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FINANCIAL REPORTING AND ANALYSIS


Project: GlaxoSmithKline Pharma Ltd. vs. Sanofi India
Ltd. (formerly Aventis Pharma)

Program and Batch: Post Graduate Diploma In Management 2014-16
Term: I
Course Name: Financial Reporting and Analysis
Name of the Faculty: Dr. Sachin Choudhary
Topic/Title GlaxoSmithKline Pharma Ltd. vs. Sanofi India Ltd.
(formerly Aventis Pharma)
Revised or Original Write-up: Original
Group Number: 4
Contact No. and Email of Group
Coordinator:
Kushal Kapoor (9411917935)
Group Members SL. Roll No. Name
1. 1401-01019 Animesh Sanyal
2. 1401-03050 Chirag Garg
3. 1401-01052 Esheta Dua
4. 1401-02068 Kushal Kapoor
5. 1401-03113 Nikhila Vijay
6. 1401-01133 Rishabh Rawat
7. 1401-03147 Satyapira Dash
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Contents

1. I ntroduction

About Pharmaceutical Industry in India... 3
Company Profiles...3

2. Financial Analysis of Companies

Profit and Loss Account Analysis 4
Liquidity Ratios Analysis... ..7
Leverage or Capital Structure Ratios Analysis8
Profitability Ratio related to Sales Analysis. 9
Profitability Ratio from Equity Shareholders viewpoint Analysis 9
Profitability Ratio related to Investments Analysis.. 11


3. Recommendations and Conclusions..12
4. References ...13












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ABSTRACT

This document contains supporting data for the presentation on Financial Statement Analysis
for GlaxoSmithKline Pharma Ltd and Sanofi India Ltd. (formerly Aventis Pharma) for the period
of five years i.e. Dec09 to Dec 13. The team has obtained publicly available annual financial
data from www.indianinfoline.com website.



INTRODUCTION

About Pharmaceutical Industry in India

Pharmaceutical industry in India has witnessed a resilient growth over the past few years with a
turnover of US $ 1 billion in 1990 to US $ 20 billion. India have exported worth US $ 8 billion
drugs to 200 plus countries around the globe. The industry ranks 3
rd
in terms of volume and 14
th

in terms of value globally.

Company Profiles

GlaxoSmithKline Pharma Ltd. was incorporated in 1924 in India and is one of the world's
leading research-based pharmaceutical and healthcare companies. Globally, the company has a
26.4 billion, leading, research-based healthcare and pharmaceutical company. In India, they
are one of the market leaders with a turnover of Rs. 3021 crore and a share of 4.2%. The
company's product portfolio includes prescription medicines and vaccines. Their prescription
medicines range across therapeutic areas, such as anti-infective, dermatology, gynaecology,
diabetes, oncology, cardiovascular disease and respiratory diseases.
Sanofi India Ltd. was established in May 1956 under the name Hoechst Fedco Pharma Private
Limited. It has aligned itself with India's healthcare needs by building expertise, capability &
capacity, through continued investments, strategic partnerships, and a shared commitment
towards patients. Sanofi dispenses medicines for the nursing of patient in various fields as
cardiology, thrombosis, oncology, diabetes, central nervous system, internal medicine and
consumer healthcare.


Sources: Department of Pharmaceutical Website, GSK Website and Sanofi Website, accessed on
10
th
Aug14
http://pharmaceuticals.gov.in/aboutus.pdf
http://www.gsk-india.com/about-company.html
http://www.sanofiindialtd.com/l/pw/en/layout.jsp?scat=9D37C496-6764-4E76-BE39-
20B4C5D6D1A6
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FINANCIAL ANALYSIS OF THE COMAPNIES
Profit and Loss Account Analysis:


Referring to above picture, total income for all three have increased i.e the two companies and the
industry. Over the period of 5 years, for Sanofi it has increased by 63% and for GSK Pharma by 37%
approx. Clearly it states that Sanofi India has performed better in terms of growth than GSK Pharma.



Total Expenditure means spending done by the company in manufacturing the finished goods.
Gathering the analysis from above chart, over the period of 5 years, GSK Pharma raised its
expenditure by 63% and Sanofi India by 56%. Taking total expenditure and total income
increase into account, Sanofi India has outperformed GSK Pharma in P&L Analysis.
0
5000
10000
15000
20000
DEC 09(12) DEC 10(12) DEC 11(12) DEC 12(12) DEC 13(12)
1267.93 1420.54
1972.12 1906.79 2077
906.34 1,032.03 1,151.52 1,270.16 1,420.43
8,148.72
14,217.93
9,850.70
8,905.19
18,321.27
Total Expenditure
Glaxo Sanofi Industry
2057.93 2279.56 2591.92 2771.2 2826.21
1,165.22
1,364.40
1,467.07
1,623.14 1,901.57
10,001.69
14,180.58
12,349.97
11,449.32
18,852.62
0
5000
10000
15000
20000
Dec 09(12) Dec 10(12) Dec 11(12) Dec 12(12) Dec 13(12)
Total Income
Glaxo Sanofi Industry
Page 5 of 13

Profit before Depreciation and Tax v/s Profit before Tax





Checking the data from above 2 graphs, Sanofi India assets depreciation rate has sharply risen
while on the other hand GSK Pharma shows constant depreciation on their assets. A conclusion
that can be drawn can be that Sanofi India might have bought new assets and also might have
changed their method for evaluating depreciation to WDV Method. This conclusion can be
drawn because the assets for both the companies increases approximately at the same rate. In
2013, the gross profits for GSK Pharma fell sharply against sharp increase in Sanofi India Profit.
Also, Sanofi India have shown constant Gross profit growth as compared to GSK Pharma over
the 5 years period. This shows that Sanofi India is more stable as compared to GSK Pharma.

789.63
858.4
619.47
864.4
749.2
258.81
329.48
315.13
351.58
480.72
0
200
400
600
800
1000
Dec 09(12) Dec 10(12) Dec 11(12) Dec 12(12) Dec 13(12)
PBDT
Glaxo Sanofi
773.26
840.77
599.06
846.56
729.32
241.47
309.74
283.98
261.71
388.46
0
200
400
600
800
1000
Dec 09(12) Dec 10(12) Dec 11(12) Dec 12(12) Dec 13(12)
PBT
Glaxo Sanofi
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Profit after Tax for GSK Pharma and Sanofi India




Same pattern have been noticed in Net Profit chart as in gross profit chart. In 2013, Sanofis
India has shown consistent growth and sharp rise in profits. GSK Pharma showed good growth
before 2013 but its net profit fell sharply. From investor point of view sharp decrease in GSK net
profit in 2013 is a sign of caution to invest in GSK Pharma.












502.51
580.73
591.27
673.82
482.9
157.58 155.22
191.19
176.71
239.96
0
100
200
300
400
500
600
700
800
Dec 09(12) Dec 10(12) Dec 11(12) Dec 12(12) Dec 13(12)
PAT
Glaxo Sanofi
Page 7 of 13

Liquidity Ratios:

1. Current Ratio:

Current Ratio provide us details how companies have utilized their assets in short run. Decline
in Sanofi India CR over 5 years shows they have not utilized their current assets efficiently in
short run. Moreover, GSK pharma has a stable current ratio throughout this period. Also as the
industry CR increases we can say that GSK Pharma have high current assets to cover their short
term liabilities than Sanofi.

2. Debtors Turnover Ratio:



A method used to determine a firm's stability in collecting debts as well as extending credit.
GSK Pharma high ratio suggests that either GSK has lot of free cash or that its collection of
accounts receivable and credit extension is very efficient. A low ratio for Sanofi tells us that the
company credit policies are not efficient. It should re-evaluate its policies so that timely
collection of imparted credit can be fulfilled.
3 3
3.1 3.1
3.3
2.4
1.9
2
0.97
1.57
3.35
0
0.5
1
1.5
2
2.5
3
3.5
4
2010 2011 2012 2013
Glaxo Sanofi Industry avg.
24.7
26.8
36.7
42.8
17.1
15.9 16.2
19.6
11.69
9.9
8.02
0
5
10
15
20
25
30
35
40
45
2013 2012 2011 2010
Glaxo
Sanofi
Industry avg.
Page 8 of 13

Leverage or Capital Structure Ratios
1. Debt to Capital ratio

The measure tells us that how much a companys capital worth so that it can cover the whole
debt and shareholders capital. In the year 2010, Sanofi and GSK Pharma were having no debts.
After 2010, GSKs Total assets have shown sharp increase as compared to Sanofi India which
implies that GSK is in a better position to cover its debt than Sanofi India.

2. Interest Coverage ratio


This ratio is useful for long term lenders who prefer this ratio to be large enough to cover the
Interest on debts that the company has to pay to them. Both the companies have high ratio
because both the companies have very little or negligible debt which can amount to any
interest.
1.00
0.89 0.891
0.889
1
0.98
0.984
0.981
0.998
0.912
0.91
0.89
0.82
0.84
0.86
0.88
0.90
0.92
0.94
0.96
0.98
1.00
1.02
2010 2011 2012 2013
Glaxo
Sanofi
Industry avg.
1,357.10
2,793.70
0 0
82
677.1
187.9
925.9
4.55
101.84
3,704.85
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
2010 2011 2012 2013
Glaxo
Sanofi
Industry avg.
Page 9 of 13

Profitability Ratio related to Sales
1. Operating Profit Margin


Till 2011, OPM for GSK Pharma have fallen sharply compared to Sanofi. So, Sanofi is
experiencing less expenses compared to GSK Pharma. Moreover showing a rise in 2012, the
OPM again drops in 23013 for GSK. On the other hand, Sanofi India has a consistent OPM with
the industry. In 2013, there operating expenses have also declined.

Profitability ratios from Equity Shareholders Viewpoint
1. Earnings Per Share(EPS)



The ratio is used by share investors to form their portfolio of shares. It provides the money
return on each share. Gathering the data from the chart, Sanofi Indias high EPS concludes that
investors will be investing in Sanofi Indias share as compared to GSK. Sanofi India share will
give higher ROE as compared to GSK Pharma.
0.41
0.26
0.33
0.294
0.306
0.242
0.224
0.27
0.306
0.235
0.266
0.29
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
2010 2011 2012 2013
Glaxo
Sanofi
Industry avg.
60.3
43.7
60.6
50.9
91.1
77.9
71.4
107.3
0
50
100
150
200
2010 2011 2012 2013
EPS
Glaxo Sanofi
Page 10 of 13

2. Dividend Yield

The measure of how much money per share shareholders are getting as a dividend return.
From the above chart, we can conclude that it is a mirror image from 2010 to 2013 for the two
companies. As Dividend Yield of Sanofi India is 1.67 times of GSK in 2013, shareholders would
invest more in Sanofi as compared to GSK to yield a higher return.

3. Price Earnings ratio(P/E)

P/E tells a future growth of the company. A high P/E ratio tells us company is looking to grow in
future. Looking at the above picture, it brings to our notice that GSK Pharma have a higher P/E.
Also, the EPS for GSK pharma is low due to which P/E is higher. So from an investor point of
view he/she should take other ratios into consideration to invest in a company.
1.7
2.3 2.3
1.7
2.8
1.4 1.4
2.8
0
0.5
1
1.5
2
2.5
3
2010 2011 2012 2013
Divindend Yield
Glaxo Sanofi
38.9
44.3
35.7
58.9
21.4
29.8
32.1
25.8
0
10
20
30
40
50
60
70
2010 2011 2012 2013
Glaxo Sanofi
Page 11 of 13

Profitability Ratios related to Investments:
1. Return on Equity (ROE)

From the graph it is evident that GSK has gathered more profit than Sanofi in 3 years. Also,
having higher ROE than industry average shows that both companies are performing well. GSK
saw a dip in profit in 2013 which had made an impact on their ROE. So, going by the latest ROE
details Sanofi India has invested its funds efficiently compared to GSK Pharma which have
generated good returns.

2. Return on Assets(ROA)

Return on Assets tell us how efficiently a company is using its assets to generate profits.
Looking at the chart above, both companies have a stable ROA for 3 years. In 2013, GSK
Pharmas ROA dropped significantly and Sanofi India have shown a slight increase in ROA. In
30.6 30.7
34.3
24.9
16.2
18.2
15.4
21
-3.72
11.91
13.56
-10
-5
0
5
10
15
20
25
30
35
40
2010 2011 2012 2013
Glaxo
Sanofi
Industry avg.
0.31
0.29
0.305
0.213
0.159
0.177
0.149
0.18
0.161
0.314
0.30
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
2010 2011 2012 2013
Glaxo
Sanofi
Industry avg.
Page 12 of 13

terms of data, Sanofi India have made more profits on their assets as compared to GSK Pharma
in 2013.
Recommendations & Conclusions:

Generally accepted accounting principles (GAAP) were adopted and practiced in both
the firms GSK Pharma and Sanofi India.

GSK Pharma has EPS of 50.9 in 2013 whereas Sanofi has EPS of only 107.3 which
indicates in the higher net profit for Sanofi. From 2012-13, Sanofi has increased its net
sales by 14% whereas GSK Pharma sales declined by 3%. Also, market sentiment have
supported this as P/E ratio for GSK has come down from 32.1 to 25.8 and Sanofi has
increased from by 35.7 to 58.9. Clearly Sanofi India has been very efficient in terms of
performance.

From the analysis we would not conclude that Sanofi India has been more efficient than
GSK Pharma throughout the 5 years. GSK Pharma should change their investing trends
and should innovate more so that come up with new products in market. This would
help them to make more stable profits and returns. Considering all the external factors
like economy of the country both the companies are performing well as compared to
industry performance.












Page 13 of 13


References:

1. http://www.indiainfoline.com/Markets/Company/Fundamentals/Profit-
Loss/Glaxosmithkline-Pharma-Ltd/500660 (10
th
August 2014)

2. http://www.indiainfoline.com/Markets/Company/Fundamentals/Profit-Loss/Sanofi-India-
Ltd/500674 (10
th
August 2014)

3. http://www.indiainfoline.com/Markets/Company/Fundamentals/Balance-Sheet/Sanofi-
India-Ltd/500674 (10
th
August 2014)

4. http://www.indiainfoline.com/Markets/Company/Fundamentals/Balance-
Sheet/Glaxosmithkline-Pharma-Ltd/500660 (10
th
August 2014)

5. http://www.indiainfoline.com/Markets/Company/Fundamentals/Key-
Ratios/Glaxosmithkline-Pharma-Ltd/500660 (11
th
August 2014)

6. http://www.indiainfoline.com/Markets/Company/Fundamentals/Key-Ratios/Sanofi-India-
Ltd/500674 (11
th
August 2014)

7. For Industry average: http://www.capitaline.com/user/framepage.asp?id=1 (11
th
August
2014)

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