Equity Market

Analysis
MOST AND LEAST IMPACTED SECTOR DUE TO
COVID-19

Admin
SHRENIK JAIN (PF1921-D50)
 N. L. Dalmia Institute of Management Studies & Research

Equity market analysis of most and least impacted sector due to Covid-19

Summer Internship Report

Submitted in partial fulfilment of the requirements

for

2 Yrs Full Time PGDM Course

Batch 2019-2021

SUBMITTED BY

Shrenik Jain

PGDM Roll No. 50

Batch 2019-2021

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 PREFACE

As a part of MBA curriculum and to gain practical knowledge in the field of equity
research, we are required to study the fundamentals of the companies and implement the
learning’s to forecast the value of the stock under the guidance of the company. This
internship helped us to enhance our knowledge regarding different sectors and key
drivers affecting the value of company and its stock movement. The Internship period
was from 5th May 2018 to 5th July 2020. This report is a concise compilation and
implementation of all that I learned at the company, to derive the value of stocks in an
orderly manner. This included functions like data analysis, data interpretation,
fundamental analysis, technical analysis.

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 ACKNOWLEDGEMENT

The internship opportunity I had with Jmarathon Advisory Services Pvt. Ltd. was a great
opportunity for learning and professional development. I consider myself a very lucky
individual as I was provided with an opportunity to be a part of it. I am also grateful for
having a chance to meet so many wonderful people and professionals who led me though
this internship period.
I am using this opportunity to express my deepest gratitude and special thanks to Mr.
Megesh Marappa, (Business Head) and Mr. Gopal Krishna (Director) of Jmarathon
Advisory Services Pvt. Ltd., who despite being extraordinarily busy with his duties, took
time out to hear, guide and keep me on the correct path and allowing me to carry out my
project, at their esteemed organization during the training.
I am extremely thankful & pay my gratitude to, Prof. Chirag Shah, my faculty guide for
his valuable guidance and support throughout the project. I sincerely acknowledge him
for extending his guidance not only for project but also for future goals in life.
I extend my gratitude to NL Dalmia Institute of Management Studies and Research,
Mumbai for giving me this excellent opportunity.

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 CERTIFICATE

This is to certify that the Summer Internship Project Report is submitted in partial
fulfilment for the award of Equity market analysis of most and least impacted sector
due to covid-19 of N. L. Dalmia Institute of Management Studies and Research. It is a
result of the bonafide research work carried out by Mr. Shrenik Jain under my
supervision and guidance during Summer Internship of 8 weeks from 5th May, 2020 till
5th July, 2020.

No part of this report has been submitted for award of any other Degree, Diploma,
Fellowship or other similar titles or prizes. The work has also not been published in any
Journals/Magazines.

Date:7th August,2020 Place: Mumbai

Industry guide

Signature of the Industry Guide:

Company: JMarathon Advisory Services Pvt. Ltd.
Name of Industry Guide: Mr. Megesh Marappa
Designation: Business Head

Internal Faculty guide

Signature of Internal Faculty Guide:

Name of the Internal Faculty Guide: Dr. Prof. Chirag Shah
Faculty: Finance Department

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 EXECUTIVE SUMMARY

Stock market analysis enables investors to spot the intrinsic worth of a security even
before investing in it. All stock exchange tips are formulated after thorough research by
experts. Stock analysts attempt to determine activity of an instrument/sector/market in
future.

By using stock analysis, investors and traders reach equity buying and selling decisions.
Studying and evaluating past and current data helps investors and traders to achieve an
edge in the markets to form informed decisions. Fundamental Research and Technical
Research are two sorts of research used to first analyse then value a security.

In this report we aimed at determining which were the most and least impacted sector
because of covid-19 with the help of fundamental and technical analysis.

In fundamental research, you are trying to seek out value of an equity share using the
knowledge provided within the financial statements of the corporate. The main aim is to
determine the relative attractiveness of the underlying business.

Technical research relates to the study of past stock prices to predict the trend of prices
in future. It shows you the direction of movement of the share prices. With the
assistance of technical research, you'll identify whether there'll be sharp rise or fall
within the price of share.

This report focused on Aviation and Pharmaceutical sector being the most and least
impacted sector respectively. Decisions related to buying or Selling the stocks are made
with the help of fundamental and technical analysis.

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 LIST OF CONTENTS
Chapter Contents Page No.
No.
Preface 2
Acknowledgement 3
Certificate 4
Executive Summary 5
List of Contents 6
1 Research Objectives and Methodology 7
1.1 Research Objectives 7
1.2 Research Methodology 7
2 Introduction 8
3 Research Analysis 10
3.1 Fundamental Analysis 10
3.2 Technical Analysis 13
4 About The Aviation Sector 19
4.1 Market Size 23
4.2 Major Initiatives undertaken by the Govt are: 24
4.3 Market Growth 25
4.4 Return of Stocks 28
4.5 Peer Comparison 30
5 Company Analysis- Indigo 31
5.1 Management Team 31
5.2 Shareholding Pattern 32
5.3 Fundamental Analysis 33
5.4 Analysis through Charts 37
5.5 Ratio Analysis 39
5.6 Technical Analysis 41
6 About The Pharmaceutical Sector 46
6.1 Market Size 50
6.2 Investments And Recent Developments 51
6.3 Government Initiatives 53
6.4 Market Growth 54
6.5 Return of Stocks 56
7 Company Analysis- Sunpharma Industries 58
7.1 Management Team 58
7.2 Shareholding Pattern 59
7.3 Fundamental Analysis 60
7.4 Analysis through Charts 62
7.5 Ratio Analysis 63
7.6 Technical Analysis 65
8 Findings and Recommendations 68
9 Bibliography 70

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 1. RESEARCH OBJECTIVES AND METHODOLOGY

1.1 OBJECTIVE OF THE STUDY

The objective of this project is to analyse the Airlines and Pharmaceutical sector to
identify various investment opportunities based on the impact of Covid-19 on these
sectors and how it has affected them.

The main objectives of the report are:

 Detailed analysis of the Airlines and Pharmaceutical sector

 Analysis of few companies in sector for identifying long term or short term
investment opportunities
 Fundament and Technical analysis of the few selected Companies
 Suggestion on holding, buy or sell position of the selected Companies
 Identifying the future prospects of the Airlines and Pharmaceutical sector

1.2 RESEARCH METHODOLOGY:

The project is made using the secondary data from various secondary sources like
financial websites, News applications and the annual report of the companies. The
future prospects of the sector will be based on the current data used in the research and
the technical analysis will be based upon on the observational research.

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 2. INTRODUCTION

COVID-19 is an ongoing pandemic, corona virus disease 2019 (COVID‑19) is caused

by severe acute respiratory syndrome corona virus 2 (SARS‑CoV‑2). The outbreak was
identified in Wuhan, China, in December 2019. This virus has widely spread worldwide
causing a huge number of reported cases. Countries have locked down to prevent the
spread of the virus and to reduce its impact in their respective countries. Every country
is taking the required measures and in process of getting cured of the virus. WHO
declared the outbreak a Public Health Emergency of International Concern on 30th
January, and declared it a pandemic on 11th March. A nationwide lockdown for 3
weeks was declared on 25th March to stop the spread. Further on 14th April, the
lockdown was extended till 3rd May and after 3rd May the lockdown has been extended
by 2 weeks (The Economic Times, 2020). As of 5th May 2020, more than 46000 cases
have been reported in India resulting in more than 1500 deaths. More than 13000 people
have recovered (GOI, 2020). World Bank and credit rating agencies have downgraded
India's growth for the fiscal year 2021 with the lowest figures India has seen in three
decades since India's economic liberalization in the 1990s (The Economic Times, 2020).
The former Chief Economic Advisor has said that India should prepare for a negative
growth rate in FY21 and that the country would need a 70 lakh crore stimulus to
overcome the contraction. However, the International Monetary Fund projection for
India for the Financial Year 2021-22 of 1.9% GDP growth is the highest among G-20
nations. India's problem is much bigger because we are already in a slowdown and there
is a recession in exports and manufacturing. Trade, transport, hotels, and tourism have
all been feeling the impact. Within a month, unemployment rose from 6.7% on 15
March to 26% on 19th April. During the lockdown, an estimated 140 million people lost
employment. More than 45% of households across the nation have reported an income
drop as compared to the previous year (digihealth_in, 2020). The aviation industry in
India has emerged as one of the fastest-growing industries in the country. India has
become the third-largest domestic aviation market in the world and is expected to
overtake the UK to become the third-largest air passenger market by 2020(Indian Brand

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Equity Foundation, 2020). The major players in this market are Air Asia Ltd., Indigo
Airlines Ltd. and Spice Jet Ltd. India is the largest provider of generic drugs globally.
Indian pharmaceutical sector industry supplies over 50 percent of global demand for
various vaccines, 40 percent of generic demand in the US, and 25 percent of all
medicine in the UK. India enjoys an important position in the global pharmaceuticals
sector. The country also has a large pool of scientists and engineers who have the
potential to steer the industry ahead to an even higher level. Currently over 80 percent
of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency
Syndrome) are supplied by Indian pharmaceutical firms. The major players in the
pharmaceutical industry are SunPharmaceutical Industries, Cipla, Dr. Reddy’s
Laboratories, and Lupin. The Indian hospitality industry have emerged as one of the key
drivers of growth among the services sector in India.

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 3. RESEARCH ANALYSIS:

3.1 FUNDAMENTAL ANALYSIS:

Fundamental analysis is a method of analysing a stock or any type of security by

measuring its intrinsic value. This is done by studying all the things that can influence
this value such as the company’s financial and management condition, that of the
industry, and the overall economic conditions. The key objective of doing this kind of
analysis is to produce a value which can be compared against the current price so that an
investor can figure out if he or she is going to buy or sell the security. If the value is lower
than the current price, the stock is said to be overpriced and an investor can decide to sell.
On the other hand, if the value is more than what is currently reflected in the current price,
the stock is labelled as undervalued which is a basis for buying because the investor aims
to capture that gains once the market realizes this and adjusts upward. In analysing
stocks, fundamental analysts work with the company’s earnings, revenues, profit
margins, and future growth, among others. In other words, the financial statement of the
company is the point of interest. The end goal of fundamental analysis is to produce a
quantitative value that an investor can compare with a security's current price, thus
indicating whether the security is undervalued or overvalued. Investors go long
(purchasing with the expectation that the stock will rise in value) companies that are
strong, and short (selling shares that you believe will drop in value with the expectation
of repurchasing when at a lower price) companies that are weak.

Fundamental Analysis is divided into 2 categories-

 Quantitative Analysis- those factors which are measurable in numerical terms

 Qualitative Analysis- those factors which are based on the character or quality of
the variable in question.

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Qualitative Analysis:
A Qualitative aspects of a business can teach a lot about what that business does and what
its goals are, as well as how it stands up in comparison with similar businesses it may be
in competition with. It is done by using EIC analysis i.e. Economy, Industry and
Company. It is a Top down approach and in this we move from Macro to Micro Aspects.

 Economy- the economy health of the country which includes GDP data,
FII’s/DII’s, Forex reserves, Monetary and fiscal Policy, Political Scenario, Union
Budget etc.
 Industry-in this we look at the potential of the industry in the economy. The
government support given to the industry e.g. National Policy on Electronics
Policy was passed by the Ministry of Electronics & Information Technology in
February 2019.

Company- in this we look at the competitive advantage of the company with respect to
its peers, management team and CEO track records. We also look at the future prospect
of the company and the range of products and services offered by the company.

Quantitative Analysis:
Quantitative analysis is completed by analysing the Financials of the corporate i.e.
Profit & Loss A/c, balance sheet & cash flow Statement & Financial Ratios of the
corporate. For a broader view we also look into the previous year’s statements.

• Financial Ratios: it includes the subsequent ratios:

1. Current Ratio- the current ratio is a liquidity ratio that measures a company's ability
to pay short-term obligations or those due within one year. It tells investors and analysts
how an organization can maximize the current assets on its balance sheet to satisfy its
current debt and other payables. it's also referred to as working capital Ratio. it is
calculated by dividing the current assets with current liabilities. A ratio under 1
indicates that the corporate ’s debts are greater than its assets while the opposite
indicates that the company has enough assets to satisfy any short-term obligations.

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2. Liquid Ratio- the quick ratio is an indicator of a company’s short-term liquidity
position and measures a company’s ability to fulfill its short-term obligations with its
most liquid assets. Since it indicates the company’s ability to instantly use its near-cash
assets (that is, assets which will be converted quickly to cash) to pay down its current
liabilities, it's also called as acid test ratio. An acid test is a quick test designed to
provide instant results and thus this name.

3. Return on Equity - it's a measure of monetary Performance calculated by dividing net

income to Average Shareholder’s Equity because shareholders' equity is equal to a
company’s assets minus its debt, ROE can be thought of as return on net assets. Return
on equity measures how effectively management is employing a company’s assets to
make profits.

4. Price to Earnings ratio- it's the ratio of the market price per share to earnings per
share. The price-earnings ratio is summary measure which primarily reflects the
subsequent factors- growth prospects, risk characteristics, shareholder orientation,
corporate image and degree of liquidity

5. Price to Book ratio- it's the ratio of market value of the share to the book value of the
share. The market value of an organization is its share price multiplied by the amount of
outstanding shares. The book value is net assets of an organization.

6. Debt to Equity ratio-The ratio shows the relative contributions of creditors and
owners. it's calculated by dividing the entire debt to the shareholders fund. The lower
the debt-equity ratio, the higher the degree of protection enjoyed by the creditors. A
high debt-equity ratio indicates how aggressive the corporate has been in financing its
growth with and indicates high level of risk.

7. Return on Assets- This ratio is calculated by dividing the profits the corporate has
made after tax by average of the entire assets. This ratio indicates how well the
corporate is utilising its assets to form profits. Higher ROA ratio is preferable to the
investors because it shows that how well the corporate is utilising its assets to maximise
the profits.

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8. Return on Capital Employed- This ratio is essentially calculated by dividing the net
Operating Profit after Tax with the average total assets. It basically shows what
proportion profit a corporation makes by comparing the operating profit to the capital
employed. a better ROCE is more favourable because it means more rupees of profits
are generated by each rupee of Capital Employed.

3.2 TECHNICAL ANALYSIS:

Technical analysis is a trading discipline employed to judge investments and identify

trading opportunities by analysing statistical trends gathered from trading activity, like
price movement and volume. Unlike fundamental analysts, who plan to evaluate a
security's intrinsic value, Technical Analysts specialise in patterns of price movements,
trading signals and various other analytical charting tools to guage a security's strength
or weakness.

Technical Analysis includes the subsequent things:

1. Candlesticks- The candlestick charts have a thin vertical line showing the price
range for a given period of time. For creating a candlestick chart, one must have
a data set that contains open, high, low and close values for every time period
you would like to display. The Candle Stick are often either white/green or
black/red. the line passing through the body of the candle sticks indicates the
periods high (upper point of the line) and low (lower point of the line). If the
body of the candle is green in colour the lower a part of the rectangular body of
the candle is the opening price and therefore the upper part of the rectangular
body is known as the closing price. this means that stock had an upper
movement for that period of time and if the candle is red the upper part of the
rectangular body of the candle is the opening price and the lower part is the
closing price.

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Types of Candle Sticks –

A. One Candle Stick Pattern

- Big White/Black

- Hammer

- Inverted Hammer

- Hanging Man

- Doji

- Marubozu

- Shaven Bottom

- Shaven Head

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B. Two Candle Stick Pattern
- Bullish & Bearish Engulfing
- Bullish & Bearish Piercing
- Bullish & Bearish Harami

C. Three Candle Stick Pattern

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- Morning Star
- Evening Star
- Three White Soldiers
- Three Black Soldiers/Crows

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2. Support and Resistance Levels- Support levels are where demand is perceived
to be strong enough to prevent the price from falling further, while resistance
levels are prices where the selling is assumed to be strong enough to stop prices
from rising higher. It can be identified to be a strong support or resistance if the
price of the stock does not break them and therefore it helps the traders in
knowing the time to enter into trade. Sometimes a stock becomes consolidated at
these levels as there is confusion in the market but if the stock manages to give a
strong candle or a prominent patter at the support or resistance levels it gives the
investors a good signal about the further movement of the stock price.

3. Indicators-

i. Relative Strength Index - The (RSI), is a momentum oscillator that

measures the speed and change of price movements. RSI oscillates
between zero and 100. Traditionally the RSI is thought of as overbought
when above 70 and oversold when below 30. Signals may be generated
by searching for divergences and failure swings. RSI also can be used to
identify the trend.
ii. StochRSI - The Stochastic RSI indicator is an oscillator that uses RSI
values, instead of price values, as inputs in the stochastic formula. The
indicator measures where the RSI’s current value is relative to its
high/low range for the required period. Like RSI, StochRSI cycles
between overbought levels above 80 and oversold levels below 20. The
StochRSI reaches these levels far more frequently than RSI, leading to
an oscillator that gives more trading opportunities. StochRSI moves
within the range of 0 to 100. Unlike RSI, StochRSI frequently reaches
the extreme 0 and 100 levels.
iii. Moving Average Convergence/Divergence- The MACD indicator is a
momentum oscillator primarily used to trade trends. Although it is an
oscillator, it is not typically used to identify over bought or oversold
conditions. It appears on the chart as two lines which oscillate without
boundaries. The crossover of the two lines gives trading signals like a two-
moving average system. MACD crossing above zero is considered bullish,

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 while crossing below zero is bearish. Secondly, when MACD turns up
from below zero it is considered bullish. When it turns down from above
zero it is considered bearish
iv. Moving Average - A moving average (MA) is among stock indicator
that's commonly utilized in technical analysis. The reason for calculating
the moving average of a stock is to assist smoothening of the price data
over a specified period of time by creating a constantly updated average
price. A simple moving average (SMA) is calculation that takes the
arithmetic mean of a given set of prices over the particular number of
days in the past; for instance , over the previous 15, 30, 100, or 200 days.
Exponential moving averages (EMA) is a weighted average that provides
greater importance to the price of a stock on most recent days, making it
an indicator that's more responsive to new information.
v. Bollinger Bands - It is a technical analysis tool developed by John
Bollinger for generating oversold or overbought signals. There are three
lines that compose Bollinger Bands: A simple moving average (middle
band) and an upper and lower band. The upper and lower bands are
typically 2 standard deviations +/- from a 20-day simple moving average,
but can be modified.

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 4. ABOUT THE AVIATION SECTOR

Curtailed mobility of individuals thanks to the Covid-19 pandemic and related

restrictions will shrink India’s air passenger traffic in both domestic and international
sectors by 40-45% and 60-65%, respectively, this fiscal. According to the International
Air Transport Association, airlines globally can lose in passenger revenues of up to
$113 billion due to this crisis.

The demand destruction can be gauged from the fact that even after resumption of
domestic air services, the load factor is hovering at 50-60%, with primarily
unidirectional flow of traffic, limited largely to essential travel and those returning to
their home cities/ countries.

In the milieu, Indian carriers are expected to log operating losses this fiscal despite
lower petroleum prices. And with the Covid-19 pandemic still raging in much of the
world, a revival to pre-pandemic levels appears unlikely even next fiscal.

This is a significant jolt to the Indian domestic aviation industry that had logged double-
digit growth in seven of the past ten fiscals before its fortunes took a turn for the worse
with the bankruptcy and grounding of a couple of major carriers.

For Indian carriers, Q1 is usually the strongest period while Q2 may be a weak quarter.
As the lockdowns/shutdowns are playing out in Q1, the brokerage (Motilal Oswal)
expects gradual improvement in the dynamics of the Indian aviation industry only from
Q3 of FY21.

The number of domestic air passengers is predicted to be 78-83 million this fiscal,
almost like fiscal 2016.

In the first quarter, passenger demand was weak as air services, grounded since March
25, resumed only on May 25, and with capacity limitations in place. Domestic demand
is likely to be subdued in the seasonally weak second quarter as well. But, the third and
fourth quarters are expected to ascertain increased travel due to the festive season,
although it'll still be lower on-year.

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Interestingly, the fares, capped by the government, are higher on-year today. However,
as airlines look to stimulate demand with the onset of the festive season amid the
expected removal of the fare cap from end-August, ticket prices on domestic routes are
expected to return far-away from the third quarter and can on the average be lower on-
year this fiscal.

Source: Directorate General of Civil Aviation (DGCA), Airports Authority of India

Delayed resumption of international operations is probably going to translate into a

steep decrease in passenger numbers for fiscal 2021. CRISIL Research projects
passenger numbers at 25-30 million, which was the level last seen in fiscal 2008.

While international operations are expected to resume in August (which were grounded
from March 23), there is uncertainty with regard to granting of air travel permissions by
different countries, and because of a visa application backlog. Also, the seasonally
strong third quarter is predicted to post a decline on-year as travellers would be
apprehensive to undertake international leisure travel. Growth is merely expected within
the fourth quarter over a low base, led by travel for VFR and business.

But, unlike in the case of domestic air fares, international air fares are expected to rise
4-6% on-year despite the low passenger traffic volume. The reason for this dichotomy is
the drop in capacity on international routes by global carriers due to bankruptcies and
fleet retirement. The rise is on the back of already elevated fares in fiscal 2020 due to a

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shortage in capacity following the grounding of Jet Airways, which had a significant
international network.

Looking through a wider lens, the share of Indian carriers in international traffic is
about to rise to 40-42% in fiscals 2021 and 2022, from ~36% over fiscals 2016 to 2020
as travellers are likely to prefer short to medium haul destinations owing to lower
incidence of Covid-19 cases in neighbouring countries, preference for direct flights over
transit through hubs and lower trip costs, which may all be served by Indian carriers.

Overall, Indian airlines are staring at a massive Rs 1.1-1.3 lakh crore revenue forgone
over fiscals 2020 to 2022. They are unlikely to recoup this loss as growth isn't expected
to return to pre-pandemic levels of double-digit increase not sooner than in the medium
term

Lower crude price not cushion enough for airline margins

One would have assumed that the expected plunge in crude oil prices to $38-42 per
barrel in fiscal 2021 compared with $64-66 per barrel in fiscal 2020 would have helped
airline companies to an extent on the margin front as it forms a sizeable 30-45% of an
airline’s cost base.

But because of the outsized impact of the demand destruction, airlines are curtailing
capacity deployment, thereby restricting opportunities for airline companies to accrue
the benefit of low crude oil prices.

In fact, airlines are projected to post losses at the earnings before interest, taxes,
depreciation, amortisation and lease rentals (Ebitdar) as well as Ebitda levels in fiscal
2021. Ebitdar margin is forecast at (4)-(1)%, whereas Ebitda margin is seen at (9)-(6)%,
as fixed costs, such as lease rentals, employee expenses and maintenance tasks, had to
be met even when the airplanes were grounded.

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The pandemic is bound to affect the net fleet addition of Indian carriers, which had
~900 aircraft on order as on March 31, because traffic is unlikely to rebound to even
fiscal 2020 level in the medium term. Indeed, a major Indian carrier has already
provided guidance to maintain its fleet number for the next two years at endfiscal 2020
level, compared with a healthy net addition of 45-50 aircraft per year.

Source: Directorate General of Civil Aviation (DGCA), Airports Authority of India

In the milieu, fleet additions are likely to be limited to fleet replacement, with newer
generation aircraft replacing older generation leased aircraft. To be sure, leased aircraft,

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which comprise ~75% share of Indian carriers’ fleet, is expected to continue to be the
preferred mode for fleet acquisition as Indian carriers lack the balance sheet heft for
outright purchases.

In fact, the carriers are expected to continue favouring the sale and leaseback model,
although the premium is likely to drop as global demand for new generation aircraft is
expected to weaken due to the pandemic, and ensuing airline bankruptcies, which will
lead to higher availability in the secondary market.

4.1 MARKET SIZE

India’s passenger* traffic stood at 341.05 million in FY20. It grew at a compound

annual growth rate (CAGR) of 11.13 per cent during FY16-FY20. Domestic passenger
traffic stood at 274.50 million in FY20, growing at a CAGR of 12.91 per cent over
FY16. International passenger traffic stood at 66.54 million, growing at a CAGR of 5.01
per cent during FY16-FY20.

Freight traffic grew at a CAGR of 5.32 per cent during FY16-FY20 from 2.70 million
tonnes (MT) to three .33 MT. Freight Traffic is expected to grow at a CAGR of 7.27 per
cent to reach 4.14 MT in FY23.

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Aircraft movement grew at a CAGR of 9.56 per cent from 1.60 million in FY16 to 2.59
million in FY20. During FY16-FY20, domestic aircraft movement increased at a CAGR
of 9.83 per cent and international aircraft movement expanded at a CAGR of three .57
per cent. India’s domestic and international aircraft movements grew to succeed in
2,155 thousand and 433 thousand during FY20, respectively.

To cater to the rising traffic , the govt of India has been working towards increasing the
amount of airports. As of March 2019, India had 103 operational airports. India has
envisaged increasing the amount of operational airports to 190-200 by FY40.

Further, the rising demand within the sector has pushed the number of airplanes
operating within the sector. The number of airplanes is expected to reach 1,100 planes
by 2027.

4.2 MAJOR INITIATIVES UNDERTAKEN BY THE GOVT

ARE:

 In April 2020, the govt introduced ‘Lifeline Udan’ flights to move essential
medical cargo to remote parts of the country to support India’s war against
COVID-19. Under this scheme, 465 flights were operated by Air India, Alliance
Air, IAF and personal carriers as of May 05, 2020.
 Under Union Budget 2020-21, Government introduced Krishi Udan scheme on
both domestic and international routes to assist farmers in transporting
agricultural products and improve the merchandise value.
 As per Union Budget 2019-20, the govt will promote aircraft financing and
leasing activities to form India's aviation market self-reliant.
 In February 2019, the govt of India sanctioned the event of a brand new
greenfield airport in Hirasar, Gujarat, with an estimated investment of Rs 1,405
crore (US$ 194.73 million).

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  As of January 2019, the govt of India has been acting on a blueprint to market
domestic manufacturing of aircrafts and aircraft financing within the country.
 In January 2019, Government organised the global Aviation Summit in Mumbai,
which witnessed participation of over 1,200 delegates from 83 countries.
 In January 2019, Government of India released its National Air Cargo Policy
Outline 2019, which envisaged making Indian air cargo and logistics the
foremost efficient, seamless and price and time effective globally by the end of
next decade.
 Regional Connectivity Scheme (RCS) has been launched.

4.3 MARKET GROWTH:

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Since October 2017, domestic passenger traffic at airports has been above 20 million
passengers every month. During March 2020, domestic passenger traffic declined by
32.9 per cent to 15 million passengers.

During the month of April 2020, domestic passenger traffic contracted by 100 per cent
and international passenger traffic declined by 99.1 per cent.

 In FY20, the air

passenger traffic was
341.05 million.
 The expenditure of
Indian travellers was
estimated to be US$136
billion.
 These future
estimates however
would not follow
anymore due to the
pandemic and we can
assume there would be
major decline.

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 MARK ET SHARE (%)
48% Jun-19 Feb-20
48%

15.60%

12.90%
16%

11.10%
12%

7.30%
10%

6.60%
6.40%

5.40%
INDIGO S P I C E J E T AI R I N D I A G O AI R AI R AS I A VI S T AR A

Source: DGCA

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The Market Share chart is arranged in order where Indigo, which is India’s Largest
Airline is having the highest market share and Vistara is having the lowest. There has
been very insignificant change in the market shares in India’s Airline Industry in recent
years.

In the picture we can see that all major airports have had a dip of more than 90% in the
number of domestic passengers due to Covid-19. Because of this the seat occupancy
has reduced, almost 1 seat is occupied in ever 2 seats.

4.4 RETURN OF STOCKS:

Q12019 (for YoY) Q42019 Q12020

Indigo 10.07 % -19.9% -1.1%
Spice jet 27.76% -68.29% 29.67%

We can see that the share prices of both major aviation companies were growing at a
good rate. The impact of Covid-19 on these stocks is visible in Q4 2019 where the
prices have declined significantly. We can hardly see any change for Indigo for Q1
2020 as the impact was not that big for Q4 but when we look at Spice Jet, due to major
slump of price in Q4 we can see that in Q1 the prices moved upwards however there are
more reasons to it which we will understand further in the report.

Page | 28
 INDIGO
1800
1600
1400
1200
1000
800
600
400
200
0
Q1 2019 Q4 2019 Q1 2020
Price at Start of Q 1415.95 1333.8 999.75
Price at End of Q 1558.65 1068.25 988.8

Price at Start of Q Price at End of Q

SPICE JET
140

120

100

80

60

40

20

0
Q1 2019 Q4 2019 Q1 2020
Price at Start of Q 97.8 116.4 38.7
Price at End of Q 124.95 36.9 50.25

Price at Start of Q Price at End of Q

(The prices are in Rs.) (Close price have been taken for calculation purpose)

Page | 29
4.5 PEER COMPARISON (MARKET CAPITALIZATION ):

Company Name Market Cap.

Interglobe Aviation ₹36365.17
Spice Jet ₹2769.35
Jet Airways ₹347.61
Global Vectra ₹76.09

The difference in Market Capitalization of companies in aviation industry is huge where

Interglobe aviation leads and thus we select it for our further analysis. Not only being
the leader in Market Share and Market Capitalization but also the leader in fleet size.
The stock trades with greater volumes as compared to other aviation stocks thus we can
produce better insights.

Market Cap.

Interglobe Aviation
Spice Jet
Jet Airways
Global Vectra

Page | 30
 5. COMPANY ANALYSIS

INDIGO (INTERGLOBE AVIATION)

5.1 MANAGEMENT TEAM

Board Members: Executives:

Meleveetil Damodaran
Rakesh Gangwal
Ronojoy Dutta
Dr Venkataramani Sumantran
Pallavi Shardul Shroff
Meleveetil Damodaran (Chairman)
Ronojoy Dutta (CEO/Whole Time
Director)
Wolfgang Prock-Schauer
(President/COO)
Aditya Pande (Chief Financial
Officer)
William Boulter (Chief Commercial
Officer)

Page | 31
Rahul Bhatia Sanjay Gupta (Chief Compliance
Ofcr/Secretary)
Anil Parashar Riyaz Haider Peer Mohamed (Chief
Aircraft Acquisition Ofcr)
Dr Anupam Khanna Capt Dhruv Rebbapragada
(Chief:Flight Safety)
Rohini Bhatia Sanjeev Ramdas (Exec VP:Customer
Service)

5.2 SHAREHOLDING PATTERN:

Holder's Name No of Shares % Share Holding

No Of Shares 384796279 100%
Promoters 147057717 38.22%
Foreign Institutions 56959815 14.8%
N Banks Mutual Funds 26068191 6.77%
Others 4663384 1.21%
General Public 6064707 1.58%
Financial Institutions 2987559 0.78%
Foreign Promoter 140994906 36.64%

Page | 32
5.3 Fundamental Analysis:

Page | 33
Above picture gives us clarity as to how much the aviation industry has been impacted
because of Covid-19. Revenue from operations has reduced by almost 92% y-o-y, major
reasons contributing to this are ASK (Available Seat Kilometre), RPK (Revenue
Passenger Kilometre) & Load Factor; all being reduced by approx. 91%, 94% and
28points respectively.

The total expenses have reduced as the management is trying to control their
maintenance costs, non-aircraft rentals and IT cost. However, their other costs make up
20-25% of fixed costs. Leasing and payroll costs are important to the aviation giant as
leasing costs have to be looked upon keeping in mind the commitments and long term
perspective and payroll costs have to be adjusted keeping in mind the motivation and
enthusiasm of the workforce being a customer service company.

Page | 34
Free cash has reduced by 14 billion rupees from 89.3 billion of march end, this is
because of fixed cash burn during lockdown which approx. amounted to 400 million
rupees a day in march and in the month of june it has been 300 million rupees a day.
The firm expects to increase liquidity by 30-40 billion rupees and additional 20 billion
if Export Credit Agencies provide moratorium towards principal repayment for aircrafts
on financial leases.

As mentioned earlier the firm has been in terms with lessors for reducing leasing costs.
They are confident that they are healthy on cash and have a manageable debt.

Page | 35
Overall Analysis is that the firm’s current situation looks bleak due to the disruption
caused by Covid-19, estimates are, that until Q3 2021 the statements are not going to
look any better. There has been gradual increase in the Revenue Available Seat

Page | 36
kilometre due to higher prices but until the load factor, ASK, RPK (Revenue Per
Kilometre) return to normalcy it might not be possible for the firm to see any profits.
Consistent cost cutting and bringing in more liquidity has been their top motives. They
have added cargo planes on lease which has resulted in additional lease cost but those
cargo planes are being used for transporting medical equipment for the nation and also
provide basis for revenue.

5.4 ANALYSIS THROUGH CHARTS:

Sales:

Quarterly JUN 2020 MAR 2020 DEC 2019 SEP 2019 JUN 2019

Sales 766.74 8,299.06 9,931.69 8,105.19 9,420.06

SALES
Sales

12000

10000

8000

6000

4000

2000

0
J u n -1 9 S e p -1 9 De c-1 9 M a r -2 0 J u n -2 0

Page | 37
EBIT:

Quarterly JUN 2020 MAR 2020 DEC 2019 SEP 2019 JUN 2019
EBIT -2,332.82 -802.03 1,037.02 -608.38 1,993.58

EBIT
EBIT

2500
2000
1500
1000
500
0
J u n -1 9 S e p -1 9 De c-1 9 M a r -2 0 J u n -2 0
-500
-1000
-1500
-2000
-2500
-3000

PAT:

Quarterly JUN 2020 MAR 2020 DEC 2019 SEP 2019 JUN 2019
PAT -2,844.29 -870.81 495.97 -1,061.99 1,203.14

Page | 38
 PAT
PAT

1500

1000

500

0
J u n -1 9 Se p -1 9 De c-1 9 M a r -2 0 J u n -2 0
-500

-1000

-1500

-2000

-2500

-3000

5.5 Ratio Analysis:

PARTICULARS JUN 2019 MAR 2020 JUN 2020

Net Sales 9,420.06 8,299.06 766.74
Total Expenditure 6,941.27 8,434.32 2,386.76
Operating Profit 2,478.79 -135.27 -1,620.02
Other Income 411.61 335.86 376.75
Interest 484.18 487.75 509.75
Depreciation 900.91 1,006.27 1,096.38
Exceptional Items 0 0 0
Profit Before Tax 1,505.31 -1,293.43 -2,849.39
Tax 304.84 -419.96 0
Profit After Tax 1,200.47 -873.47 -2,849.39
Adjusted EPS (Rs) 3.12 -2.27 -7.40

Page | 39
Ratios:

Particulars Jun2019 Mar2020 Jun2020

Operating Profit Margin 26% -1% -211%

Net Profit Margin 13% -11% -372%

EBIT Margin 21% -9% -305%

Interest Coverage Ratio 4.108988 -1.65183 -4.5898

 A company’s operating margin, also known as return on sales, is a good

indicator of how well it is being managed and how risky it is. It shows the
proportion of revenues that are available to cover non-operating costs, like
paying interest, which is why investors and lenders pay close attention to it.
Highly variable operating margins are a prime indicator of business risk like in
this case OPM has dropped to -211%.
 The net profit margin is equal to how much net income or profit is generated as
a percentage of revenue. As the sales have dropped significantly and we can see
NPM of -372%.
 Here we can see that the EBIT margin has decreased from 21% in 2019 to -
305% in 2020. As we saw above that the NP margin was -372% in 2020, so it
can be concluded that the company is paying a huge amount towards interest and
tax expenses and it is because the company has borrowed a substantial amount
of debt to carry on its operating activities.
 The interest coverage ratio is a debt ratio and profitability ratio used to
determine how easily a company can pay interest on its outstanding debt. A bare
minimum ratio of 1.5 is a must, in our case the ratio was high in 2019 but it is -
4.6 in 2020 so we can say that the company is in a bad position to pay off its
interest expenses based on its earnings.

Page | 40
5.6 TECHNICAL ANALYSIS:

Observation 1:

Call: Buy; Price: Rs.860; Target: Rs.1070; Stop-Loss: Rs.856

The stock after being impacted by Covid-19, started retracing back. The RSI level was
also below 30 and MACD intersected and started moving upwards confirming buy
signal.

Page | 41
Observation 2:

Call: Short-sell; Price: Rs.1000; Target: Rs.865; Stop-Loss: Rs.1010

Post Covid-19 retracement the stock moved to a point making it key resistance level and
thus it started downtrend, we waited for EMA and SMA to cross each other to enter
trade, we got double confirmation with MACD.

Page | 42
Observation 3:

Call: Buy; Price: Rs.875; Target: Rs.950; Stop-Loss: Rs.865

The stock once reached its key support level saw volume build up and we could take a
buy position to safely exit at EMA level however risky traders could hold for higher
returns. MACD showed an upward trend too.

Observation 4:

Call: Short-sell; Price: Rs.1080, Target: Rs.1000; Stop-Loss: Rs.1085

The stock reacted to resistance level and started moving downwards and even MACD
gave a sell signal even RSI had started moving down from 70.

Page | 43
Observation 5:

Call: Buy; Price: Rs.1090; Target: Rs.1150; Stop-Loss: Rs.1085

The stock broke resistance levels, even all indicators gave a buy signal.

Page | 44
Observation 6:

Call: Short-sell; Price: Rs.1335; Target: Rs.1240; Stop-loss: Rs.1345

This was the period when Covid-19 had started impacting stock markets. The stock left
its previous trading range and thus we give a sell call. MACD EMA SMA all indicate
toward selling the shares. The stock remained close to the support level of Bollinger
bands which indicated further downfall.

Page | 45
 6. ABOUT THE PHARMACEUTICAL SECTOR

The Indian pharma sector is that the third-largest within the world. It manufactures
almost 60 per cent of the vaccines used globally, including important ones, such as
those against diphtheria, tetanus, and pertussis required by the World Health
Organisation (WHO). Furthermore, the country meets 90 per cent of the global demand
for the vaccine against measles.

Millions across the globe use generic drugs produced by Indian drug manufacturers.
More than 250 factories in the country have been approved by the US Food and Drug
Administration (FDA) as well as the UK Medicine and Healthcare Products Regulatory
Agency (MHRA). These manufacture drugs for overseas markets, including the US &
UK.

India’s active pharmaceutical ingredient (API) industry is expected to generate $6

billion in revenues by the end of 2020.

Currently, generic drugs are playing a crucial role in the fight against COVID–19. India
has been meeting more than 20 per cent of the world and almost 50 per cent of the US’s
generic drug requirements. Unfortunately, Indian manufacturers rely heavily on China
for key starting materials (KSMs), intermediate and APIs with China catering to just
about 70 per cent of Indian pharma companies’ requirements.

The Indian pharma sector is a crucial component of the worldwide healthcare

infrastructure and is instrumental in saving countless lives each year. However, like all
other sectors, it too has been affected by COVID–19 that has brought about various
changes.

Page | 46
Trail of disruption

The COVID–19 pandemic has disrupted supply chains across the world. Every sector,
including pharma, is suffering from supply chains coming to a grinding halt. Prices of
raw materials have shot up amid limited supply, production schedules are interrupted,
factories are pack up and shipping costs are sky-high in most countries. The impact on
the Indian pharma sector is evident, as long as most raw materials are procured from
China, the epicentre of the outbreak.

With the movement of individuals and goods restricted amid lockdowns, manufacturers
of generic drugs are unable to launch products or conduct clinical trials. As a result,
timelines for drug filings have got stretched. Furthermore, cash flows from new generic
drug launches have either been wiped out or delayed.

Indian drug manufacturers face other challenges as well. An Indian pharmaceutical

facility can sell drugs within the US only after it's been inspected and approved by the
US FDA. With the ban on international travel, inspection is of course out of question,
rendering it impossible for Indian drug companies to sell within the US and other

Page | 47
overseas markets. The pandemic has also forced drug manufacturers, both contract and
captive, to delay their plans for brand spanking new product launches.

When product launches and clinical trials by large global pharma companies are
delayed, the drug companies from which they source face the warmth . Low sales,
therefore, pose another major concern for Indian drug manufacturers supplying to
international pharma giants.

Some Indian pharma facilities had to be shut as workers tested positive for COVID–19.
Plants that are operational are producing less due to manpower crunch amid lockdown
and social distancing measures. In short, production timelines have changed drastically.

Some good news

With China losing credibility on account of not disclosing information on the virus or
the severity of the outbreak on time and thereby contributing to its development into an
epidemic, government leaders and businesses are looking at other alternative low-cost
nations to source supplies. India could directly benefit from this. The country features a
robust pharma sector, with proven expertise in drug manufacturing and treatment. This
got further highlighted when the country quickly ramped up production of
Hydroxychloroquine, a key drug used in the fight against the virus.

Although India depends on China to meet its bulk drug requirement, steps taken by the
Indian government to incentivise the production of APIs and KSMs under the ‘Make in
India’ programme will help in reducing this dependence. The promotion of bulk drug
parks under this initiative would help India become self-sufficient in drug
manufacturing, from KSMs to generic formulations. The COVID–19 pandemic is
changing the world order and power structure, compelling leaders across the globe to
revisit their business and growth strategies. With its deep expertise within the
manufacture of medicine, highly skilled scientists, and low-cost manufacturing, India
definitely stands to realize from such a restructuring.

Indian pharmaceuticals market is expected to grow 3%-5% in size during FY20-21,

despite the COVID-19 related lock-down and there would be monthly revenue
improvements from June 2020, says India Ratings and Research (Ind-Ra).

Page | 48
Additionally, the ratings agency says, the seasonality within the Indian domestic
business will support the recovery. It says, "Continuous rise within the number of
COVID-19 cases in India will lead to further volume growth in related therapies.
Furthermore, pharma companies’ large cash balances and sufficient headroom under
debt covenants along side diversified funding sources will mitigate any impact of the
continued lock-down."

The COVID-19 impact on the pharma sector has been less pronounced than observed
within the other sectors, as pharmaceuticals fall into the essential service category and
sector companies are exempt from the restrictions under the nationwide lock-down.

Additionally, to avoid drug shortages, the govt of India has removed the roadblocks
within the movement of pharma products and ancillary supplies also as employees
engaged, thus aiding overall supplies. "Pharma companies with exposure to chronic
therapies will witness a lower impact than the businesses with exposure acute therapies
as patients are curtailing their visits to doctors," Ind-Ra says.

The ratings agency sees manufacturing capacities reaching healthy capacity utilisation
again.

Manufacturing volumes after declining to 50%-60% in April 2020, given the strict lock-
down, has improved significantly to 60%-80% of the initial capacities during May-June
2020, as per industry interactions of Ind-Ra. the general manufacturing activities had
reduced, given the shortage of manpower availability and lower availability of
transportation for the staff in the initial days, it added.

Ind-Ra also expect price hike by most pharma players in coming days. It says,
"Companies may take price hikes on non-DPCO (drug price control order) products up
to 8%, unlike the prior average price hike of 5% (max limit 10%) because of an increase
in raw material cost and also the additional cost incurred towards raw materials,
logistics and manpower. The annual price hikes by companies are generally taken
during 1Q. This is likely to lead to improved profitability and cash flows. it had been
difficult to take a big price hike on drugs within the domestic market in the past due to
intense competition and stable raw material and other costs."

Page | 49
6.1 MARKET SIZE:

Indian pharmaceutical sector is expected to grow to US$ 100 billion, while medical
device market is expected to grow US$ 25 billion by 2025. Pharmaceuticals export from
India stood at US$ 20.70 billion in FY20. Pharmaceutical export include bulk drugs,
intermediates, drug formulations, biologicals, Ayush and herbal products and surgical.

India's biotechnology industry comprising biopharmaceuticals, bio-services, bio-

agriculture, bio-industry, and bioinformatics is predicted grow at a mean rate of growth
of around 30 per cent a y-o-y to achieve US$ 100 billion by 2025.

India’s domestic pharmaceutical market turnover reached Rs 1.4 lakh crore (US$ 20.03
billion) in 2019, up 9.8 per cent y-o-y from Rs 129,015 crore (US$ 18.12 billion) in
2018.

Page | 50
6.2 INVESTMENTS AND RECENT DEVELOPMENTS

The Union Cabinet has given its nod for the amendment of existing Foreign Direct
Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100
per cent under the automated route for manufacturing of medical devices subject to
certain conditions.

The drugs and pharmaceuticals sector attracted cumulative FDI inflow worth US$ 16.50
billion between April 2000 and March 2020 consistent with the info released by
Department for Promotion of Industry and Internal Trade (DPIIT).

Some of the recent developments/investments within the Indian pharmaceutical sector

are as follows:

 In May 2020, Jubilant Generics Ltd entered into a non-exclusive licencing

agreement with US-based Gilead Sciences Inc to manufacture and sell the
potential COVID-19 drug Remdesivir in 127 countries, including India.
 Affordable medicines under Pradhan Mantri Bhartiya Janaushadhi Pariyojana
(PMBJP) achieved record sales turnover of Rs 52 crore (US$ 7.38 million) in
the month of April 2020.
 During December 2019, on moving annual total (MAT) basis, industry growth
was at 9.8 per cent, with price growth at 5.3 per cent, new product growth at 2.7
per cent, while volume growth at two per cent y-o-y.
 In October 2019, Telangana Government proposed Hyderabad Pharma City with
financial assistance from the Central government of Rs 3,418 crore (US$ 489
million).
 As on August 2019, the moving annual turnover (MAT) for biosimilar
molecules sold in the domestic market stood at Rs 1,498 crore (US$ 214.31
million).
 Healthcare sector witnessed private equity of total US$ 1.1 billion with 27 deals
in H12019.

Page | 51
 Indian pharmaceutical industry’s export to the US will get a boost as branded
drugs worth US$ 55 billion will become off-patent during 2017-2019.

Page | 52
6.3 GOVERNMENT INITIATIVES

Some of the initiatives taken by the govt to market the pharmaceutical sector in India
are as follows:

 India plans to line up around Rs 1 lakh crore (US$ 1.3 billion) fund to give boost
to companies to manufacture pharmaceutical ingredients domestically by 2023.
 In November 2019, the cabinet approved extension/renewal of extant
Pharmaceuticals Purchase Policy (PPP) with identical terms and conditions
while adding one additional product namely, Alcoholic Hand Disinfectant
(AHD) to the existing list of 103 medicines till the final closure/strategic
disinvestment of Pharma CPSUs.
 Under Budget 2020-21, Rs 65,012 crore (US$ 9.30 billion) has been allocated to
the Ministry of Health and Family Welfare is. The Government has allocated Rs
34,115 crore (US$ 4.88 billion) towards the National Health Mission under
which rural and urban people will get benefited.
 Rs 6,400 crore (US$ 915.72 million) has been allocated to health insurance
scheme Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY).
 As per Economic Survey 2019-20, Government expenditure (as a percentage of
GDP) increased to 1.6 per cent in FY20 from 1.2 per cent in FY15 on health.
 The National Health Protection Scheme which is largest Government funded
healthcare programme of the world, which is predicted to profit 100 million poor
families within the country by providing a cover of up to Rs 5 lakh (US$
7,723.2) per family per annum for secondary and tertiary care hospitalisation.
The programme was announced in Union Budget 2018-19.
 The Government of India is planning to set up an electronic platform to regulate
online pharmacies under a new policy to stop any misuse due to easy
availability.

Page | 53
  Government of India unveiled 'Pharma Vision 2020' to make India a global
leader in end-to-end drug manufacture. Approval time for new facilities has
been reduced to boost investment.

6.4 MARKET GROWTH:

The worst hit among the top 20 companies was Cipla, whose sales slumped by 28%,
while that of Zydus Cadila, GlaxoSmithKline and Dr Reddy’s Laboratories was each
down by 25%.

The cardiac category witnessed 13% YoY jump and the anti-diabetic category rose 10%
YoY. These were the only two therapies to see sales growth due to pre-emptive buying
amid the lockdown. Most other therapies witnessed a double-digit fall in sales.

Falling sales led to a 30% jump in inventory levels in April compared to March. The
largest slump in sales of 41% was seen in the anti-infective segment, with inventory
levels shooting up to 71 days in April from 39 days a month ago. However, drug
inventory has shrunk in the first two weeks of May, indicating sales have picked up
after a dull and lockdown-hit April.

While sales of India’s largest drugmaker Sun Pharmaceutical Industries were down 17%
in April, that of the largest multinational in India, Abbott, was down by 13%.

Page | 54
The Indian Pharma Market declined 11% in April 2020 and 8.6% in May 2020, led by a
sharp 16.7% yoy and 14.4%, respectively, decline in volume growth; while prices and
new drugs launches witnessed an increase of around 4% and 1%.

Page | 55
6.5 RETURN OF STOCKS

Returns
Jun-19 Mar-20 Jun-20

60%
50%
40%
30%
20%
10%
0%
-10%
-20%
Sun Pharma Dr. Reddy lab Divi's Lab Cipla
Jun-19 -16% -9% -7% 5%
Mar-20 12% 7% 14% 16%
Jun-20 38% 27% 21% 55%

(The prices are in Rs.) (Close price have been taken for calculation purpose)

The Q1 for 2019-20 showed decline in stock prices. For Q4 2019-20 we see growth in
prices as the impact of Covid-19 made Pharmaceutical sector number 1 choice for
investors and further increases in prices of shares in Q1 2020-21 is because till date the
curve isn’t flattening.

Market Capitalization:

Rank Company Market Capitalization June 2020 (INR crores)

1 Sun Pharmaceutical 1,16,415
2 Dr. Reddy's Laboratories 66,596
3 Divi's Laboratories 61,282
4 Cipla 51,645
5 Aurobindo Pharma 46,043

Page | 56
Due to huge number in Pharmaceutical Companies we will only look at Sun
Pharmacueticals for our analysis because of its market capitalization.

Market Capitalization

Sun Pharmaceutical

Dr. Reddy's Laboratories

Divi's Laboratories

Cipla

Aurobindo Pharma

Page | 57
 7. COMPANY ANALYSIS

SUN PHARMACEUTICALS INDUSTRIES LTD

7.1 MANAGEMENT TEAM:

Name Designation
Ashok I Bhuta Senior General Manager
C S Muralidharan Chief Financial Officer
Dilip S Shanghvi CEO
Dilip S Shanghvi Managing Director
Gautam Doshi Director
Israel Makov Chairman
Kalyanasundaram Subramanian Whole Time Director
Rekha Sethi Director
Sailesh T Desai Whole Time Director
Sudhir V Valia Non Exe.Non Ind.Director
Sunil R Ajmera Company Secretary
Sunil R Ajmera Secretary
Vivek Chaand Sehgal Director

Page | 58
7.2 SHAREHOLDING PATTERN:

Holder's Name No of Shares % Share Holding

NoOfShares 2399334970 100%
Promoters 1312134535 54.69%
ForeignInstitutions 304662580 12.7%
NBanksMutualFunds 252374826 10.52%
CentralGovt 6430 0%
Others 121283578 5.05%
GeneralPublic 178782152 7.45%
FinancialInstitutions 230090869 9.59%

Page | 59
7.3 FUNDAMENTAL ANALYSIS:

Sun Pharma is ranked No. 1 and holds approximately 8.2% market share in Indian
pharmaceutical market of over Rs. 142,000 crore as per AIOCD AWACS MAT June-
2020 report. For Q1FY21, the company launched 10 new products in the Indian market.

The revenue from operations have been more or less close to each other for the previous
quarter as well as for the same quarter last year if we ignore other operating revenue and
other income. Thus it can be said that there has been no impact of Covid-19 on the
revenues.

Page | 60
 PARTICULARS Jun-19 Mar-20 Jun-20 Jun-19 Mar-20 Jun-20
Net Sales 3,309.01 2,836.08 2,963.04 100% 100% 100%
Total Expenditure 2,388.71 2,607.54 2,297.16 72% 92% 78%
Operating Profit 920.3 228.54 665.88 28% 8% 22%
Other Income 40.67 1,218.65 77.33 1% 43% 3%
Interest 57.25 137.53 68.9 2% 5% 2%
Depreciation 135.58 142.44 142.79 4% 5% 5%
Exceptional Items 0 0 0 0% 0% 0%
Profit Before Tax 768.14 1,167.22 531.52 23% 41% 18%
Tax 4.77 11.37 -0.43 0% 0% 0%
Profit After Tax 763.37 1,155.85 531.95 23% 41% 18%
Adjusted EPS (Rs) 0.32 0.48 0.22 0% 0% 0%

Sun Pharmaceuticals has been more or less performing in similar way if we look at the
data. The difference in PAT levels y-o-y is close to each other but when compared to
previous quarter the change is due to other income which amounted to 43% of sales
compared to 3% in this quarter. The company seems to have very low debt as the
interest expense is 2% of sales which was 5% last quarter, this is probably due to paying
off some debts.

Page | 61
7.4 ANALYSIS THROUGH CHARTS:
Sales Chart:

2388.43

2364.8

2313.67

EBIT Chart:

1304.75

825.39

600.42

Page | 62
PAT Chart:

1155.85

763.37

531.95

7.5 RATIO ANALYSIS:

PARTICULARS Jun-19 Mar-20 Jun-20 Jun-19 Mar-20 Jun-20

Net Sales 3,309.01 2,836.08 2,963.04 100% 100% 100%
Total Expenditure 2,388.71 2,607.54 2,297.16 72% 92% 78%
Operating Profit 920.3 228.54 665.88 28% 8% 22%
Other Income 40.67 1,218.65 77.33 1% 43% 3%
Interest 57.25 137.53 68.9 2% 5% 2%
Depreciation 135.58 142.44 142.79 4% 5% 5%
Exceptional Items 0 0 0 0% 0% 0%
Profit Before Tax 768.14 1,167.22 531.52 23% 41% 18%
Tax 4.77 11.37 -0.43 0% 0% 0%

Page | 63
 Profit After Tax 763.37 1,155.85 531.95 23% 41% 18%
Adjusted EPS (Rs) 0.32 0.48 0.22 0% 0% 0%

Particulars Jun2019 Mar2020 Jun2020

Operating Profit Margin 28% 8% 22%

Net Profit Margin 23% 41% 18%

EBIT Margin 25% 46% 20%

Interest Coverage Ratio 14.42 9.49 8.71

 A company’s is a good indicator of how well it is being managed and how risky
it is. It shows the proportion of revenues that are available to cover non-
operating costs, like paying interest, which is why investors and lenders pay
close attention to it. Highly variable operating margins are a prime indicator of
business risk. For Sun Pharma the OPM is 22% this quarter which is safe.
 The net profit margin is equal to how much net income or profit is generated as
a percentage of revenue. NPM has been stable for y-o-y basis but for previous
quarter it was more because of One time other income.
 Here we can see that the EBIT margin has decreased from 25% in 2019 to 20%
in 2020.
 The interest coverage ratio is a debt ratio and profitability ratio used to
determine how easily a company can pay interest on its outstanding debt. A bare
minimum ratio of 1.5 is a must, in our case the ratio was high in 2019 but it is
gradually decreasing and now is 8.71. However, the firm in well above the
standard requirement.

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7.6 TECHNICAL ANALYSIS:

Observation 1:

Call: Short-sell; Price: Rs.500; Target: Rs.473; Stop-Loss: Rs. 503

As the bullish rally reached the resistance level we saw EMA & SMA crossing each
other. Call was also supported by downward moving MACD. The stock took support at
Rs.475 level.

Observation 2

Call: Buy; Price: Rs.475; Target: Rs.500; Stop-loss: Rs.470

The stock made a V-shaped recovery and followed a trend until it reached the resistance
again. The stock has been making movements in the support and resistance zone which
makes it suitable for range traders.

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Observation 3:

Call: Buy; Price: Rs.450; Target: Rs.500; Stop Loss: Rs.445

The stock broke support levels here but retraced back to support level and further made
an upside trend to reach resistance.

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Observation 4:

Call: Buy; Price: Rs.390; Target Rs.450; Stop Loss: Rs.385

There was a downward trend in the stock but as soon as the MACD gave a buy signal
along with huge increase in buy volumes it was time to buy when it broke the trend.

Observation 5:

Call: Short sell; Price: Rs.500; Target: Rs.474; Stop Loss: Rs 504

RSI and MACD here gave a sell signal after reaching the resistance. The volume of
sellers was high in the market too at that point. We can even see shooting star
candlestick along with confirmation candlestick.

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 8. FINDINGS AND RECOMMENDATIONS:

World has witnessed many financial crises in the past, the last one being the global
recession of 2008, the current coronavirus crisis is different from the past fallouts.

As normalcy is not yet on the horizon, demand drying up in ways, government

recommendations to discourage flying, we cannot say when the aviation industry will
revive back to normal conditions. Cash reserves are running down quickly for every
airline, many might go bankrupt if the situation continues for long.

There is concern about the recovery of business travel, because of cancellation of

meetings, incentives, conferencing and exhibitions events and uneven travel bans. The
current context of digital transformation offering better solutions for teleworking has
become major threat for business travel.

Reduced disposable incomes would curtail the recovery of leisure passenger segment.
Fear among the people about health is the major issue for leisure travellers, this has led
to new health screening controls which translates to higher costs for airport and
travellers.

And so the income statements might not make look attractive until the situation gets
under control, thus it is not advisable to hold aviation stocks unless and until there are
measures been taken to revive the aviation industry. There have been estimates that the
industry can perform better in Q3 if flying becomes normal.

Looking at technical indicators, the movement of the stock is limited to its support
resistance range, thus it is advisable to do range trading for frequent gains for shorter
periods. Technical indicators in this cannot provide an outlook for long term as the
industry is facing disruption.

The pharma industry has been highly responsive to the Covid-19 pandemic. Industry
operation leaders have been supplying key medicines across borders, managing

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workforce safety, handling gov. restrictions all while preparing new vaccines.
Companies are paying attention to recovery and the path to next normal.

The fundamentals of Pharma companies have more or less been flat in respect to
growth. Maintaining the fundamentals while facing all challenges is the key factor for
success of this sector. The markets have made quick V shape recovery for Pharma
companies, and are on further uptrend. But as most of the companies are on their 52-
weeks high; it is risky to hold the stocks for long term as their prices are overvalued.

Looking at technical indicators, one can take entry at dips and should exit when the
trend breaks downside or place a short sell at that time. News and quarter results are
playing important role in this sector for their upside.

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 9. BIBLIOGRAPHY:

www.civilaviation.gov.in

www.Pharmascope.org

www.Researchgate.net

www.Crisil.com

www.Econowmictimes.indiatimes.com

www.Ibef.org

www.Investindia.gov.in

www.Csimarket.com

www.Iata.org

www.Investopedia.com

www.Capaindia.com

www.Dgca.gov.in

www.mckinsey.com

www.moneycontrol.com

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