I.

BACKGROUND
About the Company

Established in the year 1924 in India GlaxoSmithKline Pharmaceuticals Ltd. is one of the
oldest pharmaceuticals company and employs over 4,500 people. Globally, they are a 26.5
billion (US$ 39.14 billion), leading, research-based healthcare and pharmaceutical company.
In India, they are one of the market leaders with a turnover of Rs 2,520.2 crore (US$ 402.37
million) and a share of 3.55 per cent. Their mission is to improve the quality of life by
enabling people to do more, feel better and live longer.

The Company and its subsidiary are engaged in the business of manufacturing, distributing
and trading in pharmaceuticals. The Company develops a range of products in
approximately three areas, including pharmaceuticals, vaccines and consumer healthcare.
The Company's product portfolio includes prescription medicines and vaccines. The
Company's prescription medicines range across therapeutic areas, and it also offers a range
of vaccines for prevention of life-threatening diseases, such as pneumococcal disease,
meningitis, hepatitis, rotavirus, whooping cough, small pox and influenza. It provides
healthcare solutions to patients, with a range of prescription medicines across areas covering
anti-infectives, dermatology, gynecology, diabetes, oncology, cardiovascular disease and
respiratory diseases. The Company's manufacturing unit is located at Nashik, and its clinical
development center is located in Bangalore.

About Pharma Industry

The Indian pharmaceuticals market is the third largest in terms of volume and thirteenth
largest in terms of value. Branded generics dominate the pharmaceuticals market,
constituting nearly 70 to 80 per cent of the market. India is the largest provider of generic
drugs globally with the Indian generics accounting for 20 per cent of global exports in terms
of volume. Of late, consolidation has become an important characteristic of the Indian
pharmaceutical market as the industry is highly fragmented.
The Indian pharma industry, which is expected to grow over 15 per cent per annum
between 2015 and 2020, will outperform the global pharma industry, which is set to grow at
an annual rate of 5 per cent between the same period##.The market is expected to grow to
US$ 55 billion by 2020, thereby emerging as the sixth largest pharmaceutical market globally
by absolute size*. India has also maintained its lead over China in pharmaceutical exports
with a year-on-year growth of 7.55 per cent to US$ 12.54 billion in 2015, according to data
from the Ministry of Commerce and Industry.
Overall drug approvals given by the US Food and Drug Administration (USFDA) to Indian
companies have nearly doubled to 201 in FY 2015-16 from 109 in FY 2014-15 an increase of
84 per cent as per analysis by USFDA.
Road Ahead
The Indian pharmaceutical market size is expected to grow to US$ 100 billion by 2025,
driven by increasing consumer spending, rapid urbanisation, and raising healthcare
insurance among others.
Going forward, better growth in domestic sales would also depend on the ability of
companies to align their product portfolio towards chronic therapies for diseases such as
such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers that are on the rise.
The Indian government has taken many steps to reduce costs and bring down healthcare
expenses. Speedy introduction of generic drugs into the market has remained in focus and is
expected to benefit the Indian pharmaceutical companies. In addition, the thrust on rural
health programmes, lifesaving drugs and preventive vaccines also augurs well for the
pharmaceutical companies.

II. Financial Statement Quality

Depreciation and Amortisation

Depreciation is provided on straight line method over the estimated useful life of the assets
as per the rates prescribed under Schedule II to the Companies Act, 2013 or re-assessed
useful life based on technical valuation as under:

Factory Buildings 30 years

Other Buildings 60 years
Plant and Equipment 10 years
Personal Computer and Laptops 3 years
Other Computer Equipment 4 years
Furniture and Fixtures 10 years
Office Equipment 5 years
Vehicles 4 years
Assets purchased on or after 1st April 1993 and where the actual cost does not exceed Rs.
5000 is depreciated at the rate of 100%. The depreciation and amortisation expense for 2016
was 24.78 crores as compared to 20.28 crores in the previous year.

Inventories
Inventories are valued at lower of cost or net realizable value. The cost is determined on first
in first out (FIFO) basis.

Revenue Recognition
The company recognises sales when significant risk and rewards of ownership in the goods
are transferred to the buyer and are recorded inclusive of excise duty, but net of trade
discounts and sales tax. Interest income is recognised on a time proportion basis.

Expense Timing
Expenses are booked on an accrual basis, i.e. booked whenever they are incurred. Borrowing
costs are booked on a time basis.
Taxes on Income

Current tax is determined as the amount of tax payable in respect of taxable income for the
year. Deferred tax is recognised, subject to the consideration of prudence in respect of
deferred tax assets, on timing differences, being the difference between taxable income and
accounting income that originate in one period and are capable of reversal in one or more
subsequent periods.

Effective tax rate for FY15-16 is 35%, while it was 37% for FY14-15 (adjusted for a 12 month
period)

Audit report:

The auditors of the company, Price Waterhouse Chartered Accountants LLP have given a
clean report, i.e. expressed an unqualified opinion. In their opinion, financial statements give
the information required by the Act in the manner so required and give a true and fair view
in conformity with the accounting principles generally accepted in India of the state of
affairs of the company as at March 31, 2016.

III. Financial Statement Analysis

Common Size Balance Sheet
Mar 16 % of Total Mar-15 % of Total

12 mths 12 mths (adjusted)

Particulars

EQUITY AND LIABILITIES

SHAREHOLDER'S FUNDS
Equity Share Capital 84.7 3% 84.7 3%
Total Share Capital 84.7 3% 84.7 3%
Reserves and Surplus 1,632.44 53% 1,766.97 55%
Total Reserves and Surplus 1,632.44 53% 1,766.97 55%
Total Shareholders Funds 1,717.15 56% 1,851.67 57%
NON-CURRENT LIABILITIES 0% 0%
Long Term Borrowings 1.6 0% 2.63 0%
Other Long Term Liabilities 5.66 0% 5.29 0%
Long Term Provisions 283.9 9% 270.96 8%
Total Non-Current Liabilities 291.16 10% 278.87 9%
CURRENT LIABILITIES 0% 0%
Trade Payables 323.08 11% 305.89 9%
Other Current Liabilities 203.59 7% 131.56 4%
Short Term Provisions 526.97 17% 668.42 21%
Total Current Liabilities 1,053.64 34% 1,105.86 34%
Total Capital And Liabilities 3,061.95 100% 3,236.40 100%
ASSETS
NON-CURRENT ASSETS
Tangible Assets 204.04 7% 123.06 4%
Capital Work-In-Progress 267.67 9% 115.22 4%
Fixed Assets 471.71 15% 238.28 7%
Non-Current Investments 47.67 2% 47.67 1%
Deferred Tax Assets [Net] 88.61 3% 82.91 3%
Long Term Loans And Advances 296.36 10% 288.31 9%
Other Non-Current Assets 11.41 0% 14.04 0%
Total Non-Current Assets 915.76 30% 671.22 21%
CURRENT ASSETS 0% 0%
Current Investments 0 0% 0 0%
Inventories 521.66 17% 368.86 11%
Trade Receivables 126.57 4% 100.32 3%
Cash And Cash Equivalents 1,333.45 44% 1,898.02 59%
Short Term Loans And Advances 115.97 4% 119.74 4%
OtherCurrentAssets 48.54 2% 78.25 2%
Total Current Assets 2,146.19 70% 2,565.18 79%
Total Assets 3,061.95 100% 3,236.40 100%
OTHER ADDITIONAL INFORMATION
CONTINGENT LIABILITIES, COMMITMENTS
Contingent Liabilities 1,387.94 45% 489.32 15%
Common Size Income Statement
% of % of
Mar 16 Mar-15
Sales Sales
12 mths
Particulars 12 mths
(adjusted)

Income
2,814.8
Revenue From Operations [Gross] 103% 2,686.83 103%
0
Less: Excise/Sevice Tax/Other Levies 86.29 3% 84.11 3%
2,728.5
Revenue From Operations [Net] 100% 2,602.73 100%
1
Other Operating Revenues 28.45 1% 27.34 1%
2,756.9
Total Operating Revenues 101% 2,630.06 101%
6
Other Income 121.83 4% 158.94 6%
2,878.7
Total Revenue 106% 2,789.00 107%
8
EXPENSES 0% 0%
Cost Of Materials Consumed 636.97 23% 581.38 22%
Purchase Of Stock-In Trade 739.94 27% 623.91 24%
Changes In Inventories Of FG,WIP And Stock-In Trade -144.49 -5% -1.11 0%
Employee Benefit Expenses 443.37 16% 394.42 15%
Depreciation And Amortisation Expenses 24.78 1% 20.28 1%
Other Expenses 603.81 22% 529.70 20%
2,304.3
Total Expenses 84% 2,148.60 83%
8
Profit/Loss Before Exceptional, ExtraOrdinary Items And
574.4 21% 640.40 25%
Tax
Exceptional Items 2.61 0% -41.50 -2%
Profit/Loss Before Tax 577.01 21% 598.90 23%

Tax Expenses-Continued Operations 0% 0%

Current Tax 207.49 8% 214.22 8%

Deferred Tax -5.69 0% 7.35 0%
Tax For Earlier Years 0 0% 0.00 0%
Total Tax Expenses 201.8 7% 221.58 9%
Profit/Loss After Tax And Before ExtraOrdinary Items 375.21 14% 377.32 14%
Profit/Loss From Continuing Operations 375.21 14% 377.32 14%
Profit/Loss For The Period 375.21 14% 377.32 14%
Ratio Analysis

1. GSK Pharmaceuticals Ltd

Mar Mar- Dec- Dec- Dec-
Ratio Formula 16 15 13 12 11
Return on Sales (Net 13.75 14.50 19.91 22.20 18.42
Profitabil % % % % %
Margin) PAT/Sales
ity
Ratios 21.03 19.51 24.92 29.38 22.43
ROE PAT/NW % % % % %
Asset Turnover Sales/TA 0.87 0.82 0.81 0.85 0.78
Average Sales per day Sales/365 7.48 7.13 6.90 7.12 6.41
Average Collection Receivables/Av
Activity Period Sales 15.18 13.79 15.37 14.12 13.32
Ratios Inventory Turnover
ratio COGS/Inventory 1.43 1.63 1.72 1.43 1.31
Fixed Asset turnover
ratio Sales/FA 7.69 13.01 17.08 20.92 20.27
Leverage 0.09 0.14 0.18 0.21 0.24
Ratios Debt ratio TD/TA % % % % %
Liquidity Current Ratio CA/CL 2.04 2.32 2.95 3.13 2.99
Ratio Quick Ratio (CA-Inv)/CL 1.54 1.99 2.56 2.79 2.61

2. Pfizer
Mar- Mar- Mar- Mar- Mar-
Ratio Formula 16 15 14 13 12
Return on Sales (Net 11.17 3.82 21.99 53.08 18.15
Profitabil Margin) PAT/Sales % % % % %
ity Ratios 10.89 5.31 18.77 33.56 14.15
ROE PAT/NW % % % % %
Asset Turnover Sales/TA 0.72 1.03 0.67 0.52 0.65
Average Sales per day Sales/365 5.47 5.01 2.75 2.60 2.79
Activity Average Collection Receivables/Av 33.0
Ratios Period Sales 27.46 8 57.33 54.65 50.87
Inventory Turnover ratio COGS/Inventory 0.99 1.43 1.68 1.37 1.26
Fixed Asset turnover
ratio Sales/FA 0.00 0.00 0.00 0.00 0.00
Leverage
Ratios Debt ratio TD/TA 0.00 0.00 0.00 0.00 0.00
Liquidity Current Ratio CA/CL 2.15 2.07 2.74 5.14 5.41
Ratio Quick Ratio (CA-Inv)/CL 1.67 1.43 2.13 4.67 4.67

DuPont Analysis-

Company Return on Asset Turnover Financial Return on

Sales Leverage Equity
GSK 13.75% 0.87 21.03%
Pfizer 11.17% 0.72 10.89%
References-

http://www.ibef.org/industry/pharmaceutical-india.aspx