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Course Name:

Assignment Title:
Submitted by:

FADM_171_Moh
Group Assignment 1
Group J3

Group Member Name

PG ID

Anmol Mundhra
Abhishek Singh
Lakshmy Govind
Parul Abrol

61710426
61710565
61710170
61710699

(Let us not waste paper, please continue writing your assignment from below)
ISB Honour Code
I will represent myself in a truthful manner.
I will not fabricate or plagiarise any information with regard to the curriculum.
I will not seek, receive or obtain an unfair advantage over other students.
I will not be a party to any violation of the ISB Honour Code.
I will personally uphold and abide, in theory and practice, the values, purpose and rules of the ISB Honour Code.
I will report all violations of the ISB Honour Code by members of the ISB community.
I will respect the rights and property of all in the ISB community.
I will abide by all the rules and regulations that are prescribed by ISB.

Q1

Q2

Dr. Reddy's(in Million Rupees)

Total Assets as of FY15
Total Assets as of FY14
Average Total Assets
Total Shareholders Equity as of
FY15
Total Shareholders Equity as of
FY14
Average Total Shareholders Equity
Net Income for FY15
EBIT
Sales FY15

194,762
170,223
182,493
111,302
90,801
101,052
22,179
29,255
148,189

Novartis(in Million USD)

Total Assets as of FY15
Total Assets as of FY14
Average Total Assets
Total Shareholders Equity as of
FY15
Total Shareholders Equity as of
FY14
Average Total Shareholders Equity
Net Income for FY15
EBIT
Sales FY15

131,556
125,387
128,472
77,122
70,844
73,983
7,028 Considering only
8,789 continuing operations
49,440

ROE=NetIncome/Average Stockholders Equity

ROE-Dr Reddys
21.95%
ROE-Novartis
9.50%
Dr. Reddy has a better ROE
ROA = Profit Margin X Asset Turnover
Asset Turnover = Sales/Average Total Assets

Pre Tax ROA=EBIT/Average Total Assets

Pre Tax ROA-Dr Reddys
16.03%
Pre Tax ROA-Novartis
6.84%
Dr. Reddy has a better pretax ROA

Asset Turnover- Dr Reddys

81.20%
Asset Turnover- Novartis
38.48%
Dr. Reddy's has better Asset Turnover Ratio

Profit Margin - Dr Reddys

19.74%
Profit Margin - Novartis
17.78%
Both Companies have similar Profit Margins

Dr. Reddy's(in Million Rupees)

Cash Flow from Operations
Purchase PPE
Purchase Intangible Assets
Capital Expenditure
Net Capital Expenditure
Cash Outflow for investing
activities
Dividend
Share Repurchase
Capex + Dividend + Share
Repurchase

Novartis(in Million USD)

Cash Flow from Operations
Purchase PPE
Purchase Intangible Assets
Capital Expenditure
Net Capital Expenditure
Cash Outflow for investing
activities
Dividend
Share Repurchase
Capex + Dividend + Share
Repurchase

Adequacy to fund Capex

Adequacy to fund Net Capex
Adequacy to fund All invetsments
Adequacy to fund Capex +
Dividend + Share Repurchase

25,235
15,315
15,315
15,143
22,647
3,587
15,365
Yes
Yes
Yes
Yes

Profit Margin = Net Income + Income Tax Expense X (1- Tax Rate)

Adequacy to fund Capex

Adequacy to fund Net Capex
Adequacy to fund All invetsments
Adequacy to fund Capex +
Dividend + Share Repurchase

11,897
2,367
1,138
3,505
2,647
19,666
6,643
6,071
16,219
Yes
Yes
No
No

Q3

Dr. Reddy's External Sales Revenue(in Million Rupees)

Value of
Value of
Sales
Sales
Segment
% Share
Segment
% Share
% Change
PSAI-2015
24,779
17%
PSAI-2014
23,580
18%
5.08%
Global Generic-2015
122,063
83%
Global Generic-2014
106,356
81%
14.77%
Proprietary-2015
1,013
1%
Proprietary-2014
1,779
1%
-43.06%
Global Genrics is Dr Reddy's largest and fastest growing segment. Proprietary being the segment with a
negative growth
Novartis External Sales Revenue(in Million USD)
Value of
Value of
Sales
Sales
Segment
% Share
Segment
Pharma-2015
30,445
62%
Pharma-2014
31,791
Alcon-2015
9,812
20%
Alcon-2014
10,827
Sandoz-2015
9,157
19%
Sandoz-2014
9,562
Pharma is Novartis largest segment. All segments report a decrease in revenue

Q4

Dr. Reddy's External Sales Revenue(in Million Rupees)

Value of
Sales
Segment
% Share
Segment
India-2015
19,772
13%
India-2015

Value of
Sales
18,182

% Share
61%
21%
18%

% Change
-4.23%
-9.37%
-4.24%

% Share
14%

% Change
8.74%

North America-2015
North America-2015
70,743
48%
61,362
47%
15.29%
Russia and Other CISRussia and Other CIS2015
2015
17,713
12%
19,819
15%
-10.63%
Europe-2015
17,800
12%
Europe-2015
16,287
12%
9.29%
Others-2015
21,827
15%
Others-2015
16,065
12%
35.87%
Total
147855
Total
131,715
% Foreign Sales
87%
North America consitutes the largest share in sales. Others being the fastest growing segment and Russia
and other CIS report a decrease in revenue
Novartis External Sales Revenue(in Million USD)
Value of
Value of
Sales
Sales
Segment
% Share
Segment
% Share
% Change
Switzerland-2015
774
2%
Switzerland-2014
658
1%
17.63%
USA-2015
18,079
37%
USA-2014
17,337
33%
4.28%
UK-2015
1,277
3%
UK-2014
1,379
3%
-7.40%
Germany-2015
3,262
7%
Germany-2014
3,742
7%
-12.83%
France-2015
2,269
5%
France-2014
2,638
5%
-13.99%
Japan-2015
3,163
6%
Japan-2014
3,781
7%
-16.34%
Others-2015
20,590
42%
Others-2014
22,645
43%
-9.07%
Total
49,414
Total
52,180
% Foreign Sales
98%
USA constitutes the largest share in sales. Switzerland has the highest growth in sales and Japan shows
maximum % decrease in sales

Q5

As seen in Q3, 83% of Dr. Reddy's revene is generated from global generic medicine. Sandoz is the generic division of Novartis.
Thus, Sandoz is the part of Novartis that is the most likely direct competitor of Dr. Reddy's

Q6
Sales Revenues
COGS
Gross Margin %

Dr Reddy (INR) Novartis (USD) Sandoz (USD)

148,189
49,440
9,157
62,786
17,404
5,325
57.63%
64.80%
41.85%

Novartis has the highest gross margin percentage, followed by Dr. Reddy and Sandoz
The relationship makes sense because the Sandoz unit of Novartis derives its revenue only
from generic drugs. Dr. Reddy generates the majority of its revenue
from generic drugs, but its portfolio also contains specialized drugs which allows it to have a
higher gross margin than Sandoz.
Novartis derives a high percentage of its revenue from patented drugs, which being highly profitable allow it to earn the highest margin amongst all 3.

7
Company/Segment
DR REDDY'S
NOVARTIS
NOVARTIS SANDOZ

Operating Income
26,286
8,977
1,005

Total Revenue
Operating margin
148,189
17.74%
49,414
18.17%
9,157
10.98%

As evident from the calculations above, IFRS operating margins of Novartis are the highest which in turn signifiies
that Novartis makes highest profit(before interest and taxes) on each dollar of sales.

Below values have already been given in the Novartis balance sheet:
Core operating margin (%) 27.9
IFRS operating margin(%) 18.17%
Novartis has a discrepancy between the IFRS operating margin and core operating margin because the Groups core
results including core operating income, core net income and core earnings per share exclude the amortization
of intangible assets, impairment charges, expenses relating to divestments, the integration of acquisitions and
restructuring charges that exceed a threshold of USD 25 million, as well as other income and expense items that
management deems exceptional and that are or are expected to accumulate within the year to be over a USD 25
million threshold.

9
SEGMENT

Pharmaceuticals
Alcon
Sandoz

CORE OPERATING INCOME

YEAR ENDED Dec 31,2015
(USD millions)
9,420.00
3,063.00
1,659.00

IFRS OPERATING INCOME

YEAR ENDED Dec 31,2015
(USD millions)
7,597.00
794.00
1,005.00

NET SALES YEAR

ENDED Dec 31,2015
(USD millions)
30,445.00
9,812.00
9,157.00

CORE OPERATING
MARGIN

IFRS OPERATING
MARGIN

30.94
31.22
18.12

As is evident from the reconcillation report on page 169 of Novartis financial report, Alcon as the higest discrepancy between IFRS ad Core
operating performance due to the higher value of Amortization of intangible assets for Alson i.e. 2063 which directly reduced the operating
margin from 31% in Core to 8% in IFRS.

24.95
8.09
10.98