FINANCIAL REPORTING AND ANALYSIS

Project: GlaxoSmithKline Pharma Limited vs Sanofi India Ltd

(formerly Aventis Pharma)

July 14th, 2017

Submitted by
Group 4 Section A
Batch 2017-19

170101032 Himani Gupta

170101049 Nachiketa Singh

170102080 Krishnesh Lungani

170103056 Bikash Panigrahi

170103068 Drishti Mittal

170103172 Rahul P N

Institute of Management Technology

 Ghaziabad

Group Details
Group 4
Section A

Roll No. Name Mail IDs Phone No.

pgp17himanigupta@imt.ac.in 9779273624
170101032 Himani Gupta
pgp17nachiketasingh@imt.ac.in 7358577945
170101049 Nachiketa Singh
pgp17krishneshlungani@imt.ac.in 9999798297
170102080 Krishnesh Lungani
pgp17bikashpanigrahi@imt.ac.in 7684879561
170103056 Bikash Panigrahi
pgp17drishtimittal@imt.ac.in 9899603223
170103068 Drishti Mittal
pgp17rahulpn@imt.ac.in 8197062706
170103172 Rahul P N
Introduction
About Pharmaceutical Industry in India

During 2005-16, the Indian pharmaceutical market increased from US$ 6 billion to US$ 36.7
billion at a CAGR of 17.46%. The market is expected to expand further at a CAGR of 15.92%
to US$ 55 billion by the year 2020. Owing to its incremental growth, India by 2020 is projected
to be among the top three pharmaceutical markets and sixth largest market globally in absolute
size. India has exported drugs worth of US$ 8 billion to 200 plus countries around the globe.

Further, India has an edge over the US and Europe due to its significantly lower cost of
production.1

Company Profiles
GlaxoSmithKline Pharma Ltd., one of the worlds leading research-based pharmaceutical and
healthcare company, was incorporate in 1924 in India. Globally, the company has a worth of
26.4 billion. The company is one of the market leaders in India with a turnover of Rs. 3021
crore and a share of 4.2%.2 The product portfolio of the company includes prescription
medicines and vaccines. Their prescription medicines range across therapeutic areas, such as

1
Pharmaceutical insutstry overview; https://www.ibef.org/industry/pharmaceutical-india.aspx accessed on 7/7/2017, at 17:00 hrs
2
Company overview, GSK Pharma Ltd.; http://www.gsk-india.com/about-company.html accessed on 7/7/2017, at 17:00 hrs
anti-infective, dermatology, gynaecology, diabetes, oncology, cardiovascular disease and
respiratory diseases.

Sanofi India Ltd., was established under the name of Hoechst Fedco Pharma Private Limited
in May 1956.3 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.

Comparative Financial Analysis

P/L Statements

GlaxoSmithKline
Pharmaceuticals Sanofi India
Ltd Ltd

Mar'17 Dec'16
INCOME
Revenue From Operations [Gross] 2,920.79 2,388.80
Less: Excise/Sevice Tax/Other Levies 0 51.1
Revenue From Operations [Net] 2,920.79 2,337.70
Other Operating Revenues 73.72 30.9
Total Operating Revenues 2,994.51 2,368.60
Other Income 71.76 70.8
Total Revenue 3,066.27 2,439.40
EXPENSES
Cost Of Materials Consumed 523.58 617.7
Purchase Of Stock-In Trade 790.7 482.5
Changes In Inventories Of FG,WIP And Stock-In Trade 79.49 -35.2
Employee Benefit Expenses 483.01 359.2
Finance Costs 1.5
Depreciation And Amortisation Expenses 26.35 131.3
Other Expenses 697.79 416.3

3
Company overview, Sanofi India Ltd.; http://www.sanofiindialtd.com/l/pw/en/layout.jsp?scat=9D37C496-6764-4E76-BE39-
20B4C5D6D1A6 accessed on 7/7/2017, at 17:15 hrs.

Total Expenses 2,600.92 1,973.30
17-Mar 16-Dec


12 mths 12 mths

Profit/Loss Before Exceptional, ExtraOrdinary Items And Tax

465.35 466.1

Exceptional Items 45.73 0

Profit/Loss Before Tax 511.08 466.1
Tax Expenses-Continued Operations
Current Tax 162.97 192.8
Deferred Tax 11.33 -23.7
Total Tax Expenses 174.3 169.1
Profit/Loss After Tax And Before ExtraOrdinary Items 336.78 297
Profit/Loss From Continuing Operations 336.78 297
Profit/Loss For The Period 336.78 297
17-Mar 16-Dec


12 mths 12 mths

OTHER ADDITIONAL INFORMATION

EARNINGS PER SHARE

Basic EPS (Rs.) 39.76 129.13
Diluted EPS (Rs.) 39.76 129.13
VALUE OF IMPORTED AND INDIGENIOUS RAW MATERIALS
Imported Raw Materials 0 284.2
Indigenous Raw Materials 0 333.5
STORES, SPARES AND LOOSE TOOLS
Imported Stores And Spares 0 0.2
Indigenous Stores And Spares 0 3.6
DIVIDEND AND DIVIDEND PERCENTAGE
Equity Share Dividend 423.52 156.7
Tax On Dividend 86.22 31.8
Equity Dividend Rate (%) 500 680

1) Profit and Loss Account Analysis

Revenue

GSK Pharma Ltd., generated a revenue increase of 0.21% from 3025.89 Cr to 3032.52 Cr in
2015 and 2016 respectively. Whereas, Sanofi India Ltd. had a 7.97% increase in revenue from
2291.87 Cr to 2474.60 Cr in 2015 and 2016 respectively. Therefore, Sanofi India Ltd. has
performed better in terms of increase in revenue generation.
Expenditure

Total Expenditure means spending done by the company in manufacturing the finished goods.
GSK Pharma Ltd. has an increase in total expenditure of 2.93% from 2424.09 Cr to 2495.08 Cr
in 2015 and 2016 respectively. Whereas for Sanofi India Ltd., the increase in expenditure was
10.5% from 1697.57 Cr to 1875.70 Cr in 2015 and 2016 respectively. Therefore, it can be
inferred that Sanofi India. Ltd. generated more increase in revenue at the cost of increase in
total expenditure.

Profit after Tax

GSK Pharma observed decline in Profit after Tax of 10.24% from 375.21 Cr to 336.78 Cr in
2015 and 2016 respectively. Sanofi India Ltd. also observed a decline in Profit after Tax of
5.09% from 321.49 Cr to 297.00 Cr in 2015 and 2016 respectively. Therefore, both the
companies have seen a fall in net profit. Further, from investors point of view, decrease in GSK
Pharma and Sanofi India Ltd. net profit in 2016 is a sign of caution to invest.

Ratio Analysis

GlaxoSmithKline
Pharmaceuticals Ltd Sanofi India Ltd

Mar'17 Mar'16 Dec'16 Dec'15

Profitability Ratios
Operating Profit Margin(%) 14.02 -- 22.29 20.93
Profit Before Interest And Tax Margin(%) 12.83 -- 16.26 15.41
Gross Profit Margin(%) 13.14 -- 16.75 15.77
Cash Profit Margin(%) 10.35 -- 17.55 15.62
Adjusted Cash Margin(%) 10.35 13.8 17.55 15.62
Net Profit Margin(%) 11.24 13.6 12.53 14.65
Adjusted Net Profit Margin(%) 10.98 -- 12.17 14.32
Return On Capital Employed(%) 22.93 -- 26.94 24.42
Return On Net Worth(%) 16.6 -- 17.11 19.76
Adjusted Return on Net Worth(%) 14.34 21.69 17.11 14.6
Return on Assets Excluding Revaluations 239.45 202.73 753.48 706.41
Return on Assets Including Revaluations 239.45 202.73 753.61 706.52
Return on Long Term Funds(%) 22.93 33.41 26.94 24.42
Liquidity And Solvency Ratios
Current Ratio 2.13 1.89 2.11 1.94
Quick Ratio 1.61 1.44 1.5 1.32
Debt Equity Ratio -- -- -- --
Long Term Debt Equity Ratio -- -- -- --
Debt Coverage Ratios
Interest Cover -- -- 311.73 993.45
Financial Charges Coverage Ratio -- -- 399.27 1,276.05
Financial Charges Coverage Ratio Post Tax -- -- 286.53 1,087.33
Management Efficiency Ratios
Inventory Turnover Ratio 7.04 -- 4.91 4.68
Debtors Turnover Ratio 20.14 24.3 16.4 16.92
Investments Turnover Ratio 7.04 5.45 4.91 4.68
Fixed Assets Turnover Ratio 10.01 -- 2.66 2.61
Total Assets Turnover Ratio 1.48 -- 1.59 1.68
Asset Turnover Ratio 1.6 1.54 1.41 1.41

Average Raw Material Holding -- -- -- --

Average Finished Goods Held -- -- -- --
Number of Days In Working Capital 73.15 139.1 151 139.98
Profit & Loss Account Ratios
Material Cost Composition 44.09 50.13 46.6 44.66
Imported Composition of Raw Materials
Consumed -- 10.85 46 46.81
Selling Distribution Cost Composition -- -- -- --
Expenses as Composition of Total Sales -- 1.88 30.16 30.46
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit 125.75 112.87 52.76 46.56
Dividend Payout Ratio Cash Profit 116.63 105.88 36.58 34.45
Earning Retention Ratio -45.51 -13.66 47.24 37
Cash Earning Retention Ratio -33.43 -6.57 63.42 57.31
AdjustedCash Flow Times 0 0 -- --
 2) Liquidity Ratios

Current Ratio

Current Ratio provide us details on how companies have utilized their assets in short run. For
GSK Pharma, the ratio concerned has increased by 12.69% from 1.89 to 2.13 in 2016 and 2017
respectively. Whereas, Sanofi India has seen a rise of 8.76% from 1.94 to 2.11 in 2015 and
2016 respectively. Increase in Current Ratio indicates that the companies have efficiently
utilized their current assets in short run.

Quick Ratio

Quick ratio compares the cash, short-term marketable securities and accounts receivable to
current liabilities. For GSK Pharma, the quick ratio has increased by 11.8% from 1.44 in 2016
to 1.61 in 2017. Whereas, Sanofi Indias quick ratio rose by 13.63% from 1.32 in 2015 to 1.5 in
2016. This implies that GSK pharma and Sanofi India have increased their cash in hand and
short term marketable securities, which can be easily utilized in covering its current liabilities.

3) Efficiency/Activity Ratios

Debtors Turnover Ratio

It is a method to determine a firm's stability in collecting debts as well as extending credit. GSK
Pharma has observed a fall of 17.11% from 24.30 to 20.14 in 2016 and 2017 respectively. For
Sanofi India Ltd., fall is comparatively smaller of 3.07% from 16.92 to 16.40 in 2015 and 2016
respectively. However, high ratio for GSK Pharma suggests that either it 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.
Asset Turnover Ratio

This ratio measures how efficiently a firm uses its assets to generate sales. For GSK Pharma,
asset turnover ratio has increased by 3.9% from 1.54 to 1.6 in 2016 to 2017 respectively.
Whereas Sanofi India has witnessed no change in its asset turnover ratio. This implies, where
GSK pharma has increased its efficiency in utilizing its assets , Sanofi India hasnt shown any
such progress.

4) Profitability Ratios

Net Profit Margin (NPM)

GSK Pharma observed a fall of 17.35% in Operating Profit Margin from 13.26 to 11.24 in 2016
and 2017 respectively. Whereas Sanofi India Ltd. observed a fall of 14.47% from 14.65 to
12.53 in 2015 and 2016 respectively. Therefore, it can be inferred that GSK Pharma and Sanofi
India both have degraded in their ability to convert revenue into profits available for
shareholders. This can be due to many reasons ranging from decreasing sales to poor customer
experience to inadequate expense management.

Return on Assets (ROA)

Return on Assets tell us how efficiently a company is using its assets to generate profits. GSK
Pharma has seen an increase of 18.11% from 202.73 to 239.45 in 2016 and 2017 respectively.
Sanofi India has seen an increase of 6.66% from 706.41 to 753.48 in 2015 and 2016
respectively. Therefore, it can be inferred that Sanofi India is more efficient in converting
money used in purchasing assets into net income or profits.
 5) Market Prospect Ratio

Dividend Payout Ratio

GSK Pharma has witnessed an increase in the dividend payout ratio by 11.41% from 112.87 to
125.75 in 2016 to 2017 respectively. Sanofi India Ltd also witnessed an increase in this
concern, by 13.26 %, from 46.56 to 52.76 in 2015 to 2016 respectively. This denotes that the
dividend payout is much more for GSK pharma than Sanofi India, nevertheless the shareholders
of both the company can expect regular dividend payout in the future.

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. GSK Pharma has seen a fall of 11.41% from 44.30 to 39.76 in 2015 and
2016 respectively. Sanofi India has seen a fall of 7.61% from 139.59 to 128.96 in 2015 and
2016 respectively. Sanofi Indias high EPS concludes that investors will be investing in Sanofi
Indias share as compared to GSK

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 39.76 in 2016 whereas Sanofi has EPS of 128.96 which
indicates in the higher net profit for Sanofi. The percentage fall in revenue for GSK
Pharma is more than double of Sanofi India. Clearly Sanofi India has been comparatively
efficient in terms of performance.

From the analysis, we would conclude that Sanofi India has been more efficient than
GSK Pharma during 2016. GSK Pharma should consider changing their investing trends
and innovate more such that they come up with new products. This should add to the
cause of making more stable profits and returns. Considering all the external factors, both
the companies are performing well.