INTRODUCTION TO RANBAXY

RANBAXY LABORATORY LIMITED was founded in Amritsar in 1937 when Ranjit Singh and Gurubux Singh fused their names together to form Ranbaxy, a company formed to distribute medicine supplies by the foreign companies. It started as distributer of vitamins and anti-tuberculosis drugs. Bhai Mohan Singh joined the company as a partner in 1952. DIAZEPAM was the first product manufactured by Ranbaxy and was most effective at that time to hit market and vastly accepted. In June 1961, Ranbaxy entered into collaboration with LEPETITSPA (MILAN) an Italian pharmaceutical company. It commenced in March 1962 with a modern plant at Okhala, New Delhi to make chloramphenicol capsules. In 1966, began the saga of an Indian pharmacy major with Bhai Mohan Singh the promoter of the company buying the business from the Italian company. The company Ranbaxy laboratory ltd. was formed. Ranbaxy went public in 1973. Over the years Ranbaxy has invested heavily and built up considerably strengths in manufacturing and marketing. Ranbaxy laboratories ltd India largest pharmaceutical company sells its product in over 100 countries. It has a ground presence in 34 countries and manufacturing facilities in 7 countries. Ranbaxy today is amongst the top 100 pharmaceutical companies in the world. It has been rated as the 11th largest company in the international generic space for the year1999. The company attributes its phenomenal growth to the vitality innovation and commitment if its over 8000 -strong multi culture workforce. The coming together of Ranbaxy and Deiichi Sankyo is a path breaking confluence. That, in one sweep. Catapults the new empowered entity to the status of the world 15th largest pharmaceutical company. Individually, the two pharmaceutical giants are formidable- one, Indias largest generics company and the other, among the largest innovator companies in Japan. And now the synchronization of proven, individual competencies in a unified, complementary platform has catalyzed a high octane thrust into a far reaching transformational trajectory. This synergy of tested success mantras energies the combined business model manifold. It usher in an expanded global foot print, a wider product portfolio, added revenue streams and better cost-competitiveness, while allowing, both companies to optimize research &manufacturing, capabilities and much more. Presently, the range of activity going on in Ranbaxy cover dosage forms, active pharmaceutical ingredient, diagnostics and the fine chemicals. Ranbaxy established their plant in India at the following locations: Paonta Sahib (H.P) Gurgaon (Haryana) Devas (M.P) Tosana (Pb) Mohali (Pb) Jejury (Maharashtra) & Goa
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VISION ,MISSION AND ASPIRATIONS VISION: GARUDA

Vision-2012
Achieve significant business in Proprietary prescription products by 2012With a strong presence in developed markets

Mission
To become a Research based International pharmaceutical company

Aspirations-2012
Aspire to be a$5 billion company become a Top 5 global generics player significant income from Proprietary products

GROWTH SCENARIO
Indias pharmaceutical industry grew at 15.7% during December 2011.Globllay India ranks third in term of manufacturing product by volume. The Indian pharmaceutical industry grow at a rate of 9.9 till 2010 and after that 9.5 till 2015.the India pharmaceutical market is expected to touch US$ 74 billion sales by 2020 from US$ 11billion. The market has the further potential to reach US$70billion by 2020 in an aggressive growth scenario. Moreover, the increasing population of the higher income group of country will open a potential US$8billion market for multinational company selling costly drugs by 2015. Beside the domestic Pharma market is estimated to touch US$20 billion by 2015, making India a lucrative destination for clinical trials for global giants. Further estimate the healthcare market in India to reach US$ 31.59 by 2020.

70 61 60 60

50

40

30

25 22

20 9 10 5 7

0 India Italy Spain China Taiwan Hungary Israel

The above graph shows the percentage of pharmaceutical products export by various countries. (SOURCE: Competitiveness of the Indian pharmaceutical Industry in the new product patent regime a report by FICCI)

The Indian Pharmaceutical is highly fragmented with more than 20,000 registered units. It has expanded drastically in the last two decades. The pharmaceutical industry in India is an extremely fragmented market with serve price competition and government price control. The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, capsules, tablets, orals and injectibles. There are approximately 250 large units and 8000 small scale units which form the core of the Indian pharmaceutical industry. (Including 5 Central Public Sector Units)

ADVANTAGES IN INDIA
The Indian pharmaceutical industry, particularly, has been a front runner in a wide range of specialties involving complex drugs manufacture, development and technology. With an advantage of being highly organised sector, the pharmaceutical companies in India are growing at a rate of US$ 4.5billion, registering further growth of 8-9% annually. More than 20,000 registered units are fragmented across the country and report says that 250 leading Indian pharmaceutical companies control 70% of the market share price competition and government price regulations. Competent workforce: India has a pool of personnel of high managerial and technical competence as also skilled workforce. It has an educated workforce and English is commonly used. Professional services are easily available. Cost effective chemical synthesis: Its track record of development, particular in the area of improved cost beneficial chemical synthesis for various drug molecules is excellent. It provides a wide variety of bulk drugs and export sophisticated bulk drugs. Legal and financial frame work: India has a 53 years old democracy and hence a solid legal framework and strong financial markets. There is an already an established international industry and business community. Information and technology: It has a good network of world class educational institutions and established strengths in information technology. Globalisation: The country is committed to free market economy and globalisation. Above all, it has a 70 billion middle class market which is continuously growing. Consolidation: For the first time in many years, the pharmaceutical industry is finding great opportunity in India. The process of consolidations, which has become a generalised phenomenon in world pharmaceutical industry, has started taking place in India.

OPERATING JOINT VENTURES AND SUBSIDIARIES OF RANBAXY

USA Brazil China Egypt Hong-Kong India Ireland Malaysia Netherland Poland South Africa Thailand Vietnam Nigeria Panama

VARIOUS DIVISION OF RANBAXY LAB. LIMITED

Chemical division Animal division Diagnostic Stan care International Pharmacy Technical Corporate care

DIVISION IN GEOGRAPHICAL AREAS

India & middle east Europe, Africa, CIS Asia pacific & Latin America North America

RANBAXY IN PAONTA SAHIB

Ranbaxy plant at Paonta Sahib was established in1992. The location spread over an area of 46acres and is situated near the town Paonta Sahib. It is surrounded by agriculture land on three sides and the Yamuna bank on the fourth side. Ranbaxy plant at Paonta Sahib is divided in to two plants. Fermentation plant Pharmaceutical plant

The Pharma division is further divided into administration block, quality control lab. Tablet and capsule block, maintenance department, ware house, soft general block and water purification plant. The site also has a pilot plant for carrying out development trials on fermentation based product. This segregated for its facilities and stilts. The site has different manufacturing of tablets and sgc (soft gel capsules) with a common warehouse production. Block a is used exclusively for manufacturing tablets product with an installed capacity of 800 million tablets per annum. Block b is used exclusively for the manufacturing of capsules with an installed capacity of 240 million capsules per annum. Fermentation division is also similarly divided into quality control, production department etc. the person working in various departments may be immediately identified by the color of the uniform they wear. The ranges of the products, which are manufactured in this plant, are quinolone, anti-bacterial and antihistamines. 90% of the products manufactured in the plant and exported to various western countries like USA, Spain 7 Canada.

RESEARCH METHODLOGY
Research is commonly refers to the search for knowledge. It is the scientific and systematic search for pertinent information on a specific topic. In fact research is an art of scientific investigation. As by Clifford Woody "Research comprises of defining and redefining the problems, formulating hypothesis or suggesting solutions, collecting , organising and evaluating the data, making deduction and reading the conclusion and at last carefully testing the conclusion to determine whether they fit formulated hypothesis."

FORMULATION OF RESEARCH PROBLEM

EXTENSIVE LITERATURE SURVEY

COLLECTION OF DATA

ANALYSIS OF DATA

INTERPRETATION OF DATA

RECOMMENDATION

OBJECTIVE OF STUDY
To study the short financial position. To test liquidity of firm. To study the CSR of Ranbaxy laboratory

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WORKING CAPITAL & FINANCIAL ANALYSIS OF RANBAXY INTRODUCTION OF WORKING CAPITAL:

Every business needs funds for two purposes- for its establishment and to carry out its day to day-to-day operation. long term funds are required to create production facilities through purchase of fixed assets such as plant and machinery, land, building, furniture,etc. Investments in these assets represent that part of firms capital which is blocked on permanent or fixed basis and is called fixed capital. Funds are also needed for short term purpose for the purchase of raw material, payment of wages and other day to day expenses, etc. These funds are known as working capital. In simple words, working capital refers to that part a firms capital which is required for financing short term or current asset such as cash, marketable securities, debtor and inventories. Funds, thus, invested in current asset keep revolving fast and are being constantly converted into cash and this cash flow out again in exchange for other current assets. Hence it is also known as revolving or circulating capital. In the words of Shubin, working capital is the amount of funds necessary to cover the cost of operating the enterprise.

CONCEPT OF WORKING CAPITAL

There are two concept of working capital- gross and net working capital Gross working capital refers to the firm investment in current assets. Current assets are the assets which can be converted into cash within an accounting year and includes cash, short term securities; debtors (account receivable or book debts0, bills receivable and stock (inventory). Net working capital refers to the differences between current asset and current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors, bills payable and outstanding expenses. Net working capital can be positive or negative. A positive net working capital will rise when current asset exceed current liabilities. A negative net working capital occurs when current liabilities are in excess of current asset. Net working capital = current asset current liabilities = 104582.33 - 82756.66 = 21825.67

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FACTORS DETERMINING THE WORKING CAPITAL Nature of business: The working capital requirement of a firm basically
depends upon the nature of its business. Public utility undertaking like electricity, water supply and railway need very limited working capital because they offer cash sales only and supply services, not products and as such no funds are tied up in inventories and receivable. On the other hand trading and finance firm require less invest of working capital in fixed assets but have to invest large amount in current assets like inventories, receivable and cash as such they need large amount of working capital. The manufacturing undertaking requires relatively sizable working capital along with fixed investment. Generally speaking it may be said that public utility undertaking require relatively very large amount, whereas manufacturing undertaking require sizeable working capital between these two extreme.

Size of business :The working capital requirement of a concern are directly

influenced by the size of its business which may be measured in term of scale of operation .greater the size of a business unit , generally larger will be the requirement of working capital . Production policy: In certain industry the demand is subject to wide fluctuation due to seasonable variation .the requirement of working capital in such cases depend upon the production policy .the production could be kept either steady by accumulating, inventories during slack period with a view to meet high demand during the peak season and increased during the peak season. If the policy is to kept production steady by accumulating inventories it will require higher working capital.

Manufacturing process/length of production cycle: In manufacturing

business the requirement of working capital increases in direct proportion of length of manufacturing process. Longer the process period of manufacture; larger the amount of working capital required. The longer the manufacturing time the raw material and the other supplies have to be carried for a longer period in the process with progressive increment of labour and services cost before the finished product is finally obtained.

Seasonal variation: In certain industry the raw material is not available

throughout the year. They have to buy raw material in bulk during, the season to ensure an uninterrupted flow and the process them during the entire year. A huge amount is thus blocked in the form of material inventories during such season which give rise to more working capital requirement. Generally during

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the busy season a firm require large r working capital than in the slack season.

Working capital cycle: In a manufacturing concern the working capital

cycle start with the purchase of raw material and ends with the realisation of cash from the sale of finished product. This cycle involves purchase of raw material and stores ,its conversion into stocks of finished goods through work in progress with progressive increment of labour and service cost , conversion of finished stock into sales, debtors and receivable and ultimately realisation of cash and this cycle continues again from cash tom purchase of raw material and so on. Rate of growth of business: The working capital requirement of a concern increase with the growth and expansion of the business activities .although it is difficult to determine the relationship between the growth in the volume of business and the growth in the working capital of a business yet it may be concluded that for normal rate of a expansion in the volume of business , we may have retained profits tom provide for more working capital but in fats growing concern we shall require larger amount of working capital.

Price level change: Change in the price level also affect the working
capital requirement.Gnerally the rising price will require the firm to maintain larger amount of working capital as more funds will be required to maintained the same current assets .the effect of rising price may be different firms .some firms may be affected much while some other may not be affected at all by the rise in price.

Other factor: Certain other factors such as operating efficiency,

management ability, irregulatries of supply, import policy, assets structure, importance of labour, banking facilities, etc, also influence the requirement of working capital.

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FINANCIAL ANALYSIS OF RANBAXY

Every company has to have a balanced capital structure; means there should be balance of debt and equity in the company's financial structure. Traditionally, firms have looked at certain ratios to access whether they have an satisfactory capital structure. The commonly used ratios are: Interest coverage ratio, Cash flow coverage ratio, Debt service coverage ratio and fixed asset coverage ratio.

INTEREST COVERAGE RATIO

= Earnings before Interest and Taxes Interest on Debt

CASH FLOW COVERAGE RATIO = EBIT+ Deprecation+ other non cash charges Interest on debt+ Loan Repayment Instalment/(1-t)

DEBT SERVICE COVERAGE RATIO = (PATi + DEPi + INTi + OAi) (LRIi)

FIXED ASSET COVERAGE RATIO = Fixed Assets Term Loans

CURRENT RATIO = Current Assets Current Liabilities

PROPRIETORY RATIO/ EQUITY RATIO = Shareholder's Funds Total Assets

SOLVENCY RATIO = 100 - Proprietary Ratio

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Here, the company has Earning Gross Profit (PBITDA) Rs (22642.7) and the deprecation amount given in the balance sheet is 3940.17, this amount will be deducted from the PBITDA, it would be 26582.87. Interest expense is Rs. 768.16.

Interest Coverage Ratio = Earnings before Interest and taxes Interest on Debt

ICR = (26582.87) 768.16 = 34.60 Internal coverage indicates the number of times interest charges are covered by the profit available to pay the interest charges. Generally, higher the ratio, safe is the long term loans/debts/creditors, because even if the profits fall, the firm shall be able to meet its fixed interest obligations out of profits.

The cash flow coverage ratio is a distinct improvement over the interest coverage ratio in measuring the debt capacity, it covers the debt service burden fully and focuses on cash flows. However, it too it characterised by the problem of establishing a suitable norm by judging its adequacy. Here the company has the PBT of Rs.10480.04 and it has paid interest of Rs.768.16 so the EBIT is Rs.11248.20 in EBIT we add deprecation of Rs.3940.17 and there is Rs.110.06 Fixed assets written down as other non cash charges. Company has paid Interest of Rs.768.16. Loan repayment amount is Rs.3019.38 and tax rate is 0% (as losses incurred). CFCR is as under

CASH FLOW COVERAGE RATIO = EBIT+ Deprecation+ other non cash charges Interest on debt+ Loan Repayment Instalment/(1-t)

CFCR

= (26582.87)+3940.17+110.06 768.16

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= 15298.43 768.16 = 19.52 The logic of the ratio is that the payments are to be made out of cash inflows of the business. Generally, higher the coverage better it is, as far as, long term solvency of the firm is concerned. From the cash flow statement we can see that company is capable of repayment of its debt more than 19 times from its internal cash flows. Company need not to take more debt for repayment of the debt so it is good for the company that it will benefit in the future because there will be less amount of interest company have to pay as it will have less debt. There will be increase in cash flow in future because company can pay its debt right now or it can hold the debt for the short term as it has interest repayment ratio more than 14 times from its profit. Company will have good credit in market and can have more amount of debt because of good loan repayment history.

Financial institution which provides the bulk of long term debt finance judge the capacity of the firm in terms of its debt coverage ratio. Normally financial institution regard a debt service coverage ratio of 2 as satisfactory, if the ratio is less than 2 the maturity period of taken loan for the repayment of the debt is enough for the adjustment but if it is more than 2 the loan repayment period is shorter so the company will have to make the adjustments for the debt coverage and for the loan repayment also. Here, the company has total PAT of Rs.10480.04. Total depreciation is Rs.3940.17, total interest paid is Rs.768.16 , total loan repayment is Rs.3019.38. Putting all the figures in the DSCR formula

DEBT SERVICE COVERAGE RATIO = (PATi + DEPi + INTi + OAi) (LRIi) = 10480.04+768.16+3940.17+0 2369.38+4023.41-3373.41 Where, the amount Rs.2369.38 is for the secured loans of previous year 2010 and the amount Rs.3373.41 is for the calculated year 2011 and Rs.4023.41 is for the proceeds from long term bank borrowings. = 15188.37 3019.38
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= 5.03 The company has a very good DSCR it is more than 2 so we can say that company whatever the loans the company has taken its repayment times is shorter so company will have to seek for the other resources for the balance of the leverage. There are less possibilities for the company to take more loans now because here the ratio suggests that the company is almost having less loan repayment period and at this time company can only afford equity. Equity will increase the repayment amount of loans without affecting the debt.

FACR is the main ratio because it indicates the asset of the company from which the financial institutions can recover the amount that has been given to the company. Financial institution feels comfortable if the fixed asset coverage ratio is at least 1.25. From the balance sheet we can get the amount of fixed assets which is Rs.51227.81 and the term loans are Rs.3373.41.

FIXED ASSET COVERAGE RATIO = Fixed Assets Term Loans

= 51227.81 3373.41 = 15.18 So, the FACR is Rs.15.18. Financial institution can trust in the company because it has crossed the minimum requirement of FACR (1.25) which is 15.18. Company has enough assets to recover the term loans. Company can also pay the term loan interest if FACR is more than 1.25; here it is 15.18 so it is good for the company to have term loans.

Current Ratio defines the relationship between current assets and current liabilities. This ratio, also known as Working Capital Ratio, it is measure of general liquidity and is most widely used to make the analysis of a short-term financial position or liquidity of a firm. According to the balance sheet the current assets are Rs. 104582.33 and the Current Liabilities are Rs. 82756.66.

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CURRENT RATIO = Current Assets Current Liabilities

= 104582.33 82756.66 = 1.26 A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time as and when they become due. A relatively low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time without facing difficulties. a ratio equal or near to the rule of thumb of 2:1, current assets double the current liabilities is considered. As the current ratio is 1.26 which is less than the desired means that the company liquidity position is not so good and the firm shall not be able to pay its current liabilities in time.

A variant to the debt-equity ratio is the proprietary ratio which is also known as Equity or Shareholders to Total Equities Ratio or Net Worth to Total Assets Ratio. This ratio establishes relationship between shareholder's funds to total assets of the firm. Given the Shareholder's funds(Share capital+ Share application money pending allotment) is Rs.40359.42 and Total Assets(Fixed Assets+ Investments+ Current Assets and loan and advances)is Rs.156792.34 The calculation is been given below:

PROPRIETORY RATIO/ EQUITY RATIO = Shareholders Funds Total Assets

40359.42 156792.34

= 25.74% Since the ratio is low, the long-term solvency position of the company is not good. This ratio indicates the extent to which the assets of the company can be lost without affecting the interest of creditors of the company.
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Solvency ratio is a small variant of equity ratio and can be simply calculated as 100-equity ratio. The ratio indicates the relationship between the total liabilities to outsiders to total assets of a firm and is calculated as follows:

SOLVENCY RATIO = 100 - Proprietary Ratio = 74.26% Since higher is the ratio of total liabilities to total assets, less satisfactory or stable is the long-term solvency position of a firm.

Debt-Equity Ratio, also known as External-Internal Ratio is calculated to measure the relative claims of outsiders and the owners against the firm's asset. This ratio indicates the relationship between the external equities or the outsiders funds and the internal equities or the shareholders funds. DEBT-EQUITY RATIO = External Equities Internal Equities

External Equities = Secured loans + Unsecured loans + Current Liabilities = 3373.41+41533.88+53188.92 = 98096.21 Internal Equities = Shareholder's fund + Reserves = 40359.42

DEBT-EQUITY RATIO = 98096.21 40359.42 = 2.43 The debt-equity ratio is calculated to measure the extent to which debt financing has been used in a business. The ratio indicates the proportionate claims of owners and the outsiders against the firm's assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. A ratio of 1:1 may be usually considered to be satisfactory ratio. Since the calculated ratio is 2.43:1, a higher ratio than the satisfactory ratio.

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Therefore, it indicates that the claims of outsiders are greater than those of owners, may not be considered by the creditors because it gives a lesser margin of safety for them at the time of liquidation of the firm. (Figures in millions)

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CORPORATE SOCIAL RESPONSIBILITY OF RANBAXY

DEFINITION
Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforces and their families as well as of the local community and society at large.

CSR OF RANBAXY
In 1978 in wake of grim health scenario in India, Ranbaxy realised the urgency to reach out to the under privileged section of society that had little or no access to basic health care. The company took conscious decision to contribute toward the national objective health for all. Toward this end the Ranbaxy ruler development trust was setup and the first well equipped mobile health care was introduced in certain underserved areas of Punjab. The Ranbaxy community health care society (RCHS) an independent body was created that is devoted to the health of the disadvantaged. Ranbaxy benefit over two lakh people in certain indentified area in state of Punjab Himanchal Pradesh, Haryana, Delhi and Madhya Pradesh. The program is based on an integrated approach of preventive, primitive and curative services, covering areas of maternal child health, family. Ranbaxy entered into public private paternership with the Punjab state government, to deliver healthcare service in identified district of Punjab. In order to encourage scientific endeavour in the country, Ranbaxy presented research award and Ranbaxy science scholar award to 12 outstanding Indian scientist and 9 brilliant young scholars. Symposia and round table conference were also organised on topic related to womens health, immunogenomics infectious diseases and pandemic influenza. Ranbaxy science foundation is a non profit organisation dedicated to promote scientific endeavours in the country by encouraging and reward and challenging national and international knowledge and expertise on subjects connected with treatment of diseases afflicting mankind.

List of services provided by Ranbaxy: Treatment of common ailment Maternal &child health Antenatal caremmunization-(BCG ,diphtheria ,hepatitis b polio ,whooping cough ,tetanus& measles) Growth monitoring
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Safe motherhood Vitamin a, prophylaxis of nutritional blindness Treatment of diarrhoea & pneumonia Postnatal care Family planning Prevention and treatment of sexually transmitted diseases& reproductive tract infections Control of disease outbreak Health education AIDS awareness School health Adolescent health Home visits by ANM

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CONCLUSION
The accumulated losses of the company at the end of the year are not less than 50% of its net worth. Further, the company has incurred cash losses in the current financial year. According to the information and explanation given to us the company has not defaulted in the repayment of the dues to its bankers and financial institutions. The company has not granted any loans and advances on the basis of security by way of pledge of shares, debenture and other securities. The financial position of the company is also not good as the company has no proper financial leverage and also the company is not dealing or trading in shares, securities, debentures and other investment. According to the information and explanation given to us, except term loans lying unutilized as at year end, the term loans taken by the company have been applied for the purpose for which they are raised. The solvency position of the company is also not good as the long term funds lower than long term assets and also excess managerial remuneration been paid by the company. The company has not made any preferential allotment of the shares during the year to parties and companies/ firms. The company did not have any outstanding debentures during the year. The company has not raised any money by public issues during the year. No frauds on or by the company has been noticed or reported during the course of the audit. CSR is welfare for society and crucial for the success of business. The Ranbaxy play important contribution to maintain the health of rural area people and also contribute their efforts in R&D to develop new medicines to control the diseases. So, a distinctive CSR profile serves of an organisation is very crucial for the success of business.

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LIKELY LIMITATIONS OF THE STUDY

Topic is vast but availability of information and timeline is short. The scope of study is limited to Paonta Sahib. There may be discrepancies in the actual data and the recorded data due to misinterpretations. Unable to meet the decision maker of the organization. Due to busy schedule of Officials proper feedback is not possible.

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BIBLIOBRAPHY

WEBSITES: http://www.ranbaxy.com ONLINE JOURNALS: - Cygnus Business Consulting and Research Indian Pharmaceutical Industry- OCTOBER-DECEMBER 2011 - FICCI Report for National Manufacturing Competitiveness Council (NMCC) ANNUAL REPORT: 2009-2010 : 2010-2011 BOOKS: - Financial Management (7th Revised Edition) By S.K Gupta and R.K Sharma -Financial Management (Sixth Edition) By M Y Khan and P K Jain (Tata McGraw Hill Education Publishing Company Limited) - Financial Management (Sixth Edition) By Prasanna Chandra (Tata McGraw Hill Education Publishing Company Limited)

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