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Fundamental analysis of Dr. Reddy laboratories


By
Avinash Kandoi
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PREFACE

This project attempts to bring under one cover the entire hard work and dedication put in by me
in completion of my project work on “FUNDAMENTAL ANALYSIS OF Dr. REDDY’S
LABORATORY LIMITED”. I have expressed my experiences in my own simple way. I hope
whoever goes through it find it interesting and worth reading. All constructive feedback is
cordially invited.
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ORIGINAL CERTIFICATE OF THE COMPANY GUIDE


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ACKNOWLEDGEMENT

I take this opportunity to acknowledge the assistance and contribution of the people
who had faith in this project.

I am extremely thankful to my faculty guide, Prof. GAUTAM SINHA, Bengal


Institute of Business Studies, Kolkata. His constant guidance helped me overcome
many barriers in the course of my study. I am fortunate to have got such encouraging
guides who made me push my limits and strive for bigger accomplishment.

I would also like to thanks my parents for their unwavering support and
encouragement throughout my course.
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DECLARATION

I, the undersigned, hereby declare that the Dissertation Report entitled


“FUNDAMENTAL ANALYSIS OF DR. REDDYS LABORATORY” is a record
of an independent work carried out by me for the Dissertation project for MBA
course.

The information contained herein is true and original, to the best of my knowledge.

Place:

Date:

---------------------------------------- ---------------------------------
Signature of the Guide Signature of student
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TABLE OF CONTENT

 EXECUTIVE SUMMARY..................................................................... 7
 INTRODUCTION ............................................................ ..................... 8
 COMPANY PROFILE ......................................................................... 12
 OVERVIEW OF THE ECONOMY ...................................................... 24
 OVERVIEW OF THE SECTOR .......................................................... 27
 OBJECTIVE OF THE PROJECT ....................................................... 32
 RESEARCH METHODOLOGY .......................................................... 33
 SECTOR DATA ANALYSIS................................................................ 34
 COMPANY DATA ANALYSIS ........................................................... 41
 FINDINGS ................................................................. .......................... 60
 CONCLUSION ................................................................... ................. 63
 RECOMMONDATION …………………………………………….….….. 64
 BIBLIOGRAPHY ……………………………………………………..…... 65
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EXECUTIVE SUMMARY

Fundamental analysis involves analysing the underlying forces that affect the
wellbeing of the economy, industry groups, and companies. Most often, the aim
of company analysis is to derive a stock's current fair value and forecast future value.
If fair value is not equal to the current stock price, fundamental analysts believe that
the stock is either over or under valued and the market price will ultimately gravitate
towards fair value. By believing that prices do not accurately reflect all available
information, fundamental analysts look to capitalize on perceived price discrepancies.

In this project an attempt has been made to analysed financial performance of Dr.
Reddys Laboratory Limited. It shows how the company has performed in 5 years (2014
– 2018). For getting work done analysis we have analysed 5yeras balance sheet, profit
& loss statement, cash flow statement and some important ratios.

Earlier part of the report gives analysis about Indian economy and Industry scenario
and the later part of the project gives information about company
financial performance. This study will show you the financial health of a company.
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INTRODUCTION

The examination and evaluation of the relevant information to select the best course of
action from among various alternatives. The methods used to analyze securities and make
investment decisions fall into two very broad categories: fundamental analysis and
technical analysis. Fundamental analysis involves analyzing the characteristics of a
company in order to estimate its value. Technical analysis takes a completely different
approach; it doesn't care one bit about the "value" of a company or a commodity.
Technicians (sometimes called chartists) are only interested in the price movement in the
market.

TECHNICAL ANALYSIS

Technical analysis is a method of evaluating securities by analyzing the statistics


generated by market activity, such as past prices and volume. Technical analysts do not
attempt to measure a security's intrinsic value, but instead use charts and other tools to
identify patterns that can suggest future activity.

FUNDAMENTAL ANALYSIS

Fundamental analysis is the examination of the underlying forces that affect the
wellbeing of the economy, industry groups and companies. As with most analysis, the
goal is to develop a forecast of future price movement and profit from it. A t the
company level, fundamental analysis may involve examination of financial data,
management, business concept and competition. At the industry level, there might be
an examination of supply and demand forces of the products. For the national
economy, fundamental analysis might focus on economic data to assess the present
and future growth of the economy.
To forecast future stock prices, fundamental analysis combines economic, industry,
and company analysis to derive a stock’s fair value called intrinsic value. If fair value
is not equal to the current stock price, fundamental analysts believe that the stock is
either over or under valued. As the current market price will ultimately gravitate
towards fair value, the fair value should be estimated to decide whether to buy the
security or not. By believing that prices do not accurately reflect all available
information, fundamental analysts look to capitalize on perceived price discrepancies.
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OBJECTIVES OF FUNDAMENTAL ANALYSIS

 To predict the direction of national economy because economic activity affects


the corporate profit, investor attitudes and expectation and ultimately security
prices.

 To estimate the stock price changes by studying the forces operating in the
overall economy, as well as influences peculiar to industries and companies.

 To select the right time and right securities for the investment

THREE PHASES OF FUNDAMENTAL ANALYSIS

 Understanding of the macro-economic environment and developments


(Economic Analysis)

 Analyzing the prospects of the industry to which the firm belongs (Industry
Analysis)

 Assessing the projected performance of the company (Company Analysis)

The three phase examination of fundamental analysis is also called as an EIC


(Economy- Industry-Company analysis) framework or a top-down approach-

Here the financial analyst first makes forecasts for the economy, then for industries
and finally for companies. The industry forecasts are based on the forecasts for the
economy and in turn, the company forecasts are based on the forecasts for both the
industry and the economy. Also in this approach, industry groups are compared against
other industry groups and companies against other companies. Usually, companies are
compared with others in the same group.
For example, a telecom operator (BSNL) would be compared to another telecom
operator not to an oil company.
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Thus, the fundamental analysis is a 3 phase analysis of


 The economy

 The industry and

 The company

PHASE NATURE OF PURPOSE TOOLS AND


ANALYSIS TECHNIQUE

1 st Economic Analysis To access the general Economic Indicators


economic situation of
the nation

To access the Industry life cycle


2 nd Industry Analysis prospect of specific analysis, comparative
industry analysis of industries.

Analysis of financial
aspects: - sales,
To analysis the ratios, balances sheet,
3 rd Company Analysis Financial and Non- profit and loss a/c,
financial aspects of a EPS etc.
company to Non-financial accepts
determine whether to Goodwill, product
buy, sell or hold the quality etc.
shares of a company.

Bottom Up Approach is just reverse of Top Down Approach staring from: -

 The company
 The industry
 The economy
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STRENGTHS OF FUNDAMENTAL ANALYSIS



Long-term Trends
Fundamental analysis is good for long term investments based on long -term trends.
The ability to identify and predict long-term economic, demographic, technological or
consumer trends can benefit investors and helps in picking the right industry groups
or companies.

Value Spotting
Sound fundamental analysis will help identify companies that represent a good value.
Some of the most legendary investors think for long-term and value. Fundamental
analysis can help uncover the companies with valuable assets, a strong balance sheet,
stable earnings, and staying power.

Business Acumen
One of the most obvious, but less tangible rewards of fundamental analysis is the
development of a thorough understanding of the business. After such painstaking
research and analysis, an investor will be familiar with the key revenue and profit
drivers behind a company. Earnings and earnings expectations can be potent drivers
of equity prices. A good understanding can help investors avoid companies that are
prone to shortfalls and identify those that continue to

Value Drivers

In addition to understanding the business, fundamental analysis allows investors to


develop an understanding of the key value drivers within the company. A stock’s price
is heavily influenced by the industry group. By studying these groups, investors can
better position themselves to identify opportunities that are high -risk (tech), low-risk
(utilities), growth oriented (computer), value driven (oil), non -cyclical (consumer
staples), cyclical (transportation) etc
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COMPANY PROFILE

The National Stock Exchange of India Ltd. (NSE) is the leading stock exchange in
India and the second largest in the world by nos. of trades in equity shares from
January to June 2018, according to World Federation of Exchanges (WFE) report.

NSE launched electronic screen-based trading in 1994, derivatives trading (in the form
of index futures) and internet trading in 2000, which were each the first of its kind in
India.
NSE has a fully-integrated business model comprising our exchange listings, trading
services, clearing and settlement services, indices, market data feeds, technology
solutions and financial education offerings. NSE also oversees compliance by trading
and clearing members and listed companies with the rules and regulations of the
exchange.

NSE is a pioneer in technology and ensures the reliability and performance of its
systems through a culture of innovation and investment in technology. NSE believes
that the scale and breadth of its products and services, sustained leadership positions
across multiple asset classes in India and globally enable it to be highly reactive to
market demands and changes and deliver innovation in both trading and non -trading
businesses to provide high-quality data and services to market participants and clients

.Mr. Vikram Limaye is the Managing Director and CEO of NSE.


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PRODUCTS

Equity & Equity Linked Products


 Cash Market (Equities)
 Indices
 Mutual Funds
 Exchange Traded Funds
 Initial Public Offerings
 Offer for Sale
 Institutional Placement Program
 Security Lending and Borrowing Scheme
 Sovereign Gold Bonds Scheme
Derivatives
 Equity Derivatives
 Currency Derivatives
 NSE Bond Futures
Debt
 Debt Market
 Corporate Bonds
 Electronic Debt Bidding Platform (NSE-EBP)
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CORPORATE STRUCTURE

NSE was incorporated in 1992. It was recognised as a stock exchange by SEBI in April
1993 and commenced operations in 1994 with the launch of the wholesale debt market,
followed shortly after by the launch of the cash market segment.
Between 1994 and 2016, we expanded our lines of business and product offerings
through key milestones:
We have also grown our business beyond traditional listing and trading services:
Year History
1995 Setup wholly-owned subsidiary, NSE Clearing, which became the first
clearing corporation to be established in India (according to the Oliver
Wyman Report). NSE Clearing commenced clearing and settlement
operations in the following year.
1998 Established NSE Indices, our subsidary, as a joint venture with CRISIL
Limited to operate an indices business. NSE Indices became a wholly-owned
subsidiary in 2013 following the acquisition of CRISIL's 49% stake.
1999 Established NSEIT, a wholly-owned subsidiary and a global technology firm
that provides end-to-end technology solutions, including application
services, infrastructure services, analytics as a service and IT enabled
services. In 2015 and 2016, respectively, NSEIT launched its Testing Center
of Excellence and Integrated Security Response Center
2000 Incorporated DotEx, a wholly-owned subsidiary, and consolidated the data
and info-vending business under DotEx.
2006 Incorporated NSE Infotech Ltd., a wholly-owned subsidiary for IT research
and development.
2016 Consolidated the education business under NSE Academy, a wholly-owned
subsidiary. Incorporated two new subsidiaries, NSE IFSC Limited and NSE
IFSC Clearing Corporation Limited, in furtherance of NSE's long -term
business strategy to establish an international exchange in GIFT City.

NSE also has strategic investments in complementary businesses, including mutual


fund registry services, back-end exchange support services for its platforms,
depository services, e-corporate governance etc.
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COMPANY

Dr. Reddy’s laboratories was founded by Dr. Anji Reddy, entrepreneur-scientist, in


1984 the DNA of the company is drawn from its founder and his vision to establish
India’s first discovery led global pharmaceutical company .in, fa ct, it is this spirit of
entrepreneurship that has shaped the company to becom e what it is today. The
company is focused on creating and delivering innovative and quality products to help
people lead healthier lives.

Dr. Reddy’s is the research based company with vertically integrated operations. The
company develops, manufactures and markets a wide range of pharmaceutical
products India and overseas. Dr. Reddy’s produces finished dosage forms, active
pharmaceutical ingredients, diagnostic, kits, critical are and biotechnology products.
The basic research program of Dr. Reddy’s focused on cancer diabetes, bacterial
infections and pain.

Since its inception in 1984, Dr. Reddy’s has chosen to walk the path of discovery and
innovation in health sciences R eddy’s has been a quests to sustain and improve the
quality of life, and they; heaves had nearly two decades of creating safe
pharmaceutical Solutions with the ultimate purpose of making the world a heather
place. Dr. Reddy’s create and deliver innovative pharmaceutical health care solutions
that people enjoy longer, healthier and more productive lives. Reddy’s generic
formulations have also become very popular in quality-conscious regulated markets
such as the US and Europe. We are all set to spread pure wings further and touch more
lives across the globe. In 1973, after gaining six years of experience in the
manufacturing and implementation of new technologies in bulk drugs from public
sector company IDPL, Hyderabad. Dr Reddy’s decided to start up basic drugs unit at
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that time there were few other players in the private sector at that end of the
pharmaceutical value chain. In 1975, Dr. Reddy’s started the construction of uniloids
of which he was the founder-managing director it was here that they made a move that
was to become the hallmark of the group in the years to come. This move was first to
construct and stat R&D laboratory ever before commencing the construction of the
plant. Based on the work done in these laboratories he constructed a plant in 1976 to
manufacture, for the first time in India, drug called ‘metrodinazole’ for the
treatment of amoebic dysentery the drug became a hit.

In 1981, as managing director of standard organics Ltd; Dr. Red dy’s aim was to
develop and manufacture a wide spectrum of bulk drugs to enable the pharmaceutical
industry to launch their formulations. Unfettered. There were only a couple of –
pharmaceutical company ‘s at that time with the capacity to develop newer dru gs bit
they would not sell the bulk to other formulators. Here, Dr. Reddy’s played a major
role in pioneering the technology and production of ‘sulphamethonazole ‘an anti-
bacterial in India. Another dream was to do it on his own, because that was the time
that his second experiment with partnership was also crumbling. He realizes his dream
shortly thereafter, then the established Dr. Reddy’s laboratories in 1984. The process
and production of methyldopa was the ultimate challenge.

The company has several distinctions to its credit. Being the first pharmaceutical
company from Asia Pacific (outside Japan) to be listed on the New York Stock
Exchange (on April 11, 2001) is only one among then. And as always , Dr. Reddy’s
chose to do it in the most difficult of circumstances against widespread skepticism.
Dr. Reddy’s came up trumps not only having its stock oversubscribed but also
becoming the best performing IPO that year.

Dr. Anji Reddy’s is well known for his passion for research and drug discovery. Dr
Reddy’s started its drug discovery programmed in 1993 and within three years it
achieved its first break through by out licensing an anti –diabetes molecule to Novo
Nor disk in March 1997/ With this very small but significant step, the Indian industry
went through a paradigm shift in its image from being known as just ‘copycats’ to
‘innovators’! Through its success, Dr. Reddy’s pioneered drug discovery in India.
There are several such inflections points in the company’s evolution from a bulk drug
(API) manufacturer into a vertically integrated global pharmaceutical company today.
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Today, the company manufactures and markets API(Bulk Actives), Finished Dosages
and Biologics in over 100 countries worldwide, in addition to having a very promising
Drug Discovery Pipeline. When Dr. Reddy’s started its first big move in 1986 from
manufacturing and marketing bulk actives to the domestic (Indian) market to
Manufacturing and exporting difficult-to-manufacture bulk votes such as Methyldopa
to highly regulated overseas markets, it had to not only overcome regulatory and legal
hurdles but also battle deeply entrenched mind-set issues of Indian Pharma being seen
as producers of ‘cheap’ and therefore ‘low quality’ pharmaceuticals.

Today, the Indian pharma industry, in stark contrast, is known globally for its proven
high quality-low cost advantage in delivering sage effective pharmaceuticals. This
transition, a tough and often-perilous one, was made possible thanks to the pioneering
efforts of companies such as Dr. Reddy’s Laboratories.

Dr. Reddy’s is a global, vertically integrated pharmaceutical company with a presence


across the value chain, producing and delivering safe, innovative, and high quality
finished dosage forms, active pharmaceutical ingredients and biological products. Our
products are marketed across the globe, with an emphasis on North America, Europe,
India, Russia and other emerging markets. We conduct NCE drug discovery researc h
in the areas of metabolic disorders and cardiovascular indication s at our research
facilities in Atlanta (USA) and Hyderabad (India). Through our Custom
Pharmaceutical Services business unit, we provide drug substance and drug product
development and manufacturing services on a proprietary basis.

Today, Dr. Reddy’s continues its journey. Leveraging on its ‘Low Cost, High
Intellect” advantage. Foraying into new markets and new businesses. Taking on new
challenges and groaning stronger and more capable. Eac h failure and each success
renewing the sense of purpose and helping the company evolve with over 950
scientists working across the globe, around the clock, the company continues its
relentless march forward to discover and deliver a breakthrough medicine to address
an unmet medical need and make a difference to people’s lives worldwide. And when
it does that, it would only be the beginning and yet it would be the most important
step. As Lao Tzu wrote a long time ago, ‘Even 1000mile journey starts with a single
step.
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DR. REDDYS LABORATORY IN INDIA

Dr. Reddy’s 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 medi cines 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 diagnosis


 Access to medicines
 Better therapy experience
 Adherence to therapy
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AWARDS
2013 Features in ‘Forbes Asia Fab 50 companies’ list at a special Forbes
Asia Fab 50 awards ceremony held in China

2011 Receives Pharmexcil Award (Gold Prize) for ‘Outstanding Export


Performance for 2010–11’ in the ‘Large Scale Industry’ category

2009 Announces Strategic Alliance with GlaxoSmithKline for emerging


markets

2007 Launches Reditux™ (Rituximab) – the world’s first biosimilar of a


monoclonal antibody

2005 Acquires Roche’s API business in Mexico

COMPANY VISION

Our vision is to become a discovery-led global pharmaceutical company.

We will achieve this vision by building: A work place that will attract, energise and
help retain the finest talent available. An organizational culture that is relentlessly
focused on the speedy translation of scientific discoveries into innovati ve products to
make a significant difference in people’s lives.

COMPANY MISSION

To be the first Indian pharmaceutical company that successfully takes its products
from discovery to commercial launch globally. We are on a tough mission and energies
can easily dissipate unless there is direction and dedication.
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LOCATION

Registered Address
8-2-337,
Road No. 3,,Banjara Hills,
Hyderabad
Telangana
500034

Tel: 040-49002900
Fax: 040-49002999
Email: shares@drreddys.com
Website: http://www.drreddys.com
Group: Reddy Group

Registrars
Bigshare Services Pvt. Ltd. 306, Right Wing, 3rd Floor Amrutha Ville, Opp.Yash

Hyderabad - 500082
Telangana

Tel: 040-23374967
Fax: 040-23370295
Email: bsshyd@bigshareonline.com
Website: http://www.bigshareonline.com

Management - Dr Reddy’s Laboratories

Name Designation
1. K Satish Reddy Chairman
2. Anupam Puri Independent Director
3. Kalpana Morparia Independent Director
4. Sridar Iyengar Independent Director
5. Leo Puri Independent Director
6. Shikha Sanjaya Sharma Independent Director
7. G V Prasad Co-Chairman & Manag. Director
8. Bruce L A Carter Independent Director
9. Omkar Goswami Independent Director
10. Bharat N Doshi Independent Director
11. Prasad R Menon Independent Director
12. Allan Oberman Independent Director
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LISTING INFORMATION
5
Face Value Of Equity Shares
Market Lot Of Equity Shares 1
BSE Code 500124
NSE Code DRREDDY
BSE Group A

Whether The Company Forms A Part Of The Following Indices -

Sensex No
Nifty Yes
BSE-100 Yes
BSE-200 Yes
S&P CNX 500 Yes
CNX Midcap No
CNX FMCG No

 The Stock Exchange,


Listed On  Mumbai, National Stock Exchange of India Ltd.,
 New york Stock Exchange
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SHAREHOLDERS FUNDS
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TOP BRAND

Omez capsule (Omeprazole 20 mg) belongs to a group of drugs called


Proton Pump Inhibitors (PPIs).

Nise tablet (Nimesulide 100 mg) belongs to a group of drugs called


NSAIDs (Non Steroidal Anti-Inflammatory Drugs).

Stamlo 2.5/5/10 tablets (Amlodipine 2.5/5/10mg) belong to a group of


drugs called calcium channel blockers.

Clamp 625 tablet is a combination of Amoxycillin (500 mg) and Potassium


Clavulanate (125 mg). It belongs to the anti-infective class of drugs.

Econorm is a probiotic that contains live cells of Saccharomyces


Boulardii (250 mg).

Razo 10/20 tablets (Rabeprazole sodium 10/20) belong to a group of


drugs called Proton Pump Inhibitors (PPIs).

Senquel F is a desensitizing toothpaste and contains potassium nitrate


formulation.
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OVERVIEW OF THE ECONOMY


Introduction
India has emerged as the fastest growing major economy in the world and is expected
to be one of the top three economic powers of the world over the next 10 -15 years,
backed by its strong democracy and partnerships.

Market size
India’s GDP is estimated to have increased 7.2 per cent in 2017 -18 and 7 per cent in
2018-19. India has retained its position as the third largest startup base in the world
with over 4,750 technology start-ups.
India's labour force is expected to touch 160-170 million by 2020, based on rate of
population growth, increased labour force participation, and higher education
enrolment, among other factors, according to a study by ASSOCHAM and Thought
Arbitrage Research Institute.
India's foreign exchange reserves were US$ 405.64 billion in the week up to March
15, 2019, according to data from the RBI.

Recent Developments
With the improvement in the economic scenario, there have been various investments
in various sectors of the economy. The M&A activity in India reached record US$
129.4 billion in 2018 while private equity (PE) and venture capital (VC) investments
reached US$ 20.5 billion. Some of the important recent developments in Indian
economy are as follows:
 During 2018-19 (up to February 2019), merchandise exports from India have
increased 8.85 per cent year-on-year to US$ 298.47 billion, while services exports
have grown 8.54 per cent year-on-year to US$ 185.51 billion.
 Nikkei India Manufacturing Purchasing Managers’ Index (PMI) reached a 14-
month high in February 2019 and stood at 54.3.
 Net direct tax collection for 2018-19 had crossed Rs 10 trillion (US$ 144.57 billion)
by March 16, 2019, while goods and services tax (GST) collection stood at Rs 10.70
trillion (US$ 154.69 billion) as of February 2019.
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 Proceeds through Initial Public Offers (IPO) in India reached US$ 5.5 billion in
2018 and US$ 0.9 billion in Q1 2018-19.
 India's Foreign Direct Investment (FDI) equity inflows reached US$ 409.15 billion
between April 2000 and December 2018, with maximum contribution from
services, computer software and hardware, telecommunications, construction,
trading and automobiles.
 India's Index of Industrial Production (IIP) rose 4.4 per cent year -on-year in 2018-
19 (up to January 2019).
 Consumer Price Index (CPI) inflation stood at 2.57 per cent in February 2019.
 Net employment generation in the country reached a 17 -month high in January
2019.

Government Initiatives
The interim Union Budget for 2019-20 was announced by Mr Piyush Goyal, Union
Minister for Finance, Corporate Affairs, Railways and Coal, Government of India, in
Parliament on February 01, 2019. It focuses on supporting the needy farmers,
economically less privileged, workers in the unorganised sector and salaried
employees, while continuing the Government of India’s push towards better physical
and social infrastructure.
Total expenditure for 2019-20 is budgeted at Rs 2,784,200 crore (US$ 391.53 billion),
an increase of 13.30 per cent from 2018-19 (revised estimates).
Numerous foreign companies are setting up their facilities in India on account of
various government initiatives like Make in India and Digital India. Mr. Narendra
Modi, Prime Minister of India, has launched the Make in India initiative with an aim
to boost the manufacturing sector of Indian economy, to increase the purchasing power
of an average Indian consumer, which would further boost demand, and hence spur
development, in addition to benefiting investors. The Government of India, under the
Make in India initiative, is trying to give boost to the contribution made by the
manufacturing sector and aims to take it up to 25 per cent of the GDP from the current
17 per cent. Besides, the Government has also come up with Digital India initiative,
which focuses on three core components: creation of digital infrastructure, delivering
services digitally and to increase the digital literacy.
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Some of the recent initiatives and developments undertaken by t he government are


listed below:
 In February 2019, the Government of India approved the National Policy on
Software Products – 2019, to develop the country as a software hub.
 The National Mineral Policy 2019, National Electronics Policy 2019 and Faster
Adoption and Manufacturing of (Hybrid) and Electric Vehicles (FAME II) have
also been approved by the Government of India in 2019.
 Village electrification in India was completed in April 2018. Universal household
electrification is expected to be achieved by March 2019 end.
 The Government of India released the maiden Agriculture Export Policy, 2018
which seeks to double agricultural exports from the country to US$ 60 billion by
2022.
 Around 1.29 million houses have been constructed up to December 24, 2018, under
Government of India’s housing scheme named Pradhan Mantri Awas Yojana
(Urban).
 Prime Minister's Employment Generation Programme (PMEGP) will be continued
with an outlay of Rs 5,500 crore (US$ 755.36 million) for three years from 2017 -
18 to 2019-20, according to the Cabinet Committee on Economic Affairs (CCEA).

Road ahead
India's gross domestic product (GDP) is expected to reach US$ 6 trillion by FY27 and
achieve upper-middle income status on the back of digitisation, globalisation,
favourable demographics, and reforms.
India's revenue receipts are estimated to touch Rs 28-30 trillion (US$ 385-412 billion)
by 2019, owing to Government of India's measures to strengthen i nfrastructure and
reforms like demonetisation and Goods and Services Tax (GST).
India is also focusing on renewable sources to generate energy. It is planning to
achieve 40 per cent of its energy from non-fossil sources by 2030 which is currently
30 per cent and also have plans to increase its renewable energy capacity from to 175
GW by 2022.
India is expected to be the third largest consumer economy as its consumption may
triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and expenditure
pattern.
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OVERVIEW OF PHARMACUTICAL SECTOR

SECTOR POLICY

PROVISIONS OF BUDGET 2018-19

 The allocation to the Ministry of Health and Family Welfare has increased by 11.5
per cent to USD 8 billion
 In a bid to make healthcare more accessible, new Health and Wellness centres are
being established with USD 185 Million already allocated. These centres will
provide essential drugs and diagnostics services free of cost. The centres are also
designed to provide comprehensive health care, including treatm ent and
medication for non-communicable diseases as well as maternal and child health
services.
 The numbers behind the world’s largest government funded health care programme
are staggering: It will provide hospitalization cover to over 100 million poor an d
vulnerable families. The scheme will provide coverage up to USD 7,700 per family
per year for secondary and tertiary care hospitalization.
 The increased expenditure on healthcare is expected to benefit the pharmaceutical
sector as well

THE NATIONAL PHARMACEUTICAL PRICING POLICY, 2012 (NPPP-2012)


HAS BEEN NOTIFIED ON DECEMBER 7, 2012. THE SALIENT FEATURES
OF THE NPPP-2012 ARE AS UNDER:

 The regulation of prices of drugs on the basis of the essentiality of drugs as


specified under the National List of Essential Medicines (NLEM) – 2011.
 The regulation of prices of drugs on the basis of regulating the prices of
formulations only.
 The regulation of prices of drugs on the basis of fixing the ceiling price of
formulations through Market Based Pricing.
 The provision of exemptions to drugs manufactured through indigenous R&D from price
control for five years.
 A Drug Price Control Order 2013 has been notified in May 2013 to implement the
provisions of NPPP-2012.
P a g e | 28

FDI POLICY

 100% FDI has been allowed through automatic route for Greenfield
pharmaceuticals projects
 For Brownfield pharmaceuticals projects, FDI has been allowed up to 74% through
automatic route and beyond that through government approval

INVESTMENT OPPORTUNITIES

 Emerging segments such as Biosimilars and Specialty drugs


 Contract Research and Manufacturing Services (CRAMS)

RESEARCH & DEVELOPMENT

Weighted tax deduction of 200% under section 35 (2AB) of the Income Tax Act for
both capital and revenue expenditure incurred on scientific research and development.
Expenditure on land and buildings are not eligible for deduction.

FOREIGN INVESTORS

 Teva Pharmaceuticals (Israel)


 Nipro Corporation (Japan)
 Procter & Gamble (USA)
 Pfizer (USA)
 Glaxo Smith Kline (UK)
 Johnson & Johnson (USA)
 Otsuka Pharmaceutical (Japan)
P a g e | 29

REASONS TO INVEST

 Indian Health Care is expected to rise at a rate of CAGR of 29% during 2015 -20
to US $280 billion with rising income, greater health awareness, increased
precedence of lifestyle diseases and improved access to insurance

 The new National Health Protection Scheme will provide hospitalization cover to
over 100 million poor and vulnerable families. Finally, the scheme will provide
coverage up to USD 7,700 per family per year for secondary and tertiary care
hospitalization

 Medical tourism to India is on a rise, primarily due to its expertise in cardiac and
orthopedic procedures, in addition to other specialized areas like neuro -surgeries,
cancer treatment and organ transplantation

 Drugs worth USD 130 billion are expected to go off patent between FY17 to FY22,
presenting a huge market opportunity for Indian manufacturers

 With increasing penetration of chemists, especially in rural India, OTC drugs will
be readily available.

 Pharma companies have increased spending to tap rural markets and develop better
infrastructure. The market share of hospitals is expected to increase from 13.1% in
2009 to 26% in 2020.

 Over USD 200 Billion is to be spent on medical infrastructure in the next decade.

 Following the introduction of product patents, several multinational companies are


expected to launch patented drugs in India.

 India’s cost of production is significantly lower than that of the USA and almost
half of that of Europe.
P a g e | 30

STATISTICS

 India’s total exports of Pharmaceuticals (APIs, Generics and Alternative system of


medicine) during 2016-17 was USD 16.8 billion and is more now.
 India has a market share of almost 42% of Generic drugs produced globally, a
market size of Africa and Middle East put together.
 North America is India’s largest export market, receiving over 34% of India’s
pharmaceuticals exports. Africa is the second largest, receiving over 19% of
India’s exports.
 The Indian pharmaceutical industry is largely dominated by generics drugs as the
industry earns around 70% of its revenues from the same.
 India’s Pharmaceutical industry has filed the highest number of Drug Master Files
(DMFS) with USFDA and by the end of year 2016, number of filings stands at
3,950. India’s Abbreviated New Drug Applications (ANDAS) total ling over 4,000
by June 2017.

KEY ACHIEVEMENTS

 Indian Drugs and Pharmaceuticals Limited (IDPL), Gurgaon modernized for mass
production of drugs for diabetes, oncology, nephrology and cardiology
 1143 Jan Aushadi stores are operationalized
 Coronary Stents price reduced by 85%
 ‘Pharma Data Bank’ launched to facilitate online filing of mandatory returns
 Pharma Jan Samadhan & Pharma Sahi Daam launched
 11 National Institutes of Pharmaceutical Education & Research (NIPERs)
approved
P a g e | 31

SUMMARIZED ADVANTAGE OF INDIAN PHARMA SECTOR

COST EFFICIENCY
Low cost of production and increasing expenditure on R&D has led to competitive
pharma exports from with exports reaching US$ 17.27 billion in FY18.

ECONOMIC GROWTH

High economic growth along with increasing penetration of health insurance to push
expenditure on healthcare and medicine in India.

POLICY SUPPORT

Government of India’s ‘Pharma Vision 2020’ aims to make India a global leader in
end-to-end drug manufacturing.

INCREASING INVESTMENT

Increasing private sector investment in R&D acquisition are driving the sector’s
growth. In FY18, Indian pharma companies invested 8.8% of their sales in R&D.

TOP COMPANY OF PHARMA IN INDIA

 Aurobindo Pharm
 Cadila health
 Cipla
 Divis labs
 Dr. Reddys Labs
 GlaxoSmithKline
 Gleanmark
 Lupin
 Piramal Enter
 Sun Pharma
P a g e | 32

OBJECTIVE OF THE PROJECT

The major objectives of this study are:


 To analyse the performance of Dr. Reddy’s Lab
 To analysis the financial performance of Dr. Reddy’s lab
 To study the profitability of Dr. Reddy’s laboratories ltd
 To assist the investors in making investment decisions in Dr. Reddy’s Lab
 To study the liquidity position of the company.
 To derive findings, conclusions and suggestions to improve various ratio
P a g e | 33

RESEARCH METHODOLOGY
The Research is a process in which the researcher wishes to find out the end
result for a given problem and thus the solution helps in future course of action.

Ares of study: This research is conducted solel y on the area of financial of the
company.

Type of study: It is quantitative and anal ytical in nature and required historical
data. It is a study of fundamental anal ysis of a company.

Source of study : The research consists of data different websites.

Period of the Study: The study covers a periods of 5 years i.e. from 2013-2014 to
2017-2018

Tools Used: The available data have been analysed by using different financial
analysis tools. Bar graph and line graph are used for representing values.
P a g e | 34

DATA ANALYSIS
SECTOR
P a g e | 35

INDIAN PHARMA MARKET

ANALYSIS

 India’s domestic pharmaceutical market turnover reached Rs 129,015 crore


(US$ 18.12 billion) in 2018, growing 9.4 per cent year-on-year (in Rs) from Rs
116,389 crore (US$ 17.87 billion) in 2017.

 Increase in the size of middle class households coupled with the improvement in
medical infrastructure and increase in the penetration of health insurance in the
country will also influence in the growth of pharmaceuticals sector.

 Medicine spending in India is projected to grow 9-12 per cent over the next
five years, leading India to become one of the top 10 countries in terms of
medicine spending.
P a g e | 36

COMPOSITION OF INDIAN PHARMA MARKET

ANALYSIS

 Based on moving annual turnover, Anti-infectives, Cardiac, Gastro Intestinal


had the biggest market share in the Indian pharma market in 2017.

 Due to their competence in generic drugs, growth in this market offers a great
opportunity for Indian firms
P a g e | 37

PHARMACEUTICAL EXPORT FROM INDIA

ANALYSIS

 India is the world’s largest provider of generic medicines; the country’s


generic drugs account for 20 per cent of global generic drug exports (in terms
of volumes). Indian drugs are exported to more than 200 countries in the
world, with the US as the key market.

 Indian pharma companies are capitalising on export opportunities in regulated


and semi-regulated markets.

 Pharmaceutical exports from India, which include bulk drugs, intermediates,


drug formulations, biologicals, Ayush & herbal products and surgical reached
US$ 17.27 billion in FY18 and US$ 13.94 billion in * FY19 (up to December
2018).
P a g e | 38

R&D SPENDING IN INDIAN PHARMA

ANALYSIS

 Investment (as % of sales) in research & development by Indian pharma


companies* increased from 5.3 per cent in FY12 to 8.5 per cent in FY18

 It is expected that in FY19 – FY20 investment in R&D (as % of sales) will


increase or remain consistent above 8%

 In FY18, highest expenditure on Research and Development was done by Sun


Pharma, followed by Lupin.
P a g e | 39

GROWING HEALTH INSURANCE

ANALYSIS

 Increasing penetration of non-life insurance including health insurance will


drive the expansion of healthcare services and pharmaceutical market in India.

 Adoption of health insurance in the country has been increasing at a fast pace

 Another boost to the sector will be the National Health Protection Scheme
under Ayushman Bharat, announced in Union Budget 2018-19. The scheme
was launched in September 2018.
P a g e | 40

GOVERNMENT EXPENDITURE

ANALYSIS

 Government expenditure on health increased from Rs 1.26 lakh crore (US$


19.55 billion) in FY12 to Rs 2.25 lakh crore (US$ 34.91 billion) in FY18,
implying a CAGR of 12.3 per cent.

 Medical technology park in Vishakhapatnam, Andhra Pradesh has already been


set up with an investment of US$ 183.31 million. States like Himachal Pradesh,
Gujarat, Telangana and Maharashtra are showing interest for making
investments in these parks.
P a g e | 41

DATA ANALYSIS
COMPANY
P a g e | 42

BALANCE SHEET
P a g e | 43

PROFIT AND LOSS ACCOUNT


P a g e | 44

CASH FLOW STATEMENT


P a g e | 45

PROMOTER SHAREHOLDING

Promoter Shareholding

2018 26.76

2017 26.79

2016 25.58

2015 25.48

2014 25.52

24.8 25 25.2 25.4 25.6 25.8 26 26.2 26.4 26.6 26.8

ANALYSIS

 As we can see in 5 years’ promoter’s shares are increasing but it is not much
and is also a sign of worry because in India promoters share should be more.
 In 2018 ending promoter’s shares are more than 2017 by .03% because of stock
option.
 In 2017 ending promoter’s shares are more than 2016 by 1.21% because of
buyback and purchase
 In 2016 ending promoter’s shares are more than 2015 by 0.1% because of
purchase of share by promoter company.
 In 2015 ending promoter’s shares are less than 2014 by .04% due to ESOP
allotment.
P a g e | 46

REVENUE FROM OPERATIONS / SALES

Operating Revenue/ Sales (Cr)

CAGR OF 5 YEARS 2.1%


12000
10011 10207.7 9719.8
9728 9359.3
10000 8434

8000

6000

4000

2000

0
2013 2014 2015 2016 2017 2018

INFLATION RATE
YEARS 2014 2015 2016 2017 2018
INFLATION 8.48% 4.87% 5.47% 2.99% 4.28%
RATES

ANALYSIS

 We can see that the sale growth for current 5 years are low with CAGR of 2.1%.
If we see it more clearly, then we can find that actual real growth is negative
because inflation (general CPI) rate on march 2018 was 4.28%.
 CAGR calculation is important to smooth out average and to get proper picture.
CAGR growth of 2.1% is not at all acceptable because it shows that companies
is not doing business well.
P a g e | 47

EQUITY SHARE CAPITAL

EQUITY SHARE CAPITAL (Cr)

FY 18 83

FY 17 82.9

85.3
FY 16

FY 15 85.2

85.1
FY 14

81.5 82 82.5 83 83.5 84 84.5 85 85.5

ANALYSIS

 Equity share capital of dr. reddy’s lab has increase from from 2014 – 2016 due
to dilution of shares.
 In 2017 company buyback its shares.
 In 2018 share capital increase slightly because of ESOP.
 We are able to see that share dilution and buyback of shares let the total number
of shares to be more or less equal.
 This shows that company is caution on diluting it equity as diluting of equity
is not good on continues basis. It will create problem in management and
control.
P a g e | 48

SHAREHOLDERS FUND, RESERVE AND SURPLUS

SHAREHOLDERS FUND, RESERVE AND SURPLUS


14000

12000

10000

11807.8
11724.8
8000

11517.7

11600.6
11605.4
11520.1
10548.5
10634
9243.9

9329

6000

4000

2000

0
FY 14 FY 15 FY 16 FY 17 FY 18

Reserve and Surplus Shareholders fund / networth

ANALYSIS

 Reserve and surplus of a company is increasing year aft er year, it means


company is progressing toward growth.
 Reserve and surplus is growing at an annual CAGR of 8.78%.
 If we consider inflation, then it will give a positive growth but not much (real
growth).
 Networth of a company is also increasing which mean there is a growth in
shareholder fund / capital.
 Networth of a company is increasing at an annual CAGR of 8.69 %. which is
less than reserve and surplus cagr of 8.78%.
 If we consider inflation of 4.28% then it will give a positive growth but not
much (real growth).
 So we can say that there is a consistent growth but that growth is not enough in
real sense.
P a g e | 49

BORROWING

Borrowing
3500

3000

2500
3124.8

3084
2664.5

2000

2588.8
2355.1

2100.8
2185.7

2089.6

1869.9
1500
1763

1000
901.5

939.1

994.4

500
485.2

488
0
fy 14 fy 15 fy 16 fy 17 fy 18

Long term borrowing Short term borrowing total debt

ANALYSIS

 Short term borrowing is in decreasing trend but during the year 2017 -2018 loan
of 3053.9cr is taken and paid 2888.6cr. So difference amount increases the short
term loan on FY 18.

 Long term borrowing increased for 3 years and then decrease on FY 17 but on
FY 18 it gets increased due to effect of change in foreign exchange rate which
increase obligation by 2.4cr and other loan taken of .40 cr. Though it paid loan
of .10cr in FY 17-18.
P a g e | 50

WORK IN PROGRESS

Work in progress
800

700

600

500

400

675
576.1

615
488.3

300

540
200

100

0
FY 14 FY 15 FY 16 FY 17 FY 18

ANALYSIS

We can see that company is increasing its work in progress from FY 14 - FY 18 i.e
576.1cr to 675cr. We can conclude that company has a big project for future and can
able to generate more cash or profit in future.
P a g e | 51

PROFIT FROM OPERATION

Operating profit (Cr)


3000

2500

2000

1500
2761.7

2391.1

1000
2404

1745.6

1329.9
500

0
FY 14 FY 15 FY 16 FY 17 FY 18

ANALYSIS
 Operating profit decrease from FY 14 to FY 18 with money of 2761.70cr to
1329.7cr.
 Operating profit is decreasing from year to year. There is a profit but is in
decreasing trend.
 CAGR of 5 years on operating profit is -7.70%.
P a g e | 52

PROFIT BEFORE TAX (PBT)

Profit before tax (Cr)


3000

2500

2000

1500

1000
2059.82
2454.39

1544.5
1676.6

500

697
0
FY 14 FY 15 FY 16 FY 17 FY 18

ANALYSIS
 Profit before tax is in decreasing trend.
 Each year PBT is decreasing. It was on rupees 2454.39cr on FY 14 and decrease
to rupee 697cr on FY 18.
 PBT has a negative CAGR of -16.85%.
 Company has to look after its operations which is degrading year after year.
P a g e | 53

NET PROFIT AND TAX

Net profit (Cr)


2500

2000

1500

1000
1679.4
1932.8

1354.5

1384.4
500

566.9
0
FY 14 FY 15 FY 16 FY 17 FY 18

Tax (Cr)
600

500

400

300

200
225.5

160.4
380.5
521.6

100
130.1

0
FY 14 FY 15 FY 16 FY 17 FY 18

ANALYSIS
 Net profit and tax is on decreasing trend and such indications in a company is
not a good sign.
 If we check profit before tax, profit after tax and tax then we can conclude that
net profit which we are seeing is because of decrease in tax. if the tax amount
increases then the net profit will decrease even more.
 Tax relaxation is given to pharma company by Indian government in R&D
P a g e | 54

EQUITY DIVIDEND RATE

Equity dividend rate%


410%

400%

390%

380%

370%

360%

400%
400%

400%
400%
360%

350%

340%
FY 14 FY 15 FY 16 FY 17 FY 18

ANALYSIS

 Company is paying constant rate of annual dividend of 400%.


 After FY 14 rate of dividend is 400%
 Company operating profit, PBT, PAT is although positive but on
decreasing trend. Its sales growth is also not so good but also it is
paying annual dividend of 400% which is doubtable.
 It’s more like pleasing shareholder rather than increasing growth.
P a g e | 55

RETURN ON EQUITY

Return on equity (ROE)


25.00%

20.00%

15.00%

10.00%
20.71%

11.93%
11.67%
5.00%
11.79%

4.80%
0.00%
FY 14 FY 15 FY 16 FY 17 FY 18

INFLATION RATE
YEARS 2014 2015 2016 2017 2018
INFLATION 8.48% 4.87% 5.47% 2.99% 4.28%
RATES

ANALYSIS
 Return on equity / networth of the firm is reducing year after year and now it
is only 4.80%.
 Inflation rate in a country on 31 st march 2018 was 4.28%.
 So real return is .52% only. This type of return on shareholders’ fund is not at
all acceptable.
 This shows how company is inefficiently managing the fund of shareholders.
P a g e | 56

RETURN ON CAPITAL EMPLOYED

Return on capital employed (ROCE)


20.00%

18.00%

16.00%

14.00%

12.00%

10.00%

8.00%

6.00%
18.59%

14.25%

13.14%
10.61%

4.00%

6.13%
2.00%

0.00%
FY 14 FY 15 FY 16 FY 17 FY 18

ANALYSIS
 Return on capital employed is positive but decreasing year after year.
 Return on capital employed is 6.13% which mean company is generating return
of 6.13% on every 1 rupee of capital employed.
 If we consider inflation rate, then this return is even low and we can even get
higher return if we employed capital in F.D or other investment.
 This shows how company is inefficiently managing the fund of investors and
lenders.
P a g e | 57

DEBT / EQUITY RATIO

Debt / Equity ratio


0.35

0.3

0.25

0.2

0.15

0.1
0.29 0.29 0.27 0.2 0.22
0.05

0
FY 14 FY 15 FY 16 FY 17 FY 18

ANALYSIS
 Company is maintaining a healthy debt to equity ratio.
 Debt equity ratio is on decreasing trend; it gives us indication that company is
reducing its debt year after year.
 Company is relying more on its shareholders’ fund rather than on lender.
 It also helps to reduces companies finance cost
P a g e | 58

CASH FLOW

Cash Flow
4000

3000 2798.2

2000 1786.1
1442.5 1538.6

905.5 1015.9
1000
189.4
28.2
0
FY 14 FY 15 FY 16 FY 17 FY 18
-304.4
-1000 -693.7
-880.8
-1179.9
-2000
-2016.5 -1909.8

-3000 -2581.8

Operating cash flow Investing cash flow Financing cash flow

ANALYSIS
 Operating Cash Flow is increasing year after year but it decreases in FY 2017
because of buyback of share by the company.
 Investing cash flows shows that company is regularly investing through
different investing medium. In FY 17 company sells his investment.
 Financing Cash Flow show that repayment of borrowing and dividend paid on
large scale happened.
 Graph show that there is more volatility in their cash flow.
P a g e | 59

FINDING, CONCLUSION AND


RECOMMENDATIONS.
P a g e | 60

FINDING

ECONOMIC FINDING

GDP of India is increasing and was above 7% in 2018 and in 1 st quarter of 2019 it is
more than 8%. Inflation rate is decreasing year after year on 2014 rate was 8.48% but
on march 21018 it was on 4.28% and in 2019 it is even less than 3%. This gives us a
brief about the health of our economy.

With the improvement in the economic scenario, there have been various investments
in various sectors of the economy. The M&A activity in India reached record US$
129.4 billion in 2018 while private equity (PE) and venture capital (VC) investments
reached US$ 20.5 billion. Some of the important recent developments in Indian
economy are as follows:
 During 2018-19 (up to February 2019), merchandise exports from India have
increased 8.85 per cent year-on-year to US$ 298.47 billion, while services exports
have grown 8.54 per cent year-on-year to US$ 185.51 billion.
 Nikkei India Manufacturing Purchasing Managers’ Index (PMI) reached a 14-
month high in February 2019 and stood at 54.3.
 Net direct tax collection for 2018-19 had crossed Rs 10 trillion (US$ 144.57 billion)
by March 16, 2019, while goods and services tax (GST) collection stood at Rs 10.70
trillion (US$ 154.69 billion) as of February 2019.
 Proceeds through Initial Public Offers (IPO) in India reached US$ 5.5 billion in
2018 and US$ 0.9 billion in Q1 2018-19.
 India's Foreign Direct Investment (FDI) equity inflows reached US$ 409.15 billion
between April 2000 and December 2018, with maximum contribution from
services, computer software and hardware, telecommunications, construction,
trading and automobiles.
 India's Index of Industrial Production (IIP) rose 4.4 per cent year -on-year in 2018-
19 (up to January 2019).
 Consumer Price Index (CPI) inflation stood at 2.57 per cent in February 2019.
 Net employment generation in the country reached a 17 -month high in January
2019.
P a g e | 61

SECTOR FINDING

Increase in the size of middle class households coupled with the improvement in
medical infrastructure and increase in the penetration of health insurance in the
country will also influence in the growth of pharmaceuticals sector and will help to
grow Indian pharma company.

Growth in generic drug will increase pharma market for Indian industries. India will
be going to be become a global market leader in generic drugs.

Development in Indian pharma company can be seen through the increase in


expenditure on R&D. Indian government is also promoting pharma in R&D, e tc.

Another boost to the pharma sector will be the National Health Protection Scheme
under Ayushman Bharat, announced in Union Budget 2018-19. The scheme was
launched in September 2018.

Medical technology park in Vishakhapatnam, Andhra Pradesh has already been set up
with an investment of US$ 183.31 million. States like Himachal Pradesh, Gujarat,
Telangana and Maharashtra are showing interest for making investments in these
parks. This shows how much potential is there in India pharma sector.

COMPANY FINDING
Dr Reddy Laboratory promotor shareholding is increasing year after year but then also
it is not enough because their percentage of holding is 1/4 th only.

Companies revenue is decreased on FY 18 but on CAGR of 5-year basis it increases


only on 2.1%. This revenue generation is not acceptable and if we considered inflation
then revenue growth will become negative.

Company had tried to buyback his share on FY 17 after diluting it for 3 consecutive
years but again in FY 18 company has diluted some of his share through ESOP.
Dilution is not good for any company but Dr Reddy laboratory tries to keep it as
minimum as possible.

Company is increasing its reserve every year and helping to grow shareholders fund.
P a g e | 62

Company tries to reduce his long term borrowing year after year and also trying to
reduce its short term capital in which it gets failed. But for a midcap company this
much relaxation is allowed

Company has a project to complete which can be shown in work-in-progress(WIP),


after completion of projects company will get profit. It has many licence and project
left for approval, after approval companies share price will get increase.

Operating profit, profit before tax, tax, profit after tax everything is decreasing year
after year. This reduction year on year is showing that company is not performing its
operation efficiently.

Companies ROC and ROCE is decreasing year after year which also showing that
company is not managing its capital properly. Company is also giving dividend of
400% year on year and their profit is decreasing every year. We can also interpret this
through their tax payment which is decreasing year after year indicating about
reduction in income and other activities.

Debt to equity ratio is also decreasing which is one of the good news for company

Cash Flow is showing that company has a positive net cash flow but on decreasing
trend. company is making cash inflow from operating activities and maximum outflow
in investing activity is happen due to more and more outflow of money in investment
product by the company.
P a g e | 63

CONCLUSION
Our economy is growing from at a faster rate and inflation is also under control. Many
different projects are initiated by government which is and will going to give benefit
to different sector in the economy.

Pharma sector in India is still in nascent stage and having lots of potential to grow.
There are many companies in it which are competing with not only one another but
with global companies and market.

Dr Reddy Laboratory is a mid-cap company in pharma sector.

Fundamental analysis of 5 years shows that company has a lot of potential but his
performance in its operating activities are degrading year after year. Company has
some strong base but its operations are need attentions. Price chart of 5 years are also
showing that its share price was increasing till FY 16 but from FY 17 -18 its share
price is started decreasing which conform my doubt about company’s performance in
recent 2 years.

Company’s operating profit, PBT, PAT, ROE, ROCE, tax, sale growth, net cash flow,
etc are reducing year after year. This shows that company’s’ operations is not at par.
Company’s equity are also increased from 2014 – 2017 in 2017 buy back occurred but
in 2018 again equity diluted. Promoters holding in a company is only 26%.

Company’s long term borrowing is less and interest is low which is a positive sign.

From my conclusion I will say don’t buy its share, it’s better to watch Dr Reddy for
now. My recommendation is based on strictly conservative investor who thinks about
his hard earn money.
P a g e | 64

RECOMMENDATION
Pharma Sector has lot of potential and so does company also have. Some of the
recommendations company should look into are: -

 Dr Reddy laboratory has to look after his operations.


 Company has to increase its sales growth.
 Company has to increase its operating profit.
 Company has to increase its profit before tax
 Company has to increase its profit after tax.
 Company has to increase its ROE AND ROCE.
 Company has to increase its promoter shareholding above 50%, so that trust on
promoters can be built.
 Company should also think about not diluting any more equity. Providing
dividend and diluting equity or borrowing short or long term is not a good sign.
P a g e | 65

BIBLIOGRAPHY

Website: -

www.moneycontrol.com

www.equitymaster.com

www.drreddys.com

www.nseindia.com

Videos: -

Videos of R.Balakrishnan.

Report: -

Annual report of Dr Reddy’s laboratory Ltd.


P a g e | 66