Pharmaceutical industry

• Pharmaceutical industry, the discovery, development, and manufacture of drugs and medications
(pharmaceuticals) by public and private organizations.

• The modern era of the pharmaceutical industry—of isolation and purification of compounds, chemical
synthesis, and computer-aided drug design—is considered to have begun in the 19th century, thousands of
years after intuition and trial and error led humans to believe that plants, animals, and minerals contained
medicinal properties.

• The unification of research in the 20th century in fields such as chemistry and physiology increased the
understanding of basic drug- discovery processes.
 About Dr. Reddy's Laboratories Ltd

•Dr Reddy's Laboratories Ltd (DRL) is an integrated global pharmaceutical company, committed to providing
affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services

&Active Ingredients, Global Generics and Proprietary Produ cts - Dr. Reddy's offers a portfolio of products and

services including Active Pharmaceutical Ingredients (APIs), custom pharmaceutical services, generics,

biosimilars and differentiated formulations.

•Dr Reddy's Laboratories was incorporated in the year 1984 in Hyderabad. The company was established by
Dr Anji Reddy with an initial capital outlay of Rs 25 lakh.
 Aurobindo Overview

• Founded in 1986 by Mr. P. V. Ramprasad Reddy, Mr. K. Nityananda Reddy and a small
group of highly committed professionals, Aurobindo Pharma was born of a vision. The
company commenced operations in 1988-89 with a single unit manufacturing Semi-
Synthetic Penicillin (SSP) at Pondicherry.
• Aurobindo Pharma became a public company in 1992 and listed its shares on the
Indian stock exchanges in 1995
 Capital Structure of DR REDDY’S
LABORATORIES
• The capital structure is the particular combination of debt and equity used
by a company to finance its overall operations and growth.
• Capital structure is how a company funds its overall operations and
growth.
• Debt consists of borrowed money that is due back to the lender,
commonly with interest expense.
• Equity consists of ownership rights in the company, without the need to
pay back any investment.
 CAPITAL STRUCTURE (DR REDDY's)
Years (Rs in crore)
Mar 2018 Mar 2017 Mar 2016 Mar 2015
Equity Share capital 83 82.9 85.3 85.2
Preferance share capital 0 0 0 0
Secured loans 69.3 70.7 85.7 86.2
deffered credit/hire purchase 63 59.7 74.7 77.5
long term borrowings -secured 6.3 11 11 8.7
total Unsecured Loans 2,445.90 485.2 993.8 2041.4
long term borrowings -unsecured 0.00 0 0.3 688.2
Loans from banks 2,445.90 485.2 993.8 1353.2
total Debt 2,515.20 555.9 1079.5 2127.6
• Dr.Reddy’s Laboratories Limited does carry debt.we can see that debt increased in 2017-18
from 2016-17 year.
• Equity share capital has increased since 2016-17 year .
 AUROBINDO PHARMA CAPITAL STRUCTURE (Aurobindo)
Years(incrores)
Mar 2018 Mar 2017 Mar 2016 Mar 2015
Equity share capital 58.59 58.59 58.52 22.2
Reserves and surplus 9923.99 8377.59 6807.33 5330.34
Preferences share capital 0 0 0 0
Debts
Secured loans 3653.83 2870.17 1002.71 1509.01
long term borrowings-secured 5624.7 4986.5 3091.9 6458.3
Long term borrowing unsecured 42074.7 25552.6 255.7 413.3
total debt 3653.83 2870.17 3751.91 2896.53

Interpretation:
Aurobindo Pharma Laboratory Limited does carry debt. we can see that debt increased in 2017-18 from
2016-17.
Equity share capital has increased from 2015 and after that it was constant.
 Comparison
• Incase of both the companies, debt has increased and debt can
lead the company to have tax advantages; interest payments
made as a result of borrowing funds may be tax deductible. Debt
also allows a company or business to retain ownership.
• Equity share capital remained same for both companies
 LEVERAGES
• The term ‘leverage’ is used to describe the ability of a firm to use
fixed cost assets or funds to increase the return to its equity
shareholders.
• In other words, leverage is the employment of fixed assets or funds
for which a firm must meet fixed costs or fixed rate of interest
obligation—irrespective of the level of activities attained, or the
level of operating profit earned.
 Types

• 1.Operational leverage: Operating leverage refers to the use of fixed operating costs such
as depreciation, insurance of assets, repairs and maintenance, property taxes etc. in the
operations of a firm. But it does not include interest on debt capital.
• 2. Financial leverage: Financial leverage is primarily concerned with the financial activities
which involve raising of funds from the sources for which a firm has to bear fixed charges
such as interest expenses, loan fees etc. These sources include long-term debt (i.e.,
debentures, bonds etc.) and preference share capital.
• 3.Combined leverage: Operating leverage shows the operating risk and is measured by the
percentage change in EBIT due to percentage change in sales. The financial leverage shows
the financial risk and is measured by the percentage change in EPS due to percentage
change in EBIT.
 LEVERAGES: DR REDDY’S
YEAR 2016-17

Contribution =Sales-Variable cost 7164

Financial leverage = EBIT/EBT 1.000241867
EBIT =Net profit +intrest rate + Tax rate 9470.29
EBT 9468
Operation leverage = contribution/EBIT 0.756471027
Combined leverage =OL*FL 0.756653992

YEAR 2017 13,769

Contribution 1.000117436
Financial leverage 19502.29
EBIT 19500
EBT 0.706019652
Operation leverage 5.12881E-05
Combined leverage 1.000234886