Financial Analysis & NOVARTIS IPCA
Management Discussion & Analysis Overview of Indian Pharma Market   <ul><li>Front ranked among country's science based ind...
<ul><li>The government’s continued focus on economic reforms and its </li></ul><ul><li>commitment to increase investment i...
Management Discussion & Analysis Novartis Performance Overview Rs / Crores
<ul><li>MRP based excise levy has lead to overall increase in drug prices </li></ul><ul><li>In OTC, implementation of exci...
Management Discussion & Analysis IPCA Performance Overview
Management Discussion & Analysis IPCA Performance Overview Verticals 2006 (Crs) 2005 (Crs) Formulations 501.29 447.59 API ...
Market Performance
Balance Sheet
Company Novartis Ipca (Rs. / Crores) 2006 2005 2006 2005             SOURCE OF FUNDS                 Shareholders Funds 33...
Novartis : Profit and Loss Account
IPCA : Profit and Loss Account
<ul><li>Basis of Accounting  </li></ul><ul><li>Statements are per Accrual system of accounting for revenue  </li></ul><ul>...
<ul><li>Foreign Exchange Transactions </li></ul><ul><li>Forex transactions recorded at exchange rates prevailing on transa...
<ul><li>Basis of Accounting  </li></ul><ul><li>Statements are per Historical Cost Convention </li></ul><ul><li>Fixed Asset...
<ul><li>Foreign Exchange Transactions </li></ul><ul><li>Forex transactions recorded at exchange rates prevailing on transa...
Ratio Analysis <ul><li>Leverage Ratios </li></ul><ul><li>Profitability Ratios </li></ul><ul><li>Liquidity Ratios </li></ul...
Leverage Ratios <ul><li>This ratio shows the contributions of creditors and owners.  </li></ul><ul><li>IPCA relies strongl...
Leverage Ratios <ul><li>The debt ratio measures the extent to which borrowed funds support the firm’s assets. </li></ul><u...
<ul><li>*   Net Profit ( Before Tax and Interest) </li></ul><ul><li>Impact of Borrowed Funds is almost 25 Paise on a Rupee...
<ul><li>Leverage ratios help in assessing the risk arising from the use of debt-capital </li></ul><ul><li>Novartis has out...
<ul><li>Earning Per Share </li></ul><ul><li>Price Earning Ratio </li></ul>Profitability Ratios
3. Return on Capital Employed 4. Net Profit Ratio Profitability Ratios
<ul><li>Profitability Ratios reflect the final result of Business Operations </li></ul><ul><li>Novartis has been managed b...
<ul><li>Current Ratio </li></ul><ul><li>Quick Ratio </li></ul>Liquidity Ratios
<ul><li>Liquidity refers to the ability of a firm to meet its obligations in the short run  </li></ul><ul><li>Acid-test ra...
<ul><li>This ratio measures how overall assets are efficiently employed so as to maximize sales </li></ul><ul><li>Novartis...
<ul><li>This ratio measures the sale per rupee of investment in Fixed Assets  </li></ul><ul><li>Since IPCA is into Formula...
3. Inventory Turnover Ratio 4. Debtors Turnover Ratio Turnover Ratios
Summary <ul><li>Novartis has been more efficient in its Asset Utilization </li></ul><ul><li>IPCA needs to keep a check on ...
<ul><li>Novartis Investors have enjoyed a better Dividend as compared to IPCA </li></ul>Turnover Ratios Company   ( Rs / C...
Summary of All Ratios
Summary of Ratio Analysis <ul><li>Novartis has greater leverage as compared to IPCA to raise Debts for its long term fundi...
<ul><li>IPCA has not been as efficient in its Asset Utilization due to High Fixed Asset requirements </li></ul><ul><li>Div...
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Novartis and IPCA Financial Analysis

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Novartis and IPCA Financial Analysis

  1. 1. Financial Analysis & NOVARTIS IPCA
  2. 2. Management Discussion & Analysis Overview of Indian Pharma Market <ul><li>Front ranked among country's science based industries. </li></ul><ul><li>Worth US$ 6 billion in domestic sales and US$ 4 billion in exports. </li></ul><ul><li>In world pharmaceutical market, india has a share of about 1.8% </li></ul><ul><li>by value and about 8% by volume. </li></ul><ul><li>IPM is poised to grow to US$ 25 billion by 2010. </li></ul><ul><li>IPM has registered a healthy growth of 15.4% with multinational </li></ul><ul><li>companies growing at 11%. </li></ul>
  3. 3. <ul><li>The government’s continued focus on economic reforms and its </li></ul><ul><li>commitment to increase investment in healthcare are expected to </li></ul><ul><li>sustain growth momentum. </li></ul><ul><li>Indian companies are today focusing on global generic business, </li></ul><ul><li>increasing focus on R&D activities and alliances with multinational </li></ul><ul><li>companies. </li></ul><ul><li>Poor public healthcare funding and infrastructure, low per capita </li></ul><ul><li>consumption of medicines are a cause of concern. </li></ul><ul><li>Appreciation of the Rupee has significantly increased pricing </li></ul><ul><li>pressure on Indian Companies </li></ul>Management Discussion & Analysis Overview of Indian Pharma Market
  4. 4. Management Discussion & Analysis Novartis Performance Overview Rs / Crores
  5. 5. <ul><li>MRP based excise levy has lead to overall increase in drug prices </li></ul><ul><li>In OTC, implementation of excise duty on MRP continues to take a </li></ul><ul><li>toll on product profitability. </li></ul>Management Discussion & Analysis Novartis Performance Overview
  6. 6. Management Discussion & Analysis IPCA Performance Overview
  7. 7. Management Discussion & Analysis IPCA Performance Overview Verticals 2006 (Crs) 2005 (Crs) Formulations 501.29 447.59 API & Intermediates 247.76 228.68 Net Total Sales 749.05 676.27
  8. 8. Market Performance
  9. 9. Balance Sheet
  10. 10. Company Novartis Ipca (Rs. / Crores) 2006 2005 2006 2005             SOURCE OF FUNDS                 Shareholders Funds 338   284 370   326 Loan Funds 6   7 197   221 Provision for Deferred Taxation (net)     48   43 Total   344   291   615   590                   APPLICATION OF FUNDS                 Fixed Asset   10   22 374   323 Investments   7   48 4   3 Deferred Taxation   11   9     Current Assets: 449   329   358 361   Less : Current Liabilities 133   116   121 97   Net Current Assets   316   213 237   263 Pre-Operative Expenses (w/off)           0 Total   344   291   615   590
  11. 11. Novartis : Profit and Loss Account
  12. 12. IPCA : Profit and Loss Account
  13. 13. <ul><li>Basis of Accounting </li></ul><ul><li>Statements are per Accrual system of accounting for revenue </li></ul><ul><li>& Cost </li></ul><ul><li>Fixed Assets </li></ul><ul><li>Straightline Method of Depreciation </li></ul><ul><li>Recorded at Cost of Acquisition or construction less CENVAT/ Service Tax </li></ul><ul><li>VAT </li></ul><ul><li>Intangible Assets are recorded at cost of acquisition </li></ul><ul><li>Leasehold Land is amortized over leasehold period </li></ul><ul><li>Cost of borrowing for assets taking substantial time to be ready for use is capitalized for the period up to the time the asset is ready for use </li></ul><ul><li>Investments </li></ul><ul><li>Long Term Investments stated at cost </li></ul><ul><li>Provisions made for non-temporary diminution in value of investments </li></ul><ul><li>Investments in associates are accounted for using equity method </li></ul>Significant Accounting Policies IPCA
  14. 14. <ul><li>Foreign Exchange Transactions </li></ul><ul><li>Forex transactions recorded at exchange rates prevailing on transaction date </li></ul><ul><li>Loss / Gain on Forex accounted for in the P&L for the year except for Fixed </li></ul><ul><li>Assets outside India charged as carrying cost to Fixed Assets </li></ul><ul><li>Revenues of Foreign subsidiary translated at average rates prevailing during the year </li></ul><ul><li>Research & Development </li></ul><ul><li>R&D expense charged to P&L on the year it is incurred </li></ul><ul><li>Expenditure on Capital Assets depreciated over the useful life of the Asset </li></ul><ul><li>Inventories </li></ul><ul><li>Raw Materials computed on First In First Out Method </li></ul><ul><li>WIP valued at cost including all Overheads except Selling & Distribution </li></ul><ul><li>Finished Goods valued at cost or realizable value whichever is lower </li></ul>Significant Accounting Policies IPCA
  15. 15. <ul><li>Basis of Accounting </li></ul><ul><li>Statements are per Historical Cost Convention </li></ul><ul><li>Fixed Assets </li></ul><ul><li>Straightline Method of Depreciation </li></ul><ul><li>Trade Marks amortized over a period of 5 years </li></ul><ul><li>Leasehold Land is amortized over leasehold period </li></ul><ul><li>Cost of borrowing for assets taking substantial time to be ready for use is capitalized for the period up to the time the asset is ready for use </li></ul><ul><li>Investments </li></ul><ul><li>Long Term Investments stated at cost </li></ul><ul><li>Provisions made for non-temporary diminution in value of investments </li></ul><ul><li>Current Investments stated at lower of Cost and Fair Value </li></ul>Significant Accounting Policies Novartis
  16. 16. <ul><li>Foreign Exchange Transactions </li></ul><ul><li>Forex transactions recorded at exchange rates prevailing on transaction date </li></ul><ul><li>Loss / Gain on Forex accounted for in the P&L for the year </li></ul><ul><li>Forex Loss / Gains on Purchase of Fixed Assets outside India charged as carrying cost to the Fixed Assets. </li></ul><ul><li>Research & Development </li></ul><ul><li>R&D expense charged to P&L on the year it is incurred </li></ul><ul><li>Expenditure on Capital Assets depreciated over the useful life of the Asset </li></ul><ul><li>Inventories </li></ul><ul><li>Cost is determined on Moving Weighted Average Basis </li></ul><ul><li>Cost of WIP and Finished Goods includes Labor & Manufacturing Overheads </li></ul><ul><li>Inventories are valued at lower of Cost and Net Realizable Value. </li></ul>Significant Accounting Policies Novartis
  17. 17. Ratio Analysis <ul><li>Leverage Ratios </li></ul><ul><li>Profitability Ratios </li></ul><ul><li>Liquidity Ratios </li></ul><ul><li>Turnover Ratios </li></ul><ul><li>Dividend Ratios </li></ul>
  18. 18. Leverage Ratios <ul><li>This ratio shows the contributions of creditors and owners. </li></ul><ul><li>IPCA relies strongly on debt to finance its funding requirements </li></ul>1. Debt Equity Ratio (Rs. In Crores) Novartis Ipca Year 2006 2005 2006 2005 Long Term Debt 6 7 197 221 Shareholders Equity 338 284 371 326 Debt-Equity Ratio 0.02 0.02 0.53 0.68
  19. 19. Leverage Ratios <ul><li>The debt ratio measures the extent to which borrowed funds support the firm’s assets. </li></ul><ul><li>Novartis doesn’t rely much on debt to fund asset acquisition </li></ul>2. Debt Ratio (Rs. In Crores) Novartis Ipca Year 2006 2005 2006 2005 Long Term Debt 6 7 197 221 Total Assets 344 291 615 590 Debt Ratio 0.02 0.02 0.32 0.37
  20. 20. <ul><li>* Net Profit ( Before Tax and Interest) </li></ul><ul><li>Impact of Borrowed Funds is almost 25 Paise on a Rupee of Net Profit earned. </li></ul>3. Interest Coverage Ratio Leverage Ratios (Rs. In Crores) Novartis Ipca Year 2006 2005 2006 2005 Net Profit * 146 102 60 83 Interest 3 2 14 11 Interest Coverage Ratio 48.67 51.00 4.29 7.55
  21. 21. <ul><li>Leverage ratios help in assessing the risk arising from the use of debt-capital </li></ul><ul><li>Novartis has outperformed IPCA as per Leverage Ratio analysis </li></ul>Summary of Leverage Ratios Leverage Ratios Leverage Ratios Novartis Ipca 2006 2005 2006 2005 Debt-Equity Ratio 0.02 0.02 0.53 0.68 Debt Ratio 0.02 0.02 0.32 0.37 Interest Coverage Ratio 48.67 51.00 4.29 7.55
  22. 22. <ul><li>Earning Per Share </li></ul><ul><li>Price Earning Ratio </li></ul>Profitability Ratios
  23. 23. 3. Return on Capital Employed 4. Net Profit Ratio Profitability Ratios
  24. 24. <ul><li>Profitability Ratios reflect the final result of Business Operations </li></ul><ul><li>Novartis has been managed better Returns on Assets </li></ul><ul><li>Debt Servicing Cost has impacted profitability of IPCA to a great extent </li></ul>Summary Profitability Ratios
  25. 25. <ul><li>Current Ratio </li></ul><ul><li>Quick Ratio </li></ul>Liquidity Ratios
  26. 26. <ul><li>Liquidity refers to the ability of a firm to meet its obligations in the short run </li></ul><ul><li>Acid-test ratio includes the current assets which are highly liquid and hence inventories are excluded. </li></ul><ul><li>Liquidity Position of Novartis is far better as compared to IPCA </li></ul>Liquidity Ratios Summary
  27. 27. <ul><li>This ratio measures how overall assets are efficiently employed so as to maximize sales </li></ul><ul><li>Novartis has been more efficient in its Asset Utilization towards sales generation </li></ul>1. Total Assets Turnover Turnover Ratios
  28. 28. <ul><li>This ratio measures the sale per rupee of investment in Fixed Assets </li></ul><ul><li>Since IPCA is into Formulations & Bulk Drugs the Fixed Capital Requirements are very high </li></ul>2. Fixed Assets Turnover Turnover Ratios
  29. 29. 3. Inventory Turnover Ratio 4. Debtors Turnover Ratio Turnover Ratios
  30. 30. Summary <ul><li>Novartis has been more efficient in its Asset Utilization </li></ul><ul><li>IPCA needs to keep a check on its Debtors Ratio as its substantially high </li></ul><ul><li>Based on the nature of business, IPCA needs to maintain a higher level of inventory as compared to Novartis </li></ul>Turnover Ratios
  31. 31. <ul><li>Novartis Investors have enjoyed a better Dividend as compared to IPCA </li></ul>Turnover Ratios Company ( Rs / Crores) Novartis Ipca Year 2006 2005 2006 2005 Final Dividend 47.9 32 7.5 7.5 No of Shares (Crores) 3 3 2.5 2.5 Dividend per Share 15 10 3 3 Dividend per Share 15 10 3 3 Market Price per Share 595 503 368 371 Dividend Yield % 2.52% 1.99% 0.82% 0.81% Final Dividend 47.9 32.0 7.5 7.5 Net Profit 108 65 62 71 Dividend Payout % 44.43% 49.08% 12.19% 10.55%
  32. 32. Summary of All Ratios
  33. 33. Summary of Ratio Analysis <ul><li>Novartis has greater leverage as compared to IPCA to raise Debts for its long term funding requirements </li></ul><ul><li>Novartis has been more Profitable in its business operations </li></ul><ul><li>Liquidity Position of IPCA is affected due to high level of inventories required to be maintained as per business requirement </li></ul>
  34. 34. <ul><li>IPCA has not been as efficient in its Asset Utilization due to High Fixed Asset requirements </li></ul><ul><li>Dividend pay-out has been good for Novartis </li></ul><ul><li>As an investor, we would prefer to invest in Novartis as compared to IPCA. </li></ul>Summary of Ratio Analysis
  35. 35. Thank You

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