Project Report
On
FINANCIAL ANALYSIS OF RANBAXY LAB LTD
Submitted to: Submitted By:
Mr. Anil K. Bhola Ms. Prachi Tuli
(GM FINANCE) Chitkara Institute of Engineering and technology
Ranbaxy laboratories ltd Chitkara University
Mohali
ACKNOWLEDGEMENT
I,PRACHI TULI would like to thank CHITKARAINSTITUTE OF ENGINEERING AND TECHNOLOGY for giving me an opportunity to undertake project.
I am also grateful to the Management of Ranbaxy group for allowing me to undergo a project in their company, providing all sorts of facilities, which was a good learning experience.
I owe my sincere thanks to Mr. Anil K. Bhola (GM-Finance) for allowing me to work in Finance Department as a trainee in Ranbaxy Labs Ltd.
I shall remain indebted to him for his able guidance and whole hearted co operation and concern. I wish to thank him for his consistent moral support and the assistance he regularly provided me.
I am extremely grateful to Mr. Vinod Sharma , Mr. Desraj Sharma, Mr.Kuldeep Thakur, Mr. Rajan Arora, Mr. P.K.Sood and all the members of Accounts and Finance Department for their solicited and selfless help.
My summer training has added to my practical knowledge and built my confidence. Thanks again to all the family members of Ranbaxy Labs Ltd with the active support of whom I was able to complete my project work successfully.
PRACHI TULI CIET CHITKARA UNIVERSITY
PREFACE
Management is a vital function concerned with all the aspects of an enterprise and hence a course in business administration has become a sort of prerequisite for a successful career in today’s dynamic business environment Theories on management aim at establishing the best way of doing things undyingly, the situational needs determine their mode of application. Effective Management is always a situational management. So a student undergoing a postgraduate program in management needs to be exposed to realities in the field, which puts to test the classroom learning.
My Project “FINANCIAL ANALUSIS OF RANBAXY LABS LTD” aims to study the financial condition of the company compare it with its key competitor in the Indian market Dr Reddy’s. To this context various methods and techniques like ratio analysis DuPont analysis, trend percentage, common size statements and statistical tools have been used to draw an exact picture of company.
By adopting various calculation and analysis efforts have been made to draw inferences about the company.
TABLE OF CONTENTS
PAGE No INDUSTRY PROFILE 5-12 COMPANY PROFILE 13-33 THEORTICAL FRAMEWORK 34-36 BACKGROUND OF THE PROJECT 37-46
Objectives of the study 39
Financial analysis tools used in the project 39-43 Statistical tools used in the project 44-45 Limitations 46
FINANCIAL ANALYSIS 47-99 Analysis of Balance Sheet items 48-61 Analysis of Operating Activities 62-74 Analysis of Investing Activities 75-78 Analysis of Solvency Condition 79-80 Analysis of Working Capital Situation 81-87 Analysis of Financial Structure 88-91 Du-Point Analysis 92-99 CONCLUSION 100-103 Major Findings 101 Interpretation 102 Recommendations 103 REFRENCES 104 APPENDIX I (ABBREVIATIONS) 105
INDIAN PHARMACEUTICAL INDUSTRY HISTORY
The Indian pharmaceutical industry dates back to the fifties, when the import and marketing of the various medical formulations first started. At the onset, Multi national companies were the only route for the manufacture of formulations and the Indian Pharmaceutical industry
government imposed restriction on the import and marketing of various medical formulations. This led to setting up of facilities in India.
The leading 250 pharmaceutical companies control over 70 percent of the market with market leader is having share of around 7% over 60% of India’s bulk drug production is exported and the balance is sold locally to the formulators. With more than 85% percent of formulation production in the country is sold in the domestic market.
India is one of the top manufacturers of bulk drugs in the world and is among the top 20 pharmaceuticals exporters in the world. The industry manufactures almost the entire range of therapeutic products and is capable of producing raw materials for manufacturing a wide range of bulk drugs from the basic stage.
The government has taken measures to give impetus to domestic production of drugs and Formulation, creating an environment conductive for canalizing new investments into the pharmaceutical sector. However the industry and experts feel that time has come for government to announce new policy initiatives, particularly relating to the research and development and pricing regime ,in order to propel the industry into a new growth orbit as well as the challenges of WTO led trading system and TRIPS driven product patent environment. The Indian Pharmaceutical Industry comprises both MNCS as well as Domestic companies.
While at one time, MNCs dominated the market; their market share has declined steadily from 75% in 1971 to about 35%. In order to boost the Domestic industry the Government Introduced prices patents in the Indian Patent Act of 1970. Domestic Pharma companies were quick to take advantage of this and developed expertise in process development and manufacturing of Pharmaceuticals. As a result Domestic Companies had a robust pipeline of products; large therapeutic width and depth were able to provide masses with low priced quality pharmaceuticals.
INDIAN PHARMACEUTICAL INDUSTRY TODAY
The days when the Indian pharmaceutical industry was synonymous with cheap generic drug production are gone. While generics continue to play a major part in the industry’s success, many companies have started down the long road of drug discovery and branded product development.
India is the world’s fourth largest producer of pharmaceuticals by volume, accounting for around 8% of global production. In value terms, production accounts for around 1.5% of the world total. The Indian pharmaceutical industry directly employs around 500,000 people and is highly fragmented. While there are around 270 large R&D based pharmaceutical companies in India, including multinationals, government-owned and private companies, there are also around 5,600
involved in pharmaceutical production. Most small firms do not have their own production facilities, but operate using the spare capacity of other drug manufacturers. The advent of pharmaceutical product patent recognition in January 2005 changed the ground rules for Indian companies. In the run up to the new post-patent era and since, the Indian industry has been evolving. R&D departments are moving away from reverse-engineering in favor of developing novel drug delivery systems and discovery research
Current and future markets
Geographically, the key markets for the Indian industry are India, the US, Europe, Russia and the former CIS countries, Africa and Latin America, particularly Brazil. Some companies have also begun to gain generic approvals in Australia. Indian companies are gearing up to expand their wings in to other prominent markets like Japan, Korea and other developed Asian countries. India remains an important market for the vast majority of Indian companies. The indigenous industry supplies around 70% of the country’s pharmaceuticals. The proportion of revenue derived from India depends largely on the strategy of the individual company and its penetration into overseas markets. For example, while Zydus Cadila aims to grow rapidly in key generic markets in the US, Europe and Latin America, India remains its most important market, accounting for 63% of revenue in fiscal 2007/08. India is also Cipla’s key market, generating almost half of the company’s revenue in 2007/08, although this percentage has been declining in recent years as the company has increasingly targeted overseas markets. Other companies, such as Dr. Reddy’s, are less reliant on the Indian market; in 2007/08, India contributed 15.7% of the company’s global revenue.
STRATEGIES
Indian companies have adopted different strategies in order to penetrate regulated generics markets. Some have entered these markets through partnerships with established generic companies; others have set up their own sales and marketing organizations, either organically or through acquisitions. A number have gone one stage further and acquired manufacturing bases in their target markets. Ranbaxy acquired Ohm Laboratories in the US in 1995, providing the company with an entry into the US market. Jubilant Organosys acquired US generic company Cadista Pharmaceuticals (formerly Trigen Laboratories) in 2005. Aurobindo Pharma acquired an FDA-compliant formulations manufacturing plant in Dayton, New Jersey in 2006. Dr. Reddy’s has MHRA-approved manufacturing facilities in the UK. Wockhardt has manufacturing facilities in various developed European countries like UK, Ireland and France. Indian pharmaceutical companies are no strangers to competition. The Indian market is highly competitive with more than 300 organized players and branded promotional costs associated with every product, yet the industry is able to offer low-priced products and remain profitable in
India. However, whether the Indian industry will be able to maintain the pace of expansion across the world is questionable in the current economic climate.
INTERNATIONAL TARGETS OF INDIAN PHARMACEUTICAL COMPANIES
Outside India, the US and EU generics markets are currently the major targets for companies following a generic strategy – but for how long? The attractive opportunities offered by the loss of patent protection on several major products in the coming period has to be offset against price reduction pressures driven by the ongoing economic downturn and aggressive competition for the business that is on offer
Major players
Dr. Reddy's Laboratories
Founded in 1984 with $160,000, Dr. Reddy’s was the first Asia-Pacific pharmaceutical outside of Japan and the sixth Indian company to be listed on the New York Stock Exchange. It earned
to strengthen its global position, Dr. Reddy acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare.
Although 58% of Dr. Reddy’s revenues come from generic drugs, the company was committed to WTO-compliance long before the 2005 bill took effect, and most of these products were already off patent. Dr. Reddy has long been a research-oriented firm, preceding many of its peers in setting up a New Drug Development Research (NDDR) in 1993 and out-licensing its first compound just four years later. Dr. Reddy’s has since out licensed two more molecules and currently has three others in clinical trials.
Although Dr. Reddy’s is publicly-traded, the Reddy family (including founder/chairman K. Anji Reddy, son-in-law/CEO GV Prasad and son/COO Satish Reddy) holds a hefty 26% share in the company.
Nicholas Piramal
Now a company grossing $350 million per year, Nicholas Piramal started its existence with the 1988 acquisition of Nicholas Laboratories and grew through a series of mergers, acquisitions and alliances. The company has formed a name for itself in the field of custom manufacturing. It cites its 1700-person global sales force as another core strength; with its acquisition of Rhodia’s
inhalation anesthetics business, Nicholas Piramal gained a sales and marketing network spanning 90 countries34.
Nicholas Piramal is well-poised for the challenge of surviving in the aftermath of product patent protection. The company has respected intellectual property rights since its inception and refused to "support generic companies seeking first-to-file or early-to-market strategies." Instead, it decided to make its own intellectual property and opened a research facility last November in Mumbai with hopes of launching its first drug in 2010 at a cost of $100,000.24,
Cipla
Cipla burst into the international consciousness in 2000 with Triomune, an AIDS treatment costing between $300 and $800 per year that infringed upon patents held by several companies who were selling the cocktail for $12,000 per year. Long before this news, Cipla had been building a strong global presence, and it now distributes its 800-odd products in over 140 countries. Privately-held Cipla holds a prominent spot in its home country as well; it is the leader in domestic sales, having just unseated GlaxoSmithKline for the first time in 28 years. Revenue in 2004 totaled $552 million (using Rs 43.472 = $1) about 75% of which was derived in India. Cipla did not report having a research program.
Originally an extension to an Irish chemicals company seeking to break into the Indian market, Biocon is now the leading biotech in India, bringing in Rs 646.36 crore (almost $150 million) in revenue for fiscal year 2004. It initially made its money by producing enzymes, but Biocon recently decided to become a research-oriented company with the goal of bringing a proprietary new drug to market.
The company went public in March 2004, and "its shares were oversubscribed by 33 times on opening day." Eight months later it launched Insugen, a bio-insulin that is its first branded product. Biocon also has two wholly-owned subsidiaries, Syngene and Clinigene, that perform custom research and clinical trials.
Serum Institute of India
The Serum Institute of India can make the enviable claim that 2 out of every 3 children in the world are immunized with one of their vaccines. It is the world’s largest producer of measles and DTP vaccines, and its portfolio includes other vaccines, antisera, plasma products and anticancer compounds. The Serum Institute earned Rs 565 crore ($130 million) in revenue in fiscal year 2005, selling mainly to UN agencies and to the Indian government. The Serum Institute is part of the Poonawalla Group, whose holdings include a horse stud farm and manufacturers of industrial equipment and components.
SWOT Analysis
Strengths
• Cost Competitiveness
• Well Developed Industry with Strong Manufacturing Base
• Rich Biodiversity
• Competencies in Chemistry and process development.
Weaknesses
• Low investments in innovative R&D and lack of resources to compete with MNCs for New Drug Discovery Research and to commercialize molecules on a worldwide basis.
• Lack of strong linkages between industry and academia. • Low medical expenditure and healthcare spend in the country
• Production of spurious and low quality drugs tarnishes the image of industry at home and abroad.
• Shortage of medicines containing psychotropic substances.
Opportunities
• Significant export potential.
• Licensing deals with MNCs for NCEs and NDDS.
• Marketing alliances to sell MNC products in domestic market. • Contract manufacturing arrangements with MNCs
• Potential for developing India as a centre for international clinical trials • Niche player in global pharmaceutical R&D.
• Supply of generic drugs to developed markets.
Threats
• Product patent regime poses serious challenge to domestic industry unless it invests in research and development
• R&D efforts of Indian pharmaceutical companies hampered by lack of enabling regulatory requirement. For instance, restrictions on animal testing outdated patent office.
• Drug Price Control Order puts unrealistic ceilings on product prices and profitability and prevents pharmaceutical companies from generating investible surplus.
• Lowering of tariff protection
• The new MRP based excise duty regime threatens the existence of many small scale Pharma units, especially in the states of Andhra Pradesh and Maharashtra which were involved in contract manufacturing for the larger, established players.
FUTURE PROSPECTS
Due to economic prosperity, a lot more customers are entering organized healthcare, antibiotics and acute therapies are normally the first line of defense, say analysts.
While India’s metros and class I cities drive the growth tier II cities and rural market add to the growth momentum.
Rising disposable income, improving health infrastructure such as the government’s incentives to set up 100-bed hospitals in non-metro towns, and the general increase in health awareness due to deep penetration of the electronic media are the corner stones of sales expansion.
Even though export and overseas trade remains key for most of the domestic companies, many of them derive nearly 40% of their sales from the desi market.
As far as MNCs in India are concerned most of the sales are generated in urban or semi-urban areas. However, multinationals like GSK, Sanofi-Aventis, MSD India (Merck) etc., have started tapping the rural sector too, of late, realizing their growing potential.
Ranbaxy Laboratories Limited, India's largest pharmaceutical company, is an integrated, research based, international pharmaceutical company, producing a wide range of quality, affordable generic medicines, trusted by healthcare professionals and patients across geographies. Ranked 8th amongst the global generic pharmaceutical companies, Ranbaxy today has a presence in 23 of the top 25 pharmaceutical markets of the world. The Company has a global footprint in 49 countries, world-class manufacturing facilities in 11 countries and serves
The United States, which alone accounts for nearly half of all pharmaceutical sales in the world, is the company's largest international market. The company is also a leading generics producer in the United Kingdom and Germany and elsewhere in Europe. Ranbaxy's other major markets include Brazil, Russia, and China, as well as India.
Incorporation
Ranbaxy Laboratories had its origins in the early 1960s when Ranjit Singh and Gurbux Singh, two employees of a Japanese pharmaceutical company operating in India, formed their own pharmaceutical preparations company in Amritsar, in Punjab state. The two merged their names to form the name for their company, Ranbaxy. Ranbaxy linked up with a European pharmaceutical company, and began production in 1962.
Ranbaxy's good fortune came in 1970, when the Indian government passed legislation that effectively ended patent protection in the pharmaceutical industry. Indian pharmaceutical manufacturers were now able to produce low-cost, generic versions of popular, yet expensive drugs, revolutionizing the drug industry in India and in much of the world. The company quickly took advantage of India's large, highly trained, yet inexpensive workforce, building up a strong staff of chemists and chemical engineers.
Key Dates:
1962: Ranjit Singh and Gurbax Singh incorporate Ranbaxy to market pharmaceuticals in
Amritsar, India, and borrow funding from moneylender Bhai Mohan Singh.
1966: Bhai Mohan Singh takes over Ranbaxy in lieu of repayment of the loan.
1967: Son Dr. Parvinder Singh joins the company, which begins producing generic drugs. 1969: Calmpose, a Valium generic, is launched, becoming the company's first success. 1973: Ranbaxy goes public and builds a new API chemical facility in Mohali.
1977: The Company begins production in Lagos, Nigeria through a joint venture. 1983: The company opens a dosage plant in Dewas.
1987: The Company builds a state-of-the-art API facility in Toansa in preparation for entry into
the U.S. market.
1988: The Toansa facility receives FDA approval.
1992: The Company launches a joint marketing agreement with Eli Lilly.
1994: The Company opens a new research and development facility in Gurgaon, India. 1995: The Company acquires Ohm Laboratories in the United States and builds a new
FDA-approved production facility.
1998: Ranbaxy begins marketing its own branded drugs in the United States; the company
launches clinical trials on the first in-house developed molecule.
2000: Ranbaxy acquires Basics, Bayer's generics business in Germany; the company enters
Brazil.
2003: Ranbaxy successfully completes the first NCE phase I clinical trial; the company acquires
RPG (Aventis) in France, becoming the leading generics manufacturer for that market.
2005: The Company launches a new $100 million production facility in Brazil. inexpensive
workforce, building up a strong staff of chemists and chemical engineers
2008: Ranbaxy entered into an alliance with one of the largest Japanese innovator companies, Daiichi Sankyo Company Ltd., to create an innovator and generic pharmaceutical powerhouse.
Mission
“To become a Research based International pharmaceutical company”
Vision-2012
Achieve significant business in proprietary prescription products by 2012 with a strong presence in developed markets
Aspirations-2012
Aspire to be a$5 billion company
Become a Top 5 global generics player
Significant income from Proprietary products
VALUES OF RANBAXY LABORATORIES LIMITED
1. Achieving customer satisfaction is fundamental to their business.
2. Practice dignity and equity in relationships and provide opportunities for people to realize their full potential.
3. Ensure profitable growth and enhance wealth of shareholders.
4. Foster mutually beneficial relationships with all their business partners. 5. Manage their operations with concern for safety and environment. 6. Be a responsible corporate citizen.
OBJECTIVES OF RANBAXY LABORATORIES LTD
1. To be a leader in the Pharmaceutical industry.
2. To be a profitable company with a steady growth in earnings.
3. To set an example as a socially responsible company.
4. To diversify in health care related areas.
5. To strive for excellence and continuous improvement in all spheres.
6. To improve the quality of life of people by providing better services and quality products.
During the year 2002, the company has evolved a 10-year vision till 2012, for sustaining significant growth consistent with its mission to be an international research based Pharmaceutical Company, under the rubric ‘Vision Garuda’, with increasing emphasis on Novel
Drug Delivery Systems Research (DDR).
In licensing and out licensing, relationship with other important pharmaceutical entities, expansion of manufacturing facilities both in India and strategic overseas locations, revamping of organizational structures to cater to the wider and more dispersed span of operations, and streamlining and standardizing the business processes through out the global organization, are other areas that receive focus and attention of management on priority.
DAIICHI SANKYO DEAL
In November 2008, Daiichi Sankyo completed the acquisition of 63.92% shares of Ranbaxy and in the process infused US $ 736 into Ranbaxy’s Balance Sheet. Accordingly, the company became a subsidiary of Daiichi Sankyo, effective 20, 2008. Further Daiichi Sankyo became promoter of the Company effective November 7, 2008.
Under the deal structure that created the 15th biggest drug maker globally, the Japanese firm acquired the entire 34.82 per cent stake in the Gurgaon-based firm from its then promoters Malvinder Singh and family.
Besides, Daiichi also made an open offer for an additional 20 per cent stake in Ranbaxy at a price of Rs 737 per share. Post acquisition, Ranbaxy became a debt-free firm with a cash surplus of around Rs 2,800 crore.
Daiichi Sankyo is a Japanese pharmaceutical company established through the merger of two leading Japanese pharmaceutical companies , Daiichi Pharmaceuticals Co. Ltd. And Sankyo Company, Limited.Daiichi Sankyo is engaged in the business of research and development, manufacturing, import and sales & marketing of pharmaceutical products globally.
Ranbaxy and Daichii Sankyo share a common view on the nature of fundamental changes in the dynamics of the industry.
The partnership between Ranbaxy and Daiichi Sankyo has created a powerful hybrid business model, with complementary strengths ranging from excellence in new drug research & development to extensive reach across global markets.
VARIOUS DIVISIONS OF RANBAXY LABORATORIES LTD
1. Chemical Division 2. Diagnostic Division 3. Stan care Division 4. Curradia Division
5. International Division 6. Pharmaceutical Division 7. Technical Division 8. Corporate Division
9. Animal Health Care Division
THE VARIOUS DEPARTMENTS
Human Resource Department
The basic function of the human resource department in the modern corporate world is knowledge management. The HR department strives to maintain cohesiveness among employees. It also ensures interdepartmental cooperation in achieving targets. The appraisal system is also taken care by this department.
The finance department takes care of the regular financial needs of the company it ensures proper allocation of funds and takes care of the working capital requirements. It verifies capital raised by different departments and sends them for approval to the higher authorities.
Stores Department
The function of this department is to provide adequate and proper storage and preservation of various items to meet the demand of various other departments by proper issues and maintaining accounts of consumption. It also keeps a track of stock accumulation and abnormal consumption.
Erection and Fabrication Department
As the name suggests, this department identifies new projects and helps in erecting them. This department also undertakes major modifications of equipment.
ERP Department
ERP department helps to integrate the entire enterprise starting from the supplier to the customer, covering financial and human resources. This will enable the enterprise to increase productivity by reducing costs. It also ensures a single solution to the information needs of the whole organization.
Production Department
As a part of their on going commitment to produce hi-tech quality drugs and pharmaceuticals that take care of the specific needs of markets around the world, Ranbaxy Laboratories Limited has increased the investment in the production department. It is the most important department of the company and has the following objectives:
1. Improving volume of production. 2. Reducing rejection rate.
3. Maintaining rework rate.
Engineering Department
This department undertakes building, construction and maintenance. Maintaining service facilities such as water, gas, heating, ventilation, air conditioning, painting and plumbing are some of the other areas dealt by this department. This department also helps in maintaining electrical equipments such as generators, transformers, telephone system and electrical installation.
The purchase department provides material to the factory without which the wheels of machines cannot move. The various functions performed by this department include: Securing good vendor performance, including prompt deliveries of supplies of acceptable qualities.
1. To develop satisfactory sources of supply and maintaining good relationships with the suppliers.
2. To pay reasonably low prices.
Quality Control/Quality Assurance Department
The purpose of QC & QA departments is to ensure that the desired quality standard is achieved. It also ensures that the processing or fabrication of material conforms to the specific characteristics selected, to assure that the resulting product will in fact perform its intended function.
BRIEF INTRODUCTION OF RANBAXY PLANT IN PUNJAB
In the chemical division, various bulk drugs are manufactured. The chemical division has three units in Punjab. One is located at Toansa, two are located at Mohali and one unit is located at Dewas near Indore in Madhya Pradesh, where Ciprofloxacin is manufactured. In the plant of chemical division, various drugs like antibiotics, anti-malarial, anti bacterial and anti ulcer are manufactured.
Two plants at Mohali are generally known as Mohali-1 and Mohali –II.. The Mohali-1 plant started functioning in 1974 Toansa plant started functioning in 1987, the Mohali-II plant
independently manage all these plants. In each unit, separate facilities with respect to the manufacture of drugs, along with their manufacturing areas have been provided. This is required to reduce the chance of any cross contamination under the drug laws and to comply with good manufacturing practices. MOHALI-I
Mohali-1 plant is an old plant and most of the drugs were first introduced here for commercial
production, before shifting them to other locations with better facilities from FDA point of view. This plant is so designed that the title modification of different drugs can be manufactured the plant basically deals mostly with the manufacturing of ACTIVE PHARMACEUTICAL INGRIDIENTS (API). This plant is divided into plant areas A10 & A11.
MOHALI II
At MOHALI –II PLANTS, separate Blocks have been divided for the preparation of each drug .The Toansa, Mohali-II and Dewas plants are planned in such a way that their system, facilities, manufacturing practices and standards meet the requirements OF FDA .MOHALI-II plant deals mainly in the manufacturing of active pharmaceutical ingredients (API).The plant is divided into two plant areas A8 and A9.
R&D
Ranbaxy views its R&D capabilities as a vital component of its business strategy that will provide a sustainable, long-term competitive advantage. The Company has a pool
of over 1,200 scientists engaged in path-breaking research.
Ranbaxy is among the few Indian pharmaceutical companies in India to have started its research program in the late 70's, in support of its global ambitions. A first-of-its-kind world class R&D centre was commissioned in 1994. Today, the Company's multi-disciplinary R&D centre at Gurgaon, in India, houses dedicated facilities for generics research and innovative research. The robust R&D environment for both drug discovery and development reflects the Company's commitment to be a leader in the generics space offering value added formulations based on its Novel Drug Delivery System (NDDS) and New Chemical Entity (NCE) research capabilities. The new drug research areas at Ranbaxy include anti-infectives, inflammatory / respiratory, metabolic diseases, and oncology, urology and anti-malaria therapies. Presently, the Company has 8-10 programs including one Anti-malaria combination drug, Arterolane maleate + Piperaquine phosphate for which Phase-III clinical trials have commenced in India, Bangladesh and Thailand.. The Company has signed collaborative research programs with GSK and Merck. NDDS focus is mainly on the development of NDA/ANDAs of oral controlled-release products for the regulated markets. Ranbaxy’s first significant international success using the NDDS technology platform came in September 1999, when the Company out-licensed its first once-a-day formulation to a multinational company.
PRODUCT REVIEW
Using the finest R&D and Manufacturing facilities, Ranbaxy Laboratories Limited manufactures and markets generic pharmaceuticals, value added generic pharmaceuticals, branded generics, active Pharmaceuticals (API) and intermediates.
The Company remains focused on ascending the value chain in the marketing of pharmaceutical substances and are determined to bring in increased revenues from dosage forms sales.
Ranbaxy's diverse product basket of over 5,000 SKUs available in over 125 countries worldwide encompasses a wide therapeutic mix covering a majority of the chronic and acute segments. Healthcare trends project that the chronic treatment segments will outpace the acute treatment segments, primarily driven by a growing aging population and dominance of lifestyle diseases. Our robust performance in Cardiovascular, Central Nervous System, Respiratory, Dermatology, Orthopedics, Nutritionals and Urology segments, clearly indicates that the Company has strengthened its presence in the fast-growing chronic and lifestyle disease segments. Ranbaxy's top 20 products, ranging from Anti-infectives to Dermatological, account for revenues of over US $ 600 Mn.
Anti - Infectives
Anti- infective has been the main driver of Ranbaxy’s sales. The important brands in this category are Cifran (Ciprofloxacin), Sporidex (Ciphalexin), Enhancin (Amoxyclav), Crixan
Zanocin (Ofloxacin), Ceroxim (Cefuroxime Axetil), and Loxof (Levofloxacin).The anti-infectives franchise remained the largest revenue generator for the Company during 2008,accounting for 37% of global dosage from sales. Co-Amoxiclav was the leading contributor.
In India, Ranbaxy continued to maintain its leadership in the Anti-infective segment, garnering 10.9% market share during the year 2008.
Cardiovascular
Cardiovascular was the second largest therapeutic segment for the Company in the year 2008. Statins have been the key drivers for this segment. The sale of Simvastatin has grown substantially in the past few years, a trend that is
likely to continue in the future. In India, Simvotin (Simvastatin) is the market leader in the cholesterol reducer segment. Another leading brand in this category is Storvas (Atorvastatin). Storvas has been one of the fastest-ever to enter the top-300 brands list of the Indian Pharma industry. Other global cardiovascular brands are Covance (Losartan) and Caslot (Carvedilol).
Central Nervous System
The Central Nervous Segment is one of the important focus areas identified by Ranbaxy, with Serlift being the key brand. In India, Serlift is number 1 amongst Sertraline brands. Gebapentin was another major contributor in this segment during the year 2008.
Gastrointestinal
The key brands in this category include Histac and Romesac. The segment showed a growth of 56% in revenues in 2008. The company was designated as the US distributor for the Authorized Generic versions of Omerprazole , garnering 43% market share.
This segment emerged as the fourth largest therapeutic segment for Ranbaxy in 2008 and posted healthy growth of 18%.Ketrolac Tromethamine emerged as a leading product in this segment. Ranbaxy became the first company to launch Teriparatide injection, a biogeneric product for the treatment of Osteoporosis, in India.
Respiratory
Antihistamines form the core of Ranbaxy’s presence in this segment. Other key products in this segment include Chlorpheniramine, Cetirizine and their combinations.
Nutritionals
Nutritionals have been a major contributor to Ranbaxy’s sales. Two of the important products in this category are Revital and Riconia. It is a leading brand in India and has done exceedingly well in some parts of the world as an OTC product.
Dermatological
The dermatology category is mainly driven by India region and is likely to show a good growth pattern in the future. Some of the key brands doing well in this segment are Mobizox, Silverex, Moisturex, etc
ALLIED BUSINESSES
Ranbaxy Animal Health
The Animal Health division saw an encouraging growth despite the prevailing poor market conditions. The division grew at twice the growth rate recorded in the industry. On the basis of having a vast dome satiated animal population, the livestock, poultry business and pets business are among the fastest growing sectors in India. A vast infrastructure of veterinary colleges, agricultural institutes, technologists and researchers are helping farmers to source healthy, cost effective products. In conjunction with the present scenario, the AHC division of Ranbaxy Laboratories Limited has introduced several latest generation products.
Ranbaxy Fine Chemicals Limited (RFCL)
RANKEM is established as a powerful brand, RFCL's brand for its range of Reagents is now synonymous with excellence in reagents and fine chemicals in the country. The focus of business remains on developing extensive customer
relations; enhancing service levels and enriching the product mix with the help of a qualified and competent marketing and sales team
Diagnostics
The diagnostics division has aggressively focused on market expansion activities based on strategy of reliability, quality products and efficient service. Introduction of products in ‘Point of Care’ markets has expanded market presence and over the next
few years this segment will see considerable expansion in line with world trends.
Plans are afoot for the introduction of more parameters for the ‘Point of Care’ market and the launch of Special Chemistries, a range of drug assays, plus an entry into automated microbiology in both the Base and Dade Behring business areas.
OPERATING JOINT VENTURES AND SUBSIDIARIES
BRAZIL : Ranbaxy S.P. Medicamentos Ltd. CHINA : Ranbaxy (Guangzhou China) Ltd.
EGYPT : Ranbaxy Egypt Ltd.
GERMANY : Basics Gmb H.
HONG KONG : Ranbaxy (Hong Kong) Ltd. INDIA : Rexcel pharmaceuticals Ltd.,
Solus pharmaceuticals Ltd., Vidyut Travel Services ltd.
IRELAND : Ranbaxy Ireland Ltd.
MALAYSIA : Ranbaxy (Malaysia) Sdn. Bhd. NETHERLANDS : Ranbaxy Pharmaceuticals B.V.
NIGERIA : Ranbaxy Nigeria Ltd.
PANAMA : Ranbaxy Panama SA.
POLAND : Ranbaxy Poland Sp. Zo.
SOUTH AFRICA : Ranbaxy (SA) (Pty.) Ltd.
THAILAND : Unichem pharmaceuticals LTD., Unichem Distributors Ltd. Part, Ranbaxy Unichem CO.Ltd.
U.K : Ranbaxy (UK) Ltd
USA : Ranbaxy pharmaceuticals Inc. Ohm Laboratories Inc.,
Ranbaxy Schein Pharma, LLC VIETNAM : Ranbaxy Vietnam Company Ltd.
Corporate Social Responsibility
Ranbaxy Community Health Care SocietyRanbaxy has a strong element of Corporate Social Responsibility inscribed in its values and its concern for the society extends well beyond its business motives.
The company does not view success and achievements in terms of commercial gains only but firmly believes that corporate social responsibility is the key for providing a deep symbiotic relationship that exists between the company and the environment it functions. Over two decades ago, in 1979, in the wake of grim health scenario of India, Ranbaxy realized the urgency to reach out to those who had little or no access even to basic health care and instituted ‘Ranbaxy Rural
Development Trust’.
The main objective of the programme was to deliver primary health care to the underserved and underprivileged section of the society to achieve positive health for them and thus to contribute to the national objective ‘Health For All’. As the scope of the programme and company’s commitment grew, in 1994, a professionally managed, nonprofit, independent body ‘Ranbaxy
Community Health Care Society’ (RCHS) was established against the backdrop of full moral
and financial support of the company.
Community participation
It was recognized that over 70 percent of the deliveries in RCHS service areas were conducted at home by either untrained or improperly trained ‘dais'. Thus, as a strategy, two-phase
intervention was planned where the RCHS Medical officers were trained to train the ‘dais' in the first phase and training of ‘dais' from the community was done in the second phase.
RCHS has established community based local groups like health committees, women groups and other interactive groups like “dais”, “anganwari” workers, volunteers, adolescents and breast-feeding support groups to promote community involvement and self-sustainability.
Scientific approach
With a view to plan future strategies for need based interventions, RCHS regularly monitors and records all vital events such as live births, infant deaths, maternal deaths and abortions etc. Special attention is given to promote ORS in Diarrhea and early diagnosis and appropriate treatment of Pneumonia. Focused work with precise risk groups like pregnant women, lactating mothers, newly married eligible couples and adolescent girls to prevent low birth weight and anemia in pregnancy, including referral services for dealing with obstetrical emergencies are some of the steps taken in order to bring down the infant and maternal mortality rates in RCHS
areas.
Ranbaxy Science Foundation
Ranbaxy Laboratories Limited incorporated Ranbaxy Research Foundation in 1985 and was later reconstituted as a separate society
as Ranbaxy Science Foundation and registered under the Societies Act in May 1994. with an implicit mission of giving impetus to research activity and help in reviving India’s great scientific tradition. The Foundation instituted Ranbaxy Research Awards to recognize original outstanding contributions in the fields of Medical and Pharmaceutical Sciences. Every year the Foundation invites nominations for 4 awards – 3 Awards for Rs. 1,00,000/- each in the fields of Medical Sciences in Basic. Applied and Clinical and 1 Awards of Rs. 1,00,000/- in the field of Pharmaceutical Sciences. So far 104 scientists have been honored by the Foundation.
Ranbaxy Science foundation (RSF) is a non profit organization dedicated to promote scientific endeavors in the country by encouraging and rewarding and channeling national and international knowledge and expertise on subjects connected with treatment of diseases afflicting mankind. To achieve these objectives, the Foundation conducts Round Table Conferences on topics concerning public health and symposia on topics at the cutting edge of research in medical sciences to explore the latest in the selected area of specialty and its potential application for the benefit of mankind.
Being committed to recognizing and furthering excellence, the Foundation has also initiated “Research Scholarship Awards for the Young Scientists” with an aim to stimulate their interest in research.
Ranbaxy's Anti-Malaria collaborative research program
Ranbaxy has been working on the anti-malaria collaborative research project since May 2003. Although ant malarial drugs have a large market, it is a market with very limited resources. Together with the challenges of drug resistance, poor health systems, lack of affordable, safe and convenient treatment options, malaria treatment represents one of the largest unmet medical needs. Ranbaxy is developing a synthetic peroxide ant malarial drug in order to address this unmet need. The Company has obtained approval from the Drug Controller General of India to initiate Phase III human clinical trials for this drug in India. Ranbaxy plans to seek regulatory approval in other countries outside India to the Phase-III clinical trials.
The production of RBx 11160 (Arterolane) is not dependent on the availability of agricultural resources (from which the current Artemisinin drugs are derived), giving it a clear advantage in product scale-up and cost.
Ranbaxy is committed to developing a drug that is not only safe and effective, but also affordable to people in India, Africa and other disease endemic countries.
Ranbaxy comprehensive anti-HIV portfolio comprises Bio-Equivalent Anti-Retrovirals (ARVs) and Anti-Infectives for Opportunistic infections
Ranbaxy, in its endeavor to make ARVs accessible to patients around the world, is leveraging its global network of offices, affiliates, joint ventures and alliances. With Ranbaxy products being marketed in over 125 countries and ground operations in 49 countries, Ranbaxy provides pre & post sales support to institutions, NGOs, and Ministries of Health, making Ranbaxy ARVs available in their respective treatment programs
Encouraged by the positive response to its efforts to make quality anti-HIV generics, Ranbaxy is committed to working on all possible fronts and seeking partnerships to improve access to these medicines.
Ranbaxy offers a complete basket of pharmaceuticals for several first line HAART regimens. The current portfolio is the largest range of bio-equivalent generic ARVs available from a single company. These products are manufactured at Ranbaxy's WHO prequalified and USFDA approved facilities.
• Several Ranbaxy ARVs approved by USFDA and WHO
• First Asian pharmaceutical company to get approval for a generic ARV from USFDA
• Over 250 approvals of ARVs across 40 countries, with 130 more in pipeline
• Only company using both WHO & USFDA approved API supplier
• Bioequivalence studies conducted at leading CROs in North America
• All ARVs comply with Zone IV and Zone II stability requirements
• Leading supplier of ARVs to global NGOs, Institutions & Government programs
• Ranbaxy's ARVs have catered to treatment programs in over 50 countries globally
Financial analysis refers to an assessment of the viability, stability and profitability of a
business, sub-business or project. Strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account.
Financial statements are prepared to meet external reporting obligations and also for decision making purposes. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. The financial statements are of much interest to a number of groups of persons. Apart from management there are other interested parties like shareholders, debenture holders, potential investors – large and small, bankers, trade creditors, journalists, legislators and politicians who are increasingly getting interested in the analysis and interpretation of financial statements. “To interpret, means to put the meaning of a statement into simple terms for the benefit of a person.” This is essentially done through the tools of analysis such as comparative statements, common size statements and ratio analysis. These tools may be compared with the laboratory tests, which aid a physician in the diagnosis of a malady. Just as laboratory test are
similarly the tools of analysis only help in establishing relationship between one accounting figure and another in the financial statements and go no far. It is the expert who has to grasp the significance of related figures and form an opinion as to whether the ratio calculated indicates a favorable or adverse state of affairs. Therefore while analysis comprises resolving the statements by breaking them into simpler statements by a process or rearranging, regrouping and the calculation of ratios, interpretation is the mental process of understanding the terms of such statements and forming opinions of inferences about the financial health, profitability, efficiency and such other aspects of the undertaking.
There are various methods or techniques that are used in analyzing financial statements, such as
comparative statements, schedule of changes in working capital, common size percentages, funds
analysis, trend analysis, and ratios analysis.
Goals
Financial analysts often assess the firm's:
1. Profitability - its ability to earn income and sustain growth in both short-term and long-term.
A company's degree of profitability is usually based on the income statement, which reports on
the company's results of operations;
2. Solvency - its ability to pay its obligation to creditors and other third parties in the long-term; 3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate obligations;
Both 2 and 3 are based on the company's balance sheet, which indicates the financial condition of a business as of a given point in time.
4. Stability- the firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of the income statement and the balance sheet, as well as other financial and non-financial indicators
Methods
Financial analysts often compare financial ratios (of solvency, profitability, growth, etc.):
• Past Performance - Across historical time periods for the same firm (the last 5 years for
example),
• Future Performance - Using historical figures and certain mathematical and statistical
techniques, including present and future values, This extrapolation method is the main source of errors in financial analysis as past statistics can be poor predictors of future
Objectives of the study
1. To study the financial condition of Ranbaxy 2. To depict the trends in Ranbaxy’s operations
3. To analyze the financial strengths and weaknesses of Ranbaxy
4. To compare the financial condition of Ranbaxy with its key competitor in the Indian market Dr Reddy’s
Financial Analysis tools used in the Project
Common size Statement
An efficient way of analyzing financial statements is to convert them in to common size statements by expressing absolute rupee amounts into percentages. When this method is pursued, the income statement exhibits each expense item as a percentage of net sales, and net sales are taken at 100%. Similarly, each individual asset or liability classification is shown as percentage of total assets and liability respectively.
Trend Percentages
Horizontal analysis of financial statements can be carried out by computing trend percentages.
Trend percentage states several years' financial data in terms of a base year. The base year
equals 100%, with all other years stated in some percentage of this base.
Ratio analysis
o Financial Ratio are used as a relative measure that facilitates the evaluation of efficiency or condition of a particular aspect of a firm's operations and status o Ratio Analysis involves methods of calculating and interpreting financial ratios
in order to assess a firm's performance and status There are two types of ratio comparisons that can be made:
Time-Series Analysis
– Combined Analysis uses both types of analysis to assess a firm's trends versus its competitors or the industry
Financial ratios may be classified basically in to following classes;
1. Liquidity ratio
The liquidity ratios measure the ability of a firm to meet its short term obligations and the short term obligations and reflect the short term financial strength/solvency of a firm. The ratios which indicate the liquidity of a firm are:
(i) Net working capital
(ii) Current ratios
(iii) Acid test / quick ratios
(iv) Super quick ratios
(v) Turnover ratios
(vi) Defensive-interval ratios
(vii) Cash flow from operations ratios
2. Leverage / Capital Structure Ratios
The long term solvency of a firm can be examined by using leverage or capital structure ratios. The leverage or capital structures may be defined as financial ratios which throw light on the long term solvency of a firms reflected in its ability to assure the long term lenders with principal on maturity or in predetermined installments at due dates.
There are two different, but mutually dependent and interrelated types of leverage ratios. First type of ratios, are based on the relationships between borrowed funds and owner’s capital. These ratios are computed from the balance sheet and have many variations such as
a) Debt-equity ratio b) Debt-assets ratio
c) Equity-assets ratio
The second type of capital ratios also called coverage ratios are calculated from profit and loss account. Included in this category are
a) Interest coverage ratio b) Dividend coverage ratio c) Total fixed charges ratio d) Cash flow ratios
e) Debt services coverage ratio
3. Profitability Ratios
Profitability ratios can be determined on the basis of either sales or investments. The profitability ratios on the basis of sales are
a) Profit margin(gross and net) ratio b) Expenses ratio.
Profitability in relation to investments is measured by a) Return on assets
b) Return on capital employed c) Return on share holder’s equity
4. Activity Ratios
Activity ratios are concerned with measuring the efficiency in the asset management. These ratios are also called efficiency ratios and asset utilization ratios. The efficiency with which the assets are used would be reflected in the speed and rapidity with which assets are converted into sales.
a) Inventory turnover ratio b) Capital turnover ratio
d) Fixed Asset turnover ratio
Words of Caution Regarding Ratio Analysis
• A single ratio rarely tells enough to make a sound judgment.
• Financial statements used in ratio analysis must be from similar points in time.
• Audited financial statements are more reliable than unaudited statements.
• The financial data used to compute ratios must be developed in the same manner.
• Inflation can distort comparisons.
Du-Point analysis
The return on investment (ROI) ratio developed by Du Point for its own use is now used by
many firms to evaluate how effectively assets are used. It measures the combined effects of profit margins and asset turnover
The return on equity (ROE) ratio is a measure of the rate of return to stockholders.
Decomposing the ROE into various factors influencing company performance is often called the
Du Point system.
Where
• Net profit = net profit after taxes
• Equity = shareholders' equity
• Sales = Net sales
This decomposition presents various ratios used in fundamental analysis.
• The company's tax burden is (Net profit ÷ pretax profit). This is the proportion of the
company's profits retained after paying income taxes.
• The company's interest burden is (Pretax profit ÷ EBIT). This will be 1.00 for a firm with
no debt or financial leverage.
• The company's operating profit margin or return on sales (ROS) is (EBIT ÷ Sales). This
is the operating profit per dollar of sales.
• The company's asset turnover (ATO) is (Sales ÷ Assets).
• The company's leverage ratio is (Assets ÷ Equity), which is equal to the firm's debt to
equity ratio . This is a measure of financial leverage.
• The company's return on assets (ROA) is (Return on sales x Asset turnover).
• The company's compound leverage factor is (Interest burden x Leverage).
ROE can also be stated as:
ROE = Tax burden x Interest burden x Margin x Turnover x Leverage ROE = Tax burden x ROA x Compound leverage factor
Statistical Tools Used
Least square method of fitting trend line
This is the best method of trend fitting na time series and is most used in practice. This is a mathematical method and a trend line in this method is fitted or obtains in such a way that following two conditions are fulfilled.
(1) ∑(Y - Yc) = 0 i.e. the sum of deviations of the actual values of Y and computed
trend values (Yc) is zero.
(2) ∑(Y - Yc)2 least i.e. the sum of the squares of deviations of the actual and
computed trend values from this line is the least.
Trend line thus fitted under this method is called as the Line of Best Fit
Least square method can be used to fit straight line trend or parabolic trend or exponential
trend.
Fitting of Straight Line Trend
A straight line trend can be expressed by the following equation: Y=a+bX
Where Y = Trend Values, X = Unit of Time a is the Y- intercept and b is the slope of the time.
In the above equation, to determine two constants, a and b, the following two normal equations are solved:
∑ Y = Na + b ∑ X
∑ XY = a ∑ X + b ∑ X2
After determining the equation Y = a + bX, we have find the trend values related to different years and plot them on the graph paper which shows a straight line trend.
Computation of Straight Line Trend
The procedure to compute straight line trend in this method is as follows:
(i) Any year is taken as the year of origin. Usually first year is taken as zero, deviations
of the other years are marked on 1,2,3………etc. Time deviations are denoted by X;
(ii) Then ∑ X, ∑ Y, ∑ XY and ∑ X2 are computed.
(iii) The values computed are put in the following normal equations.
(iv) Finally, the calculated values of a and b are put in Y = a + bX and trend values are
Limitations
1. Ranbaxy follows calendar year while Dr Reddy follows fiscal year. Therefore comparable final reports were not available. The final reports of Ranbaxy have been compared with that of Dr Reddy’s corresponding to the calendar year.
2. Ranbaxy adopted the new financial guidelines (AS-30) of ICAI w.e.f. Oct 1, 2008. Consequently the financial statements of 2008 may not be comparable to those of previous years in some respects.
ANALYSIS OF BALANCE SHEET ITEMS
COMMON SIZE BALANCE SHEET
LIABILITIES 04 05 06 07 08
SHARE CAPITAL 4.5 3.991 2.691 2.372 1.794
RESERVES AND SURPLUS 56.2 46.953 31.232 29.889 28.434
SHARE APPLICATION MONEY
0.069
0.006 0.001 0.015
-EQUITY SHARE WARRANTS 1.5
SECURED LOANS 3.23 7.576 3.239 4.642 1.383
UNSECURED LOANS 0.06 14.495 42.662 39.9 30.417
DEFFERED TAX LIABILITY 3.51 2.49 2.17 3.203
CURRENT LIABILITY 20.12 15.608 10.445 10.593 30.23
PROVISIONS 12.3 8.873 7.547 9.386 6.242
TOTAL 100 100 100 100 100
ASSETS 04 05 06 07 08 FIXED ASSETS 21.25 25.718 20.708 18.685 12.435 CAPITAL WORK-IN-PROGRESS 6.4 9.277 4.359 4.163 3.66 INVESTMENTS 16.45 16.348 38.7 41.166 30.884 INVENTORIES 21.71 19.094 13.79 12.411 10.231 SUNDRY DEBTORS 19 17.287 14.639 11.226 8.746
CASH AND BANK BALANCE 0.9 2.499 1.027 2.295 16.517
OTHER CURRENT ASSETS 1.95 2.527 1.128 1.297 1.149
LOANS AND ADVANCES 2.34 7.251 5.648 8.756 7.307
DEFFERED TAX ASSET 9.072
TREND PERCENTAGES
2004 2005 2006 2007 2008 SHARE CAPITAL 100 100.18 100.29 100.33 113.07 RESERVES &SURPLUS 100 94.4 93.19 101.29 143.53 SECURED LOANS 100 265.4 168.17 273.72 121.52 UNSECURED LOANS 100 27161.12 118646.99 126022.4 143104.38 CURRENT LIABILITY 100 87.67 87.07 100.29 426.3 PROVISIONS 100 81.52 102.93 145.36 143.99 Table 2 2004 2005 2006 2007 2008 FIXED ASSETS 100 136.74 163.41 167.45 165.988 CAPITAL WIP 100 163.8 6 114.28 123.95 162.31 INVESTMENTS 100 112.33 394.65 476.76 532.79 INVENTORIES 100 99.4 106.54 108.9 133.71 S. DEBTORS 100 102.8 129.19 112.52 130.57CASH & BANK
BALANCE 100 312.92 190.96 484.3 5193.07 OTHER CURRENT ASSETS 100 146.46 96.99 126.73 167.13 LOANS AND ADVANCES 100 66.41 76.77 135.18 168.03 Table 3
Figure 1
Figure 2
TREND:The proportion of share capital in the total liabilities has been declining over the years.
A major fall was seen during the year 2006.
REASON: To fund the several inorganic growth initiatives, the company during March
2006,raised US $ 440 MN through a FCCB offering. This was by far the largest fund raising exercise in the Indian pharmaceutical sector.Debt was raised through various other modes also.
INTERPRETATION:Depicts decreasing reliance of the company on share holder’s money and
Figure 3
Figure 4
TREND: As depicted by the graph the percentage of resrves and surplus declined steeply during
the year 2006 and remained consistent over the next to years.
REASON: A substantial decline in resrves and surplus in theyear 2006 was seen because of the
augmentation,modernization and automation of manufacturing capacities and research and development involving substantial investments.
INTERPRETATION: Ranbaxy has ensured heavy internal accruals over the years to fund its
Figure 5
Figure 6
TREND: Secured loans have shown an intresting trend. Decreasing in the year 2006, then rising
in the next year followed by a steep fall.
REASON:loans were raised to fund the Capex plans of the company during the year 2007, while
majority of them were retired through the proceedes of the Daiichi Sankyo deal and thus resulted in the decline in both the terms as a percentage of total liablities as well as absolute value.
INTERPRETATION: Secured loans have been major component of the capital structure of
Figure 7
Figure 8
TREND: As can be seen from the graph unsecured loans rose at an unpreecedenting pace and
then fell abruptly as percentage of total liabilities while the amount kept increasing througout the period.
REASON:Raising of the FCCBs along with other loans to finance the updation and
modernization of various facilities lead to the increase in the proprtion of the unsecured loans.
INTERPRETATION: The continuous increase in value clearly depicts increasing reliance on
debt and specifically unsecured ones might be because of the ease with which these can be raised.
Figure 9
Figure 10
TREND: Current liabilities as a proportion of total liabilities kept falling for the first three years
while increased abruptly in the year 2008.
REASON: When seen in conjunction with the long term liabilities this fall can be attributed to
the increase in the more than proportionate increase in the long term loans. The sudden increase in the current liabilities was because of the loss borne because of the fair valuations of the derivatives.
INTERPRETATION: The steep increase in the current liabilities is not a major cause of
concern for the company because it is a consequence of factors not within the control of the company.
Figure 11
Figure 12
TREND: The value of fixed assets as a proportion of total assets has been declining over the
years. This is despite extensive capital expenses being taken over by the company.
REASON: The main reason behind such a trend is huge investments being made by the
company in different ventures along with the expansion of various facilities of Ranbaxy. Also Greenfield investments were made.
INTERPRETATION: Though the absolute value of fixed assets has been increasing still an
increasing proportion of the assets are being locked up in the low yielding short term assets which may be a cause for concern.
Figure 13
Figure 14
TREND: A consistent fall in the work in progress can be seen in the graph as a percentage while
the absolute value continuously increased.
REASON: Efforts towards reducing working capital lead to a well managed inventory situation
which is clearly depicted in the graph. A substantial fall in the working capital was observed during the year 2007.
INTERPRETATION: Reduction in the proportion of capital WIP is a sign of the increasing
efficiencies of the company. Also it depicts the declining importance of WIP among total assets of Ranbaxy.
Figure 15
Figure 16
TREND: Ranbaxy experienced an increase in the proportion of investments while a fall was
seen in the last year. The absolute value of investments has been increasing and they form a substantial proportion of the total assets.
REASON: Acquisition of controlling stakes in entities in as well as abroad is the basic reason.
The increase is particularly high in the year 2006 in which Ranbaxy made significant acquisitions.
INTERPRETATION: Ranbaxy has been focusing on different modes of growth and expanding
Figure 17
Figure 18
TREND: Inventories as a proportion of the total assets has been declining over the years despite
a slight increase in their absolute values over the years.
REASON: A concentrated effort towards reducing working capital during the year 2006 &2007
lead to a significant decline in the level of inventories, receivables which is clearly depicted in the graph. A reduction in the level of working capital has added to the efficiencies of Ranbaxy.
INTERPRETATION: Operational efficiencies of Ranbaxy have been improving which is
clearly shown by this trend. Inventory is being quickly converted in to receivables and thus improving the working capital scenario.
Figure 19
Figure 20
TREND: Sundry debtors have been loosing importance as a percentage of total assets. Absolute
value increased at a seep rate in the year 2006 followed by a sudden fall. A sort of revival was observed during the last year.
REASON: Sales of Ranbaxy increased at a robust pace during the year 2006 which created
better receivable condition for the company .A concentrated effort towards reducing working capital during the last some years lead to a significant decline in the level of inventories, receivables which is clearly depicted in the graph. A reduction in the level of working capital has added to the efficiencies of Ranbaxy.
INTERPRETATION: The decline in the operating cycle has added on to the effectiveness of
Figure 21
Figure 22
TREND: Cash levels of Ranbaxy have remained consistent except for the last year when a sharp
increase in the level of cash was seen.
REASON: As a part of the Daiichi Sankyo deal the company received US $736 million which
was basically responsible for the sudden increase in the level of cash.
INTERPRETATION: A constant level of cash despite the increase in the level of operations
Figure 23
Figure 24
TREND: Sharp fluctuations can be seen in the level of loans and advances as a percentage of
total assets,while the absolute value kept on increasing.
REASON: Continous efforts towards reducing working capital , improved the current asset
position conditions and thus the level of loans and advances.
