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FINANCIAL STATEMENT ANALYSIS WITH RATIO ANALYSIS on

Glenmark Pharmaceutical Limited

Company Profile

Glenmark Pharmaceuticals Ltd. (GPL) is a research-driven, global, integrated pharmaceutical company headquartered at Mumbai, India. It is a leading player in the discovery of new molecules both NCEs (new chemical entity) and NBEs (new biological entity). The company has a significant presence in branded generics markets across emerging economies including India. GPL along with its subsidiary has twelve manufacturing facilities in four countries and has five R&D centres.

PROFITABILITY RATIOS
Profitability reflects the final result of business operations. Types of ratios--- Profit Margin Ratios i. Gross Profit Margin ii. Operating Profit Margin / EBITDA Margin iii. Net Profit Margin Rate Of Return Ratios i. Operating profit to operating assets ii. Net income to total assets iii. Return On Equity

Profitability Ratios

Efficiency
Total Asset Turnover Operating Asset Turnover Working Capital Turnover Shareholder Equity Turnover

Return Per Share Equity


Earning per Share Dividend per share

Gross Profit Margin


Gross profit is obtained by subtracting cost of Goods sold from the net sales. Gross Profit Margin (Gross Profit/ Net Sales)* 100 Gross Profit margin is generally used to analyze efficiency of a company to use its raw materials labor and manufacturing related fixed assets to generate profits. A higher margin is a favorable profit indicator.

Year
GlenMark

2009
31.03

2010
13.92 74.89

2011
22.62 65.05

Pharma Industry
23.79

80
60 40 20 0 2009

Glenmark Pharma . Indus


2010 2011

The company has shown a good gross profit in the year 2009 as comapred to the industry standards. The gross profits dropped drastically in the year 2010 In 2011 there was a marginal increase in gross profits.

Operating Profit Margin


Operating Expenses are mostly fixed cost of operations such as general, marketing and administrative expenses

Operating Profit Margin= (Operating Profit/ Net Sales)* 100

Operating Profit margin is generally used to analyze efficiency of a company to use its Operations to generate profits. Management has much more control over its Operating expenses.

Year
Glenmark

2009 42.12 26.2

2010 23.67 76.72

2011 29.76 68.2

Pharma Industry

100

80 60
40 20 0 2009 2010 2011 Glenmark Pharma Industry

Profit Before Tax Margin


Profit Before tax is the profit left after deducting the interest from the operating profit Profit before Tax Margin=(Operating Profit/ Net Sales)*100 A Company has access to variety of tax management techniques to manipulate the timing and magnitude of the taxable income.

Year

2009

2010

2011

Glenmark Pharma
Pharma. Industry

28.79
20.01

11.84
71.24

20.88
61.3

80 60 40 20 0 2009 2010 2011

Glenmark Pharma Pharma Industry

Net Profit Margin


Net Profit is the earnings left for the shareholders after deduction of tax from PBT. This ratio shows the earnings left for shareholders (equity & preference) as a % of net sales. Gross profit & net profit ratios provide a valuable understanding of the cost & profit structure of the firm & enables us to identify sources of biz efficiency/ inefficiency.

Year Glenmark Pharma Pharma Industry 60 50 40 30 20 10 0 2009

2009 25.5

2010 12.57

2011 17.66

15.95

56.91

48.43

NET INCOME TO TOTAL ASSETS

Glenmark industry

2010

2011

Return on Equity

Return On Equity=Net Income/ Average shareholders 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 ON EQUITY
YEAR GLENMARK 2009 2010 0.1312009 0.0773371 2011 0.1277392

GLENMARK
0.14

0.12
0.1 0.08

0.06
0.04 0.02

GLENMARK

0
2009 2010 2011

Return on total Asset

This ratio indicates how profitable a company is relative to its total assets. The return on assets (ROA) ratio illustrates how well management is employing the company's total assets to make a profit. Return on Total Assets = Net Income/ Avg. Total Assets.

As a rule of thumb, investment professionals like to see a company's ROA come in at no less than 5%. Of course, there are exceptions to this rule. An important one would apply to banks, which strive to record an ROA of 1.5% or above.

RETURN ON TOTAL ASSETS


YEAR GLENMARK 2009 0.0947654 2010 0.0509954 2011 0.0678857

GLENMARK
0.1

0.08
0.06 0.04 0.02 0 2009 2010 2011 GLENMARK

Total asset turnover

This ratio measures sales per rupee of investment in total assets. It also measures the efficiency with which total assets are employed. Total Asset Turnover= Net Sales/ Total Assets Higher total asset turnover ratio shows that the company has been more effective in using the investment in the total asset to generate revenue.

TOTAL ASSETS TURNOVER


YEAR GLENMARK 2009 0.3222712 2010 0.3854538 2011 0.4530524

GLENMARK
0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2009 2010 2011

GLENMARK

WORKING CAPITAL TURNOVER

A measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales. Working Capital Turnover=Net Sales/ Working Capital Higher the working capital turnover, the better

WORKING CAPITAL TURNOVER


YEAR GLENMARK 2009
0.5071262

2010
0.6065503

2011
0.7129236

GLENMARK
0.8

0.7
0.6 0.5

0.4
0.3 0.2

GLENMARK

0.1
0 2009 2010 2011

Earning per share

The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.

Earning Per Share=Profit After Tax/Number of Ordinary Shares

EARNING PER SHARE


YEAR GLENMARK 2009 8.71 2010 4.75 2011 7.85

GLENMARK
10 9 8 7 6 5 4 3 2 1 0 2009 2010 2011

GLENMARK

Dividend per share


The sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued. Dividend per share= Dividend/ no of ordinary shares

DIVIDEND PER SHARE


YEAR GLENMARK 2009 0.4 2010 0.39 2011 0.39

GLENMARK
0.435 0.43 0.425 0.42 0.415 0.41 0.405 0.4 0.395 0.39 0.385 2009 2010 2011

GLENMARK

Solvency Ratios

Short Term Solvency Current Ratio Quick Ratio Inventory Turnover Ratio Accounts Receivable Turnover Ratio Long Term Solvency
Debt Equity Ratio Interest Cover Ratio

Current Ratio

Current ratio is a popular ratio used to ascertain whether a company's short-term assets are readily available to pay off its short-term liabilities. Current Ratio=Current Assets/ Current Liabilities.

A high current ratio is a sign of financial strength, co has more money than it can efficiently use.
a high current ratio is not necessarily good, and a low current ratio is not necessarily bad (see chart below).

CURRENT RATIO
YEAR GLENMARK 2009 2010 2011

1.85
GLENMARK

2.47

2.52

3 2.5 2 1.5

GLENMARK

1
0.5 0 2009 2010 2011

Quick Ratio

The quick ratio - aka the quick assets ratio or the acidtest 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.
Quick Ratio = (Current Assets Inventories)/ Current Liabilities .

An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets.

QUICK RATIO
YEAR GLENMARK 2009
1.263587

2010
1.5913493

2011
1.5071685

1.8

GLENMARK

1.6
1.4 1.2 1 0.8 0.6 0.4 GLENMARK

0.2
0 2009 2010 2011

Accounts Receivable Turnover

Debtors turnover ratio indicates the relationship between Net Credit Sales and Average Accounts Receivable

Debtors Turnover =Net Credit Sales/Avg. Accounts Receivable The higher the ratio, the greater the efficiency of credit management.

ACCOUNTS RECIEVABLE TURNOVER


YEAR GLENMARK 2009 2010 2011

2.8

3.3

3.9

GLENMARK
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2009 2010 2011

GLENMARK

INVENTORY TURNOVER

Inventory Turnover Ratio = Net Sales/Inventory This ratio shows how many times a companys inventory is sold & replaced over a period

However it may be also calculated as Cost of goods sold/ Average Inventory.


It reflects the efficiency of inventory management. The higher the ratio the more efficient the inventory management & vice versa.

INVENTORY TURNOVER
YEAR GLENMARK 2009 2010 2011

4.29
GLENMARK

7.34

7.89

9 8 7 6 5 4 3 2 1 0 2009 2010 2011

GLENMARK

Debt equity ratio

The debt equity ratio compares a company's total liabilities to its total shareholders equity. Debt Equity Ratio= Total Liabilities/ Shareholders Equity.
If ratio >1=> assets are mainly financed with debt Unfavorable for the company If Ratio <1 = > more money comes out from equity Favorable for the company If ratio = 1; there is no liability

DEBT EQUITY RATIO


Year 2009
0.71

2010
0.61

2011
0.51

GlENMARK INDUSTRY 0.8


0.7 0.6 0.5 0.4 0.3 0.2 0.1

0.34

0.26

0.25

GLENMARK INDUSRTY

0
2009 2010 2011

Interest Cover Ratio

Ratio used to determine how easily the company can pay interest on outstanding debts Interest Coverage Ratio= Earnings Before interest & Taxes/ Interest Expenses. The lower ratio, the more the company is burdened by debt expenses

INTREST COVER RATIO


Year GLENMARK INDUSTRY 45 40 35 30 25 20 15 GLENMARK INDUSTRY 2009 3.6
6.42

2010 2.2
7.31

2011 3.9
41.81

10 5 0
2009 2010 2011

Directors Report

Value patent expiration Increased Costs of Drug Development Scope for Expansion

Auditors Report

Regular Payment of Interest No amount Overdue

Notes to Account
SIGNIFICANT ACCOUNTING POLICIES: i) Basis of Accountings ii) Fixed Assets (including Intangibles), Depreciation and Amortization iii) Borrowing Costs iv) Impairment of Assets v) Foreign Currency Transactions

By Group 8