CHAPTER I. INTRODUCTION The primary motive of buying a share is to sell it subsequently at a higher price.

In many cases, dividends are also expected. Thus, dividends and price changes constitute the return from investing in shares. Consequently, an investor would be interested to know the dividend to be paid on the share in the future as also the future price of the share. These values can only be estimated and not predicted with certainty. These values are primarily determined by the performance of the company which in turn is influenced by the performance of the industry to which the company belongs and the general economic and socio political scenario of the country. An investor who would like to be rational and scientific in his investment activity has to evaluate a lot of information about the past performance and the expected future performance of companies, industries and the economy as a whole before taking the investment decision. Such evaluation or analysis is called fundamental analysis. 1.1. MEANING OF FUNDAMENTAL ANALYSIS Fundamental analysis is really a logical and systematic approach to estimating the future dividends and share price. It is based on the basic premise that share price is determined by a number of fundamental factors relating to the economy, industry and company. Hence, the economy fundamentals, industry fundamental and company fundamentals have to be considered while
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analyzing a security for investment purpose. Fundamental analysis is in other words a detailed analysis of the fundamental factors affecting the performance of companies. Each share is assumed to have an economic worth based on its present and future earning capacity. This is called its intrinsic value or fundamental value. The purpose of fundamental analysis is to evaluate the present and future earning capacity of a share based on the economy, industry and company fundamentals and thereby assess the intrinsic value of the share. The investor can then compare the intrinsic value of the share with the prevailing market price to arrive at an investment decision. If the market price of the share is lower than its intrinsic value, the investor would decide to buy the share as it is under priced. The price of such a share is expected to move up in future to match with its intrinsic value. On the contrary, when the market price of share is higher than its intrinsic value, it is perceived to be overpriced. The market price of such a share is expected to come down in future and hence, the investor would decide to sell such a share. Fundamental analysis thus provides an analytical framework for rational investment decision making. This analytical framework is known as EIC framework, or economy-industry-company analysis.

Fundamental analysis insists that no one should purchase or sell a share on he basis of tips and rumors. The fundamental approach calls upon the investor to make his buy or sell decision on the basis of a detailed analysis of the information about the company, the industry to which the company belongs, and the economy. This results in informed investing. 1.2. INDUSTRY PROFILE The Indian pharmaceutical industry currently tops the chart amongst Indias science based industries with wide ranging capabilities in the complex field of drug manufacture and technology. A highly organized sector, the Indian pharmaceutical industry is estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually. It ranks very high amongst all the third world counties, in terms of technology, quality and the vast range of medicines that are manufactured. It ranges from simple headache pills to sophisticated antibiotics and complex cardiac compounds; almost every type of medicine is now made in the Indian pharmaceutical industry. The Indian pharmaceutical sector is highly fragmented with more than 20000 registered units. It has expanded drastically in the last two decades. The pharmaceutical and chemical industry in India is an extremely fragmented market with severe price competition and government price control. The pharmaceutical industry in India meets around 70 percent of the countrys
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demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles. There are approximately 250 large units and about 8000 small scale units, which form the core of the pharmaceutical industry in India. Indias pharmaceutical industry is now the third largest in the world in terms of volume and stands 14th in terms of value. According to data published by the department of pharmaceuticals, ministry of chemicals and fertilizers, the total turnover of Indias pharmaceuticals industry was $21.04 billion. Of this the domestic market was worth $12.26 billion. The Indian pharmaceuticals market is expected to reach $55 billion in 2020. the market has the further potential to reach $70 billion by 2020 in an aggressive growth scenario. Moreover, the increasing population of the higher income group in the country will open a potential $8 billion market for multinational companies selling costly drugs by 2015. besides, the domestic pharma market is estimated to touch $20 billion by 2015, making India a lucrative destination for clinical trials for global giants. Further it is estimated the healthcare market in India to reach $ 31.59 billion by 2020. The Indian diagnostic services are projected to grow at a CAGR of more than 20 percent during 2010-12. some of the major Indian pharmaceutical forms, including sun pharma, Cadilla Healthcare and Piramal Life Sciences, had applied for
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conducting clinical trials on at least 12 new drugs in 2010, indicating a growing interest in new drug discovery research. India tops the world in exporting generic medicines worth $11 billion and currently, the Indian pharmaceutical industry is one of the worlds largest and most developed. Moreover, the Indian generic drug market to grow at a CAGR of around 17 percent between 2010-11 and 2012-13. 1.3. NEED FOR THE STUDY The sole purpose behind investing in securities is to get higher rate of return. However, the risk factor associated with the return often does not fulfill the purpose of investment. To a fundamental analyst, the market equity price tends to move towards the fundamental intrinsic value. A difference between the current and the intrinsic value is an indicator of the expected excess rewards for investing in the security. A large body of research demonstrates that economically significant abnormal returns spread over several years can be obtained by implementing fundamental analysis trading strategies. The need for the study is as follows: The study aims at assessing financial health of the business. The study tries to analyze the present scenario of drugs and pharmaceuticals industry in India.

The study gives an idea of the position of the companies chosen in the market and to recommend investing in the companies which tend to maximize the return.

1.4. OBJECTIVE OF THE STUDY Primary objective The primary objective of the study is to carry out the fundamental analysis of the drugs and pharmaceuticals industry. Secondary objectives

To study the present scenario of drugs and pharmaceuticals industry in India. To study the impact of various economic factors on the performance of the industry and the companies.

To study the financial performance of the companies chosen from the drugs and pharmaceuticals industry for ten financial years for the period 2000-2010.

To give an insight into the position and role of the industry in the stock market. To compute various key financial ratios and compare it with the peers chosen. To give an insight into the trend patterns of the drugs and pharmaceuticals industry and companies chosen.

To forecast the future growth potential of the drugs and pharmaceuticals industry and the companies chosen. 1.5. SCOPE OF THE STUDY Fundamental analysis is a cornerstone of investing. Before making an investment into any company, the countrys economic situation, the industry the company belongs to and the own performance of the company must be
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studied carefully. This is because, the earnings potential and riskiness of a company are linked to the prospects of the industry to which it belongs and the prospects of various industries, in turn, are largely influenced by the developments in the macro economy. The study on the fundamental analysis of drugs and pharmaceuticals industry helps to identify the future trend of the industry. It helps in

identifying the key factors to be considered before making an investment. This study is used to choose among the drugs and pharmaceuticals companies and devise an optimum portfolio which would increase the return to the investors while reducing the risk involved. This study can also be extended to find the intrinsic value of equity stocks of the drugs and pharmaceuticals companies. To a fundamental analyst, the market equity price tends to move towards the fundamental intrinsic value. A difference between the current and the intrinsic value is an indicator of the expected excess rewards for investing in the security. The fundamental analysis thus provides both quantitative and

qualitative aspects of the investment analysis. 1.6. LIMITATIONS OF THE STUDY Data collection is restricted to secondary source. No primary data are collected. This study can be useful only for long term investment.
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This study is carried out based on the data obtained from the annual reports of the companies which may subject to manipulation and window dressing.

The study uses only historical information. But an investor should be concerned more about the present and future.

The financial performances of the companies are analyzed based on certain accounting concepts and conventions. An investor should know them to have a better understanding.

Todays stock market is totally running on the perception of investors. So the investment decisions arrived at on the basis of fundamental analysis would not be viable.

CHAPTER II. REVIEW OF LITERATURE There is large body of literature reporting on the use of book to market ratio in differentiating between growth and value stocks. Various studies have shown that book to the market ratio (BM) of a firm is strongly positively correlated to the future stock performance firms with high book to market (referred as value stocks) earn significant positive excess returns whereas firms with low book to market (referred as growth stocks) earn significant negative excess returns. Fama and French (1992) find that two variables, market equity and ratio of book equity to market equity capture much of the cross section of average stock returns. French (1993) confirms that portfolios constructed to mimic risk factors related to BM add substantially to the variation in the stock returns explained by a portfolio. Fama and French (1995) confirmed that low BM (high stock price relative to book value is typical of firms with high average returns on capital (growth stocks), whereas high BM is typical of firms that are relatively distressed. Penman (1991) also find that low BM equity firms remain more profitable than high BM firms for at least five years after portfolios are formed on BM. Lakonishok, Shliefer and Vishny (1994) also show that BM ratio of a firm is strongly positively correlated to the future stock performance. Firms within each BM category may not be homogenous. Some firms in the low book to market may have strong fundamentals hence
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better prospects whereas others may be overvalued weak firms. Applying fundamental analysis helps in differentiating between two categories of firms. Various studies have shown that how application of fundamental analysis by using information in financial statements can be useful in predicting the subsequent returns. Ball and Brown (1968) first documented the predictive properties of corporate earnings with respect to future abnormal stock returns. They assessed the usefulness of existing accounting income numbers by examining their information content and timeliness and concluded that its content is considerable. Ou and Penman (1989) selected and studied a comprehensive set of 68 accounting ratios and the evidences suggested that financial statement capture fundamentals that are not reflected in prices. The findings indicated that the predictive association between earning predictions and future stock returns capture a good deal of contemporaneous association between earnings and stock returns. Holthausen and Larcker (1998) examined the profitability of a trading strategy which is based on Logit Model designed to predict the subsequent twelve month excess returns from sixty accounting ratios. One of the drawbacks of these two studies rests on the use of complex methodologies and a vast amount of historical information to make necessary predictions. To overcome these problems, Lev and Thiagrajan (1993) utilised twelve financial signals claimed to be useful by the financial analysts, and
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found them useful in demonstrating a statistically significant relation between an aggregate fundamental score, indicating the quality of earnings, and the earnings response coefficient. Abarbanell and Bushee (1998) documented that information contained in fundamental analysis is related to both future earnings and returns. The study argue that investors can earn abnormal returns by trading on various signals of financial performance, as the market fails to fully incorporate the information in historical financial data into prices in a timely manner. Piotroski (2000) applied fundamental analysis strategy on value stocks to examine whether a simple accounting based fundamental analysis strategy, when applied to a broad portfolio of high BM firms can shift the distribution of returns earned by an investor and concluded that firms with stronger fundamentals are more likely to have better realisation of earnings. Mohanram (2005) applied modified fundamental signals to growth stock and results indicate that modified fundamental signals are successful in differentiating between firms that are likely to perform well in future and those that are likely to perform poorly. A strategy based on buying high score firms and shorting low score firms consistently earns significant excess returns. In this paper, we evaluate the usefulness of fundamental analysis in terms of their ability to assist growth stock investors in forecasting what to buy and what to

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sell and also if buying and selling decisions consistently earns significant excess returns.

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CHAPTER III. RESEARCH METHODOLOGY

The methodology of the study explains the systematic way of finding answers to the predetermined objectives. Moreover this provides the clear path to accomplish and achieve the desired results. The following are the stages through which research has to pass for collecting, analyzing and interpreting the information. Research Design: In this study, a descriptive research design was used in order to carry out the fundamental analysis of Drugs and Pharmaceuticals Industry. Data: The study is fully depended on secondary data. Secondary data refers to the data collected already for some other purpose which may sometimes be able to be used for our analysis. Sources of Data: The data used for this study is secondary in nature. The data are

collected from the publications, journals and websites of CMIE (Center for Monitoring Indian Economy), OPPI (Organization of Pharmaceutical Producers of India), RBI handbook of Indian economy and other related financial websites.
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Sampling technique: In this study, Judgment sampling is used to select the sample. In

Judgment sampling, the researchers judgment is used for selecting the sample unit which he/she considers as the representative of the population. Here, the sample is a list of ten companies selected from the drugs and pharmaceuticals industry Sample Unit: In this study, the concentration was mainly focused on Indian economy. As such, a total of ten drugs and pharmaceuticals companies which are operating in India and across globe are taken. The ten companies chosen are the representative of the drugs and pharmaceuticals industry in our country. The ten companies are: 1. 2. 3. 4. 5. 6. 7. 8. Cipla Ranbaxy Laboratories. Dr.Reddys Laboratories. Sun Pharmaceutical Industries. Novartis India. Merck Pharmaceuticals. Cadila Healthcare. GlaxoSmithKline Pharmaceuticals.
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9. 10.

Orchid Chemicals and Pharmaceuticals. Glenmark Pharma.

Duration of the study: The study is carried out from 18th December 2011 to 18th April 2011. Data Analysis: The data after collection has to be processed and analyzed in accordance with the outline laid down for the purpose at the time of developing the research plan. This is essential for a scientific study and for ensuring that we have all the relevant data. Processing implies editing, classification, coding and tabulation of the data collected so that they can be used for analysis. The term analysis refers to the computation of certain measures along with searching for patterns of relationship that exists among data-groups. Thus in the process of analysis, relationships or differences supporting or conflicting with original or new hypothesis should be subjected to statistical tests of significance to determine with what validity data can be said to indicate any conclusions. RESEARCH TOOLS & TECHNIQUES Research tools are statistical techniques used for data analysis and to arrive at certain conclusions.
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The tools and techniques used for this project are: Industry Life Cycle Analysis Porters Five Force Model for Industry Analysis SWOT analysis of drugs and pharmaceuticals industry Ratio Analysis Trend Analysis Correlation Analysis Regression Analysis Multidimensional scaling technique

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PART IV- ANALYSIS AND INTERPRETATION 4.1. INDUSTRY LIFE CYCLE ANALYSIS Many industrial economists believe that the development of almost every industry may be analyzed in terms of the life cycle with four welldefined stages. The stages are: Pioneering stage Rapid growth stage Maturity and stabilization stage Decline stage

Pioneering stage: During this stage, the technology and or the product is relatively new. Lured by promising prospects, many entrepreneurs enter the field. As a result, there is keen and often chaotic competition. Only a few entrants may survive this stage. Most of today's major pharmaceutical companies were founded in the late 19th and early 20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin became mass-manufactured and distributed. Switzerland, Germany and Italy had particularly strong industries, with the UK, US, Belgium and the Netherlands following suit. In India, Legislation was enacted to test and approve drugs and to require appropriate labeling. Prescription and non-prescription drugs became
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legally distinguished from one another. Cancer drugs were a feature of the 1970s. From 1978, India took over as the primary center of pharmaceutical production without patent protection. Rapid growth stage: Once the period of chaotic developments is over, the rapid growth stage arrives. Due to the relatively orderly growth during this period, firms which survive the intense competition of the pioneering stage, witness significant expansion in their sales and profits. In India, the drugs and pharmaceuticals industry remained relatively small until the 1970s when it began to expand at a greater rate. Legislation and a number of acts provided for strong patents, to cover the process of manufacture of specific products. By the mid 1980s, small biotechnology firms were struggling for survival which led to the formation of mutually beneficial partnerships with large pharmaceutical companies and a host of corporate buyouts of smaller firms. . In the 2000s, market for drugs and pharmaceuticals industry changed dramatically due to change in the consumerism and the use of internet which made possible the direct purchase of medicines by drug consumers and of raw materials by drug producers, transforming the nature of business. With the increase in the standard of living and increased consumption expenditure, the demand for drugs and pharmaceuticals products is on the uptrend. The ill
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health caused by pollution and imbalance of work and life also increases the demand for drugs and medicines. The drugs and pharmaceuticals industry in our country enjoys maturity stage in the current scenario with increased export and import of drugs all over the world, increased demand and high consumption expenditure. Maturity and stabilization stage: After enjoying an above-average rate of growth during the rapid growth stage, the industry enters the maturity and stabilization stage. During this stage, when the industry is more or less fully developed, its growth rate is comparable to that of the economy as a whole. Decline stage: With the satiation of demand, encroachment of new products, and changes in Consumer preferences, the industry eventually enters the decline stage, relative to the economy as a whole. In this stage, which may continue indefinitely, the industry may grow slightly during prosperous periods, stagnate during normal periods, and decline during recessionary periods. The sales figures of Drugs and Pharmaceuticals Industry for the period 2000-01 to 2009-10 is used to analyze the trend in sales over the past years. Model fit is a tool used where regression equation is formed using non linear regression. The following table presents the total income or earnings

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growth percentage of drugs and pharmaceuticals industry for the period 200001 to 2009-10. Table 4.1.1: Total sales growth Year Sales (Rs. In Crores) 2001 23547 2002 26034.7 2003 28975.6 2004 33621.4 2005 43902 2006 51971 2007 63536 2008 74904 2009 85515 2010 92956 The above information is presented in the following model fit. Figure 4.1.1. Model fit of Total sales

The regression equation using the above model is as follows:

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Y = 0.4348*x^8+-18.7185*x^7 +334.376265*x^6 +-3207.7822*x^5+ 17858.7850415503*x^4 +-58210.3907*x^3+107664.795063933*x^2+100210.3172*x+59329.4699 S Using the above regression equation, the sales of drugs and pharmaceuticals industry for the next five years can be predicted. It is shown in the following table. Table 4.1.2. Sales forecasted Year 2011 2012 2013 2014 2015 Sales (Rs. in Crores) 98112.6 106406.5 114700.4 122994.3 131288.2

The above prediction indicates that in the following years, the sales of drugs and pharmaceuticals industry will continue to be on the uptrend. Thus, the drugs and pharmaceuticals industry in our country continues to be in the Maturity stage and it may move to stabilization. Increased investments spent by the drugs and pharmaceuticals companies in Research & development to increase sales and withstand competition evidences the situation. PORTERS FIVE FORCE MODEL FOR INDUSTRY ANALYSIS Michael Porter has argued that the profit potential of an industry depends on the combined strength of the following five basic competitive forces:
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Threat to new entrants Rivalry among the existing firms Pressure from substitute products Bargaining power of buyers Bargaining power of sellers

The following diagram shows the forces that drive competition and determine industry profit potential. Figure 4.1.2: Micheal Porters Five force model

Threat of New Entrants: New entrants add capacity, inflate costs, push prices down and reduce profitability. Hence, if an industry faces the threat of new entrants, its profit potential would be limited. The threat from new

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entrants is low if the entry barriers confer an advantage on existing firms and deter new entrants. Entry barriers are high when: The new entrants have to invest substantial resources to

enter the industry. Economies of scale are enjoyed by the industry. Existing firms control the distribution channels, benefit

from product differentiation in the form of brand image and customer loyalty. Switching costs which refers to the one-time costs of

switching from the products of one supplier to another are high. entrants. In case of the drugs and pharmaceuticals industry, the entry barriers are high due to the cost of Research and Development and patent limitations. Rivalry between Existing Firms: Firms in an industry compete on the basis of price, quality, promotion, service, warranties and so on. Generally, a firms attempts to improve its competitive position provoke retaliatory action from others. If the rivalry between the firms in an industry is strong, competitive moves and countermoves dampen the average profitability of the industry. The intensity of rivalry in an industry tends to be high when:
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The Government policy limits or even prevents new

The number of competitors in the industry is large. At least a few firms are relatively balanced and capable of

engaging in a sustained competitive battle. The industry growth is sluggish, prodding firms to strive for

a higher market share. The level of fixed costs is high, generating strong pressure

for all firms to achieve a higher capacity utilization level. There is chronic over capacity in the industry. The industrys product is regarded as a commodity or near-

commodity, stimulating strong price and service competition. The industry confronts high exit barriers.

In the drugs and pharmaceuticals industry, high industry competition is existing. The companies are gaining greater benefit and statutory protection through patent laws and regulations. This enables the companies to gain first mover advantage. Pressure from Substitute Products: In a way, all firms in an industry face competition from industries producing substitute products. Performing the same function as the product of industry, substitute products may limit the profit potential of the industry by imposing a ceiling on the prices that can be

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charged by the firms in the industry. The threat from substitute products is high when: The price-performance tradeoff offered by the substitute

products is attractive. The switching costs for prospective buyers are minimal. The substitute products are being produced by industries

earning superior profits. In case of drugs and pharmaceuticals industry, the pressure from substitute products is minimum with the protection from patent rights. However, after the expiry of the patents, the pressure from substitute products is medium. Bargaining Power of Buyers: Buyers are a competitive force. They can bargain for price cut, ask for superior quality and better service, and induce rivalry among competitors. If they are powerful, they can depress the

profitability of the supplier industry. The bargaining power of a buyer group is high when: Its purchases are large relative to the sales of the seller. Its switching costs are low. It poses a strong threat of backward integration.

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However, in drugs and pharmaceuticals industry the bargaining power of buyers is low. Bargaining Power of Suppliers: Suppliers, like buyers, can exert a

competitive force in an industry as they can raise prices, lower quality and curtail the range of free services they provide. Powerful suppliers can hurt the profitability of the buyer industry. Suppliers have strong bargaining power when: Few suppliers dominate and the supplier group is more

concentrated than the buyer group. supplied. The switching costs for the buyers are high. Suppliers do present a real threat of forward integration. There are hardly any viable substitutes for the products

In drugs and pharmaceuticals industry, the bargaining power of suppliers is low. SWOT ANALYSIS OF DRUGS AND PHARMACEUTICALS INDUSTRY SWOT (Strengths, weaknesses, Opportunities, Threats) analysis helps in determining the distinctive competencies, competitive weaknesses and relevant

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business opportunities. The SWOT analysis of Drugs and Pharmaceuticals Industry is as follows. Strengths The industry registered double digit growth rate despite the economic slowdown. Net exporter of bulk drugs and formulations. Existing patent protection for a number of years on key products. Low cost in process development and research and development. Marketing strength in major geographical areas. Large pool of skilled technical manpower. Increasing liberalization of government policies. Efficient technologies for large number of Generics. Weaknesses Discontinuation of products in the latter stages of development. Fragmentation of installed capacities. Non-availability of major intermediaries for bulk drugs. Various price controls. Increased size and operational complexity makes the companies a little agile.
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Opportunities With increase in purchasing power, health care expenditure would increase. Decreasing development time through favorable Research and Development collaborations and internal efforts. Emergence of integrated global markets and globalization of products. Patent law facilitates consolidation of industry. Wider opportunities for merger agreements among companies to capitalize their strengths.

Threats A number of major products may lose patent protection. Ambiguity regarding the timing and content of the patent protection acts. Increased competition for core products. Increase in the number of safety issues. High entry cost in newer markets. High cost of sales and marketing.

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4.2.

RATIO ANALYSIS

DR.REDDYS LABOROTORIES. Table 4.2.1. Profitability ratios of Dr.Reddys Lab Year Gross profit EBITDA Net profit Return on Return on ratio (%) margin ratio (%) assets (%) equity (%) ratio (%) 2000-01 49.76 28.02 15.71 15.56 26.11 2001-02 60.24 41.95 30.77 31.23 31.53 2002-03 56.25 32.47 25.56 21.36 21.69 2003-04 52.22 22.83 17.05 13.45 13.83 2004-05 48.60 9.99 4.23 2.79 3.16 2005-06 43.99 20.62 10.54 6.63 9.33 2006-07 56.19 41.27 31.11 25.02 26.91 2007-08 42.54 23.33 14.21 9.01 9.88 2008-09 46.43 24.26 14.02 9.51 10.66 2009-10 46.82 30.54 19.25 13.06 14.31 The above table presents the profitability ratios of Dr.Reddys Laboratories. The Gross profit ratio of Dr. Reddys Laboratories for the period 2000-01 to 2009-10 is presented above. It has increasing trend till the year 2002-03 and decreasing trend till 2005-06. It again increases from 2007-08 till 2009-10. The EBITDA margin of Dr. Reddys Laboratories is 9.99 % in the year 2004-05 and 30.54 % in 2009-10. Highest margin ratio recorded in the year 2001-02 and lowest in 2004-05. The net profit margin of Dr. Reddys Lab comes down to 4.23 % in 2004-05 and increases to 31.11 % in 2006-07. It is 19.25 % in 2009-10.

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The return on assets ratio of Dr. Reddys Lab is 31.23 % in 2001-02 and it comes down to 2.79% in 2004-05 which is the lowest return recorded. It is 13.06 % in 2009-10. The return on equity of Dr. Reddys Lab has declining trend till 2004-05 where it is 3.16%. It increases to 26.91 % in 2006-07 and comes down to14.31 % in 2009-10. The following diagram presents the above information. Figure 4.2.1. Profitability ratios of Dr.Reddys Lab

GLAXOSMITHKLINE PHARMACEUTICALS The following table presents the profitability ratios of GlaxoSmithKline pharmaceuticals for the period 2000-01 to 2009-10.

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Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Table 4.2.3. Profitability ratios of GlaxoSmithKline Gross profit EBITDA Net profit Return on Return on ratio (%) margin ratio (%) assets (%) equity (%) ratio (%) 23.60 15.89 7.69 15.87 17.88 22.11 7.66 2.94 7.71 7.85 31.31 16.99 6.39 16.87 16.93 36.17 26.33 10.37 25.69 25.80 40.79 36.63 21.51 35.89 36.04 43.09 46.49 25.06 52.66 52.93 43.93 49.69 14.42 45.45 45.66 47.31 52.13 16.08 39.34 39.51 46.45 50.36 14.42 37.28 37.41 46.13 42.46 11.65 29.03 29.12

The above table presents the gross profit ratio of GlaxoSmithKline Pharmaceuticals for the period 2000-01 to 2009-10. It has increasing trend till the year 2007-08 and remains at around 46% from 2008 to 2010. The EBITDA margin of GlaxoSmithKline pharmaceuticals for the period 2000-01 to 2009-10 has an increasing trend from the year 2001-02 till 2007-08 and reaches 42.46 % in 2009-10. The net profit margin of GlaxoSmithKline pharmaceuticals increases from 2.94 % in 2001-02 to 25.06% in 2005-06. It again comes down in the latter years and reaches 11.65 % in the year 2009-10. The return on assets ratio of GlaxoSmithKline pharmaceuticals has an increasing trend except in the year 2001-02. It increases to 52.66% in the year 2005-06 and falls in the following years till it reaches 29.03 % in 2009-10.
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The return on equity of GlaxoSmithKline pharmaceuticals has an increasing trend till 2005-06 at 52.93%. It comes down to 45.66 % in 2006-07 and subsequently reaches 29.12 % in 2009-10. The above information is presented in the following diagram. Figure 4.2.2. Profitability ratios of GlaxoSmithKline

NOVARTIS INDIA Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Table 4.2.4. Profitability ratios of Novartis India Gross profit EBITDA Net profit Return on Return on ratio (%) margin ratio (%) assets (%) equity (%) ratio (%) 33.44 19.62 9.64 15.95 24.99 34.96 22.76 14.31 29.78 31.30 31.22 21.28 13.13 24.57 25.45 41.22 22.61 22.49 43.44 44.47 36.00 22.57 13.78 22.36 22.89 39.02 27.14 20.50 31.37 31.96 41.71 25.17 16.37 22.26 22.78 44.23 27.12 17.57 21.62 21.68 46.87 28.76 17.25 20.14 20.15 44.13 29.04 18.58 19.54 19.54
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The above table presents the gross profit ratio of Novartis India for the period 2000-01 to 2009-10. The gross profit margin does not follow any trend and it increases from 41.71% in 2006-07 to 44.13% in 2009-10. The EBITDA margin of Novartis India increases to 27.14% in 2005-06 and it reaches 29.04 % in 2009-10. The net profit margin of Novartis India is 9.64% in 2000-01 and it reaches 20.50 % in 2005-06. In 2009-10, it is 18.58%. The return on assets ratio of Novartis India is 43.44 % in 2003-04 which is the highest and the lowest is recorded in 2000-01 at 15.95%. The return on assets does not follow any particular pattern of increase or decrease. The return on equity of Novartis India is 24.99% for the year 2000-01. It increases to 44.47% in 2003-04 and comes down in the following years. It follows downward trend and is 19.54% in 2009-10. Figure 4.2.3. Profitability ratios of Novartis India

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ORCHID CHEMICALS AND PHARMACEUTICALS The following table presents the profitability ratios of Orchid chemicals and pharmaceuticals for the period 2000-01 to 2009-10. Table 4.2.5. Profitability ratios of Orchid Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Gross profit ratio (%) 25.95 28.20 23.46 27.19 19.85 35.07 27.54 43.01 29.43 34.62 EBITDA margin ratio (%) 30.86 23.59 21.49 21.87 25.55 31.11 32.91 33.69 20.84 69.18 Net profit ratio (%) 10.12 1.54 3.71 4.48 4.83 9.89 10.92 14.89 -4.38 26.89 Return on assets (%) 5.01 0.78 1.96 2.63 2.13 4.57 4.53 6.99 -1.64 12.61 Return on equity (%) 9.17 1.92 4.86 7.41 6.58 10.56 19.28 26.82 -8.89 33.23

The above table presents the gross profit ratio of Orchid chemicals and pharmaceuticals for the period 2000-01 to 2009-10. It is 25.95% in 2000-01 which reaches 43.01% in 2007-08. It is 34.62% in 2009-10. The EBITDA margin of Orchid is 30.86% in 2000-01. It has decreasing trend till the year 2002-03. It increases in the following years and reaches 33.69% in 2007-08. It is 69.18 % in 2009-10. The net profit margin of Orchid chemicals and pharmaceuticals is 10.12% in the year 2000-01. It comes down to 1.54% in 2001-02. It has

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increasing trend from 2002-03, where it increases to 14.89% in 2007-08. In 2008-09, it is negative with -4.38% and it is 26.89 % in 2009-10. The return on assets ratio of Orchid chemicals and pharmaceuticals is 5.01 times in the year 2000-01. It falls down to 1.96 times in 2002-03. It is negative with -1.64 times in 2008-09. In 2009-10, it is 12.61 times. The return on equity of Orchid chemicals and pharmaceuticals is 9.17 times in 2000-01. It has decreasing trend and comes down to 4.86. It has increasing trend from 2004-05 and reaches 26.82 times. It is negative in the year 2008-09 with -8.89 times. In 2009-10, it is 33.23 times. The above information is presented in the following diagram. Figure 4.2.4. Profitability ratios of Orchid

36

CADILA HEALTHCARE The following table presents the profitability ratios of Cadila Healthcare pharmaceuticals for the period 2000-01 to 2009-10. Table 4.2.6. Profitability ratios of Cadila Healthcare Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Gross profit ratio (%) 30.55 34.04 36.95 41.34 41.21 43.54 41.89 46.25 46.60 37.96 EBITDA margin ratio (%) 20.69 20.68 20.07 21.59 20.99 21.29 22.65 23.22 25.92 34.65 Net profit ratio (%) 13.67 12.70 8.19 13.09 12.06 12.92 14.11 14.04 15.25 26.69 Return on assets (%) 10.95 8.17 8.47 15.12 13.33 14.10 15.39 13.18 12.95 22.71 Return on equity (%) 11.99 12.15 16.61 26.49 21.39 22.39 23.20 22.41 21.57 31.03

The above table presents the gross profit ratio of Cadila Healthcare. The gross profit ratio is 30.55% in 2000-01 which increases to 41.34% in 2003-04. It comes down to 41.21% in the following year and again rises to 43.54% in 2005-06. It is 46.60% in 2008-09 and 37.96 % in 2009-10. The above table presents the EBITDA margin of Cadila Healthcare. It is 20.69% in 2000-01. It has decreasing trend till 2002-03. It increases from 20.99% in 2004-05 to 34.65% in 2009-10.

37

The net profit margin of Cadila Healthcare has decreasing trend from 2000-01 to 2002-03. It reaches 13.09% in 2003-04 and comes down in the following years to 12.92%. It increases from 12.92 %in 2005-06 to 26.69% in 2009-10. The return on assets ratio of Cadila Healthcare is 10.95 % in 2000-01. It has decreasing trend till 2002-03 and increases to15.12% in 2003-04. It is 15.39% in 2006-07 and it comes down to 12.95% in 2008-09. It increases to 22.71 % in 2009-10. The return on equity of Cadila Healthcare is 11.99% in 2000-01. It has increasing trend and reaches 26.49% in 2003-04. It comes down to 21.39% in 2004-05 and increases up to 23.20% in 2006-07. It is 31.03% in 2009-10. Figure 4.2.5. Profitability ratios of Cadila Healthcare

38

CIPLA The following diagram presents the profitability ratios of Cipla for the period 2000-01 to 2009-10. Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 The Table 4.2.7. Profitability ratios of Cipla Gross profit EBITDA Net profit Return on Return on ratio (%) margin ratio (%) assets (%) equity (%) ratio (%) 33.36 26.04 18.22 23.92 24.71 32.33 25.96 18.24 25.44 26.41 30.41 23.65 16.97 21.27 23.15 35.46 23.31 15.95 20.79 24.26 33.81 25.78 18.17 23.42 26.36 34.64 27.04 20.38 24.78 30.64 37.88 25.89 18.75 19.88 20.64 34.61 23.48 16.69 16.18 18.68 40.03 21.11 14.84 14.68 17.85 40.09 26.88 19.29 18.27 18.29 above table presents the gross profit ratio of Cipla. It is 33.36% in

the year 2000-01. It comes down to 30.41 times in 2002-03. It increases to 35.46 % in 2003-04 and falls to 33.81 times in 2004-05. It increases to 37.88% in 2006-07. It is 40.03 % in 2008-09 and 40.09% in 2009-10. The above table presents the EBITDA margin of Cipla for the period 2000-01 to 2009-10. It is 26.04% in 2000-01. It has declining trend till the year 2003-04 where it reaches 23.31 % in 2003-04. It increases to 27.04 times in 2005-06. It comes down subsequently to 21.11% in 2008-09 and increases to 26.88% in 2009-10.

39

The net profit margin of Cipla is 18.22% which comes down to 15.95% in 2003-04. It increases to 18.17 times in 2004-05 and 20.38 times in 2005-06. It has declining trend in the following years till it reaches 14.84 times in 200809. It is 19.29 times in 2009-10. The return on assets ratio of Cipla is 23.92 % in 2000-01. It increases to 25.44% in 2001-02. It comes down to 21.27 in 2002-03. It increases to 20.79% in 2003-04 and increases to 23.42% in 200506. It reaches 24.78 times in 2005-06 which comes down in the latter years and reaches 14.68% in 2008-09. It is 18.27% in 2009-10. The return on equity of Cipla is 24.71% in 2000-01. It increases to 26.41% in 2001-02 and comes down to 23.15% in 2002-03. It increases in the following years and reaches 30.64% in 2005-06. It comes down in the latter years and reaches 18.29% in 2009-10. Figure 4.2.6. Profitability ratios of Cipla

40

MERCK PHARMACEUTICALS The following table presents the profitability ratios of Merck pharmaceuticals. Table 4.4.7. Profitability ratios of Merck Pharmaceuticals. Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Gross profit ratio (%) 31.17 34.75 31.45 42.74 41.69 40.97 43.56 43.27 37.05 38.54 EBITDA margin ratio (%) 19.79 21.85 20.49 18.97 30.97 31.41 52.43 32.97 24.38 21.58 Net profit ratio (%) 12.29 13.17 11.51 10.81 18.73 19.79 18.44 21.31 15.76 13.59 Return on assets (%) 28.26 29.71 22.76 20.19 28.60 26.43 15.76 16.27 13.96 14.01 Return on equity (%) 29.24 29.71 22.76 20.19 28.60 26.43 15.76 16.27 13.96 14.01

The above table presents the gross profit ratio of Merck pharmaceuticals. It is 31.17% in the year 2000-01. It increases to 34.75% in 2001-02 and comes down to 31.45%. It again increases to 42.74% in 2003-04. It reaches 40.97% in 2005-06 which increases in the next two years and reaches 43.27%. It is 38.54% in 2009-10. The above table presents the EBITDA margin Merck pharmaceuticals. It is 19.79% in 2000-01 which increases to 21.85% in 2001-02. It increases to

41

30.97% in 2004-05. The ratio is 52.43% in 2006-07. It has downward trend in the later years and reaches 21.58% in 2009-10. The net profit margin of Merck pharmaceuticals for the year 2000-01 is 12.29%. It increases to 13.17% in 2000-01 and comes down to 11.51% in 2002-03 and 10.81% in 2003-04. It increases to 19.79% in 2005-06. It is 21.31% in 2007-08. It comes down and reaches 13.59% in 2009-10. The return on assets ratio of Merck pharmaceuticals is 28.26% in the year 2000-01. It increases in 2001-02 to 29.71%. It comes down in the following years and reaches 20.19% before increasing 28.60% in 2004-05. It comes down in the following years and has downward trend before reaching 14.01% in 2009-10. The return on equity of Merck pharmaceuticals is 29.24% in the year 2000-01. It has decreasing trend and reaches 13.96 % in 2008-09. It is 14.01% in 2009-10. The above information is presented in the following diagram. Figure 4.4.7. Profitability ratios of Merck Pharmaceuticals.

42

GLENMARK PHARMA The profitability ratios of Glenmark Pharma are presented in the following table. Table 4.4.8. Profitability ratios of Glenmark Pharma Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Gross profit ratio (%) 41.32 52.57 54.16 48.76 48.51 49.15 48.16 55.51 56.61 58.41 EBITDA margin ratio (%) 19.16 21.25 21.45 20.96 23.95 21.27 28.85 36.55 31.13 23.50 Net profit ratio (%) 10.22 9.64 11.03 11.98 12.81 11.90 16.65 28.19 25.19 12.48 Return on assets (%) 8.23 11.44 12.16 12.02 8.77 6.43 9.93 25.05 9.51 5.08 Return on equity (%) 13.20 17.75 21.75 17.87 22.14 21.11 29.94 37.83 17.72 7.24

43

The above table presents the gross profit ratio of Glenmark pharma. It is 41.32% in 2000-01. It increases to 54.16% in 2002-03. It comes down to 48.51% in 2004-05 which again increases to 55.51% in 2007-08. It also increases from that year to 56.61% in 2008-09 and 58.41% in 2009-10. The above table presents the EBITDA margin of Glenmark pharma. It is 19.16% in 2000-01. It increases to 21.45% in 2002-03 which comes down to 20.96% in 2002-03 and increases to 23.95% in 2004-05. It has increasing trend and reaches 36.55% in 2007-08. It comes down in the following years to 23.50% in 2009-10. The net profit margin of Glenmark pharma. It is 10.22% in 2000-01 which comes down in 2001-02 to 9.64%. It increases to 12.81% in 2004-05. It is 28.19% in 2007-08. It comes down to 12.48% in 2009-10. The return on assets ratio of Glenmark pharma is given in the above table. It is 8.23% in 2000-01 which increases to 12.16% in 2002-03. It declines to 6.43% in 2005-06. It increases to 25.05% in 2007-08. It comes down to 9.51% in 2008-09 and 5.08% in 2009-10. The return on equity of Glenmark pharma is 13.20% in 2000-01. It increases to 21.75% in 2002-03. It comes down in 2003-04 to 17.87% and increase to 29.94% in 2006-07. It has highest ratio of 37.83% in 2007-08. It comes down to 7.24% in 2009-10.
44

The above information is presented in the following diagram.

Figure 4.4.8. Profitability ratios of Glenmark Pharma

RANBAXY LABOROTARIES The profitability ratios of Ranbaxy Laboratories are presented in the following table. Table 4.4.9. Profitability ratios of Ranbaxy Year 2000-01 Gross profit ratio (%) 33.89 EBITDA margin ratio (%) 18.59
45

Net profit ratio (%) 10.80

Return on assets (%) 9.67

Return on equity (%) 11.53

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

38.97 47.29 51.50 46.67 44.99 47.25 42.83 41.41 36.36

18.95 26.34 27.04 18.39 8.45 14.49 22.49 28.62 23.81

12.14 20.49 20.82 13.91 5.82 9.14 14.39 22.46 11.96

14.54 32.99 33.73 19.94 6.22 6.88 10.22 14.04 7.64

15.68 33.12 34.23 21.02 8.92 16.19 24.34 28.11 13.83

The above table presents the gross profit ratio of Ranbaxy laboratories. It is 33.89% in 2000-01 which increases to 51.50% in 2003-04. It comes down to 46.67% in 2004-05 and to 44.99% in 2005-06. It increases to 47.25% in 2006-07 and comes down to 42.83% in 2007-08. It has declining trend from the year 2006-07 and reaches 36.36% in 2009-10. The EBITDA margin Ranbaxy laboratories is 18.59% in 2000-01 which increases to 27.04% in 2003-04 with an increasing trend. In the year 2004-05, it is 18.39% which comes down to 14.49% in 2006-07. It increases to 28.62% in 2008-09 and comes down to 23.81% in 2009-10. The net profit margin of Ranbaxy laboratories is 10.80% in the year 2000-01. It increases to 20.82% in 2003-04 and comes down to 13.91% in 2004-05. It is 5.82% in 2005-06 and 9.14% in 2006-07. It increases to 22.46% in 2008-09. It is 11.96% in 2009-10.

46

The return on assets ratio of Ranbaxy Laboratories is 9.67% in the year 2000-01. It increases to 33.73% in 2003-04. It comes down to 19.94% in 2004-05 and 6.22% in 2005-06. It increases to 14.04% in 2008-09 and 7.64% in 2009-10. The return on equity of Ranbaxy laboratories is 11.53 times in the year 2000-01. It has increasing trend and reaches 34.23% in 2003-04. It comes down to 21.02% in 2004-05 which increases to 28.11% in 2008-09. It is 13.83% in 2009-10. Figure 4.4.9. Profitability ratios of Ranbaxy

SUN PHARMACEUTICALS INDUSTRY The profitability ratio of Sun Pharmaceuticals Industry is presented in the following table. Table 4.4.10. Profitability ratios of Sun Pharma
47

Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Gross profit ratio (%) 36.5 47.2 48.01 40.30 31.89 20.23 17.62 25.80 20.5 37.4

EBITDA margin ratio (%) 29.85 29.53 34.39 37.59 35.03 41.86 41.84 47.00 48.91 55.15

Net profit ratio (%) 24.09 24.59 29.17 28.51 30.35 35.71 37.83 42.81 45.60 48.70

Return on assets (%) 26.98 31.26 33.24 20.53 10.47 14.37 17.88 23.53 24.45 15.64

Return on equity (%) 29.05 31.98 33.24 27.99 27.65 31.49 25.68 24.10 24.56 15.72

The above table presents the gross profit ratio of Sun pharmaceuticals industry for the period 2000-01 to 2009-10. It is 36.5% in the year 2000-01. It has increasing trend till the year 2002-03 and reaches 48.01%. It has

decreasing trend in the following years and reaches 17.62% in the year 200607. It is 37.4% in the year 2009-10. The above table presents the EBITDA margin of Sun pharmaceuticals industry. It is 29.85% in the year 2000-01. It increases to 37.59% in the year 2003-04. It comes down to 35.03% in the year 2004-05. It increases to 55.15% in the year 2009-10. The net profit margin of Sun pharmaceuticals industry for the period 2000-01 to 2009-10 is shown in the above table. It is 24.09% in the year 200001 which has increasing trend in the latter years and reach 29.17% in 2002-03.

48

It continues with increasing trend except for the year 2003-04 where it falls down to 28.51%. It increases to 48.70% in the year 2009-10. The return on assets ratio of Sun pharmaceuticals industry for the year 2000-01 is 26.98% which increases to33.24% in the year 2002-03. It comes down to 20.53% in 2003-04 and to 10.47% in 2004-05. It then has upward trend and increases to 24.45% in 2008-09. It is 15.64% in the year 2009-10. The return on equity of Sun pharmaceuticals industry is 29.05% in the year 2000-01. It increases to 33.24% in the year 2002-03. It comes down to 27.65% in the year 2006-07. It has decreasing trend from the year 2005-06 where it comes down from 31.49% to 15.72 % in 2009-10. Figure 4.4.10. Profitability ratios of Sun Pharma

DR.REDDYS LABOROTORIES.
49

Table 4.4.11. Liquidity and leverage ratios of Dr.Reddys Lab Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Current ratio 2.82 2.10 1.91 1.48 1.56 1.24 1.28 1.14 1.78 1.18 Liquid ratio 1.28 1.01 1.02 0.57 0.59 0.43 0.35 0.33 0.36 0.40 Debt Equity ratio 0.57 0.05 0.036 0.024 0.0243 0.019 0.024 0.003 0.0005 0.0005

The above table indicates that the current ratio is 2.82 in 2000-01 and it has decreasing trend. It reaches to 1.18 times in 2009-10. The company maintains very small amount of debt compared to the net worth and it has very low ratio of debt to equity. The highest leverage is in 2000-01 at .088 times. The company maintains very small amount of debt compared to the net worth and it has very low ratio of debt to equity. The above information is presented in the following diagram. Figure 4.4.11. Liquidity and leverage ratios of Dr.Reddys Lab

50

GLAXOSMITHKLINE PHARMACEUTICALS The following table presents the liquidity and leverage ratios of GlaxoSmithKline pharmaceuticals for the period 2000-01 to 2009-10. Table 4.4.12. Liquidity and leverage ratios of Glaxosmithkline Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Current ratio 2.82 2.10 1.91 1.48 1.56 1.24 1.28 1.14 1.78 1.18 Liquid ratio 1.28 1.01 1.02 0.57 0.59 0.43 0.35 0.33 0.36 0.40 Debt Equity ratio 0.088 0.017 0.0034 0.0043 0.0042 0.0051 0.0046 0.0042 0.0037 0.0031

51

The above table indicates that the current ratio is 2.82 in 2000-01 and it has decreasing trend. It reaches to 1.18 times in 2009-10. The liquid ratio of GlaxoSmithKline pharmaceuticals has decreasing trend from 1.28 times in 2000-01 to 0.33 times in 2007-08. It is 0.40 times in 2009-10. The company maintains very small amount of debt compared to the net worth and it has very low ratio of debt to equity. The highest leverage is in 2000-01 at .088 times. The above information is presented in the following diagram. Figure 4.4.12. Liquidity and leverage ratios of Glaxosmithkline

NOVARTIS INDIA

52

The following table presents the liquidity and leverage Novartis India for the period 2000-01 to 2009-10.

ratios of

Table 4.4.13. Liquidity and leverage ratios of Novartis India Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Current ratio 1.52 1.32 1.59 1.94 1.52 1.52 1.65 1.53 1.10 1.08 Liquid ratio 1.23 1.05 1.15 1.17 1.04 1.21 1.10 1.00 1.06 1.07 Debt Equity ratio 0.57 0.05 0.036 0.024 0.0243 0.019 0.024 0.003 0.0005 0.0005

The above table indicates that the current ratio of Novartis India is 1.52 times in 2000-01. It increases to 1.94 times in 2003-04 and remains at 1.52 times in 2004-05 and 2005-06. It comes down in the following years and reaches 1.08 times in 2009-10. The liquid ratio of Novartis India is 1.23 for the year 2000-01. It comes down to1.05 in 2001-02 and increases to 1.17 in the year 2004-05. It reaches 1.21 times in 2005-06. From the year 2007, it increases to 1.07 times in 200910.

53

The company maintains very small amount of debt compared to the net worth and it has very low ratio of debt to equity. The highest leverage is in 2000-01 at .57 times. Figure 4.4.13. Liquidity and leverage ratios of Novartis India

ORCHID CHEMICALS AND PHARMACEUTICALS The following table presents the liquidity and leverage ratios of Orchid chemicals and pharmaceuticals for the period 2000-01 to 2009-10. Table 4.4.14. Liquidity and leverage ratios of Orchid Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Current ratio 4.63 2.25 1.79 1.91 1.93 2.65 1.56 1.56
54

Liquid ratio 2.06 1.07 0.49 0.69 0.66 1.15 0.68 0.71

Debt Equity ratio 0.83 1.44 1.48 1.82 2.09 1.31 3.26 2.84

2008-09 2009-10

1.65 1.50

0.78 1.00

4.43 1.63

The above table indicates that the current ratio of Orchid chemicals and pharmaceuticals is 4.63 times in the year 2000-01. It has decreasing trend till 2002-03 and rises to 2.65 in 2005-06. It remains the same for 2006-07 and 2007-08 and rises to 1.65 times. In 2009-10, it is 1.50 times. The liquid ratio of Orchid chemicals and pharmaceuticals is 2.06 times in the year 2000-01. It has decreasing trend till 2002-03 and rises to 0.69 times in 2003-04. It has increasing trend from the year 2006-07 and reaches 1.00 times in the year 2009-10. The company has debt to equity ratio of 0.83 times in the year 2000-01 which rises to 2.09 times in the year 2004-05. It comes down to 1.31 in 200506 and raises again to 3.26 times in 2006-07. Highest debt equity ratio is maintained in the year 2008-09 at 4.43 times.

Figure 4.4.14. Liquidity and leverage ratios of Orchid

55

CADILA HEALTHCARE The following table presents the liquidity and leverage ratios of Cadila Healthcare pharmaceuticals for the period 2000-01 to 2009-10. Table 4.4.15. Liquidity and leverage ratios of Cadila Healthcare Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Current ratio 2.34 1.45 1.22 1.22 1.01 0.52 0.35 0.76 0.78 0.57 Liquid ratio 1.19 1.09 1.05 1.21 1.10 1.00 1.00 1.02 1.38 1.28 Debt Equity ratio 0.09 0.49 0.96 0.75 0.60 0.59 0.51 0.70 0.67 0.37

The above table indicates that the current ratio of Cadila Healthcare is 2.34 times in the year 2000-01. It follows downward trend and falls to 0.35
56

times in the year 2006-07. It increases to 0.76 times in 2007-08 and 0.78 times in 2008-09. In 2009-10, it is 0.57 times. The liquid ratio of Cadila Healthcare is 1.19 times in 2000-01. It comes down to 1.05 times in 2002-03 after which it increases to 1.21 times in 200304. It follows declining trend from the year2005-06 till it increases to 1.02 times in 2007-08. It is 1.28 times in 2009-10. The company has debt to equity ratio of 0.09 times in 2000-01. It increases in the subsequent years to 0.96 times. It follows declining trend from that year and reaches 0.51 times in 2006-07. It is 0.67 times in 2008-09 and 0.37 times in 2009-10. The following diagram presents the above information. Figure 4.4.15. Liquidity and leverage ratios of Cadila Healthcare

CIPLA
57

The following diagram presents the liquidity and leverage ratios of Cipla for the period 2000-01 to 2009-10. Table 4.4.16. Liqudity and leverage ratios of Cipla Year Current ratio Liquid ratio Debt Equity ratio 2000-01 2.58 0.93 0.033 2001-02 2.31 0.92 0.038 2002-03 2.29 0.87 0.089 2003-04 2.43 1.14 0.167 2004-05 2.31 1.03 0.126 2005-06 2.56 1.25 0.236 2006-07 3.21 1.69 0.038 2007-08 2.65 1.50 0.155 2008-09 2.79 1.61 0.216 2009-10 2.66 1.37 0.0009 The above table indicates that the current ratio of Cipla is 2.58 times in 2000-01. It declines and reaches 2.29 times in 2002-03. It increases to 2.56 times in 2005-06 and 3.21 times in 2006-07. It is 2.79 times in 2008-09 and 2.66 times in 2009-10. The liquid ratio of Cipla is 0.93 times in 2000-01. It comes down to 0.87 times in 2002-03. It increases to 1.69 times in 2006-07. In the year 200708, it is 1.50 times and 1.61 times in 2008-09. In 2009-10, it is 1.37 times. The company has debt to equity ratio of 0.033 times in the year 2000-01. It has increasing trend and reaches 0.167 times in the year 2003-04. It comes down to 0.126 times in 2004-05 and increases to 0.236 times in 2005-06. It

58

comes down to 0.038 times in 2006-07 and increases to 0.155 times in 200708. It is 0.216 times in 2008-09 and 0.0009 times in 2009-10. Figure 4.4.16. Liqudity and leverage ratios of Cipla

MERCK PHARMACEUTICALS The following table presents the liquidity and leverage ratios of Merck pharmaceuticals. Table 4.4.17. Liquidity and leverage ratios of Merck Pharmaceuticals Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Current ratio 2.51 2.03 2.18 1.74 1.67 1.91 1.75 2.02 2.09
59

Liquid ratio 1.07 0.93 0.92 0.98 0.95 1.10 0.79 0.98 0.83

Debt Equity ratio 0.035 0 0 0 0 0 0 0 0

2009-10 The above

2.11 table indicates

that

0.92 the current

ratio

0 of Merck

Pharmaceuticals is 2.51 times in the year 2000-01. It has decreasing trend from the year 2002-03 where it comes down to 1.67 times in 2004-05 and again increases to 2.11 times in 2009-10. The liquid ratio of Merck Pharmaceuticals is 1.07 times in 2000-01. It has decreasing trend and comes down to 0.92 times in 2002-03 and to 0.95 times in 2004-05. It reaches 1.10 times in 2005-06 and 0.92 times in 2009-10. The company has debt to equity ratio of 0.035 times in the year 2000-01. In the following years, the debts of the company are nil and hence the debt to equity ratio is nil in those years. The above information is presented in the following diagram.

Figure 4.4.17. Liquidity and leverage ratios of Merck Pharmaceuticals

60

GLENMARK PHARMA The liquidity and leverage ratios of Glenmark Pharma are presented in the following table. Table 4.4.18. Liquidity and leverage ratios of Glenmark Pharma Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Current ratio 3.51 1.58 2.04 2.40 3.74 2.66 2.43 2.33 2.04 2.12 Liquid ratio 2.16 1.12 1.51 1.50 2.71 1.79 1.61 1.59 1.55 1.46 Debt Equity ratio 0.56 0.55 0.79 0.49 1.52 2.28 2.02 0.51 0.86 0.43

The above table indicates that the current ratio of Glenmark pharma. It is 3.51 times in 2000-01. It comes down to 1.58 times in 2001-02 and
61

increases with an upward trend of 3.74 times in 2004-05. It has declining trend in the latter years and comes down to 2.04 times in 2008-09. It is 2.12 times in 2009-10. The liquid ratio of Glenmark pharma is 2.16 times in 2000-01. It comes down to 1.12 times in 2001-02. It is 2.71 times in 2004-05. It is 1.79 times in 2005-06. It has declining trend and reaches 1.46 times in 2009-10. The company has debt to equity ratio of 0.56 times in 2000-01. It is 0.79 times in 2002-03 and 0.49 times in 2003-04. It has increasing trend and reaches 2.28 times in 2005-06. It is 0.86 times in 2008-09 and 0.43 times in 2009-10. The above information is presented in the following diagram. Figure 4.4.18. Liquidity and leverage ratios of Glenmark Pharma

RANBAXY LABOROTARIES
62

The liquidity and leverage ratios of Ranbaxy Laboratories are presented in the following table. Table 4.4.19. Liquidity and leverage ratios of Ranbaxy Laboratories Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Current ratio 2.20 1.87 2.29 1.65 1.69 1.76 2.02 1.64 0.59 0.91 Liquid ratio 1.17 1.04 1.30 0.69 0.81 0.85 1.06 0.81 0.28 0.51 Debt Equity ratio 0.19 0.078 0.003 0.015 0.054 0.433 1.353 1.380 1.002 0.809

The above table indicates that the current ratio of Ranbaxy Laboratories is 2.20 times in the year 2000-01. It is 1.87 times in the year 2001-02 which increases to 2.29 times in 2002-03. It again comes down and reaches 1.64 times in the year 2007-08 after which it falls to 0.59 times. It is 0.91 times in the year 2009-10. The liquid ratio of Ranbaxy Laboratories is 1.17 times in 2000-01. It comes down to 1.04 times and increases to 1.30 times in 2002-03. It is 0.69 times in 2003-04 which has increasing trend and reaches 1.06 times in 200607. It is 0.51 times in 2009-10.

63

The company has debt to equity ratio of 0.19 times in 2000-01. It comes down to 0.003 times in 2002-03. It is 1.354 times in 2006-07 which increases to 1.380 in 2007-08. It is 0.809 times in 2009-10. Figure 4.4.19. Liquidity and leverage ratios of Ranbaxy Laboratories

SUN PHARMACEUTICALS INDUSTRY The liquidity and leverage ratio of Sun Pharmaceuticals Industry is presented in the following table. Table 4.4.20. Liquidity and leverage ratios of Sun Pharma Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Current ratio 4.20 3.06 2.95 1.54 1.89 1.94 1.97 1.74
64

Liquid ratio 1.73 1.48 1.68 0.70 1.06 0.92 0.69 0.79

Debt Equity ratio 0.077 0.023 0 0.363 1.642 1.192 0.436 0.024

2008-09 2009-10

1.70 2.96

0.28 0.48

0.004 0.005

The above table indicates that the current ratio of Sun pharmaceuticals industry is 4.20 times for the year 2000-01. It has decreasing trend and comes down to1.54 times in the year 2003-04. It increases in the year 2004-05 to 1.89 times and to 1.97 times in 2006-07. It is 2.96 times in the year 2009-10. The liquid ratio of Sun pharmaceuticals industry is 1.73 times in the year 2000-01. It has declining trend where it comes down from 1.06 times in the year 2004-05 to 0.28 times in the year 2008-09. It is 0.48 times in the year 2009-10. The company has debt to equity ratio of 0.077 times in the year 2000-01. It comes down to 0.023 in 2001-02 and nil in 2002-03. It increases to 1.192 times in 2005-06. It declines to 0.004 in 2008-09. It is 0.005 in 2009-10. Figure 4.4.20. Liquidity and leverage ratios of Sun Pharma

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DR.REDDYS LABOROTORIES. The following table presents the turnover ratios of Dr.Reddys Laboratories. Table 4.4.21. Turnover ratios of Dr.Reddys Lab Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Inventory turnover ratio 5.84 7.87 6.38 6.44 5.09 4.52 7.76 5.22 5.44 4.89 Receivables turnover ratio 3.23 3.36 4.47 3.74 3.71 3.45 3.58 3.72 2.82 4.14 Fixed assets Turnover ratio 3.10 4.29 3.22 3.63 2.75 3.57 5.55 3.38 3.30 3.34

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The inventory turnover ratio of Dr. Reddys Lab is shown in the above table. It has declining trend from the year 2007-08 and reaches 4.89 times in 2009-10. Highest ratio is maintained in the year 2001-02. The receivables turnover ratio of Dr. Reddys Laboratories is having a decreasing trend and it is 2.82 times in 2008-09. In 2009-10, it is 4.14 times. The fixed assets turnover ratio is highest in the year 2006-07 with 5.55 times and it is lowest in 2004-05 at 5.55 times. The above information is presented in the following diagram.

Figure 4.4.21. Turnover ratios of Dr.Reddys Lab

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GLAXOSMITHKLINE PHARMACEUTICALS The following table presents the turnover ratios of GlaxoSmithKline pharmaceuticals for the period 2000-01 to 2009-10. Table 4.4.22. Turnover ratios of GlaxoSmithKline Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Inventory turnover ratio 5.37 8.26 7.84 8.27 6.84 9.18 15.70 16.24 17.51 17.37 Receivables turnover ratio 7.36 13.68 18.72 24.75 20.36 29.73 62.58 88.53 69.03 81.81 Fixed assets Turnover ratio 9.55 12.27 13.91 17.43 17.81 24.56 44.09 38.23 44.24 47.36

The inventory turnover ratio of GlaxoSmithKline Pharmaceuticals is volatile till the year 2005-06 and it has increasing trend till 2008-09 at 17.51 times. It reaches 17.37 in the year 2009-10. The receivables turnover ratio of GlaxoSmithKline pharmaceuticals has an upward trend from 2000 till the year 2003-04 at 24.75 and it comes down to 20.36 in 2004-05. It also increases and reaches to 88.53 in 2007-08 and 81.81 times in 2009-10.

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The fixed assets turnover ratio of GlaxoSmithKline Pharmaceuticals has an upward trend from 9.55 times in 2000-01 to 44.09 times in 2006-07. It comes down to 38.23 times and reaches 47.36 times in 2009-10. The above information is presented in the following diagram. Figure 4.4.22. Turnover ratios of GlaxoSmithKline

NOVARTIS INDIA The following table presents the turnover ratios of Novartis India for the period 2000-01 to 2009-10. Table 4.4.23. Turnover ratios of Novartis India Year 2000-01 2001-02 2002-03 2003-04 2004-05 Inventory turnover ratio 8.03 8.34 6.56 9.96 7.17
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Receivables turnover ratio 8.74 7.56 9.92 7.37 11.36

Fixed assets Turnover ratio 3.65 4.03 4.63 19.63 21.88

2005-06 2006-07 2007-08 2008-09 2009-10

8.58 8.03 8.18 11.99 12.15

13.29 12.75 14.06 13.21 13.48

53.37 56.13 60.09 69.74 80.03

The inventory turnover ratio of Novartis India is 8.03 times in 2000-01. It does not follow a certain pattern till the year 2005-06. From the year 200607, it increases consistently and reaches 12.15 times in the year 2009-10. The receivables turnover ratio of Novartis India is 8.74 times in the year 2000-01. It reaches 11.36 in the year 2004-05 after which it increases to13.29 times in 2005-06. It is 14.06 times in 2007-08, 13.21 times in 2008-09 and 13.48 times in 2009-10. The fixed assets turnover ratio of Novartis India is 3.65 times in the year 2000-01 and it increases consistently in the following years. It has an

increasing trend and reaches 80.03 times in 2009-10. The following diagram presents the above information. Figure 4.4.23. Turnover ratios of Novartis India

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ORCHID CHEMICALS AND PHARMACEUTICALS The following table presents the turnover ratios of Orchid chemicals and pharmaceuticals for the period 2000-01 to 2009-10. Table 4.4.24. Turnover ratios of Orchid Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Inventory turnover ratio 2.67 2.53 2.01 2.53 1.63 1.91 1.47 1.96 1.60 3.06
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Receivables turnover ratio 3.46 3.17 6.17 4.65 3.24 2.55 2.43 2.37 1.81 1.72

Fixed assets Turnover ratio 0.80 0.88 0.86 0.99 0.92 0.94 0.90 0.88 0.64 0.84

The inventory turnover ratio of Orchid chemicals and pharmaceuticals is 8.03 times in 2000-01. It does not follow a certain pattern till the year 200506. From the year 2006-07, it increases consistently and reaches 12.15 times in the year 2009-10. The receivables turnover ratio of Orchid chemicals and pharmaceuticals is 3.46 times in the year 2000-01 which falls and rises to 6.17 times in 200203. It follows downward trend from 2003-04 and reaches 1.72 times in 200910. The fixed assets turnover ratio of Orchid is .80 times in 2000-01. It rises to 0.99 times in 2003-04 and comes down to .84 in the year 2009-10. The above information is presented in the following diagram. Figure 4.4.24. Turnover ratios of Orchid

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CADILA HEALTHCARE The following table presents the turnover ratios of Cadila Healthcare pharmaceuticals for the period 2000-01 to 2009-10. Table 4.4.25. Turnover ratios of Cadila Healthcare Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Inventory turnover ratio 5.71 4.99 5.33 6.81 5.62 5.99 4.41 5.08 4.99 4.95 Receivables turnover ratio 9.26 7.89 6.84 6.58 10.02 6.89 6.08 5.95 4.57 4.70 Fixed assets Turnover ratio 2.00 1.57 1.43 1.68 1.61 1.86 1.96 2.15 2.08 1.98

The inventory turnover ratio of Cadila Healthcare is 5.71 times in the year 2000-01. It does not follow any trend patterns. It reaches 6.81 times in the year 2003-04 which declines in the following years. It is 4.95 times in the year 2009-10. The receivables turnover ratio of Cadila Healthcare is 9.26 times in the year2000-01. It declines to 6.58 times in the year 2003-04. It increases to
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10.02 times in 2004-05 after which it follows downward trend and reaches 4.57 times in 2008-09. It is 4.70 times in 2009-10. The fixed assets turnover ratio of Cadila Healthcare is 2.00 times in 2000-01. It comes down to 1.43 times in 2002-03. It increases to 1.68 times in 2003-04 after which it does not follow any trend. It is 2.15 times in 2007-08. It comes down to 2.08 times in 2008-09 and 1.98 times in 2009-10. The following diagram presents the above information. Figure 4.4.25. Turnover ratios of Cadila Healthcare

CIPLA The following diagram presents the turnover ratios of Cipla for the period 2000-01 to 2009-10.
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Table 4.4.26. Turnover ratios of Cipla Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Inventory turnover ratio 3.57 3.25 2.48 3.38 3.02 3.12 3.64 3.75 3.74 3.71 Receivables turnover ratio 6.57 5.06 4.11 3.86 3.84 3.40 3.46 3.02 2.85 3.61 Fixed assets Turnover ratio 5.34 4.33 3.94 3.51 3.05 2.82 2.57 2.53 2.63 2.79

The inventory turnover ratio of Cipla is 3.57 times in 2000-01 which comes down to 2.48 times in 2002-03. It increases to 3.38 times in 2003-04. It is 3.75 times in 2007-08 and 3.71 times in 2009-10. The receivables turnover ratio of Cipla is 6.57 times in 2000-01. It has declining trend and reaches 3.40 times in 2005-06. It is 3.02 times in 2007-08 and increases to 3.61 times in 2009-10. The fixed assets turnover ratio of Cipla is 5.34 times which has declining trend and reaches to 2.53 times in 2007-08. It increases in 2008-09 and reaches to 2.79times in 2009-10. The above information is presented in the following diagram. Figure 4.4.26. Turnover ratios of Cipla

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MERCK PHARMACEUTICALS The following table presents the liquidity and leverage ratios of Merck pharmaceuticals. Table 4.4.27. Turnover ratios of Merck Pharmaceuticals Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Inventory turnover ratio 5.82 7.29 5.74 8.98 9.94 9.49 9.35 8.89 5.48 8.24 Receivables turnover ratio 8.08 9.02 8.29 7.04 7.68 7.17 11.99 10.38 8.99 10.97 Fixed assets Turnover ratio 3.91 4.47 5.03 5.96 8.15 9.25 8.41 8.49 6.61 7.67

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The inventory turnover ratio of Merck pharmaceuticals is 5.82 times in the year 2000-01. It increases to 9.94 times in 2004-05 after which it has declining trend and reaches 5.48 times in 2008-09. It is 8.24 times in 2009-10. The receivables turnover ratio of Merck Pharmaceuticals is 8.08 times in 2000-01. It does not follow any increasing or decreasing trend. It reaches the highest of 11.99 times in 2006-07. It is 8.99 times in 2008-09 and 10.97 times in 2009-10. The fixed assets turnover ratio of Merck Pharmaceuticals is 3.91 times for the year 2000-01. It has increasing trend and reaches 9.25 times in the year 2005-06. It comes down to 8.41 times in 2006-07 and increases to 8.49 times. It is 7.67 times in 2009-10. The above information is presented in the following diagram.

Figure 4.4.27. Turnover ratios of Merck Pharmaceuticals

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GLENMARK PHARMA The liquidity and leverage ratios of Glenmark Pharma are presented in the following table. Table 4.4.28. Turnover ratios of Glenmark Pharma Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Inventory turnover ratio 4.96 7.22 6.77 4.27 4.46 4.07 3.71 5.04 6.64 6.85 Receivables turnover ratio 3.57 3.18 2.43 2.69 2.72 1.99 1.92 2.32 2.11 3.11 Fixed assets Turnover ratio 1.36 1.90 2.99 2.55 2.37 2.24 2.92 3.75 5.01 5.41

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The inventory turnover ratio of Glenmark pharma is shown in the above table. It is 4.96 times in 2000-01. It increases to 7.22 times in 2001-02. It comes down to 6.77 times in 2002-03. It comes down to 3.71 times in 200607. It has increasing trend from the year 2007-08 and reaches 6.85 times in 2009-10. The receivables turnover ratio of Glenmark pharma is 3.57 times in 2000-01. It has decreasing trend from 2002-03 and reaches 2.43 times. It increases to 2.72 times in 2004-05. It has decreasing trend and reaches 1.92 times in 2006-07. It is 3.11 times in 2009-10. The fixed assets turnover ratio of Glenmark Pharma is 1.36 times in 2000-01. It has increasing trend and reaches 2.99 times in 2002-03. It comes down to 2.24 times in 2005-06. It increases in the following years and reaches 5.41 times in 2009-10. Figure 4.4.28. Turnover ratios of Glenmark Pharma

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RANBAXY LABOROTARIES The liquidity and leverage ratios of Ranbaxy Laboratories are presented in the following table. Table 4.4.29. Turnover ratios of Ranbaxy Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Inventory turnover ratio 4.05 4.52 4.98 5.42 4.23 4.09 4.36 4.39 3.88 3.89 Receivables turnover ratio 3.66 4.02 4.33 7.90 4.83 4.51 4.11 4.86 4.54 3.12 Fixed assets Turnover ratio 3.04 3.44 4.62 5.40 4.32 3.03 2.90 2.92 3.19 3.00

The inventory turnover ratio of Ranbaxy Laboratories is 4.05 times in 2000-01. It increases to 5.42 times in 2003-04. It comes down to 4.09 times in
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2005-06. It again increases and reaches 4.39 times in 2007-08. It is 3.89 times in 2009-10. The receivables turnover ratio of Ranbaxy Laboratories is 3.66 times in 2000-01. It has upward trend and increases to 7.90 times in 2003-04. It comes down in the following years and reaches 4.11 times in 2006-07. It is 3.12 times in 2009-10. The fixed assets turnover ratio of Ranbaxy laboratories is 3.04 times in the year 2000-01. It increases and reaches 5.40 times in 2003-04. It comes down to 2.90 times in 2006-07. It increases to 3.19 times in 2008-09 and 3.00 times in 2009-10. Figure 4.4.29. Turnover ratios of Ranbaxy

SUN PHARMACEUTICALS INDUSTRY

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The liquidity and leverage ratio of Sun Pharmaceuticals Industry is presented in the following table. Table 4.4.30. Turnover ratios of Sun Pharma Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Inventory turnover ratio 3.79 5.31 5.09 5.23 5.39 4.90 4.99 6.08 5.70 3.24 Receivables turnover ratio 5.97 6.46 4.02 6.58 4.29 8.73 5.36 2.24 4.08 3.33 Fixed assets Turnover ratio 2.97 3.33 3.43 2.29 2.29 2.41 2.82 3.76 3.97 2.49

The inventory turnover ratio of Sun pharmaceuticals industry is shown in the above table. It is 3.79 times in the year 2000-01. It increases from 5.09 times in the year 2002-03 to 5.39 times in 2004-05. It again increases to 6.08 times in 2007-08. It is 3.24 times in the year 2009-10. The receivables turnover ratio of Sun pharmaceuticals industry is 5.97 times in the year 2000-01. It increases to 6.46 times in 2001-02. It comes down to 4.02 times and increases again to 6.58 times in 2003-04. It is 8.73 times in 2005-06. It comes down to 2.24 times in 2007-08 and 3.33 times in 2009-10.

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The fixed assets turnover ratio of Sun pharmaceuticals industry is 2.97 times in the year 2000-01. It increases to 3.43 times in the year 2002-03. It comes down in the following years and reaches 2.29 times after which it has increasing trend till 2008-09 at 3.97 times. It is 2.49 times in the year 2009-10. The above information is presented in the following diagram. Figure 4.4.30. Turnover ratios of Sun Pharma

4.3.TREND ANALYSIS

Total drugs and pharmaceuticals Import across the world. Figure 4.5.1. Total drugs and Pharmaceuticals Import across the world

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Using the trend line y=909.55x 154.36, the import of drugs and pharmaceuticals is predicted to be Rs.9850.69 crores for the year 2011.

Total drugs and pharmaceuticals Export across the world. The following table presents the total drugs and pharmaceuticals Export across the world for the period from 2001 to 2010. Table 4.5.2. Total drugs and pharmaceuticals Export across the world Year 2000-01 2001-02 2002-03 2003-04 2004-05 Export (Rs. In Crores) 8757.47 9834.68 12826.10 15213.24 17857.80 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Export (Rs. In Crores) 22115.72 26895.18 30759.64 40421.71 42091.90

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Trend analysis can be used to fit a trend line and predict the future export of drugs and pharmaceuticals. Figure 4.5.2. Total drugs and pharmaceuticals Export across the world

Using the trend line y = 3897.5x +1241, the export of drugs and pharmaceuticals for the year 2011 is predicted to be Rs. 44113.5 crores. Sales growth of Drugs and Pharmaceuticals companies The following table shows the percentage sales growth of drugs and pharmaceuticals companies for the period from 2001 to 2010. Table 4.5.3. Sales growth of Drugs and Pharmaceuticals companies Year 2000-01 2001-02 2002-03 Sales growth (%) 15.75 11.46 12.73
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Year 2005-06 2006-07 2007-08

Sales growth (%) 19.3 22.26 18.18

2003-04 2004-05

11.57 5.91

2008-09 2009-10

15.15 12.06

The above data can be used to predict the sales growth of drugs and pharmaceuticals using the trend analysis.

Figure 4.5.3. Sales growth of Drugs and Pharmaceuticals companies

Using the sales growth trend line y= 0.3959x + 12.259, the sales growth percentage of drugs and pharmaceuticals companies can be predicted. For the year 2011, the sales growth percentage is 16.6139%. Expenses growth of Drugs and Pharmaceuticals companies The following table shows the percentage expenses growth of drugs and pharmaceuticals companies for the period from 2001 to 2010.

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4.5.4 Expenses growth of Drugs and Pharmaceuticals companies Year 2000-01 2001-02 2002-03 2003-04 2004-05 Expenses growth (%) 16.99 6.87 11.96 11.27 8.98 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Expenses growth (%) 17.39 20.08 17.15 24.92 3.9

Trend analysis can be used to predict the future expenses growth percentage of drugs and pharmaceuticals. 4.5.4 Expenses growth of Drugs and Pharmaceuticals companies

Using the expenses growth trendline y = 0.4202x + 11.64, the expenses growth percentage of drugs and pharmaceuticals companies is predicted as 16.2644%.
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Price-To-Earnings Ratio Of Drugs & Pharmaceuticals Scrips The following table presents the Price-To-Earnings ratio of drugs and pharmaceutical scrips for the period 2001 to 2010. Table 4.5.5. Price-To-Earnings Ratio Of Drugs & Pharmaceuticals Scrips Year Price-T0Year Price-ToEarnings ratio Earnings ratio (times) (times) 2000-01 23.4 2005-06 31.5 2001-02 22.2 2006-07 23 2002-03 13.1 2007-08 19.4 2003-04 21.5 2008-09 32 2004-05 28 2009-10 21.6 Trend analysis can be used to estimate the future Price-To-Earnings ratio of drugs and pharmaceuticals scrips. Figure 4.5.5. Price-To-Earnings Ratio Of Drugs & Pharmaceuticals Scrips

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Using the Price-To-Earnings ratio trend line y=0.557x+20.507, the Price-To-Earnings ratio of drugs and pharmaceutical scrips ratio for the year 2011 is estimated to be 26.634 times. Total Trading Volumes Of Drugs & Pharmaceuticals Scrips The following table shows the total trading volumes of drugs and pharmaceuticals scrips for the period 2001 to 2010. Table 4.5.6. Total Trading Volumes Of Drugs & Pharmaceuticals Scrips Trading volumes Year Trading volumes (Rs. In Lacs) (Rs. In Lacs) 2000-01 2134529 2005-06 6938574 2001-02 2550020 2006-07 7251769 2002-03 1420923 2007-08 7708020 2003-04 5275048 2008-09 8816411 2004-05 6272304 2009-10 10305614 Trend analysis can be used to predict the total trading volumes of drugs and pharmaceuticals scrips with the help of the above table. Figure 4.5.6. Total Trading Volumes Of Drugs & Pharmaceuticals Scrips Year

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The total trading volumes trendline y=942039x+686107, the total trading volumes of drugs and pharmaceuticals scrips is estimated to be Rs. 11048536 lakhs.

4.4.

CORRELATION the correlation between Sales and Gross Domestic

Analysing

Product(GDP) Correlation is used to analyze the relationship between sales of drugs and pharmaceuticals industry and the GDP of the economy. H0: There is no significant relationship between sales and GDP. H1: There is a significant relationship between sales and GDP. Table 4.6.1. Correlations between Sales and GDP

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Sales

Pearson Correlation Sig. (2-tailed) Pearson Correlation GDP Sig. (2-tailed)

Sales 1 .083 .389

GDP .083 .389 1

The above table indicates that Sales and GDP are positively correlated and the correlation is 0.083. The significant value is 0.389 which is greater than 0.05. Hence H1 is accepted and H0 is rejected. This helps us to arrive at an inference that there is a significant relationship between sales and GDP. Analyzing the relationship between Sales and Interest rate. The relationship between Sales of the drugs and pharmaceuticals industry and Interest rate of our economy is analyzed using correlation. H0: There is no significant relationship between sales and interest rate. H1: There is a significant relationship between sales and interest rate. Table 4.6.2. Correlations between Sales and Interest Rate Sales Sales Pearson Correlation 1 Sig. (2-tailed) Interest Pearson Correlation -.114 Sig. (2-tailed) 0 Interest -.114 0 1

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The sales and interest rate are negatively correlated with -0.114. The significant value is 0 which is less than 0.05. Hence H0 is accepted and H1 is rejected. So, there is no significant relationship between sales and interest rate.

Analyzing the relationship between Sales and Inflation. The relationship between Sales of drugs and pharmaceuticals industry and Inflation of the economy is analyzed using correlation. H0: There is no significant relationship between sales and inflation. H1: There is a significant relationship between sales and inflation.

Table 4.6.3. Correlations between Sales and Inflation Sales Inflation Sales Pearson Correlation 1 .157 Sig. (2-tailed) .102 Inflation Pearson Correlation .157 1 Sig. (2-tailed) .102 There is a positive correlation between sales and inflation.

The

significant value is 0.102 which is higher than 0.05. H1 is accepted and H0 is rejected. So there is a significant relationship between Sales and Inflation. Analyzing the relationship between Sales and Consumption expenditure. The relationship between Sales of the drugs and pharmaceuticals industry and Consumption expenditure is analyzed with the help of correlation.
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Table 4.6.4. Correlations between Sales and Consumption expenditure Sales Sales Consumption .142 .138 1

Pearson Correlation 1 Sig. (2-tailed) Consumption Pearson Correlation .142 Sig. (2-tailed) .138 The sales have positive correlation of 0.142 with consumption expenditure. The significant value is 0.138 which is greater than 0.05. Hence, H0 is rejected and H1 is accepted. Therefore we can infer that there is a significant relationship between sales and consumption expenditur 4.5. MULTIPLE-REGRESSION Multiple Regression is used to analyze the relationship among variables. The variables considered are Sales of the Drugs and Pharmaceuticals Industry and the companies chosen, GDP of the economy, Interest rate, Inflation and Consumption Expenditure. H0: There is no significant relationship among the variables chosen. H1: There is a significant relationship among the variables chosen. A regression equation can be formed, having the Sales as dependent variables. The various macro economic factors such as GDP, Inflation,

Interest rate and Consumption expenditure are considered as the independent variables.
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Model GDP Inflation Consumption Interest

Table 4.7. Coefficients Unstandardized Standardized Coefficients Coefficients B Std. Error Beta 188.408 1057.769 .023 579.656 972.911 .111 .003 .024 .026 -720.417 2946.943 -.034

t .178 .596 .143 -.244

Sig. .859 .553 .886 .807

The significant value for the variables GDP and Sales is 0.859. It is greater than 0.05. Hence H0 is rejected and H1 is accepted. So, there is a significant relationship between Sales and GDP. The significant value for the variables Sales and Inflation is 0.553 which is greater than 0.05. Hence H1 is accepted. Therefore, there is a significant relationship between sales and inflation. The significant value for Sales and Consumption expenditure is 0.886 which is g reader than 0.05. Therefore, H1 is accepted. There is a significant relationship between sales and consumption expenditure. The significant value for sales and interest rate is 0.807. Thus H1 is accepted. There is a significant relationship between sales and interest rate.

A regression equation can be formed using the standardized coefficients or beta values.

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Sales = 0.023 GDP + 0.111 Inflation + 0.026 Consumption expenditure 0.034 Interest.

When the GDP increases by 1%, it leads to 23% increase in the sales of drugs and pharmaceuticals industry. When the Inflation increases by 1%, it leads to 11.1% increase in the sales of drugs and pharmaceuticals industry and vice versa. When the Consumption expenditure increases by 1%, it leads to 2.6% increase in the sales of drugs and pharmaceuticals industry. Interest rate has inverse relationship with the Sales of drugs and pharmaceuticals industry. Thus, when the interest rate falls by 1%, it results in increase in sales of drugs and pharmaceuticals industry by 3.4% and vice versa. 4.6. MULTI DIMENSIONAL SCALING TECHNIQUE The profitability, liquidity, leverage and turnover ratios of the ten drugs and pharmaceuticals companies chosen are used to group the companies using the multi dimensional scaling technique.

95

The above diagram depicts that the four drugs and pharmaceuticals companies i.e,. Novartis India, Merck Pharmaceuticals, GlaxoSmithKline Pharmaceuticals and Sun Pharmaceuticals Industry are grouped together as similar companies. This grouping of companies is done based on the ratios computed.

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CHAPTER V 5.1. FINDINGS OF THE STUDY Life Cycle Analysis: Life cycle analysis indicate that the drugs and pharmaceuticals industry is in the growing phase in our country. It provides wider scope for increased profit potential and huge market share. Trend analysis: Based on the data pertaining to drugs and pharmaceuticals industry for the period 2001 to 2010, the following estimates were made using Trend analysis: The import of drugs and pharmaceuticals for the period 2011 is

predicted to be Rs.9850.60 Crores. The export of drugs and pharmaceuticals for the year 2011 is

predicted to be Rs. 44113.5 crores.

The sales growth percentage of drugs and pharmaceuticals

companies for the year 2011 is predicted to be 16.6139%.

The expenses growth percentage of drugs and pharmaceuticals

companies is predicted as 16.2644%. The Price-To-Earnings ratio of drugs and pharmaceutical scrips

ratio for the year 2011 is estimated to be 26.634 times.

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The total trading volumes of drugs and pharmaceuticals scrips is

estimated to be Rs. 11048536 lakhs. Correlation: Using correlation analysis, the following findings were arrived at. There is a significant relationship between sales of drugs and

pharmaceuticals industry and GDP. There is no significant relationship between sales of drugs and

pharmaceuticals industry and Interest rate of the economy. There is a significant relationship between sales of drugs and

pharmaceuticals industry and Inflation rate. There is a significant relationship between sales of drugs and

pharmaceuticals industry and Consumption expenditure. Multi regression Multi - regression is used to analyze the degree of influence of each of the independent variables such as GDP, Interest rate, Inflation rate and dependent variable sales. The following

Consumption expenditure on the regression equation is obtained.

Sales = 0.023 GDP + 0.111 Inflation + 0.026 Consumption expenditure 0.034 Interest. Ratio analysis:
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DR.REDDYS LABORATORIES Dr.Reddys Laboratories has increasing trend and it has higher returns in terms of Gross profit, EBITDA margin, Net profit, Return on assets and return on equity. The current ratio of Dr.Reddys Lab is 1.18 which is lower than the previous year. The current ratio is lower than the current ratio of drugs and pharmaceuticals industry for the year 2009-10 which is 1.461. The liquid ratio is 0.40. The debt to equity ratio of the industry for 2009-10 is 0.527 whereas it is 0.0005 for Dr.Reddys Lab. The inventory turnover ratio has declining trend and it is 4.89 times in 2009-10. The receivables turnover ratio is 4.14 times and fixed assets turnover ratio is 3.34 times.

GLAXOSMITHKLINE PHARMACEUTICALS The profitability ratios of Glaxosmithkline pharmaceuticals shown a declining trend when compared to the previous years. The current ratio of Glaxosmithkline is 1.18 times. It is lower than the industry current ratio which is 1.461 times. The liquid ratio is 0.40 times.
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 The debt to equity ratio of the industry for 2009-10 is 0.527 times whereas it is 0.0031 times for Glaxosmithkline. The inventory turnover ratio has declining trend and it is 17.37 times in 2009-10. The receivables turnover ratio has increased from the previous year and it is 81.81 times. The fixed assets turnover ratio has increased to 47.36 times.

NOVARTIS INDIA The gross profit ratio of Novartis India is 44.13%. The EBITDA margin and Net profit ratios have increasing trend from the previous year and have reached 29.04% and 18.58% respectively. The return on equity and return on assets have come down from previous year to 19.54% . The current ratio of Novartis India is 1.08 times. The liquid ratio is 1.07 times. The debt to equity ratio is 0.0005 times. The turnover ratios of Novartis India have increasing trend. The

inventory turnover ratio is 12.15 times. Receivables turnover ratio and fixed assets turnover ratios are 13.48 times and 80.03 times respectively.

ORCHID CHEMICALS AND PHARMACEUTICALS

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 Orchid chemicals and pharmaceuticals has shown excellent performance compared to the previous years. The profitability ratios have increased substantially. The gross profit ratio is 34.62%, EBITDA margin

69.18%, Net profit ratio 26.89%. The return on assets and return on equity are 12.61% and 33.23% respectively. Orchid chemicals and pharmaceuticals has current ratio more than the Industry and it is 1.50 times. The liquid ratio is 1.00 times. The debt to equity ratio of Orchid chemicals and pharmaceuticals is 1.63 times.

The inventory and fixed assets turnover ratios have increased from previous years to 3.06 times and 0.84 times respectively. receivables turnover ratio has come down to 1.72 times. The

CADILA HEALTHCARE The profitability ratio of Cadila healthcare has increasing trend except for the gross profit ratio. It has come down to 37.96%. The EBITDA margin and net profit ratios have increased from previous years to 34.65% and 26.69% respectively. The return on assets and return on equity are 22.71% and 31.03% respectively.

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 The current ratio of Cadila has come down to 0.57 times. The liquid ratio however is 1.28 times. The debt to equity ratio is 0.37 times. The turnover ratios of Cadila healthcare has declining trend. The

inventory turnover ratio is 4.95 times, receivables turnover ratio is 4.70 times and fixed assets turnover ratio 1.98 times.

CIPLA The profitability ratios indicate that the performance of the company has been better compared to the previous years. The gross profit ratio is 40.09%, Net profit ratio 19.29%, EDITDA margin 26.88%, Return on assets and return on equity are 18.27% and 18.29% respectively. The current ratio of Cipla is 2.66 times. It is higher than the drugs and pharmaceuticals industry current ratio of 1.461 times. The liquid ratio is 1.37 times. The debt to equity ratio of Cipla is 0.0009 times. The inventory turnover ratio is 3.71 times. The receivables turnover ratio and fixed assets turnover ratio are 3.61 times and 2.79 times respectively.

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MERCK PHARMACEUTICALS The gross profit ratio of Merck pharmaceuticals is 38.54 times. The EBITDA margin and Net profit ratios are 21.58% and 13.59% respectively. The return on assets and return on equity are 14.01% respectively. Merck pharmaceuticals have current ratio of 2.11 times which is higher than the current ratio of drugs and pharmaceuticals industry. The liquid ratio is 0.92 times The debt to equity ratio of merck pharmaceuticals is nil. The turnover ratios of Merck Pharmaceuticals have increasing trend. The inventory turnover ratio is 8.24 times. The receivables turnover ratio and fixed assets turnover ratio are 10.97 and 7.67 times respectively.

GLENMARK PHARMA The profitability ratios of Glenmark Pharma have declining trend except for gross profit ratio. The gross profit ratio has increased to 58.41%. The EBITDA margin is 23.50%. The net profit margin is 12.48%. The return on assets and return on equity are 5.08% and 7.24%.

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 The current ratio of Glenmark Pharma is 2.12 times which is higher than the current ratio of the drugs and pharmaceuticals industry. The debt to equity ratio of Glenmark pharma is 0.43 times. The turnover ratios of Glenmark Pharma have increasing trend. The inventory turnover ratio is 6.85 times. The receivables turnover ratio and fixed assets turnover ratio are 3.11 and 5.41 times respectively.

RANBAXY LABOROTARIES The profitability ratios of Ranbaxy laboratories have declining trend. The gross profit ratio is 36.36%. The EBITDA margin is 23.81% and net profit margin is 11.96%. The return on assets and return on equity are 7.64% and 13.83% respectively. The current ratio of Ranbaxy is 0.91 times. It is lower than the current ratio of drugs and pharmaceuticals industry which is 1.461 times. The liquid ratio is 0.51 times. The debt to equity ratio is 0.809 times. The inventory turnover ratio of Ranbaxy laboratories is 3.89 times. The receivables turnover ratio is 3.12 times and fixed asset turnover ratio is 3 times. SUN PHARMACEUTICALS INDUSTRY
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The profitability ratios of sun pharmaceuticals industry has increasing trend except for return on assets and return on equity. The gross profit ratio is 37.4%, EBITDA margin is 55.15%, and net profit margin is 48.70%. The return on assets and return on equity are 15.64% and 15.72% respectively.

The current ratio of Sun Pharmaceuticals Industry is 2.96 times which is higher than the current ratio of drugs and pharmaceuticals industry. The liquid ratio is 0.48 times.

The debt to equity ratio of Sun Pharmaceuticals Industry is 0.005 times. The turnover ratios of Sun pharmaceuticals Industry has declining trend. The inventory turnover ratio is 3.24 times. The receivables turnover ratio and fixed assets turnover ratio are 3.33 times and 2.49 times respectively. The following table presents the summary of various ratios for the

year 2009-10 for the drugs and pharmaceuticals companies chosen.

Table 5.1.5.1. Ratio analysis

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Sun Pharma

Dr.Red dy

Ranbaxy Cipla

Glenma rk GSK

Cadila

Merck

Novartis

Orchid

Ratios

Gross profit 46.8 Ratio 2 EBITDA 30.5 Margin 4 Net profit 19.2 Ratio 5 Return on 13.0 Assets 6 Return on 14.3 Equity 1 Current Ratio 2.96 Liquid Ratio 0.48 Debt equity 0.00 5 Inventory Turnover 3.24 Receivable Turnover 3.33 Fixed assets Turnover 2.49

37.4

36.3 46.1 58.4 37.9 38.5 40.09 6 3 1 6 4 44.13 34.62

23.8 42.4 34.6 21.5 55.15 26.88 1 6 23.5 5 8 29.04 69.18 48.7 11.9 11.6 12.4 26.6 13.5 19.29 6 5 8 9 9 18.58 26.89

29.0 22.7 14.0 15.64 18.27 7.64 3 5.08 1 1 19.54 12.61 13.8 29.1 31.0 14.0 15.72 18.29 3 2 7.24 3 1 19.54 33.23 1.18 0.4 2.66 1.37 0.91 1.18 2.12 0.57 2.11 1.08 0.51 0.4 1.46 1.28 0.92 1.07 1.5 1

0.000 0.000 0.80 0.00 5 9 9 3 0.43 0.37 0 4.89 4.14 3.34 3.71 3.61 2.79

0.000 5 1.63

17.3 3.89 7 6.85 3.11 5.41 12.15 3.06 81.8 3.12 1 3.11 4.7 3 10.9 7 13.48 1.72

47.3 6 5.41 1.98 7.67 80.03 0.84

Ranking of companies and benchmarking with the Industry

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The following table presents the summary of amount of Sales, Net worth, Paid up equity capital, Investment made and Fixed assets maintained by the top ten drugs and pharmaceuticals companies chosen. They are assigned ranks comparing with peers and having the industry as the benchmark. The figures are shown as Rupees in Crores.

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Table 5.1.6.1. Ranking of companies and benchmarking with the Industry Companies Industry Sales 92956 Rank Networth Rank Paid Rank Investment Rank Fixed up assets Capital 71703 4855 22892 36346 5,717.98 5,914.60 5,914.09 4,134.60 1,759.15 1,773.41 1,622.10 146.92 593.46 997.25 3 1 2 4 6 5 7 10 9 8 103.56 84.4 160.58 210.21 84.7 26.98 68.2 25.45 15.98 70.44 3 5 2 1 4 8 7 9 10 6 3,951.69 2,652.70 265.1 3,833.69 190.91 992.92 598.9 4.73 15.75 123.57 1 3 6 2 7 4 5 10 9 8 740.52 Rank

Sun 1905.52 4 Pharma Dr.Reddys 1,845.09 7 Cipla Ranbaxy GSK Glenmark Cadila Merck Novartis Orchid 5,605.69 1 4,781.59 2 1,884.14 6 1,029.56 9 1,885.60 5 3,252.06 3 624.27 10

1,315.60 4 2,011.17 1 1,593.40 2 92.81 190.41 950.4 89.14 7.8 8 7 5 9 10

1,232.07 8

1,463.42 3

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Multidimensional scaling technique: Using the ratios computed for the companies, Multidimensional scaling technique is applied to group the companies which are similar to one another. The four drugs and pharmaceuticals companies such as Novartis India, Merck Pharmaceuticals, GlaxoSmithKline and Sun Pharmaceuticals Industries are grouped as similar companies.

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5.2. SUGGESTIONS To the investors:

Since the drugs and pharmaceuticals industry in India is in the growth stage, there is an increased demand for drugs and medicinal products. This witnesses profit potential and huge market to serve. choosing this industry to make an investment is recommended. Hence,

The ten companies chosen in this study are the major players in Indian drugs and pharmaceuticals industry. Notable among them are

Dr.Reddys Laboratories, Cipla, Orchid chemicals and pharmaceuticals, GlaxoSmithKline and Ranbaxy Laboratories. The investor can choose the above companies to construct an optimum portfolio. The ten drugs and pharmaceuticals companies chosen have the history of continuous and growing dividend, Bonus share issue and rights issue, Share splits.

The drugs and pharmaceuticals companies scrips bring more return and less risk to the long term investors than short term investors and day traders.

The investors are recommended to invest in the securities of the above chosen drugs and pharmaceuticals companies with a minimum investment origin of 5 years.
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 The investors are recommended to invest in shares of listed companies. They should watch the price movements. To the Companies: The growing phase of the drugs and pharmaceuticals industry in India is a sign of increased profit potential for the drugs and pharmaceuticals companies. However, the companies suffer from severe competition from the giant drugs companies and foreign ventures that operate in India.

The companies need to take effective measures to overcome the problem of import of drugs from China and other foreign nations.

For long term sustainment and profit, the companies should go for continuous innovation. Investment made in Research & Development should be increased and new drugs formulations and bulk drugs should be introduced into the market. To overcome the problem of competing with giant drugs corporate, the small drugs firms can be recommended to form joint ventures and merger strategies. This enables the companies to share and capitalize their strengths and overcome the weaknesses.

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 The companies need to design right product mix for future sustained growth. Recent advancements in biotechnology and information technology should be fully utilized.

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5.3.

CONCLUSION Fundamental analysis is a guide for the investors to reduce risk and get

more return. The fundamental analysis provides valuable information to the shareholders, creditors, prospective investors about the overall operating efficiency and financial performance of the company. This enables the

investors to make effective decisions. Of the various tools used in fundamental analysis, ratio analysis is the most important yardstick that provides a measure of comparison between different companies for different years. Fundamental analysis helps to find the true value of shares which is also known as intrinsic value. A difference between the current market price and the intrinsic value is an indicator of the expected excess rewards for investing in the security. The fundamental analysis thus provides both quantitative and qualitative aspects of the investment analysis.

5.1

BIBLIOGRAPHY
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Websites:

www.finsights.com www.moneycontrol.com www.myiris.com www.stockmarkit.com www.economywatch.com www.rbi.org.in www.nseindia.com www.stockmaster.com www.geojitbnpparibas.com www.rediffmoney.com www.sharemartetbasics.com www.scribd. Indian-Pharma-Industry-.com www.pharmaceutical-drug-

manufacturers.com/pharmaceutical-associations

www.prowess.com www.proquest.com

The reports of the following associations and institutions were used in this study.
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Drug Information Association (DIA) Centre for Monitoring Indian Economy (CMIE) Organization of Pharmaceuticals Producers of India

(OPPI)

RBI handbook on Indian economy International Federation of Pharmaceutical

Manufacturers and Associations (IFPMA)

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