COST ANALYSIS

REPORT

Shilpa Medicare Limited

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Shilpa Medicare Limited

(Cost Analysis Report)

AN ASSIGNMENT REPORT

MASTER OF BUSINESS ADMINISTRATION

(MITTAL SCHOOL OF BUSSINESS)
LOVELY PROFESSIONAL UNIVERSITY
PHAGWARA, PUNJAB

Declaration:
I declare that this Assignment is my work. I have not copied it from any other student’s work
or any other source except where due acknowledgment is made explicitly in the text, nor has
any part been written for me by any other person. I had done this assignment on my own, in
this, I have not been assisted in any way by any person.

NAME: - Aakash Jain

ROLL NO.:- A08
REGISTRATION NO.:- 12101551
SUBMITTED TO: - Dr. Sachin
COURSE: - INTERNATIONAL ENVIRONMENT AND MANAGEMENT
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TABLE OF CONTENTS
Shilpa Medicare Limited __________________________________________ 4
Products of shilpa medicare ltd ______________________________________________ 5
Fixed costs ______________________________________________________________ 6
Variable costs____________________________________________________________ 7
Annual reports of Shilpa Medicare ltd(2019-2021) ____________________________ 11-13

Cost Sheet ____________________________________________________ 14

Cost sheet Analysis _____________________________________________ 15
Ratio Analysis ____________________________________________________________ 16
References _____________________________________________________________ 19
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SHILPA MEDICARE LIMITED

INTRODUCTION
Shilpa Medicare Ltd. formerly known as Shilpa Antibiotics was incorporated as a private limited
company in November 20th 1987 and has been promoted by Vishnukant C Bhutada and his
associates. Shilpa Medicare Limited (SML) is engaged in manufacturing of Active
Pharmaceutical Ingredients (API) Formulation and Development service. The company started
its operations as API manufacturer way back in 1987 at Raichur Karnataka- India. The company
started commercial production in November 1989. In November 1993 Shilpa Medicare Limited
was converted into a Public Limited Company. SML deals in high-quality Active Pharmaceutical
Ingredients (APIs) Bulk drug Intermediates Formulations and Development service New Drug
Delivery Systems Peptides / Biotech products and Specialty Chemicals etc. using sophisticated
technology meticulously in order to comply with laid down international
standards/specifications. SML is among the world's leading suppliers of Oncology/Non-
Oncology APIs and intermediates.Circa 1992 the company installed production facilities to
manufacture sodium methoxide. During FY 2015 projects of five products transfer executed
successfully other projects of eight products have been completed and ready for transfer to
plant. Ten new molecules have been taken for development considering future demand.During
FY15 as part of mobilization of resources for the purpose of expanding the operations of the
Company fresh funds were raised by allotting 1764705 equity shares of Rs.2/- each to Tano
Mauritius India FVCI II the existing member of the Company at a premium of Rs 423/-each on
15 May 2014 on preferential basis. During FY2016 the company after obtaining the approval
of members at the 28th Annual General Meeting held on 28 September 2015 divided the face
value of existing equity share of Rs.2/- into two equity shares of Re.1/- each fully paid-up with
effect from the Record Date specified. Raichem Medicare Pvt Ltd. a subsidiary of Shilpa
Medicare completed installation of all machineries during the FY 2015-2016 and recruited all
the key personnel also commenced trial production in August 2015 after the Audit by External
Consultant from Italy and started commercial production in December-2015. The subsidiary
obtained the Drug Manufacturing license and GMP certificate and consent from pollution control
board for operating the plant. In FY 16-17 Shilpa Medicare successfully launched the generic
versions of Vidaza Injection & Xeloda Tablets. During the year under review as part of
mobilization of resources for the purpose of expanding the operations of the company fresh
funds were raised by allotting 3025000 equity shares of Re.1/- each to TA FII Investors Limited
at a premium of Rs.569/- each on 26 December 2016 on preferential basis.Pursuant to the
order dated 24 November 2017 of Hon'ble National Company Law Tribunal Bangalore Bench
the Navya Biologicals Private Limited has been merged with the Company with effect from 1
April 2016 being the appointed date for merger.In FY18 Shilpa Medicare entered into Share
Purchase agreement with joint partner ICE SPA Italy to dispose off its entire stake in Raichem
Medicare Private Limited. According to the terms of agreements Shilpa Medicare has so far
disposed off 24% stake in the company for which the consideration has already been received.
The company is in the process of disposing the remaining 26% with prior approval of Reserve
Bank of India.
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PRODUCTS OF SHILPA MEDICARE LTD.

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FIXED COST:
The term fixed cost refers to a cost that does not change with an increase or decrease in the
number of goods or services produced or sold. Fixed costs are expenses that have to be paid
by a company, independent of any specific business activities.

 Insurance:

Insurance (In Millions)

300
250
200
150
100
50
0
2019
2020
2021

2019 2020 2021

Insurance 167.39 154.12 269.4

 Depreciation and Amortization:

Depreciation and amortisation expenses

(In Millions)
4,200.00
4,000.00
3,800.00
3,600.00
3,400.00
3,200.00
2019
2020
2021

2019 2020 2021

Depreciation and amortisation
3,716.91 3,495.73 4,084.80
expenses
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VARIABLE COST:
A variable cost is a cost that varies in relation to either production volume or the amount of
services provided. If no production or services are provided, then there should be no variable
costs. If production or services are increasing, then variable costs should also increase.

 Travelling and conveyance:

Travelling and conveyance

300
250
200
150
100
50
0
2019
2020
2021

2019 2020 2021

Travelling and conveyance 228.01 261.54 128.54

 Contract Labour Charges:

Contract labour charges

1,020.00
1,000.00
980.00
960.00
940.00
920.00
900.00
2019
2020
2021

2019 2020 2021

Contract labour charges 1,011.63 1,008.72 946.94
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 Legal and professional Fees:

Legal and professional fees

(In Millions)
2500
2000
1500
1000
500
0
2019
2020
2021

2019 2020 2021

Legal and professional fees 664.77 1,148.27 2,203.35

 Facility Fees:

Facility fees (In Millions)

700
600
500
400
300
200
100
0
2019
2020
2021

2019 2020 2021

Facility fees 317.23 410.83 645.2
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 Payment to auditors:

Payments to auditors (In Millions)

17

16.5

16

15.5

15

14.5
2019
2020
2021

2019 2020 2021

Payments to auditors 15.5 15.5 17

 Research and Development expenses:

Research and development expenses

(In Millions)
3,500.00
3,000.00
2,500.00
2,000.00
1,500.00
1,000.00
500.00
0.00
2019
2020
2021

2019 2020 2021

Research and development
1,725.28 3,121.76 2,701.66
expenses
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 Transportation Charges:

Transportation charges (In Millions)

140
120
100
80
60
40
20
0
2019
2020
2021

2019 2020 2021

Transportation charges 77.48 99.52 123.19

 Bad debts:

Bad debts/ Advance written off

(In Millions)
300
250
200
150
100
50
0
2019
2020
2021

2019 2020 2021

Bad debts/ Advance written off 280.04 13.73 35.97
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ANNUAL REPORT OF SHILPA MEDICARE LTD

Annual Report of year 2019:
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Annual Report of year 2020:

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Annual Report of year 2021:

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COST SHEET OF SHILPA MEDICARE LTD.

Properly reliable and trusted cost sheet of the company Shilpa Medicare Ltd. Can’t be prepared
due to the lack of availability of the company data but here some key details of the cost sheet
is covered, as it includes different fixed costs and variable costs of Shilpa Medicare specifically
chosen for this assignment and includes many other various costs such as opening and closing
stock of raw material, work-in-progress has been taken. There are various fixed and variable
costs which have been mentioned in the notes above.
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COSTS SHEET ANALYSIS

Cost Analysis Chart
60000

50000

40000

30000

20000

10000

0
Sales

Mar-19 Mar-20 Mar-21

From the above mentioned chart we can say that work cost has most affecting factors like
Auditors fee, legal and professional fee, depreciation and salaries etc. and the reason it’s
showing sudden increase as compared to other mentioned costs. After work cost office and
administration overhead and selling overheads don’t have much effect on the cost of
production, cost of goods sold and cost of the sales. By the time profit got added to the cost of
sales the sales is showing again sharp rise in the graph.
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Ratio Analysis
 P/V RATIO =
CONTRIBUTION/SALES

(CONTRIBUTION = PROFIT + FIXED COST OR SALES – VARIBALE COST)

The Profit Volume (P/V) Ratio is the measurement of the rate of change of profit due to
change in volume of sales. It is one of the important ratios for computing profitability as it
indicates contribution earned with respect of sales.
Contribution
For 2019: - 19,444.25
For 2020: - 24,883.84
For 2021: - 29,908.08
P/V ratio
For 2019: - 62%
For 2020: - 61%
For 2021: - 63%

Pv ratio

63%

63%

62%

62%

61%

61%

60%

60%
2019 2020 2021
Pv ratio 62% 61% 63%

We know that high PV ratio shows high profit by slightly increasing the volume of sale. In year
2019 the company has low PV ratio of as compare to the year 2021. The rise in the ratio maybe
because of effective increase in sales of 2021.
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 Break-even point:
Break-even point (BEP) is a term in accounting that refers to the situation where a company’s
revenues and expenses were equal within a specific accounting period. It means that there
were no net profits or no net losses for the company – it “broke even”. BEP may also refer to
the revenues that are needed to be reached in order to compensate for the expenses incurred
during a specific period.

Break-even point = Total fixed cost / PV ratio

For year 2019: -6244.866874
For year 2020: - 6011.47537
For year 2021: - 6935.101907

Break even point

7000

6800

6600

6400

6200

6000

5800

5600

5400
2019 2020 2021
Break even point 6244.866874 6011.47537 6935.101907

We can see the effect of the low sales in the world wide lockdown, the break-even point tends
to rise making it difficult for the company to earn profit at low level of production. In year 2019
company had Rs. 6244.86 million as break-even point but it started decreasing in next year
stating the fall in Break-even point of the company. In year 2020 the company had break-even
point of Rs. 6011.47 million which keeps on rising in year 2021 to Rs. 6935.101 million.
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 Margin of safety
Margin of safety = Profit/PV ratio
OR
= Actual sales – Sales at Break-even Point
For year 2019: 25016.04313

For year 2020: 34973.38463

For year 2021: 40700.64809

Margin of safety
2019
50000

40000

30000

20000

10000
Margin of safety
0

2021 2020

Margin of safety shows the wellness of the business which is how much break-even point is
below the sales so that even if there is fall in sales there will be chances of improvement. We
can notice that the company has good margin of safety in year 2020,2019 and 2021 which
shows that soundness of the company i.e. the company is doing well in sales activities and
production.
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References:
https://www.screener.in/company/SHILPAMED/consolidated/
https://www.bseindia.com/bseplus/AnnualReport/530549/71186530549.p
df
https://www.bseindia.com/bseplus/AnnualReport/530549/5305490320.pd
f
https://www.bseindia.com/bseplus/AnnualReport/530549/71186530549.p
df