PROFITABLITY PERFORMANCE ANALYSIS OF INDIAN PHARMA SECTOR

Topics: Financial ratios, Generally Accepted Accounting Principles, Profit Pages: 10 (3248 words) Published: May 27, 2014
ZENITH International Journal of Multidisciplinary Research __________________ISSN 2231-5780

Vol.3 (1), January (2013)
Online available at zenithresearch.org.in

PROFITABLITY PERFORMANCE ANALYSIS OF INDIAN PHARMA
SECTOR
T.NARAYANA GOWD*; DR.C.BHANU KIRAN**; DR.CH.RAMA PRASADA RAO** * Research Scholar (Part-time), SKIM, S.K.University, Anantapur &Associate Professor, Srikalahastiswara Institute of Information and Management Sciences, Kapuganneri (village), Srikalahasti( Mandal),

Chitoor (District), Andhrapradesh , Pin:517641 India.
** Associate Professor & Placement Officer,
Anantha Lakshmi Institute of Technology & Sciences,
Itukalapalli (v), Anantapur, Pin:515721, Andrapradesh, India. *** Professor, Sri Krishanadevaraya Institute of Management (SKIM), S.K.University, Anantapur, Pin: 515003, Andrapradesh, India . _____________________________________________________________________________________

ABSTRACT
India's pharmaceutical industry is now the third largest in the world in terms of volume and ranked14th in terms of value. It is growing annually at rate of 8 to 9 %. The Indian pharmaceuticals market is expected to reach US$ 55 billion in 2020 from US$ 12.6 billion in 2009. This was stated in a report title "India Pharma-2020”by McKinsey & Company. Profitability performance analysis of Indian Pharmaceutical sector is immensely useful to stakeholders. Earning profit is essential for survival of the firm. Profitability is the yardstick for measuring the performance of the industry. In this paper an attempt has made to measure the profitability performance and to analyze the impact of selected profitability ratios on ROE of the sample company of Dr.Reddys Laboratory’s Limited. For fulfillment of the objectives the data is collected from the annual reports during 2002-03 to 2011-12; the collected data is analyzed and computed to fit for drawing inferences. The correlation and multiple regression analysis were used to find out the impact of selected profitability ratios (Gross Profit, Operating Profit, Net Profit, Earning per Share and Return on Total Assets) on ROE. The result reveals that selected profitability ratios have significant impact on ROE.

KEYWORDS: Earning per Share (EPS), Gross profit (GP), Net Profit (NP), Pharma Sector, Profitability, Return on Equity (ROE) & Return on Total Assets (ROA) _____________________________________________________________________________ INTRODUCTION

India's pharmaceutical industry is now the third largest in the world in terms of volume. Its ranked 14th in terms of value. Between September 2008 and September 2009, the total turnover of India's pharmaceuticals industry was US$ 21.04 billion. The domestic market was worth US$ 12.26 billion. This was reported by the Department of Pharmaceuticals, Ministry of Chemicals 293

ZENITH International Journal of Multidisciplinary Research __________________ISSN 2231-5780

Vol.3 (1), January (2013)
Online available at zenithresearch.org.in

and Fertilizers. As per a report by IMS Health India, the Indian pharmaceutical market reached US$ 10.04 billion in size in July 2010. A highly organized sector, the Indian Pharma Industry is estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually. The Indian pharmaceuticals market is expected to reach US$ 55 billion in 2020 from US$ 12.6 billion in 2009. This was stated in a report title "India Pharma 2020: Propelling access and acceptance, realizing true potential" by McKinsey & Company. In the same report, it was also mentioned that in an aggressive growth scenario, the Pharma market has the further potential to reach US$ 70 billion by 2020.Due to increase in the population of high income group, there is every likelihood that they will open a potential US$ 8 billion market for multinational companies selling costly drugs by 2015. This was estimated in a report by Ernst & Young. The domestic pharma market is estimated to touch US$ 20 billion by 2015. The...

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