You are on page 1of 54

Roll no.

26
35 122 126 128 148

Name Gadhiya Amit


Italiya Bathani Chauhan Jaydeep Nilesh Vipul

Chodvadiya Ashish Gadhiya Chirag

The Indian Pharmaceutical Industry today is in the front rank of Indias science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology a highly organized sector, the Indian Pharma Industry is estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually. It ranks very high in the third world, in terms of technology, quality and range of medicines manufactured From simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now made indigenously.

Top 20 Biopharmaceutical & Biotechnology companies in India, as of 2011 Rank Company Revenue 2011 (Rs crore) 1 Biocon 1483 2 Serum Institute of India 1041 3 Panacea Biotec 928.41 4 Nuziveedu Seeds Private Limited 610 5 Reliance Life Sciences 490 6 Quintiles 476.25 7 Novo Nordisk 462 8 Rasi Seeds 371.88 9 Mahyco 364.9 10 Trans Asia 350 11 Ankur Seeds 325 12 Syngene International 318 13 Bharat Biotech International 298.34 14 Indian Immunologicals Limited 283 15 Krishidhan Seeds 276.13 16 Shantha Biotechnics 272 17 Novozymes 242 18 Bharat Serums 226 19 Jubilant Lifesciences 210 20 Eli Lilly and Company 204

THE GROWTH SCENARIO: India's US$ 3.1 billion pharmaceutical industry is growing at the rate of 14 percent per year. It is one of the largest and most advanced among the developing countries. Over 20,000 registered pharmaceutical manufacturers exist in the country. The domestic pharmaceuticals industry output is expected to exceed Rs260 billion in the financial year 2002, which accounts for merely 1.3% of the global pharmaceutical sector. Of this, bulk drugs will account for Rs. 54 billion (21%) and formulations, the remaining Rs 210 billion (79%). In financial year 2001, imports were Rs. 20 billion while exports were Rs87 billion.

Advantage To India

1.

Competent Work Force

2.
3. 4. 5.

Cost Effective Chemical Systems


Information & technology Globalization Consolidation

World Wide Pharmaceutical Drug Production

Indian Pharma Industry An Overview The Indian Pharma industry has gained significant traction in the last few years. It is currently on a high growth trajectory and rapidly integrating with the global industry. This integration is opening up tremendous new opportunities for Indian Pharma across all segments including generics, research and development of New Chemical Entities (NCE) and Contract Research and Manufacturing Services (CRAMS). Indian companies are now well positioned to explore these opportunities as they adopt effective and efficient business models that are spread across one or more of each of these segments.

Cipla
Cipla Limited

Type Traded as

Public BSE: 500087 NSE: CIPLA

Industry Founded

Pharmaceuticals 1935

Headquarters Mumbai, Maharashtra, India


Key people Products Revenue Net income Y. K. Hamied (CMD), Chairman Pharmaceuticals and diagnostics 5,717.72 crore (US$1.26 billion) (2010) 1,082.59 crore (US$238.17 million) (2010) Employees Website over 16000 www.cipla.com

Fundamental analysis is the study of economic, industry, and company conditions in an effort to determine the value of a company's stock. Fundamental analysis typically focuses on key statistics in a company's financial statements to determine if the stock price is correctly valued. Fundamental analysis is a method used to determine the value of a stock by analyzing the financial data that is 'fundamental' to the company. Fundamental analysis is really a logical and a systematic approach to estimating the future dividend and share price it is based on the basic premise that share price is determined by number of fundamental factor relating to the economy, industry and company. Fundamental analysis thus provide and analytical framework for rational decision-making. The analytical framework is known as EIC framework, or Economic Industry and Company analysis. Thus fundamental analysis insist that no one should purchaser or sell a share on the basis of tips and rumor but on the basis of detailed analysis and information.

Fundamental analysis includes: 1. Economic analysis 2. Industry analysis 3. Company analysis

1. ECONOMIC ANALYSIS The first step to this type of analysis includes looking at the macroeconomic situation. Key Indicators of Economy 1. Industrial Growth 2. Core infrastructure industries 3. Inflation 4. Money indicator 5. Stock market 6. Fiscal indicator 7. Merchandise Trade 8. Foreign investment 9. Foreign exchange reserves 10. Exchange rate

GDP growth forecast for selected countries 2000-2050 GDP - Composition by Sector:Agriculture: 17.6% Industry: 29% Services: 53.4%

2. INDUSTRY ANALYSIS
The next step taken in analysis in this category is looking at the industry as a whole. Industry Analysis includes 1. 2. 3. 4. 5. Total sales, Price levels, Competition and their effects, Foreign competition, Any entrances or exits from the industry.

Once the economic analysis is made the investor would look into the industry group which appears promising in the coming year or years. Each Industry has a life cycle of its own. As per industry life cycle theory, three stages of its life can be discerned viz. Pioneering stage, expansion stage and stagnation stage. The industry analysis should cover policy statements of the government from time to time current developments in the industry, technological changes, market conditions, capacity build-ups and utilization levels, labor problems, competitions and foreign investment interest, global state of the industry and export potential.

3. COMPANY ANALYSIS: Last in this process of studying the fundamentals includes looking at the company individually. Company Analysis includes

1. 2. 3. 4. 5.

Sales, Prices, New products, Earnings, Any chance of debt or equity occurring.

Share prices depends partly on its intrinsic worth for which financial analysis of a company is necessary to help the investor to decide whether to buy or not the share of the company. The soundness and intrinsic worth of a company is known only by an indepth fundamental analysis. The market price of a share depends among other parameters on the sound fundamentals of the company, the financial and operational efficiency and the profitability of the company. An investor needs to know the performance of the company, its intrinsic worth as indicated by some parameters like book value, earning per share, P/E multiple etc.

MEANING OF RATIO:-

A ratio is only a comparison of the numerator with the denominator. The tern ratio refers to the numerical or quantitative relationship between two figures and obtained by dividing the former by the latter. Ratio analysis is an important and age old technique of financial analysis. The data given in financial statements ratio are relative form of financial data and very useful techniques to cheek upon the efficiency of a firm. Some ratio indicates the trend or progress or downfall of the firm. Aid to measure general efficiency: Ratios enable the mass of accounting data to be summarized and simplified.

Aid to measure financial solvency: They point out firms liquidity position to meet its short-tern obligation and long-tern solvency.

1. Profitability Ratio 1. Gross Profit Ratio Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales. Formula: Gross Profit Ratio = (Gross profit / Net sales) 100 Company/Year 2007 2008 2009 2010 2011 2012 Average

Cipla

24.27

17.16

20.88

21.68

16.65

19.15

19.96

Gross Profit Ratio


30 25 20 15 10 5 0 Cipla

2007 24.27

2008 17.16

2009 20.88

2010 21.68

2011 16.65

2012 19.15

Here, the average gross profit Ratio of the 19.96 % for Cipla. In the year 2007 Gross profit ratio is 24.27 which is the highest in the last six years. And in 2011 the ratio is 16.65 which is the lowest in the last six years.

2. Net Profit Ratio Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage.

Formula:-

Net Profit Ratio = (Net profit / Net sales) 100


Company/Year Cipla 2007 18.41 2008 16.43 2009 14.58 2010 18.97 2011 14.98 2012 15.92 Average 16.55

Net Profit Ratio


20 15 10 5 0 Cipla 2007 18.41 2008 16.43 2009 14.58 2010 18.97 2011 14.98 2012 15.92

This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while interpreting the ratio it should be kept in minds that the performance of profits also be seen in relation to investments or capital of the firm and not only in relation to sales. Here, the average NP Ratio is for the 16.55 %. In the year 2010 it was 18.97 % which is the highest in last six years. And the lowest was 14.58 % in the year 2009.

3. Operating Profit Ratio Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage. Operating ratio measures the cost of operations per dollar of sales. This is closely related to the ratio of operating profit to net sales. Formula: - Operating Ratio = [(Cost of goods sold + Operating expenses) / Net sales] 100
Company/Year Cipla 2007 23.07 2008 20.27 2009 23.78 2010 24.63 2011 20.27 2012 22.89 Average 22.48

Operating Profit Ratio


25 20 15 10 5 0 2007 23.07 2008 20.27 2009 23.78 2010 24.63 2011 20.27 2012 22.89

Cipla

Here, the average operating Ratio is of the company is 22.48 %. And the highest operating ratio is 24.63 % in the year 2010. And the lowest ratio is 20.27 % in the year 2008 and as well as 2011 also.

2. Liquidity & Solvency Ratios:


1. Current Ratio
Current ratio may be defined as the relationship between current assets and current liabilities. This ratio is also known as "working capital ratio". It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is calculated by dividing the total of the current assets by total of the current liabilities. Formula: Current Ratio = Current Assets / Current Liabilities

Company/Year Cipla

2007 2.65

2008 2.62

2009 1.81

2010 2.17

2011 1.94

2012 3.12

Average 2.39

Current Ratio
3.5 3 2.5 2 1.5 1 0.5 0 Cipla

2007 2.65

2008 2.62

2009 1.81

2010 2.17

2011 1.94

2012 3.12

Interpretation: A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time and when they become due. On the other hand, a relatively low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time without facing difficulties. A ratio equal to or near 2:1 is considered as a standard or normal or satisfactory. Here, the average Current Ratio of the company was 2.39 %. And it was exactly near about the standard of current ratio which is 2:1. So we can say that satisfactory level of Current ratio is satisfied.

2. Quick Ratio
Liquid ratio is also termed as "Liquidity Ratio",Acid Test Ratio" or "Quick Ratio". It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm to pay its short term obligations as and when they become due.

Formula: -

Liquid Ratio = Liquid Assets / Current Liabilities

Company/Year

2007

2008

2009

2010

2011

2012

Average

Cipla

1.76

1.88

1.93

1.57

1.56

1.89

1.77

Quick Ratio
2 1.5 1 0.5 0 Cipla 2007 1.76 2008 1.88 2009 1.93 2010 1.57 2011 1.56 2012 1.89

Interpretation: The quick ratio/acid test ratio is very useful in measuring the liquidity position of a firm. It measures the firm's capacity to pay off current obligations immediately and is more rigorous test of liquidity than the current ratio. It is used as a complementary ratio to the current ratio. Liquid ratio is more rigorous test of liquidity than the current ratio because it eliminates inventories and prepaid expenses as a part of current assets. Usually a high liquid ratio an indication that the firm is liquid and has the ability to meet its current or liquid liabilities in time and on the other hand a low liquidity ratio represents that the firm's liquidity position is not good. As a convention, generally, a quick ratio of "one to one" (1:1) is considered to be satisfactory. Here, the average quick ratio is 1.77 %. And the highest quick ratio was 1.93 % in the year 2009. And the lowest ratio was 1.56 % in the year 2011. And the quick ratio is satisfied.

3. Debt-Equity Ratio
Debt-to-Equity ratio indicates the relationship between the external equities or outsiders funds and the internal equities or shareholders funds. Formula: Debt Equity Ratio = External Equities / Internal Equities

Or Outsiders funds / Shareholders funds


Company/Year 2007 2008 2009 2010 2011 2012 Average

Cipla

0.04

0.15

0.22

--

0.07

--

0.14

Interpretation:-

Debt to equity ratio indicates the proportionate claims of owners and the outsiders against the firms assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. However, the interpretation of the ratio depends upon the financial and business policy of the company. A ratio of 1:1 is usually considered to be satisfactory ratio although there cannot be rule of thumb or standard norm for all types of businesses. Here, the average Debt-Equity Ratio is of Cipla is 0.14 %. And the highest ratio was 0.22 % in the year 2009. And the lowest ratio was 0.04 % in the year 2007. It was near about 0 in 2010 as well as 2012.

4. Long term Debt-Equity Ratio


It is also known as external internal equity ratio. It is determined to ascertain soundness of the long term financial policies of the company.

Formula: -

Long term Debt Equity Ratio = Total Long Term Debts / Total Long Term Funds Or Total Long Term Debts / Shareholders Funds
Company/Year Cipla 2007 0.04 2008 0.15 2009 0.02 2010 -2011 -2012 -Average 0.10

Interpretation: Here, the average Long-term Debt Equity Ratio is for company was 0.10%. and the highest ratio was 0.15 % in the year 2008 and the lowest ratio was 0.02 % in the year 2009. In the last 3 years we can say that there is no long term debt in company.

3. Turn-over Ratios:
1. Inventory Turn-over Ratio Stock turnover ratio and inventory turnover ratio are the same. This ratio is a relationship between the cost of goods sold during a particular period of time and the cost of average inventory during a particular period. It is expressed in number of times. Stock turnover ratio / Inventory turnover ratio indicates the number of time the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory. This ratio indicates whether investment in stock is within proper limit or not. Formula:-

Inventory Turnover Ratio = Cost of goods sold / Average inventory at cost Inventory Turnover Ratio = Net Sales / Average Inventory at Cost Inventory Turnover Ratio = Net Sales / Average inventory at Selling Price Inventory Turnover Ratio = Net Sales / Inventory

Company/Year Cipla

2007 3.71

2008 3.83

2009 3.79

2010 4.18

2011 3.73

2012 3.88

Average 3.85

Interpretation: Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a high inventory turnover/stock velocity indicates efficient management of inventory because more frequently the stocks are sold, the lesser amount of money is required to finance the inventory. A low inventory turnover ratio indicates an inefficient management of inventory. A low inventory turnover implies over-investment in inventories, dull business, poor quality of goods, stock accumulation, accumulation of obsolete and slow moving goods and low profits as compared to total investment. Here, the average Inventory Turnover Ratio is 3.85 % and the highest ratio is 4.18 % in the year 2010 and the lowest ratio is 3.71 % in the year 2007.

2. Debtors Turn-over Ratio


Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year. Formula: Debtors Turnover Ratio = Total Sales / Debtors
Company/Year
Cipla

2007
3.74

2008
3.47

2009
3.24

2010
3.31

2011
4.14

2012
4.63

Average
3.76

Interpretation: Here, the average Debtors Turnover Ratio is for the company was 3.76 % and the highest ratio was 4.63 % in 2012 and the lowest ratio was 3.24 % in the year 2009.

3. Fixed Assets Turn-over Ratio


Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Formula:Fixed Assets Turnover Ratio = Cost of Sales / Net Fixed Assets
Company/Year Cipla 2007 2.75 2008 1.91 2009 1.94 2010 1.94 2011 1.61 2012 1.62 Average 1.96

Interpretation: Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means underutilization of fixed assets. Here, the average Fixed Assets Turnover Ratio is for company was 1.96 %. And the highest ratio was 2.75 % in the year 2007 and lowest ratio was 1.61 % in the year 2011.

4. Valuation Ratios:
1. Dividend payout Ratio
Dividend payout ratio is calculated to find the extent to which earnings per share have been used for paying dividend and to know what portion of earnings has been retained in the business. It is an important ratio because ploughing back of profits enables a company to grow and pay more dividends in future.

Formula: -

Dividend Payout Ratio = Dividend per Equity Share / Earnings per Share

Company/Year Cipla

2007 27.22

2008 25.92

2009 23.41

2010 17.31

2011 27.23

2012 16.60

Average 22.95

Interpretation: Here, the average Dividend Payout Ratio is for the company 22.95 %. The highest ratio was 27.22 % in the year 2007 and the lowest was 16.60 % in the year 2012. From the above we can saw that company making reserve by 77 % of EPS so we can say that company give priority to reserve than dividend.

2. Earnings per Share An earnings per share ratio (EPS Ratio) is a small variation of return on equity capital ratio and is calculated by dividing the net profit after taxes and preference dividend by the total number of equity shares. Formula: (Net profit after tax Preference dividend) / No. of equity shares (common shares)
Company/Year Cipla 2007 8.59 2008 9.02 2009 9.99 2010 13.47 2011 11.96 2012 14.00 Average 11.17

Here, the average Earning per Share ratio of company was 11.17 %. And the highest ratio was 14 % in the year 2012 and the lowest ratio was 8.59 % in the year 2007.

Strengths
1. Low cost of production. 2. Large pool of installed capacities 3. Efficient technologies for large number of Generics. 4. Large pool of skilled technical manpower. 5. Increasing liberalization of government policies.

Weakness

1. 2. 3. 4. 5.

Fragmentation of installed capacities. Low technology level of Capital Goods of this section. Non-availability of major intermediaries for bulk drugs Lack of experience to exploit efficiently the new patent regime. Very low level of Biotechnology in India and also for New Drug Discovery Systems. Lack of experience in International Trade. Low level of strategic planning for future and also for technology forecasting.

6. 7.

Opportunities

1. Growing attention for health. 2. New diagnoses and new social diseases. 3. Spreading prophylactic approaches. 4. Saturation point of market is far away. 5. New therapy approaches.

6. New delivery systems.


7. Spreading attitude for soft medication (OTC drugs). 8. Easier international trading.

Threats

1. 2. 3. 4. 5. 6.

High Cost of discovering new products and fewer discoveries. Stricter registration procedures. High entry cost in newer markets. Competition, particularly from generic products. More potential new drugs and more efficient therapies. Switching over form process patent to product patent.

Here, the average gross profit Ratio of the 19.96 % for Cipla. In the year 2007 Gross profit ratio is 24.27 which is the highest in the last six years. And in 2011 the ratio is 16.65 which is the lowest in the last six years. Here, the average NP Ratio is for the 16.55 %. In the year 2010 it was 18.97 % which is the highest in last six years. And the lowest was 14.58 % in the year 2009.

Here, the average operating Ratio is of the company is 22.48 %. And the highest operating ratio is 24.63 % in the year 2010. And the lowest ratio is 20.27 % in the year 2008 and as well as 2011 also.
Here, the average Current Ratio of the company was 2.39 %. And it was exactly near about the standard of current ratio which is 2:1. So we can say that satisfactory level of Current ratio is satisfied. Here, the average quick ratio is 1.77 %. And the highest quick ratio was 1.93 % in the year 2009. And the lowest ratio was 1.56 % in the year 2011. And the quick ratio is satisfied. Here, the average Debt-Equity Ratio is of Cipla is 0.14 %. And the highest ratio was 0.22 % in the year 2009. And the lowest ratio was 0.04 % in the year 2007. It was near about 0 in 2010 as well as 2012.

Here, the average Long-term Debt Equity Ratio is for company was 0.10%. and the highest ratio was 0.15 % in the year 2008 and the lowest ratio was 0.02 % in the year 2009. In the last 3 years we can say that there is no long term debt in company.
Here, the average Inventory Turnover Ratio is 3.85 % and the highest ratio is 4.18 % in the year 2010 and the lowest ratio is 3.71 % in the year 2007. Here, the average Debtors Turnover Ratio is for the company was 3.76 % and the highest ratio was 4.63 % in 2012 and the lowest ratio was 3.24 % in the year 2009. Here, the average Fixed Assets Turnover Ratio is for company was 1.96 %. And the highest ratio was 2.75 % in the year 2007 and lowest ratio was 1.61 % in the year 2011. Here, the average Dividend Payout Ratio is for the company 22.95 %. The highest ratio was 27.22 % in the year 2007 and the lowest was 16.60 % in the year 2012. From the above we can saw that company making reserve by 77 % of EPS so we can say that company give priority to reserve than dividend. Here, the average Earning per Share ratio of company was 11.17 %. And the highest ratio was 14 % in the year 2012 and the lowest ratio was 8.59 % in the year 2007.

This is the final and most important stage of the entire project. The main objective of my project ends with this Stage. This part will indicate to the investor, creditors, and shareholders each of the Companys overall operating efficiency and performance that will help them to make the most efficient investment decision. The final investment decision is given on the basis of ratio analysis. Thus, it will highly affect the investment decision. From the analysis of pharmaceutical company. I found that the financial position and the capital structure of the Cipla is stronger company. An earnings per share of the Cipla is also good position. So it is also good company for the earning per share for investors. But after that according to me it is advisable for the investing money in Cipla ltd. On the base of overall analysis.

Pharmaceutical company have lots of room to grow, no Invest in these types of industries helps the investors at long time.
Do not invest in inactive shares generally it is difficult to encase them. Before investing we should undertake a deeps study on the net sales, net profits in relations to equity capital employed &should attempt to forecast for the coming years. From the company point of view, the company should allow the investors to take part in board of directors meeting &gives maximum dividend to the shareholders.

Do not over pay for growth.


Do not invest in unlisted shares. The Investors should become cautious while investing for very long time. The investors should analyze the price movement. Economic performance is greatly affected to the performance of the industries of the country, so investors should know economic performance of the country while investing.

Web sites:1) General:a. http://www.wikipedia.org/ b. http://www.Moneycontrol.com/ c. www.economywatch.com 2) Company`s Web sites:www.cipla.com

Books& Other Material:1) Book:- Financial Management (Fifth Edition) Author: - M.Y. Khan & P.K. Jain Publication: - Himalaya publication house. 2) Book:- Management Accounting (Third Edition) Author: - R.S.N. Pillai & Bhagavathi Publication: - Sultan Chand & Co.

3) Magazine:-Fundamental analysis of pharmaceutical industries


Publication:- BSE training institute.

You might also like