ACKNOWLEDGEMENT

This project would have been difficult to complete without the invaluable

contributions from some important persons. Let me take this opportunity to

thank them.

First of all, I would like to thank Globe Capital Market Ltd. for giving me such

challenging projects to work upon. I would also thank Mr. Sunil Taparia, Business

Head, Globe Capital Market Ltd. for giving this opportunity to work with the

organization. I hope this challenge has brought the best out of me.

I am indebted to my project guide Mr. Ritesh Purohit, Assistant Vice President

(Business Development), and I would like to take this opportunity to thank you sir

for the patience you showed in solving my problems and for the direction and

support you gave to this project through your invaluable insights, which constantly

inspired me to think beyond the obvious. Your encouragement and co-operation

helped me instill a great degree of self-confidence to deliver a good work. I am also

thankful to Mr. Yuvraj Malhotra, Advisor (Finance) who gave his valuable inputs

in the project and helped me in learning about the in this short period of two

months. I am also thankful to Ms. Ruchi Paliwal (Faculty mentor) for taking

constructive interest in my project and providing me valuable support at many point

of time.

And last but not the least; I would thank all the employees of Globe Capital Market

Ltd. who provided me with an environment conducive for learning during the

Eight weeks.

I hope I can build upon the experience and knowledge that I have gained here and

make an important contribution towards this industry in the coming future.

1

CONTENT

1. Executive Summery…………………………………………………………… 42. Introduction to topic…………………………………………………………… 63. Company Profile……………………………………………………………….. 10

i. About the company……………………………………………………...10ii. Promoters………………………………………………………………..10iii. Vision and mission………………………………………………………11iv. Core values………………………………………………………………11v. Organization Structure…………………………………………………. 13vi. Services………………………………………………………………... 14vii. Porter’s five forces analysis……………………………………………. 18viii. Competitive analysis…………………………………………………… 21ix. Marketing Strategies…………………………………………………… 24x. SWOT analysis………………………………………………………… 27

4. Project undertaken in organization……………………………………………. 325. Report on business unit……………………………………………………….. 356. Understanding of functional process………………………………………….. 39

i. Introduction…………………………………………………………… 39ii. Fundamental analysis………………………………………………….. 39iii. Procedure……………………………………………………………... 41iv. In depth fundamental analysis of pharmaceutical industry…………… 49

A. Global pharmaceutical industry…………………………………… 49B. Economic analysis…………………………………………………. 52C. Industry analysis…………………………………………………… 55D. Company analysis………………………………………………… 59

v. Comparative financial statement analysis……………………………. 63A. Current ratio……………………………………………………… 64B. Quick ratio………………………………………………………… 66C. Debt equity ratio…………………………………………………… 68D. Gross profit margin……………………………………………….. 70E. Operating profit margin…………………………………………… 72F. Net profit margin………………………………………………….. 74G. Return on equity…………………………………………………… 76H. Dividend per share…………………………………………………. 78I. Earning per share……………………………………………………80J. Dividend pay out ratio………………………………………………82K. Interest coverage ratio……………………………………………….84L. Inventory turn over ratio…… ………………………………………86

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M. Receivable turnover ratio…………………………………………… 88vi. Conclusion……………………………………………………………... 89

7. Key learnings…………………………………………………………………… 918. Bibiliography…………………………………………………………………. 92

3

PART-A

CHPTER-1

EXECUTIVE SUMMERY

FUNDAMENTAL ANALYSIS involves analyzing the characteristics of a company in

order to estimate its market value. As an investor it is always difficult to decide which

company to choose for investment and how to find out the company that is strongest and

has good future prospects. Fundamental equity analysis helps in analyzing the strength

and assets of the company. Main purpose of investment is returns and liquidity.

As assigned by my Corporate mentor Mr. RITESH PUROHIT, I started studying various

reports on PHARMACEUTICAL INDUSTRY and the companies that are the major

player in this industry. The major players are RANBAXY, CIPLA, SUN PHARMACY,

DR. REDDY’S, BIOCON, LUPIN, MANKIND etc.

India is a reputed name the world generic market. The country's pharmaceutical sector

has become a prominent provider of healthcare product, meeting almost 95% of the

country’s pharmaceuticals needs. The industry has gained strength from the strong

Indian economy and strong sectors like health care, insurance, biotechnology and IT.

Analyzing the Indian Pharmaceutical Industry focuses and analyses each and every

aspect of the industry using SWOT, PEST and PORTER analysis.

To realize the potential of the Indian Pharmaceutical Industry the pharmacy companies

have to realize the potential of having strategic alliances.

4

All fundamental analysis starts from economic analysis of the country and further goes

with industry and company analysis. Company analysis starts from company’s Financial

Statement and compare the companies within the industry and their relative assets,

liquidity ratios and other measures. So that in a relatively short time frame have an idea

of how a company is traveling. At the very least we will have to look at a company’s

Income Statement (Profit and Loss Statement) and Balance Sheet.

5

CHAPTER II

INTRODUTION TO TOPIC

The methods used to analyze securities and make investment decisions fall into two very broad categories

1. Fundamental analysis

2. Technical analysis.

Fundamental analysis involves analyzing the characteristics of a company in order to

estimate its value. Technical analysis takes a completely different approach; it doesn't

care one bit about the "value" of a company or a commodity. Technicians (sometimes

called chartists) are only interested in the price movements in the market. Despite all the

fancy and exotic tools it employs, technical analysis really just studies supply and

demand in a market in an attempt to determine what direction, or trend, will continue in

the future. In other words, technical analysis attempts to understand the emotions in the

market by studying the market itself, as opposed to its components. If you understand the

benefits and limitations of technical analysis, it can give you a new set of tools or skills

that will enable you to be a better trader or investor.

What is Fundamental Analysis?

When talking about stocks, fundamental analysis is a technique that attempts to

determine a security’s value by focusing on underlying factors that affect a company's

actual business and its future prospects. On a broader scope, we can perform

fundamental analysis on industries or the economy as a whole. The term simply refers to

the analysis of the economic well-being of a financial entity as opposed to only its price

movements. Fundamental analysis serves to answer questions, such as:

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Is the company’s revenue growing?

Is it actually making a profit?

Is it in a strong-enough position to beat out its competitors in the future?

Is it able to repay its debts?

These are very simple and involved questions, and there are literally hundreds of others

we might have about a company. It all really boils down to one question: Is the

company’s stock a good investment? Think of fundamental analysis as a toolbox to help

you answer this question. The term fundamental analysis is used most often in the

context of stocks, but we can perform fundamental analysis on any security, from a bond

to a derivative.

Fundamentals: Quantitative and Qualitative

We could define fundamental analysis as “researching the fundamentals”, but that doesn’t

tell us a whole lot unless we know what fundamentals are. The big problem with

defining fundamentals is that it can include anything related to the economic well-being

of a company. Obvious items include things like revenue and profit, but fundamentals

also include everything from a company’s market share to the quality of its management.

The various fundamental factors can be grouped into two categories: quantitative and

qualitative.

Quantitative – capable of being measured or expressed in numerical terms.

Qualitative – related to or based on the quality or character of something, often as

opposed to its size or quantity.

In our context, quantitative fundamentals are numeric, measurable characteristics about a

business. The biggest source of quantitative data is the financial statements. We can 7

measure revenue, profit, assets and more with great precision. Turning to qualitative

fundamentals, these are the less tangible factors surrounding a business - things such as

the quality of a company’s board members and key executives, its brand-name

recognition, patents or proprietary technology.

Quantitative factor Vs Qualitative factor:

Neither qualitative nor quantitative analysis is inherently better than the other. Instead,

many analysts consider qualitative factors in conjunction with the hard, quantitative

factors. Take the Coca-Cola Company, for example. When examining its stock, an

analyst might look at the stock’s annual dividend payout, earnings per share, P/E ratio

and many other quantitative factors. However, no analysis of Coca-Cola would be

complete without taking into account its brand recognition. Anybody can start a

company that sells sugar and water, but few companies on earth are recognized by

billions of people. It’s tough to put your finger on exactly what the Coke brand is worth,

but you can be sure that it’s an essential ingredient contributing to the company’s

ongoing success.

The Concept of Intrinsic Value:

Before we get any further, we have to address the subject of intrinsic value. One of the

primary assumptions of fundamental analysis is that the price on the stock market does

not fully reflect a stock’s “real” value. After all, why would we be doing price analysis if

the stock market were always correct? In financial jargon, this true value is known as the

intrinsic value.

For example, let’s say that a company’s stock was trading at $20. After doing extensive

homework on the company, you determine that it really is worth $25. In other words,

you determine the intrinsic value of the firm to be $25. This is clearly relevant because

an investor wants to buy stocks that are trading at prices significantly below their

8

estimated intrinsic value. This leads us to one of the second major assumptions of

fundamental analysis: in the long run, the stock market will reflect the fundamentals.

There is no point in buying a stock based on intrinsic value if the price never reflected

that value. Nobody knows how long “the long run” really is. It could be days or years.

This is what fundamental analysis is all about. By focusing on a particular business, an

investor can estimate the intrinsic value of a firm and thus find opportunities where he or

she can buy at a discount. If all goes well, the investment will pay off over time as the

market catches up to the fundamentals. The big unknowns are:

1) You don’t know if your estimate of intrinsic value is correct

2) You don’t know how long it will take for the intrinsic value to be reflected in the

marketplace.

Criticism of Fundamental Analysis:

The biggest criticism of fundamental analysis is technical analysis. Technical analysis is

the other major form of security analysis. Technical analysts solely based on the price

and volume movements of securities. Using charts and a number of other tools, they

trade on momentum, not caring about the fundamentals. While it is possible to use both

techniques in combination, one of the basic tenets of technical analysis is that the market

discounts everything. Accordingly, all news about a company already is priced into a

stock, and therefore a stock’s price movements give more insight than the underlying

fundamental factors of the business itself. Followers of the efficient market hypothesis,

however, are usually in disagreement with both fundamental and technical analysts. The

efficient market hypothesis contends that it is essentially impossible to produce market-

beating returns in the long run, through either fundamental or technical analysis. The

rationale for this argument is that, since the market efficiently prices all stocks on an

ongoing basis, any opportunities for excess returns derived from fundamental (or

technical) analysis would be almost immediately whittled away by the market’s many

participants, making it impossible for anyone to meaningfully outperform the market over

the long term.

9

CHAPTER III

COMPANY PROFILE

ABOUT GLOBE CAPITAL MARKET LIMITED

Globe Capital is one of the largest growing investment solutions companies that provide

a wide range of services to its vast and diversified client base. The company has its

corporate office in New Delhi with regional offices in Mumbai, Kolkata & Jaipur and

growing network of more than 200+ offices across 150+ locations in India with overseas

office in London and Dubai.

Globe Capital accounts for more than 10% of NSE clearing volumes in its F&O segment.

In 2008, Globe Capital Market Ltd. attracted US$ 42 million of equity capital in Foreign

Direct Investment (FDI) from Citi Group and its representative is also on the Board of the

Company. Promoted by a group of professionals, Globe Capital has grown consistently

since inception.

PROMOTERS

1. Mr. Ashok Agarwal: Mr. Agarwal is the founder and CEO of globe capital

group in India. He is also a co-founder of Icon capital ltd. Professionally he is a

charted accountant with a rich experience of more than 20 years in global capital

market. He has been the president of the Delhi stock exchange in 1993, 1994 and

1999

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2. Mr. Yashpal Mendiratta: Mr. Mendiratta is the founder and executive

director of globe capital group in India. He is also a co-founder of Icon capital

ltd. professionally he is a charted accountant and has a rich experience of more

than 20 years in global capital market

VISION AND MISSION

Vision: To become the leading and most respected financial solution company

Mission: No matter what the size of our client is; no matter what the market

condition is; no matter what the asset nature is; we will always be driven by the sole

mission for our clients that their money must grow.

CORE VALUES

Always Be Client Centric: Clients' interests always come first. lf we serve our

clients well, our own success will follow.

Always Be Transparent: Integrity and honesty are at the heart of our business. We

maintain highest ethical standards and demonstrate sound judgment in executing the

responsibility.

11

Always Be Prudent: We apply wise financial and business strategies. Our clients

rely on our experience, judgment and analysis for their hard earned wealth to grow.

Always Be Foresighted: Long term relationship with our clients is more important

than short term gains. Always anticipate change and be prepared.

ORGANIZATIONAL STRUCTURE

12

SERVICES:

13

PROMOTERS (Mr. Ashok Agarwal and Mr. Yashpal

Mendiratta)

HR(Ms. parinita

Rishi)

MARKETING (Mr. Suneel

Raparia)

OPERATIONS (Mr. Manish

Agrawal)

IT (Mr. Anurag Batra)

INVESTMENT BANKING (Mr.

Ramesh Kumar Ahuja)

PORTFOLIO(PMS)

Mr. K. K Mittal

COMMODITY(Mr. Deepak

Sadhwan)

CURRENCY(Mr. Ravi Rastogi)

CONTRACT NOTES

(Mr. Ram Singh)

CDSLAND NDSL(Pradeep

Khandelwal)

ARBITRAGE (Shyam Sundar

Khandelwal)

1. Equity & Derivative Trading:

Globe capital Trading platform offers online equity & derivative trading facilities

for investors who are looking for the ease and convenience and hassle free trading

experience. We provide ODIN DIET application, which is a high-end, integrated

trading application for fast, efficient and reliable execution of trades. You can

now trade in NSE and BSE simultaneously from any destination at your

convenience. You can access a multitude of resources like live quotes, charts,

research, advice, and online assistance help you to take informed decisions. You

can also trade through our branch network bt registering with us as our client.

You can also trade through us on phone by calling our designated representatives

in the branches where you are registered as a client.

2. Commodities:

Globe capital is a member of 3 major national level commodity exchanges, i.e.

National Commodity and Derivative Exchange (NCDEX), Multi Commodity

Exchange (MCX) and National Commodity Exchange of India (NMCE) offers

you trading platform of NCDEX, MCX and NMCE. You can get real-time

streaming quotes, place orders and watch the confirmation, all on a single screen.

We use ODIN DIET application to provide you with live trading terminals. In

this segment, Globe Capital have spread our wings globally by acquiring

Membership of Dubai Gold and Commodities Exchange. We provide trading

platform to trade in DGCX and also clear trades of trading members being a

clearing member.

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3. Currency Trading:

At Globe Capital Market we offer currency trading on both NSE FX and MCX

SX and is supported by valued research. We offer expert advice on Currency

Arbitrage and Hedging strategies to our individual and corporate customers

4. Portfolio Management:

To address varying investment preferences Globe offers Portfolio Management

services (PMS). As a focused service, PMS pays attention to details, and

portfolios are customized to suit the unique requirements of investors. Equities as

an asset class outperform almost any other investment vehicle over a longer time

period. PMS aims at providing the same by investing on behalf of clients on the

basis of well-conducted research, experience and expertise of our Fund Manager,

well supported by our research team.

5. Mutual Funds & IPOs Distribution:

Globe Capital offers distribution and collection services of various schemes of all

Major Fund houses and IPOs through its mammoth network of branches across

India. Globe is registered with AMFI as an approved distributer of mutual funds.

We assure you a hassle free and pleasant transaction experience when you invest

in mutual funds and IPOs through us. We are registered with all major Fund

Houses.

15

6. Clearing Services:

We also offer Clearing Services to the Trading Member in the F&O segment and

are responsible for a significant chunk of the total clearing activities as high as

10% of the total clearing process. Globe Capital Market is the # 1 clearing

member for both NSE FX and MCX SX in currency trading.

7. Depository Participant With NSDL And CDSL:

Globe also holds membership of two major Depositories in the country i.e. NSDL

and CDSL and is catering to over 65000 accounts.

8. Globe Research Based Advisory Services:

Our massive R&D facility caters to need of investors, who are continuously in

need of opportunities for striking rich rewards on their investment. We have the

best people, process and technology resources providing complete research

solutions on equity, commodities, IPOs and Mutual funds. We offer proactive

and timely world class research based advice and guidance to our clients so that

they can take informed decisions.

MEMBERSHIPS AND REGISTRATIONS

16

1. National Stock Exchange (NSE)

2. Bombay Stock Exchange (BSE)

3. Multi Commodity Exchange (MCX)

4. National Commodities & Derivatives Exchange (NCDEX)

5. National Multi-Commodities Exchange of India Limited (NMCE)

6. National Securities Depository Limited (NSDL)

7. Central Depository Services Limited (CDSL)

8. Dubai Gold & Commodity Exchange (DGCX)

9. London Stock Exchange (FSA Registered Broking entity, London)

10. Portfolio Manager (Registered with SEBI)

IMPORTANT MILESTONE:

1994 Globe became the member of National Stock Exchange.

1999 Globe became the depository participant of NSDL.

2000 Globe acquired Trading as well as Clearing membership of NSE F&O.

2000 Globe became the depository participant of CDSL.

2003 Globe group acquired the membership of NCDEX, MCX and NMCE.

2006 Globe group expanded globally and acquired the Trading & Clearing

Membership of Dubai Gold and Commodity Exchange (DGCX) and London

Stock Exchange in 2007

2007 Globe became the clearing member of Bombay Stock Exchange in its F&O

Segment.

2008 Globe became clearing and trading member of Currency Derivatives in NSE,

BSE and MCX.

PORTER’S FIVE FORCES:

17

Porter's five forces analysis is a framework for the industry analysis and business strategy

development developed by Michael E. Porter of Harvard Business School in 1979. It

uses concepts developed in Industrial Organization (IO) economics to derive five forces

which determine the competitive intensity and therefore attractiveness of a market.

Attractiveness in this context refers to the overall industry profitability. An "unattractive"

industry is one where the combination of forces acts to drive down overall profitability.

A very unattractive industry would be one approaching "pure competition".

Porter referred to these forces as the micro environment, to contrast it with the more

general term macro environment. They consist of those forces close to a company that

affect its ability to serve its customers and make a profit. A change in any of the forces

normally requires a company to re-assess the marketplace. The overall industry

attractiveness does not imply that every firm in the industry will return the same

profitability. Firms are able to apply their core competences, business model or network

to achieve a profit above the industry average.

18

THE FIVE FORCES MODEL RELEVANT TO THE INDIAN

BROKRAGE INDUSTRY

1. The Bargaining Power Of Customers

Lack of Expertise Curtails Bargaining Power: Retail investors often

lack the knowledge and expertise in the financial sector that calls them to

approach the broking houses.

Low Product Differentiation Proves Beneficial: The retail broking

services provided by the various companies are homogeneous with very low

product differentiation. This allows customers to enjoy a greater bargaining

power.

2. The Bargaining Power Of Suppliers

Increased Dependence On Ipos: There is a growing dependence of

corporate on broking houses with the rising number of IPO’s coming to the

market.

3. The Intensity Of Competitive Rivalry

Move towards Consolidation: Lots of brokerage companies are moving

towards consolidation with the smaller ones. The small firms are becoming either

franchisees for the larger brokers or closing operations.

19

Increased Focus of Banks In Retail Broking: Various foreign banks

like ABN Amro and others are planning to enter the Indian retail Brokerage

industry.

Online Trading Competes with Traditional Brokerage: There is an

increasing demand for online trading due to consumer’s growing preference for

internet as compared to approaching the brokers.

4. Threat Of New Entrants

Entry of Foreign Players: New forms of trading including T+2 settlement

system, dematerialization etc are Strengthening the retail brokerage market and

attracting foreign companies to enter the Indian industry.

5. The Threat Of Substitute Products

Alternative Investment Options: Various alternative forms of investment

including fixed deposits with banks and post offices etc act as substitutes to retail

broking products and services. Now even various banks provide similar type of

services. They also give the same service of portfolio management and wealth

management.

20

COMPETITIVE ANALYSIS

Major players in industry:

1. India Bulls

India bulls is India's leading retail financial services company with 77 locations

spread across 64 cities. Its size and strong balance sheet allows providing varied

products and services at very attractive prices, our over 750 Client Relationship

Managers are India bulls is lead by a highly regarded management team that has

invested Crores of rupees into a world class Infrastructure that provides real-time

service& 24/7 access to all information and products. The India bulls

Professional Network offers real-time prices, detailed data and news, intelligent

analytics, and electronic trading capabilities, right at your fingertips. This

powerful technology is complemented by our knowledgeable and customer

focused Relationship Managers.

India bulls offer a full range of financial services and products ranging from

Equities, Derivatives, Demat services and Insurance to enhance wealth and to

achieve the financial goals.

2. Motilal Oswal Securities

One of the top-3 stock-broking houses in India, with a dominant position in both

institutional and retail broking, MOSt is amongst the best-capitalized firms in the

broking industry in terms of net worth. MOSt was founded in 1987 as a small

sub- broking unit, with just two people running the show. Focus on customer-

first-attitude, ethical and transparent business practices, respect for

21

professionalism, research-based value investing and implementation of cutting-

edge technology have enabled it to blossom into a thousand-member team.

The institutional business unit has relationships with several leading foreign

institutional investors (FIIs) in the US, UK, Hong Kong and Singapore. In a

recent media report MOSt was rated as one of the top-10 brokers in terms of

business transacted for FIIs.

The retail business unit provides equity investment solutions to more than 50, 000

investors through 270 outlets spanning 150 cities and 22 states. MOSt provides

Advice- Based Broking, Portfolio Management Services (PMS), E-Broking

Services, Depository Services, Commodities Trading, and IPO and Mutual Fund

Investment Advisory Services. Its Value PMS Scheme gave a 160% post-tax

return for the year ended March 2004.

In Asia Money Brokers Poll 2003 MOSt has been rated as the Best Domestic

Research House- Mega Funds, while in 2000 and 2002 it has been rated as the

Best Domestic Equity Research House and Second best amongst Indian

Brokerage firms respectively

3. HDFC Securities

HDFC securities is a brand brought to you by HDFC Securities Ltd, which has

been promoted by the HDFC Bank& HDFC with the objective of providing the

diverse customer base of the HDFC Group and other investors a capability to

transact in the Stock Exchanges& other financial market transactions. The

services comprise online buying and selling of equity shares on the National

Stock Exchange (NSE). Buying and selling of select corporate debt and

government securities on the NSE would be introduced in a subsequent phase. In

22

a few months, they will also start offering the following online trading services on

the BSE and NSE:

•Buying and selling of shares on the BSE

•Arbitrage between NSE& BSE

•Trading in Derivatives on the NSE

•Margin trading products.

They are also planning to include buying and selling of Mutual Funds, IPQ

subscriptions, Right issues, purchase of Insurance policies and asset financing.

4. Religare Securities Limited

Religare Securities Limited (RSL), a 100% subsidiary of Religare Enterprises

Limited is a leading equity and securities firm in India. The company currently

handles sizeable volumes traded on NSE and in the realm of online trading and

investments; it currently holds a reasonable share of the market. The major

activities and offerings of the company today are Equity Broking, Depository

Participant Services, Institutional Broking and Research Services. To broaden the

gamut of services offered to its investors, the company offers an online

investment portal armed with a host of revolutionary features.

5. Angle Broking

Angel Broking's tryst with excellence in customer relations began in 1987.

Today, Angel has emerged as one of the most respected Stock-Broking and

Wealth Management Companies in India. With its unique retail-focused stock

trading business model, Angel is committed to providing ‘Real Value for Money’

to all its clients. The Angel Group is a member of the Bombay Stock Exchange

(BSE), National Stock Exchange (NSE) and the two leading Commodity

23

Exchanges in the country: NCDEX & MCX. Angel is also registered as a

Depository Participant with CDSL

MARKETING STRATEGIES:

The environment for marketing has become dynamic and turbulent. Without adequate

preparation it difficult for organization to survive in such an environment. Companies

need to collect information about customers like and dislike and the reason once the

information is collected they need to analyze it and devise new strategies to outperform

their competitor some basic marketing strategies adopt by Globe Capital Market Ltd. Are

1. Online Trading:

Globe capital provides online trading to its all clients for all three

segments i.e. Equity, Commodity and Currency. For online trading Globe

capital provide a software to its clients that is called ODIN DIET.

Through this software clients can easily trade in stock market by

themselves.

2. Call And Trade:

Research analysts of company facilitate their premium customer to invest

in high return yielding stocks on the basis of their own expertise.

24

3. SMS and Messenger Services:

Investment tips are sent by company to its client on regularly basis.

Company also has its own messenger “Globe IM” through which clients

can directly chat with company’s analyst online.

4. 3 In 1 A/C:

Globe capital provides trading for all segments i.e. Equity, Currency and

commodity through one demat account on the basis of client choice.

5. Annual Maintenance Charges:

Globe capital Charge only Rs. 350 per year for maintenance of demat

account which is easily affordable for any client.

6. Attractive Demat A/C Schemes:

Globe capital provide various attractive schemes for opening of a demat

account i.e. a client can open a demat account for life time in Rs 999/-

only (no maintenance charges)

7. Attractive Brokerage Slab:

the brokerage amount is basically depend on trading capacity of client or

sub-broker of company i.e. the company charges between 0.1to 0.3 % in

delivery and 0.01 to 0.03% in intraday for its sub-broker and 0.3 and

0.03% for delivery and intraday to its retail client.

25

8. Personal Selling:

Globe capital has a strong sales workforce. Sales person make client

through cold calling, public relation and sales promotion. They directly

contact with people and tell them about the products and services and

convert them into a client of company.

9. Demo Classes:

On the launch of a new products or services company Conduct demo

classes to introduce it to its institutional client, sub-broker and employee at

company’s head quarter.

10. Booklets:

Time to time company distributes some booklets regarding its products

and services, brokerage and other charges, investment tips and other stock

market news to its sub-brokers, institutional clients and other premium

clients.

26

SWOT ANALYSIS:

A scan of the internal and external environment is an important of the strategic planning

process. The SWOT analysis provides information that is helpful in the matching the

firm’s resources and capabilities to the competitive environment in which it operates. As

such, it is an instrument in strategy formulation and selection.

Environment factors which are internal to the firm usually can be classified as strengths

(S) or weaknesses (W), and those which are external to the firm can be classified as

opportunities (O) or threats (T). Such an analysis of the strategic environment is referred

to as a SWOT analysis.

Strengths:

1. Largest clearing member: Globe offer clearing services to the trading

member in the F&O segment and are responsible for a significant chunk of the

clearing activities as high as 10% of the total clearing process. Globe capital

market is the No.1 clearing member for both NSE FX and MCX SX in currency

trading.

2. Robust financial health: Globe capital market ltd. Has a net worth of

approx Rs 4000 Crore. In year 2008 Globe capital market ltd. Attracted US$ 42

million of equity capital in foreign direct investment (FDI) from city group and its

representative is also on the board of the company. Company has deposited Rs.

1600 Crore in HDFC bank as security which is called margin money for its

clearing services.

27

3. Product and services: Company has a vast range of services which include

trading in equity, derivatives and commodities (including international markets

through DGCX and LSE), depository services for shares & commodities (ISO

9001: 2000) and web –based accounting.

The group, in addition to expanding its existing network, also plans to augment

the existing product portfolio by entering into the growing businesses viz.

Margin financing, mutual funds and IPO distribution.

4. Strong information system: IT plays a major role for in success of any

broking firm. Company has a well-equipped IT system with state-of-the-art

network capabilities and hi-tech statistical software tools, is supported by a team

of over 130 professionals from diverse backgrounds. All these system converge

to provide customers easy accessibility, convenience and hassle-free trading under

online sophisticated risk monitoring surveillance system.

5. Portfolio management services: To address varying investment

preferences Globe offers Portfolio Management services (PMS). As a focused

service, PMS pays attention to details, and portfolios are customized to suit the

unique requirements of investors. Equities as an asset class outperform almost

any other investment vehicle over a longer time period. PMS aims at providing

the same by investing on behalf of clients on the basis of well-conducted research,

experience and expertise of our Fund Manager, well supported by our research

team.

28

Weaknesses:

1. Weak brand recognition: In comparison of other broking house Globe

Capital has a less brand recognition which is a major weakness for this firm. Firm

is mainly working on institutional broking. Firm has entered in retail broking just

2 years ago so, to compete with the giant in this segment i.e. India bulls, HDFC

securities etc. still the brand recognition has to made.

2. Weak promotional strategies: The promotion and advertisement strategies

of Globe capital are not as strong as its competitors. The advertisement through

print and electronic media should be done to increase recall rate in customer’s

mind.

3. Visibility and presence : As the firm basically work for institutional broking

so still a vast area is untouched this include rural area ad tier II and tier III cities,

where the firm need to open its branches or franchises.

Opportunities:

1. Developing Indian economy: Indian economy seems to be out of

recession. This is the right time for inventers to Re-enter the market. The

company should adopt some strategies to increase the Business through

existing clients.

2. Availability of qualified workforce: The increasing number of

management graduates helps to get sales force at trainee levels at less salary.

29

It reduces the salaries expenses of the company. The company can tie up with

reputed B school for trainee.

3. Opportunities for market expansion: Market Huge untapped

market in rural areas, tier2 and tier3 cities and towns of India can be

concentrated to increase the business. In these area company can built some

franchises or make sub-broker who are currently working as a small firm.

4. Many a banks are offering fund transfer services. The company can tie-ups

for fund transfers to attracts customers of different banks.

5. New financial products: Company can enter in its own mutual fund,

insurance like other competitor i.e. HDFC, kotak mahindra, ICICI, SBI etc.

6. Scope in retail Broking: The capital market in the last few years has

turned out to be one of the favorable avenues for the retail investor. As

company has taken entry in retail spectrum of share broking so some kind of

marketing strategies should be adopted to become a well known brand in retail

broking services

7. Other financial services: As Indian financial market is a robust

market so some kind of services like Global depositary receipt (GDR), letter

of credit (LC), foreign currency convertible bonds (FCCB), merger demerger

and acquisition can be provided to large scale entities likewise its Subsidiary

Icon global market ltd.

.

30

Threats:

1. High degree competition: The increasing no. of broking firm is becoming a

major threat for the company. The sub-broker and clients can switch to these

firms as they are charging less brokerage.

2. Fluctuation in government policies: Changes in regulatory framework of

broking industry can be a big threat. Government and regulatory bodies’ i.e.

SEBI can charge more money or the regulation regarding broking can be

tightened which can reduce the no. of clients any time.

3. Other threats: Companies must develop and implement physical,

administration and technical safeguards to achieve the following goals:

Ensure the security and confidentiality of customer records and

information

Secure against any anticipated threats or hazards to the security

or integrity of such information

Secure against unauthorized access to or use of such

information that could result in substantial harm or

inconvenience to any customer.

31

Chapter IV

PROJECT UNDERTAKEN IN ORGANIZATION

In my summer internship programme I was working in research department where during

eight weeks of time period several tasks were assigned to me like industry analysis,

fundamental analysis, technical analysis as well as I was also assigned a job to gain

knowledge about strategies of different broking firms and their sub-brokers.

From first day of my internship I was told to go through some industry reports so I could

gain valuable insights about these industries. These published reports were from major

research companies’ i.e. FICCI, KPMG, IBEF, SSKI etc. these reports gave me a

valuable overview of these industries i.e. Pharmaceutical, health care, power,

construction, steel, oil and gas and many more, which was beneficial for me as well as for

organization also. These reports helped me to choose an industry for Fundamental

Analysis.

For industry analysis purpose I was also given some contacts of research analysts of

different firms with whom I discussed about current scenario and future prospects of

these industries. Some of these analysts are Mr. Sameer Relia, Managing Director,

Atherstone Global Securities Limited and Mr. Jagannadham Thunuguntla, Equity Head,

SMC Capital Ltd. From the discussion with these people I got to know the major factors

which contribute in growth of an industry. I also got to know, what are the key points

one should keep in mind while doing industry analysis i.e. Major cost components,

government policies, business model etc.

32

After getting through these reports and discussions, I gave a presentation on an industry

of my choice to my mentor and other office staff. The presentation was on the basis of

some key points,

i. Economy of the country or size of economy.

ii. Contribution of particular industry in this economy.

iii. Government planning and budgeting for this particular sector.

iv. Regulatory bodies and their policies.

v. Business model of industry.

vi. Growth opportunities in the industry

vii. Market share of major players.

viii. Operating profit margin of top ten companies of industry.

I gave presentation on Pharmaceutical industry as I have chosen this industry for my

topic, fundamental analysis. The presentation was helpful for me as well as for company

staff because it is not possible for a person to have a thorough knowledge about all the

industries and it is very necessary for any research team to be well up to date about every

industry. So this presentation helped me and other staff members a lot to gain a better

insight about Pharmaceutical industry.

After this presentation I was told to choose any three companies of this industry and to do

comparative company analysis, which was basically a financial statement analysis of all

the companies and to suggest which one can be a better option for a long term

investment. For this analysis I chose three companies from NIFTY 50 index, which were

Sun pharmacy, Cipla, Ranbxy.

Apart from the industry analysis and comparative financial statement analysis I also got

an opportunity to get a brief knowledge about technical analysis. In which I learnt about

price-volume chart, RSI and moving average convergence divergence (MACD) etc. I 33

have also calculated them during my internship but due to short period of time, could not

get a detailed knowledge about their implementation in equity market. For three

companies, Infosys, SBI and Bharti Airtel, I calculated these technical indicators

During these days I was also told to collect some useful data from sub-brokers of

company’s competitors i.e. brokerage, demat charges, marketing strategies etc. through

this information I got to know how a broking firm performs business. This was also very

important for the company to know their competitor’s strategies.

These all tasks were assigned to me in my summer internship, which I performed

successfully with my total efficiency. That gave me valuable learning, how a research

team of any financial services provider works and how the research done by this team is

beneficial for companies, their investors and an individual customer.

34

CHAPTER V

REPORT ON BUSINESS UNIT:

The different business units in the organization:

35

Globe Capital Market ltd. basically has several departments i.e. marketing, Operations,

research and information technology. Among these all departments I got an opportunity

to do work in the Research Department. Research can be defined as the search for

knowledge or any systematic investigation to establish facts. The Research Department

plays a major role in a broking firm or any other research based investing organization,

which analyzes securities and markets using both fundamental analysis and technical

analysis and some other techniques.

ROLE OF RESEARCH DEPARTMENT:

This Department Discovers new knowledge about products, processes, and services, and

then applying that knowledge to create new and improved products, processes and

services that fulfill market needs.

In a full-service brokerage firm an analyst of research department analyzes and studies

the markets and securities and issue recommendations. So this dept. is very important in

advisory services where as an analyst or advisor, you need to give suggestions and

recommendations to your clients. This is possible only if we have done a detailed study

and research on that industry or company and a competitive analysis that, why a company

is more successful and prospering, how to invest in this company will yield profit and

what are the various strategies that a company uses to be successful in this competitive

world.

Research department plays an important role in improving current and developing new

trading algorithms. We do this in close cooperation with the trading department.

Suggestions may come from the traders, but the department also generates new ideas

36

itself. We analyze these ideas and develop solutions or prototypes which are tested in

close cooperation with the traders. We should also keep in mind that all the

recommendations should be reliable and based on true facts and figures. Research plays

an important role in maintaining and improving the leading status of a proprietary trading

firm worldwide.

Basically Research and development expenditures are an investment in a company's

future - companies which do not spend sufficiently in R&D are often said to be 'eating

the seed corn'; that is, when their current product lines become outdated and overtaken

by their competitors, they will not have viable successors in the pipeline. So how much

is reasonable to spend on research? That is highly dependent both on the technology area

and how fast the market is moving. 2% of company revenue, not profit, might be enough

in a fairly sedate market, but to keep up in rapidly changing markets, companies should

expect to spend 15% or more in research and development just to keep up with the rest of

the pack.

Older standards hold that research looked at least five to ten years into the future, and

development one to five years, but those timeframes have shortened as the speed of

technology has increased. It is always difficult in times of tight money justify spending

significant sums on something that may not yield returns for another ten to fifteen years,

if ever. But spending on research and development is vital to continued growth and

prosperity, both for a company and for a country or world.

37

RELATION WITH OTHER DEPARTMENT

Research and IT: -

In the present scenario it is very difficult to imagine work without computers and internet

where it has become a medium of communication and social networking. Research

department depends on greatly on IT dept. for its information needs. To do research the

first and the foremost requirement is information about any industry, company, its

functioning, working, strategies etc.

Research and Marketing: -

To do marketing for any product or service we should have a complete knowledge of that

area. This is possible only when you have researched about which product is better in

what ways and why should one go for it and for whom that is good? For example

investment in which stock is good varies from person to person depending on his needs

whether he wants to invest for long term or short term.

Research and HR: -

Research is a tedious task which requires a lot of patience and it cannot be computerized

because it requires human skills and knowledge. So Human resource is a very important

part of research and advisory services.

38

CHAPTER VI

UNDERSTANDING OF FUNCTIONAL PROCESS

INTRODUCTION

The time one talks about stock market, another word also clicks and that is risk, people

have lost their millions in this stock market. Stocks are just like gamble for those who

don’t know how to invest. Investors can surely take out profit from market very easily

with the help of equity research which includes both technical and fundamental analysis.

It helps one to take out this money with sufficient if not unlimited profits. Equity

research also includes detailed study of some companies that would help one to compare

those companies and decide which is better to invest in. The future prospects of a

company can also seen using this analysis.

Basically equity research includes two techniques:

1. Fundamental analysis

2. Technical analysis

FUNDAMENTAL ANALYSIS

Fundamental analysis of the business involves analyzing its financial statements and

health, its management and competitive advantages, its competitor and markets. When

39

analyzing a stock using fundamental analysis there are two basic approaches one can use;

bottom up analysis and top down analysis.

Fundamental analysis is performed on historical and present data, but with the goal of

making financial forecasts. There are several possible objectives:

To conduct a company stock valuation and predict its probable price evolution.

To make a projection on its business performance.

To evaluate its management and make internal business decisions.

To calculate its credit risk.

Fundamental analysis includes:

1. Economic analysis

2. Industry analysis

3. Company analysis

On the basis of these three analyses the intrinsic value of the share are determined. This

is considered as the true value of the share. If the intrinsic value is higher than the market

price it is recommended to buy the share, if it is equal to market price hold the share and

if it is less than the market price sell the shares.

40

Top-Down and Bottom-Up Approach:

Investor can use either a top-down or bottom-up approach.

The top-down investor starts his analysis with global economics, including both

international and national economic indicators, such as GDP growth rates,

inflation, interest rates, exchange rates, productivity and energy prices. He

narrows his search down to regional/industry analysis of total sales, price levels,

the effects of competing products, foreign competition, and entry and exit from

the industry. Only then he narrows his search to the best business in that area.

The bottom-up investor starts with specific business, regardless of their

industry/region.

PROCEDURE:

The major part of fundamental analysis is to analyze a company’s financial statements

which are disclosed by every listed company in the last of its financial year. Financial

statements are the medium by which a company discloses information concerning its

financial performance. Followers of fundamental analysis use the quantitative

information gleaned from financial statements to make investment decisions. The three

most important financial statements - income statements, balance sheets and cash flow

statements. On the basis of these statements Ratio analysis is done which helps to

investor in his investing decisions in a particular stock. Let’s examine the analysis of

thee statements in detail:

1. The Income Statement: 41

The income statement is basically the first financial statement we will come

across in an annual report. Basically, the income statement shows how much

money the company generated (revenue), how much it spent (expenses) and the

difference between the two (profit) over a certain time period.

Generally speaking, companies ought to be able to bring in more money than they

spend or they don’t stay in business for long. Those companies with low

expenses relative to revenue - or high profits relative to revenue - signal strong

fundamentals to investors.

Revenue as an Investor Signal: Revenue, also commonly known as sales,

is generally the most straightforward part of the income statement. Often, there is

just a single number that represents all the money a company brought in during a

specific time period. The best way for a company to improve profitability is by

increasing sales revenue.

The Expenses: There are many kinds of expenses, but the two most common

are the cost of goods sold (COGS) and selling, general and administrative

expenses (SG&A). Cost of goods sold is the expense most directly involved in

creating revenue. It represents the costs of producing or purchasing the goods or

services sold by the company.

Next, costs involved in operating the business are SG&A. This category includes

marketing, salaries, utility bills, technology expenses and other general costs

associated with running a business.

PROFITS = REVENUE - EXPENSES

42

Profit, most simply put, is equal to total revenue minus total expenses. However,

there are several commonly used profit subcategories that tell investors how the

company is performing.

Gross profit is calculated as revenue minus cost of goods sold. Companies with

high gross margins will have a lot of money left over to spend on other business

operations, such as R&D or marketing.

Operating profit is equal to revenues minus the cost of sales and SG&A. This

number represents the profit a company made from its actual operations. High

operating margins can mean the company has effective control of costs, or that

sales are increasing faster than operating costs.

Net income generally represents the company's profit after all expenses, including

financial expenses, have been paid. This number is often called the "bottom line"

and is generally the figure people refer to when they use the word "profit" or

"earnings".

When a company has a high profit margin, it usually means that it also has one or

more advantages over its competition. Companies with high net profit margins

have a bigger cushion to protect themselves during the hard times. An investor

can gain valuable insights about a company by examining its income statement.

Increasing sales offers the first sign of strong fundamentals. Rising margins

indicate increasing efficiency and profitability.

2. Balance Sheet:

The balance sheet, also known as the statement of financial condition, offers a

snapshot of a company's health. It tells you how much a company owns (its

assets), and how much it owes (its liabilities). The difference between what it

43

owns and what it owes is its equity, also commonly called "net assets" or

"shareholders equity".

The balance sheet tells investors a lot about a company's fundamentals i.e. how

much debt the company has, how much it needs to collect from customers (and

how fast it does so), how much cash and equivalents it possesses and what kinds

of funds the company has generated over time.

Assets, liability and equity are the three main components of the balance sheet.

Carefully analyzed, they can tell investors a lot about a company's fundamentals.

Assets: There are two main types of assets: current assets and non-current

assets. Current assets are likely to be used up or converted into cash within one

business cycle - usually treated as twelve months. Three very important current

asset items found on the balance sheet are: cash, inventories and accounts

receivables.

Non-current assets are defined as anything not classified as a current asset. This

includes items that are fixed assets, such as property, plant and equipment

(PP&E). Unless the company is in financial distress and is liquidating assets,

investors need not pay too much attention to fixed assets.

Liabilities: There are current liabilities and non-current liabilities. Current

liabilities are obligations the firm must pay within a year, such as payments owing

to suppliers. Non-current liabilities, meanwhile, represent what the company

44

owes in a year or more time. Typically, non-current liabilities represent bank and

bondholder debt.

3. The Cash Flow Statement:

The cash flow statement shows how much cash comes in and goes out of the

company over the quarter or the year. Companies produce and consume cash in

different ways, so the cash flow statement is divided into three sections: cash

flows from operations, financing and investing.

Cash Flows from Operating Activities: It shows how much cash comes

from sales of the company's goods and services, less the amount of cash needed to

make and sell those goods and services. Investors tend to prefer companies that

produce a net positive cash flow from operating activities.

Cash Flows from Investing Activities: It shows the amount of cash the

company has spent on capital expenditures, such as new equipment or anything

else that needed to keep the business going. It also includes acquisitions of other

businesses and monetary investments such as money market funds. Investor

should see a company re-invest capital in its business by at least the rate of

depreciation expenses each year. If it doesn't re-invest, it might show artificially high

cash inflows in the current year which may not be sustainable.

Cash Flow from Financing Activities: This section describes the

goings-on of cash associated with outside financing activities. Typical sources of

cash inflow would be cash raised by selling stock and bonds or by bank

45

borrowings. Likewise, paying back a bank loan would show up as a use of cash

flow, as would dividend payments and common stock

Cash Flow Statement Considerations: Investors should invest in

companies that produce plenty of free cash flow (FCF). Free cash flow signals a

company's ability to pay debt, pay dividends, buy back stock and facilitate the

growth of business. Free cash flow, which is essentially the excess cash

produced by the company, can be returned to shareholders or invested in new

growth opportunities without hurting the existing operations. The most common

method of calculating free cash flow is:

Ideally, investors should see that can company pay for the investing figure out of

operations without having to rely on outside financing to do so? If a company is able to

pay for its own operations and growth than it is a signal to investors that it has very

strong fundamentals.

46

Ratio analysis:

Ratio analysis isn't just comparing different numbers from the balance sheet, income

statement, and cash flow statement. It's comparing the number against previous years,

other companies, the industry, or even the economy in general. Ratios look at the

relationships between individual values and relate them to how a company has performed

in the past, and might perform in the future.

Ratio analysis is an attempt to derive quantitative measure or guides concerning the

financial health and profitability of business enterprises. Ratio analysis can be used both

in trend and static analysis. There are several ratios at the disposal of an analyst but their

group of ratio he would prefer depends on the purpose and the objective of analysis.

Objective of Ratios:

Ratio is work out to analyze the following aspects of business organization-

A) Solvency-

1) Long term

2) Short term

3) Immediate

B) Stability

C) Profitability

D) Operational efficiency

E) Credit standing

F) Structural analysis

47

G) Effective utilization of resources

H) Leverage or external financing

Types of Comparisons:

The ratio can be compared in three different ways –

1. Cross Section Analysis: One of the way of comparing the ratio or ratios of the

firm is to compare them with the ratio or ratios of some other selected firm in the same

industry at the same point of time. So it involves the comparison of two or more firm’s

financial ratio at the same point of time. The cross section analysis helps the analyst to

find out as to how a particular firm has performed in relation to its competitors.

2. Time Series Analysis: The analysis is called Time series analysis when the

performance of a firm is evaluated over a period of time. By comparing the present

performance of a firm with the performance of the same firm over the last few years, an

assessment can be made about the trend in progress of the firm.

3. Combined Analysis: If the cross section & time analysis, both are combined

together to study the behavior & pattern of ratio, then meaningful & comprehensive

evaluation of the performance of the firm can definitely be made. A trend of ratio of a

firm compared with the trend of the ratio of the standard firm can give good results. For

example the ratio of operating expenses to net sales for firm may be higher than the

industry average however, over the years it has been declining for the firm, whereas the

industry average has not shown any significant changes.

48

IN DEPTH FUNDAMENTAL ANALYSIS OF

PHARMACEUTICAL INDUSTRY

In my summer internship programme, to get in depth knowledge about fundamental

analysis, firstly I chose the pharmaceutical industry. For the analysis purpose I was

provided some reports on the pharmaceutical industry but as the fundamental analysis

starts with the economy analysis and it was also essential to get some knowledge about

the Global scenario of the industry I have chosen, which proceeds as follows:

I. GLOBAL PHARMACEUTICAL INDUSTRY

Globally, pharmaceutical industry grew at a compounded annual growth rate of 9.1 per

cent in the last 23 years to $491 billion. Mergers and acquisitions reshaped

multinationals. With a slew of brand name drugs losing patent protection in the next few

years and the pressure building for pharmaceuticals to cut price, these giants find

themselves under immense strain to find new drugs and reduce price. Bringing a new

drug into the market costs a company an average of about $800 to $900 million. Some

estimates show that patient recruitment and medical personnel account for nearly 70 per

cent of the clinical costs that are required to bring a drug to market. The less expensive

means to raise research productivity is outsourcing research to low cost having such as

India and China. The global pharmaceutical outsourcing market stands at $10 billion.

Some of the major trends that are expected in the future include mergers and acquisitions

in the industry; new product launches by MNCs and Indian companies; in-licensing of

patented products by Indian companies to launch them in the Indian market and increase

in the number of contract research organizations.

49

Barriers to entry in the Global Pharmaceutical Industry:

Like many industries, any new entrant into the pharmaceutical sector will be faced with

various hurdles that have been previously erected by already established businesses and

by national and international standards and regulations. These include:

Economies of scale - manufacturing, R&D, marketing, sales

Distribution product differentiation - established products, brands and

relationships

Capital requirements and financial resources

Access to distribution channels: preferred arrangements

Regulatory policy: patents, regulatory standards

Switching costs - employee retraining, new equipment, technical assistance

The barriers to entry are extremely high in the pharmaceutical industry. Many of the top

firms have significant manufacturing capabilities that are hard to replicate. Also, they

have extensive patents that guarantee the protection of their products while they defend

their brands with large marketing budgets. Since any emerging pharmaceutical company

can expect a sharp retaliation from the established competitors in the pharmaceutical

industry, the overall threat of entry into the global marketplace is relatively low in

comparison to other international industries.

The largest factors that influence the success of many pharmaceutical companies are

capital requirements and financial resources, regulatory policies, and research and

development. All three of these factors can influence one another and a lapse in one area

can be disastrous for the future of the company.

50

Factors affecting the pharmaceutical industry:

1. Government regulations - drug prices, FDA regulations, sales & marketing

practices

2. Loss of patent protection - patent expiration, biogenerics, legal attack of

patent validity, patent law reform, health crises. Patent expiration is no longer the

only threat to patent protection.

3. Industry player environment - outsourcing, M&A, spin-outs, future

industry. A churning of pharmacy industry players will continue as both large

and small companies fight for survival.

4. New product development - R&D, poor quality drug candidates, slow

production of novel drug discovery technology.

5. Socio-economic Trends -- greater end-user involvement, threat of

bioterrorism, epidemiology, DTC advertising & customer confidence,

employment, stock market performance, worldwide market

6. Social And Demographic Factors: As the population ages and the

diseases increase, new medical needs emerge and the demand for effective

medicines rises accordingly. In Russia, around 15% of the population and 40% in

China are above the age of 60.

51

II. ECONOMIC ANALYSIS

India, an emerging economy is the 12th largest economy in the world which is growing

with an average GDP rate of 7% which is 2nd fastest in the world. In which service sector

contributes maximum 54% following by manufacturing sector 29% and agriculture 17%.

While doing analysis of Indian economy I found:

India has a huge talent pool of managerial and technical manpower and this

provides it with a competitive edge in the global market.

The democracy promotes a transparent environment that includes a free press and

a proper legal and accounting system.

It has a competitive and dynamic private sector that accounts for more than 75%

of India's GDP.

Government has become more liberal and has reduced its control on foreign trade

and investment and is heading its way towards privatizing the domestic sector.

This has shown a marked increase in FDI and FII inflows (but we are lagging

behind if we compare with China)

52

The weakness of India is the continuing public-sector budget deficit, which is

nearly 10% of GDP, lack of proper infrastructure to support the growth

momentum, inflation (which is now easing).

Some of the key factor contributes in Indian economy:

1) Gross Domestic Product:

Indian Economy has experienced a growth rate of almost 7% and In the first three

months the GDP in India expanded at the rate of 8.6% which is boosted by

industrial production and services. India Gross Domestic Product is worth $1159

billion or 1.87% of the world economy, according to the World Bank, traditional

village farming, modern agriculture, handicrafts, a wide range of modern

industries and a multitude of services contribute in India’s diverse economy.

Services are the major source of economic growth, accounting for more than half

of India’s output with less than one third of its labor force.

The services sector is growing at a rate of around 12% and its contribution to

GDP is maximum, around 54%. This is slated to continue to be the major

contributor to the GDP in the years to come due to increase in importance of

activities like trading, banking & finance, infotainment, real estate, transportation,

security, management & technical consultancy, hotels, restaurants, storage and

communications to name a few. All these industries are showing growth.

2) Inflation:

The overall inflation averaged for the month of April 2010 stood at 9.6 percent as

compared to the inflation of 1.3 percent seen in the same month of previous year.

53

The major contributor to inflation are rising global and domestic fuel prices,

massive trade deficits in US, rising prices of foods and manufacturing products.

3) Interest Rates

According to monetary policies for year 2010-11 the bank rate has been retained

at 6% Interest rates have been increased (CRR increased by 25 basis points from

5.75% to 6.0%, increased the repo rate by 25 basis points from 5.0% to 5.25% and

increased the reverse repo rate by 25 basis points from 3.5% to 3.75% ) by RBI.

As a result of the increase in the CRR, about Rs. 12, 500 Crore of excess liquidity

will be absorbed from the system.

The expected outcomes of the actions are:

Inflation will be contained and inflationary expectations will be anchored.

The recovery process will be sustained.

Government borrowing requirements and the private credit demand will

be met.

Policy instruments will be further aligned in a manner consistent with the

evolving state of the economy

4) Consumers Spending Power:

The per capita income in India has grown by 10.5% to Rs.44, 345 in 2009-10 as

against Rs.40141 in 2008-09, at the current price. The growth in the economy has

lead to increase in purchasing power and thus increase in spending power. The

major components of spending are– food, housing, apparel and services,

transportation, healthcare, entertainment, and personal insurance and pensions.

54

5) Money Supply And Exchange Rate:

The money supply growth rate is much above the targeted range and the current

liquidity built up in the economy could lead to inflationary expectations in coming

months. Enormous increase in liquidity is due to increase in capital flows. The

CRR hike and increase in interest rates will strengthen the rupee making foreign

investment attractive.

III. INDUSTRY ANALYSIS

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 injectibles. There are about 250 large units and about 8000 Small Scale Units,

which form the core of the pharmaceutical industry in India (including 5 Central Public

Sector Units). These units produce the complete range of pharmaceutical formulations,

i.e. medicines ready for consumption by patients and about 350 bulk drugs, i.e.

Chemicals having therapeutic value and used for production of pharmaceutical

formulations.

Technologically strong and totally self-reliant, the pharmaceutical industry in India has

low costs of production, low R&D costs, innovative scientific manpower, strength of

national laboratories and an increasing balance of trade. The Pharmaceutical Industry,

with its rich scientific talents and research capabilities, supported by Intellectual Property

Protection regime is well set to take on the international market.

The Indian Pharmaceutical industry is highly fragmented with about 24, 000

players (around 330 in the organized sector).

The top ten companies make up for more than a third of the market.

55

The leading 250 pharmaceutical companies control 70% of the market with top

ten market leader holding nearly 30% of the market share.

The total value of Indian pharmaceutical sector was estimated of $13 bn in 2007

which is expected to reach $34 bn in 2012.

The industry is growing at an average rate of 8% over the last five years. While

the global pharmaceutical industry is growing at the rate of 6% but still India’s

share in world market will be 2015 which is just over 2% of global market.

The Indian pharmaceutical industry accounts for about 1% of the world's

pharmaceutical industry in value terms and 8% in volume terms.

Barriers to entry: Licensing, distribution network, patents, plant approval by

regulatory authority.

The increasing health consciousness of people, affordability due to rising income

level of expanding middle class, health insurance facilities and newer and better

medicines are some of the factors facilitating immense growth potential in this

industry. The annual per capita drug expenditure is still amongst the lowest in the

world.

The new business model is emerging which is creating outsourcing opportunities

i.e. Contract R&D, Contract manufacturing, Drug discovery and development,

clinical trials and custom synthesis and technical services like Bioinformatics.

Indian pharmaceutical industry is significantly influenced by regulations. There

are three tiers of regulations – on bulk drugs, on formulations and on overall

profitability. This has made the profitability of the sector susceptible to the

whims and fancies of the pricing authority.

The new Pharmaceutical Policy 2006, which proposes to bring 354 essential drugs

under price control has not been officially passed as yet and has been stiffly

opposed by the pharmaceutical industry.

The average R&D spending in India as a whole is a meager 2% of sales; the top

five companies are spending about 5% to 10%, despite growing at a CAGR of

53% over the last four years. The ratio is still way below the global average of

15% to 20% of sales.

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According to eleventh five year plan the total plan budgetary required projected

for the pharmaceutical industry is Rs.927 Crore and the major part of this money

will be invested in Research and development which is the major growth indicator

for this industry.

Due to 100% FDI allowed in this industry, domestic companies would face fresh

competition from MNCs, as they would make aggressive new launches. That

said, for the latter, the going might not be that easy, as prices of patented products

would most likely be subject to ‘negotiations’.

When the government is looking to cut down healthcare costs in the developed

markets by facilitating a speedy introduction of generic drugs into the market,

companies like Ranbaxy and Dr. Reddy’s will stand to benefit. However, despite

this huge promise, intense competition and consequent price erosion would

continue to remain a cause for concern.

A key to sustained growth and profitability in the highly competitive US market is

by acquiring scale (possible through acquisitions), being present across

geographies, having a lean cost structure, a balanced product mix comprising of

niche products besides plain vanilla generics and a strong marketing and

distribution network.

Partnerships are likely to play a crucial role in driving growth going forward

Currently India has the highest number of US FDA approved plants outside the

US at 75.

Government is planning to increase public spending on health to at least 2% to

3% of GDP over the next five years from the current 0.8%, which can provide

further impetus to the pharmaceutical industry

FDI up to 74% is permitted through automatic route in the case of bulk drugs,

their intermediates and formulations (except those produced by the use of

recombinant DNA technology). 100% FDI is permitted in case of formulation of

drugs.

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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 injectibles. There are about 250 large units and about 8000 Small Scale Units,

which form the core of the pharmaceutical industry in India (including 5 Central Public

Sector Units). These units produce the complete range of pharmaceutical formulations,

i.e. medicines ready for consumption by patients and about 350 bulk drugs i.e.

Chemicals having therapeutic value and used for production of pharmaceutical

formulations.

Technologically strong and totally self-reliant, the pharmaceutical industry in India has

low costs of production, low R&D costs, innovative scientific manpower, strength of

national laboratories and an increasing balance of trade. The Pharmaceutical Industry,

with its rich scientific talents and research capabilities, supported by Intellectual Property

Protection regime is well set to take on the international market.

Advantage to India

Competent workforce

Cost-effective chemical synthesis

Legal & Financial Framework

Information & Technology

Globalization

Consolidation

The future of the industry will be determined by how well it markets its products to

several regions and distributes risks, its forward and backward integration capabilities, its

R&D, its consolidation through mergers and acquisitions, co-marketing and licensing

agreements.

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IV. COMPANY ANALYSIS:

Company analysis is the most important part of fundamental analysis. Company analysis

is basically based on financial statement analysis which includes balance sheet, income

statement and cash flow statement analysis. It is appropriate to choose most liquid stock

while doing a fundamental analysis so I chose three pharmaceutical company which stand

in NIFTY 50 stock index, these companies are, Cipla, Sun pharmacy and Ranbaxy.

Financial statement analysis is the main task which is based on the collected data and it is

based on the analytical capacity and perception of the researcher, mean in which sense

and role he or she read and justify.

The company analysis of all two companies which I have chosen is proceeds further:

Overview of Companies:

1. Cipla Ltd.: Chemical, Industrial & Pharmaceutical Laboratories, now known

as Cipla, was incorporated 1935. The company focuses on development of new

formulations and has a wide range of pharmaceutical products. It offers

prescription drugs, bulk drugs, animal products and pesticides. It also offers a

wide range of food and beverages, baked foods, oral hygiene products, detergents,

room fresheners and personal care products.

Almost 55% of overall incomes from its operations come from outside India. It

has 5, 500 registered products in various countries. Cipla offers drugs used for

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treatment of cancer, Alzheimer's, arthritis, Parkinson’s, cardiovascular diseases

and many more. It also offers drugs that prevent transmission of AIDS from

mother to child.

The company provides consulting services on preparation of product and material,

conducts plant evaluation and supplies plant equipments. Cipla has set up two

institutes namely Dr K.A. Hamied Institute and Cipla Cancer Palliative Care &

Training Centre. It has a presence across 170 countries with manufacturing units

approved by regulatory authorities like USFDA, WHO-Canada and MHRA-UK,

among others. Cipla was first company outside US and Europe to launch CFC-

free inhalers. In 2007 Cipla launched oral emergency contraceptive pill under the

brand name I-Pill.

2. Sun Pharmaceutical Industry: Sun Pharmaceutical Industries began with

just 5 products to treat psychiatry ailments in 1983. Sales were initially limited to

2 states West Bengal and Bihar. Sales were rolled out nationally in 1985.

Products that are used in cardiology were introduced in 1987 and Monotrate, one

of the first products launched at that time has since become one of our largest

selling products. Important products in Cardiology were then added; several of

these were introduced for the first time in India. Sun Pharmacy was listed on the

main stock exchanges in India in 1994.

It is an international specialist pharmacy company, with a presence in 30 markets.

It also makes active pharmaceutical ingredients. In branded markets, its products

are prescribed in chronic therapy areas like cardiology, psychiatry, neurology,

gastroenterology, diabetology and respiratory. Realizing the fact that research is a

critical growth driver, they established their research center SPARC in 1993 and

this created a base of strong product and process development skills. In India, it

has reached leadership in each of the therapy areas that we operate in, and are

rated among the leading companies by key customers. Strengthening market

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share and keeping this customer focus remains a high priority area for the

company.

Another API plant, its Ahmednagar plant, was acquired from the multinational

Knoll Pharmaceuticals in 1996, and upgraded for approvals from regulated

markets, with substantial capacity addition over the years. This was the first of

several sensibly priced acquisitions, each of which would bring important parts to

the long-term strategy.

With world-class technology and a team of strong professionals, it has built sites

and systems that meet the most stringent international manufacturing standards.

Expert quality teams ensure that systems and processes remain in compliance

with the latest standards.

A number of its plants hold approvals from the USFDA and the UK MHRA.

APIs and Dosage forms are made in 19 sites across India, US, Hungary and

Bangladesh.

3. Ranbaxy Laboratories: Ranbaxy Laboratories is India's largest

pharmaceutical company incorporated in 1961. The company has global presence

in 49 countries and is ranked amongst top ten global generics companies.

Ranbaxy has world-class manufacturing facilities in 11 countries namely Brazil,

China, Ireland, India, Japan, Malaysia, Nigeria, Romania, South Africa, USA and

Vietnam.

Ranbaxy has its R & D centre that helps company to have long term competitive

advantage. It caters treatment to segment of diseases that includes

Cardiovascular, Central Nervous System, Respiratory, Dermatology, Orthopedics,

Nutritionals and Urology. Ranbaxy's top 20 products, ranging from Anti-

infective to Dermatological, account for revenues of over $ 600 Million. Using

the finest R&D and Manufacturing facilities, that manufactures and markets

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generic pharmaceuticals, value added generic pharmaceuticals, branded generics,

Active Pharmaceuticals and intermediates (API).

With workforce of over 12, 000 spread across 50 nations, it pursues to become

Global leader in pharmaceutical sector. In 2001 Ranbaxy entered consumer

healthcare through launch of 4 brands Revital, Pepfiz, Gesdyp & Garlic Pearls.

In 2004 launched its first herbal range of products through New Age Herbals

(NAH), with products offering remedies in categories of Cough & Cold (Olesan

Oil & Cough Syrups) and Appetite Stimulant (Eat Ease). In 2005, another

popular brand, Chericof – The complete cough formula was introduced. During

2006, the business registered sales of $19 Million registering a growth of 19%.

Revital, the flagship brand continues to maintain leadership in its segment. It also

produces molecules like Simvastatin, Ciprofloxacin, Amoxycillin, Isotretinon and

many more

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COMPARATIVE FINANCIAL STATEMENT ANALYSIS

OF CIPLA, SUN PHARMACY AND RANBAXY FOR

FINANCIAL YEAR 2008-2009 WITH INTERPRETATION.

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LIQUIDITY AND SOLVENCY RATIO:

1) Current Ratio:

Current ratio is mainly used to give an idea of the company’s ability to pay its

short-term liabilities (debt and Payables) with its short- term assets (cash,

inventory and receivables). The higher the current ratio, the more capable the

company is of paying its obligations.

Formula: Current Assets

Current Liabilities

CIPLA SUNPHARMA RANBAXY

Current Assets 4419.57 2743.66 6509.98

Current Liabilities 1568.71 1038. 44 4571. 31

Current Ratio 2.81 2.64 1.42

Interpretation: From the comparison of the three Companies I found that, although

all the three companies have good current ratio but still Cipla has a current ratio of 2.81:

1 in comparison of Sun pharmacy’s 2.64: 1 and Ranbaxy’s 1.42. This shows that Cipla

is in better condition to pay its short term liabilities like short term loans and accounts

payables

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Although the recommended current ratio is 2: 1 but Cipla and Sun Pharmacy have higher

current ratio than recommended ratio which indicates both the entity can still utilize their

current assets which can accelerate their growth, where Ranbaxy is able to pay its short

term liabilities but in case of emergency it may have to face some problems.

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2) Quick Ratio:

A quick ratio indicates whether a firm has enough short-term assets to cover its

immediate liabilities without selling inventory. Companies with ratio of less than

1 cannot pay their current liabilities.

Formula: Quick assets

Current liabilities

Where: Quick Assets = Current assets - inventory

CIPLA SUN PHARMA RANBAXY

Quick Assets 3021.25 2256.92 5311 46

Current liabilities 1568.71 1038.44 4571.31

Quick ratio 1.92 2.17 1.16

Interpretation: Although the quick ratio for all three companies is more than

1 i.e. 1.92:1 for Cipla, 2.17:1 for Sun pharmacy and 1.16:1 for Ranbaxy but It

shows that, Cipla and Sun pharmacy can easily meet the situation of urgency in

comparison of Ranbaxy. From balance sheet we can get to know that Ranbaxy

also has enough amounts of current assets to pay its short term liabilities but still

it should emphasis on reducing its short term liabilities.

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The high difference of current ratio and quick ratio for Cipla shows it’s highly

dependency on inventory for current assets. This indicates that Cipla should emphasis to

control the inventory level.

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3) Debt -Equity Ratio:

Debt equity ratio indicates what proportion of equity and debt the company is

using to finance its assets. A high debt-equity ratio generally means that a

company has been aggressive in financing its growth with debt. This can result in

volatile earnings as a result of the additional interest expense.

Formula: Total long term debt

Total share holder’s fund + reserves and surplus

CIPLA SUN PHARMACY RANBAXY

long term debt 940.24 23.6 3725.37

Share capital 4350.75 5151.42 3541.11

Debt-equity ratio 0.22 0.004 1.05

Interpretation: The debt- equity ratio for Cipla and Sun pharmacy is very less (0.22

for Cipla and 0.004 for Sun pharmacy) which shows that both the companies have less

borrowed fund to pay. The debt equity ratio for Sun pharmacy is approximately

negligible in comparison of its owner’s fund; this indicates that company can use debt to

increase the shareholder’s benefit. Because the higher the debt-equity ratio, the larger the

shareholders’ earnings when the cost of debt is less than the firm’s overall rate of return

on investment.

Both companies can easily borrowed funds from banks and other sources; this shows the

opportunities to business expansion and new projects easily can be started due to

availability of funds at cheaper rate.

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Less debt-equity ratio of these companies also indicates towards their strong financial

health which attracts to investors easily.

In comparison of Cipla and Sun pharmacy, Ranbaxy is using more debt to operate its

business which is a cheaper source of funds.

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PROFITABILITY RATIO:

1) Gross Profit Margin:

A financial metric used to assess a firm’s financial health by revealing the proportion of

money left over net sales after accounting for the cost of goods sold. It indicates the

relation between production cost and selling price. A high gross profit margin implies

that firm is able to produce at relatively lower cost.

Formula: Net sales – Total expenditure (excluding S & D and miscellaneous exp.)

Net sales

CIPLA SUN PHARMA RANBAXY

Gross Profit 5234.29 2774.65 4652.04

Net Sales 2095.20 570.08 1926.61

Gross Profit Margin 40.02% 20.54% 41.41%

Interpretation: from the above table it can be determined that Ranbaxy and Cipla has

higher gross profit margin than Sun pharmacy. It shows, both the companies are

efficiently able to control production cost in comparison of Sun pharmacy and we can say

both the companies have higher available funds to spend on its research and development

and Selling and Distribution activities. It shows their strong growth prospect in future as

R&D activities plays a major role in growth of any pharmaceutical company.

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2) Operating Margin:

Operating ratio to measure a company’s pricing strategy and operating

efficiency. Operating margin is measurement of what proportion of a

company’s revenue is left over after paying for variable costs of production

such as wages, raw materials etc.

Formula: Operating income

Net sales

CIPLA SUN PHARMACY RANBAXY

Operating profit 1244.84 80. 82 256. 17

Net sales 5234.29 2774. 65 4652. 04

Operating margin 23.78% 2.9% 5.59%

Interpretation: From the analysis it can be refer that, operating margin of Cipla is

23.78% which is very high than Sun pharmacy (2.9%) and Ranbaxy (5.59%). It shows

that Cipla is earning more profit on its sale or I can say that Cipla is making more money

before interest and taxes which indicates that it can easily pay for fixed costs, such as

interest on debt and taxes. Whereas Sun pharmacy and Ranbaxy need to control over on

their operating expenses so the operating margin can be raised.

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3) Net Profit Margin:

This ratio shows the net earnings (to be distributed to both equity and

preference shareholders) as a percentage of net sales. It measures the overall

efficiency of production, administration, selling, financing, pricing and tax

management. Jointly considered, the gross and net profit margin ratios

provide an understanding of the cost and profit structure of a firm.

Formula: Net profit

Net Sales

CIPLA SUN PHARMACY RANBAXY

Net profit 776.81 1265.29 -1044.80

Net sales 5234.29 2774.65 4652.04

Net profit margin 14.84% 45.6% -22.45%

Interpretation: The above table shows that Cipla has less net profit margin 14. 91%

than Sun pharmacy which is 31.05%. Which indicates that investment in Sun pharmacy

is a better option for investor as it is yielding more profit to shareholders but when I

compare net profit margin and operating profit margin of Sun pharmacy I found a huge

difference in both which means that the contribution of other income ( revenue

generating other than operating activities) is very high. Such a trend is usually

inconsistent as major contributor to the revenue is operating activities.

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But still, Sun pharmacy would be in an advantageous position to survive in adverse

economic condition i.e. fall in selling prices, declining demand for product etc.

Ranbaxy showing a negative net profit margin which shows Ranbaxy is bearing a loss of

22. 45% but if it is compared with operating profit margin we will get to know the major

cause of losses are financing and investing activities or it can be said, company is

maintaining its variable cost at appropriate levels but fixed needs very high level of

improvement.

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4) Return On Equity:

Return on equity means the amount of net income returned as a percentage of

shareholders equity. Return on equity measures a corporation’s profitability

by revealing how much profit a company generates with the money

shareholders have invested.

Formula: Net Profit

Net worth

CIPLA SUN PHARMACY RANBAXY

Net Profit 776.81 1265.29 -1044.80

Net worth 4350.75 5151.42 3541.11

Return on equity 17.89% 24.56% -29.50%

Interpretation: From the above table it can be determined that Sun pharmacy

is more profitable company due to its high return on share holder’s equity.

Because share holder are earning more money on their investment in Sun

pharmacy. Ranbaxy is occurring losses on its owner’s fund so comparatively it is

far behind from other two companies in fulfillment of the basic objective of a

business, to increase share holders return or it can be said that it is not a good

option for investment.

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INVESTMENT VALUATION RATIO:

1) Dividend Per Share:

Dividend per share shows how much dividend is paid to shareholders on

each dividend.

Formula: Total dividend paid to equity share holders

No. of equity share outstanding

CIPLA SUN PHARMACY RANBAXY

Dividend paid 155.46 284.79 0.00

No. of equity

share

777291357 207116391 420369753

Dividend per share ~ Rs. 2 per share Rs. 13.75 per share Rs 0.00

Interpretation: By analysis it can determine that Sun pharmacy is paying Rs. 13.

75 per share as comparison to Cipla, which is only Rs. 2 per share. Ranbaxy is not in

position to pay dividend due to losses. It shows that investing in Sun pharmacy yield

more money as dividend which is in share holder interest.

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2) Earning Per Share:

Earnings per Share are calculated to find out overall profitability of the

organization. Earnings per Share represent earning of the company

whether or not dividends are declared. EPS measures the profits available

to the equity shareholders on each share held.

Formula: Net profit after tax and preference share dividend

No. of equity share outstanding

CIPLA SUN PHARMACY RANBAXY

Net profit after tax 776. 81 1265.29 -1044.80

No. of equity shares 777291357 207116391 420369753

EPS 9.9 61.09 -24.85

Interpretation: it is shown that EPS is much higher of Sun pharmacy i.e. Rs 61.09

in comparison of Cipla which EPS is Rs 9.9. The higher EPS will attract more investors

to acquire shares in the company as it indicates that the business is more profitable

enough to pay the dividends in time.

Due to losses Ranbaxy is occurring losses of Rs.24.85 on every equity share.

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3) Dividend Payout Ratio:

The payout ratio provides an idea of how well earnings support the

dividend payments. More mature companies tend to have a higher payout

ratio. D/P ratio shows the percentage share of net profits after taxes and

after preference dividend has been paid to the equity holders.

Formula: Dividend per share

Earning per share

CIPLA SUN PHARMACY RANBAXY

Dividend per share 2 13.75 0.00

Earning per share 9.9 61.09 -24.85

Dividend payout ratio 0.2 0.225 0.00

Interpretation: Cipla and Sun Pharmacy have approx equal payout ratio but

if the retained earning per share is considered than Sun pharmacy retained higher

earnings than Cipla i.e. Rs 47.34 against Rs 7.9. by multiplying this amount to

total no. of shares of both companies, total retained earnings for yr 2008-09 can

be calculated i.e. Rs. 980.4 crore for Sun pharmacy and Rs. 614.06 crore for

Cipla. It shows that over all retained earnings of Sun pharmacy is also higher

than Cipla which can be invested in new projects and research and development

activities. It shows the good future growth of the company. So to buy share of

Sun pharmacy will be more profitable.

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DEBT COVERAGE RATIOS:

1) Interest Coverage Ratio:

A ratio used to determine how easily a company can pay interest on

outstanding debt. The lower the ratio, the more the company is burdened by

debt expense. When a company's interest coverage ratio is 1.5 or lower, its

ability to meet interest expenses may be questionable. An interest coverage

ratio below 1 indicates the company is not generating sufficient revenues to

satisfy interest expenses.

Formula: EBIT

Interest expenses

CIPLA SUN PHARMACY RANBAXY

EBIT 953.54 1298.81 1485.94

Interest expenses 52.23 2.77 145.83

Interest coverage 18.25 468.8 10.18

Interpretation: From the interest coverage ratio of these companies it can be

referred that Sun pharmacy has much higher interest coverage ratio than Cipla and

Ranbaxy. It shows that the company is not burdened by debt expenses because

interest expenses are negligible which creates more profit for shareholders.

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MANAGEMENT EFFCIENCY RATIO:

1) Inventory Turnover Ratio: The ratio shows how many times a company’s

inventory is sold and replaced over a period. High inventory turnover shows

strong sales of company. High inventory levels are unhealthy because they

represent an investment with a rate of return of zero

Formula: Sales

Inventory

CIPLA SUNPHARMACY RANBAXY

Sales 5295.33 2833.65 4676.21

Inventory 1398.32 486.74 1198.5

Inventory turnover 3.79 5.82 3.90

Interpretation: Here all the companies have strong inventory turnover which

shows there strong sales. Comparatively Sun pharmacy has more inventory

turnover i.e. 5.82 than 3.79 of Cipla and Ranbaxy. So it can be said that

management efficiency of Sun pharmacy is better than Cipla and Ranbaxy.

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2) Receivable Turnover Ratio:

It is an accounting measurement used to quantify a firm's effectiveness in

extending credit as well as collecting debts. The receivables turnover ratio is an

activity ratio, measuring how efficiently a firm uses its assets

Formula: Net credit sales

Average accounts receivable

CIPLA SUN PHARMACY RANBAXY

Net credit sales 5234.29 2774.65 4652.04

Average receivable 1615.53 867.73 953.27

Receivable turnover 3.24 3.2 4.88

NOTE: Some companies' reports will only show sales - this can affect the ratio

depending on the size of cash sales. I also took the net sales as net credit sales as the

real value of net credit sales was not given in income statement of these companies. So a

right conclusion on the basis of this ratio cannot be given.

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CONCLUSION:

On the basis of above financial statement analysis it can be said that, maximum ratios are

in favor of Sun pharmacy’s financial health i.e Current ratio, quick raio, debt equity ratio,

Return on equity, net profit margin, interest coverage ratio, etc.

It shows its strong fundamental. The company is using negligible debt to operate its

business, so it can easily borrow funds from different sources like bank and debenture

bonds, which is available at cheaper rate to increase its R&D expenditure. In

pharmaceutical industry R&D expenditure of any company plays an important role in its

growth because innovation of new drugs increases capabilities to compete with

competitors.

Creditors can also take decision in favor of sun pharmacy because debt-equity and

interest coverage ratio of company shows its power to pay debt easily and timely.

Net profit margin and return on equity is also very high in comparison of other two

companies, which shows company is capable to pay returns to its owner by utilizing their

funds. So it can be a best choice for investor.

While Cipla is also having good amount of current assets over current liabilities which

shows its ability to face situation og urgency. Due to high gross profit margin, more

money is available to spend on R&D activities but sill the net profit margin can be

improved. It is sufficient to pay dividend but in comparison to Sun Pharmacy dividend

paid to shareholder is very less so investors may be less interested to invest in Cipla.

Debt-equity ratio is also very less so company can take step for business expansion by

borrowing funds.

Ranbaxy has a debt equity ratio of 1.05 which shows it is more risky company than other

two companies. Although debt is cheaper source of money but still high amount of debt

increases outside obligations. Difference of gross profit and net profit shows that

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company’s other activities than its core activities are major cause for losses. Due to

which company is not able to pay dividend. It puts company at the lower end in investing

decision of investors.

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PART-C

KEY LEARNINGS

On the completion of my summer internship programme I realize that summer internship

programme is very important part for management studies, which provide us a practical

knowledge of corporate world. Through summer internship I could learn, how to

implement my theoretical knowledge, practically while working in corporate culture.

During my summer internship in Globe Capital Market Ltd. I learnt how an individual’s

performance contributes in organization growth, at the same time co-operation skills also

required. While working in research department of the company I learnt different process

of the research on which a broking firm basically operates its business. It can be

fundamental or technical or valuation method to forecast a firm’s future prospect that

helps an individual investor in taking his investment decision.

I learnt lots of aspects about corporate culture. One has to work with his full efficiency

and dedication. One needs to be sincere during the work. One needs to complete the

work assigned to him on time so the further process doesn’t get interrupted. Team work

plays a major role in success of an organization.

Experience of my training was great at Globe Capital. The entire staff was supportive

and I was treated as an employee in organization. Always they helped me when I was in

need and I was always improved.

At last I can say that it was a great exposure for me and I enjoyed my work and learnt

different things which will be helpful for me in near future and prove to the foundation of

my success.

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BIBLIOGRAPHY

Journals:

1. Perlitz Uwe, (2008) Indian pharamaceutical industry on course for Globalization,

Deutsche bank Research

2. Agarawal Sanjay, (2006), The Indian Pharmaceutical industry, KPMG

Web Sites:

www.tradingeconomics.com

http://www.indiainbusiness.nic.in/indian-economy.pdf

www.investopedia.com

www.moneycontrol.com

www.fourstocks.com

www.nseindia.com

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