A PROJECT REPORT

ON

“FINANCIAL STATEMENT ANALYSIS OF GLENMARK PHARMACEUTICAL”

SUBMITTED IN PARTIAL FULFILLMENT FOR THE REQUIREMENT OF THE AWARD OF

THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

SESSION 2021-2023

FROM

NARAYANA BUSINESS SCHOOL, AHMEDABAD

AFFIALIATED TO GUJARAT TECHNOLOGICAL UNIVERSITY

Subject: Financial Statement Analysis

Component: CEC

Submitted by

Name: Abhishek Bansal

Batch: MBA + PGPCE 2021-2023

Roll No.: MBA 2021-002

Under the Guidance of

Name: Dr. Nidhi Srivastava

Designation: Professor

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 DECLARATION

I Abhishek Bansal hereby declare that I am a student of Narayana Business School,

Ahmedabad studying in MBA 1st Semester, Roll No.- MBA 2021-002. This project report
entitled “FINANCIAL STATEMENT ANALYSIS OF GLENMARK PHARMACEUTICAL”
submitted by me for the partial fulfilment of the degree of Master of Business Administration
from GUJARAT TECHNOLOGICAL UNIVERSITY.

I also hereby declare that this project report has not been submitted at any time to any other
university or institute for the award of any Degree or Diploma.

ABHISHEK BANSAL
MBA + PGPCE 2021-2023
MBA 2021-002

2
 ACKNOWLEDGEMENT

The project on “FINANCIAL STATEMENT ANALYSIS OF GLENMARK

PHARMACEUTICAL” would not have seen the light of the day without the following
people and their priceless support and cooperation. Hence, I extend my gratitude to all of
them.

As a student of Narayana Business School, I am highly indebted to Dr. Purvi Gupta

(DEAN Academics at NBS) who has provided me the necessary information and for the
support extended in the completion of this project. She also extended her valuable
suggestions and comments on bringing out this report in the best way possible.

I especially thanks to Dr. Nidhi Srivastava Ma’am (Professor at NBS) who set the ball
rolling for my project. She has been a source of inspiration through their constant guidance,
personal interest, encouragement and help. I convey my sincere thanks to her. In spite of her
busy schedule, she always found time to guide me throughout the project. I am also grateful
to her for reposing confidence in my abilities and giving me the freedom to work on my
project. Without their invaluable help I would not have been able to do justice to the project.
I also express thanks to my parents, my family members, and all my friends for their valuable
support in completion of this project successfully.
Last but not least I am thankful to all those people who helped me directly and indirectly.

ABHISHEK BANSAL
MBA + PGPCE 2021-2023
MBA 2021-002

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 PREFACE

Without practical training, management education is meaningless so along with the theory,
practical training is provided to management students to expose them to the actual working
environment of any organization. Such training provides a framework of knowledge relating
to the concepts and practices of the assigned topics in the organization. This Project Report is
an integral part of the course curriculum of Master of Business Administration. In this the
student is in the position to analyze the integral working of an organization with mature eyes
and understand the dynamics in a much better manner.
It is in this sense that practical training in company has a significant role to play in the subject
of consumer behavior for developing managerial and administrative skills in the future
managers and to enhance their analytical skills.
This project work really helped me to get a practical insight in to the actual environment of
the world and provided me an opportunity to make my concepts regarding Financial
Statement Analysis clearer.

ABHISHEK BANSAL
MBA + PGPCE 2021-2023
MBA 2021-002

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 INDEX
Sr No. Particular Page no.
1. INTRODUCTION: PHARMACEUTICAL INDUSTRY 6
2. INTRODUCTION: GLENMARK PHARMACEUTICAL 13
3. PESTLE ANALYSIS: PHARMACEUTICAL INDUSTRY 16
4. INTRODUCTION TO FINANCIAL STATEMENT ANALYSIS 20
5. CONCEPTS: FINANCIAL STATEMENT ANALYSIS 24
6. COMPARATIVE BALANCE SHEET 27
7. COMMON SIZE BALANCE SHEET 29
8. COMPARATIVE INCOME STATEMENT 31
9. COMMON SIZE INCOME STATEMENT 32
10. RATIO ANALYSIS 33
11. DUPONT ANALYSIS 39
12. FINDINGS 41
13. ANNEXURE 42
14. BIBLIOGRAPHY 44

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 INTRODUCTION: PHARMACEUTICAL INDUSTRY

The Pharmaceutical Industry discovers, develops, produces, and markets drugs or

pharmaceutical drugs for use as medications to be administered (or self-administered)
to patients, with the aim to cure them, vaccinate them, or to alleviates symptoms. Pharmaceutical
companies may deal in generic or brand medications and medical devices. They are subject to
a variety of laws and regulations that govern the patenting, testing, safety, efficacy
and marketing of drugs. The global pharmaceuticals market is expected to grow from
$1228.45 billion in 2020 to $1250.24 billion in 2021 at a compound annual growth rate
(CAGR) of 1.8%

The modern era of the pharmaceutical industry of isolation and purification

of compounds, chemical synthesis, and computer-aided drug design—is considered to have
begun in the 19th century, thousands of years after intuition and trial and error led humans to
believe that plants, animals, and minerals contained medicinal properties. The unification of
research in the 20th century in fields such as chemistry and physiology increased the
understanding of basic drug-discovery processes. Identifying new drug targets, attaining
regulatory approval from government agencies, and refining techniques in drug discovery and
development are among the challenges that face the pharmaceutical industry today. The
continual evolution and advancement of the pharmaceutical industry is fundamental in the
control and elimination of disease around the world.

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HISTORY

MEDICINES OF ANCIENT CIVILIZATIONS

The oldest records of medicinal preparations made from plants, animals, or minerals are those
of the early Chinese, Hindu, and Mediterranean civilizations. An herbal compendium, said to
have been written in the 28th century BC by the legendary emperor Shennong, described the
antifever capabilities of a substance known as chang shan (from the plant species Dichroa
febrifuga), which has since been shown to contain antimalarial alkaloids (alkaline organic
chemicals containing nitrogen). Workers at the school of alchemy that flourished in
Alexandria, Egypt, in the 2nd century BC prepared several relatively purified inorganic
chemicals, including lead carbonate, arsenic, and mercury. According to De materia medica,
written by the Greek physician Pedanius Dioscorides in the 1st century AD, verdigris (basic
cupric acetate) and cupric sulfate were prescribed as medicinal agents. While attempts were
made to use many of the mineral preparations as drugs, most proved to be too toxic to be
used in this manner.

Many plant-derived medications employed by the ancients are still in use today. Egyptians
treated constipation with senna pods and castor oil and indigestion with peppermint and
caraway. Various plants containing digitalis-like compounds (cardiac stimulants) were
employed to treat a number of ailments. Ancient Chinese physicians employed ma huang, a
plant containing ephedrine, for a variety of purposes. Today ephedrine is used in many
pharmaceutical preparations intended for the treatment of cold and allergy symptoms. The
Greek physician Galen (c. 130–c. 200 AD) included opium and squill among the drugs in his
apothecary shop (pharmacy). Today derivatives of opium alkaloids are widely employed for
pain relief, and, while squill was used for a time as a cardiac stimulant, it is better known as a
rat poison. Although many of the medicinal preparations used by Galen are obsolete, he made
many important conceptual contributions to modern medicine. For example, he was among
the first practitioners to insist on purity for drugs. He also recognized the importance of using
the right variety and age of botanical specimens to be used in making drugs.

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PHARMACEUTICAL SCIENCE IN THE 16TH AND 17TH CENTURIES

Pharmaceutical science improved markedly in the 16th and 17th centuries. In 1546 the
first pharmacopoeia, or collected list of drugs and medicinal chemicals with directions for
making pharmaceutical preparations, appeared in Nürnberg, Ger. Previous to this time,
medical preparations had varied in concentration and even in constituents. Other
pharmacopoeias followed in Basel (1561), Augsburg (1564), and London (1618).
The London Pharmacopoeia became mandatory for the whole of England and thus became
the first example of a national pharmacopoeia. Another important advance was initiated
by Paracelsus, a 16th-century Swiss physician-chemist. He admonished his contemporaries
not to use chemistry as it had widely been employed prior to his time in the speculative
science of alchemy and the making of gold. Instead, Paracelsus advocated the use of
chemistry to study the preparation of medicines.

In London the Society of Apothecaries (pharmacists) was founded in 1617. This marked the
emergence of pharmacy as a distinct and separate entity. The separation of apothecaries from
grocers was authorized by King James I, who also mandated that only a member of the
society could keep an apothecary’s shop and make or sell pharmaceutical preparations. In
1841 the Pharmaceutical Society of Great Britain was founded. This society oversaw
the education and training of pharmacists to assure a scientific basis for the profession. Today
professional societies around the world play a prominent role in supervising the education
and practice of their members.

ISOLATION AND SYNTHESIS OF COMPOUNDS

In the 1800s many important compounds were isolated from plants for the first time. About
1804 the active ingredient, morphine, was isolated from opium. In
1820 quinine (malaria treatment) was isolated from cinchona bark and colchicine (gout treatment)
from autumn crocus. In 1833 atropine (variety of uses) was purified from Atropa belladonna,
and in 1860 cocaine (local anesthetic) was isolated from coca leaves. Isolation and
purification of these medicinal compounds was of tremendous importance for several
reasons. First, accurate doses of the drugs could be administered, something that had not been
possible previously because the plants contained unknown and variable amounts of the
active drug. Second, toxic effects due to impurities in the plant products could be eliminated
if only the pure active ingredients were used. Finally, knowledge of the chemical structure of

8
pure drugs enabled laboratory synthesis of many structurally related compounds and the
development of valuable drugs.

Pain relief has been an important goal of medicine development for millennia. Prior to the
mid-19th century, surgeons took great pride in the speed with which they could complete a
surgical procedure. Faster surgery meant that the patient would undergo the excruciating pain
for shorter periods of time. In 1842 ether was first employed as an anesthetic during surgery,
and chloroform followed soon after in 1847. These agents revolutionized the practice of
surgery. After their introduction, careful attention could be paid to prevention of tissue
damage, and longer and more-complex surgical procedures could be carried out more safely.
Although both ether and chloroform were employed in anesthesia for more than a century,
their current use is severely limited by their side effects; ether is very flammable
and explosive and chloroform may cause severe liver toxicity in some patients. However,
because pharmaceutical chemists knew the chemical structures of these two anesthetics, they
were able to synthesize newer anesthetics, which have many chemical similarities with ether
and chloroform but do not burn or cause liver toxicity.

THE DEVELOPMENT OF ANTI-INFECTIVE AGENTS

DISCOVERY OF ANTISEPTICS AND VACCINES

Prior to the development of anesthesia, many patients succumbed to the pain and stress of
surgery. Many other patients had their wounds become infected and died as a result of their
infection. In 1865 the British surgeon and medical scientist Joseph Lister initiated the era
of antiseptic surgery in England. While many of the innovations of the antiseptic era are
procedural (use of gloves and other sterile procedures), Lister also introduced the use
of phenol as an anti-infective agent.

NATIONAL LIBRARY OF MEDICINE

In the prevention of infectious diseases, an even more important innovation took place near
the beginning of the 19th century with the introduction of smallpox vaccine. In the late 1790s
the English surgeon Edward Jenner observed that milkmaids who had been infected with the
relatively benign cowpox virus were protected against the much more deadly smallpox. After
this observation he developed an immunization procedure based on the use of crude material
from the cowpox lesions. This success was followed in 1885 by the development

9
of rabies vaccine by the French chemist and microbiologist Louis Pasteur. Widespread
vaccination programs have dramatically reduced the incidence of many infectious diseases
that once were common. Indeed, vaccination programs have eliminated smallpox infections.
The virus no longer exists in the wild, and, unless it is reintroduced from caches of smallpox
virus held in laboratories in the United States and Russia, smallpox will no longer occur in
humans. A similar effort is under way with widespread polio vaccinations; however, it
remains unknown whether the vaccines will eliminate polio as a human disease.

IMPROVEMENT IN DRUG ADMINISTRATION

While it may seem obvious today, it was not always clearly understood that medications must
be delivered to the diseased tissue in order to be effective. Indeed, at times apothecaries
made pills that were designed to be swallowed, pass through the gastrointestinal tract, be
retrieved from the stool, and used again. While most drugs are effective and safe when taken
orally, some are not reliably absorbed into the body from the gastrointestinal tract and must
be delivered by other routes. In the middle of the 17th century, Richard
Lower and Christopher Wren, working at the University of Oxford, demonstrated that drugs
could be injected into the bloodstream of dogs using a hollow quill. In 1853 the French
surgeon Charles Gabriel Pravaz invented the hollow hypodermic needle, which was first used
in the treatment of disease in the same year by Scottish physician Alexander Wood. The
hollow hypodermic needle had a tremendous influence on drug administration. Because drugs
could be injected directly into the bloodstream, rapid and dependable drug action became
more readily producible. Development of the hollow hypodermic needle also led to an
understanding that drugs could be administered by multiple routes and was of great
significance for the development of the modern science of pharmaceutics, or dosage form
development.

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DRUG DEVELOPMENT IN THE 19TH AND 20TH CENTURIES

NEW CLASSES OF PHARMACEUTICALS

In the latter part of the 19th century a number of important new classes of pharmaceuticals
were developed. In 1869 chloral hydrate became the first synthetic sedative-hypnotic (sleep-
producing) drug. In 1879 it was discovered that organic nitrates such as nitroglycerin could
relax blood vessels, eventually leading to the use of these organic nitrates in the treatment of
heart problems. In 1875 several salts of salicylic acid were developed for their antipyretic
(fever-reducing) action. Salicylate-like preparations in the form of willow bark extracts
(which contain salicin) had been in use for at least 100 years prior to the identification and
synthesis of the purified compounds. In 1879 the artificial sweetener saccharin was
introduced. In 1886 acetanilide, the first analgesic-antipyretic drug (relieving pain and fever),
was introduced, but later, in 1887, it was replaced by the less toxic phenacetin. In
1899 aspirin (acetylsalicylic acid) became the most effective and popular anti-inflammatory,
analgesic-antipyretic drug for at least the next 60 years. Cocaine, derived from the coca leaf,
was the only known local anesthetic until about 1900, when the
synthetic compound benzocaine was introduced. Benzocaine was the first of many local
anesthetics with similar chemical structures and led to the synthesis and introduction of a
variety of compounds with more efficacy and less toxicity.

TRANSITIONS IN DRUG DISCOVERY

In the late 19th and early 20th centuries, a number of social, cultural, and technical changes
of importance to pharmaceutical discovery, development, and manufacturing were taking
place. One of the most important changes occurred when universities began to encourage
their faculties to form a more coherent understanding of existing information. Some chemists
developed new and improved ways to separate chemicals from minerals, plants, and animals,
while others developed ways to synthesize novel compounds. Biologists did research to
improve understanding of the processes fundamental to life in species of microbes, plants,
and animals. Developments in science were happening at a greatly accelerated rate, and the
way in which pharmacists and physicians were educated changed. Prior to this transformation
the primary means of educating physicians and pharmacists had been through
apprenticeships. While apprenticeship teaching remained important to the education process
(in the form of clerkships, internships, and residencies), pharmacy and medical schools began

11
to create science departments and hire faculty to teach students the new information in basic
biology and chemistry. New faculty were expected to carry out research or scholarship of
their own. With the rapid advances in chemical separations and synthesis, single pharmacists
did not have the skills and resources to make the newer, chemically pure drugs. Instead, large
chemical and pharmaceutical companies began to appear and employed university-trained
scientists equipped with knowledge of the latest technologies and information in their fields.

As the 20th century progressed, the benefits of medical, chemical, and biological research
began to be appreciated by the general public and by politicians, prompting governments to
develop mechanisms to provide support for university research. In the United States, for
instance, the National Institutes of Health, the National Science Foundation, the Department
of Agriculture, and many other agencies undertook their own research or supported research
and discovery at universities that could then be used for pharmaceutical development.
Nonprofit organizations were also developed to support research, including the Australian
Heart Foundation, the American Heart Association, the Heart and Stroke Foundation of
Canada, and H.E.A.R.T UK. The symbiotic relationship between large public institutions
carrying out fundamental research and private companies making use of the new knowledge
to develop and produce new pharmaceutical products has contributed greatly to the
advancement of medicine.

RESEARCH AND DEVELOPMENT

Drug discovery is the process by which potential drugs are discovered or designed. In the
past, most drugs have been discovered either by isolating the active ingredient from
traditional remedies or by serendipitous discovery. Modern biotechnology often focuses on
understanding the metabolic pathways related to a disease state or pathogen, and
manipulating these pathways using molecular biology or biochemistry. A great deal of early-
stage drug discovery has traditionally been carried out by universities and research
institutions. Drug development refers to activities undertaken after a compound is identified
as a potential drug in order to establish its suitability as a medication. Objectives of drug
development are to determine appropriate formulation and dosing, as well as to establish
safety. Research in these areas generally includes a combination of in vitro studies, in vivo
studies, and clinical trials. The cost of late-stage development has meant it is usually done by
the larger pharmaceutical companies.

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 INTRODUCTION: GLENMARK PHARMACEUTICAL

COMPANY PROFILE

Glenmark Pharmaceutical Limited is considered as one of the renowned producer, exporter

and providers of generic drug and active pharmaceutical ingredient. It is an Indian
pharmaceutical company headquartered in Mumbai, India. The company initially sold its
products in India, Russia, and Africa only but it become worldwide known after 2011. By
2011 the founder of the company was one of the richest men in India, and Glenmark had
worldwide sales of $778 million, a 37% increase over the last year's sales; the growth was
driven by Glenmark's entry into the US and European generics markets. By 2008 Glenmark
was the fifth-biggest pharmaceutical company in India.

Type Public

Industry Pharmaceuticals

Founded 1977

Founders Gracias Saldanha

Headquarters Mumbai, India

Area served Global

Key people Glenn Saldanha, MD & Chairperson

Products Medicines and vaccines

Website glenmarkpharma.com

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Glenmark was founded with a vision to emerge as a leading integrated research-based, global
pharmaceutical company. Our branded generics business has a significant presence in
markets across emerging economies including India.

The generics business services the requirements of developed markets like US and Western
Europe. Our API business sells products in over 65 countries including the US, various
countries in the EU, South America, and India.

With 14 manufacturing facilities and 3 R&D centers dedicated to the goal of enriching lives
across the globe we believe that the real force behind our continued successes are dedicated
employees from across 60 nationalities, committed to creating 'A new way for a new world'.

VISION STATEMENT

• We value knowledge such that it empowers our people to find innovative solutions to
manage change
• We respect all our stakeholders
• We value achievement of objectives and consistently strive towards our Vision, with
perseverance
• To emerge as leading integrated research – based global pharmaceutical company

MISSION STATEMENT

• To remain one of the leading sellers of the generic medicine across the world
• To continuously develop new product to meet changing requirement of the world
• To maintain consistent quality standard in each product category
• To earn customers confidence as a reliable, innovative, and preferred supplier to their
daily medicinal needs.

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COMPANY’S PHILOSOPHY

Enriching lives is why we exist; it is what we aim to accomplish and it is the promise of our
brand to all the lives we touch. We at Glenmark truly live this by discovering innovative
molecules to address evolving needs of patients and producing effective medicines to help
people lead fuller, healthier, and happier lives.

Starting with our flagship product forty years ago, we have always put the patient at the
Centre of our strategy. Satisfying unmet patient needs is the core principle guiding our over
two-decade old foray into researching novel therapies for challenging health conditions in our
focus therapy areas of Dermatology, Respiratory and Oncology. Over the last four decades,
Glenmark has made huge strides in delivering high-quality medicines to patients in need, all
over the world. Our rapidly growing Formulation's business services the requirements of
everyone, be it the developed markets of US and Europe or the emerging ones of India,
Russia, and Brazil. With a commercial presence in more than 80 countries we have positively
impacted over a 100 million lives. Each Glenmark employee across our offices in over 50
nations, 14 manufacturing facilities and 3 R&D centers is committed to ‘enriching lives to
create a healthier and happier world.’

CODE OF CONDUCT

Glenmark has been built on the pillars of integrity, knowledge, respect and trust. At
Glenmark we operate at high ethical standards and are committed towards building the
organization on the foundation of our core values.

The Glenmark Code is the backbone of our Corporate Governance and outlines the principles
that govern us in a constantly changing business environment. The Glenmark Code guides
our functioning by setting highest standards for business conduct in the market place.

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 PESTLE ANALYSIS: PHARMACEUTICAL INDUSTRY

The PESTEL analysis of pharmaceutical industry can give companies an idea about the
external factors which can have a temporary or lasting impact on the pharmaceutical industry.
The given list shows the effect of the external factors:

POLITICAL FACTORS:

For any business to flourish, it is essential to have a stable political condition. Here are some
political conditions which can impact the pharmaceutical industry:

• Most countries maintain frameworks that include guidelines about safety standards,
certifications, etcetera. They also mark the banned drugs, which may cause health
hazards. If a pharmaceutical company fails to follow those regulations, its business
may suffer severely.
• Administrations of most countries try to gain control over the price of the drug to
make it affordable for people. It may toll on the growth of pharmaceutical companies.
• Governments of some countries subsidize the pharmaceutical companies to keep the
essential drugs within the commoners' reach. It helps the companies to survive in the
competitive market.

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ECONOMIC FACTORS:

The economy of any direct impacts the businesses. The pharmaceutical industry is also
affected when the economic conditions of a country get affected. The PESTEL analysis
pharmaceutical industry can identify the economic conditions which can affect the
pharmaceutical companies:

• As the economic conditions of the countries are developing with time, the household
income of people is also increasing. It may allow them some essential drugs. They
may have the urge to buy costlier drugs, which were previously out of reach for many
people.
• The researchers are constantly working on drug modification, resulting in more
beneficial and potential drug production. As people are buying those drugs, the
pharmaceutical industry is also flourishing.
• The average healthcare spending of the families is increasing. If there are aged people
in a family, there are more chances of high healthcare expenses. It also includes the
cost of medicines. It is also giving the pharmaceutical companies to earn better profit
even after following Government guidelines about pricing.

SOCIAL FACTORS:

Socio-cultural factors of any country can impact the industries within the periphery of the
country. The pharmaceutical industry is not an exception, and the sociological conditions
dominate it gravely. Here are some sociological conditions which can impact the growth of
the pharmaceutical industry:

• The lifestyle of people has people incredibly fast yet stagnant. As a result, more
people are moving towards obesity. Thus, facing health conditions like diabetes,
thyroid, hypertension. The patients need continuous medication to deal with this.
Hence the sales of the pharmaceutical companies are also increasing.
• As the healthcare system has improved all over the country, the number of the aging
population is also growing. Hence, there is a need for more medicines for them than
for the younger ones. It creates a greater demand in pharmaceutical companies
resulting in their expansion.
• Many people are concentrating on having a healthy lifestyle while doing exercises,
eating healthy. It may result in a decrease in the demand for drugs in the future.

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TECHNOLOGICAL FACTORS:

The pharmaceutical industry is greatly dependent on technological innovations. The PESTEL

analysis pharmaceutical industry can show how the technical conditions can affect the
business:

• The pharmaceutical industry is greatly dependent on technology. The research and

biotechnological innovations have resulted in the production of drugs that are good in
quality and have low production costs. It will allow more people to get access to
medicines that they previously could not afford.
• The drugs require proper storage conditions. Technology has made it easier to
preserve medicines and transport them without getting harmed due to unpleasant
conditions.
• Technology has provided pharmaceutical companies with the chance to reach more
companies through campaigns. They can also deliver the medicine at the door, which
has increased the reach of the companies. It can also increase the revenue of
pharmaceutical companies.

ENVIRONMENTAL FACTORS:

Environment is a significant concern, and the impact of waste materials on the environment
has worried the environmentalists. Here are some ecological issues which may affect the
pharmaceutical industry:

• As the production of drugs is related to a large carbon footprint, many countries are
coming up with regulations to decrease the effect on the environment. As abiding by
these regulations may be costly for the new companies, they may fail to establish their
business.
• The production of drugs results in the creation of different biotechnological
pollutants. They may be hazardous for people's health. The company needs to take
care of this waste to maintain the safety of the people.
• Like other companies, pharmaceutical companies may take up some corporate
responsibilities towards the environment. They can donate money or campaign for
some environmental causes, which can help them create a better image.

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LEGAL FACTORS:

A nation's legal conditions do not have much direct impact on the pharmaceutical industry.
However, there can be some indirect issues that may affect the growth of the pharmaceutical
business. The PESTEL analysis pharmaceutical industry can help to point out the legal
aspects which can work on the growth of the pharmaceutical industry:

• As pharmaceutical products are one of the essential ones, the government always uses
laws to control the fraud regarding the expiration dates and manufacturing of the
batch of drugs. If a company fails to adhere to the set guidelines, it may have to face
legal proceedings.
• Pharmaceutical companies are mainly dependent on their database. If they get
affected by cyber threats, the customer may lose their confidence in them. It can affect
their business as well.
• Pharmaceutical companies should maintain strict legal guidelines while formulating
the framework for their business and researches. They ensure the safety of the
products. It helps them to avoid legal issues. Thus, allowing them to stay away from
the high expenses of proceedings.

KEY TAKEAWAYS

The PESTEL analysis of pharmaceutical industry shows that the pharma industry has
ample scope for expansion in the future. Some essential drugs may capture the market for a
long time. At the same time, the government guidelines to cut off the price may impact the
growth of the pharmaceutical industry to some extent. The companies can make strategies to
increase the business while adhering to the government guidelines. It can help them develop
their business, and at the same time, they can avoid the potential harms.

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 INTRODUCTION TO FINANCIAL STATEMENT ANALYSIS

Financial analysis is the process of examining a company’s performance in the context of its
industry and economic environment in order to arrive at a decision or recommendation.
Often, the decisions and recommendations addressed by financial analysts pertain to
providing capital to companies specifically, whether to invest in the company’s debt or equity
securities and at what price. An investor in debt securities is concerned about the company’s
ability to pay interest and to repay the principal lent. An investor in equity securities is an
owner with a residual interest in the company and is concerned about the company’s ability
to pay dividends and the likelihood that its share price will increase.

Overall, a central focus of financial analysis is evaluating the company’s ability to earn a
return on its capital that is at least equal to the cost of that capital, to profitably grow its
operations, and to generate enough cash to meet obligations and pursue opportunities.

Fundamental financial analysis starts with the information found in a company’s financial
reports. These financial reports include audited financial statements, additional disclosures
required by regulatory authorities, and any accompanying (unaudited) commentary by
management. Basic financial statement analysis as presented in this reading provides a
foundation that enables the analyst to better understand other information gathered from
research beyond the financial reports.

USERS OF FINANCIAL STATEMENT ANALYSIS

There are different users of financial statement analysis. These can be classified into internal
and external users. Internal users refer to the management of the company who analyzes
financial statements in order to make decisions related to the operations of the company. On
the other hand, external users do not necessarily belong to the company but still hold some
sort of financial interest. These include owners, investors, creditors, government, employees,
customers, and the general public. These users are elaborated on below:

20
1. MANAGEMENT

The managers of the company use their financial statement analysis to make intelligent
decisions about their performance. For instance, they may gauge cost per distribution
channel, or how much cash they have left, from their accounting reports and make decisions
from these analysis results.

2. OWNERS

Small business owners need financial information from their operations to determine whether
the business is profitable. It helps in making decisions like whether to continue operating the
business, whether to improve business strategies or whether to give up on the business
altogether.

3. INVESTORS

People who have purchased stock or shares in a company need financial information to
analyze the way the company is performing. They use financial statement analysis to
determine what to do with their investments in the company. So depending on how the
company is doing, they will either hold onto their stock, sell it or buy more.

4. CREDITORS

Creditors are interested in knowing if a company will be able to honor its payments as they
become due. They use cash flow analysis of the company’s accounting records to measure
the company’s liquidity, or its ability to make short-term payments.

5. GOVERNMENT

Governing and regulating bodies of the state look at financial statement analysis to determine
how the economy is performing in general so they can plan their financial and industrial
policies. Tax authorities also analyze a company’s statements to calculate the tax burden that
the company has to pay.

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6. EMPLOYEES

Employees need to know if their employment is secure and if there is a possibility of a pay
raise. They want to be abreast of their company’s profitability and stability. Employees may
also be interested in knowing the company’s financial position to see whether there may be
plans for expansion and hence, career prospects for them.

7. CUSTOMERS

Customers need to know about the ability of the company to service its clients into the future.
The need to know about the company’s stability of operations is heightened if the customer
(i.e. a distributor or procurer of specialized products) is dependent wholly on the company for
its supplies.

8. GENERAL PUBLIC

Anyone in the general public, like students, analysts and researchers, may be interested in
using a company’s financial statement analysis. They may wish to evaluate the effects of the
firm on the environment, or the economy or even the local community. For instance, if the
company is running corporate social responsibility programs for improving the community,
the public may want to be aware of the future operations of the company.

TYPES OF FINANCIAL STATEMENTS

Companies use the balance sheet, income statement, and cash flow statement to manage the
operations of their business and also to provide transparency to their stakeholders. All three
statements are interconnected and create different views of a company’s activities and
performance.

BALANCE SHEET

The balance sheet is a report of a company's financial worth in terms of book value. It is
broken into three parts to include a company’s assets, liabilities, and shareholders' equity.
Short-term assets such as cash and accounts receivable can tell a lot about a company’s
operational efficiency; liabilities include the company's expense arrangements and the debt

22
capital it is paying off; and shareholder’s equity includes details on equity capital
investments and retained earnings from periodic net income. The balance sheet must balance
assets and liabilities to equal shareholder’s equity. This figure is considered a company’s
book value and serves as an important performance metric that increases or decreases with
the financial activities of a company.

INCOME STATEMENT

The income statement breaks down the revenue a company earns against the expenses
involved in its business to provide a bottom line, meaning the net profit or loss. The income
statement is broken into three parts that help to analyze business efficiency at three different
points. It begins with revenue and the direct costs associated with revenue to identify gross
profit. It then moves to operating profit, which subtracts indirect expenses such as marketing
costs, general costs, and depreciation. Finally, after deducting interest and taxes, the net
income is reached.

Basic analysis of the income statement usually involves the calculation of gross profit
margin, operating profit margin, and net profit margin, which each divide profit by revenue.
Profit margin helps to show where company costs are low or high at different points of the
operations.

CASH FLOW STATEMENT

The cash flow statement provides an overview of the company's cash flows from operating
activities, investing activities, and financing activities. Net income is carried over to the cash
flow statement where it is included as the top line item for operating activities. Like its title,
investing activities include cash flows involved with firmwide investments. The financing
activities section includes cash flow from both debt and equity financing. The bottom line
shows how much cash a company has available.

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 CONCEPTS: FINANCIAL STATEMENT ANALYSIS

First of two key methods of the financial statement analysis is the use of horizontal and
vertical analysis.

HORIZONTAL FINANCIAL STATEMENT ANALYSIS

It means the comparison of the information from the financial report of a company over some
certain time periods. Both the financial information and the ratios derived from it can be
compared. In other words, horizontal analysis (very often referred as trend analysis) is
reviewing and comparing the dynamics of the same indicators and making conclusions on
company’s performance over time. As said before, this analysis method may be applied the
financial statement information itself and to ratios derived from it, so the horizontal analysis
may include either absolute values comparison or percentage comparison. Ratios and
indicators of a company can also be compared to average values in the economic sector or
values of competitors.

VERTICAL ANALYSIS

It is a process of comparison of one item to the base item. Commonly, the vertical analysis is
conducted for the financial statement of a single period (unlike the horizontal analysis, which
is reviewing information over at least two different periods of time, or more). Also referred as
common-size analysis, vertical analysis generally means usage of total assets or total
liabilities or shareholders’ equity as base figures of the proportion. The main reason for
performing the vertical analysis for one single period is seeing the relative proportions of
different elements of assets and sources of finance. The second method of the financial
statement analysis is ratios calculation and interpretation. Many ratios, showing the relative
size of one number in relation to another exist, and being able to measure them and see their
dynamics over time is extremely useful in terms of understanding firm’s performance and
position.

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RATIO ANALYSIS

1. Liquidity Ratios: The most important group of ratios in terms of firm’s debt paying
ability. Includes the following ratios:

• Current Ratio: that indicates a firm's ability to pay its current liabilities from its
current assets.

• Quick Ratio: measuring how well a company can meet its short-term obligations
with its most liquid assets.

• Cash Ratio: showing how well a company can pay off its current liabilities with only
cash and cash equivalents.

Liquidity index, measuring the amount of time required to convert assets into cash.

2. Activity Ratios: These ratios are used to measure the efficiency of a company, describing
how well it uses the assets, leverage or other balance sheet items of that kind:

• Total Asset Turnover: measuring firm's ability to generate sales from its assets.
Working capital turnover, measuring the amount of revenue, generated by the
working capital.

• Accounts Receivable Turnover: which measures how many times during a period
the business can turn accounts receivable into cash.

• Accounts Payable Turnover: that measures how many times during a period a
company pays its suppliers.

• Inventory Turnover: (days inventory outstanding), indicating how many days it

usually takes a firm to turn its inventory into sales.

3. Profitability Ratios: This is a set of ratios, measuring the fundamental criteria of

company’s performance – the ability of a company to earn a profit. Most commonly used are
the following ratios:

• Net Profit Margin: measuring net income generated by 1 dollar of sales.

• Return on Equity: that measures the ability of a firm to generate profits from the
shareholders’ investments.

• Return on Assets: measuring the amount of income, generated by company’s assets

during the period.

25
4. Solvency Ratios: A set of ratios indicating firm’s ability to pay its debt. The long-term
debt-paying ability can be measured by the following ratios:

• Interest Coverage Ratio: measuring how many times a company could cover the
interest expense with its income.

• Debt Ratio: it indicates firm’s long-term debt-paying ability by comparing its total
liabilities to total assets.

• Capitalization Ratio: that is a measure of the company’s financial leverage. To

calculate it the long-term debt should be divided by total capital available.

• Debt to Equity Ratio: it compares the total debt of a company with the total
shareholders’ equity.

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 COMPARATIVE BALANCE SHEET

FINANCIAL STATEMENT OF GLENMARK

PHARMACEUTICALS COMPARATIVE
(All amounts in millions of Indian Rupees, unless otherwise stated) ANALYSIS

PARTICULARS 31-Mar-21 31-Mar-20

ASSETS

Non-current assets

Property, plant and equipment 14902.76 14688.16 1.46%

Capital work in progress 933.10 1524.97 -38.81%

Intangible assets 2322.15 1431.29 62.24%

Intangible assets under development 380.92 475.17 -19.84%

Financial assets

i. Investments 69899.48 47139.29 48.28%

ii. Loans 59307.01 71155.46 -16.65%

iii. Other financial assets 259.18 268.80 -3.58%

Deferred tax assets (net) 8532.94 8047.35 6.03%

Other non-current assets 546.50 546.53 -0.01%

Total non-current assets 157084.04 145277.02 8.13%

Current assets

Inventories 7623.87 8375.02 -8.97%

Financial assets

i. Trade recievables 24887.49 18352.40 35.61%

ii. Cash and cash equivalents 147.23 872.92 -83.13%

iii. Bank balances other than cash and cash
10.62 9.67 9.82%
equivalents
iv. Other financial assets 9986.25 11191.99 -10.77%

Other current assets 6435.70 5436.97 18.37%

Total current assets 49091.16 44238.97 10.97%

27
Total assets 206175.20 189515.99 8.79%

EQUITY AND LIABILITIES

EQUITY

Equity share capital 282.17 282.17 0.00%

Other equity 147812.89 131980.47 12.00%

Total equity 148095.06 132262.64 11.97%

LIABILITIES

Non-current liabilities

Financial liabilities

i. Borrowings 31125.78 31311.66 -0.59%

ii. Other financial liabilities 1920.89 2056.51 -6.59%

Total non-current liabilities 33046.67 33368.17 -0.96%

Current liabilities

Financial liabilities

i. Borrowings 5130.15 4425.97 15.91%

ii. Trade payables

ii. a.) Total outstanding dues of Micro
310.11 748.82 -58.59%
enterprises and Small enterprises
ii. b.) Total outstanding dues of other than
15916.61 1501.71 959.90%
Micro and Small enterprises
iii. Other current financial assets 1873.73 2035.95 -7.97%

Other current liabilities 471.81 388.25 21.52%

Provisions 1092.82 1024.04 6.72%

Current tax liabilities (net) 238.24 160.44 48.49%

Total current liabilities 25033.47 23885.18 4.81%

Total liabilities 58080.14 57253.35 1.44%

Total equity and liabilities 206175.20 189515.99 8.79%

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 COMMON SIZE BALANCE SHEET

FINANCIAL STATEMENT OF GLENMARK

PHARMACEUTICALS COMMON COMMON
(All amounts in million of Indian Rupees, unless otherwise SIZE SIZE
stated)
PARTICULARS 31-Mar-21 31-Mar-20 Year 2021 Year 2020

ASSETS

Non-current assets

Property, plant and equipment 14902.76 14688.16 7.23% 7.75%

Capital work in progress 933.10 1524.97 0.45% 0.80%

Intangible assets 2322.15 1431.29 1.13% 0.76%

Intangible assets under development 380.92 475.17 0.18% 0.25%

Financial assets

i. Investments 69899.48 47139.29 33.90% 24.87%

ii. Loans 59307.01 71155.46 28.77% 37.55%

iii. Other financial assets 259.18 268.80 0.13% 0.14%

Deferred tax assets (net) 8532.94 8047.35 4.14% 4.25%

Other non-current assets 546.50 546.53 0.27% 0.29%

Total non-current assets 157084.04 145277.02 76.19% 76.66%

Current assets

Inventories 7623.87 8375.02 3.70% 4.42%

Financial assets

i. Trade recievables 24887.49 18352.40 12.07% 9.68%

ii. Cash and cash equivalents 147.23 872.92 0.07% 0.46%

iii. Bank balances other than cash
10.62 9.67 0.01% 0.01%
and cash equivalents
iv. Other financial assets 9986.25 11191.99 4.84% 5.91%

Other current assets 6435.70 5436.97 3.12% 2.87%

Total current assets 49091.16 44238.97 23.81% 23.34%

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Total assets 206175.20 189515.99 100.00% 100.00%

EQUITY AND LIABILITIES

EQUITY

Equity share capital 282.17 282.17 0.14% 0.15%

Other equity 147812.89 131980.47 71.69% 69.64%

Total equity 148095.06 132262.64 71.83% 69.79%

LIABILITIES

Non-current liabilities

Financial liabilities

i. Borrowings 31125.78 31311.66 15.10% 16.52%

ii. Other financial liabilities 1920.89 2056.51 0.93% 1.09%

Total non-current liabilities 33046.67 33368.17 16.03% 17.61%

Current liabilities

Financial liabilities

i. Borrowings 5130.15 4425.97 2.49% 2.34%

ii. Trade payables

ii. a.) Total outstanding dues of
Micro enterprises and Small 310.11 748.82 0.15% 0.40%
enterprises
ii. b.) Total outstanding dues of other
15916.61 1501.71 7.72% 0.79%
than Micro and Small enterprises
iii. Other current financial assets 1873.73 2035.95 0.91% 1.07%

Other current liabilities 471.81 388.25 0.23% 0.20%

Provisions 1092.82 1024.04 0.53% 0.54%

Current tax liabilities (net) 238.24 160.44 0.12% 0.08%

Total current liabilities 25033.47 23885.18 12.14% 12.60%

Total liabilities 58080.14 57253.35 28.17% 30.21%

Total equity and liabilities 206175.20 189515.99 100.00% 100.00%

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 COMPARATIVE INCOME STATEMENT

STATEMENT OF PROFIT AND LOSS Comparative

PARTICULARS 31-Mar-21 31-Mar-20 P&L

INCOME

Revenue from operation 75679.33 67126.31 12.74%

Other income 3962.37 6067.88 -34.70%

Total income 79641.70 73194.19 8.81%

Expenses

Cost of materials consumed 26782.60 22519.81 18.93%

Purchases of stock in trade 3159.55 3652.41 -13.49%

Changes in inventories of finished goods, stock

52.40 487.68 -89.26%
in trade and work in progress

Employee benefits expenses 11073.96 10723.27 3.27%

Finance costs 2658.98 2563.90 3.71%

Depreciation and amortisation expense 1508.15 1385.38 8.86%

Other expense 15707.41 16700.84 -5.95%

Total expenses 60943.05 58033.29 5.01%

Profit before exceptional items and taxes 18698.65 15160.90 23.33%

Exceptional items- expenses/ income -738.92 -185.54 298.25%

Profit before tax 19437.57 15346.44 26.66%

Tax expense

Current tax 3436.18 2692.37 27.63%

Deferred tax -493.08 -891.41 -44.69%

Total tax expense 2943.10 1800.96 63.42%

Profit for the year 16494.47 13545.48 21.77%

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 COMMON SIZE INCOME STATEMENT

Common Common
STATEMENT OF PROFIT AND LOSS
size size

PARTICULARS 31-Mar-21 31-Mar-20 Year 2021 Year 2020

INCOME

Revenue from operation 75679.33 67126.31 100.00% 100.00%

Other income 3962.37 6067.88 5.24% 9.04%

Total income 79641.70 73194.19 105.24% 109.04%

Expenses

Cost of materials consumed 26782.60 22519.81 35.39% 33.55%

Purchases of stock in trade 3159.55 3652.41 4.17% 5.44%

Changes in inventories of finished
goods, stock in trade and work in
progress 52.40 487.68 0.07% 0.73%

Employee benefits expenses 11073.96 10723.27 14.63% 15.97%

Finance costs 2658.98 2563.90 3.51% 3.82%

Depreciation and amortisation expense 1508.15 1385.38 1.99% 2.06%

Other expense 15707.41 16700.84 20.76% 24.88%

Total expenses 60943.05 58033.29 80.53% 86.45%

Profit before exceptional items and
taxes 18698.65 15160.90 24.71% 22.59%

Exceptional items- expenses/ income -738.92 -185.54 -0.98% -0.28%

Profit before tax 19437.57 15346.44 25.68% 22.86%

Tax expense

Current tax 3436.18 2692.37 4.54% 4.01%

Deferred tax -493.08 -891.41 -0.65% -1.33%

Total tax expense 2943.10 1800.96 3.89% 2.68%

Profit for the year 16494.47 13545.48 21.80% 20.18%

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 RATIO ANALYSIS

1. LIQUIDITY RATIO

LIQUIDITY RATIO

Current Ratio 1.96

Quick Ratio / Acid Test Ratio 1.66

Cash Ratio 0.01

A liquidity ratio is a type of financial ratio used to determine a company’s ability to pay its
short-term debt obligations. Three liquidity ratios are commonly used – the current ratio,
quick ratio, and cash ratio. In each of the liquidity ratios, the current liabilities amount is
placed in the denominator of the equation, and the numerator is changed accordingly.

In current ratio, with current assets on top and current liabilities on the bottom, ratios above
2.0 are sought after. A ratio of 1 means that a company can exactly pay off all its current
liabilities with its current assets. A ratio greater than 1 (e.g., 2.0) would imply that a company
is able to satisfy its current bills. In fact, a ratio of 2.0 means that a company can cover its
current liabilities two times over and in above scenario we can say that the company can
cover its current liabilities 1.96 times.

The quick ratio measures a company's capacity to pay its current liabilities without needing to
sell its inventory or obtain additional financing. A result of 1 is considered to be the normal
quick ratio. It indicates that the company is fully equipped with exactly enough assets to be
instantly liquidated to pay off its current liabilities and in the Glenmark pharmaceutical Quick
ratio is 1.66 which means company can liquidate its asset quickly whenever in need.

The cash ratio is a liquidity measure that shows a company's ability to cover its short-term
obligations using only cash and cash equivalents. Ideally Cash Ratio is needed to be
maintained at 0.5 as compared to current liability but in this company, it is 0.01 which shows
that the company is somewhere short on cash and cash equivalent.

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 2. SOLVENCY RATIO

Solvency / Leverage Ratio

Debt- Equity Ratio 0.21

Debt to Asset Ratio 0.15

Interest Coverage Ratio 6.31

Debt Service Coverage Ratio 0.46

Solvency ratios are primarily used to measure a company's ability to meet its long-term
obligations. In general, a solvency ratio measures the size of a company's profitability and
compares it to its obligations.

Debt-Equity ratio tells you how much debt you have compared to equity. A ratio of 0.5
means that you have Rs. 0.50 of debt for every Rs. 1.00 in equity. Generally, lenders see
ratios below 1.0 as good and ratios above 2.0 as bad. Here in Glenmark it is 0.21 which
means company has very less debt compared to equity which is good for it.

If the debt-to-assets ratio is greater than one, a business has more debt than assets. If the ratio
is less than one, the business has more assets than debt. Higher the ratio higher riskier the
company is and in above scenario it is 0.15 which means company has very minimal debt
compared to its total assets.

The interest coverage ratio is a debt and profitability ratio used to determine how easily a
company can pay interest on its outstanding debt. Higher the ratio higher the interest paying
ability of the firm and Glenmark Pharmaceutical is doing good here also by 6.31 Interest
Coverage Ratio.

The debt-service coverage ratio (DSCR) is a measure of the cash flow available to pay
current debt obligations. A debt service coverage ratio of 1 or above indicates that a company
is generating sufficient operating income to cover its annual debt and interest payments. This
Ratio in Glenmark shows company is not in position to take additional debt.

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 3. ACTIVITY RATIO

Activity/ Turnover Ratio

Debtor Turnover Ratio 3.50

Asset Turnover Ratio 0.37

Inventory Turnover Ratio 9.46

Investment Turnover Ratio 1.08

Working Capital Turnover Ratio 3.15

Activity ratios are financial metrics used to gauge how efficient a company’s operations are.
The term can include several ratios that can apply to how efficiently a company is employing
its capital or assets.

The receivables turnover ratio is an accounting measure used to quantify a company's

effectiveness in collecting its accounts receivable, or the money owed by customers or
clients. Higher the ratio higher the quality customers and Glenmark has DTR of 3.50 which
indicates that company is receiving its sales proceeds easily.

Asset Turnover Ratio indicates how efficiently company assets are being utilized to generate
sales. A high ratio indicates that a company is using its total assets very efficiently or that it
does not own many assets, to begin with. A low ratio indicates that too much capital is tied up
in assets and that assets are not being used efficiently in generating revenue. In this company
we can see ATR at 0.37 which means company is not able to generate sales as compared to
its capital fixed in its assets.

Inventory turnover measures how many times in a given period a company is able to replace
the inventories that it has sold. A slow turnover implies weak sales and possibly excess
inventory, while a faster ratio implies either strong sales or insufficient inventory. Glenmark
has ITR of 9.46 which states that company is easily rotating its inventory in generating sales.

35
The investment turnover ratio is a financial tool used to determine how efficiently a company
is generating revenues using their debts and equity. This ratio provides insight for investors
on how effectively a company utilizes its resources to generate revenues. Glenmark has
Investment Turnover Ratio of 1.08 which states that company is able to generate its revenue
as equal as its capital employed.

Working capital turnover is a ratio that measures how efficiently a company is using its
working capital to support sales and growth. working capital turnover measures the
relationship between the funds used to finance a company's operations and the revenues a
company generates to continue operations and turn a profit. Glenmark has Working Capital
Turnover Ratio of 3.15 which shows company is somewhat effective in using its funds to
generate revenue.

36
 4. PROFITABILITY RATIO

PROFITABILITY RATIOS

Gross Profit Margin 94.83%

Net Profit Margin 21.80%

Earnings Per Share 58.46

Return on Capital Employed 13.13%

Return on Equity 268.20

Return on Net Worth 58.46

Profitability ratios assess a company's ability to earn profits from its sales or operations,
balance sheet assets, or shareholders' equity. Profitability ratios indicate how efficiently a
company generates profit and value for shareholders.

Gross profit margin is an analytical metric expressed as a company's net sales minus the cost
of goods sold (COGS). Gross profit margin is often shown as the gross profit as a percentage
of net sales. Here Glenmark has a GP Margin of 94.83% which is very high and shows that
the company is occurring very less cost on its sales.

The net profit margin, also known as net margin, indicates how much net income a company
makes with total sales achieved. A higher net profit margin means that a company is more
efficient at converting sales into actual profit. Glenmark has NP Margin of 21.80% which is
good but as compared to the GP Margin it is very low which company is spending very
heavily on the administration expenses.

Earnings per share (EPS) is a company's net income (or earnings) divided by the number of
common shares outstanding. EPS shows how much a company earns for each share and
Glenmark has EPS of 58.46 which means company is earning 58.46 Rupees per Share.

37
Return on Capital Employed (ROCE), a profitability ratio, measures how efficiently a
company is using its capital to generate profits. The return on capital employed metric is
considered one of the best profitability ratios and is commonly used by investors to determine
whether a company is suitable to invest in or not. Glenmark ROCE is 13.13% which means
company is able to generate only 13.13% of profit on its capital.

Return on equity (ROE) is a measurement of how effectively a business uses equity – or the
money contributed by its stockholders and cumulative retained profits – to produce income.
In other words, ROE indicates a company’s ability to turn equity capital into net profit.
Glenmark ROE is 268.20 which is very good and hence its equity utilization is good.

Your net worth is the amount by which your assets exceed your liabilities. In simple terms,
net worth is the difference between what you own and what you owe. Company’s RoNW is
58.46 which shows positive net worth and hence and company has good financial health.

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 DUPONT ANALYSIS

DuPont analysis is a useful technique used to decompose the different drivers of return on
equity (ROE). An investor can use analysis like this to compare the operational efficiency of
two similar firms. Managers can use DuPont analysis to identify strengths or weaknesses that
should be addressed.

While Profit Margin measures the profitability of a business, Asset Turnover shows how
efficiently the assets of the business are utilized to generate revenue. Financial Leverage
shows how is the business capitalized. In other words, financial leverage is a liquidity ratio
that shows how much of a businesses’ total capital is funded by shareholders and how much
by debt.

The formula used in DuPont Analysis is an expanded form of Return on Equity (ROE). The
Formula for Return on Equity is as follows:

ROE= Net Income / Shareholders Equity

As mentioned earlier, DuPont Analysis uses three factors to analyse the quality of a business;
Profit Margins, Asset Turnover and Financial Leverage.

The formula is as follows:

ROE= Profit Margin * Asset Turnover * Financial Leverage

If you expand each of the components of the above formula, this is something that you will
get.

As it is clear from the formula above, DuPont Analysis is simply an expansion of the ROE
formula. If you cancel the Net sales and Total Assets, you will get back the formula for ROE.

39
 DUPONT ANALYSIS

NET ASSET
FINANCIAL
COMPANIES PROFIT TURNOVER
LEVERAGE
ROE
MARGIN RATIO

GLENMARK
PHARMACEUTICAL
22% 0.37 1.39 11%

SUN PHARMA 16% 0.32 1.55 7%

From above data we can easily see that the Sun Pharma is more financially leveraged as
compared to Glenmark Pharmaceutical. Which means that Sun Pharma has lot of Debt on its
books as compared to Glenmark Pharmaceutical and it might create a situation for the
company if the margin reduces, company still has to pay debt obligation creating a trouble for
the company.

On the other side Net Profit Margin of the Glenmark Pharmaceutical is also higher than Sun
Pharma which states that the Glenmark Pharmaceutical is a best option for any Investor to
invest. Glenmark Pharmaceutical is easily able to generate the higher profits against each
sale.

Asset Turnover Ratio suggests that Glenmark Pharmaceutical is effectively using it assets in
generating sales as compared to the Sun Pharma.

At last ROE of Glenmark is higher than Sun Pharma which states Glenmark Pharma is
Overall performing better than the Sun Pharma and it will be the preference for any investor
to invest.

40
 FINDINGS

• The company has good Liquidity Ratios

• The company has less amount of debt
• Solvency Ratio of the company depicts the healthy financial position
• The company is effective in generating the sales
• The company has effectively utilized the capital and equity of the shareholders
• Profitability of the company is also very high
• The company’s Return on Equity is also very impressive
• Company’s loan has been reduced by 16.65% from the previous year
• Company’s 76.66% of capital is invested in the Total Non-Current Assets
• The company’s profit has been increased by 21.77% from the past year
• Revenue has been increased by 12.74% from past year

41
ANNEXURE

42
43
 BIBLIOGRAPHY
www.wikipedia.com

www.investopedia.com

https://glenmarkpharma.com/

www.google.com

www.studyfinance.com

www.corporatefinanceinstitute.com

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