This document provides an analysis of the capitalization, leverage, and dividend policies of Torrent Pharmaceuticals, a leading pharmaceutical company in India. It summarizes Torrent's market capitalization over the past three years, which was $7.01 billion as of November 2022. It also analyzes the company's operating leverage, financial leverage, combined leverage, and debt-to-equity ratio for 2020-2022. The analysis finds that 2022 was financially the best year for Torrent, with lower leverage ratios and debt-to-equity compared to prior years.

1. SECTORAL ANALYSIS ON CAPITALISATION, LEVERAGE
AND DIVIDEND POLICY
Financial Management

2. TORRENT PHARMA IS ONE OF THE LEADING PHARMA COMPANIES IN INDIA. TORRENT
PHARMA INITIATED THE CONCEPT OF NICHE MARKETING IN INDIA AND IS RANKED
AMONGST THE LEADERS IN THERAPEUTIC SEGMENT OF CARDIOVASCULAR (CV), CENTRAL
NERVOUS SYSTEM (CNS), GASTRO-INTESTINAL (GI) AND WOMEN HEALTHCARE (WHC).
TORRENT PHARMA HAS MADE SUBSTANTIAL CONTRIBUTIONS IN DIABETOLOGY, PAIN
MANAGEMENT, GYNAECOLOGY, ONCOLOGY AND ANTI-INFECTIVE SEGMENTS. TORRENT
PHARMA HAS BEEN ESTABLISHED IN MORE THAN 40 COUNTRIES AND IS RANKED FIRST
AMONGST INDIAN COMPANIES FOR HAVING THE LARGEST MARKET SHARE IN BRAZIL AND
GERMANY.

3. DIVIDEND POLICY OF TORRENT PHARMACEUTICALS

4. CAPITALIZATION
YEAR 2020 2021 2022
MARKET
CAPITALIZATION $6.48 B $7.45 B $7.01B
CHANGE (%) YOY 47.8% 14.94% -5.83%
As of November 2022 Torrent
Pharmaceuticals has a market cap of $7.01
Billion.
The market capitalization, commonly called
market cap, is the total market value of a
publicly traded company's outstanding shares
and is commonly used to measure how much a
company is worth.

5. OPERATING LEVERAGE
Year 2020 2021 2022
Sales (In Rs.
Cr.)
6,026 6,333 6,742
EBIT 3,256 3,890 4,285
Contribution 2,500 2,443 2,457
Operating
Leverage
0.76 0.62 0.57
1. Operating Leverage = Operating
leverage is a method to measure the
degree to which a company, project,
or firm can increase operating income
by increasing revenue. A company
that earns sales with low variable
costs and a high gross margin has
high operating leverage.
Formula: Contribution / EBIT

6. FINANCIAL
LEVERAGE
YEAR 2020 2021 2022
EBIT 3,256 3,890 4,285
EBT 2,768 3,143 3,946
Financial
Leverage
1.17 1.23 1.08
Financial leverage can be defined as
the use of debt or borrowed funds to
increase returns from an investment or
project. Investors utilize leverage to
amplify their purchasing power in the
market.
Formula : EBIT/EBT

7. COMBINED
LEVERAGE
YEAR 2020 2021 2022
FINANCIAL
LEVERAGE
1.17 1.23 1.08
OPERATING
LEVERAGE
0.76 0.62 0.57
CORPORATE
LEVERAGE
0.89 0.76 0.61
Financial Leverage X Operating
Leverage.
A degree of combined leverage (DCL) is
a leverage ratio that summarizes the
combined effect that the degree of
operating leverage (DOL) and the degree
of financial leverage has on earnings per
share (EPS), given a particular change in
sales.

8. DEBT TO EQUITY RATIO
YEAR 2020 2021 2022
DEBT 3,124.45 2,941.07 1,971.60
EQUITY (in Rs. Crore) 84.62 84.62 84.62
DEBT TO EQUITY
RATIO
0.76 0.73 0.53

9. INTERPRETATION
• If we compare the overall leverages and the debt to equity Ratio – 2022 has been the best year financially as the
company has a:
∙ Lower Financial Leverage which means that company is borrowing less funds to invest in assets.
∙ Lower combined leverage which means there are less fixed costs in the company hence low risk which is a good sign.
∙ Lower operating leverage, which means that every sale is generating more or some profit.
∙ Lower Debt to Equity Ratio, meaning that company is using less debt and more of equity which is again a good sign.

10. ZYDUS
Zydus Lifesciences Limited, formerly Cadila Healthcare Limited, is an Indian multinational
pharmaceutical company based in Ahmedabad that primarily manufactures generic drugs. In
2020, it was ranked 100th on the Fortune India 500 list. Ramanbhai Patel (1925-2001), a
lecturer at the L.M. College of Pharmacy, and his business partner Indravadan Modi founded
Cadila in 1952. Over the next four decades, it grew into a well-known pharmaceutical company.
Stock price as on November 11,2022
NSE: ZYDUSLIFE Rs.427.90 -5.90 (1.36%)
Revenue: 15,139 crores INR (US$1.9 billion)
Founder: Ramanbhai Patel
Headquarters: Ahmedabad
CEO: Sahil Manchanda
Founded: 1952
Number of employees: 23,000
Subsidiaries: : Zydus Wellness, Zydus Pharmaceuticals USA, MORE

11. CAPITALIZATION
• CAPITALIZATION
• As of November 2022, Zydus Lifesciences has a market cap of $5.57 Billion. This makes 4th
• In the Indian Pharmaceutical industry according to the data. The market capitalization,
commonly called market cap, is the total market value of a publicly traded company’s.
• outstanding shares and is commonly used to measure how much a company is worth.
YEAR 2020 2021 2022
MARKET
CAPITALIZATION
$6.66 B $5.57 B $ 6.23 B
CHANGE(%) YOY 82.9% -16.3% 11.8%

12. DIVIDEND POLICY
1) Interim Dividend: The Board of Directors may declare an interim dividend based on
a review of profits earned during the current fiscal year to date. The interim dividend
may be declared during the fiscal year, typically at the time of reviewing and
approving the quarterly / semi-annual financial results.
2) Final Dividend: The Board may recommend the final dividend, subject to approval
by the Company’s members, based on the Company’s profitability as reported in the
annual audited financial statements.
The annual final dividend recommendation is subject to the company’s members;
approval at a special meeting called for that purpose.

13. 1. OPERATING LEVERAGE :
OPERATING LEVERAGE IS A MEASURE OF HOW REVENUE GROWTH
TRANSLATES INTO GROWTH IN OPERATING INCOME. IT IS A MEASURE OF LEVERAGE,
AND OF HOW
RISKY, OR VOLATILE, A COMPANY’S OPERATING INCOME IS.
OPERATING LEVERAGE = CONTRIBUTION / EBIT
YEAR 2020 2021 2022
SALES $2.80 B $ 2.56 B $ 2.79 B
EBIT $0.78 B $ 0.32B $0.55 B
CONTRIBUTION 2.02 2.24 2.24
OPERATING LEVERAGE 2.58% 7% 4.07%

14. FINANCIAL LEVERAGE : FINANCIAL LEVERAGE IS THE USE OF BORROWED MONEY (DEBT) TO FINANCE
THE PURCHASE OF ASSETS WITH THE EXPECTATION THAT THE INCOME OR CAPITAL GAIN FROM THE NEW
ASSET WILL EXCEED THE COST OF BORROWING.
FORMULA: EBIT/EBT
YEAR 2020 2021 2022
EBIT $0.78 B $0.32 B $ 0.55 B
EBT 0.23 0.19 0.30
FINANCIAL LEVERAGE 3.39% 1.68% 1.83%

15. COMBINED LEVERAGE : FINANCIAL LEVERAGE X OPERATING
LEVERAGE
YEAR 2020 2021 2022
FINANCIAL LEVERAGE 3.39% 1.68% 1.83%
OPERATING LEVERAGE 2.58% 7% 4.07%
CORPORATE LEVERAGE 8.74 11.76 7.44

16. DEBT TO EQUITY RATIO
YEAR 2020 2021 2022
DEBT 2277.70 1903.80 2456.70
EQUITY 102.40 102.40 102.40
DEBT TO
EQUITY RATIO
22.24 18.59 23.99

17. INTERPRETATION
By looking at the above numbers, we can say that Zydus Lifesciences is neither in a good
position nor in a bad position.
• Comparing the years 2021 and 2022, operating leverage has decreased by almost 3%
which is a bad sign for the company. It is so because the company is not generating enough
profit on every sale.
• The financial risk of the company has reduced since 2020. Low financial leverage
means that company is using less of the borrowed funds for investment purposes.
• Combined leverage has decreased which basically means that company’s fixed cost
are low giving a good sign.
• Debt to Equity ratio has increased meaning that there is more debt in the company as
compared to equity.

18. ALEMBIC PHARMACEUTICALS
• Oldest pharmaceutical company, 1907.
• Founded in Vadodra, Gujarat.
• Leader in pharmaceutical sector.
• Extensive list of products.

19. CAPITALIZATION
As of 2022, Alembic
Pharmaceuticals has a market
capitalization of $1.5 Billion.
Year 2022 2021 2020
Market cap $1.5
billion
$2.5
billion
$1.3
billion

20. DEBT TO EQUITY
RATIO
1. In the year 2022, the debt to equity
ratio is as low as 0.12 as compared to the
debt/equity ratio in the year 2020.
2. This means that the company is
majorly raising money through equity
financing rather than debt financing.
3. It is visible through the above table,
that the company is barely raising money
through debt, and in fact, they have
drastically reduced their debts in 2022 as
compared to the year 2020.
Year DEBT/EQUITY RATIO
2022 0.12
2021 0.04
2020 0.5

21. LONG TERM DEBT TO
CAPITALIZATION RATIO
The long-term debt of the
company is constantly
decreasing, it is clearly visible.
As the ratio is less than 1, it can
be said that the debt is at a
manageable level and the
business is going healthy.
Furthermore, debt is getting
under control more and more
every year.
Year Long term
debt
Shareholder
s equity
Long term
debt +
shareholde
rs equity
Ratio
2022 204.5 39.31 243.81 0.84
2021 298.47 39.31 337.78 0.88
2020 1079.26 39.31 1118.57 0.96

22. OPERATING
LEVERAGE
Year Contribution EBIT Operating
Leverage
2022 284.92 675.02 0.422
2021 152.60 1729.36 0.09
2020 135.67 1201.98 0.113
Comparing the years 2021 and
2022, operating leverage has
increased which is a good sign
for the company. It is so because
the company is generating good
amount of profit on every sale.

23. FINANCIAL LEVERAGE
Year EBIT EBT Financial
leverage
2022 675.02 658 1.02
2021 1729.36 1416.59 1.22
2020 1201.98 1176.79 1.02
The financial risk of the company
has reduced as compared to 2021.
Low financial leverage means that
company is using less of the
borrowed funds for investment
purposes.

24. COMBINED LEVERAGE
Year Financial
leverage
Operating
leverage
Composite
leverage
2022 1.02 0.422 0.43
2021 1.22 0.09 0.1098
2020 1.02 0.113 0.115
Combined leverage has
decreased which basically
means that company’s fixed
cost are low giving a good
sign.

25. DIVIDEND POLICY

26. STOCK TRENDS
The stock of the company had
reached all-time high in year of
2021, and was showing great
signs and was considered a
strong stock.
But as of November, the stock
has been struggling, and had
dipped to as low as 550.

27. COMPARISON OF THE THREE COMPANIES
• All 3 companies are leading pharmaceutical companies of India. Torrent pharmaceuticals has the largest market cap
in our comparison, at 7 billion, then Zydus life sciences at 6.7 billion and finally Alembic at 1.5 billion.
• Apart from Zydus Life sciences no other company has seen a rise in market cap. Torrent and Alembic, both saw a
decline. This is because of the vaccine development of Zydus life sciences.
• After comparison of all the leverages and seeing the balance sheet, the debt of all the companies is at manageable
level. All the companies, are very healthy, and are showing great signs post pandemic too.
• That being said, the share price of Torrent pharmaceutical is the only one that has seen a rise, rest all have seen a fall,
ranging from 5%-20%, in the last year.

28. THANK YOU!