cipla business analysis
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Cipla Business analysisName of the Student Roll No
Swarna Biyani 04
Sanket Desai 09
Behram Engineer 12
Rohan Jadhav 18
Rohit Jadhav 19
Namrata Kolte 25
Shama Lonare 27
Shivangi Mathur 30
Ashok Wagh 54
Business profile of Cipla
Business profile of Cipla It is a prominent Indian Pharmaceutical Company, best-known outside its
home country for manufacturing low-cost anti-AIDS drugs for HIV-positive patients in developing countries.
Founded by Khwaja Abdul Hamied as The Chemical, Industrial & Pharmaceutical Laboratories in 1935.
Apart from its core pharmaceuticals offerings, Cipla offers services like consulting, commissioning, engineering, project appraisal, quality control, know-how transfer, support, and plant supply.
Apart from its presence in the Indian market, Cipla also has an export market and regularly exports to more than 185 countries.
Business profile of Cipla Board of Directors:
Founder: Dr. K.A. Hamied (1898-1972)
Chairman & Managing Director: Dr. Y.K. Hamied
Joint Managing Director: Mr. M.K. Hamied
Whole-time Director: Mr. S. Radhakrishnan
Non-Executive Directors: Mr. V.C. Kotwal, Dr. H.R. Manchanda, Mr. M.R. Raghavan,
Mr. Ramesh Shroff, Mr. Pankaj Patel, Mr. Amar Lulla.
Business profile of Cipla
Y/E March (` cr)
3QFY2011 2QFY2011 2QFY2011 % chg qoq
3QFY2010 % chg yoy
Net sales 1,501 1580 (5.0) 1344 11.7
Other income
78 52 49.7 112 (30.2)
Gross profit 806 831 (3.1) 719 12.0
Operating profit
266 331 (19.7) 286 (6.9)
Net profit 233 263 (11.5) 289 (19.4)
Business Analysis of Cipla
Products and offerings.
The company has a wide range of products with more than 150 API and 1600 formulations.
No single product contributes to more than 2% of sales.
Some of the major Product are Vanlid 150,VC15,Enta Vir 150.
Market Share and ReachLargest Market share of 5.3% in Indian retail
Pharma sales.20 products in top 200 Pharma brands in India. Market leader in respiratory and Anti-Viral
categories.Distribution network of 42 sales depots,2300
stockist, 160000 chemists and over 4800 sales personnel.
Location of plants and FactoriesPlants all over India in locations like Himachal
Pradesh, Bangalore, Maharashtra, Goa, Madhya Pradesh.
Company plans to spend around 19Bn Rs over the next few years to modernize and build new plants
Most of the plants have UD FDA approval.The absence of plants near ports can increase the
logistical costs when it comes to exports.
Business ModelCipla has low risk Business model where it partners
with foreign pharma companies to distribute its APIs. It has partnership with companies in 170 countries and
has 7000 product registrations.Exports contribute to more than 50% of sales with
Africa contributing to 36% of exports.The RnD expense has increased steadily by 17% YoY
enabling CIPLA to gain more patents.
Strengths-Exports to over 175 countries that contribute 54% of the total turnover.-Market leader in key therapeutic areas such as respiratory care and anti-viral.-Company has an extensive distribution network. -Cipla has 18 brands that features among the top 300 brands.-Large basket of around 1500 formulations.-One of the country’s best R&D Process.
Weakness-Domestic growth was steady at 10 per cent.-Growth in formulation exports was affected due to various factors including non-availability of important raw materials, lower tender business in anti-retroviral.
Opportunities:-- 46 ANDAs pending for approval in US.- Plans of launching bio-similar, particularly relating to the oncology, anti-asthmatic and anti-arthritis categories - Around 10% contribution to the revenue from the Indore SEZ to start coming in from FY2013E.- 5–6 Inhalers products are at different stages of approvals.
Threats:-
- Some pending legal cases on account of alleged overcharging in respect of certain drugs under the Drug Price Control Order. - Sensitive to fluctuations in foreign currency exchange rates.
SWOT analysis
Consolidated Balance Sheet and its Analysis
Consolidated Balance Sheet
Balance Sheet (Consolidated)
Y/E March (Rs. Crore)
Particulars FY2007 FY2008 FY2009 FY2010
SOURCES OF FUNDS
Equity Share Capital 155 155 155 161
Reserves & Surplus 3081 3600 4192 5750
Shareholder's Funds 3236 3755 4348 5911
Total Loans 123.5 540.5 940.2 5.1
Deferred tax liabilty 112.7 149.2 164.2 179.2
Total Liability 3472 4445 5452 6095
APPILCATION OF FUNDS
Gross block 1800 2202 2693 2897
Less: Accumulated Depreciation 412 540 701 886
Net block 1388 1662 1992 2011
Capital WIP 73 233 366 684
Investments 118 93 80 246
Current Assests 2834 3745 4418 4367
Cash 131 80 53 62
Loans & Advances 696 1138 1113 1226
Others 2007 2527 3251 3079
Current Liabilties 941 1288 1405 1214
Net Working Capital 1893 2457 3013 3153
Total Assets 3472 4445 5452 6095
Interpretation In sources of funds, the equity share capital issued to public
has increased from 155 in FY2009 to 161 in FY2010.
Investments made by CIPLA in FY2009 had dipped to just 80 crores as against FY2008 which was about 93 crores. But in FY2010 the investments have again raised to astonishing 246 crore.
The current liabilities for the FY2010 have reduced by around 13% as compared to P.Y. This shows that the company has few liabilities to owe to the lenders.
The working capital has increased by about 4.6% for the year FY2010.
Vertical Revenue StatementVertical Revenue Statement
(Consolidated)
Particulars FY2007 FY2008 FY2009 FY2010
Gross Sales 3533 4101 5022 5410
Less : Excise Duty 95 91 61 52
Net Sales 3438 4010 4961 5358
Other Operating Income 125 207 276 265
Total Operating Income 3563 4217 5237 5623
Total Expenditure 2750 3384 4013 4292
Net Raw material 1726 2054 2347 2453
Other Mfg. costs 387 314 439 445
Personnel 185 214 271 319
Other 454 802 955 1075
EBITDA 688 626 948 1066
Less : Depreciation & Amortisation 103 116 152 167
EBIT 585 510 796 899
Particulars FY2007 FY2008 FY2009 FY2010
PBT 807 838 895 1325
Less: Tax 140 137 124 244
PAT 667 701 771 1081
EPS ( Rs.) 8.6 9 9.9 13.5
InterpretationNet sales increased from 3438 in FY2007 to 5358 in FY2010.
Percentage change in PAT as compared to P.Y. for FY2009 was 43.3% as compared to FY2008 which was just about 5.1%.
Decrease in PAT % in FY2010 by 1.8%.
Even though the Net Sales have increased from FY2009 to FY2010, the PAT has reduced.
Cash FlowY/E March (` cr) FY2008 FY2009 FY2010
Profit before tax 838 897 1,326
Depreciation 131 171 190
(Inc)/Dec in Working Capital (404) (711) (174)
Less: Other income
Direct taxes paid 171 165 256
Cash Flow from Operations 393 292 1086
(Inc.)/Dec.in Fixed Assets (563) (700) (526)
(Inc.)/Dec. in Investments 25 13 (166)
Other income - - -
Cash Flow contd..
Cash Flow from Investing (538) (687) (692)
Issue of Equity - - 669
Inc./(Dec.) in loans 448 395 (935)
Dividend Paid (Incl. Tax) (155) (155) (155)
Others (200) 130 36
Cash Flow from Financing 93 369 (386)
Inc./(Dec.) in Cash (52) (26) 9
Opening Cash balances 132 80 53
Closing Cash balances 80 53 62
Inference from cash flow
The cash inflow in the year 2008, 2009 was negative, while in the yr 2010, it was positive. However, the closing cash balance for all the 3yrs was positive.
The cash outflow in terms of the dividend paid was consistent for all the 3yrs.
As far as the financing activities are concerned, the cash inflow in the yr 2008, 2009 was less than the cash outflow, whereas in the yr2010 the cash inflow was more than the outflow.
If we compare the years 2008 and 2009 some of the loan was paid off in the year 2009, and additional loan was taken in the year 2010.
Inference from cash flowThere was no issue of equity shares in the year 2008 and 2009
whereas there was issue of equity shares in the year 2010.
There was more cash outflow from investing activities in all the three years. From this we can assume the purchases must have been more than the sales.
Cash flow form operating activities decreased in the year 2009 as compared to 2008 but dramatically increased in the year 2010
SOURCES AND APPLICATIONS OF FUNDS
Application & Investments
2008 2009 20100
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
fixed assets
investments
Changes in the working capital
2008 2009 20100
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
current assets
current liabilities
changes (approx)
Changes in Sources of funds
2008 2009 20100
1000
2000
3000
4000
5000
6000
7000
sources working capital changes
Ratio Analysis Ratio Analysis is the process of identifying the financial
strengths and weaknesses of the firm by logically establishing the relationship between the figures given in Profit & Loss account and Balance Sheet and interpreting the result thereof in order to derive meaningful conclusions.
Ratio Analysis of cipla Current Ratio=Current assets
Current Liabilities
Fy2008=745/1288=2.9 Fy2009=4418/1405=3.14 Fy2010=4367/1214=3.59
The ideal Current ratio is 2:1.If the current ratio is 2:1 the company’s position
is good.The current assets is more than 2:1 then its shows that the funds are unnecessarily blocked in the current assets. It affects the profitability of the organisation.
Asset Turnover Ratio= Net Sales/Net assets Fy2008=2.1 Fy2009 =2.1Fy2010 =2.0This ratio indicates whether the assets are efficiently utilized or
not. A high ratio indicates efficient utilization of assets. On the other hand a low ratio indicates inefficient utilization. An increase in the ratio indicates that there is improvement in the utilization of fixed assets.
Inventory Turnover Ratio(days)= cost of goods sold *365/Average stock
Fy2008 =91 Fy2009 =88 Fy2010 =94 This indicates how fast the inventory is moving through the
firm and generating sales.
Average Collection period= Days in a year/ Debtor turnover ratio
Fy2008=105 Fy2009=114 Fy2010 =111 The main aim of this ratio is to ascertain how much time
debtors take to make the payment to the firm. More number of days indicate delayed payments by the debtors. Over here it is found that on an average debtors take 111 day (for fy 2010) to make payment.
Average Payment Period=Days in a year/Creditors turnover ratio Fy2008=45 Fy2009=45 Fy2010=54 This ratio indicates the period which is normally taken by the
firm to make payments to the creditors. Less number of days implies that the creditors are being paid quickly thereby increasing the credit worthiness of the firm.
Working Capital Cycle(ex cash)days=
Net Sales/net working capital Fy2008= 179 Fy2009 = 186Fy2010 =196
The ratio indicates the number of days the working capital is being used.
Net Debt to equity Ratio=
Debt (Long term)/ Equity (Shareholder’s funds) Fy2008=0.1 Fy2009=0.2 Fy2010 =(0.0) This ratio judges the long term financial position and
soundness of the long term financial policies of the firm. In general lower the debt-equity ratio higher the degree of protection enjoyed by the lenders.
Changes in working capitalParticulars F.Y. 2008 F.Y. 2009 F. Y. 2010
(Rs.in crores) (Rs.in crores) (Rs.in crores)
Cash 80 53 62
Loans & advances 1,138 1,113 1,226
Other 2,527 3,251 3,079
Current Assets (A) 3,745 4,418 4,367
Less:
Current liabilities (B) 1,288 1,405 1,214
Working Capital(A-B) 2,457 3,013 3,153
Inference from changes in working capital. The cash balance of the company has reduced in the years 2009 and
2010 affecting the net working capital of the company.Though in the year 2010 the cash balance has increased to a certain extent as compared to the year 2009.
The loans and advances granted to others by the company has managed to remain more or less the same, though in the year 2010 they have marginally increased to some extent.
The current assets of the company in the year 2009 has increased considerably over its previous year mainly because of other current assets increasing manifold times. Though in the year 2010 it has dropped a bit due to a drop in the other assets.
Inference from changes in working capital.
The current liabilities like the current assets has increased in the year 2009 as compared to 2008 though not in the same proportion, hence the increase in working capital has not been affected much. But then again in the year 2010 the current liabilities has decreased marginally over the previous year.
The working capital has managed to increase steadily over the years indicating the company’s good health. This has been possible mainly due to an excess of current assets over the current liabilities in all the 3 financial years.
The overall study of the working capital depicts a pleasant picture of the company and calls for a positive response from all the existing and future investors of the company.
ConclusionSources and Application of Funds: There is substantial increase in the profits of the company as compared to
the last year i.e. 2009. It is Rs.1324.99 cr. in the year 2010 i.e. an increase of by Rs.423.68 cr. Major transactions that are affecting the profits is the revenue generated from the sale of brand and other related rights which amounts to Rs.95.00 cr. There remarkable increase working capital in the trade payables i.e. it has increased to rs.30.79 cr as compared to Rs 10.99 in the year 2009.The major sources of the company is through the issue of the QIP shares and applications of the funds are diverted towards the purchase of the fixed assets.
Revenue Statement: Net sales increased is from 3438 in FY2007 to 5358 in FY2010.which is
positive for companies point of view. There is Decrease in PAT % in FY2010 by 1.8%.Even though the Net Sales have increased from FY2009 to FY2010, the PAT has reduced means operating margin has decreased.
ConclusionBalance sheet: In sources of funds, the equity share capital issued to public has
increased. Investments made in FY2009 had dipped to just 80 crores as against FY2008, in FY2010 the investments have again raised to 246 crore. Current liabilities for the FY2010 have reduced compared to P.Y.it shows that the company has few liabilities to owe to the lenders. The working capital has increased by about 4.6% for the year FY2010.
Working Capital: There has been continuous increase in working capital. This is mainly due
to an excess of current assets over the current liabilities. This is positive sign for investors.
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