sustainable growth and shareholder
value.

FINANCIAL AND CAPITAL STRUCTURES OF FDC ltd

FDC Ltd has established a highly resilient financial and capital structure. The
company's low debt-to-equity ratio, currently standing at 0.30, showcases a
preference for equity financing over debt. This prudent approach is attractive to
potential investors and creditors as it signifies a lower risk of encountering
financial difficulties. Furthermore, FDC Ltd's current ratio of 1.1 demonstrates a
strong ability to meet its short-term liabilities, indicating a favorable liquidity
position. The company also boasts considerable liquidity, with a cash-to-current
assets ratio of 0.79, providing further assurance of its ability to fulfill any
immediate financial obligations. Overall, with its robust financial and capital
structures, coupled with a healthy balance sheet and ample cash reserves, FDC Ltd
stands in a strong position to weather any financial challenges.

STRENGTHS
Profitability Margins: FDC Company exhibits strong profitability with healthy
margins, including a Gross Profit Margin of 21.89%, Operating Profit Margin of
16.40%, and Net Profit Margin of 14.55%. These margins reflect efficient cost
management and overall profitability.
Return On Assets: The Return on Assets (ROA) of 12.08% and Return on Equity (ROE)
of 76.5% demonstrate efficient utilization of both total assets and shareholders'
equity, indicating strong financial performance.
Inventory Turnover Ratio: The Inventory Turnover Ratio (ITR) of 1.87 reflects
efficient management of inventory, which is crucial for optimizing cash flow and
minimizing holding costs.
Liquidity Ratio: FDC Company maintains a strong liquidity position, as evidenced
by a Current Ratio of 3.29 and a Quick Ratio of 1.59. This suggests the ability to cover
short-term liabilities with current assets and meet immediate obligations without
heavy reliance on inventory.
 Low Debt-to-Equity Ratio: The Debt-to-Equity Ratio of 0.30 indicates a conservative
financing approach, minimizing financial risk and providing stability to the
company's capital structure.
Earnings Per Share (EPS): A high EPS of 14.45 signifies strong profitability on a per-
share basis, enhancing shareholder value.

Weaknesses:
Limited Information on Long-Term Strategy: The analysis still lacks information
about FDC Company's long-term strategic vision and plans, hindering a
comprehensive assessment of its growth sustainability.
External Economic Factors: The evaluation does not consider external economic
factors, such as market conditions or industry trends, which could impact the
company's performance.

PROJECTS / PRODUCTS AND SERVICES FDC LTD. CAN EXPAND.

Research and Development (R&D) Expansion:

Evaluate opportunities to expand R&D efforts to discover and develop new drugs
or therapeutic solutions.
Focus on areas with unmet medical needs, emerging diseases, or innovative
technologies.

New Product Launches:

Identify gaps in the existing product portfolio and launch new pharmaceutical
products catering to different therapeutic categories.
Explore the development of specialty drugs or biologics to address niche markets.

International Market Expansion:

Conduct market analysis to identify countries with growing healthcare needs and
regulatory environments conducive to market entry.
Establish partnerships or consider acquisitions to facilitate international
expansion.

Biotechnology and Gene Therapies:

 Invest in biotechnology to develop advanced therapies, including gene therapies
or personalized medicine.
Explore collaborations with biotech companies for cutting-edge research and
development.

Vaccines and Preventive Medicines:

Expand the portfolio to include vaccines for infectious diseases or preventive

medicines to address public health concerns.
Align product development with global health priorities.

Digital Health and Telemedicine:

Embrace digital health technologies to improve patient engagement, remote

monitoring, and healthcare delivery.
Develop or partner with tech companies for telemedicine solutions and health
apps.

Nutraceuticals and Over-the-Counter (OTC) Products:

Diversify into the production of nutraceuticals and OTC products, targeting

consumer wellness and self-care trends.
Consider acquiring or licensing existing brands to enter these markets quickly.

Biosimilars and Generic Drugs:

Expand the biosimilars portfolio to offer more cost-effective alternatives to

biologic drugs.
Continue to develop and market high-quality generic drugs for a broader market
reach.

Regenerative Medicine and Cell Therapies:

Investigate opportunities in regenerative medicine and cell therapies for

conditions with limited treatment options.
Collaborate with research institutions or start-ups specializing in these areas.

Supply Chain Optimization:

Optimize the supply chain for greater efficiency and cost-effectiveness.

Explore vertical integration opportunities, such as in-house manufacturing of key
components or active pharmaceutical ingredients (APIs).
 MAJOR SOURCES OF FUNDING OF FDC LTD.
Equity Financing: FDC Company relies on equity financing, as indicated by a
low Debt-to-Equity Ratio of 0.30. This suggests that a significant portion of the
company's funding comes from equity sources, which can include investments
from shareholders, retained earnings, or new equity issuance.
Internal Cash Generation: The company's strong profitability margins,
including a Net Profit Margin of 14.55% and a high Earnings Per Share (EPS) of
14.45, indicate robust internal cash generation. This internal funding source
suggests that XYZ Company is effectively converting sales into profits,
providing funds for operational needs and potential investments.
Efficient Inventory Management: The Inventory Turnover Ratio (ITR) of 1.87
signifies effective inventory management. By optimizing inventory turnover,
XYZ Company can enhance cash flow and reduce the need for external funding
to maintain inventory levels.

Recommendations:
Continue Prudent Financing Approach: Given the low Debt-to-Equity Ratio,
FDC Company should continue its prudent financing approach, emphasizing
equity financing over excessive debt. This strategy helps minimize financial risk
and provides stability to the capital structure.
Optimize Working Capital: With a Current Ratio of 3.29 and Quick Ratio of
1.59, FDC Company should continue optimizing working capital. Efficient
working capital management ensures the company's ability to cover short-term
obligations without excessive reliance on external funding.
Strengthen Long-Term Strategic Planning: To address the weakness of limited
information on long-term strategy, FDC Company should strengthen its long-
term strategic planning. Clearly communicating future initiatives and goals
can attract investor confidence and support strategic decision-making.
Monitor External Economic Factors: Recognizing external economic factors
impacting the industry is essential. FDC Company should actively monitor
market conditions, industry trends, and economic changes to adapt its
strategies and mitigate potential risks.
Consider Diversification: If growth opportunities arise, FDC Company may
consider diversifying its funding sources. Exploring partnerships, joint
ventures, or strategic alliances can provide additional funding avenues while
sharing risks and rewards.
Invest in Technology and Efficiency: To further enhance profitability and
internal cash generation, FDC Company may invest in technology and
operational efficiency. Streamlining processes can positively impact margins
and provide additional funds for growth and innovation.
Regular Financial Analysis: Continuous financial analysis, including periodic
reviews of profitability metrics, liquidity ratios, and return metrics, will enable
FDC Company to proactively identify areas for improvement and make
informed financial decisions.

THANK YOU