PROJECT REPORT

(Submitted for the Degree of B.Com. Honours in Accounting & Finance

under the University of Calcutta)

A COMPARATIVE
STUDY ON
CIPLA V/S CADILA
HEALTH CARE

SUBMITTED BY:
 NAME OF THE CANDIDATE: RISHI JHA
 REGISTRATION NO: 046-1111-0529-21
 CU ROLL NO: 211046-21-0313
 NAME OF THE COLLEGE: PRAFULLA CHANDRA COLLEGE

SUPERVISED BY:
NAME OF THE SUPERVISOR: SUDIP MALAKAR

NAME OF THE COLLEGE: PRAFULLA CHANDRA COLLEGE

MONTH & YEAR OF SUBMISSION

APRIL,2024
 ANNEXURE I

SUPERVISOR’S CERTIFICATE
This is to certify that Miss. RISHI JHA, a student of B.COM. Honours in

Accounting & Finance of PRAFULLA CHANDRA COLLEGE under the

University of Calcutta has prepared a Project Report with the title FINANCIAL

STATEMENTANALYSIS.

My contribution however, was mainly in the form of general guidance and discussion.

Place: Kolkata Signature:

Date: Name: SUDIP MALAKAR

Designation: PROFESSOR

College: PRAFULLA CHANDRA COLLEGE

 ANNEXURE-II

STUDENT’S DECLARATION
I hereby declare that the Project work titled “Analysis of Financial Statements of

Pharma Sector (Cipla and Cadila Healthcare)” submitted by me for the partial

fulfillment of the degree of Bachelor of Commerce (Hons.) in Accounting & Finance

under the University of Calcutta is my original work and has not been submitted

earlier to any other University/Institutions for the fulfillment of the requirement for

any course of study.

I also declare that no chapter of this manuscript in whole or in part has been

incorporated in this report from any earlier work done by others or by me. However,

extracts of any literature which has been used for this report has been duly

acknowledged providing details of such literature in the references.

Signature:

Place: KOLKAT Name: RISHI JHA

Date: CU Registration no: 046-1111-0529-21

CU Roll no: 211046-21-0313

ACKNOWLEDGEMENT
A project of this magnitude depends on contributions from a wide range of

people for its success. I would like to take the opportunity to acknowledge many

people who have contributed a great deal of their time and expertise to the

development of the project.

I take the privilege to acknowledge and extend my heartfelt gratitude to

my supervisor SUDIP MALAKAR , for his encouragement and support , which

has made the completion of this project possible. She has helped and encouraged

me a lot in this research work& safeguarded the completion of this research and

supported the purpose of my study right from the beginning.

The supporting teacher often invested additional time in the project and

did everything in her power to ensure the quality of the project which has

resulted in a great impact on the success of this work.

Thank you all for your kind support, guidance , comments on my

research during the long process of evaluating the project in the field and writing

up the results.
 CONTENT
PAGE NO

 CHAPTER-I INTRODUCTION 6-15

1.1 ABSTRACT 6

1.2 BACKGROUND OF STUDY 7

1.3 LITERATURE OVERVIEW 8-10

1.4 OBJECTIVES OF STUDY 11

1.5 RESEARCH METHODOLOGY 12-14

1.6 LIMITATION OF STUDY 15

 CHAPTER-II CONCEPTUAL FRAME WORK 16-25

2.1 DEFINATION 16

2.2 PURPOSE OF FINANCIAL STATEMENT 17

2.3 INDUSTRY OVERVIEW 18

2.4 PROGRESS OF PHARMACEUTICAL INDUSTRY 19

2.5 CHALLENGES OF PHARMACEUTICAL INDUSTRY 20

2.6 RESEACH DESIGN 21

2.7 ADVANTAGES OF FINANCIAL STATEMENT 22

2.8 DISADVANTAGES OF FINANCIAL STATEMENT 23

2.9 COMPANY PROFILE 24-25

 CHATER-III DATA INTERPRETATION AND RATIO ANALYSIS 26-53

3.1 RATIO ANALYSIS

 FINDINGS CONCLUSIONS AND REC0MMENDATION 54-56

4.1 SUMMARY OF OBSERVATION 54

4.2 SUGGESTION AND SCOPE FOR IMPROVEMENT 54

4.3 CONCLUSION 55

4.4 RECOMMENDATION 56

 BIBLOGRAPHY 57

 ANNEXURE-III CASH FLOW STATEMENT 58

 ANNEXURE-IV PROFIT AND LOSS A/C 59-60

 ANNEXURE-V BALANCE SHEET 61-62

 INTRODUCTION

1.1 ABSTRACT
Since last two decades of Indian econom , there is a continue research on company

financial activities , particularly aimed at understanding how companies finance their

investments and what sources they used to finance. In practice, it is observed that

finance managers use different combinations of debt-equity to meet the various financial

requirements of the company at least cost and risk and for the long term beneifts of the

company.

Therefore this study is aimed to make a comparative study on the financial statement of

Cipla and Cadila Health Care Ltd for the period 2014-2018 and analysis the effects of

changes in capital structure on its investment pattern over the period of time. The study

also helps to determine the importance of debt-equity mix for effective investment

policy. Similarly, to study the financing decisions, this paper include the trend analysis

of detail financial information of Cipla and Cadila Health Care Ltd.

 1.2 BACKGROUND OF THE STUDY
The pharmaceutical industry is one of the sunrise sectors in India. It has been growing

at approximately 10% every year. Indian companies hold just around 7% share in the

global pharmaceutical market but they are expected to become major players soon with

the help of their innovatively-engineered generic drugs and active pharmaceutical

ingredients (API). There are 74 U.S. FDA-approved manufacturing facilities in India,

more than in any other country outside the U.S. Indian Pharma companies are also

believed to be filing up to 20% of all Abbreviated New Drug Applications (ANDA) to

the FDA. London research company Global Insight estimates that India’s share of the

global generic market will rise by 33% in the next five years.

At this juncture, it is necessary to take a closer look at some of the promising

companies in the Indian pharma sector and identify possible investment opportunities

within these companies. With that aim, this report attempts to study the financial

reports of CIPLA and CADILA HEALTHCARE. A study of their financial

performance with the help of various ratios, financial indicators, charts and graphs

shows a clear comparison between the two companies and highlights the advantages

and disadvantages of each of them

1.3 LITERATURE REVIEW
Different individuals have expressed their opinions and views in respect of the

financial position and the future prospects of both the organizations- CIPLA and

CADILA HEALTHCARE.

For example-

1. Rajeswar, Rao K.(1980) examined the working capital policies of

Public Enterpricses in India and found that working capital efficiency could

not be achieved by majority of the selected companies

2. Myers (1984) stated that there was not sufficient evidence on the

relationship between risk and capital structure. According to the trade-off

theory, higher debt ratio increases the probability of financial distress.

3. Dutta, Sukamal (1991) evaluated the working capital crisis and

financial statement analysis the period 1983-84 to 1985-86. The study

concluded that the overall financial conditions of 40% of the firms were

assumed to be precarious.

4. Mohan, Reddy P, (1995) examined the various aspects relating to

financial statement analysis among six selected large- scale private

companies in Andhra Pardesh from 1977 to 1986. The study revealed that

the investment in current assets in the selected companies were more than

that of fixed asset.

5. Carelton and Siberman (1997) concluded that, if lower the degree of

financial leverage adopted then higher will be the variability in rate of return

on invested capital.

6. , R. and Poornima, S. (2001) showed that the effective financial

statement analysis is still most crucial in organizations success for 28

medium and large scale spinning mills in Coimbatore in the state of Tamil

Nadu.

7. Bhaduri (2002) study the capital structure choice in a sample of 363

Indian firms between 1989 and 1995 by employing the factor analytic

approach. His results suggested that the financial mix of the firm is

influenced by firm size, growth, and uniqueness. Notably, collateral value of

assets and tax shield factors did not shown up as important explanatory

variables.

8. Sarawat, B.P. and Agarwal, R.S (2004) attemted to evaluate the

financial statement analysis position of Nepal cement industry for the period

of eight years from 1993-94 to 2000-01 by selected to major player in public

sector.

9. Safi, Hijazi, Tahir and Kamal, Yasir (2005) in their study, ”impact

of financial statement analysis on the Profitibility of Firms: Case of Listed

Pakistani Companies”, investigated the relationship between measure of

financial statement analysis and the corporate profitability of the non-

financail firms.
10. Anand, Manoj and Malhotra, Keshav(2007) examined the

financial statement analysis performance of Indian corporate over the

period 2002-2004.

11. Eldomiaty (2007) stated that researchers decided to take India as sample

of emerging market and evaluate performance of the pharmatical industry

12. Abel, Maxime (2008) examined the impact of financial statement

analysis on cash holding of small and medium-sized Manufaturing

Enterprises (SMEs) in Sweden

13. Sharon Gomes (2011) a retired physician expressed her viewpoint that

in spite of the rapid and amazing developments of CADILA

HEALTHCARE, CIPLA still possessed a talented school of researcher and

medical experts.
1.4 OBJECTIVES OF THE STUDY
• To ascertain the financial ratios which are likely to reflect the liquidity,

profitability,

solvency as well as the profit of CIPLA and CADILA .

• To know the profit of CIPLA and CADILA and understand the movement of profits

over

the years.

• To assess the operating efficiency of CIPLA and CADILA

.•To know the Equity position of CIPLA and CADILA.

• To know the working capital position of CIPLA and CADILA.

1.5 RESEARCH METHODOLOGY
Since the study is restricted only to the financial statements of CIPLA and CADILA,

there is no scope for the primary collection of data.

DATA TYPE
The data and figures for both the organizations have been collected through the annual

accounts like cash flow statements, balance sheets and profit and loss accounts. All the

data is of secondary source and so there are no primary sources of data colletion. The

project data has also collected from various official websites of the selected company.

such as

 http://www.cipla.com/index.php

 http://www.cardilacare.com/index.php

DATA SOURCE
The data , facts and figures have been collected from the audited annual accounts of

CIPLA and CADILA HEALTHCARE relating to several past years. All the figures

have been published in the annual accounts and duly verified and approved by the

management of both the organizations.

PERIOD OF STUDY
The comparative analysis between both the organizations and evaluation of their future

prospects has required the data of financial statement,profit and loss statement and

cash flow statement has been collected for the last five years 2013-2014, 2014-2015,

2015-2016, 2016-2017, and 2017-2018.

METHOD OF ANALYSIS
The Analysis is based on Analytical Ratio

ANALYSIS FROM LONG-TERM INVESTMENT PERSPECTIVE

 DEBT EQUITY RATIO

 INTEREST COVERAGE RATIO

 DIVIDEND PER SHARE

 P/E RATIO

ANALYSIS FROM SHORT TERM INVESTMENT PERSPECTIVE

 EARNING PER SHARE

 SHARE PRICE

ANALYSIS FROM LONG-TERM LENDING PERSPECTIVE

 LONG-TERM DEBT/EQUITY RATIO

 FIXED ASSET TURNOVER RATIO

ANALYSIS FROM SHORT TERM LENDING PERSPECTIVE

 CURRENT RATIO

 INVENTORY TURNOVER RATIO

 QUICK RATIO

 WORKING CAPITAL TURNOVER RATIO

ANALYSIS FROM PROFITABILITY PERSPECTIVE

 OPERATING RATIO

 GROSS RATIO

 NET PROFIT RATIO

SAMPLE DESIGN

NAME OF THE COMPANIES

THE NAME OF THE COMPANIES ARE CIPLA AND CADILA

HEALTH CARE LTD.

PERIOD OF STUDY

The data of financial statement and profit and loss statement, has been

collected for the last five years 2014 –2015 to 2017-2018.

AREA OF STUDY

The comparasion of Pharmatical Industry Cipla and Cadila Health Care

Ltd by comparing there Analytical Ratios, Annual Report and Cash flow.
1.6 LIMITATION OF THE STUDY
 This study is limited to CIPLA and CADILA.

 Since the study is an academic effort, availability of sufficient time was the

constraint.

 The analysis is based entirely on secondary basis.

 As the data are secondary data so the reliability of the results depends upon

the reliability of the data published.

 Lack of accessibility and insufficient data on the site.

 Unprecedented changes in government policies are not considered in the

project.
 CONCEPTUAL FRAMEWORK

2.1 FINANCIAL STATEMENT’S

DEFINATION
Records that outline the financial activities of a business, an individual or any other
entity. Financial statements are meant to present the financial information of the entity
in question as clearly and concisely as possible for both the entity and for readers.
Financial statements for businesses usually include: income statements, balance sheet,
statements of retained earnings and cash flows, as well as other possible statements

It is a standard practice for businesses to present financial statements that adhere to

generally accepted accounting principles (GAAP), to maintain continuity of information
and presentation across international borders. As well, financial statements are often
audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax,
financing or investing purposes. Financial statements are integral to ensuring accurate
and honest accounting for businesses and individuals alike
 2.2 PURPOSE OF FINANCIAL
STATEMENTS
"The objective of financial statements is to provide information about the financial
position, performance and changes in financial position of an enterprise that is useful to
a wide range of users in making economic decisions."Financial statements should be
understandable, relevant, reliable and comparable. Reported assets, liabilities, equity,
income and expenses are directly related to an organization's financial position.

Financial statements are intended to be understandable by readers who have "a

reasonable knowledge of business and economic activities and accounting and who are
willing to study the information diligently."Financial statements may be used by users
for different purposes:

 Owners and managers require financial statements to make important business

decisions that affect its continued operations. Financial analysis is then
performed on these statements to provide management with a more detailed
understanding of the figures. These statements are also used as part of
management's annual report to the stockholders.

 Employees also need these reports in making collective bargaining agreements

(CBA) with the management, in the case of labor unions or for individuals in
discussing their compensation, promotion and rankings.

 Prospective investors make use of financial statements to assess the viability of

investing in a business. Financial analyses are often used by investors and are
prepared by professionals (financial analysts), thus providing them with the basis
for making investment decisions.
2.3 INDUSTRY OVERVIEW
The Indian pharmaceutical industry is estimated to be worth US$4.5billion , growing at

about 8to9 percent annually . The domestic pharma market witnesses a growth of 22%

in March , highest in the last 18 months .The revenue CAGR(compound annual growth

rate) over the past three years had been 12.4% , but it is expected to be up at 15.3% from

2018 to 2019 according to Barclays Capital Equity Research report “India Healthcare &

Pharmaceuticals”.

India's pharmaceutical market grew at 15.7 percent during December 2016.Globally,

India ranks third in terms of manufacturing pharma products by volume. According to

McKinsey, the Pharmaceutical Market is ranked 14th in the world. By 2019 it is

expected to reach top10 in the world beating Brazil, Mexico, South Korea and Turkey

.More importantly, the incremental market growth of US$14 billion over the next

decade is likely to be the third largest among all markets . The US and China are

expected to add US$200bn and US$23bn respectively.

The Pharmaceutical industry in India meets around 70% of the country's demand for

bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets,

capsules, orals and injectable.

2.4 PROGRESS OF

PHARMACEUTICAL INDUSTRY
The pharmaceutical sector is emerging as one of the major contributors to Indian exports

with export earnings rising from a negligible amount in early 1990s to Rs.29, 139.57

cores by 2007-08. The exports of Drugs, pharmaceuticals & fine chemicals of India

were growing at a compounded annual growth rate (CAGR) of 66.7% during the two

year period 2012 to 2014.

Currently, the Indian pharmaceutical industry is one of the world’s largest and most

developed, ranking 4th in volume terms and 13th in value terms. The country accounted

for 8 percent of global production and 2 percent of world markets in pharmaceuticals.

Most of the domestic pharmaceutical drug requirements are met by the domestic

industry. In the segment of Active Pharmaceutical Ingredients (APIs) India ranks third

in the world producing about 500 different APIs.

 2.5 CHALLENGES OF PHARMACEUTICAL

INDUSTRY

1. High ‘Out of Pocket (Coop)’ expenditure limiting access to

medicines:

While India is making reasonably rapid strides in its economic growth, the country is

increasingly facing constraints in providing healthcare benefits to a vast majority of its

population with ballooning ‘Out of Pocket (Coop)’ expenditure of around 74 percent

and 72 percent of which is the cost of medicines .

2. Public and government pressure to make drug prices more

affordable:

The Department of Pharmaceuticals has reportedly started comparing Indian drug prices

with their international equivalents in terms of the ‘purchasing power parity’ and ‘per

capita income’ and not just their prevailing prices in various developed markets

converted into rupees. With such comparisons the government has already started

voicing that prices of medicines in India are not the cheapest but on the contrary one of

the costliest in the world... Thus, one of the critical challenges of the Indian

Pharmaceutical Industry continues to be delivering affordable medicines for a large

section of the population of the country, as expected by the government. Reported high

profitability, at least, of the listed pharmaceuticals companies gives an impression to the

stakeholders, including the government, that there is a scope for further reduction of

pharmaceutical prices in India.

2.6 RESEARCH DESIGN
The case study and research for the project is based on the comparison of the financial

statements of two reputed companies from the field of medicine and drugs. These two

companies are-

 CIPLA

 CADILA HEALTHCARE

CIPLA
Copal was founded by Kawaka Abdul Haciendas the Chemical, Industrial &

Pharmaceutical Laboratories in 1935. It is today the largest single supplier of HIVand

anti-malarial drugs in the world in terms of volume.

CADILA HEALTHCARE
Cadila Health care is an Indian pharmaceutical company headquartered at Ahmedab

and in Gujarat state of western India . The company is the fifth largest pharmaceutical

company in India.Cadila Laboratories was founded in 1952 by Ramanbhai Patel(1925–

2001) and his business partner Shri Indravadan Modi. The company evolved over the

next four decades into one of India's established pharmaceutical companies.

 2.7 ADVANTAGES OF PHARMACEUTICAL

INDUSTRY

1. We know they work because of many many clinical trials. This is not the case with

alternative "medicine."

2. We know how they work. The mechanism of action of many drugs are known. The

same cannot be said of alternative "medicines"

3. We know the effective doses. We know how much of the drug is effective for the

condition/illness.

4. We know the toxic dose and levels. We know how much of the drug is harmful.

5. We know (most of) its side effects. Doctors can anticipate and warn the patients

about possible (but rare) side effects of the drug.

 2.8 DISADVANTAGES OF

PHARMACEUTICAL INDUSTRY
1. New drugs are expensive. This is because it takes a lot of money to research,

manufacture and market new drugs. I wish it weren't so but it's the price we pay for

living in a capitalist society.

2. Adverse drug reactions and side effects. While there are such, these are relatively

rare and are more of a nuisance than a threat to life. When a patient has side effects, the

doctor can easily switch her to a different drug.

3. Some medicines have low therapeutic index. What that means is that the effective

dose is very close to the toxic dose. In cases such as these, it is up to the doctor and

patient to weight the risks and benefits of taking the medicine.

These are all I can think of now. Modern medicine has saved billions of lives all over

the world and has made humans live longer. While it is not perfect, it is still a force

that has made the world a better place.

2.9 METHODOLOGY COMPANY

PROFILE

Cipla's products include:

Pharmaceuticals: Cipla manufactures anabolic steroids, analgesics/antipyretics,

antacids, anthelmintics, anti-arthritis, anti-inflammatory drugs, anti-TB drugs,

antiallergic drugs,etc.

Animals Health Care Products: These include: aqua products, equine products,

poultry products, products for companion animals, and products for livestock

animals.

OTC: These include child care products, eye care products, food supplements, skin

care products, and oral hygiene products.

Flavour and Fragnance: Cipla manufactures a wide range of flavors’, which are

used in foods and beverages, fruit juices, baked goods, and oral hygiene products.

The company has a sales turnover of Rs. 10974.58 Cr. (FY17) which makes it the

second largest Indian Pharmaceutical company by revenue . The market capitalization

st
of the company as on 31 August is Rs 46,842.67 Cr which is second to Sun Pharma.
Cadila’s products include:
It develops and manufactures a large range of pharmaceuticals as well as diagnostics,

herbal products, skin care products and other OTC products. The company also makes

EverYuth Naturals Walnut Scrub & Ultra Mild Scrub -India's leading scrub brand,

EverYuth Naturals Golden Glow Peel-Off, the number one in the peel-off category and

a face wash range.

It is also the maker of Sugar Free, India's most popular artificial sweetener and

Nutralite, India's most popular cholesterol-free margarine.

The company has a sales turnover of Rs. 3,274.50 Cr. (FY14) which makes it the sixth

largest Indian Pharmaceutical company by revenue. The market capitalization of the

company as on 31st August is Rs 41,318 Cr which is sixth in the Indian Pharmaceutical

Industry.
FORMULA:
LONG-TERM LIABILITIES

DEBT EQUITY RATIO=

SHAREHOLDER’S FUND

NET PROFIT (BEFORE INTEREST$ TAX)

INTEREST COVERAGE RATIO= -

INTEREST

MARKET VALUE PER SHARE

PRICE EARNING RATIO=- -

EARNING PER SHARE

TOTAL DIVIDEND

DIVIDEND PER SHARE= -

NO OF EQUITY SHARE

NET PROFIT

EARNING PER SHARE=- -

NO OF EQUITY SHARE

CURRENT ASSET

CURRENT ASSET=-
CURRENT LIABILITIES
 NET PROFIT

NET PROFIT RATIO= ------------------------------ *100

NET SALE

GROSS PROFIT

GROSS PROFIT= -------------------------------------- *100

NET SALE

OPERATING NET PROFIT

OPERATING RATIO=
NET SALE

TURNOVER

FIXED ASSET TURNOVER RATIO=------------------------------------

SHAREHOLDER’S FUND

COST OF GOODS SOLD

STOCK TURN OVER RATIO=---------------------------------

AVERAGE STOCK

MARETABLE SECURITIES

QUICK RATIO= -
QUICK LIABILITIES
 ANALYSIS FROM LONG TERM

INVESTMENT PERSPECTIVE

The primary factors that drive long term investments are risk the investment will

exposed to and the expected returns. An investor may opt for low risk and low to

moderate returns in the form of regular dividends or for high risk and high returns

on investment in the form of growth in value. Risk and returns on investments can

be evaluated using trend analysis and comparative analysis by means of financial

ratios.

The companies to be evaluated for investment opportunities are the pharmaceutical

market leader Cipla and another player in the pharmaceutical industry Cadila

Healthcare.
DEBT/EQUITY RATIO
13-Mar 14-Mar 15-Mar 16-Mar 17-Mar
Cipla 0.00011 0.00009 0.00012 0.00009 0.00003
Cadila 0.57000 0.39000 0.28000 0.17000 0.42000

0.6

0.5

0.4

0.3 Cipla
Cadila
0.2

0.1

0
13/Mar 14/Mar 15/Mar 16/Mar 17/Mar

INTERPRETATION:

The debt-equity ratio for Cipla is much less than that of Cadila. Cadila’s debt-

equity is showing a declining trend over the years except 2015-16 during which

there is a marginal increase to 0.29 from 0.25. The notable fall in the debt-equity

ratio in FY2013 might be an attempt by Cipla and Cadila to expedite their

recovery by regaining confidence of the investor’s confidence by lowering

their debt accumulated during recession. The reserves in the corresponding

period have also increased in both companies.

INTEREST COVERAGE RATIO
13-Mar 14-Mar 15-Mar 16-Mar 17-Mar
Cipla 61.27 15.22 12.32 14.13 31.28
Cadila 5.79 23.25 35.22 109.64 58.86

17/Mar

16/Mar

15/Mar Cadila
Cipla

14/Mar

13/Mar

0 20 40 60 80 100 120

INTERPRETATION:

The interest cover for Cipla is much higher than that of Cadila, it does however take a

decline during recession yet it remains at sustainable levels due to Cipla’s enormous

market share. Cadila’s interest cover presents the story of a growing company; its

interest is on the higher side due to high debt. Looking at the Interest coverage ratio of

both the companies, long term debt held by Cipla is low and also the PBDIT is high as

compared to Cadila. But both the companies have a positive interest cover

showing their credibility of paying back the Interest.

P/E RATIO
13-Mar 14-Mar 15-Mar 16-Mar 17-Mar
Cipla 14.12 14.54 22.88 27.2 24.31
Cadila 23.52 22.77 25.65 27.92 22.28

30

25

20

15 Cipla
Cadila
10

0
13/Mar 14/Mar 15/Mar 16/Mar 17/Mar

INTERPRETATION:

This ratio denotes whether the Stock is undervalued or overvalued. P/E ratio of

both the companies shows a similar increasing treads with a marginal dip in FY-14.
DIVIDEND PER SHARE

13-Mar 14-Mar 15-Mar 16-Mar 17-Mar

Cipla 2 2 2 2 2
Cadila 7.5 9 12 3.2 3.2

100%
90%
80%
70%
60%
Cadila
50%
Cipla
40%
30%
20%
10%
0%
13/Mar 14/Mar 15/Mar 16/Mar 17/Mar

INTERPRETATION:
The sum of declared dividends for every ordinary share issued. Dividend per share
(DPS) is the total dividends paid out over an entire year (including interim dividends
but not including special dividends) divided by the number of outstanding ordinary
shares issued. Lesser the DPS, more is the company thinking in terms of expanding
its business thereby reinvesting a major share of profits in the business operations.
Cadila pays a higher dividend per share than Cipla as any small player would attract
investors which increases over the years on account of increase in both sales volumes
and operating income. Cipla being an established company in its maturity phase
pays regular but fixed dividends.
ANALYSIS:

After a thorough analysis of the companies, it can be concluded that Cipla presents a

safe low return investment opportunity with constant dividends, whereas Cadila

provides a moderately high risk investment with attractive returns. This is reinforced

by the respective market shares of the companies which clearly reflect that Cipla is the

dominant market player which has been in the industry for a long time and is in its

maturity stage whereas Cadila is a relatively new player on the growth path with a

presently low market share

 ANALYSIS FROM SHORT TERM

INVESTMENT PERSPECTIVE

For an investor to invest in a company for short term there are two parameters of

interest-

 RISK

 RETURN

Both return and risk are like two sides of the same coin. Without effective and

attractive return on the investment made, no person is interested to risk his capital

and wait for future. Similarly, if there is no risk undertaken, then the rate of return

which is made available to the investor is very less and inappropriate.

In evaluating the Risk in short term investment the following ratios are considered.

 EARNINGS PER SHARE

 SHARE PRICE

 ROA
EARNING PER SHARE

13-Mar 14-Mar 15-Mar 16-Mar 17-Mar

Cipla 18.77 17.29 14.71 17.40 12
Cadila 24.35 44.13 62.08 19.31 6.47

90
80

70
60

50
Cadila
40
Cipla
30
20

10

0
13/Mar 14/Mar 15/Mar 16/Mar 17/Mar

INTERPRETATION: The earnings per share is a good measure of

profitability and when compared with EPS of similar companies, it gives a viewof the

comparative earnings or earnings power of the firm. EPS ratio calculated for a number

of years indicates whether or not the earning power of the company has increased.
SHARE PRICE

13-Mar 14-Mar 15-Mar 16-Mar 17-Mar

Cipla 386.3 402.00 714.15 530.00 549.25
Cadila 158.45 185.86 358.40 334.30 449.15

800

700

600

500

400 Cipla
Cadila
300

200

100

0
13/Mar 14/Mar 15/Mar 16/Mar 17/Mar

INTERPRETATION: In the past two years, Cadila’s share prices has

increased significantly, especially in 2015 growing more than a 100% rate.

Cipla’s share price has been growing consistently too. This is in line with our analyses

that it is a fairly priced stock.

ANALSIS

For an investor planning to choose one of these two firms for a short term investment,

Cadila would be advised to go for. With regard to the analyses on the basis of risk and

return, the beta value of Cadila is not only less than one, but in comparison to Cipla, its

volatility has been relatively much lower. This is also supported by the steady

increase in the EPS and P/E ratios. For a short term investment perspective, the market

price of Cadila’s shares has been growing extremely effectively compared to that of

Cipla's. As Cadila is in the mid segment of the industry and looking at the trend in the

Market share price, Investing in Cadila is risky at a very slight level.

 ANALYSIS FROM LONG TERM

LENDING PERSPECTIVE

If we go to a bank for loan, the question that a banker will think is what are the Risk

and Return (in terms of interest) in giving the loan and “Why company needs the

money”. The possible reasons could be

 Expansion Plans (Red Ocean Strategy)

 Entering New Market (Blue Ocean Strategy)

 To Pay off old Debt

We will evaluate which company is better for lending Long term loan by

analyzing their Financial statements over the last five financial years.
LONG TERM DEBT/EQUITY RATIO

13-Mar 14-Mar 15-Mar 16-Mar 17-Mar

Cipla 0.0 0.0 0.0 0.0 0.0
Cadila 0.27000 0.24000 0.13000 0.07000 0.19000

0.3

0.25

0.2
Cipla
0.15
Cadila

0.1

0.05

0
13/Mar 14/Mar 15/Mar 16/Mar 17/Mar

INTERPRETATION:

This ratio defines the risk of the firm, the higher the value higher is the risk of

company in market as higher debt in comparison to equity increases the interest

burden of the company there by reducing net profit. Here we observe that for Cipla the

Debt Equity ratio is zero for all the years but for Cadila it is on a decreasing trend from

2013 to 2016 but much higher as compared to Cipla (market leader). Hence, Cipla is

less leveraged compare Cadila, so Cadila is riskier compared to Cipla.

FIXED ASSET TURNOVER RATIO

13-Mar 14-Mar 15-Mar 16-Mar 17-Mar

Cipla 1.65000 1.74000 1.74000 1.87000 2.22000
Cadila 1.76000 1.79000 1.96000 2.23000 0.9000

17/Mar

16/Mar

15/Mar Cipla
Cadila

14/Mar

13/Mar

0 1 2 3 4 5

INTERPRETATION:

As seen here the Fixed Asset Turnover ratio of Cipla has been decreasing since 2013-

2015, but the asset Growth rate for Cipla is particularly very high during the year 2013-

14. So, Fixed assets are increasing every year but the revenue or sales is not

increasing in the same proportion showing some inefficiency in its operations over the

year. But in case of Cadila, the asset turnover is increasing consistently over the year

which shows company sales are increasing year on year with increasing Assets. So

Cadila operations are more efficient then Cipla over the past five years in terms of

fixed asset utilization.

ANALSIS:

Besides these core ratios, the credibility of the company in market is

determined by proportion of unsecured loans (Loans without collateral) compared

to total loans of the company. It is an indicator of risk of loan default, the higher

the credibility lower is the risk. Here market credibility of Cipla is very high

compared to Cadila which is quite evident seeing the size of Cipla and its long

existence in market. This also has a disadvantage in terms of return as a company

with high credibility will negotiate for lower rate of interest. When comparing Cipla

and Cadila, it is observed that both companies have growth plans, secured and can

give good returns. Cipla being low in debt equity ratio and high interest coverage

will have less risk while lending but it will have high negotiation power in terms of

interest rate so the returns will be considerably lower. On the other hand when we

look at Cadila financials the Loan is comparatively more risky so bank can negotiate

for higher interest rate thereby higher returns.

Considering efficient operations of Cadila as compared to Cipla, I would recommend

the long term lending to Cadila as it is considerably safer and returns will be higher
in this case.
 ANALYSIS FROM SHORT TERM
LENDING PERSPECTIVE

For a Banker to lend to a company for short term there are two parameters of

interest-

 Why the company requires loan?

 Whether the company will be able to pay it back?

This is checked by looking at the operating cycle, if the company has its cash

stuck in the Inventory and receivables then the company has less cash to run its

daily operations. So the company might be looking for short term funding for

more liquidity.
CURRENT RATIO

14-Mar 15-Mar 16-Mar 17-Mar 18-Mar

Cipla 1.95 1.92 1.66 1.84 2.33

Cadila 1.03 1.35 1.19 1.83 1.03

INTERPRETATION:

The below given graph shows that Cipla has relatively better current ratio than Cadila

which indicates better liquidity but we must also consider whether the Current

Assets comprise more of Inventory and Receivables or Cash.

DEBTORS TURNOVER RATIO

14-Mar 15-Mar 16-Mar 17-Mar 18-Mar

Cipla 5.18 5.56 5.35 6.08 5.72
Cadila 5.82 5.75 5.94 5.10 2.45

INTERPRETATION:

By maintaining this ratio of credit to accounts receivable, a firm is indirectly extending

interest-free loans to their clients. A low ratio implies the company should re-assess its

credit policies in order to ensure the timely collection of imparted credit that is not

earning interest for the firm. There has been a steady decrease of the ratio in case of

Cadila, while that of Cipla has been displaying a meager but constant increase. This

could be because of the effective collection of the receivable accounts or it operates on

cash basis.
INVENTORY TURNOVER RATIO

14-Mar 15-Mar 16-Mar 17-Mar 18-Mar

Cipla 3.50 3.77 3.11 4.18 4.14
Cadila 6.36 6.09 6.67 10.85 3.51

INTERPRETATION:

In the above graph, it can be noted that the ITR of Cipla is almost constant and had

shown a slight rise toward the end, which signifies the increase in profit. As for Cadila,

there has been a steady dip in ITR and has recently shown a rise. Cadila should take

into account not to stock inventories more than the required level as it increases the

storage expenses.
QUICK RATIO

14-Mar 15-Mar 16-Mar 17-Mar 18-Mar

Cipla 1.68 1.50 1.30 1.51 1.54
Cadila 1.73 1.60 1.41 2.23 1.92

INRTERPRETATION:

It is the ratio of liquid assets to current liabilities. The true liquidity refers to the
ability of a firm to pay its short term obligations as and when they become due. It
measures the firm's capacity to pay off current obligations immediately and is more
rigorous test of liquidity than the current ratio. The values of quick ratio in case of
Cipla consistently being greater than 1 indicates that the firm is liquid and has the
ability to meet its current and liquid liabilities. On the other hand a low liquidity ratio
for Cadila represents that the firm's liquidity position is not good.
WORKING CAPITAL TURNOVER RATIO

13-Mar 14-Mar 15-Mar 16-Mar 17-Mar

Cipla 1.79 1.83 1.89 1.88 2.24
Cadila 3.58 3.69 3.6 3.18 3.54

INTERPRETATION:

The working capital turnover ratio is a measure of the efficiency with which the

working capital is being used by a firm. A high ratio indicates efficient utilization of

working capital and a low ratio indicates otherwise. But a very high working capital

turnover ratio may also mean lack of sufficient working capital which is not a good

situation.
 ANALYSIS FROM PROFITABILITY RATIO

These ratios measure management’s overall effectiveness as shown by the

returns generated on sales and investment.Usually three types of profitability

ratios are calculated .

. Gross Profit Ratio

. Operating Profit Ratio

. Net Profit Ratio

Gross profit ratio may be indicated to what extent the selling prices of goods per

unit may be reduced without incurring losses on operations.It reflects efficiency

with which a firm produces its product.

Operating ratio shows the operational efficiency of the business.Lower operating

ratio shows higher operating profit and vice-versa.

Net Profit Ratio is used to measure the overall profitability and hence it is very

useful to proprietors.
OPERATING PROFIT
14-Mar 15-Mar 16-Mar 17-Mar 18-Mar
Cipla 26.39 24.78 24.43 25.56 19.84
Cadila 34.50 39.41 74.93 24.84 3.14

INTERPRETATION:
Operating Profit Margin indicates how effective a company is at controlling the

cost and expenses associated with their normal business operations. Except 2017

Cadila has higher Operating Profit than Cipla Ltd.

NET PROFIT RATIO
14-Mar 15-Mar 16-Mar 17-Mar 18-Mar
Cipla 17.87 14.37 15.70 11.61 8.77
Cadila 13.37 20.76 23.23 27.57 17.35

INTERPRETATION:
Net Profit compare the net income of the firm with total sales achieved. So from

above table we can observe that in year 2013 Cipla has higher Net

Profit than Cadila Health Care Ltd.

GROSS PROFIT RATIO
14-Mar 15-Mar 16-Mar 17-Mar 18-Mar
Cipla 9.93 7.16 3.86 5.43 6.89
Cadila 4.3 7.01 4.71 3.5 2.65

INTERPRETATION:
Gross Profit Margin indicated how efficeiently a business is using its material and

labour. In the above years we can that except 2015 Cipla has higher Gross Profit

ratio than Cadila.

FINDINGS CONCLUSION & RECOMMENDATION

4.1 SUMMARY OF OBSERVATIONS

With the help of various ratios and trends, it has been seen that both the

organizations are better off in comparison with one another in one respect or the

other. CIPLA being an old and experienced organization in the market of

pharmaceuticals, has a higher credibility but, CADILA provides a higher return

to the investors and so the investors prefer to choose CADILA over CIPLA.

4.2 SUGGESTIONS AND SCOPE FOR

IMPROVEMENT:

CIPLA:

 It should make more efforts for better utilization of its fixed assets.

 Attempts should be made to increase market share price so as to get the

attention of the investors and try to pay consistent dividend to the

shareholders at regular intervals.

 CADILA:

 CADILA being a newer company should attempt to gain a greater

dominance in the market with the help of better share price, regular

dividends an d better solvency situation.

 It should reduce the debt-equity ratio , so that it can obtain loans from the

banks at a cheaper rate.

4.3 CONCLUSION

From this project we come to know that financial management is very

important as it is the life-blood of any organization as it deals with many issues

such as for knowing the profitability and for future reference financial

management has a close relationship with the financial accounting. It can be done

by comparing the balace sheet, deriving the different ratio, knowing the

shareholding and capital structure of the organization.

The financial projections are impossible to be 100% accurate but the

projections serve a frame work to analysis the company’s operations in detail and

thus understand reasons for deviations from the forecast. It also reflects the

financial strength and stability of the organization in the market which in turn is

helpful for the investors. It also, influences various aspects such as nature of

business, production and supply conditions and the standing in the market among

the other competitors.

It is the most important for the investors that the company ratios and

profitability are positive, so that they can invest amount of share in the company

without having the risk of losing the amount they had invested.
4.4 RECOMMENDATION

The ratio analysis and industry analysis are very useful for individuals

to instantly assess a company or industry by making two basic types of

comparisons.

First, the analyst can compare a present ratio with past (or expected) ratios

for the organization to determine if there has been an improvement or

deterioration or no change over time.

Second, the ratios of one organization may be compared with similar

organization or with industry averages at the same point in time. This is a type of

‘benchamarking’ so that one may determine whether the organization is ‘average’

in performance or doing better or worse than others.

These shows that for a company to proceed with an bright future

should have a sound profitability which reflects the true picture of the

company and which would help the company not only to have good investors

investing in the company but also building up the organization employees trust

and building a better future for the company.

 BIBLIOGRAPHY

The information for the project has been collected from the followin

 WWW.CADILAPHARMA.COM

 WWW.CIPLA.COM

 WWW.PHARMACEUTICAL-BUSINESS-REVIEW.COM

 WWW.INDEED.CO.IN/CIPLA-LTD

BOOKS REFERRED

 Financial Statement Analysis

 Magagine
 12 mths 12 mths 12 mths 12 mths 12 mths

INCOME

Revenue From Operations [Gross] 9,415.70 9,659.70 8,657.70 7,208.30 6,284.80

Less: Excise/Sevice Tax/Other

195.80 190.30 160.60 148.30 129.60
Levies

Revenue From Operations [Net] 9,219.90 9,469.40 8,497.10 7,060.00 6,155.20

Other Operating Revenues 209.60 368.20 154.20 164.00 202.50

Total Operating Revenues 9,429.50 9,837.60 8,651.30 7,224.00 6,357.70

Other Income 128.60 94.10 55.40 50.70 37.00

Total Revenue 9,558.10 9,931.70 8,706.70 7,274.70 6,394.70

EXPENSES

Cost Of Materials Consumed 1,831.00 2,036.20 1,896.70 1,628.80 1,510.70

Purchase Of Stock-In Trade 1,752.90 1,236.60 1,397.00 1,154.30 899.20

Changes In Inventories Of FG,WIP

-138.80 4.20 -97.10 -69.50 -89.70
And Stock-In Trade

Employee Benefit Expenses 1,500.20 1,331.70 1,208.50 1,071.10 904.20

Finance Costs 45.00 48.60 67.90 90.20 168.70

Depreciation And Amortisation

375.00 302.20 287.30 201.20 184.70
Expenses

Other Expenses 2,580.60 2,846.00 2,490.50 2,239.20 2,008.20

Total Expenses 7,945.90 7,805.50 7,250.80 6,315.30 5,586.00

Profit/Loss Before Exceptional,

1,612.20 2,126.20 1,455.90 959.40 808.70
ExtraOrdinary Items And Tax

Exceptional Items -0.30 -2.50 -10.40 -17.20 0.00

Profit/Loss Before Tax 1,611.90 2,123.70 1,445.50 942.20 808.70

Tax Expenses-Continued Operations

 Current Tax 192.10 563.90 297.80 134.60 131.70

Deferred Tax -62.90 7.70 -34.20 -2.10 -14.20

Tax For Earlier Years -0.30 -0.50 -4.20 -26.50 1.30

Total Tax Expenses 128.90 571.10 259.40 106.00 118.80

Profit/Loss After Tax And Before

1,483.00 1,552.60 1,186.10 836.20 689.90
ExtraOrdinary Items

Profit/Loss From Continuing

1,483.00 1,552.60 1,186.10 836.20 689.90
Operations

Profit/Loss For The Period 1,483.00 1,552.60 1,186.10 836.20 689.90

Minority Interest -29.10 -30.00 -37.60 -32.60 -36.40

Share Of Profit/Loss Of Associates 33.80 0.00 2.10 0.00 0.00

Consolidated Profit/Loss After MI

1,487.70 1,522.60 1,150.60 803.60 653.50
And Associates

OTHER ADDITIONAL INFORMATION

EARNINGS PER SHARE

Basic EPS (Rs.) 15.00 15.00 56.00 39.00 32.00

Diluted EPS (Rs.) 15.00 15.00 56.00 39.00 32.00

DIVIDEND AND DIVIDEND PERCENTAGE

Equity Share Dividend 327.60 327.60 245.70 184.30 153.60

Tax On Dividend 66.70 66.70 69.90 42.30 56.90

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