Indian Pharmaceutical Industry FINANCIAL ANANLYSES

PREPARED BY: ASHA PATEL ROLL NO. 28

INTRODUCTION

A pharmaceutical company, or drug company, is a commercial business whose focus is to research, develop, market and/or distribute drugs, most commonly in the context of healthcare. They can deal in generic and/or brand medications. They are subject to a variety of laws and regulations regarding the patenting, testing and marketing of drugs. From its beginnings at the start of the 19th Century, the pharmaceutical industry is now one of the most successful and influential, attracting both praise and controversy.

Presentation Structure

Indian Pharmaceutical Evolution

India Advantage
Financial analyses

Indian Pharmaceutical Evolution

Phase V

Phase IV
Phase III Development Phase Phase II Government Control Phase I Early Years Market share domination by foreign companies Indian Patent Act 1970 Drug prices capped Local companies begin to make an impact Process development Production infrastructure creation Export initiatives Growth Phase Rapid expansion of domestic market International market development Research orientation

Innovation and Research

New IP law Discovery Research Convergence

Relative absence of organized Indian companies

1970

1980

1990

2000

2010

India Advantage

Large skill base

Experts in process chemistry Long history of reverse engineering

Unmatched cost competitiveness

Lower cost of infrastructure and skilled manpower Vertical integration

India Advantage

Strong local industry

Growing expertise with international regulatory compliance High quality manufacturing with abundant capacities

Speed

Very strong entrepreneurial spirit Hungry for growth and recognition Quick learners and fast movers

Availability of capital

Stock market has seen unprecedented growth in the last decade Continues to be bullish on the pharma industry

Financial analyses
BALANCE SHEET
SOURCES Capital Reserves Deferred Tax Liability Minority Interest LTL CL Dec 2004 Rs in crore 1,858.91 23,218.49 1,908.47 208.77 8,527.30 18,389.06 Dec 2005 In crore 1,862.21 23,405.03 1,899.27 168.69 20,042.62 15,007.92 Dec 2006 In crore 1,863.43 23,986.48 1,636.03 343.22 39,556.19 17,596.57

Total
Fixed Assets Investments Deferred Tax Asset

54111
15,294.13 183.77 836.66

62,385.74
20,591.41 171.72 2,698.34

84,981.92
38,953.34 362.35 981.16

Capital(WIP)
CA Total

2,875.54
34,920.90 54111

5,595.49
33,328.78 62385.74

3,580.98
41,104.09 84981.92

Ratio analyses

Liquidity Ratios: Liquidity refers to ability of firm to meet it short term requirements. Here, short term means requirements which are to be meet in a period of 1 year. Liquidity is generally dependent on two things current assets and current liabilities. Working capital ratio:

Working capital refers to the cash a business requires for day-to-day operations
2004 CA (in Rs mn) CL Working Capital 18283.77 4410.227 13873.54 2005 23529 6103.3 17425.7 2006 37045.39 7363.989 29681.4

 Current ratio
An indication of a industry's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. Current ratio is equal to current assets divided by current liabilities. If the current assets of a company are more than twice the current liabilities, then that company is generally considered to have good short-term financial strength. Current ratio = Current assets / current liabilities

liquidity ratio
As current ratio includes some items which are not very liquid, so liquid ratio is more accurate measure of liquidity of firm Liquid ratio = Current assets inventory/ Current liabilities

Cash ratio
As liquid ratio contains debtors, so it does not gives a clear picture of cash and near cash items. So we calculate cash ratio to know about the liquidity of firm for very short terms.
Years
CA (in Rscrore) Inventory Debtors CL Current ratio Liquid Ratio

2004
34,920.90 14350.94 11356.67 18,389.06 1.899004 1.118598

2005
33,328.78 13624.02 11403.52 15,007.92 2.220746 1.312957

2006
41,104.09 16115.52 15716.33 17,596.57 2.335915 1.420082

Cash Ratio

0.50102

0.553124

0.526935

 Comparison

Interpretation

The industrys current ratio for period of three years is somewhat equal to 2 for 2005 it is less than 2 but it can be almost equivalent to two). So industry has very sound liquidity position. It signifies that industry can easily meet its short term obligations. Also the liquid ratio is equal to one that is a equivalent to its ideal value. The cash ratio is 0.5 it implies that companies has cash or near cash items which is equivalent to 50% of current liabilities. As current ratio is double of Liquid ratio, and four times of cash ratio, it shows that debtors, inventory and cash forms significant part of the current assets. And industry has properly distributed its current assets. The company is also able to maintain the liquidity of company throughout the period of three years. As the values for ratios remain same for the industry even value of current assets has over the period.

EPS(Earnings Per Share): EPS = PAT/ No. Of Shares It denotes the profit earned by the money of each share holders.
Particulars Dec 2004 Dec 2005 Dec 2006

EPS

35.23

4.42

8.62

From the above table it is quite cleat that EPS is decreasing for industry. But the reason for low EPS is not low profit earned by the industry but it is due the fact the industry raised more equity capital in this year.

Interest Coverage ratio:

A ratio used to determine how easily a industry can pay interest on outstanding debt.

The lower the ratio, the more the industry is burdened by debt expense
Particulars Dec 2004 Dec 2005 Dec 2006

PBIT Interest

9599 334.88

2282.86 671.16

7546.66 1036.32

industry is covering its interest expenses very well.

Closing Comment

India is an acquired taste Give it some time & it will grow on you

Thank you!