Financial analysis

Of
Dr. Reddy’s Laboratories
&
Sun Pharma

Group Assignment
PROGRAMME: PGDM-QF
Batch: 2023-2025 Trimester -1
Corporate Finance (1PGDMQF03)

Submitted by: Submitted to:

Shivam Tripathi (10) Dr. Tirthank Shah
Ujjval Jasani (14)
Viraj Patel (15)
Yashvi Goswami (17)

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 TABLE OF CONTENT

BACKGROUND AND INTRODUCTION: ....................................................................................... 3

PART 1: CAPEX ANALYSIS ............................................................................................................. 6
PART B: RATIO ANALYSIS ........................................................................................................... 12
PART 3: IMPACT OF CAPEX ......................................................................................................... 16
REFERENCES & BIBLIOGRAPHY ............................................................................................... 20

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 BACKGROUND AND INTRODUCTION:
DR. REDDY’S LABORATORIES:

Dr. Reddy’s Laboratories commenced its generics business in India in 1986 and is today a
trusted name in the healthcare industry consistently serving the needs of millions of patients
with high quality, affordable and innovative medicines across therapy areas.

Portfolio spanning wide range of therapy and disease areas:

Over the years, the company has significantly grown its portfolio of products across mass and
specialty therapies. Today, our portfolio has over 200 products covering the whole spectrum
of disease areas spanning gastroenterology, oncology, pain management, cardiovascular,
dermatology, urology, nephrology, rheumatology and diabetes. Seven of our brands are listed
in “Top-300 of the Indian Pharma Market” and many others hold leadership positions in their
respective categories.

Ensuring that medicines are available when needed:

Dr. Reddy’s has built a robust field force driven by the zeal to make a difference in the lives of
patients. The 5000-member strong team network connects with more than three lakh doctors
on a regular basis to ensure that quality medicines we make are available for patients across
the length and breadth of the country. Their efforts are backed by our unique inventory
management system, VIVA (Viable Vision), to ensure that the medicines are available for
patients when they need it.

Going beyond the pill to address patient needs:

As a company we have progressively transitioned from being a maker of molecules to a

provider of medicines. Along the way we developed a deeper empathy for the needs of patients
and their caregivers. This has impelled Dr. Reddy’s as an organization to go beyond medicines
and leverage our capabilities to meet some of these unmet patient needs. Our Purple Health
initiative in India aims at taking patient care beyond the pill focusing our efforts in four areas:

• Disease awareness and convenient diagnoses

• Access to medicines

• Better therapy experience

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 • Adherence to therapy

SUN PHARMA:

Sun Pharmaceutical Industries Ltd. (Sun Pharma) is the fourth largest specialty generic
pharmaceutical company in the world with global revenues of over US$ 5.1 billion. Supported
by more than 40 manufacturing facilities, we provide high-quality, affordable medicines,
trusted by healthcare professionals and patients, to more than 100 countries across the globe.

Diversified Specialty and Generics Portfolio:

We manufacture and market a large basket of pharmaceutical formulations covering a broad

spectrum of chronic and acute therapies. It includes generics, branded generics, specialty,
complex or difficult to make technology-intensive products, over-the-counter (OTC),
antiretrovirals (ARVs), Active Pharmaceutical Ingredients (APIs) and Intermediates. Our
broad portfolio of more than 2000 high quality molecules covers multiple dosage forms,
including tablets, capsules, injectables, inhalers, ointment, creams, and liquids.

Every year, we sell over 30 billion doses covering neuro-psychiatry, cardiology,

gastroenterology, anti-infectives, diabetology, oncology, ophthalmology, dermatology,
urology, nephrology and respiratory among others.

Key highlights and background:

1. Founding and Growth: Sun Pharma started as a small manufacturing facility with just
five products and a vision to make healthcare more affordable. Over the years, it has
grown exponentially through strategic acquisitions and organic expansion.
2. Global Presence: The company operates in over 150 countries, with a strong presence
in markets like the United States, Europe, and emerging markets.
3. Research and Development: Sun Pharma has a robust research and development
division focused on developing innovative pharmaceuticals and specialty generics.
They invest significantly in R&D to bring new, cost-effective treatments to the market.
4. Diverse Product Portfolio: Sun Pharma manufactures a broad range of pharmaceutical
products, including prescription and over-the-counter medications, active
pharmaceutical ingredients (APIs), and specialty pharmaceuticals.

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 5. Acquisitions: Sun Pharma has made several strategic acquisitions over the years,
including the acquisition of Ranbaxy Laboratories in 2015, which further expanded its
global footprint.
6. Quality and Compliance: The company places a strong emphasis on quality and
compliance with global regulatory standards. It has a number of manufacturing
facilities that are approved by stringent regulatory authorities.
7. Social Responsibility: Sun Pharma is committed to corporate social responsibility and
actively engages in various initiatives related to healthcare, education, and community
development.
8. Leadership: Mr. Dilip Shanghvi, the founder of Sun Pharma, played a pivotal role in its
growth and success. He has been recognized as one of the most influential business
leaders in India.

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 PART 1: CAPEX ANALYSIS
DR. REDDY’S:
FY 2018-19
ASSETS AMOUNT (₨ IN MLN) PERCENTAGE (%)
LAND 3 0.04
BUILDING 1372 19.20
PLANT & MACHINERY 5233 73.26
EQUIPMENTS 535 7.5
TOTAL 7143 100

CAPEX BREAKUP IN % FOR FY 2018-19

8% 0%
19%

73%

LAND BUILD P&M FURN & EQP

INTERPRETATION:
As seen in the above pie chart, the company has heavily invested into plant & machinery with
73.26% of their total capex for the FY 2018-19.

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 FY 2019-20
ASSETS AMOUNT (₨ IN MLN) PERCENTAGE (%)
LAND 4 0.08
BUILDING 889 18.32
PLANT & MACHINERY 3570 73.60
EQUIPMENTS 387 8
TOTAL 4850 100

CAPEX BREAKUP IN % FOR FY 2019-20

8% 0%
18%

74%

LAND BUILD P&M FURN & EQP

INTERPRETATION:
As seen in the above pie chart, the company has heavily invested in plant & machinery with
74% of their total capex for FY 2018-19.

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 FY 2020-21
ASSETS AMOUNT (₨ IN MLN) PERCENTAGE (%)
LAND 13 0.17
BUILDING 2720 35.26
PLANT & MACHINERY 4544 58.90
EQUIPMENTS 437 5.67
TOTAL 7714 100

CAPEX BREAKUP IN % FOR FY 2020-21

6%0%

35%

59%

LAND BUILD P&M FURN & EQP

INTERPRETATION:
As seen in the above pie chart, the company has heavily invested in plant & machinery with
59% of their total capex for FY 2020-21.

Also, they have significantly increased their investment in buildings as an expansion plan of
their manufacturing facilities to cater to the medical needs during the COVID-19 PANDEMIC.

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SUN PHARMA:
FY 2018-19
ASSETS AMOUNT (₨ IN MLN) PERCENTAGE (%)
LAND 106 1.34
BUILDING 491 6.21
PLANT & MACHINERY 7065 89.24
FURNITURE 48 0.67
EQUIPMENT 208 2.64
TOTAL 7918 100

CAPEX BREAKUP IN % FOR FY 2018-19

1%
3%1%
6%

89%

EQUIPMENT LAND BUILD P&M FURN

INTERPRETATION:
As seen in the above pie chart, the company has heavily invested in plant & machinery with
89% of their total capex for FY 2018-19.

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 FY 2019-20
ASSETS AMOUNT (₨ IN MLN) PERCENTAGE (%)
LAND 0.1 0.01
BUILDING 381 8.20
PLANT & MACHINERY 4009 86.32
FURNITURE 71 1.53
EQUIPMENT 183 3.94
TOTAL 4644 100

CAPEX BREAKUP IN % FOR FY 2019-20

2%4%0%
8%

86%

EQUIPMENT LAND BUILD P&M FURN

INTERPRETATION:
As seen in the above pie chart, the company has heavily invested in plant & machinery with
86% of their total capex for FY 2019-20.

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 FY 2020-21
ASSETS AMOUNT (₨ IN MLN) PERCENTAGE (%)
LAND 229 4.25
BUILDING 436 8.10
PLANT & MACHINERY 4306 80.03
FURNITURE 38 0.70
EQUIPMENT 378 7.02
TOTAL 5387 100

CAPEX BREAKUP IN % FOR FY 2020-21

1% 7%
4%
8%

80%

EQUIPMENT LAND BUILD P&M FURN

INTERPRETATION:
As seen in the above pie chart, the company has heavily invested in plant & machinery with
86% of their total capex for FY 2020-21.

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 PART B: RATIO ANALYSIS
DR. REDDY’S LABORATOIRES:
RATIOS MARCH MARCH MARCH MARCH MARCH
‘23 ‘22 ‘21 ‘20 ‘19
DEBT - 0.12 0.07 0.07 0.07
EQUITY
RATIO
EBIT 18.75 11.95 16.26 16.51 13.98
MARGIN
NET 15.40 11.26 16.37 24.78 12.02
PROFIT
MARGIN

DEBT EQUITY RATIO

0.14

0.12

0.1

0.08

0.06

0.04

0.02

0
MARCH ‘19 MARCH ‘20 MARCH ‘21 MARCH ‘22 MARCH ‘23

INTERPRETATION:

• As seen in the above line chart, the company has a steady debt position with 0.07 debt-
equity ratio which shows that the company has a decent debt position.

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 EBIT & NET PROFIT MARGIN
30

25

20

15

10

0
MARCH ‘19 MARCH ‘20 MARCH ‘21 MARCH ‘22 MARCH ‘23

EBIT MARGIN NET PROFIT MARGIN

INTERPRETATION:

• As seen in the above line chart, the company has a decent EBIT and Net Profit margins
with few ups and downs in some financial years.

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SUN PHARMA:
RATIOS MARCH MARCH MARCH MARCH MARCH
‘23 ‘22 ‘21 ‘20 ‘19
DEBT 0.32 0.20 0.26 0.24 0.26
EQUITY
RATIO
EBIT 23.09 9.41 18.13 15.31 10.39
MARGIN
NET 8.12 -0.64 16.71 25.62 7.92
PROFIT
MARGIN

DEBT EQUITY RATIO

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
MARCH ‘19 MARCH ‘20 MARCH ‘21 MARCH ‘22 MARCH ‘23

EBIT & NET PROFIT MARGIN

30

25

20

15

10

0
MARCH ‘19 MARCH ‘20 MARCH ‘21 MARCH ‘22 MARCH ‘23
-5

EBIT MARGIN NET PROFIT MARGIN

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INTERPRETATION:
• As seen in the above line chart, the company has a decent debt-equity ratio which
signifies a steady debt position of the company. In FY 2022-23, the company reported
its highest debt-equity ratio.
• The EBIT margin has constantly improved but in one financial year, the company
experienced a decline in its EBIT margin.
• The net profit margin of the company has experienced a significant decline in two
financial years. In other financial years, the company experienced growth in its net
profit margin.

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 PART 3: IMPACT OF CAPEX
DR. REDDY’S LABORTORIES:
FINANCIAL YEARS AMOUNT OF CAPEX (₨ IN MLN)
FY 2018-19 7143
FY 2019-20 4850
FY 2020-21 7714
TOTAL 19707

TOTAL CAPEX
9000
8000
7000
6000
5000
4000
3000
2000
1000
0

FY 2018-19 FY 2019-20 FY 2020-21

IMPACT ON ITS PERFORMANCE:

PARTICULARS FY 21-22 (₨ IN MLN) FY 22-23 (₨ IN MLN)
SALES 138864 162989
NET PROFIT 16232 26128
EARNING PER SHARE 97.85 157.37

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 CAPEX IMPACT ON FY 2021-22 & 2022-23
FY 2021-22 FY 2022-23

162989
138864

26128
16232

157.37
97.85
SALES NET PROFIT EARNING PER SHARE

INTERPRETATION:
This capex had a positive impact on the company’s performance for the following reasons:

1. The company experienced a significant growth in its sales and revenue from operations
after expanding its business because of this capex as seen in the above graph.
2. The company’s net profits also showed improvement after this capex which signifies
that this capex helped in generating revenue and higher profits for the company.
3. This capex took two years of time to show its impact on the performance of the
company and initially the profits went down but in the subsequent year it exponentially
grew.
4. This capex also had a major positive impact on the earnings per share of the company.
It helped the company to increase its earnings per share and fulfill the wealth
maximization objective of its shareholders.
5. Major factors that affected pharma industry during 2021-22 were covid-19, stiff
competition, escalation in raw material cost, research & development expenditure, war
between Russia and Ukraine, and problems in supply chain.

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SUN PHARMA:

FINANCIAL YEARS AMOUNT OF CAPEX (₨ IN MLN)

FY 2018-19 7918
FY 2019-20 4644
FY 2020-21 5387
TOTAL 17949

TOTAL CAPEX
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
FY 2018-19 FY 2019-20 FY 2020-21

IMPACT ON ITS PERFORMANCE:

PARTICULARS FY 21-22 (₨ IN MLN) FY 22-23 (₨ IN MLN)

SALES 155859 208121
NET PROFIT (999.9) 16907
EARNING PER SHARE (0.4) 7.0

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 CAPEX IMPACT ON FY 2021-22 & 2022-23
FY 2021-22 FY 2022-23

208121
155859

16907

7
-0.4
-999.9

SALES NET PROFIT EARNING PER SHARE

INTERPRETATION:
This capex had a positive impact on the company’s performance for the following reasons:

1. The company experienced a significant growth in its sales and revenue from operations
after expanding its business because of this capex as seen in the above graph.
2. The company’s net profits also showed improvement after this capex which signifies
that this capex helped in generating revenue and higher profits for the company.
3. This capex took two years of time to show its impact on the performance of the
company and initially there were no profits but in the subsequent year it exponentially
grew.
4. This capex also had a major positive impact on the earnings per share of the company.
It helped the company to increase its earnings per share from a negative EPS to a
positive EPS and partially fulfill the wealth maximization objective of its shareholders.
5. Major factors that affected pharma industry during 2021-22 were covid-19, stiff
competition, escalation in raw material cost, research & development expenditure, war
between Russia and Ukraine, and problems in supply chain.

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 REFERENCES & BIBLIOGRAPHY
• https://sunpharma.com/
• https://www.drreddys.com/
• https://www.moneycontrol.com/

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