A

project report
on
capital structure
of
RANBAXY

Prepared by : Submitted to :
Rutvij Bhatt (6)
Darshan zaveri (36) Pro.shandhaya harkawat
Akshay jadav (38)
Hiren Makwana (49)
 Company Information

• During the year 2006, company consolidated it’s

position as a key global player.
• It’s strategic acquisitions and expansions in
different parts of the world provided momentum to
company’s aspiration to achieve a turnover of US $ 5
Bn by 2012.
• Growing ahead of the market, achieved the No. 1
position in the Indian market.successfully leveraged
inherent skills to deliver a winning performance
with global sales of over US $ 1.3 Bn.
 Capital structure Analysis
• Every company has to have a balanced capital
structure,means there should be balance of equity
and debt in the company’s capital formation.
traditionally, firms have looked at certain ratios to
assess whether they have a satisfactory capital
structure. The commonaly used ratios are:interesrt
coverageratio, cash flow coverage ratio,debt
servicecoverage ratio, and fixed asset coverage ratio
• Here, company has earned gross profit (PBITDA) Rs
6081.70.And the depriciation amount given in the
balace sheet is Rs 1067.5,this amount would be
deducted from the PBITDA .it would be 5014.2
(PBIT).The interest on debt is Rs1036.32.
• ICR = Earnings before interest and taxes
Interest on debt

= 5014.2
1036.32

= 4.84
• company is capable to repay its debt 5 time from the
profit.it suggests that company has very good capital
strucutre and it could take more DEBT in future.
Company has very good working capital it can be used
as repayment.
• The cash flow coverge ratio is a distinct improvement
over the interest ceverage ratio in measuring the debt
capacity, it covers sthe debt service burden fully and
it focuses on cash flows. However, it too is
characterised by sthe problem of establishing a
suitable norm for judging its adequacy.Here company
has PBT of Rs 4429.76, and it has paid interest of Rs
584.44 so the EBIT is Rs 5014.2 in EBIT we will add
depriciation of Rs 1067.5. there are no other non cash
charges so, the total amoun is Rs 6081.7.company has
paid interest of Rs 584.44. loan repayment amount is
Rs 1722.69 and tax rate is 25% CFCR is as,
CFCR = EBIT + Deprication + Othernon-cashcharges
Interest on debt + Loanrepayment instalment/(1-t)

= 5014.2 + 1067.5.+ 0
584.44 +1722.69/(1-0.25)

= 2.64
• company is capable of repayment of its debt more
than twice from its internal cash flow.company need
not to take any more debt for reapyment of the debt
so it is good for the company that it will benifit in
future because there will be less amount of interest
company have to pay as it wil have less debt .there
will increase in cash flow in future because company
can pay its debt right now or it can hold the debt for
the short term as it has interest repayment ratio is
more than 4 time from its profit.company will have
good credit in market and can have more amount of
debt because of good debt reapyment history.
• Here, company has total ten years PAT is Rs
34859.6 millon.total ten years deprication is
Rs 8450 millon,ten years interest paid is Rs
11399.52 million ,loan repayment instalment
is Rs 18343 million.putting all these value in
the DSCR formula
• DSCR = Σ(PATi +DEPi + INTi +Li)
Σ( INTi + LRI i)
= (34859.6 +8450 + 11399.52 + 18343)
(11399.52
+18343)

= 73052.12
29742.52

= 2.45
• The company has very good DSCR it is more than 2 so
we can say that comapny whatever the loans
company had taken it’s repayment time is shorter so
company will have to seek for the other resources for
the balace of the leverage.there are less
possibilities for the company to take more loans now
because here the ratio suggests that the company is
almost having less loan repayment cycle and at this
time comapny can only afford equity .equity will
increase the repayment amount of loans without
affecting the debt.
• get the amount of fixed assets which is Rs 17359.1million. the
term loans are Rs11332.8,
• So ,the FACR is 1.53
• FACR = Fixed assests
• Term loans
= 1.53

• financial institution can trust in the company because it has

crossed the minimum requrement of FACR (1.25) which is
1.53.comapany has enough assests to recver the term loan
.comapny can able pay the term loan interest if FACR is more than
1.25,here it is 1.53 so it is good for the company to have term loans.
•
 Ratios ICR CFCR DSCR FACR
Years
2003 3.92 2.44 2.38 1.30

2004 3.08 2.05 2.09 1.167

2005 4.12 2.56 2.35 1.37

2006 3.45 2.31 2.29 1.27

2007 4.84 2.64 2.45 1.53

 Conclusion

• Company has very good financial structure as we can see

from the all capital ratios that company can repay its debt
easily,debt interest can also be paid easily .company has
enough assets form that comapy can pay its all term
loans.from the cash flow statement we can see that
company has adequate cash in circulation company can
have more cash as CFCR is more than 2 times.comapny is
having very good capital structure .in future company can
think for more leverage because all ratios ffavourthe
company .if company is enough to pay its all debt,interest
and loans company is progresssing and there are more
chance to get more leverage in future.
 Introduction
• Cipla was incorporated in 1935, in the name of Chemical Industrial and
Pharmaceutical Laboratories. The name was changed to the acronym
‘Cipla’ in 1984. Over the last 6 decades Cipla has set up plants at five
locations, mainly concentrated in Maharashtra. The Hammed brothers,
sons of the founder, late Dr K A Hammed, manage Cipla. Dr Y K Hammed,
with a doctorate in Organic Chemistry from Cambridge, is the Chairman
and Managing Director. He himself heads the research division, which has
around 200 people. His brother, M K Hammed, looks after marketing. Cipla
has four plants located at Patalaganga, Kurkumbh, Mumbai in
Maharashtra and one at Bangalore in Karnataka. All plants make bulk
drugs as well as formulations and have secured FDA (USA)/ MCA (UK) for
most of its plants. Cipla has crossed the USD 1 billion mark in terms of
turnover for the year 2007-08. While domestic sales grew by more than
13%, export sales posted a growth of about 23% for the quarter. Total sales
for the year 2007-08 has increased by 16% which has been in line with the
estimates.

Cipla
 Background
• Cipla was officially opened on September 22, 1937 when the
first products were ready for the market. The Sunday Standard
wrote: "The birth of Cipla which was launched into the world
by Dr. K.A. Hammed will be a red letter day in the annals of
Bombay Industries. The first city in India can now boast of a
concern, which will supersede all existing firms in the
magnitude of its operations. India has lagged behind in the
march of science but she is now awakening from her lethargy.
The new company has mapped out an ambitious programme
and with intelligent direction and skillful production bids fair
to establish a great reputation in the East. "

Cipla
 Business
• Cipla occupies the third position in the domestic
formulations market and commands a market share of 4.74
per cent. Cipla currently markets over 350 products and is the
market leader in the generic segment consisting of more
than 100 products. The company has strong presence in
antiasthmatic, antibiotics, cardiovascular, anti-AIDS and
anticancer areas. Cipla was the first one to enter into the
competitive generics business and has occupied the
leadership position in this segment. Cipla is the market
leader in anti asthmatic inhaler segment with over 70 per
cent market share. This segment is growing rapidly mainly
due to increase in pollution leading to a spurt in the number
of asthma cases in patients. One of its major products,
Asthalin inhaler has annual sales of more than Rs 30 crore.

Cipla
• The company offers full range of inhalers, rotahalers and
spacers that have gained excellent acceptance among the
asthma patients. The company has introduced CFCfree,
environment-friendly Budecort inhalers for the first time in
India. The CFC- free products have a huge export potential
.The inhaler therapy is preferred to tablets since the dose
required is about 1/ 10 of the oral dose. Moreover, the drug
directly goes to the lung and gives instantaneous relief to the
patient. Cipla will be maintaining a leadership position due to
the entire range of inhalers and with the advantage of
economies of scale. Cipla has presence in niche segments
such as cardiovascular, anti-AIDS, and anticancer. The
company has several products in each of these segments
that will help it maintain a steady growth in the long run.

Cipla
• Cipla is building a strong presence in the anti-AIDS segment and is offering the
entire range of products. The company has reduced the prices of anti-AIDS drug
five times in the domestic market through technological advancements. The
company's recent offer to supply the cocktail of drugs consisting of Lamivudine,
Nevirapine and Stavudine at US $ 350 per patient per year to Medicins Sans
Frontieres (MSF) has given it an international recognition. Cipla has ambitious
plans to supply anti-AIDS drugs at concessional prices to African countries at a
fraction of international price ranging from US $ 5000-8000 charged by MNCs. The
company manufactures the entire range of anti-AIDS drugs namely: Lamivudine,
Zidovudine, Navirapine, Didanosine and Stavudine. Cipla has introduced more than
100 new products in the generic segment. The company has also introduced
branded products in anti-epilepsy, anti- AIDS, psychiatry, Obesity and NSAIDS
segments. These products are likely to contribute significantly in the current year
and will help the company to improve the market share. Apart from the anti-aids
products, some of the new products launched by the company are Silagra
(Sildenafil citrate) for erectile dysfunction, Venlor(Venlafaxine) an anti-
depressant, Obestat (Sibutramine) for obesity and Rofixx(Rofecoxib) a Cox-2
inhibitor for acute and chronic pain.

Cipla
 FINANCIALS
• CAPITAL STRUCTURE:
• A mix of a company's long-term debt, specific short-
term debt, common equity and preferred equity. The
capital structure is how a firm finances its overall
operations and growth by using different sources of
funds. Debt comes in the form of bond issues or
long-term notes payable, Debt comes in the form of
bond issues or long-term notes payable, while equity
is classified as common stock, preferred stock or
retained earnings. Short-term debt such as working
capital requirements is also considered to be part of
the capital structure.

Cipla
 Capital Structure of Cipla: Year After
Year (2000-2007)
From To Class of share Authorized Issued Paid Up Paid Up Paid Up
Capital Capi Shares Face capital
tal (Nos) Value
2007 2008 Equity Share 175.00 155.66 777291357 2 155.46
2006 2007 Equity Share 175.00 155.66 777291357 2 155.46

2005 2006 Equity Share 175.00 60.17 29987023 2 59.97

3
2004 2005 Equity Share 65.00 60.17 29987023 2 59.97
3
2003 2004 Equity Share 65.00 60.17 59972349 10 59.97

2002 2003 Equity Share 65.00 60.17 59972349 10 59.97

2001 2002 Equity Share 65.00 60.17 59972349 10 59.97

2000 2001 Equity Share 65.00 60.17 59972349 10 59.97

Cipla
• The aspect that stands out in Cipla's financial
statements is the high profit margins over the
last five years. The operating profit margins
ranged around 27 per cent, while the net profit
margins have been around 17 per cent during
the last few years.

Cipla
 Ratios:
• Profit After tax /sales

Year- 2007 Year-2008

= 668.03/3438.24 = 701.43/3997.9
= .1942 or 19.42% = .1755 or 17.55%

GROSS PROFIT MARGIN

Gross profit/Sales
Year-2007 Year-2008
= 814.93/3438.24 =850.05/3997.90
=.2370 or 23.7% =.2126 or 21.26%
Cipla
• Total Assets Turnover
• Sales/Total Assets

Year-2007 Year-2008
= 4413.74/3438.24 = 5733.21/3997.90
= 1.28 Times = 1.43 Times

Debt/Equity Ratio

Year-2007 Year -2008

=123.56/3236.27 = 580.53/3755.82
= .038 = .154

Cipla
 • Working capital
turnover
• Sales/Net current
Assets
Year-2007 Year-2008
=3438.24/1893.42 =3997.90/2496.27
=1.816 = 1.60
Return on Investments(ROI)
EBIT/Net Assets
Year-2007 Year-2008
= 814.93/1893.42 = 850.05/2496.27
=.43 = .34

Cipla
• Return on Equity(ROE)
• PAT/ Net worth(Equity)

Year-2007 Year-2008
=668.03/3236.27 = 701.43/3755.82
=.206 or 20.6% = .1867or 18.67%

Leverage Calculation:
Degree of Operating Leverage (DOL)
DFL = 1+ Interest /PBT
Year-2007 Year-2008
= 1+(6.95/807.98) = 1+ (11.69/838.36)
= 1.0086 = 1.014

Cipla
 Capital ratios
• ICR:101.78
– Company uses debt fund rarely and owned fund
mostly.if compnay uses debt fund share holder
get more benefits. Because interest is a cheaper
source.it gives also a tax benefit.
• CFCR:8.84
– Company can pay its lease and repayment of
loans and interest 8.84 times company has good
cashflow. Company should increase debt portion
in capital structure.

Cipla
• DSCR:83.57
Company is able to pay 83.57 timeloan and
interest from its PBITDS based on this ratio
company can increase leverage.
FCR:6.48
On a time of liquidation company can able to pay
its debt from of company is good but
sometime less debt portion affects EPS.

Cipla
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