FINANCIAL

STATEMENT
ANALYSIS

PHARMACEUTICAL
SECTOR
RATIO ANALYSIS

Submitted by:
Manav Singh
Section C
Page | 1
 16021021089

Pharmaceutical Sector in
India

The pharmaceutical industry in India ranks 3rd in the world terms of volume and
14th in terms of value. According to Department of Pharmaceuticals, Ministry of
Chemicals and Fertilizers, the total turnover of India's pharmaceuticals industry
between 2008 and September 2009 was US$21.04 billion. Hyderabad, Mumbai,
Bangalore and Ahmedabad are the major pharmaceutical hubs of India. The
domestic market was worth US$13.8 billion in 2013.
The government started to encourage the growth of drug manufacturing by Indian
companies in the early 1960s, and with the Patents Act in 1970. However,
economic liberalization in 90s by the former Prime Minister P.V. Narasimha Rao
and the then Finance Minister, Dr. Manmohan Singh enabled the industry to
become what it is today. This patent act removed composition patents from food
and drugs, and though it kept process patents, these were shortened to a period of
five to seven years.
The Lack of patent protection made the Indian market undesirable to the
multinational companies that had dominated the market. Whilst the multinationals
streamed out, Indian companies carved a niche in both the Indian and world
markets with their expertise in reverse-engineering new processes for
manufacturing drugs at low costs. Although some of the larger companies have
taken baby steps towards drug innovation, the industry as a whole has been
following this business model until the present. India's biopharmaceutical industry
clocked a 17 percent growth with revenues of Rs.137 billion ($3 billion) in the 2009-
 10 financial year over the previous fiscal. Bio-pharma was the biggest contributor
generating 60 percent of the industry's growth at Rs. 8,829 crores, followed by bio-
services at Rs. 2,639 crores and bio-agro at Rs.1, 936 crores.

Sun Pharmaceuticals
 Sun Pharmaceutical Industries Limited (NSE: SUNPHARMA,
BSE: 524715) is an Indian multinational pharmaceutical company
headquartered in Mumbai, Maharashtra that manufactures and sells
pharmaceutical formulations and active pharmaceutical ingredients
(APIs) primarily in India and the United States. The company offers
formulations in various therapeutic areas, such as cardiology,
psychiatry, neurology, gastroenterology and diabetology. It also
provides APIs such as warfarin, carbamazepine, etodolac, and
clorazepate, as well as anticancer, steroids, peptides, sex hormones,
and controlled substances.

Lupin Limited
 Lupin Limited is a transnational pharmaceutical company based in
Mumbai. It is the seventh-largest company by market capitalization; the
10th-largest generic pharmaceutical company by revenue globally.
Lupin is the fifth-largest generic pharmaceutical company in the US by
prescription-led market share and 3rd largest Indian pharmaceutical
company by revenue. It has the distinction of being the fastest growing
generic pharmaceutical player in the US and Japan; and is the 4th
largest and the fastest growing generic pharmaceutical player in South
Africa.
 Ratio Analysis

Liquidity or Solvency Ratios

1. Current Ratio

Name of the Current Ratio of

Company Mar. 2016

Sun 1.84

Pharmaceuticals
Lupin Limited 1.74

Conclusion:
 We know that a higher current ratio is more favorable for a

company. Now here, Sun Pharmaceuticals has a higher current ratio.

Hence it is in favor of the company.

2. Quick Ratio

Name of the Quick Ratio of Mar.

Company 2016
Sun 1.51

Pharmaceuticals
Lupin Limited 2.41

Conclusion:
 We know that higher quick ratio is favorable for any firm.

Now here, Lupin Limited has a higher quick ratio. Hence it

is in favor of the company.

3. Debt Equity Ratio

Name of the Debt Equity Ratio

 Company of 2016
Sun 0.09

Pharmaceuticals
Lupin Limited 0.27

Conclusion:

We all know that a lower debt equity ratio is favorable for

the company. Now here, Sun Pharmaceuticals has a higher

debt equity ratio. Hence it is in favor of the company.

4.Interest Coverage Ratio

 Name of the Interest Coverage

Company Ratio of 2016

Sun 14.13

Pharmaceuticals
Lupin Limited 31.34

Conclusion:

We all know that higher interest coverage ratio is

favorable for any company. Now here, Lupin Limited has a

higher interest coverage ratio. Hence it is in favor of the

company.
 Activity Ratios

1.Stock Turnover Ratio

Name of the Stock Turnover

Company Ratio of 2016

Sun 4.18

Pharmaceuticals
Lupin Limited 6.06

Conclusion:

We know that higher stock turnover ratio is favorable for

any company. Now here, Lupin Limited has a higher stock

turnover ratio. Hence it is in favor of the company.

 2.Debtor Turnover Ratio

Debtor Turnover Ratio=Cost of Goods Sold/Average

Debtors

Name of the Debtor Turnover

Company Ratio of 2016

Sun 6.08

Pharmaceuticals
Lupin Limited 2.37

Conclusion:

We all know that higher debtor turnover ratio is favorable

for any company. Now here, Sun Pharmaceuticals has

 a higher debtor turnover ratio. Hence it is in favor of the

company.

3.Investment Turnover Ratio

Investment Turnover Ratio=Net Sales

(Shareholders Equity + Outstanding Debt)

Name of the Investment

Company Turnover Ratio of

2016
Sun 4.18

Pharmaceuticals
Lupin Limited 6.06

Conclusion:
 We all know that higher investment turnover ratio is

favorable for any company. Now here, Lupin Limited has a

higher investment turnover ratio. Hence it is in favor of the

company.

4.Total Assets Turnover Ratio

Name of the Total Asset

Company Turnover Ratio of

2016
Sun 0.90

Pharmaceuticals
Lupin Limited 0.74
 Conclusion:

We all know that higher asset turnover ratio is always

favorable for any company. Now here Sun

Pharmaceuticals has a higher asset turnover ratio.

Hence it is in favor of the company.

Profitability Ratios

1.Gross Profit Ratio

Name of the Gross Profit Ratio

 Company of 2016
Sun 13.40

Pharmaceuticals
Lupin Limited 17.19

Conclusion:

We all know that higher gross profit ratio is favorable for

any company. Now here, Lupin Limited has a higher gross

profit ratio. Hence it is in favor of the company.

2.Net Profit Ratio

Name of the Net Profit Ratio of

 Company 2016
Sun 11.61

Pharmaceuticals
Lupin Limited 13.26

Conclusion:

We all know that higher net profit ratio is favorable for

any company. Now here, Lupin Limited has a higher net

profit ratio. Hence it is in favor of the company.

3.Operating Ratio
 Name of the Operating Ratio of

Company 2016
Sun 17.06

Pharmaceuticals
Lupin Limited 23.55

Conclusion:

We all know that higher operating ratio is favorable for

any company. Now here, Lupin Limited has a higher

operating ratio. Hence it is in favor of the company.

 4.Return on Capital Employed

Net Operating Profit

Capital Employed

Name of the Return on Capital

Company Employed of 2016

Sun 13.90

Pharmaceuticals
Lupin Limited 13.61

Conclusion:

We all know that higher return on capital employed is

favorable for any company. Now here, Sun

Pharmaceuticals has a higher return on capital

employed. Hence it is in favor of the company.

 Source

For Introduction of the Sector:

https://en.wikipedia.org/wiki/Pharmaceutical_industry

For Introduction of Sun Pharmaceuticals:

https://en.wikipedia.org/wiki/Sun_Pharmaceutical

For Introduction of Lupin Limited:

https://en.wikipedia.org/wiki/Lupin_Limited

For Accounting Ratios of Sun Pharmaceuticals:

http://www.moneycontrol.com/financials/sun-pharmaceuticals/ratios/C

For Accounting Ratios of Lupin Limited:

http://www.moneycontrol.com/financials/lupinlimited/ratios/LL