Indian Telecom Sector

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Table of Contents
1.INTRODUCTION2
2.INDUSTRY2
3.MAJOR MACROECONOMIC ENVIRONMENT4
4.MOTIVATION TO CHOOSE THIS SECTOR5
5.ACCOUNTING POLICIES5
5.1Accounting Policies of Cipla5
5.2Comparison of accounting policies of Cipla with other players8
6.ANALYSIS OF RATIOS11
6.1Liquidity Ratios11
6.2Solvency Ratios13
6.3Profitability Ratios15
6.4Efficiency or Turnover Ratios19
7.DUPOINT ANALYSIS22
8.VALUATION23
9.CONCLUSION24
10. REFERENCES25

1. INTRODUCTION

The project aims at financial statement analysis of companies in the pharmaceutical sector in Indian industrial space. While analyzing the pharmaceutical sector, the focus of the project is on the Indian as well as multinational companies operating in the pharmaceutical sector. In project the analysis is being performed on four companies i.e. Cadilla, Cipla, Pfizer, and Lupin. These companies are selected as the broad representative of the pharmaceutical sector with cipla representing the large market share player, Cadilla as a smaller player, Lupin as a medium market share player and Pfizer India representing a multinational company. Accounting policies of Cipla have been examined in depth. Accounting policies of other players have been compared with Cipla. The ratio analysis performance of Cipla has been analyzed over the past five years as well as over competitors. The key financial ratios used are:

* Liquidity Ratios
* Solvency Ratios
* Profitability Ratios
* Turnover Ratios
* Market Ratios
* Dupont Analysis
All the quantitatively analysis has been done supported with adequate interpretation and conclusion. Time series and competitor analysis has also been done.

2. INDUSTRY

The pharmaceutical industry of India including both imports and exports was worth around $29.9 billion in 2011-12 financial year. The domestic formulation market was around $11.6 billion. In value term, it constitutes only 1.2% of the global pharmaceutical market value. This low market share in global pharmaceutical industry is mainly due to low cost of drugs and low penetration of healthcare in India as compared to the developed markets such as USA and Europe. India as a country spends just 1.4% of its total GDP on healthcare; the country ranks amongst the lowest in this respect. In contrast the developed markets like USA and Europe, the corresponding figure is in excess of 6.5 – 8 % of total GDP. India produces almost 1,00,000 drugs of various kind annually. The domestic formulations industry is highly fragmented both in terms of number of players and variety of drugs. There are 300-400 organized players (large scale) and almost 15,000 unorganized players (small scale) in pharmaceutical space. However, when we talk about sales the industry is dominated by organized players. In 2011-12 the top ten companies has a market share of around 41.3%. The multinationals enjoyed a share of 30% in sales in this period.

The above statistics clearly show that the pharmaceutical sector is clearly divided among large no. of players and none of the players enjoy a clear large market share. This condition is a bit dangerous for Indian companies as they may die in the longer run competing to large pharmaceutical companies like GSK and Pfizer. Also in future consolidation may take place resulting in large consolidated companies where smaller Indian companies may become a target of large multinationals. Unlike other industries, the domestic pharmaceutical industry does not bunch-up due to a low capital-intensity and gestation period. Hence, companies expand capacities in line with demand patterns. Cost of setting up manufacturing plant

(RS Million)| Bulk Drugs | Formulations| Average gestation Period| US FDA Approved| 300-400| 500-600| 18-24 Months|
Others| 150-200| 250-300| 6-12 Months|

Also, unapproved units have lower gestation periods. The average gestation period for a US...
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