Technicals Report .Chandan

A PROJECT REPORT
On
“Technical and Fundamental Analysis of
Securities of Pharmaceutical and Biotech
Companies”
Submitted By
CHANDAN KISHORE
07BS1059
KARVY CONSULTANTS LTD.

A PROJECT REPORT
ON
Technical and Fundamental Analysis of Securities of
Pharmaceutical and Biotech Companies
Submitted By
CHANDAN KISHORE
07BS1059
Faculty Guide Company Guide
Dr. Padma Srinivasan Mr. Balaji Rao
A.V.P.
(KARVY CONSULTANTS LTD.)
A report submitted in partial fulfillment of the requirements
Of MBA Program of ICFAI Business School

Declaration
I, the undersigned, hereby declare that the stated work, technical and fundamental analysis of
securities of pharmaceutical and biotech companies, is my own work. The report has been
prepared in partial fulfillment of requirements towards the Summer Internship Project, karvy
Consultants ltd. I further declare that this dissertation has not been submitted earlier to any other
university or institution for the award of any other degree or diploma.
Place Chandan Kishore
Bangalore
ACKNOWLEDGEMENT
It is often said success is not a destination, but a journey. I realized it even better during my
Summer Internship Program. I may not have come this far without help, guidance and support of
certain people who acted as guides, friends and torch bearers along the way.
I express my deepest and most sincere thanks to my company guide Mr. Balaji Rao
Assistant Vice President, Karvy Consultants Ltd. and my faculty guide Dr. Padma Srinivasan.
The project cannot be completed without their able support and guidance. Thanking them is a
small gesture for the generosity shown.
I take this opportunity to specially thank all my teammates for the cooperation in doing the
project.
I am deeply indebted to the Dean, professors, lecturers of IBS, Bangalore for their assistance and
constant motivation.
By
Chandan Kishore,
07BS1059
ICFAI Business School
Bangalore.
ABSTRACT
The most motivating aspect associated with pursuing a course in 58259540.docManagement is

the dynamism associated with it. Dynamism of adding a new perspective to one’s personality and
vision by accumulating wider knowledge, developing analytical skills not only by traditional
ways of teaching and learning but by observing things at work. The project gives a considerable
exposure to the students and provides them with an opportunity to see the practical aspects of
corporate
My project report is on Technical and Fundamental Analysis of Equity Segment. In this global
environment, how does an investor react to a particular state of market sentiment and to what
extent the market swing and volatility affects the attitude of the investors. The answer, not so
surprisingly, is rather simple. As a young MBA student at ICFAI, the principles that I was taught
were that Investments have to be made by spotting (hopefully, earlier than actual affect in the
price change) the under priced and prospective growth prospects of the share and then designing
a portfolio that can satisfy the investment objectives in the most efficient way.
The investors purchased shares without any fundamental and Technical Analysis and most of the
trades were based on individual judgments and the price movements. In a market which is
considered more as a speculative rather than an investment avenue, it is very essential that the
investors should have a beforehand experience and knowledge in the related field.
The recent roller coaster ride of the market resulted in the month of February and March this year
has wiped out billions of market capitalization and invested capital of every segment of the
investors. There was rapid surge in the number of retail investors in the market along with
volumes touching the sky during the last 1 year. Investor’s were attracted towards the share
market by the rapid increase in the market capitalization and the northward movement of the
share prices in each and every category and industry.
Fundamental and Technical Analysis is one of the most potent tools for analyzing the securities
and preserve value, and the fundamentals behind creating successful portfolio. What we do need
is going back to the basics.
Executive Summary
This report brings us details from the Indian capital market of pharmaceutical and biotech sector
and some macroeconomic variables that are related to it. This report primarily focuses on the
Indian pharmaceutical market and its performance. This report also focuses on pharmaceutical
stocks market and factor affecting it.
Along with the fundamental analysis, this report also shows the
importance of technical analysis and some key indicators. This report brings you the fundamental
analysis of stocks of pharmaceutical and biotech sector for a period of five years and technical
analysis for a period of two years. It is done to understand the investment option in Indian capital
market. I have chosen fundamental analysis to understand the financial health of company and
technical analysis for knowing the right time to invest. I have used candle sticks to understand
the share movement and used three technical analysis tools to understand the share price
movement. They are exponential moving average (EMA), Relative strength index (RSI), and
Bollinger bands.
The reasons for choosing these three indicators are that these are the
most commonly used and most applicable of all the indicators. The Fibonacci numbers were used
in these tools to get the good retracement levels.
Finally, the report gives a view of factors which should be considered
while investing and also the methods of analysis, which is required at the time of investing for
proper valuation of securities.
TABLE OF CONTENTS
1. Introduction
SL. NO. PARTICULARS PAGE NO.
Acknowledgements v
Abstract vi
Executive Summary vii
1 Introduction 8
1.1 Objectives 8
1.2 Methodology 8
1.3 Limitations 9
2 Karvy the Fina Polis 10
3 Study of Literature 12
3.1 Equity 12
3.2 Fundamental Analysis 12
3.3 The Major Statements 14
3.4 Financial Ratios 15
3.5 Technical Analysis 22
3.6 Chart Analysis 23
4 Main Text 30
4.1 Indian Economy Overview 30
4.2 Indian Pharmaceutical Industry 33
4.3 Biotech Industry 35
5 Company Analysis 36
5.1 Dr Reddy’s Lab. 37
5.2 Ranbaxy Laboratories Ltd. 42
5.3 Cipla Ltd. 48
5.4 Sun Pharmaceutical Ltd. 54
5.5 Glaxo Smithkline 60
5.6 Biocon India Ltd. 66
5.7 Torrent Gujarat Biotech 72
6 Conclusions 78
7 Suggestions 79
8 Bibliography 80
1.1 Objective of the Project - This project aims at understanding the securities market of
Pharmaceutical and Biotech Sector with the help of analysis tool such as Technical and
Fundamental analysis.
To learn the methodology that help in making profit from share market.
To study the investment opportunities in Pharmaceutical and Biotech sectors.
To provide a secondary data for the organization to study the sectors undertaken.
1.2 Methodology - For this project I will study the literature and find out variables and
various parameters that will help me in the analysis. The data will be collected through websites
of financial institutions and annual reports of different companies. Also research published by
different institutions on internet will be considered. The analysis of securities is done by
technical and fundamental analysis. After the analysis of the data, the project report containing
the description of the project, objectives of the project, analysis conducted, findings and
recommendations is provided.
Technical Analysis
Technical Analysis is a method of evaluating future security prices and market directions based
on statistical analysis of variables such as trading volume, price changes, etc., to identify
patterns. Technical analysts study trading histories to identify price trends in particular stocks,
mutual funds, commodities, or options in specific market sectors or in the overall financial
markets. They use their findings to predict probable, often short-term, trading patterns in the
investments that they study.
Fundamental Analysis
Fundamental analysis looks at a share’s market price in light of the company’s underlying
business proposition and financial situation. It involves making both quantitative and qualitative
judgments about a company. Fundamental analysis can be contrasted with 'technical analysis’,
which seeks to make judgments about the performance of a share based solely on its historic
price behavior and without reference to the underlying business, the sector it's in, or the economy
as a whole. This is done by tracking and charting the company’s stock price, volume of shares
traded day to day, both on the company itself and also on its competitors. In this way investors
hope to build up a picture of future price movement.
1.3 Limitations of Study –
Major limitations are –
• As the study is limited to a time frame of 3 months, time is too short for research.
• Indian market is developing market hence equity market is also influenced by news, latest
happenings, economic factors, political factors; media hype etc. hence research can only
indicate and give directions regular review and monitoring of portfolio is required.
• No intraday recommendation can be included in the study.
1.4 Scope of the study:

The secondary market is under study to make an allocation in a complete portfolio with
specification like percentage allocation, sector screening, target price, duration and time frame.
It can be used for long term as well as short term investments.
2. Karvy the Finapolis

Karvy, is a premier integrated financial services provider and ranked among the top five in the
country in all its business segments, services over 16 million individual investors in various
capacities, and provides investor services to over 300 corporate, comprising the who is who of
corporate India. Karvy covers the entire spectrum of financial services such as Stock Broking,
Depository Participants, Distribution of Financial Products- Mutual Funds, Bonds, Fixed
Deposits, Equities, Insurance Broking, Commodities Broking, Personal Finance and Advisory
services, Merchant Banking and Corporate Finance, Placement of Equity, IPOs, among others.
Karvy has a Professional Management team and ranks among the best in Technology, Operations
and Research of various Industrial Segments.
Karvy Early Days: -
The birth of Karvy was on a modest scale of 1982. It began with the vision and enterprise of a
small group of practicing Chartered Accountants who founded the flagship company-Karvy
Consultants Limited. They started with consulting and financial accounting automation, and
carved inroads into the field of registry and share accounting by 1985. Since then, Karvy have
utilized our experience and superlative expertise to go from strength to strength to better our
services, to provide new ones, to innovate, diversify and in the process, evolve Karvy as one of
India’s premier integrated Financial Service Enterprise.
Alliances:
Karvy Computershare Private Limited is a 50:50 joint venture of Karvy Consultants Limited and
Computershare Limited, Australia. Computershare Limited is world's largest -- and only global --
share registry, and a leading financial market services provider to the global securities industry.
The joint venture with Computershare, reckoned as the largest registrar in the world, servicing
over 60 million shareholder accounts for over 7,000 corporations across eleven countries spread
across five continents. Computershare manages more than 70 million shareholder accounts for
over 13,000 corporations around the world. Karvy Computershare Private Limited, today, is
India's largest Registrar and Share Transfer Agent servicing over 300 corporate and mutual funds
and 16 million investors.
Quality Policy:
To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by
combining its human and technological resources, to provide superior quality financial services.
In the process, Karvy will strive to exceed Customer's expectations.
Quality Objectives:
As per the Quality Policy, Karvy will:
Build in-house processes that will ensure transparent and harmonious relationships with its
clients and investors to provide high quality of services.
Establish a partner relationship with its investor service agents and vendors that will help in
keeping up its commitments to the customers.
Provide high quality of work life for all its employees and equip them with adequate knowledge
& skills so as to respond to customer's needs.
Continue to uphold the values of honesty & integrity and strive to establish unparalleled
standards in business ethics.
Use state-of-the art information technology in developing new and innovative financial products
and services to meet the changing needs of investors and clients.
Strive to be a reliable source of value-added financial products and services and constantly guide
the individuals and institutions in making a judicious choice of same.
Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers and
regulatory authorities) proud and satisfied.
3. Study of Literature
3.1Equity
A stock or any other security represents an ownership interest. On a company’s balance sheet,
the amount of the funds contributed by the owners (the stockholders) plus the retained earnings
(or losses). Also called as shareholder’s equity. In the context of margin trading, the value of
securities in a margin account minus what has been borrowed from the brokerage. In the context
of real estate, the difference between the current market value of the property and the amount the
owner still owes would receive after selling a property and paying off the montage. In terms of
investment strategies, equity (stocks) is one of the principal assets classes. The other two are
fixed-income (bonds) and cash/cash-equivalents. These are used in assets allocation planning to
structure a desired risk and return profile for an investor’s portfolio. The term’s meaning depends
very much on the context. In general, we can think of equity as ownership in any assets after all
debt is considered the owner’s equity because he or she can readily sell the item for cash. Stocks
are equity because they represent ownership in a company. It represents a claim on part of the
corporation’s assets and earnings. There are two main types of stock: common and preferred.
Common stock usually entitles the owner to vote at shareholders’ meetings and to receive
dividends. Preferred stock generally does not have voting rights, but has a higher claim on Assets
and earnings than the common shares. For example, if a company has 1,000 shares of stock
outstanding and one person owns 100 shares, that person would own and have claim to 10% of
the company’s assets. Stocks are the foundation of nearly every portfolio. Historically, they have
outperformed most other investments over the long run.
3.2Fundamental Analysis
Fundamental analysis is the examination of the underlying forces that affect the well being of the
economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast
and profit from future price movements. At the company level, fundamental analysis involves
examination of financial data, management, business concept and competition. At the industry
level, there might be an examination of supply and demand forces for the products offered. For
the national economy, fundamental analysis might focus on economic data to assess the present
and future growth of the economy. To forecast future stock prices, fundamental analysis
combines economic, industry, and company analysis to derive a stock's current fair value and
forecast future value. If fair value is not equal to the current stock price, fundamental analysts
believe that the stock is either over or under valued and the market price will ultimately gravitate
towards fair value. Fundamentalists do not need the advice of the random walkers and believe
that markets are weak-form efficient. By believing that prices do not accurately reflect all
available information, fundamental analysts look to capitalize on perceived price discrepancies.
General Steps to Fundamental Evaluation

The typical approach to analyzing a company involves four basic steps:
1. Determine the condition of the general economy.
2. Determine the condition of the industry.
3. Determine the condition of the company.
4. Determine the value of the company's stock.
Determine the condition of the general economy

First and foremost in a top-down approach would be an overall evaluation of the general
economy. The economy is like the tide and the various industry groups and individual companies
are like boats. When the economy expands, most industry groups and companies benefit and
grow. When the economy declines, most sectors and companies usually suffer. Many economists
link economic expansion and contraction to the level of interest rates. Interest rates are seen as a
leading indicator for the stock market as well. Once a scenario for the overall economy has been
developed, an investor can break down the economy into its various industry groups.
Determine the condition of the industry

The company's industry obviously influences the outlook for the company. If the prognosis is for
an expanding economy, then certain groups are likely to benefit more than others. An investor
can narrow the field to those groups that are best suited to benefit from the current or future
economic environment. If most companies are expected to benefit from an expansion, then risk
in equities would be relatively low and an aggressive growth-oriented strategy might be
advisable. A growth strategy might involve the purchase of technology, biotech, semiconductor
and cyclical stocks. If the economy is forecast to contract, an investor may opt for a more
conservative strategy and seek out stable income -oriented companies. A defensive strategy
might involve the purchase of consumer staples, utilities and energy-related stocks. To assess a
industry group's potential, an investor would what to consider the overall growth rate, market
size, and importance to the economy. While the individual company is still important, its industry
group is likely to exert just as much, or more, influence on the stock price. When stocks move,
they usually move as groups; there are very few lone guns out there. Many times it is more
important to be in the right industry than in the right stock.
Once the industry group is chosen, an investor would need to narrow the list of companies before
proceeding to a more detailed analysis. Investors are usually interested in finding the leaders and
the innovators within a group. The first task is to identify the current business and competitive
environment within a group as well as the future trends. How do the companies rank according to
market share, product position and competitive advantage? Who is the current leader and how
will changes within the sector affect the current balance of power? What are the barriers to entry?
Success depends on an edge, be it marketing, technology, market share or innovation. A
comparative analysis of the competition within a sector will help identify those companies with
an edge and those most likely to keep it.
Determine the condition of the company.

Company Analysis
With a shortlist of companies, an investor might analyze the resources and capabilities within
each company to identify those companies that are capable of creating and maintaining a
competitive advantage. The analysis could focus on selecting companies with a sensible business
plan, solid management and sound financials.
Business plan
The business plan, model or concept forms the bedrock upon which all else is built. If the plan,
model or concepts stink, there is little hope for the business. For a new business, the questions
may be: Does its business make sense? Is it feasible? Is there a market? Can a profit be made?
For an established business, the questions may be: Is the company's direction clearly defined? Is
the company a leader in the market? Can the company maintain leadership?
Management
Just as an army needs a general to lead it to victory, a company relies upon management to steer
it towards financial success. Some believe that management is the most important aspect for
investing in a company. In order to execute a business plan, a company requires top-quality
management. Investors might look at management to assess their capabilities, strengths and
weaknesses. Even the best-laid plans in the most dynamic industries can go to waste with bad
management. Alternatively, even strong management can make for extraordinary success in a
mature industry. Some of the questions to ask might include: How talented is the management
team? Do they have a track record? How long have they worked together? Can management
deliver on its promises? If management is a problem, it is sometimes best to move on.
Financial analysis
The massive amount of numbers in a company's financial statements can be bewildering and
intimidating to many investors. On the other hand, if we know how to analyze them, the financial
statements are a gold mine of information. Financial statements are the medium by which a
company discloses information concerning its financial performance. Followers of fundamental
analysis use the quantitative information gleaned from financial statements to make investment
decisions.
3.3The Major Statements
The Balance Sheet
The balance sheet represents a record of a company's assets, liabilities and equity at a particular
point in time. The balance sheet is named by the fact that a business's financial structure balances
in the following manner:
Assets = Liabilities + Shareholders' Equity
Assets represent the resources that the business owns or controls at a given point in time. This
includes items such as cash, inventory, machinery and buildings. The other side of the equation
represents the total value of the financing the company has used to acquire those assets.
Financing comes as a result of liabilities or equity. Liabilities represent debt (which of course
must be paid back), while equity represents the total value of money that the owners have
contributed to the business - including retained earnings, which is the profit made in previous
years.
The Income Statement
While the balance sheet takes a snapshot approach in examining a business, the income statement
measures a company's performance over a specific time frame. Technically, we could have a
balance sheet for a month or even a day, but we only see public companies report quarterly and
annually. The income statement presents information about revenues, expenses and profit that
was generated as a result of the business' operations for that period.
Statement of Cash Flows
The statement of cash flows represents a record of a business' cash inflows and outflows over a
period of time. Typically, a statement of cash flows focuses on the following cash-related
activities:
• Operating Cash Flow (OCF): Cash generated from day-to-day business operations
• Cash from investing (CFI): Cash used for investing in assets, as well as the proceeds from the
sale of other businesses, equipment or long-term assets
• Cash from financing (CFF): Cash paid or received from the issuing and borrowing of funds
The cash flow statement is important because it's very difficult for a business to manipulate its
cash situation. There is plenty that aggressive accountants can do to manipulate earnings, but it's
tough to fake cash in the bank. For this reason some investors use the cash flow statement as a
more conservative measure of a company's performance.
3.4Financial Ratios
From these statements a number of useful ratios can be calculated. The ratios fall under six main
categories profitability, per share, liquidity, leverage, coverage and component. When
performing ratio analysis on a company, the ratios should be compared to other companies within
the same or similar industry to get a feel for what is considered "normal."
1) Liquidity Measurement Ratios
Liquidity ratios attempt to measure a company's ability to pay off its short-term debt obligations.
This is done by comparing a company's most liquid assets (or, those that can be easily converted
to cash), its short-term liabilities. In general, the greater the coverage of liquid assets to short-
term liabilities the better as it is a clear signal that a company can pay its debts that are coming
due in the near future and still fund its ongoing operations. On the other hand, a company with a
low coverage rate should raise a red flag for investors as it may be a sign that the company will
have difficulty meeting running its operations, as well as meeting its obligations.
a) Current Ratio
The current ratio is a popular financial ratio used to test a company's liquidity (also referred to as
its current or working capital position) by deriving the proportion of current assets available to
cover current liabilities. The concept behind this ratio is to ascertain whether a company's short-
term asset are readily available to pay off its short-term liabilities. In theory, the higher the
current ratio, the better.
b) Quick Ratio
The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity indicator that
further refines the current ratio by measuring the amount of the most liquid current assets there
are to cover current liabilities. The quick ratio is more conservative than the current ratio because
it excludes inventory and other current assets, which are more difficult to turn into cash.
Therefore, a higher ratio means a more liquid current position.
2) Profitability Indicator Ratios
These ratios, much like the operational performance ratios, give users a good understanding of
how well the company utilized its resources in generating profit and shareholder value.
The long-term profitability of a company is vital for both the survivability of the company as
well as the benefit received by shareholders. It is these ratios that can give insight into the all
important "profit".
a) Profit Margin Analysis
Profit margin analysis uses the percentage calculation to provide a comprehensive measure of a
company's profitability on a historical basis (3-5 years) and in comparison to peer companies and
industry benchmarks. Basically, it is the amount of profit generated by the company as a percent
of the sales generated. The objective of margin analysis is to detect consistency or
positive/negative trends in a company's earnings. Positive profit margin analysis translates into
positive investment quality. To a large degree, it is the quality, and growth, of a company's
earnings that drive its stock price.
b) Return on Equity
This ratio indicates how profitable a company is by comparing its net income to its average
shareholders' equity. The return on equity ratio (ROE) measures how much the shareholders
earned for their investment in the company. The higher the ratio percentage, the more efficient
management is in utilizing its equity base and the better return is to investors.
3) Debt Ratios
These ratios give users a general idea of the company's overall debt load as well as its mix of
equity and debt. Debt ratios can be used to determine the overall level of financial risk a
company and its shareholders face. In general, the greater the amount of debt held by a company
the greater the financial risk of bankruptcy. While it is not mandatory in understanding the
individual debt ratios, it will give some background information on the debt of a company. The
ratios covered in this section include the debt ratio, which is gives a general idea of a company's
financial leverage as does the debt-to-equity ratio. The capitalization ratio details the mix of debt
and equity while the interest coverage ratio and the cash flow to debt ratio show how well a
company can meet its obligations.
a) Debt-Equity Ratio
The debt-equity ratio is another leverage ratio that compares a company's total liabilities to its
total shareholders' equity. This is a measurement of how much suppliers, lenders, creditors and
obligors have committed to the company versus what the shareholders have committed.To a
large degree, the debt-equity ratio provides another vantage point on a company's leverage
position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets
in the debt ratio. Similar to the debt ratio, a lower the percentage means that a company is using
less leverage and has a stronger equity position.
b) Capitalization Ratio
The capitalization ratio measures the debt component of a company's capital structure, or
capitalization to support a company's operations and growth. Long-term debt is divided by the
sum of long-term debt and shareholders' equity. This ratio is considered to be one of the more
meaningful of the "debt" ratios – it delivers the key insight into a company's use of leverage.
There is no right amount of debt. Leverage varies according to industries, a company's line of
business and its stage of development. Nevertheless, common sense tells us that low debt and
high equity levels in the capitalization ratio indicate investment quality.
c) Cash Flow To Debt Ratio
This coverage ratio compares a company's operating cash flow to its total debt, which, for
purposes of this ratio, is defined as the sum of short-term borrowings, the current portion of long-
term debt and long-term debt. This ratio provides an indication of a company's ability to cover
total debt with its yearly cash flow from operations. The higher the percentage ratio, the better
the company's ability to carry its total debt.
5) Cash Flow Indicator Ratios
Cash flow indicator focus on the cash being generated and the safety net that it provides to the
company. These ratios can give users another look at the financial health and performance of a
company. We all know that profits are very important for a company. However, through the
magic of accounting and non-cash-based transactions, companies that appear very profitable can
actually be at a financial risk if they are generating little cash from these profits. For example, if
a company makes a ton of sales on credit, they will look profitable but haven't actually received
cash for the sales, which can hurt their financial health since they have obligations to pay.
The ratios in this section use cash flow compared to other company metrics to determine how
much cash they are generating from their sales, the amount of cash they are generating free and
clear, and the amount of cash they have to cover obligations.
a) Operating Cash Flow/Sales Ratio
This ratio, which is expressed as a percentage, compares a company's operating cash flow to its
net sales or revenues, which gives investors an idea of the company's ability to turn sales into
cash. It would be worrisome to see a company's sales grow without a parallel growth in operating
cash flow. Positive and negative changes in a company's terms of sale and/or the collection
experience of its accounts receivable will show up in this indicator.
b) Dividend Payout Ratio
This ratio identifies the percentage of earnings (net income) per common share allocated to
paying cash dividends to shareholders. The dividend payout ratio is an indicator of how well
earnings support the dividend payment. Here's how dividends "start" and "end." During a fiscal
year quarter, a company's board of directors declares a dividend. This event triggers the posting
of a current liability for "dividends payable." At the end of the quarter, net income is credited to a
company's retained earnings, and assuming there's sufficient cash on hand and/or from current
operating cash flow, the dividend is paid out. This reduces cash, and the dividends payable
liability is eliminated. The payment of a cash dividend is recorded in the statement of cash flows
under the "financing activities" section.
6) Investment Valuation Ratios
This section of the ratio analysis looks at a wide array of ratios that can be used by investors to
estimate the attractiveness of a potential or existing investment and get an idea of its valuation.
a) Price/Book Value Ratio
A valuation ratio used by investors which compares a stock's per-share price (market value) to its
book value (shareholders' equity). The price-to-book value ratio, expressed as a multiple (i.e.
how many times a company's stock is trading per share compared to the company's book value
per share), is an indication of how much shareholders are paying for the net assets of a company.
The book value of a company is the value of a company's assets expressed on the balance sheet.
It is the difference between the balance sheet assets and balance sheet liabilities and is an
estimation of the value if it were to be liquidated. The price/book value ratio, often expressed
simply as "price-to-book", provides investors a way to compare the market value, or what they
are paying for each share, to a conservative measure of the value of the firm.
b) Price/Cash Flow Ratio
The price/cash flow ratio is used by investors to evaluate the investment attractiveness, from a
value standpoint, of a company's stock. This metric compares the stock's market price to the
amount of cash flow the company generates on a per-share basis. This ratio is similar to the
price/earnings ratio, except that the price/cash flow ratio (P/CF) is seen by some as a more
reliable basis than earnings per share to evaluate the acceptability, or lack thereof, of a stock's
current pricing. The argument for using cash flow over earnings is that the former is not easily
manipulated, while the same cannot be said for earnings, which, unlike cash flow, are affected by
depreciation and other non-cash factors.
c) Price/Earnings Ratio
The price/earnings ratio (P/E) is the best known of the investment valuation indicators. The P/E
ratio has its imperfections, but it is nevertheless the most widely reported and used valuation by
investment professionals and the investing public. The financial reporting of both companies and
investment research services use a basic earnings per share (EPS) figure divided into the current
stock price to calculate the P/E multiple (i.e. how many times a stock is trading (its price) per
each dollar of EPS). It's not surprising that estimated EPS figures are often very optimistic during
bull markets, while reflecting pessimism during bear markets. Also, as a matter of historical
record, it's no secret that the accuracy of stock analyst earnings estimates should be looked at
skeptically by investors. The ratio will also vary widely among different companies and
industries.
d) Price/Earnings To Growth Ratio
The price/earnings to growth ratio, commonly referred to as the PEG ratio, is obviously closely
related to the P/E ratio. The PEG ratio is a refinement of the P/E ratio and factors in a stock's
estimated earnings growth into its current valuation. By comparing a stock's P/E ratio with its
projected, or estimated, earnings per share (EPS) growth, investors are given insight into the
degree of overpricing or under pricing of a stock's current valuation, as indicated by the
traditional P/E ratio. The general consensus is that if the PEG ratio indicates a value of 1, this
means that the market is correctly valuing (the current P/E ratio) a stock in accordance with the
stock's current estimated earnings per share growth. If the PEG ratio is less than 1, this means
that EPS growth is potentially able to surpass the market's current valuation. In other words, the
stock's price is being undervalued. On the other hand, stocks with high PEG ratios can indicate
just the opposite - that the stock is currently overvalued.
e) Price/Sales Ratio
A stock's price/sales ratio (P/S ratio) is another stock valuation indicator similar to the P/E ratio.
The P/S ratio measures the price of a company's stock against its annual sales, instead of
earnings. Like the P/E ratio, the P/S reflects how many times investors are paying for every
dollar of a company's sales. Since earnings are subject, to one degree or another, to accounting
estimates and management manipulation, many investors consider a company's sales (revenue)
figure a more reliable ratio component in calculating a stock's price multiple than the earnings
figure.
f) Dividend Yield
A stock's dividend yield is expressed as an annual percentage and is calculated as the company's
annual cash dividend per share divided by the current price of the stock. The dividend yield is
found in the stock quotes of dividend-paying companies. Investors should note that stock quotes
record the per share dollar amount of a company's latest quarterly declared dividend. This
quarterly dollar amount is annualized and compared to the current stock price to generate the per
annum dividend yield, which represents an expected return. Income investors value a dividend-
paying stock, while growth investors have little interest in dividends, preferring to capture large
capital gains. Whatever your investing style, it is a matter of historical record that dividend-
paying stocks have performed better than non-paying-dividend stocks over the long term.
Determine the value of the company's stock

After determining the condition and outlook of the economy, the industry, and the company, the
fundamental analyst is prepared to determine if the company's stock is overvalued, undervalued,
or correctly valued.
3.5Technical Analysis
A useful definition of technical analysis is:

The study of the behaviour of market participants, as reflected in the price of shares or the value
of market indexes, in order to identify stages in the development of trends.
Technical Analysis is the forecasting of future financial price
movements based on an examination of past price movements. Like weather forecasting,
technical analysis does not result in absolute predictions about the future. Instead, technical
analysis can help investors anticipate what is "likely" to happen to prices over time. Technical
analysis is applicable to stocks, indices, commodities, futures or any tradable instrument where
the price is influenced by the forces of supply and demand. Price refers to any combination of the
open, high, low, or closes for a given security over a specific time frame. The time frame can be
based on intraday, daily, weekly or monthly price data and last a few hours or many years. In
addition to this volume or open interest figures can be included with their study of price action.
The field of technical analysis is based on three assumptions:
1. The market discounts everything.
2. Price moves in trends.
3. History tends to repeat itself.
These reasons are found in observations of the stock market, as first noted by Charles Dow in
USA and can be described in three ways.
1. The market discounts everything. Over time, market prices reflect everything that can be
known about a stock and its future prospects. The market as a mechanism is very efficient at
discounting whatever can affect prices. Even unforeseen events, such as new competition, legal
or financial problems, a company takeover, the death of a founder, and so on are quickly priced
into the stock. Even unknown (not yet publicized) fundamental factors, such as a sharp earnings
drop, are seldom unknown or unanticipated by everyone; those who know often act on the
information, and selling volume starts to pick up on rallies. There are traders, investors, and
analysts outside a company or an industry who see changes coming, through astute observation
and sharp analysis.
2. Price moves in trends. The information about a company’s stock and its future earnings
prospects that are reflected in the stock price will also be reflected in a price trend or tendency to
go up or down. Trends are not only up or down, but sideways as well or what is sometimes called
a trendless pattern—we can consider a sideways movement to be the third trend possibility, for
example, a stock moves between 40 and 50 multiple times. A trend is the action of a body in
motion staying in motion until an equal countervailing force occurs.
3. History tends to repeat itself. Price trends occur and reoccur in patterns that are largely
predictable. The idea of trends reoccurring is that history repeats itself. If there was abundant
stock for sale (supply) previously for sale at 50 and that selling caused a retreat in prices, it may
well be the case again when the stock approaches this level again. If it doesn’t, that tells us
something also, as demand was this time strong enough to overcome selling.
TECHNICAL ANALYSIS IS AN ANALYTIC PROCESS
Fundamental analysis tends to the view that prices for a financial instrument are directly related
to the intrinsic value of the asset underlying it. Technical analysis, on the other hand, recognizes
that there are other forces at play that shape supply and demand for a financial instrument and
cause its price to deviate significantly from a consistent relationship with the intrinsic value of
the underlying asset. The technical analyst therefore studies changes in the level of supply and
demand for the traded instrument directly, rather than indirectly via the factors affecting supply
and demand for the underlying asset. Technical analysis will be used as part of the decision-
making process in investing or trading in shares. It will be used primarily to assist with the
timing element of the process, where an investor or trader seeks to:
Identify the beginning of an uptrend in a stock
Buy a position in the stock
Identify the end of the trend
Sell the position
General Steps to Technical Evaluation
Steps in technical analysis are:-

1. Broad market analysis through the major indices such as the BSE and NSE
2. Sector analysis to identify the strongest and weakest groups within the broader
market.
3. Individual stock analysis to identify the strongest and weakest stocks within select
groups
The beauty of technical analysis lies in its versatility. Because the principles of technical analysis
are universally applicable, each of the analysis steps above can be performed using the same
theoretical background. It does not matter if it is a stock, market index or commodity. The
technical principles of support, resistance, trend, trading range and other aspects can be applied
to any chart. While this may sound easy, technical analysis is by no means easy. Success requires
serious study, dedication and an open mind.
3.6Chart Analysis
Overall Trend: The first step is to identify the overall trend. This can be accomplished with
trend lines, moving averages or peak/trough analysis. As long as the price remains above its
uptrend line, selected moving averages or previous lows, the trend will be considered bullish.
Support: Areas of congestion or previous lows below the current price mark support levels. A
break below support would be considered bearish.
Resistance: Areas of congestion and previous highs above the current price mark the resistance
levels. A break above resistance would be considered bullish.
Pictorial Price History: The price chart is an easy to read historical account of a security's price
movement over a period of time. Charts are much easier to read than a table of numbers. On most
stock charts, volume bars are displayed at the bottom. With this historical picture, it is easy to
identify the following:
 Reactions prior to and after important events.

 Past and present volatility.
 Historical volume or trading levels.
 Relative strength of a stock versus the overall market.
Assist with Entry Point
Technical analysis can help with timing a proper entry point. It is no secret that timing can play
an important role in performance. Technical analysis can help spot demand (support) and supply
(resistance) levels as well as breakouts. Simply waiting for a breakout above resistance or buying
near support levels can improve returns.
It is also important to know a stock's price history. If a stock we thought was great for the last 2
years has traded flat for those two years, it would appear that stock market has a different
opinion. If a stock has already advanced significantly, it may be prudent to wait for a pullback.
Or, if the stock is trending lower, it might pay to wait for buying interest and a trend reversal.
Technical Analysis: Tools
Tools of technical analysis are:
1. Japanese candlesticks
2. Moving Average
3. Bollinger Bands
4. RSI
Japanese Candlesticks
In the 1600s, the Japanese developed a method of technical analysis to analyze the price of rice
contracts. This technique is called candlestick charting.
Candlestick charts display the open, high, low, and closing
prices in a format similar to a modern-day bar-chart, but in a manner that extenuates the
relationship between the opening and closing prices. Candlestick charts are simply a new way of
looking at prices, they don't involve any calculations. Each candlestick represents one period.
Each candlestick represents one period of data. Figure given below displays the elements of a
candle.
Moving Average
The moving average is one of the most widely used technical indicators because it is versatile
and easily constructed. It serves as a device to follow trends in the movement of a currency (or
stock). Its purpose is to identify and signal to a technical trader that a new trend, a sustained
movement either up or down in the currency, has begun or that an old trend has ended or
reversed. The reason trends are easier to see using a moving average is that it acts to smooth the
volatility inherent in looking at the price action the moving average produces buy and sell signals
to the analyst or trader. The signals have a lag to market conditions; therefore a moving average
is a trend.
Exponential Moving Average
The exponential moving average is a type of moving average that gives more weight to recent
prices in an attempt to make it more responsive to new information. An exponential (or
exponentially weighted) moving average is calculated by applying a percentage of today's
closing price to yesterday's moving average value. Exponential moving averages place more
weight on recent prices.
Bollinger bands
Bollinger Bands are similar to moving average envelopes. The difference between Bollinger
Bands and envelopes is envelopes are plotted at a fixed percentage above and below a moving
average, whereas Bollinger Bands are plotted at standard deviation levels above and below a
moving average. Since standard deviation is a measure of volatility, the bands are self-adjusting:
widening during volatile markets and contracting during calmer periods.
Bollinger Bands are usually displayed on top of security

prices, but they can be displayed on an indicator. These comments refer to bands displayed on
prices. As with moving average envelopes, the basic interpretation of Bollinger Bands is that
prices tend to stay within the upper- and lower-band. The distinctive characteristic of Bollinger
Bands is that the spacing between the bands varies based on the volatility of the prices. During
periods of extreme price changes (i.e., high volatility), the bands widen to become more
forgiving. During periods of stagnant pricing (i.e., low volatility), the bands narrow to contain
prices.
Bollinger Bands have the following characteristics.
Sharp price changes tend to occur after the bands tighten, as volatility lessens.
When prices move outside the bands, a continuation of the current trend is implied.
Bottoms and tops made outside the bands followed by bottoms and tops made inside the bands
call for reversals in the trend.
A move that originates at one band tends to go all the way to the other band. This observation is
useful when projecting price targets.
The following chart shows Bollinger Bands on Exxon's prices.
The Bands were calculated using a 20-day exponential moving average and are spaced two
deviations apart. The bands were at their widest when prices were volatile during April. They
narrowed when prices entered a consolidation period later in the year. The narrowing of the
bands increases the probability of a sharp breakout in prices. The longer prices remain within the
narrow bands the more likely a price breakout.
Relative Strength Index
The Relative Strength Index (RSI) is one of the most popular indicators used by technical traders.
It is an oscillator, which means it moves back and forth between 0 and 100 levels. It was first
introduced by Welles Weilder in an article in Commodities Magazine (now known as Futures) in
June, 1978. The RSI is used most often by day traders and other short term investors, but the
information it provides can help all investors.
The RSI is a trend following oscillator that ranges from 0 to 100. It gives an indication whether
the equity is currently “overbought” or “oversold”, or in other words, it is a measure of
momentum.
If a currency’s price is increasing, RSI will move upwards towards 100, implying buying or
accumulation of the equity. If the equity’s price is decreasing, RSI will move downwards. This
implies selling pressure or distribution.
4. Main Text
4.1 Indian Economy Overview
Economics experts and various studies conducted across the globe envisage India and China to
rule the world in the 21st century. For over a century the United States has been the largest
economy in the world but major developments have taken place in the world economy since
then, leading to the shift of focus from the US and the rich countries of Europe to the two Asian
giants- India and China.
According to some experts, the share of the US in world GDP is expected to fall (from 21 per
cent to 18 per cent) and that of India GDP to rise (from 6 per cent to 11 per cent in 2025), and
hence the latter will emerge as the third pole in the global economy after the US and China.
Indian Economy experienced a GDP growth of 9.4 percent during 2006-07 to 8.5 percent during
2007-08. By 2025 the India's economy is projected to be about 60 per cent the size of the US
economy. The transformation into a tri-polar economy will be complete by 2035, with the Indian
economy only a little smaller than the US economy but larger than that of Western Europe. By
2035, India is likely to be a larger growth driver than the six largest countries in the EU, though
its impact will be a little over half that of the US.
India, which is now the fourth largest economy in terms of purchasing power parity, will
overtake Japan and become third major economic power within 10 years.
Indian GDP growth yearly (%)

Industry
India is fourteenth in the world in factory output. They together account for 27.6% of the GDP
and employ 17% of the total workforce. However, about one-third of the industrial labor force is
engaged in simple household manufacturing only.
Economic reforms brought foreign competition, led to privatization of certain public sector
industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the
production of fast-moving consumer goods.
Post-liberalization, the Indian private sector, which was usually run by oligopolies of old family
firms and required political connections to prosper was faced with foreign competition, including
the threat of cheaper Chinese imports. It has since handled the change by squeezing costs,
revamping management, focusing on designing new products and relying on low labor costs and
technology.
Indian Industrial growth (in %)
Global trade relations
India currently accounts for 1% of World trade as of 2007 according to the WTO. Until the
liberalisation of 1991, India was largely and intentionally isolated from the world markets, to
protect its fledging economy and to achieve self-reliance. Foreign trade was subject to import
tariffs, export taxes and quantitative restrictions, while foreign direct investment was restricted
by upper-limit equity participation, restrictions on technology transfer, export obligations and
government approvals; these approvals were needed for nearly 60% of new FDI in the industrial
sector. The restrictions ensured that FDI averaged only around $4billions annually between 1991
and 2006; a large percentage of the capital flows consisted of foreign investment, commercial
borrowing and deposits of non-resident Indians.
(Foreign investment in India)

Fore
ign trade of india (series1-export, series2-import)
4.2 Pharmaceuticals Industry - Global Scenario

According to the data from IMS Health Incorporated or IMS, the global pharmaceutical industry
has grown at the rate of 10% over the last seven years. The size of the global pharmaceutical
industry is estimated at US$518 billion and is concentrated in the developed world. Around 48%
of the market is cornered by North America, 28% by the European Union and 11 % by Japan as
of December 2004. (Source: IMS Intelligence 360 Report).
IMS Health projects that the global industry would register strong growth even in the face of
continued government pressure on pricing and a number of widely used drugs going off patent.
The pharmaceutical sector is the second largest global industry (banking is the largest)
The US Food & Drug Administration (FDA) is the most powerful national regulatory body,
driving the regulatory framework in which the sector operates globally.
Global pharmaceutical players are facing expiry of patents on more than 75 percent of the drugs
already in the streamline and their manipulation in getting these patents extended are facing with
lot of resistance in the wake of hosts of drugs going off patent in the U.S, approximately
US$80bn, higher purchasing power, increasing healthcare costs and well developed health
insurance and reimbursement system in developed countries,
Indian Pharma companies can seize this opportunity and increase the market share in the global
market.
Indian Pharmaceutical Industry
The Indian drugs and pharmaceuticals industry has made rapid strides over the years. Today the
industry is manufacturing practically the entire range of the therapeutic products. It is capable of
producing raw materials for the manufacture of a wide range of bulk drugs from the basic stage
and a range of pharma machinery and equipment. The industry has achieved global recognition
as a low cost producer of quality bulk drugs and formulations. Leading Indian companies have
established marketing and manufacturing activities in over 60 countries including USA and
Western Europe. The phenomenal progress made by the industry over the years is depicted below
Progress of the Pharma Industry Year Status
1950s Formulations Mostly imported MNC dominance
1960s Formulations Domestic endeavor on imported bulk drugs
1970s Formulations some imports Bulk Drugs Indigenous manufacture by domestic companies
1980s Formulations Marginal Imports (<5%) Bulk Drugs Significant indigenous manufacture
based on Domestic R&D)
1990s Formulations Significant exports, minimal imports (2%) Bulk drugs Self reliant (exports >
imports)
2000s Signatory to WTO and patent protection act Formulations Contract Manufacture,
launching of generics in International markets Bulk Drugs Significant tie-ups in contract,
research, drug discovery and drug development, and biotechnology. The Indian pharmaceutical
industry is a success story providing employment for millions and ensuring that essential drugs at
affordable prices are available to the vast population of this sub- continent.
The Indian Pharmaceutical industry today is in the front rank of India's science - based industries
with wide ranging capabilities in the complex field of drug manufacture and technology. A
highly organized sector, the Indian Pharma Industry is estimated to be worth $4.5 billion,
growing at about 12 to 13 percent annually. It ranks very high in the third world, in terms of
technology, quality and range of medicines manufactured. From simple headache pills to
sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now
made indigenously.
Biotechnology Overview - India:
India is on the threshold of a biotechnology revolution. Vast changes to facilitate growth are
taking place in the country. The advantages the country has are the large pool of scientific talent
available at a reasonable cost, a wealth of R & D institutions, rich and varied bio-diversity, strong
IT skills and an English speaking population. Venture capitalists are now keenly studying the
sector for opportunities.
Market Potential
Industry Size
As per the Association of Biotech Led Entrepreneur (ABLE) survey, Indian Biotechnology
industry was around Rs 32.65 billion (US $ 0.7 billion) in March 2004, as against Rs 23.45
billion (US $ 0.52 billion) in the previous year, registering a growth of over 39%. At present
Indian Biotechnology industry is increasing by 1.2% as against the previous year.
Industry Segments
Indian Biotechnology industry is classified around five major segments. They are
1. Biopharmaceutical 2. Bioagriculture 3. Bioinformatics 4. Bioservices 5. Bioindustry
Out of these five segments, Biopharmaceutical segment is contributing 76% of the Indian market
in 2003-2004.
India has been practicing conventional biotechnology for several decades. Products manufactured
by the use of genetic engineering, immunological techniques, cell culture methods and
hybridoma technology are increasingly being used during the last 5 years and local research in
these areas has been intensified. The following table-1 gives the current consumption and future
demand of biotech products in value in India, as compiled and computed by the author.
Estimated Investment Opportunities in Biotechnology in the Near Future
Over the next five years, biotechnology can offer opportunities for fresh investment of Rs. 7 to
Rs. 8 billion in India. This fresh investment, if realized, could result in a turnover of Rs. 9 to
Rs.10 billion during the next 5 to 7 years. This could contribute towards import substitution,
augmentation of local production and introduction of some new products in the global market.
The growth is expected in the following segments of the industry:
The growth is expected in the following segments of the industry:
Agri-biotech 60% Diagnostic and therapeutics 25% Vaccines 15%

5.1 Dr. Reddy's Laboratories
Dr.Reddy's Laboratories is India’s leading pharmaceutical company with presence in over 100
countries. Dr Reddy's manufactures a range of products such as Active Pharmaceutical
Ingredients, Generic & Branded Finished Dosages, Specialty Pharmaceuticals and
Biopharmaceuticals. Dr. Reddy's Laboratories was founded in 1984 by Dr Anji Reddy. In 1986,
Dr. Reddy's went public and entered international markets with exports of Methyldopa. In 1987,
Dr. Reddy's obtained its first USFDA approval for Ibuprofen API and started its formulations
operations. In 1988, Dr. Reddy's acquired Benzex Laboratories Pvt. Limited to expand its Bulk
Actives business. In 1990, Dr. Reddy's, entered a new territory when it, for the first time in India,
exported Norfloxacin and Ciprofloxacin to Europe and Far East. In 1993, Dr. Reddy's Research
Foundation was established and the company started its drug discovery programme. In 1994, Dr.
Reddy launched a GDR issue of US$ 48 million. In 1995, the company set up a joint venture in
Russia. In 1997, Dr. Reddy's became the first Indian pharmaceutical company to out-license an
original molecule when it licensed anti-diabetic molecule, DRF 2593 (Balaglitazone), to Novo
Nordisk. In 1998, Dr. Reddy's licensed anti-diabetic molecule, DRF 2725 (Ragaglitazar), to
Novo Nordisk. In 1999, the company acquired American Remedies Limited, a pharmaceutical
company based in India. In the year 2000, became the first Asia Pacific pharmaceutical company,
outside Japan, to be listed on the New York Stock Exchange. In 2001, Dr. Reddy's Laboratories
became India's third largest pharmaceutical company with the merger of Cheminor Drugs
Limited, a group company. In 2002, Dr. Reddy's made its first overseas acquisition - BMS
Laboratories Limited and Meridian Healthcare in UK. In 2003, Dr. Reddy's launched Ibuprofen,
first generic product to be marketed under the "Dr. Reddy's" label in the US. In 2006, Dr.
Reddy's achieved a revenue of US$ 1 Billion. In the same year, Dr. Reddy's acquired Betapharm-
the fourth-largest generics company in Germany. Today, Dr. Reddy's Laboratories is leading
pharmaceutical company in India in terms of turnover and profitability.
Financial Data of Dr. Reddy’s Labs Ltd.
Income statement of Dr. Reddy's Laboratories Ltd. for the last 5 years. (in crore
Rs)
Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Mar ' 03
Income :
Operating Income 3,783.26 2,003.25 1,548.76 1,661.22 1,533.84
Expenses
Material Consumed 1,121.59 756.15 544.43 581.30 477.78
Manufacturing Expenses 213.46 123.18 90.64 83.66 68.20
Personnel Expenses 299.04 205.85 178.66 161.39 131.48
Selling Expenses 323.40 243.15 182.12 173.53 147.48
Adminstrative Expenses 498.42 357.86 389.71 314.56 248.26
Expenses Capitalised 0.00 0.00 0.00 0.00 0.00
Cost Of Sales 2,455.91 1,686.19 1,385.56 1,314.43 1,073.19
Operating Profit 1,327.35 317.06 163.19 346.79 460.66
Other Recurring Income 272.74 91.21 59.86 57.35 46.46
Adjusted PBDIT 1,600.08 408.27 223.05 404.14 507.11
Financial Expenses 51.96 24.63 12.73 4.23 6.05

Depreciation 133.50 111.33 92.46 71.72 58.56
Other Write offs 18.16 13.31 5.23 0.01 2.28
Adjusted PBT 1,396.47 259.00 112.62 328.17 440.23
Tax Charges 188.99 52.64 -21.10 20.15 39.07
Adjusted PAT 1,207.48 206.36 133.73 308.02 401.16

Non Recurring Items -38.79 4.77 -68.27 -24.83 -9.07
Other Non Cash adjustments -0.02 -0.01 0.00 0.00 0.00
Reported Net Profit 1,176.86 211.12 65.46 283.20 392.09
Earnigs Before Appropriation 1,496.49 392.66 231.77 409.47 469.69
Equity Dividend 62.97 38.35 38.26 38.26 38.26

Preference Dividend 0.00 0.00 0.00 0.00 0.00
Dividend Tax 10.70 5.38 5.37 4.90 4.90
Retained Earnings 1,422.82 348.93 188.15 366.31 426.53
Balance Sheet of Dr. Reddy's Laboratories Ltd. of the last 5 years. (in Rs crore)
Mar ' Mar ' Mar ' Mar ' Mar ' 03
07 06 05 04
SOURCES OF FUNDS
Owner's Fund
Equity Share Capital 83.96 38.35 38.26 38.26 38.26
Share Application Money 0.00 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves & Surplus 4,289.40 2,223.79 2,035.82 2,008.76 1,768.66
Loan Funds
Secured Loans 1.92 145.13 3.27 35.64 4.29
Unsecured Loans 327.98 778.74 269.96 22.58 24.47
Total 4,703.26 3,186.01 2,347.31 2,105.24 1,835.68
USES OF FUNDS
Fixed Assets
Gross Block 1,291.19 1,052.90 1,004.22 810.95 765.29
Less : Revaluation Reserve 0.00 0.00 0.00 0.00 0.00
Less : Accumulated Depreciation 609.15 491.08 441.68 352.85 289.36
Net Block 682.04 561.82 562.54 458.10 475.93
Capital Work-in-progress 280.61 112.92 60.13 105.25 51.41
Investments 966.99 911.36 358.46 612.05 156.64
Net Current Assets

Current Assets, Loans & Advances 4,028.55 2,398.87 2,000.88 1,343.70 1,482.08
Less : Current Liabilities & Provisions 1,254.93 798.95 634.68 413.86 330.37
Total Net Current Assets 2,773.62 1,599.92 1,366.20 929.84 1,151.71
Miscellaneous expenses not written 0.00 0.00 0.00 0.00 0.00
Total 4,703.26 3,186.02 2,347.33 2,105.24 1,835.69
Note :
Book Value of Unquoted Investments 966.68 911.05 413.63 419.48 183.13
Market Value of Quoted Investments 1.20 1.16 31.88 254.94 0.62
Contingent liabilities 1,896.92 2,409.27 189.19 208.33 166.05
Number of Equity shares outstanding (in 1,679.12 766.95 765.19 765.19 765.16
Lacs)
Ratio Analysis
PER SHARE RATIOS
EPS (Rs.) 70.09 27.53 8.55 37.01 51.24

Dividend Per Share 3.75 5.00 5.00 5.00 5.00
Operating Profit Per Share (Rs.) 79.05 41.34 21.33 45.32 60.20
Book Value Per Share (Rs.) 260.45 294.95 271.05 267.52 236.15
Net Operating Income Per Share (Rs.) 225.31 261.20 202.40 217.10 200.46
PROFITABILITY RATIOS
Operating Margin (%) 35.08 15.82 10.53 20.87 30.03

Gross Profit Margin (%) 31.55 10.26 4.56 16.55 26.21
Net Profit Margin (%) 29.01 10.08 4.06 16.47 24.81
Return On equity (%) 26.90 9.33 3.15 13.83 21.69
LEVERAGE RATIOS
Total Debt/Equity 0.07 0.40 0.13 0.02 0.01
Fixed Assets Turnover Ratio 3.06 2.01 1.59 2.13 2.13
LIQUIDITY RATIOS
Current Ratio 3.21 3.00 3.15 3.25 4.49

Quick Ratio 2.81 2.43 2.59 2.57 3.72
Inventory Turnover Ratio 8.72 5.14 5.95 7.47 7.64
PAYOUT RATIOS
Dividend payout Ratio (Net Profit) 6.25 20.71 66.64 15.24 11.00
Earning Retention Ratio 93.90 78.82 67.38 85.99 89.25
Findings:-
We can see that company’s income and net profit is increasing every year. It has a good net profit
margin, EPS, ROE ratios. Company has a good financial position and fundamentally good for
investing. The company’s stock is valuable stock, as well as growth stock. Long term investment
can give a very good return as profit.
Technical Analysis
21 days EMA 13 days EMA
Findings
From july2006 to the last week of September the trend was bullish. In October the trend is
bearish. FROM Feb.5th onwards trend is bearish till 15th Dec. 2007. During this period the 21
days EMA is over 13 days EMA. Trend was bullish later but again it become bearish from 31 st
December and till mid of February. After that the trend is bullish. The resistance was RS 740
and support level was Rs 510.
Findings
The RSI indicator shows that the stock was bearish maximum time in two years. It was bullish
for December 15th 2006 to February 5th 2007 and December 2007 to 20th of January 2008. The
stock is still recovering. The Bollinger band shows that stock was very much volatile. The
volatility was less between October 15th 2007 and 15th December 2007.
5.2 Ranbaxy Laboratories Ltd.
Ranbaxy Laboratories Limited is an integrated, research based, international pharmaceutical
company, producing a wide range of quality, affordable generic medicines. Ranbaxy is ranked
amongst the top ten global generic companies and has a presence in 23 of the top 25 pharma
markets of the world. The company is headquartered in India. It has presence in 49 countries,
with manufacturing facilities in 11 and a diverse product portfolio.
Ranbaxy was incorporated in 1961. Bhai Mohan Singh was the founder of the company. He
bought the company from his cousins Ranjit Singh and Gurbax Singh. Ranbaxy's name is a
fusion of Ranjit and Gurbax's names. Ranbaxy went public in 1973. Ranbaxy's first joint venture
was set up in Lagos (Nigeria) in 1977. In 1985, Ranbaxy Research Foundation was established
and Stancare, Ranbaxy's second pharmaceutical market division started functioning. In 1987,
production started at Ranbaxy's Toansa Plant (Punjab) and with this Ranbaxy became India's
largest manufacturer of antibiotics/antibacterials. In 1988, Ranbaxy's Toansa Plant got US FDA
approval. In 1990, Ranbaxy was granted its first US patent, for Doxycyline. In 1993, Ranbaxy set
up a joint venture in China. In 1994, Ranbaxy established regional headquarters in UK and USA.
In the same year its GDR was listed in Luxembourgh Stock Exchange. In 1995, Ranbaxy
acquired Ohm Laboratories, a manufacturing facility in the US and inaugurated state-of-the art
new manufacturing wing at Ranbaxy's US subsidiary Ohm Laboratories Inc. In 1997, Ranbaxy
crossed a sales turnover of Rs. 10000 millions. In 1998, Ranbaxy entered USA, world's largest
pharmaceutical market, with products under its own name. In the same year, Ranbaxy filed its
first Investigational New Drug (IND) application with the Drugs Controller General OF India for
approvals to conduct Phase 1 Clinical trials. In 1999, Ranbaxy commenced trials for its NCE. In
2000, Ranbaxy acquired Bayer's Generic business in Germany, and entered into Brazil, the
largest pharmaceutical market in South America. In 2001, Ranbaxy set up a manufacturing
facility in Vietnam. In 2003, Ranbaxy launched Cefuroxime Axetil after approval from USFDA.
It was the first approval granted to any generic company for this product. In 2003, Ranbaxy and
Glaxo SmithKline Plc entered into an alliance for drug discovery and development. In 2004,
Ranbaxy acquired a wholly-owned subsidiary RPG (Aventis) SA and began operations in France
as a Top 10 generic company. In 2005, Ranbaxy launched operations in Canada and acquired
generic product portfolio from EFARMES of Spain. In 2006, Ranbaxy acquired Be Tabs
pharmaceuticals of South Africa, unbranded generic business of GSK in Italy & Spain, and
Terapia of Romania.
The Income statement of Ranbaxy Laboratories Ltd. for the last 5 years.(in Cr)
Dec ' 06 Dec ' 05 Dec ' 04 Dec ' 03 Dec ' 02
Income :
Expenses
Material Consumed 1,663.53 1,536.59 1,483.86 1,480.68 1,228.26
Cost Of Sales 3,533.06 3,458.00 3,162.60 2,901.43 2,326.32
Operating Profit 632.06 182.49 628.69 915.51 716.57
Adjusted PBDIT 662.39 205.95 656.82 934.12 725.82

Depreciation 106.75 101.33 81.85 69.67 48.37
Other Write offs 0.00 0.00 0.00 0.00 156.61
Adjusted PBT 497.20 78.20 563.99 856.37 500.05
Tax Charges 62.43 -22.34 99.87 161.59 89.79
Adjusted PAT 434.77 100.54 464.13 694.78 410.26

Non Recurring Items -58.98 98.79 36.65 97.69 68.41
Other Non Cash adjustments 19.34 12.72 26.74 2.30 56.96
Reported Net Profit 380.54 212.04 527.52 794.78 623.58
Earnigs Before Appropriation 451.16 439.05 884.54 1,013.98 634.87
Equity Dividend 316.89 316.67 316.26 315.63 243.40

Dividend Tax 44.44 44.41 44.04 40.44 23.76
Retained Earnings 89.82 77.97 524.24 657.90 367.70
Balance Sheet of Ranbaxy Laboratories Ltd. for the last 5years.
SOURCES OF FUNDS
Owner's Fund
Reserves & Surplus 2,162.7 2,190.8 2,320.7 2,134.2 1,697.33
9 0 9 4
Loan Funds
Secured Loans 224.29 353.49 133.37 30.49 0.63
Unsecured Loans 2,954.3 676.31 2.49 3.76 6.27
1
Total 5,528.6 3,407.1 2,645.3 2,356.0 1,889.71

1 0 7 2
USES OF FUNDS
Fixed Assets
Gross Block 2,133.5 1,799.3 1,402.7 1,141.7 1,027.70
7 2 9 9
Net Block 1,434.0 1,199.9 877.58 706.52 658.21
3 7
Investments 2,679.9 762.78 679.07 337.50 337.50

5
Net Current Assets

9 8 9 3
Less : Current Liabilities & Provisions 1,508.2 1,397.5 1,542.3 1,243.6 933.41
4 6 3 9
Total Net Current Assets 1,112.7 1,011.5 824.57 1,227.7 867.48
6 2 4
Total 5,528.6 3,407.1 2,645.3 2,356.0 1,889.72

2 1 8 3
Note :
Book Value of Unquoted Investments 2,659.9 762.77 679.07 337.50 337.50
4
Contingent liabilities 159.40 202.40 307.95 179.70 144.75
Number of Equity shares outstanding (in 3,726.8 3,724.4 1,858.9 1,855.4 1,854.52
Lacs) 7 2 1 4
Ratio Analysis
(Rs in Cr.)
PER SHARE RATIOS
EPS (Rs.) 10.21 5.69 28.38 42.84 33.62

Reported Return On Net Worth (%) 16.19 8.92 21.04 34.26 33.28
LEVERAGE RATIOS
LIQUIDITY RATIOS
Current Ratio 1.74 1.72 1.53 1.99 1.93

Quick Ratio 1.03 0.98 0.91 1.40 1.23
PAYOUT RATIOS
Earning Retention Ratio 16.89 -259.14 22.38 48.75 34.88
Findings
The company has given only half dividend in 2005 and 2006 compared to 2004. The debt/ equity ratio of
company has increased to 1.35. this has happened due to more M&A. company’s income And profit is
increasing. And company is continuously increasing in size. The company is good for investment and
can give good return in long term. The stocks are value stocks and performance of company has made it a
growth stock too.
Technical analysis
21days EMA 13 days EMA
Findings:
In the last week of august the 13 days EMA has crossed the 21 days EMA.
This is a buy signal. 15th of Feb. was good for long position. Last week of
April 2007 was good for short position. 1st September 2007 has shown the
reversal pattern. From last week of November 2007 the pattern has become
bearish. Again from mid Feb. 2008 the pattern is bullish.
Bollinger Band RSI
Findings
RSI shows that securities were bearish in June and July 2006 and October to mid December
2006.from 3rd week of January 2007 to 15th of April 2007 the trend is bearish. From 15 th of April
to complete May the trend is bullish. The trend is bullish again from sep.2007 and last till mid
Nov. 2007. From 15th Feb. 2008 onward the trend is bullish.
5.3 Cipla Ltd.
Cipla is 2nd largest pharmaceutical company in India in terms of retail sales. Cipla manufactures
an extensive range of pharmaceutical & personal care products and has presence in over 180
countries across the world. Cipla's product range includes Pharmaceuticals, Animal Health Care
Products, OTC, Bulk Drugs, Flavours & Fragrances, and Agrochemicals. Cipla also provides a
host of consulting services such as preparation of product and material specifications, evaluation
of existing production facilities to meet GMP, definition of appropriate plant size and
technologies etc.
Cipla's continued success in its overseas business has been largely due to its strategy in forming
strategic alliances with partners all over the globe who assist with the registration process and
help market Cipla products internationally. In the U.S., Cipla has alliances with nine generic
majors including Teva Pharmaceuticals USA, Inc., Watson Pharmaceuticals, Inc., Eon Labs, Inc.
and Akorn, Inc. for over 125 projects. Similar alliances exist in Europe, South Africa, Australia
and the Middle East. In other international markets, Cipla has exclusive marketing tie-ups with
companies which are well versant with the local market. Cipla was registered as a public limited
company on August 17, 1935. Cipla's first product was launched into the market in 1937. In
1940, during the Second World War when the drug supplies were cut off, Cipla started producing
fine chemicals. In 1944, Cipla bought the premises at Bombay Central to build a modern
pharmaceutical laboratory. In 1946, Cipla's product for hypertension, Serpinoid, was exported to
the American Roland Corporation. In 1952, Cipla set up first research division for attaining self-
sufficiency in technological development. In 1960, Cipla started operations at second plant at
Vikhroli, Mumbai. In 1968, Cipla manufactured ampicillin for the first time in India. In 1976,
Cipla launched medicinal aerosols for asthma. In 1982, Cipla's fourth factory became operational
at Patalganga, Maharashtra. In 1984, Cipla developed anti-cancer drugs, vinblastine and
vincristine in collaboration with the National Chemical Laboratory, Pune. In 1991, Cipla
pioneered the manufacture of the antiretroviral drug, zidovudine. In 1994, Cipla's fifth factory
began commercial production at Kurkumbh, Maharashtra. In 1997, Cipla launched transparent
Rotahaler, the world's first such dry powder inhaler device. In 2000, Cipla became the first
company, outside the USA and Europe to launch CFC-free inhalers. In 2002, Cipla set up four
state-of-the-art manufacturing facilities set up in Goa. In 2003, Cipla launched TIOVA
(Tiotropium bromide), a novel inhaled, long-acting anticholinergic bronchodilator. In 2005,
Cipla set up a state-of-the-art facility for manufacture of formulations at Baddi, Himachal
Pradesh.
Income statement of Cipla Ltd. for the last 5 years.
Income :
Expenses
Material Consumed 1,785.62 1,469.76 1,132.89 1,013.66 741.95
Cost Of Sales 2,740.16 2,287.46 1,749.23 1,500.65 1,140.86

Adjusted PBDIT 887.61 731.87 523.31 444.20 332.50
Depreciation 103.37 80.18 55.05 40.28 28.36
Other Write offs 0.00 0.00 0.00 0.10 0.07
Adjusted PBT 773.08 635.62 456.59 390.35 299.59
Tax Charges 139.95 102.20 105.00 87.75 64.75
Adjusted PAT 633.13 533.42 351.59 302.60 234.84
Non Recurring Items 34.90 74.22 58.02 4.10 12.90
Other Non Cash adjustments 0.00 0.00 0.00 -11.10 0.00
Earnigs Before Appropriation 972.23 841.46 503.72 295.59 247.74

Equity Dividend 155.46 155.46 104.96 89.96 59.97
Dividend Tax 26.42 21.80 14.95 11.53 7.68
Balance Sheet of Cipla Ltd. for the last 5 years.
SOURCES OF FUNDS
Owner's Fund
Reserves & Surplus 3,071.84 1,913.98 1,483.60 1,193.90 999.79
Loan Funds
Secured Loans 7.25 51.27 40.37 30.60 28.89
Unsecured Loans 116.31 417.64 154.67 179.99 65.90
Total 3,350.86 2,442.86 1,738.61 1,464.46 1,154.55
USES OF FUNDS
Fixed Assets
Gross Block 1,799.71 1,366.67 986.67 740.79 516.98
Net Block 1,379.10 1,047.29 728.85 537.38 360.73
Investments 117.80 22.43 18.30 180.37 126.59
Net Current Assets

Less : Current Liabilities & Provisions 1,053.91 1,006.15 867.39 745.54 652.81
Total Net Current Assets 1,780.77 1,286.13 885.50 690.70 638.29
Total 3,350.86 2,442.86 1,738.61 1,464.46 1,154.55
Note :
Contingent liabilities 1,586.64 1,600.75 503.88 448.57 255.30
Number of Equity shares outstanding (in Lacs) 7,772.91 2,998.70 2,998.70 599.72 599.72
Findings:-
Sales and Profit of Cipla Ltd. is growing from last five years. Its asset has also grown
continuously. It has spliced its share two times during 2004-06. Balance sheet and Income
statement shows that company’s financial health is good and is growing continuously. It is
continuously giving dividend also.
Ratio Analysis
PER SHARE RATIOS
EPS (Rs.) 8.59 20.26 13.66 51.14 41.31


Return On Net Worth (%) 20.69 30.78 26.53 24.45 23.37
LEVERAGE RATIOS
LIQUIDITY RATIOS
Current Ratio 2.69 2.28 2.02 1.93 1.98

Quick Ratio 1.76 1.33 1.16 1.16 1.08
PAYOUT RATIOS
Findings:
Change in earning per share of Cipla Ltd. In 2005 and 2007 is due to splicing of share in May
2004 and April 2006. Dividend payout ratio is very good. Debt/ equity ratio is very less which is
a good sign. Current ratio is good. Book value per share is good one. EPS is also good. Ratios are
very good if we are looking for an investment. The stocks are in growth phase and are value
stocks. In long run company investment in this company can give a good return.
Technical Analysis
Findings:
We can observe that 21 days (green) EMA was above the 13 days (red) EMA, this shows bearish
trend. From august reversal pattern can be observed. The 13 days EMA is above the 21 days
EMA. This shows the bullish pattern. This trend changed in December and trend went bearish. In
mid November EMA pattern changes and becomes reverse. This is showing a bullish pattern.
Market become bearish in mid January 2008 and trend remain till February. From March again
13 days EMA goes above 21 days EMA and trend become bullish. In the beginning of March it
has shown a buy indicator. Trend is bullish now.
-RSI - Bollinger bands
The RSI (green) indicator shows that the share was normal from May 2006 to mid of August
2007. It was oversold in beginning of September and at the end of September. In mid December
it was bought more as the line touches 70 marks. Their patterns become bullish from third week
of February. Bollinger band has shown that volatility was more up to July 2006. Volatility was
more throughout NOV.2006 to Sep.2007. From December 2007 volatility has increased. From
April 2008 it has gone down little.
5.4 Sun Pharmaceutical Industries Ltd.
Sun Pharma began in 1983 with just 5 products to treat psychiatry ailments. Sales were initially
limited to 2 states - West Bengal and Bihar. Sales were rolled out nationally in 1985. Products
that are used in cardiology were introduced in 1987, and Monotrate, one of the first products
launched at that time has since become one of our largest selling products. Important products in
Cardiology were then added; several of these were introduced for the first time in India.
Realizing the fact that research is a critical growth driver, we established our research centre
SPARC in 1993 and this created a base of strong product and process development skills.
Sun Pharma was listed on the main stock exchanges in India in 1994; and the Rs. 55 crore issue
of a Rs. 10 face value equity share at a premium of Rs. 140/- was oversubscribed 55 times. The
minimum 25% that was required under the regulations then for listing was offered to the public,
the owner family continues to hold a majority stake in Sun Pharma. Company used this money to
build a greenfield site for API manufacture, as well as for acquisitions. For the acquisitions,
typically companies or assets that could be turned around and brought on track were identified.
By 1997, headquarters were shifted to Mumbai, the commercial capital of the country. company
began on the first of its international acquisitions with an initial $7.5 million investment in
Caraco Pharm Labs, Detroit. By 2000, it had completed 8 acquisitions, each such move adding
new therapy areas or offering an entry to important international markets. A new research centre
was set up in Mumbai for generic product development for the US market. In India, as new
therapy areas were entered into post acquisition; customer attention, product selection and
focused marketing helped it gain a foothold in areas like orthopaedics, gynaecology, oncology,
etc. From a ranking at 38th in 1994, by 2000 it was ranked 5th with a leadership in 8 of the 11
therapy areas that it is present in. The year 2000 was the year of turnaround at the US subsidiary,
Caraco, as it began to receive approvals after successful inspection by the USFDA. In December
2004, a research centre spread over 16 acres was inaugurated by the President of India, with
special lab space for drug discovery and innovation. In May 2007, company, along with its
subsidiaries, signed definitive agreements to acquire Taro Pharmaceutical Industries Ltd.,
(TAROF, Pink Sheets), a multinational generic manufacturer with established subsidiaries,
manufacturing and products across the U.S., Israel, Canada for $454 mill. This all-cash deal is
subject to Taro shareholder approval and requisite regulatory clearances.
The Income statement of Sun Pharmaceutical Industries Ltd. for the last 5 years.
Income :
Operating Income 1,662.56 1,291.64 1,007.28 844.06 793.32
Expenses
Material Consumed 1,173.07 842.44 564.20 384.97 323.35
Cost Of Sales 1,717.21 1,276.55 887.25 642.09 528.91
Operating Profit -54.65 15.09 120.03 201.97 264.41
Adjusted PBDIT 638.61 507.56 346.12 309.00 269.47

Depreciation 46.27 40.73 32.83 23.55 19.14
Other Write offs 0.00 0.00 2.45 0.00 0.00
Adjusted PBT 583.54 455.60 310.84 285.45 249.39
Tax Charges 11.61 27.39 17.77 34.65 21.42
Adjusted PAT 571.93 428.21 293.07 250.80 227.97

Non Recurring Items 57.00 33.08 6.78 8.26 3.32
Other Non Cash adjustments -0.05 0.00 12.45 -12.65 0.12
Equity Dividend 130.01 102.30 69.57 60.29 46.52

Dividend Tax 18.25 14.36 9.91 7.88 6.01
Balance Sheet of Sun Pharmaceutical Industries Ltd. for the last 5 years.
SOURCES OF FUNDS
Owner's Fund
Reserves & Surplus 2,351.42 1,370.67 1,011.28 797.73 634.00
Loan Funds
Secured Loans 20.39 18.23 13.92 51.46 0.00
Unsecured Loans 1,047.76 1,727.59 1,800.73 260.79 0.00
Total 3,517.64 3,210.76 2,920.10 1,171.82 696.22
USES OF FUNDS
Fixed Assets
Gross Block 838.70 744.26 612.05 510.08 340.34
Net Block 589.29 536.19 439.15 367.19 231.34
Investments 1,057.49 779.62 985.24 558.93 85.61
Net Current Assets

Current Assets, Loans & Advances 2,191.88 2,259.95 1,757.17 484.47 487.26
Less : Current Liabilities & Provisions 352.93 395.80 309.40 264.84 175.38
Total Net Current Assets 1,838.95 1,864.15 1,447.77 219.63 311.88
Total 3,517.64 3,210.76 2,920.10 1,171.82 696.22
Note :
Number of Equity shares outstanding (in Lacs) 1,934.02 1,857.32 1,855.11 927.56 930.48
Findings
The company’s operating income and net increasing every year. Company is giving dividend
every year and is increasing every year. Asset of the company is rising every year.
Ratio Analysis
PER SHARE RATIOS
EPS (Rs.) 32.52 24.83 16.48 25.84 24.83
Operating Profit Per Share (Rs.) -2.83 0.81 6.47 21.77 28.42
Operating Margin (%) -3.28 1.16 11.91 23.92 33.32

Gross Profit Margin (%) -6.07 -1.98 8.65 21.13 30.91
LEVERAGE RATIOS

LIQUIDITY RATIOS
Current Ratio 6.21 5.71 5.68 1.83 2.78

Quick Ratio 5.25 5.04 5.07 1.21 1.89
PAYOUT RATIOS
Findings
EPS and dividend is increasing every year. Book value per share is increasing every year. Net
profit margin and return on net worth is increasing every year. Debt/equity ratio is coming down,
which is now 043 only. Current and quick ratios are good. Dividend payout ratio is also good.
Technical Analysis
Findings
Stock of the company is growing before May 7, 2007. It is observed that during this period the
13 days EMA is above the 21 days EMA. After May 7th 2007 the trend had become bearish till
last week of July. Pattern changed to bullish from August and remained bullish up to December
31st, 2007. From January 2008 trend became bearish and on 21st January it has a big fall.
Afterward it started recovering and trend became bullish.
RSI Bollinger Band
Findings
The RSI indicator shows that the trend was bullish till May 7 th 2007. It lies above 50 marks
during this period. From July it is bearish as indicator line is below 50. From November it is
bullish again. In January 21st 2008 it became bearish and recovered in first week of February.
After that the trend is bullish again. The Bollinger bands showed that the securities were less
volatile as the band width remains constant for a long period. From November 2007 it has little
widen and volatility has increased. The securities were never oversold or overbought as it never
crossed the limit of 30 and 70 in RSI.
5.5 GlaxoSmithKline Pharmaceuticals Ltd.

Established in the year 1924 in India GlaxoSmithKline Pharmaceuticals Ltd. (GSK Rx India) is
one of the oldest pharmaceuticals company and employs over 3500 people. Globally, it is a USD
42 billion, leading, research-based healthcare and pharmaceutical company. In India, it is one of
the market leaders with a turnover of Rs. 1500 crore and a share of 6.2 per cent*. At GSK, its
mission is to improve the quality of life by enabling people to do more, feel better and live
longer. This mission drives us to make a real difference to the lives of millions of people with our
commitment to effective healthcare solutions.
The GSK India product portfolio includes prescription medicines and vaccines. Its prescription
medicines range across therapeutic areas such as anti-infectives, dermatology, gynaecology,
diabetes, cardiovascular disease and respiratory diseases. The company is the market leader in
most of the therapeutic categories in which it operates. GSK also offers a range of vaccines, for
the prevention of hepatitis A, hepatitis B, invasive disease caused by H, influenzae, chickenpox,
diphtheria, pertussis, tetanus and others.
With opportunities in India opening up, GSK India is aligning itself with the parent company in
areas such as clinical trials, clinical data management, global pack management, sourcing raw
material and support for business processes including analytics.
GSK’s best-in-class field force, backed by a nation-wide network of stockists, ensures that the
Company’s products are readily available across the nation. GSK has two manufacturing units in
India, located at Nashik and Thane as well as a clinical development centre in Bangalore. The
state of art plant at Nashik makes formulations while bulk drugs are manufactured at Thane.
Being a leader brings responsibility towards the communities in which it operate. At GSK it has
a Corporate Social Responsibility program, that works towards fulfilling basic healthcare,
education and other developmental needs of 15 tribal villages near Nashik. GSK also runs an
HIV/AIDS helpline - considered to be a pioneering effort in India that supports those in distress
and despair.
GSK is committed to developing new and effective healthcare solutions. The values on which the
group was founded have always inspired growth and will continue to do so in times to come.
Financial summary of GSK

Income statement of GlaxoSmithKline Pharmaceuticals Ltd. for the last 5 years. ( in Cr Rs)
Income :
Expenses
Material Consumed 633.21 628.60 637.79 593.71 496.88
Cost Of Sales 1,014.60 1,045.70 1,034.33 962.91 831.05
Adjusted PBDIT 639.44 576.12 494.96 447.84 314.42

Depreciation 16.16 15.85 15.73 17.47 17.93
Other Write offs 0.00 0.00 0.00 0.00 0.00
Adjusted PBT 621.93 558.91 476.87 427.82 293.86
Tax Charges 211.46 194.23 171.62 152.19 102.70
Adjusted PAT 410.47 364.68 305.25 275.63 191.16

Non Recurring Items 166.05 174.13 190.99 53.80 -22.26
Other Non Cash adjustments -38.87 6.70 5.84 3.66 3.33
Equity Dividend 304.93 262.58 237.17 209.57 74.48

Dividend Tax 51.82 36.83 33.26 27.39 9.54
Balance Sheet of GlaxoSmithKline Pharmaceuticals Ltd. for the last 5 years. (Rs in crore)
SOURCES OF FUNDS
Owner's Fund
Reserves & Surplus 1,276.21 1,110.01 863.90 836.94 593.01
Loan Funds
Secured Loans 0.00 0.00 0.00 0.00 0.00
Unsecured Loans 5.77 5.54 4.85 3.84 2.86
Total 1,366.68 1,200.25 953.45 928.10 670.35

USES OF FUNDS
Fixed Assets
Gross Block 266.71 253.63 253.11 252.64 256.69
Net Block 87.47 85.80 81.57 86.98 95.33
Investments 1,333.32 1,139.41 913.06 776.83 409.12
Net Current Assets

Current Assets, Loans & Advances 587.60 542.83 502.98 544.60 479.47
Total Net Current Assets -59.54 -33.62 -56.54 59.80 161.85
Total 1,366.68 1,200.25 953.46 928.12 670.35
Note :
Number of Equity shares outstanding (in Lacs) 847.03 847.03 847.03 873.23 744.75
Findings
Operating income and net profit is increasing continuously. Company is returning very high
dividend from last five years. It has given 360% dividend in2007. Its asset has increased
continuously. Company stocks are value and growth stocks.
Ratio Analysis
PER SHARE RATIOS
Reported EPS (Rs.) 63.48 64.40 59.28 38.15 23.13

LEVERAGE RATIOS

LIQUIDITY RATIOS
Current Ratio 0.90 0.94 0.89 1.12 1.51

Quick Ratio 0.54 0.46 0.43 0.53 0.73
PAYOUT RATIOS
Findings
EPS of company is increasing but compared to 2006, in2007, it was little lesser. Dividend rep
share is very high and is Rs36 for a share of Rs 10. Book value per share has increased
continuously. The profit margin is very good. It has no debt, which is a good thing. Current ratio
and Quick ratio is fair. Dividend payout ratio is very good and increasing. The company is
financially good. The company is giving very good returns to its investors. In future it will give
good returns for long term investment.
Technical analysis
Findings
The trend was bearish till august 2006. From august to mid October 2006 the trend was bullish.
This can be shown as the movement of 13 days EMA above 21 days EMA. The trend was
bearish till March 2007. From April 2007 to July the trend was bullish which became bearish
after wards. It remained bearish till 21st January 2008, as we can see the 21 days EMA above the
13 days EMA. The stock price started improving from February 2008 and deeper in March and
again is improving from last week of March.
RSI Bollinger Band
Findings
Bollinger Bands shows that from August 2006 to January 2008 the volatility was very less. From
January 2008 volatility has increased. The RSI shoes that from August 2006 this trend has
changed to bullish as it has crossed the 50 mark and last at 15 th of October. The trend has again
bullish from April 2007 and it was heavily bought in June. The trend become bearish in last week
of July 2007 and was heavily sold in august 2007 as it crosses30 mark. It remained bearish till
January 2008 excluding first and second week of January 2008 when it was bullish. In last week
of February it recovered little, gone down in March 3rd week and recovering as bullish from
April.
5.6 Biocon India Ltd.
Biocon is India's leading integrated biotechnology enterprise focused on the development of

biopharmaceuticals. Since its inception Biocon has evolved from an enzyme manufacturing
company to a fully integrated biopharmaceutical enterprise, focused on healthcare. Biocon has
successfully forayed into drug discovery and development. It has developed innovative and
effective biomolecules in diabetology, oncology, cardiology and other therapeutic segments.
Biocon delivers products and solutions to partners and customers in over 50 countries.
Biocon was founded on November 29, 1978 as a joint venture between Biocon Biochemicals
Ltd. of Ireland and an Indian entrepreneur, Kiran Mazumdar Shaw. In 1979, Biocon became the
first Indian company to manufacture and export enzymes to USA and Europe. Unilever plc.
acquired Biocon Biochemicals Ltd. in Ireland in 1979 and merged it with its subsidiary, Quest
International. In 1989, Biocon became the first Indian biotech company to receive US funding
for proprietary technologies. In 1993, Biocon's R&D and manufacturing facilities received ISO
9001 certification from RWTUV, Germany. In 1994, Biocon established a subsidiary Syngene
International Pvt. Ltd to address the growing need for outsourced R&D in the pharmaceutical
sector. In 1996, Biocon entered the biopharmaceuticals and statins segment. In 1998, Unilever
sold its shareholding in Biocon to the Indian promoters and Biocon became an independent
entity. In 2000 Biocon commissioned its first fully automated submerged fermentation plant to
produce speciality pharmaceuticals. In the same year Clinigene, India's first clinical research
organisation and a subsidiary of Biocon, was set up to pursue clinical research and development.
In 2001, Biocon became the first Indian company to be approved by US FDA for the
manufacture of lovastatin, a cholesterol-lowering molecule. In 2003 Biocon became the first
company worldwide to develop human insulin on a Pichia expression system. In 2004, Biocon
entered the stock market with its IPO and became only the second Indian company to cross the $
1 billion mark on the day of listing. In 2006, Biocon launched India's first cancer drug BIOMAb
EGFR.
Major Achievements of Biocon:
• First Indian company to manufacture and export enzymes to USA and Europe.
• First Indian biotech company to receive US funding for proprietary technologies.
• First Indian company to be approved by US FDA for the manufacture of lovastatin, a
cholesterol-lowering molecule.
• First company worldwide to develop human insulin on a Pichia expression system.
• India's largest producer and exporter of enzymes.
• Second Indian company to cross the $ 1 billion mark on the day of listing.
• Launched India's first cancer drug BIOMAb EGFR
Financial summary of Biocon
Income statement of Biocon Ltd. for the last 5 years.(Cr rupees )

Income :
Operating Income 825.35 691.63 650.44 501.88 255.64
Expenses
Expenses Capitalised 0.00 0.00 0.00 -0.71 -0.17
Cost Of Sales 637.78 511.58 460.63 347.56 192.62
Adjusted PBDIT 227.29 186.31 204.80 161.18 64.21

Depreciation 57.61 22.85 18.09 13.85 12.02
Other Write offs 0.00 0.00 0.00 0.00 0.00
Adjusted PBT 161.52 160.98 184.02 144.16 47.14
Tax Charges 12.70 27.39 14.12 22.81 11.85
Adjusted PAT 148.82 133.59 169.90 121.35 35.28

Non Recurring Items 9.53 -0.11 3.17 3.32 0.59
Earnigs Before Appropriation 488.50 372.00 278.76 183.75 59.08
Equity Dividend 30.00 25.00 20.00 10.00 0.00

Dividend Tax 5.10 3.51 2.81 1.28 0.00
Balance Sheet of Biocon Ltd. for the last 5 years. (Cr rupees)
SOURCES OF FUNDS
Owner's Fund
Reserves & Surplus 890.53 751.77 644.51 490.04 122.96
Loan Funds
Secured Loans 106.49 104.91 76.34 64.69 68.57
Unsecured Loans 0.28 0.14 0.00 0.00 0.00
Total 1,047.30 906.82 770.85 604.73 193.37
USES OF FUNDS
Fixed Assets
Gross Block 861.19 316.11 270.20 191.23 155.55
Net Block 715.08 226.54 203.40 142.52 120.08
Investments 78.60 139.06 223.73 8.93 8.48
Net Current Assets

Total Net Current Assets 223.72 84.79 33.71 398.97 56.82
Total 1,047.30 906.82 770.84 604.73 193.36
Note :
Number of Equity shares outstanding (in Lacs) 1,000.00 1,000.00 1,000.00 1,000.00 18.38
Findings
The operating income and profit of company is increasing continuously. It is giving dividend
each year. Fixed and current assets have increased continuously. The company’s business is
growing every year in terms of volume.
Ratio Analysis
PER SHARE RATIOS
EPS (Rs.) 15.84 13.35 17.44 12.47 195.21
Net Operating Income Per Share (Rs.) 82.54 69.16 65.04 50.19 1,391.12
Free Reserves Per Share (Rs.) 86.45 74.12 63.62 48.47 650.68

Return On Net Worth (%) 16.83 16.64 25.10 23.08 28.74
LEVERAGE RATIOS

LIQUIDITY RATIOS
Current Ratio 1.87 1.34 1.13 3.71 1.71

Quick Ratio 1.29 0.91 0.84 3.13 1.13
PAYOUT RATIOS
Findings
The company has a good EPS though it was more in 2005, but it has increased in 2007 compared
to 2006. Dividend per share is continuously increasing. Book value per share has increased
continuously. Though net profit margin has decreased after 2005 but it can be told in good
position. Debt/ Equity ratio of company is very less. Current and Quick ratios are good which
show a good cash flow. Dividend payout ratio is increasing continuously. The company looks
good in terms of financial health. The company stock can be classified as value stock. The sector
has good chance of growth so stock can give a good return in long term investment.
Technical Analysis
Findings
From September 2006 to February 2007 the 21 days EMA is above the 13 days EMA. This
shows that stock trend is bearish. From 5th of February 2007 the trend has changed and 13 days
EMA has gone above 21 days EMA. This shows reversal of pattern and this pattern last in the
beginning of August 2007. Pattern reversal occurred again in 2nd week of October 2007 and this
bullish trend lasted on 20th of January 2008. Pattern of stock is bearish after 20th 0f January 2008.
The sign of reversal is in the chart from 21 of April. In future we can expect a bullish trend. The
support level can be taken as Rs 390 and resistance level as Rs 650.
RSI Bollinger Band
Findings
RSI indicator shows that the pattern is bearish from may 2006 to 15th January 2007. After that he
trend has changed to bullish for the period up to July 31 st. it remain bearish in August. Pattern
changes to bullish from September 2007 and it was over bought in November 007 as the line
crossed 70 marks. The bullish pattern was broken on January 21st, 2008. It remains bearish till 21
April 2008. After that a reversal pattern is observed in chart. The Bollinger Band shows that
volatility was very high from March 2007 to June 2007. From July to October 2007 show a
shrink in band. This shows that stocks were more stable during this period. After that volatility is
again high.
5.7 Torrent Gujarat Biotech Ltd.
Torrent Gujarat Biotech Limited was established in 1992 with the noble intention of making
available, then scarce life saving drug, "Penicillin", through Fermentation technology developed
by the Torrent Group. Penicillin plant was commissioned in June 1995 with an installed capacity
of 1500 MMU Penicillin production per year. With an aim of value addition through forward
integration, a Downstream plant to produce Semi Synthetic Penicillin & Semi Synthetic
Cephalosporin products was commissioned in September 1996 with an installed capacity of 820
MT combined production per year. Demand and effectiveness of Penicillin motivated Torrent
Group and others to put up Penicillin plants in India in early 1990's. Torrent Gujarat Biotech was
commissioned in June 1995. It achieved internationally acceptable Quality of products by 1996
and had the highest productivity among contemporary new generation plants. Simultaneous
capacity addition worldwide in early 90's and the market dynamics started affecting the Penicillin
business globally from the year 1995. Situation became worst in the year 1997-98 when selling
prices dived southwards from the level of around $20 per BU to $10 per BU and lower (Rs. 1025
per BU to Rs. 430 per BU and lower). But Torrent Gujarat Biotech strategically survived this
onslaught. It not only increased its productivity / yields of the products but also introduced
various innovative cost reducing manufacturing steps. Torrent Gujarat Biotech has been awarded
Certificate of suitability from European Directorate for the Quality Medicines (EDQM) for its
Amoxycillin Tri hydrate. This has contributed to increased Exports to Europe. The operating
results of Torrent Gujarat Biotech Ltd started improving since 2000-01 leading to CAGR of 13%
in three years ending 2002-03. Penicillin-G was shifted from negative list of imports to OGL of
Import & Export Policy of GOI from April 2003, making the product importable without any
restrictions. The international prices have crashed since June 2003 from around $11 to $6 per
BU. The domestic prices have also fallen in line with the international prices from Rs.600 to
Rs.310 per BU making Penicillin operations unviable. Penicillin industry is facing onslaught of
import from China at unremunerative prices. This has led to adverse business environments and
losses, since 2003-04. As a consequence, Torrent Gujarat Biotech Ltd had to suspend the
production of Penicillin-G from April 2005. Meantime, European Union has imposed
Countervailing duty of 28.1% in 2005 on the Amoxycillin imported from the company making
the product less competitive in European markets
The Income statement of Torrent Gujarat Biotech Ltd. For the last 5 years
Jun ' 07 Jun ' 06 Mar ' 05 Mar ' 04 Mar ' 03
Income :
Operating Income 0.00 7.53 55.15 83.22 128.23
Expenses
Administrative Expenses 0.34 2.55 3.38 4.99 4.70
Expenses Capitalized 0.00 0.00 0.00 0.00 0.00
Cost Of Sales 0.47 18.91 63.56 84.89 100.26
Operating Profit -0.47 -11.39 -8.41 -1.68 27.97
Adjusted PBDIT 0.72 -9.76 -7.90 -0.02 29.89

Depreciation 0.03 10.54 11.14 11.47 15.64
Other Write offs 0.00 0.00 0.00 0.00 0.00
Adjusted PBT 0.41 -20.74 -19.48 -12.16 12.42
Tax Charges 0.00 0.04 0.00 0.00 0.00
Adjusted PAT 0.40 -20.78 -19.48 -12.17 12.42

Non Recurring Items 0.00 -46.55 0.12 -0.29 0.05
Reported Net Profit 0.79 -67.21 -19.18 -9.55 12.47
Earnings Before Appropriation -202.58 -203.38 -136.16 -116.98 -107.43
Equity Dividend 0.00 0.00 0.00 0.00 0.00

Dividend Tax 0.00 0.00 0.00 0.00 0.00
Retained Earnings -202.58 -203.38 -136.16 -116.98 -107.43
Balance Sheet of Torrent Gujarat Biotech Ltd. for the last 5 years.(in Cr Rs)
SOURCES OF FUNDS
Owner's Fund
Reserves & Surplus -99.18 -99.97 -32.76 -13.57 -5.48
Loan Funds
Secured Loans 29.81 29.81 50.05 55.40 75.69
Unsecured Loans 13.70 42.70 46.35 42.70 42.70
Total -10.83 17.38 108.48 129.37 157.75
USES OF FUNDS
Fixed Assets
Gross Block 0.36 0.39 215.08 215.15 211.90
Net Block 0.10 0.14 108.44 119.59 127.79
Investments 0.00 0.00 0.00 0.00 0.00
Net Current Assets

Total Net Current Assets -10.93 17.24 -2.43 7.29 27.17
Total -10.83 17.38 108.50 129.37 157.76
Note :
Number of Equity shares outstanding (in Lacs) 447.45 447.45 447.45 447.45 447.45
Findings
The company is continuously making loss. The financial health of company is not good. In 2007
turnover is zero.
Ratio Analysis
PER SHARE RATIOS
EPS (Rs.) 0.17 -15.02 -4.29 -2.14 2.79
Operating Profit Per Share (Rs.) -0.10 -2.54 -1.88 -0.37 6.25
Book Value Per Share (Rs.) -12.14 -12.32 2.70 6.99 8.80
Operating Margin (%) 0.00 -151.29 -15.24 -2.01 21.81

Gross Profit Margin (%) 0.00 -291.30 -35.44 -15.79 9.61
Net Profit Margin (%) 66.56 -734.45 -34.46 -11.25 9.57
Return On Net Worth (%) 0.00 0.00 -158.66 -30.55 31.67
LEVERAGE RATIOS

LIQUIDITY RATIOS
Current Ratio 0.48 1.85 0.91 1.22 1.76

Quick Ratio 0.48 1.85 0.65 0.59 1.37
PAYOUT RATIOS
Findings
The financial ratios of the company are very bad. EPS is negative. Dividend is zero. Bok value is
negative. The company is not good for investment.
Technical Analysis
Findings
We can find from chart that till November 2006 the stocks were in bearish trend. from mid
November2006 to first week of December the stocks were bearish and 13 days EMA is above 21
days EMA. From February 2007 the stock is following bearish trend. In December 2007 it got a
huge gain and bullish trend remain up to last of December. After that the trend is bearish and 21
days EMA is above 13 days EMA. This indicates bearish trend which is continued.
Findings
The RSI shows that the trend was bearish till September 2006. From October 2006 to December
2006 the trend was bullish as it crossed the 50 mark point. It went bullish in July 2007 for a short
period. From august to October 2007 it is little bullish after that it goes bearish. In December it
has got a huge gain and it was overbought as it crossed the 70 limit and reached 95 marks. There
was a huge fall in January 2008 in trend and it became bearish and until now it is bearish.
Bollinger bands show that the stocks were less volatile up to November 2007. From December
2007 it was very much volatile as the bands have widened. Again from bands have narrowed and
volatility has become less.
6. Conclusions
From the above analysis we conclude that pharma and biotech sector is a defensive stock sector
as it is less risky than other sectors. The sector has companies whose stocks can be considered as
value as well as growth stock. The sector is growing fast as the incomes and profit of companies
are growing with a very fast rate. Some companies are making losses due to decreasing sales.
It is required to invest in a company which is fundamentally correct and can give expected return.
Fundamental analysis of economy, sector along with company can minimize the risk associated
with the investment in share market.
Technical analysis shows the sentiment of market and reflects the investors view about the
particular share. It can help in predicting the right time of investment. It can help in making profit
and minimizing the losses. It also helps in intraday, short term and long term investments.
A combination of fundamental and technical analysis can help in minimizing the market risk and
making the desired return from investment. It is helpful in making the portfolio of investment.
7. Suggestions
It has been observed that there is not a single factor that affects the movement in the stock
market but a number of variables like GDP, P/E, etc. influence a market to a great extent.
Any investor before making an investment should analyze the general economic conditions
prevailing in the economy and should make a suitable framework for investment decisions.
Along with the fundamental analysis an educated investor should always emphasize the
importance of technical analysis as a tool to maximize profits and minimize risk.
8.Bibliography
Books
Technical analysis A to Z by Achelis and steven, Equis international
Mastering Fundamental Analysis by Michel tomsett, Dearborn Financial Publication
Key to Investing in common Stock by Barbara Apostolou, West Land books,
Fischer and Jordon –Security Analysis and Portfolio management , Printice Hall
Publication
Web sites
Moneycontrol.com
Equiymaster.com
Indsec.com
Litwick.com
Finance.yahoo.in

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A PROJECT REPORT

KARVY CONSULTANTS LTD.

Faculty Guide Company Guide

Dr. Padma Srinivasan Mr. Balaji Rao

(KARVY CONSULTANTS LTD.)

A report submitted in partial fulfillment of the requirements

Of MBA Program of ICFAI Business School

Place Chandan Kishore

ICFAI Business School

The most motivating aspect associated with pursuing a course in 58259540.docManagement is

To study the investment opportunities in Pharmaceutical and Biotech sectors.

• No intraday recommendation can be included in the study.

1.4 Scope of the study:

It can be used for long term as well as short term investments.

2. Karvy the Finapolis

Karvy Early Days: -

As per the Quality Policy, Karvy will:

General Steps to Fundamental Evaluation

Determine the condition of the general economy

Determine the condition of the industry

Determine the condition of the company.

3.3The Major Statements

The Balance Sheet

The Income Statement

1) Liquidity Measurement Ratios

2) Profitability Indicator Ratios

a) Profit Margin Analysis

5) Cash Flow Indicator Ratios

a) Operating Cash Flow/Sales Ratio

b) Dividend Payout Ratio

6) Investment Valuation Ratios

a) Price/Book Value Ratio

b) Price/Cash Flow Ratio

d) Price/Earnings To Growth Ratio

Determine the value of the company's stock

A useful definition of technical analysis is:

The field of technical analysis is based on three assumptions:

1. The market discounts everything.

2. Price moves in trends.

3. History tends to repeat itself.

TECHNICAL ANALYSIS IS AN ANALYTIC PROCESS

Identify the beginning of an uptrend in a stock

Buy a position in the stock

Identify the end of the trend

Sell the position

General Steps to Technical Evaluation

Steps in technical analysis are:-

 Reactions prior to and after important events.

Assist with Entry Point

Technical Analysis: Tools

Tools of technical analysis are:

Exponential Moving Average

Bollinger Bands are usually displayed on top of security

The following chart shows Bollinger Bands on Exxon's prices.

Relative Strength Index

Indian GDP growth yearly (%)

Global trade relations

(Foreign investment in India)

4.2 Pharmaceuticals Industry - Global Scenario

Indian Pharmaceutical Industry

Progress of the Pharma Industry Year Status

1950s Formulations Mostly imported MNC dominance

1960s Formulations Domestic endeavor on imported bulk drugs