Cipla Financial Accounting
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CERTIFICATE
This is to certify that the report presented contains our original work. It does not contain any material that has been taken from any source, except as acknowledged
(LAKSHMI BALACHANDRAN)
(LOVNEET TYAGI)
(PRABHA KUMARI)
(R. ANANDAPADMANABHAN)
(RAAJEEV TIRUPATI)
Table of Contents
Executive Summary
Introduction
Dr. Reddys Labs
CIPLA
Reason for Selection of these Two Firms
Pharmaceutical Industry in India
Study Period
Growth Analysis
DU PONT Analysis:
Ratio Analysis:
Current Ratio
Quick Ratio
Inventory Turnover Ratio
Debtor Turnover Ratio
Operating Cycle
Solvency Ratio
Interest Cover
Cash Flow Analysis
Stock Prospects
Statement of Accounting Policies
Dr. Reddys Labs
CIPLA
Note On Directors Report & MDA
Dr. Reddys
CIPLA
Conclusion
APPENDIX 1 Worksheets
Dr. Reddys Labs
CIPLA
References:
1.Executive Summary
The project report analyses the relative performances of Cipla and Dr Reddys over the period 2006-2007 to 2010-2011.They are the major players in Indian pharmaceuticals industry.
CIPLA is more consistent in terms of sales growth. The Profitability ratios of Cipla are constantly increasing; the main driver of profitability is Net sales. In comparison, Dr Reddyss has fluctuating sales growth. Profitability ratio is also not consistent for them but they have a better asset and inventory turnover .The operating cycle of Cipla is on an average 1.7 times higher than that of Dr.Reddys .So it can be inferred that Dr Reddys is managing its inventory better than Cipla. Liquidity Ratios look solid for both the companies for all years which will help them to raise funds.
Ciplas D/E ratio is significantly lower which makes it more risk averse. The trend in Pharmaceuticals Company is to maintain very low debt to equity ratio since the demand is not very stable.
As Cipla has demonstrated a more consistent performance with a conscious management drive to keep the sales growing, the group recommends a BUY on it for institutional investors. With the high EPS and PE ratio of Dr Reddyss, the group recommends a BUY for retail investors.
Also a comparison of segment wise net sales (that is India and outside India) reveals that the outside segment contributes more to the sale both for Cipla and Dr Reddyss .Also the asset turnover is higher in both Cipla and Dr Reddyss for outside geographical segments due to higher sales.
2.Introduction
Dr. Reddys Labs
Founded in 1984 by Dr. K. Anji Reddy, it is Indias second largest pharmaceutical company. Their products are marketed globally, but the focus areas are India, USA, Europe and Russia, with research emphasis on metabolic disorders and cardiovascular symptoms. Through its three businesses – Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – Dr. Reddys offers a wide portfolio of products and services.
CIPLA
Established in 1935, Cipla is a leading pharmaceutical company indigenous to India. It has spear-headed the pharmaceutical sector for almost a generation now and has accomplished world standards. With 50 plants across the country contributing close to 1200 products to the industry, Cipla caters to a range of health related ailments and has a global presence with customer base in approximately 180 countries.
Reason for Selection of these Two Firms
The primary reason for choosing these two companies is driven by the fact that they are the leading pharmaceutical companies in India. Both the companies are established and well known and hence their financial performance is stable and mature. By analyzing their financial statements for the last 5 years, we can get an idea of the variation in the growths of the two firms in terms of their sales and profits.
Pharmaceutical Industry in India
The Indian pharmaceutical industry is the worlds second-largest by volume. As the front-runner amongst Indias science-based industries, the prospects look bright in terms of increased capability in drug technology. The market is expected to reach US$ 55 billion in 2020 from US$ 12.6 billion in 2009. With research expertise in the tool-kit, the industry is set to compete in global markets. International companies associated with this sector have stimulated, assisted and spearheaded this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world.
The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units. It has expanded drastically in the last two decades. The leading 250 pharmaceutical companies control