Summer Internship Project a Study on

Valuation Using Fundamental Analysis Of Pharmaceuticals Sector

(Glenmark Pharmaceuticals Limited)
submitted for the partial fulfilment of the requirement of the degree
of

Post Graduation Diploma in Management (PGDM)

Approved by

All India Council of Technical Education (AICTE)

Submitted by

KARTHIK B AVAGHAN
Roll no.: PG04

Specialization: FINANCE

Submitted To

ATHARVA SCHOOL OF BUSINESS (ASB)

MALAD-MARVE ROAD, CHARKOP NAKA,
MALAD (WEST), MUMBAI 400095
 DECLARATION BY THE CANDIDATE

I Karthik B Avaghan hereby certify that the work which is being presented in
this Summer Internship Project Report entitled “Valuation Using
Fundamental Analysis Of Pharmaceuticals Sector” in partial fulfillment of
the requirement for the award of the Degree of Post Graduate Diploma In
Management and submitted to the Atharva School of Business Mumbai, is an
authentic record of my own work carried out during a period from 2 nd May
2023 to 31th July 2023, at Infinite Financial Services under the guidance of
Prof. Amrita Mathew.
The matter presented in this project report has not been submitted by me for
the award of any other degree at this or any other Institute. Wherever
references have been made to intellectual properties of any individual /
Institution /Government / Private / Public Bodies / Universities, research paper,
textbooks, reference books, research monographs, archives of newspapers,
corporate, individuals, business / Government, and any other source of
intellectual properties viz., speeches, quotations, conference proceedings,
extracts from the website, working paper, seminal work et al, they have been
clearly indicated, duly acknowledged and included in the Bibliography.

Name of the Student: Karthik B Avaghan

Signature of the Student:

This is to certify that the above statement made by the candidate is correct to the
best of our knowledge.

Signature of Faculty Mentor:

Name of Faculty Mentor: Prof. Amrita Mathew
 CERTIFICATE

This is to certify that Mr. Karthik B Avaghan is a bonafide student of the two-
year full-time Post Graduate Diploma in Management (PGDM), Finance, Roll
No. 04 of the institute. As a part of the All India Council of Technology
(AICTE) guidelines, the student has carried out the Summer Internship Project
“Valuation Using Fundamental Analysis Of Pharmaceuticals Sector” at
Infinite Financial Experts during the period from 02nd May 2023 to 31st July
2023 under my guidance in partial fulfillment of requirement for the completion
PGDM as prescribed by the All India Council of Technical Education (AICTE).
This Summer Internship Project Report is the record of authentic work carried
out by him during the period from May 2023 to July 2023.

Name & Signature Name & Signature

(Faculty Mentor) (Director)

Place:
Date:
 ACKNOWLEDGEMENT

I would like to convey my sincere appreciation to everyone who has helped this
project be completed with the highest precision, whether directly or indirectly. First
of all, I want to thank my mentor Prof. Amrita Mathew for her valuable advice, which
made it possible for me to finish this research. Next, I want to thank Mr. Sunny
Mondal for being my mentor, his excellent advice, and his unwavering support.
Chapter No. Details Page No.
Title
Declaration
Certificate by the
Company
Certificate by the
Institute
Acknowledgement
1.0 INTRODUCTION 6-23
1.1 Basic Theoretical
concepts
1.2 Literature Review
1.3 Significance of the
study
1.4 Statement of the
Problem
1.5 Objectives of lead
generation in Real
estate
1.6 Research hypothesis
1.7 Scope of the study
2.0 PROFILE OF THE 24-38
ORGANIZATION
2.1 Name of the company
2.2 Vision & Mission of
the organization
2.3 About the company
2.4 Swot Analysis
2.5 Current status of the
company
2.6 Organizational chart of
the company
2.7 Any special award to
the organization
3.0 RESEARCH & 39-40
METHODOLOGY
4.0 Bibliography 41
5.0 Conclusion & 42
Recommendations
 1. INTRODUCTION

1.1 Background

A major player in the international healthcare sector is the Indian multinational

pharmaceutical corporation Glenmark Pharmaceuticals Limited. As a manufacturer of
generic drugs and active pharmaceutical ingredients (APIs), Gracias Saldanha founded the
business in 1977. Since then, the company has expanded its product line to include branded
and specialty pharmaceuticals, concentrating on therapeutic fields like dermatology,
respiratory, oncology, and cardiovascular.

The pharmaceutical industry is distinguished by its crucial contribution to furthering medical

knowledge, offering cutting-edge therapies, and meeting a variety of medical demands on a
global scale. Understanding the real worth of businesses like Glenmark Pharmaceuticals is
essential for investors and analysts alike in this highly competitive and regulated sector.
Stakeholders may evaluate the company's financial health, growth potential, and risk
concerns using fundamental analysis, which helps them make wise investment decisions.

A thorough review of a company's financial statements, important financial statistics, growth

drivers, and competitive positioning is included in fundamental analysis. In order to
determine Glenmark Pharmaceuticals' potential for future growth, this study looks at the
company's revenue sources, profit margins, R&D projects, and therapeutic pipeline.

The firm's intellectual property rights (IPRs) and regulatory clearances, which give its unique
goods competitive advantages and market exclusivity, are also linked to its performance. The
dynamic nature of the pharmaceutical industry and the constantly changing regulatory
environment, however, make a thorough comprehension of these elements necessary
during the valuation process.
In conclusion, evaluating a valuation of Glenmark Pharmaceuticals Limited using
fundamental analysis necessitates a careful investigation of its financial performance,
growth prospects, and strategic positioning within the pharmaceutical industry. This history
gives the reader perspective for appreciating the importance of basic analysis in making wise
investment choices in this crucial and dynamic sector.

1.2 Need and Significance of the Study

For many stakeholders, including investors, financial analysts, and policymakers, the study of
value utilising fundamental analysis of the pharmaceuticals industry, with a focus on
Glenmark Pharmaceuticals Limited, is extremely important and relevant. This study's
importance may be summed up as follows:

1. Making Well-Informed Investment Decisions:

A thorough insight of Glenmark Pharmaceuticals' financial situation, future growth

possibilities, and competitive positioning is provided through fundamental analysis. This
information is essential for investors to make educated choices about buying the company's
stocks or bonds and to choose the best times to enter and exit the market.

2. Risk assessment:

The pharmaceutical industry is vulnerable to a number of hazards, including those related to

clinical trial results, patent expirations, and regulatory clearances. Investors may evaluate
and quantify these risks by conducting a detailed fundamental research of Glenmark
Pharmaceuticals, which enables them to control and reduce possible losses.

3. Sector-Specific Insights:
The pharmaceutical business is characterised by distinctive characteristics, including
protracted drug development cycles, high R&D costs, and patent protection. Researchers can
acquire sector-specific insights that lead to a greater knowledge of the industry by examining
the valuation of Glenmark Pharmaceuticals in this context.

4. Strategic Planning for the Company:

The management of Glenmark Pharmaceuticals uses fundamental analysis to pinpoint

opportunities for development and create plans to improve financial performance. They may
allocate resources more effectively and give the initiatives with the best returns the greatest
priority by comprehending the factors that influence their company's worth.

5. Regulation and Policy Implications:

Policymakers might gain from research on pharmaceutical sector valuation since it reveals
the economic benefits and difficulties of the business. Understanding the variables that
affect a company's value, such as Glenmark Pharmaceuticals', may help policymakers make
decisions that support innovation, healthcare access, and the industry's long-term
sustainability.

6. Academic Contributions:

The valuation research in the pharmaceutical industry adds to the corpus of

knowledge. Researchers can improve financial knowledge and procedures for
evaluating enterprises in this particular market by examining various valuation
models, variables impacting values, and their ramifications.

1.3 Nature and Scope for the Study

Due to the complexity and importance of the pharmaceutical business, the study of
fundamental analysis-based valuation in the pharmaceutical sector, with a special focus on
Glenmark Pharmaceuticals Limited, has a broad character and breadth. The following
summarises the nature and scope of this study:

1. Financial Analysis and Performance Evaluation: Glenmark Pharmaceuticals' historical

financial performance, revenue growth, profitability, and efficiency are all examined in-depth
in this study's financial analysis. Researchers can assess a company's financial health and
spot trends and patterns in its financial statements by examining important financial ratios
and indicators.

2. Growth Prospects and Pipeline Analysis: A key component of the study is understanding
Glenmark Pharmaceuticals' medication development pipeline and growth prospects.
Researchers look at how much money the firm invests in R&D, how far down the medication
pipeline it is, and how these medicines could affect future income streams.

3. Impact of Intellectual Property Rights and Regulatory Approvals: The study investigates
the importance of IPRs and regulatory approvals on the value of Glenmark Pharmaceuticals.
In order to ascertain how the company's patent portfolio, exclusive rights, vulnerability to
patent expirations, and risk of generic competition would affect the company's competitive
position and growth potential.

4. Risk Assessment and Mitigation: The research includes a thorough analysis of the risks
that Glenmark Pharmaceuticals must deal with, including commercial, operational, and
regulatory concerns. To protect the company's financial performance and investors'
interests, researchers identify risk factors and provide measures for risk mitigation.
5. Sector-wide perspective and comparative analysis: Glenmark Pharmaceuticals'
performance is compared to those of its competitors in the industry as part of the study's
nature. In order to understand the business's relative performance and competitive
advantages, it requires comparing the financial indicators and value of the company to those
of other pharmaceutical companies.

6. Investment Decision-Making: The study's scope includes assisting stakeholders'

investment decision-making. Investors, analysts, and financial institutions can make wise
choices about Glenmark Pharmaceuticals' stocks, bonds, or other financial instruments
thanks to the useful information provided by fundamental analysis.

7. Policy Implications and Industry Insights: The research makes contributions to larger
policy implications and industry insights in addition to its company-specific focus.
Researchers can pinpoint the pharmaceutical industry's economic benefits and suggest
legislative changes to promote expansion, innovation, and healthcare accessibility.

1.4 Research Problem

Finding the company's intrinsic worth and assessing its investment potential is the research
topic of the study of valuation using fundamental analysis of Glenmark Pharmaceuticals
Limited in the pharmaceutical industry. The primary research questions that this project
seeks to answer are as follows:

1. Financial Performance Evaluation: What are the most important financial statistics and
indicators that represent Glenmark Pharmaceutical’s financial health, and how has the
company performed financially over the past few years?
2. Growth Prospects and Drug Development Pipeline Analysis: What potential does
Glenmark Pharmaceuticals' drug development pipeline have, and how does it factor into the
company's projected future growth?

3. What effects do Glenmark Pharmaceuticals' intellectual property rights and regulatory

clearances have on the company's competitive positioning and market exclusivity?

4. What are the main hazards that Glenmark Pharmaceuticals is exposed to, and how can
the firm successfully minimise these risks?

5. Comparative analysis and sector-wide perspective: How do Glenmark Pharmaceuticals'

financial results and value stack up against those of its competitors?

1.5 Research Question

The following is the research question for the examination of Glenmark Pharmaceuticals
Limited's value utilising fundamental analysis in the pharmaceutical industry:

What is Glenmark Pharmaceuticals Limited's intrinsic value, and how does fundamental
analysis help determine its potential as an investment in the pharmaceutical sector?

The purpose of this research topic is to examine how Glenmark Pharmaceuticals is valued
utilising basic analytical methods. It aims to comprehend the aspects of the business that
affect intrinsic value, such as its financial performance, growth potential, intellectual
property rights, and regulatory environment. The research will examine the role that
fundamental analysis plays in determining a company's financial stability and market
position, spotting possible hazards, and gauging its all-around investment appeal.
1.6 Aims and Objectives of Study

The following are the goals and objectives of the research of Glenmark Pharmaceuticals
Limited's valuation utilising fundamental analysis in the pharmaceutical industry:

Aims:

1. The main goal of this study is to use fundamental analysis to ascertain the intrinsic value
of Glenmark Pharmaceuticals Limited. The research aims to determine the underlying value
of the firm by examining its financial statements, growth prospects, and competitive stance.

2. To evaluate Glenmark Pharmaceuticals' investment potential in the pharmaceutical

industry is one of the study's secondary objectives. The research attempts to offer insights
into the company's desirability as an investment opportunity by assessing its financial
health, pipeline of medication prospects, and intellectual property rights.

Objectives:

1. Conduct a financial analysis to assess the performance and health of Glenmark

Pharmaceuticals' finances by examining its financial statements and important financial
measures.

2. Analyse Future Revenue Streams and Growth Opportunities: To determine the potential
of the company's drug development pipeline and its effects on prospective future revenue
sources.
3. Consider the impact of regulations and intellectual property rights: to comprehend the
impact of governmental clearances and intellectual property rights on the company's
competitive position and market exclusivity.

4. To identify the main risks that Glenmark Pharmaceuticals is facing and to provide ways for
mitigating those risks.

5. Conduct a comparative analysis to evaluate and compare Glenmark Pharmaceuticals'

financial performance and valuation to those of its competitors.

6. Insights for Decision-Making: To offer insightful information that will help investors,
financial analysts, and policymakers decide on investments in the pharmaceutical industry
and Glenmark Pharmaceuticals Limited.

1.7 About the Company

A well-known Indian multinational pharmaceutical business with a large position in the

global healthcare sector is Glenmark Pharmaceuticals Limited. The business was first
established in 1977 by Gracias Saldanha as a maker of generic medications and APIs.
Glenmark Pharmaceuticals has developed its product line throughout time to include
branded and speciality drugs, becoming as a major participant across a range of therapeutic
areas.

Glenmark Pharmaceuticals, an international company with its headquarters in Mumbai, sells

its goods in more than 80 nations. A wide range of medical demands are met by the
company's diversified product portfolio, which covers dermatology, respiratory, cancer,
cardiovascular, and other therapeutic areas.
Due to Glenmark Pharmaceuticals' dedication to research and development, a strong
medication development pipeline with a focus on both unique and distinctive
pharmaceuticals has been created. The business has a solid reputation in the pharmaceutical
industry because to its creative strategy and concentration on quality and compliance.

Investors and financial experts actively monitor Glenmark Pharmaceuticals' financial

performance because it is a publicly traded corporation. Using fundamental analysis, it is
important to consider the company's growth potential, intellectual property rights,
regulatory approvals, and competitive positioning.

1.8 Scheme of Chapters

The following chapters can be used to organise the study of Glenmark

Pharmaceuticals Limited's value using fundamental analysis in the pharmaceutical
industry:

Introduction

Gives a general description of the study's importance, goals, and research subject.

Literature Review

Focuses on Glenmark Pharmaceuticals while reviewing the body of knowledge and

research on valuation in the pharmaceutical industry. examines the approaches,
difficulties, and variables taken into account in fundamental analysis for
pharmaceutical corporations.
Company Overview

Provides a thorough overview of Glenmark Pharmaceuticals, including information

about its background, business structure, therapeutic areas, and global reach. reveals
information about its product line and market positioning.

Analysis of Financial Performance

Evaluates key financial ratios and indicators by doing a thorough examination of

Glenmark Pharmaceuticals' financial statements in order to determine the company's
performance and overall health.

Evaluation of Growth Prospects and the Pipeline

Analyses the stage of development, therapeutic emphasis, and possible commercial

effect of Glenmark Pharmaceuticals' medication development pipeline. evaluates the
potential for the company's growth based on its R&D efforts.

Impact of Intellectual Property Rights on Regulation

Investigates the importance of Glenmark Pharmaceuticals' intellectual property

rights, such as patents and regulatory exclusivities, and their impact on the firm's
competitive position and market exclusivity.

Risk Evaluation and Mitigation Techniques

Identifies and assesses the main risks that Glenmark Pharmaceuticals must deal with,
including market, operational, and regulatory risks. offers risk-reduction techniques
to protect the business's financial success.
Estimating intrinsic value using valuation models

Explains the many valuation models and methods used to calculate the intrinsic value
of Glenmark Pharmaceuticals. evaluates many methods, including the Discounted
Cash Flow (DCF) model, in order to get at a valuation.

Comparative Evaluation and Sector-Level View

Compares Glenmark Pharmaceuticals to its competitors in the market, looking at

their financial results, valuation multiples, and positioning.

Making Investment Decisions and the Verdict

Summarises the study's findings and offers guidance for Glenmark Pharmaceuticals
and the pharmaceutical industry as a whole in making investment decisions.
reiterates the study's relevance and possible ramifications as it comes to a close.

2. LITERATURE REVIEW
2.1 About the Industry

In the lead of improving global healthcare is the pharmaceutical sector, which includes
businesses like Glenmark Pharmaceuticals Limited. The industry's main activities include the
creation, production, and distribution of pharmaceutical goods, such as medications,
vaccines, and medical equipment that are used to identify, treat, and prevent illnesses.

The pharmaceutical industry is essential to raising living quality and advancing human
health. It is propelled by ongoing efforts in innovation, research, and development to
introduce fresh, efficient therapies to the market. Oncology, cardiovascular illness,
respiratory disorders, central nervous system disorders, immunology, and infectious diseases
are some of the industry's key therapeutic specialties.

The incidence of illnesses, ageing populations, rising healthcare costs, as well as

developments in biotechnology and precision medicine, all have an impact on the industry's
growth. The dynamics and competitive landscape of the sector are also greatly impacted by
shifting regulatory environments, patent expirations, and the growing emphasis on
personalised treatment.

With its cutting-edge medications, biosimilars, and other medical solutions, Glenmark
Pharmaceuticals Limited thrives in this dynamic environment and contributes to the
pharmaceutical industry. Glenmark Pharmaceuticals is a worldwide player who competes
against other domestic and foreign businesses in addition to the world's largest
pharmaceutical corporations.

The pharmaceutical industry is subject to rigorous regulations and intellectual property

protections, with patents serving as a key mechanism to protect innovations and incentivize
research and development. This regulatory environment significantly influences the
industry's investment climate, market access, and profitability.

Given the industry's complexities and its direct impact on public health, the study of
valuation using fundamental analysis of Glenmark Pharmaceuticals Limited in the
pharmaceutical sector is essential for investors, analysts, policymakers, and industry
stakeholders. Understanding the factors influencing the valuation of pharmaceutical
companies aids in making well-informed decisions, shaping policies, and fostering
sustainable growth in the sector.

2.2 Review of Opportunities and Challenges in the Industry

The pharmaceutical industry, which includes businesses like Glenmark Pharmaceuticals

Limited, offers a variety of possibilities and difficulties that have a big impact on the
development and valuation of the sector. An examination of these chances and difficulties
reveals the pharmaceutical industry's dynamic character and its consequences for basic
analysis and investment choices.

Opportunities:

Rapid technological advancements: Opportunities for the development of novel

pharmaceuticals and personalised medicine are provided by advances in biotechnology,
genetics, and data analytics, which help pharmaceutical companies boost their revenue and
stand out in the market.

Growing Global Healthcare Spending: A wider market for pharmaceutical goods is created by
rising healthcare spending, particularly in emerging nations, giving businesses like Glenmark
Pharmaceuticals the chance to grow their market penetration and boost their sales.
Demand for Pharmaceutical Treatments for Chronic Diseases: Companies with a strong
portfolio in these therapeutic areas benefit from the continuous demand for pharmaceutical
treatments due to the increased prevalence of chronic diseases including diabetes,
cardiovascular disease, and cancer.

Investments in Research and Development: Pharmaceutical firms' R&D spending results in

the creation of innovative medications, biosimilars, and specialised treatments, all of which
have the potential to become profitable, patent-protected goods with expanded market
share.

Challenges:

Regulatory Obstacles: The pharmaceutical sector must adhere to strict regulatory clearance
procedures and compliance standards, which causes delays in the release of new
medications and higher prices.

When the patents on popular medications expire, generic competitors enter the market,
which affects pharmaceutical firms' market share and earnings.

Rising Research and Development Costs: Pharmaceutical businesses have financial

difficulties as a result of the high R&D costs associated with developing new treatments and
gaining regulatory clearances.

Clinical studies have inherent risks, and negative results may force the withdrawal of
treatment candidates, wasting resources and squandering investment possibilities.
The pharmaceutical sector is subject to rising pricing pressure, particularly in public
healthcare systems, and access problems in emerging regions, which have an impact on
revenue potential.

2.3 Literature review related to your topic

Fundamental Analysis of Indian Pharmaceutical Companies by (Dr. Ashok

Kumar Panigrahi)

The earning potential of a firm is taken into account when estimating a stock's true value.
This earning potential is dependent on the investing environment, as well as aspects related to
the industry, competition, management calibre, operational effectiveness, profitability, capital
structure, and dividend policy. Many investors choose their investments based on
fundamental analysis, and they decide whether to purchase or sell using technical analysis. It
has to do with determining whether or not a company's present market price is fair—that is,
whether it is overpriced or underpriced—by looking at its inherent value. In order to select
shares that will beat the market and deliver steady profits to the investor, it is thought that
analysis of the economy, strategy, management, product, and other relevant information
would be helpful.

It is the investigation of the underlying factors that have an impact on the interests of the
economy, industry, and businesses. In this case, an effort has been made to analyse the
fundamental analysis by looking at the financial performance of 10 chosen Pharma and
Healthcare firms using various statistical methodologies. The top-ranked firm is Torrent
Pharmaceuticals, with Piramal coming in second.

Fundamental Analysis of Pharmaceutical Companies by (Ritika Goel)

"Not knowing what you're doing increases risk." The major inspiration for this study comes
from these straightforward yet impactful statements of the great investor Warren Buffett. This
essay is intended to assist everyone familiar with and interested in stock market investments
in taking the first step up the ladder to a more promising financial future. Investing is by no
means an easy procedure. The basic study of 17 pharmaceutical businesses competing on a
worldwide scale is the main topic of the article. The primary classification utilised to group
the businesses was the kind of medications they produce, including branded, generic, and
oncogenic. The businesses were picked based on their top revenue figures within this wide
category. In order to identify which stock is rising to the top of the market in the relevant
industry based on both macroeconomic and microeconomic aspects, the study takes into
account 14 significant fundamental ratios. Other industries' investment possibilities can be
determined using these ratios.

Valuation Using Fundamental Analysis Of Pharmaceuticals Sector by (Dr.

Prasad Chundi, K. Mounika)

The most well-known multiplier commonly employed to price stocks in practise is the price-
to-earnings ratio (P/E). Although that is backed by evidence from exercise, there is no
evidence from studies to support the use of the P/E ratio. The accuracy of the P/E ratio and
the five most common multiples in evaluating the stocks of South African firms listed on the
JSE Securities Exchange from 1988 to 2007 is examined in this article. The results of the
study demonstrated that for specialised sectors, particular multiples must be used instead of
the P/E ratio since it no longer provides the most accurate analysis across all industries. By
using multiples other than the P/E ratio, it may be possible to improve the accuracy of
fairness valuation based largely on multiples. With the help of American investor Philip A.
Fisher, who is regarded as one of the founders of the qualitative equity valuation model, this
paper proposes the use of numbers, mathematical formulas, and more traditional quantitative
factors inside the qualitative equity valuation version.

An Empirical Study of Pharmaceutical Sector in India by (Dr. Manjula Shastri)

Due to the low cost of labour in India, big international corporations with operations there
mostly run and control the Indian pharmaceutical industry. There aren't many pharmaceutical
firms that are only based in India. More than 20,000 licenced medicine producers in India
sold formulations and bulk medications worth $9 billion in 2002. Over 60% of the bulk
pharmaceuticals were shipped, mostly to the US and Russia, while 85% of these formulations
were marketed in India. The majority of market participants are small to medium-sized
businesses, while the top 250 firms account for 70% of the Indian market. The analysis aids
in locating the effective stocks among the industry leaders. In order to arrive at the
conclusions, the performance of the stocks will be examined using historical price
movements for technical and fundamental methodologies. Investors who use fundamental
and technical research can assess a security's effectiveness and forecast future moves.

Valuation of Indian Companies – An Analytical Perspective by (B Rajesh

Kumar)

The analytical valuation viewpoint of Indian enterprises is the main topic of this study report.
Based on total revenues during the previous 10 years (1997–2006), five top corporations from
each of these areas were chosen. These top five businesses in each industry were chosen from
a sample of 8500 businesses overall. Eight financial metrics were used to appraise the firms.
With three businesses from each area included in the top ten list, the infrastructure and
information technology sectors had the greatest average sales growth rates. For the previous
ten years, Idea Cellular's revenues have grown at the fastest average pace. In terms of average
market capitalization, ONGC was the most valuable firm, followed by Reliance Industries
Ltd. and Hindustan Lever Ltd. TCS is the most valued firm according to the Tobin q ratio,
followed by Infosys, Wipro, and Satyam. According to the regression analysis, a company's
worth is correlated favourably with asset and sales growth. The value of a company will
decrease as its capital structure's debt component increases.

Determinants of Relative Valuation in Different Industry Sectors—An

Empirical Study by (B. Rajesh Kumar)

The purpose of this essay is to identify the underlying causes of distinct relative value
multiples across various industrial sectors. It is based on a survey of 189 businesses across
seven market segments. The study determines the determining factors for the most popular
earnings, revenue, and book value multiples by regression analysis: P/E ratios, enterprise
value to EBITDA multiple, and price to book multiple. Furthermore, we discover that the
impact of dividend disbursements on valuation multiples varies across industries.
 INTRODUCTION

The pharmaceuticals industry is crucial to the global economy because it

satisfies the rising demand for medical supplies and services. Pharmaceutical
businesses devote a significant amount of money to creating novel medicines,
running clinical trials, and securing regulatory clearances, making it one of the
most research-intensive sectors. Accurately estimating the intrinsic value of
pharmaceutical firms is crucial for investors and other stakeholders in this
industry to make wise investment choices and determine the general health of
the sector.

Calculating a company's or industry's genuine value while taking into

consideration its operational and financial fundamentals is the process of
valuation. In order to arrive at a fair value, fundamental analysis, a widely-used
method in valuation, including a thorough assessment of a company's financial
statements, earnings, cash flows, and other crucial indicators. Fundamental
analysis offers useful insights into the performance, future growth prospects,
and competitive positioning of specific pharmaceutical businesses when used in
the pharmaceuticals industry.

This review of the literature focuses on the issue of "Valuation Using

Fundamental Analysis of Pharmaceuticals Sector," covering the many
approaches, elements, and difficulties involved in valuing pharmaceutical firms.
Investors, financial analysts, and researchers who comprehend the nuances of
fundamental analysis in the context of this dynamic business will be better able
to manage the difficulties associated with valuing pharmaceutical companies.

One of India's key sectors is the manufacture of medicines, which anticipates

recording strong results in the next several years. In India, pharmaceutical
businesses produced more than $20 billion in sales overall in the most recent
fiscal year. By 2017, that figure is anticipated to surpass $26 billion. In India,
the pharmaceutical sector ranks third in terms of volume. In an era of ageing
populations, growing healthcare expenses, and the continual discovery of new,
highly lucrative medications, pharmaceutical firms have been the dominant
participants in the health care sector. As a result, buying stocks and other
financial instruments from pharmaceutical businesses appears to be a wise
investment.

An asset or thing is considered an investment if it is bought with the expectation

that it may one day produce income or increase in value. A purchase of
commodities that are not used right now but will be utilised to generate wealth
down the road is referred to as an investment in the economic sense. It is
primarily done to assure safety and act as an inflation hedge. Investing in all
kinds of assets is a fascinating hobby that draws individuals from all walks of
life, regardless of their profession, economic situation, level of education, or
family history. Stocks are a special type of investment since they give us a little
stake in a business.

As a result, the returns might be higher and they have a track record of being
wise investments for our money. Securities investments may be both rewarding
and exciting. It is gratifying, but it comes with a lot of danger and need accurate
information in addition to creative talent. Both logical and emotional responses
are present in these investments. One of the riskiest and most profitable
investing options is the purchase of financial assets. Investors have a wide range
of alternatives at their disposal, including mutual funds, shares, fixed income
securities like bonds, and bank deposits. The best option will rely on the stocks'
risk and return characteristics. Therefore, before making an investment, an
investor should consider the risk, return, and performance of the potential
investment. Given these circumstances, risk return analysis and security
analysis are now more important than ever.

An essential component of investment decision-making is valuation, which is

made more difficult by the pharmaceutical industry's special features.
Pharmaceutical firms must have their financials, upcoming medicines, clinical
trial results, regulatory environment, and intellectual property rights thoroughly
analysed in order to be valued.

This in-depth examination investigates how to value pharmaceutical firms using

basic analysis. In order to determine the intrinsic value of pharmaceutical
companies, it digs into the numerous procedures and approaches used by
analysts and investors. We seek to give a full grasp of the complexities and
difficulties involved in valuing pharmaceutical firms by reviewing the literature
and research in this field.

Overview of the Pharmaceutical Sector

An overview of the pharmaceutical industry, its historical growth, and its place
in the world of healthcare will be given in this section. We'll talk about the key
participants in the market, the many kinds of businesses that are out there (big
pharmaceutical corporations, biotechnology businesses, generic medication
producers, etc.), as well as the possibilities and problems they confront.

Importance of Fundamental Analysis in the Pharmaceutical Sector

A key component of investment analysis, fundamental analysis seeks to

determine the inherent worth of a firm by analysing its financial statements,
management, competitive positioning, and market developments. We will go
through the importance of basic analysis in the pharmaceutical industry in this
section. We'll go into great depth about elements including the protracted and
expensive drug development process, the effect of regulatory decisions on a
company's success, and the function of intellectual property rights.

Key Financial Ratios and Pharmaceutical Valuation Indicators

The primary financial measurements and indicators that are frequently

employed in evaluating pharmaceutical firms will be the subject of this section.
The price-to-earnings (P/E), price-to-sales (P/S), price-to-book (P/B), and return
on equity (ROE) ratios will all be covered. We will also look at particular
metrics that are pertinent to the pharmaceutical industry, such as the success rate
of clinical trial medications and the proportion of revenue spent on research and
development (R&D).

The Importance of IP Rights in Pharmaceutical Valuation

In the pharmaceutical industry, intellectual property rights (IPRs) are crucial

because they safeguard the significant expenditures made in medication
development and research. This section will look at how regulatory
exclusivities, trademarks, and patents affect a pharmaceutical company's
valuation. A company's financial performance will also be examined in relation
to the difficulties presented by patent expirations and generic competitors.

Pharmaceutical Valuation Models and Techniques

The numerous valuation models and methods used in the pharmaceutical

industry will be presented in this section. We will go into depth about the
Discounted Cash Flow (DCF) model, which is a popular method for
determining a company's intrinsic value based on anticipated future cash flows.
We'll also look at several additional methods, such the Precedent Transaction
Analysis (PTA) and Comparable Company Analysis (CCA), and talk about
whether they're appropriate for valuing pharmaceuticals.

Considering Risk When Valuing Pharmaceuticals

Pharmaceutical company valuation includes managing a great lot of uncertainty
and risk because of things like legal requirements, results of clinical trials, and
rivalry. This section will look at sensitivity analysis, scenario analysis, and
Monte Carlo simulations as tools for evaluating risk and incorporating it into the
valuation process.

Case Studies and Experimental Data

The case studies and empirical research on valuing pharmaceutical firms using
fundamental analysis are presented in this part. We may learn more about the
merits of alternative valuation strategies and the difficulties the pharmaceutical
industry faces by examining examples from real-world situations.

Modern Pharmaceutical Valuation Trends

New trends and innovations in the pharmaceutical business have a substantial

influence on company values. This section will examine recent developments
including gene treatments, precision medicine, and the effect of digital health
technology on pharmaceutical values.

Fundamental Analysis and Valuation

Fundamental Analysis:
A thorough strategy called fundamental analysis entails assessing a wide range
of financial and non-financial elements that might affect a company's
performance and value. The following essential components of basic analysis
are frequently present in the pharmaceuticals sector:

a. Financial Statements Analysis: Assessing the company's revenue, spending,

assets, liabilities, and cash flow patterns by looking over the income statement,
balance sheet, and cash flow statement. Understanding the financial health of
the business is made easier by analysing financial measures including
profitability ratios (e.g., gross profit margin, net profit margin), liquidity ratios
(e.g., current ratio, quick ratio), and leverage ratios (e.g., debt-to-equity ratio).

b. Revenue Growth and Product Pipeline: Examining the company's history

and anticipated revenue growth. assessing the company's product development
pipeline, current research and development (R&D) initiatives, and the market
potential for novel medications.

c. Earnings and EPS Growth: Examining the evolution of the company's

earnings and earnings per share (EPS). For investors, steady and consistent
profits growth is a good sign.

d. Regulatory Environment: Evaluating how the company's performance and

value will be affected by regulatory approvals, changes in healthcare
regulations, and patent expirations.
e. Competitive Analysis: Knowing the company's market share in the
medicines industry and the competitive environment. assessing the company's
entry hurdles and competitive advantages.

f. Management and Governance: Assessing the management team's skill and

expertise as well as the efficiency of the company's corporate governance
procedures.

2. Valuation Methods:

The intrinsic value of pharmaceutical enterprises is estimated using a variety of

valuation techniques. Typical methods of appraisal include:

a. Discounted Cash Flow (DCF) Analysis: The DCF analysis calculates the
present value of anticipated future cash flows produced by the business. This
approach accounts for the time worth of money and potential future growth.

b. Price to Earnings Ratio (P/E) P/E ratio: The P/E ratio evaluates the stock
price to the earnings per share (EPS) of a firm. Investors can use this
information to determine if a stock is overpriced or undervalued in relation to its
profits.

c. Price-to-Sales (P/S) ratio. P/S ratio: This ratio contrasts the stock price of a
firm with its earnings per share. When earnings are unstable or negative, this
ratio is helpful.
d. Pricing to Book (P/B) P/B ratio: This ratio evaluates the stock price in
relation to the book value per share of the firm. It shows if the stock is selling
for more than or less than its net asset value.

e. Comparable Company Analysis (CCA): To evaluate comparable valuation,

CCA compares the company's valuation multiples (P/E, P/S, and P/B) to those
of its industry peers.

3. Valuation Methods in Pharmaceuticals Sector

The intrinsic worth of businesses working in the pharmaceuticals sector is
calculated using a variety of valuation techniques. The many financial and
operational facets of pharmaceutical enterprises are taken into consideration by
these appraisal techniques. In the pharmaceutical industry, some of the crucial
valuation techniques include:

a. Dividend Discount Model (DDM): The DDM is a stock valuation technique

that gauges a company's stock's intrinsic value based on anticipated future
dividends. For pharmaceutical businesses that continuously distribute dividends
to their shareholders, this strategy is especially pertinent.

b. Profits Growth Models: Depending on the predicted future rates of an

organization's profits growth, several earnings growth models, such as the
Gordon Growth Model, can be used to calculate the value of a pharmaceutical
firm.
c. Market Multiple Valuation: This technique entails comparing the financial
indicators of the firm being assessed to the market-average valuation multiples
of pharmaceutical companies that are publicly listed. It offers an instant
assessment of the company's value based on current market trends.

d. Earnings Per Share (EPS) Valuation: The emphasis of this method is on

valuing pharmaceutical companies according to their profits per share (EPS).
The estimated EPS is multiplied by a reasonable price-to-earnings (P/E) ratio to
arrive at the valuation.

e. Transaction Multiples: This strategy bases value on current mergers and

acquisitions or other pharmaceutical sector activities. The multiples observed in
these transactions (such EV/EBITDA or EV/Sales) are applied to the financial
parameters of the firm being evaluated.

f. Sum-of-the-Parts worth: SOTP valuation includes assessing each section or

business unit of a diversified pharmaceutical firm independently before
combining them to determine the total worth of the organisation. When a
pharmaceutical business has several activities or subsidiaries with various
growth possibilities and risk profiles, this approach might be helpful.

g. Asset-Based Valuation: Asset-based valuation focuses on determining the

net asset value of the business while taking into account both tangible assets
(like real estate, machinery, and equipment) and intangible assets (like goodwill,
intellectual property, and patents). For pharmaceutical firms with important
patents and intellectual property, this strategy is especially pertinent.
4. Factors Affecting Valuation in Pharmaceuticals Sector

Like in any other business, a number of factors affect the pharmaceuticals

sector's valuation. The inherent worth of a firm may be ascertained through
fundamental research by looking at its financials, market movements, and
overall economy. The following elements are key in establishing valuation when
doing fundamental analysis on the pharmaceuticals industry:

a. Revenue and profit Growth: Pharmaceutical firms with steady revenue and
profit growth are typically seen as having a higher market value. A company's
ability to maintain steady growth is a sign of a healthy market for its products,
successful R&D initiatives, and successful marketing tactics.

b. Medication Pipeline: A pharmaceutical company's worth is heavily

influenced by the quality and promise of its medication pipeline. Companies
with a strong pipeline of prospective pharmaceuticals are more likely to see
future revenue growth, which will be good for their price.

c. Intellectual property and patents: For a certain amount of time, patents

shield an organization's cutting-edge medications from rivalry. Strong patent
protection can give a competitive edge and increase valuation because there is
less chance of losing money to generic competition.

d. Regulatory Environment: The pharmaceutical industry is highly regulated,

and changes to the laws may have a big influence on how much a firm is worth.
A company's worth can be increased by favourable regulatory approvals and a
quick drug approval procedure.

e. Competitive Environment: A company's valuation may be impacted by the

degree of competition in the pharmaceutical industry. Companies with novel or
ground-breaking medicines may be valued higher than those with fierce rivalry
in their therapeutic fields.

f. Market Potential: An important consideration is the size of the market that a

pharmaceutical firm services and its potential for expansion. Value may be
benefited by a wider addressable market and more growth possibilities.

g. Financial Health: A company's valuation may be impacted by its financial

health, which includes elements like debt levels, cash flow, and profitability.
Strong financials show the capacity to overcome obstacles and make
investments for future expansion.

h. Research and Development (R&D) Investments: Pharmaceutical

businesses significantly rely on research and development (R&D) to create new
medications. Increased R&D spending can show a commitment to innovation,
but it's important to weigh the possible rewards.

i. Geographic Exposure: Businesses having a worldwide footprint and diverse

geographic exposure may have a more steady income stream and less
susceptibility to localised economic swings.

5. Empirical Studies on Valuation in Pharmaceuticals Sector

Numerous elements influencing stock value in numerous businesses, including
the pharmaceutical industry, are frequently examined in empirical research in
finance and economics. To determine the primary influences on stock prices and
business values, these studies often employ historical financial data as well as
other pertinent information.

The following are some recurring issues that empirical research in the
pharmaceutical industry frequently examines:

a. Financial Ratios and Performance measures: To evaluate a company's

value in relation to its financial health, researchers may look at financial ratios
including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, price-to-
sales (P/S) ratio, and other performance measures.

b. Growth and Profitability: Studies frequently look at the connection

between the valuation of a pharmaceutical firm and factors like return on equity
and profit margins. To comprehend their effect on values, analysts can also
examine growth indicators like revenue growth rates and profits growth rates.

c. Research and Development (R&D) Expenditures: Researchers may look at

how R&D expenditures affect the value of pharmaceutical companies. A healthy
R&D pipeline is sometimes regarded as an indicator of possible growth in
future sales and profits.

d. Generic Competition and Patent Expirations: Another topic of interest is

how generic competition and patent expirations affect pharmaceutical values.
The revenue and profitability of a corporation might be dramatically impacted
by generic competition.

e. Regulatory approvals and the drug pipeline: Studies may examine how
values are impacted by new medication approvals or a healthy drug pipeline.
Positive changes in the drug development process can increase investor value
and trust.

f. Market Sentiment and Investor Behaviour: Some research may examine

how investor perception, market sentiment, and behavioural biases affect stock
prices in the pharmaceutical industry.

g. Macroeconomic issues: To comprehend their influence on pharmaceutical

business values, researchers may also take into account larger macroeconomic
issues including interest rates, inflation, and general market circumstances.

6. Market Efficiency and Anomalies

Market efficiency is the measure of how accurately market stock prices reflect
all relevant information and represent fair value. Securities trade at their
inherent value in an efficient market, making it impossible for investors to
regularly beat the market by taking advantage of assets that are mispriced. But
anomalies—also referred to as market anomalies or inefficiencies—are
instances where specific assets or strategies often produce anomalous returns
that differ from what could be anticipated in an efficient market. The notion of
market efficiency is put into doubt by these oddities.
Researchers and investors have looked into market efficiency in the context of
valuing the pharmaceuticals industry using fundamental analysis and have
found several abnormalities. Here are a few illustrations:

a. Value and Growth oddities: Stock value is a common focus of market

oddities. The growth anomaly says that firms with strong growth characteristics
may not always outperform as predicted, whereas the value anomaly suggests
that undervalued stocks (e.g., with low price-to-earnings or price-to-book ratios)
tend to outperform the market over time.

b. Post-Earnings Announcement Drift (PEAD): The PEAD anomaly is the

propensity for equities to have out-of-the-ordinary performances after the
publication of earnings announcements. Positive earnings surprises may result
in long-term outperformance in the pharmaceuticals industry.

c. Momentum Anomaly: According to the momentum anomaly, stocks that

have recently outperformed likely to continue doing so, while equities that have
recently underperformed tend to keep underperforming. The efficient market
theory is called into question by this phenomenon.

d. Size Anomaly: The size anomaly shows that small-cap stocks frequently beat
large-cap stocks over the long term, which runs counter to the notion that larger
businesses should be more reliable and successful.
e. Volatility Anomaly: According to several research, low-volatility equities
frequently produce better risk-adjusted returns than anticipated under the
Capital Asset Pricing Model (CAPM) and efficient market theory, while having
reduced risk.

LITERATURE REVIEW

Fundamental Analysis of Indian Pharmaceutical Companies by

(Dr. Ashok Kumar Panigrahi)

The earning potential of a firm is taken into account when estimating a stock's
true value. This earning potential is dependent on the investing environment, as
well as aspects related to the industry, competition, management calibre,
operational effectiveness, profitability, capital structure, and dividend policy.
Many investors choose their investments based on fundamental analysis, and
they decide whether to purchase or sell using technical analysis. It has to do
with determining whether or not a company's present market price is fair—that
is, whether it is overpriced or underpriced—by looking at its inherent value. In
order to select shares that will beat the market and deliver steady profits to the
investor, it is thought that analysis of the economy, strategy, management,
product, and other relevant information would be helpful.

It is the investigation of the underlying factors that have an impact on the

interests of the economy, industry, and businesses. In this case, an effort has
been made to analyse the fundamental analysis by looking at the financial
performance of 10 chosen Pharma and Healthcare firms using various statistical
methodologies. The top-ranked firm is Torrent Pharmaceuticals, with Piramal
coming in second.

Fundamental Analysis of Pharmaceutical Companies by (Ritika

Goel)

"Not knowing what you're doing increases risk." The major inspiration for this
study comes from these straightforward yet impactful statements of the great
investor Warren Buffett. This essay is intended to assist everyone familiar with
and interested in stock market investments in taking the first step up the ladder
to a more promising financial future. Investing is by no means an easy
procedure. The basic study of 17 pharmaceutical businesses competing on a
worldwide scale is the main topic of the article. The primary classification
utilised to group the businesses was the kind of medications they produce,
including branded, generic, and oncogenic. The businesses were picked based
on their top revenue figures within this wide category. In order to identify which
stock is rising to the top of the market in the relevant industry based on both
macroeconomic and microeconomic aspects, the study takes into account 14
significant fundamental ratios. Other industries' investment possibilities can be
determined using these ratios.

Valuation Using Fundamental Analysis Of Pharmaceuticals

Sector by (Dr. Prasad Chundi, K. Mounika)
The most well-known multiplier commonly employed to price stocks in practise
is the price-to-earnings ratio (P/E). Although that is backed by evidence from
exercise, there is no evidence from studies to support the use of the P/E ratio.
The accuracy of the P/E ratio and the five most common multiples in evaluating
the stocks of South African firms listed on the JSE Securities Exchange from
1988 to 2007 is examined in this article. The results of the study demonstrated
that for specialised sectors, particular multiples must be used instead of the P/E
ratio since it no longer provides the most accurate analysis across all industries.
By using multiples other than the P/E ratio, it may be possible to improve the
accuracy of fairness valuation based largely on multiples. With the help of
American investor Philip A. Fisher, who is regarded as one of the founders of
the qualitative equity valuation model, this paper proposes the use of numbers,
mathematical formulas, and more traditional quantitative factors inside the
qualitative equity valuation version.

An Empirical Study of Pharmaceutical Sector in India by (Dr.

Manjula Shastri)

Due to the low cost of labour in India, big international corporations with
operations there mostly run and control the Indian pharmaceutical industry.
There aren't many pharmaceutical firms that are only based in India. More than
20,000 licenced medicine producers in India sold formulations and bulk
medications worth $9 billion in 2002. Over 60% of the bulk pharmaceuticals
were shipped, mostly to the US and Russia, while 85% of these formulations
were marketed in India. The majority of market participants are small to
medium-sized businesses, while the top 250 firms account for 70% of the Indian
market. The analysis aids in locating the effective stocks among the industry
leaders. In order to arrive at the conclusions, the performance of the stocks will
be examined using historical price movements for technical and fundamental
methodologies. Investors who use fundamental and technical research can
assess a security's effectiveness and forecast future moves.
Valuation of Indian Companies – An Analytical Perspective by
(B Rajesh Kumar)

The analytical valuation viewpoint of Indian enterprises is the main topic of this
study report. Based on total revenues during the previous 10 years (1997–2006),
five top corporations from each of these areas were chosen. These top five
businesses in each industry were chosen from a sample of 8500 businesses
overall. Eight financial metrics were used to appraise the firms. With three
businesses from each area included in the top ten list, the infrastructure and
information technology sectors had the greatest average sales growth rates. For
the previous ten years, Idea Cellular's revenues have grown at the fastest
average pace. In terms of average market capitalization, ONGC was the most
valuable firm, followed by Reliance Industries Ltd. and Hindustan Lever Ltd.
TCS is the most valued firm according to the Tobin q ratio, followed by Infosys,
Wipro, and Satyam. According to the regression analysis, a company's worth is
correlated favourably with asset and sales growth. The value of a company will
decrease as its capital structure's debt component increases.

Determinants of Relative Valuation in Different Industry Sectors

—An Empirical Study by (B. Rajesh Kumar)
The purpose of this essay is to identify the underlying causes of distinct relative
value multiples across various industrial sectors. It is based on a survey of 189
businesses across seven market segments. The study determines the determining
factors for the most popular earnings, revenue, and book value multiples by
regression analysis: P/E ratios, enterprise value to EBITDA multiple, and price
to book multiple. Furthermore, we discover that the impact of dividend
disbursements on valuation multiples varies across industries.