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Abstract

This project was carried out with an intention to know and understand the facts of fast
developing Indian economy, among the various financial institutions, the share market
has become a major source of investment for every category of investors ranging from
big institutional investors to small individual investor.
Unlike earlier days when common man used to invest his savings in less risky and
well trusted financial institutions and instruments like public and private sector Banks,
Government Bonds and policies etc., todays investors have realized that stock market
is a crucial source of earning quicker and higher returns on their investments as
compared to the returns earned in traditional investment methods
The project contains five pharmaceutical sector stocks namely Cipla, Dr. Reddys,
GlaxoSmithKline, Lupin and Ranbaxy The analysis is done on these five stocks to
determine which one is better for investor. !or each stock based upon the ratios I have
recommended which stock to buy. Some investors look for sales of a company, some
may look for dividend payout ratio. It again depends on investor based upon the ratios
he can choose which stock to invest.
At the end conclusion and recommendations have been specified so as to make the
project work more meaningful and purposeful.

CHAPTER-I
INTRODUCTION

INTRODUCTION

India is a developing country. Nowadays many people are interested to invest in


financial markets especially on equities to get high returns, and to save tax in honest
way. Equities are playing a major role in contribution of capital to the business from
the beginning. Since the introduction of shares concept, large numbers of investors are
showing interest to invest in stock market.
In an industry plagued with skepticism and a stock market increasingly difficult to
predict and contend with, if one looks hard enough there may still be a genuine aid for
the Day Trader and Short Term Investor.
The price of a security represents a consensus. It is the price at which one person
agrees to buy and another agrees to sell. The price at which an investor is willing to
buy or sell depends primarily on his expectations. If he expects the security's price to
rise, he will buy it; if the investor expects the price to fall, he will sell it. These simple
statements are the cause of a major challenge in forecasting security prices, because
they refer to human expectations. As we all know firsthand, humans expectations are
neither easily quantifiable nor predictable. If prices are based on investor
expectations, then knowing what a security should sell for (i.e., fundamental analysis)
becomes less important than knowing what other investors expect it to sell for. That's
not to say that knowing what a security should sell for isn't important--it is. But there
is usually a fairly strong consensus of a stock's future earnings that the average
investor cannot disprove
Fundamental analysis and technical analysis can co-exist in peace and complement
each other. Since all the investors in the stock market want to make the maximum
profits possible, they just cannot afford to ignore either fundamental or technical
analysis.

NEED OF THE STUDY

To start any business capital plays major role. Capital can be acquired in two ways by
issuing shares or by taking debt from financial institutions or borrowing money from
financial institutions. The owners of the company have to pay regular interest and
principal amount at the end.
Stock is ownership in a company, with each share of stock representing a tiny piece of
ownership. The more shares you own, the more of the company you own. The more
shares you own, the more dividends you earn when the company makes a profit. In
the financial world, ownership is called Equity.
Advantages of selling stock:

A company can raise more capital than it could borrow.

A company does not have to make periodic interest payments to creditors.

A company does not have to make principal payments

Stock/shares play a major role in acquiring capital to the business in return investors
are paid dividends to the shares they own. The more shares you own the more
dividends you receive.
The role of equity analysis is to provide information to the market. An efficient
market relies on information: a lack of information creates inefficiencies that result in
stocks being misrepresented (over or under valued). This is valuable because it fills
information gaps so that each individual investor does not need to analyze every stock
thereby making the markets more efficient.

SCOPE OF THE STUDY


The scope of the study is identified after and during the study is conducted. The
project is based on tools like fundamental analysis and ratio analysis. Further, the
study is based on information of last five years.

The analysis is made by taking into consideration five companies i.e. Cipla,
Dr Reddys, GlaxoSmithKline, Lupin and Ranbaxy.

The scope of the study is limited for a period of five years.

The scope is limited to only the fundamental analysis of the chosen stocks.

OBJECTIVES OF THE STUDY

The objective of this project is to deeply analyze our Indian pharma sector for
investment purpose by monitoring the growth rate and performance on the basis of
historical data.
The main objectives of the Project study are:

Detailed analysis of Pharmaceutical Sector which is gearing towards


international standards

Analyze the impact of qualitative factors on industrys and companys


prospects

Comparative analysis of five key players in the industry which include Cipla,
Dr Reddys, GlaxoSmithKline, Lupin and Ranbaxy through fundamental
analysis.

METHODOLOGY
Research design or research methodology is the procedure of collecting, analyzing
and interpreting the data to diagnose the problem and react to the opportunity in such
a way where the costs can be minimized and the desired level of accuracy can be
achieved to arrive at a particular conclusion.
The methodology used in the study for the completion of the project and the
fulfillment of the project objectives.
The sample of the stocks for the purpose of collecting secondary data has been
selected on the basis of Random Sampling. The stocks are chosen in an unbiased
manner and each stock is chosen independent of the other stocks chosen. The stocks
are chosen from the pharmaceutical sector.
The sample size for the number of stocks is taken as 5 for fundamental analysis of
stocks as fundamental analysis is very exhaustive and requires detailed study.

LIMITATIONS

This study has been conducted purely to understand Equity analysis for
investors.

The study is restricted to three companies based on Fundamental analysis.

The study is limited to the companies having equities.

Detailed study of the topic was not possible due to limited size of the project.

There was a constraint with regard to time allocation for the research study i.e.
for a period of 45 days.

Suggestions and conclusions are based on the limited data of five years.

CHAPTER-II
REVIEW OF LITERATURE

EQUITY ANALYSIS
Investment success is pretty much a matter of careful selection and timing of stock
purchases coupled with perfect matching to an individuals risk tolerance. In order to
carry out selection, timing and matching actions an investor must conduct deep
security analysis.
Investors purchase equity shares with two basic objectives;
1.

To make capital profits by selling shares at higher prices.

2.

To earn dividend income.

These two factors are affected by a host of factors. An investor has to carefully
understand and analyze all these factors. There are basically two approaches to study
security prices and valuation i.e. fundamental analysis and technical analysis
The value of common stock is determined in large measure by the performance of the
firm that issued the stock. If the company is healthy and can demonstrate strength and
growth, the value of the stock will increase. When values increase then prices follow
and returns on an investment will increase. However, just to keep the savvy investor
on their toes, the mix is complicated by the risk factors involved. Fundamental
analysis examines all the dimensions of risk exposure and the probabilities of return,
and merges them with broader economic analysis and greater industry analysis to
formulate the valuation of a stock.

FUNDAMENTAL ANALYSIS
Fundamental analysis is a method of forecasting the future price movements of a
financial instrument based on economic, political, environmental and other relevant
factors and statistics that will affect the basic supply and demand of whatever
underlies the financial instrument. It is the study of economic, industry and company
conditions in an effort to determine the value of a companys stock. Fundamental
analysis typically focuses on key statistics in companys financial statements to
determine if the stock price is correctly valued. The term simply refers to the analysis
of the economic well-being of a financial entity as opposed to only its price
movements.
Fundamental analysis is the cornerstone of investing. The basic philosophy
underlying the fundamental analysis is that if an investor invests re.1 in buying a
share of a company, how much expected returns from this investment he has.
The fundamental analysis is to appraise the intrinsic value of a security. It insists that
no one should purchase or sell a share on the basis of tips and rumors. The
fundamental approach calls upon the investors to make his buy or sell decision on the
basis of a detailed analysis of the information about the company, about the industry,
and the economy. It is also known as top-down approach. This approach attempts to
study the economic scenario, industry position and the company expectations and is
also known as economic-industry-company approach (EIC approach).
Thus the EIC approach involves three steps:
1.

Economic analysis

2.

Industry analysis

3.

Company analysis

1. ECONOMIC ANALYSIS
The level of economic activity has an impact on investment in many ways. If the
economy grows rapidly, the industry can also be expected to show rapid growth and
vice versa. When the level of economic activity is low, stock prices are low, and when
the level of economic activity is high, stock prices are high reflecting the prosperous
outlook for sales and profits of the firms. The analysis of macro economic
environment is essential to understand the behavior of the stock prices.
The commonly analyzed macro economic factors are as follows:
Gross Domestic Product (GDP): GDP indicates the rate of growth of the economy.
It represents the aggregate value of the goods and services produced in the economy.
It consists of personal consumption expenditure, gross private domestic investment
and government expenditure on goods and services and net exports of goods and
services. The growth rate of economy points out the prospects for the industrial sector
and the return investors can expect from investment in shares. The higher growth rate
is more favorable to the stock market.

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Savings and investment: It is obvious that growth requires investment which in turn
requires substantial amount of domestic savings. Stock market is a channel through
which the savings are made available to the corporate bodies. Savings are distributed
over various assets like equity shares, deposits, mutual funds, real estate and bullion.
The savings and investment patterns of the public affect the stock to a great extent.
Inflation: Along with the growth of GDP, if the inflation rate also increases, then the
real growth would be very little. The effects of inflation on capital markets are
numerous. An increase in the expected rate of inflation is expected to cause a nominal
rise in interest rates. Also, it increases uncertainty of future business and investment
decisions. As inflation increases, it results in extra costs to businesses, thereby
squeezing their profit margins and leading to real declines in profitability.
Interest rates: The interest rate affects the cost of financing to the firms. A decrease
in interest rate implies lower cost of finance for firms and more profitability. More
money is available at a lower interest rate for the brokers who are doing business with
borrowed money. Availability of cheap funds encourages speculation and rise in the
price of shares.
Tax structure: Every year in March, the business community eagerly awaits the
Governments announcement regarding the tax policy. Concessions and incentives
given to a certain industry encourage investment in that particular industry. Tax
reliefs given to savings encourage savings. The type of tax exemption has impact on
the profitability of the industries.
Infrastructure facilities: Infrastructure facilities are essential for the growth of
industrial and agricultural sector. A wide network of communication system is a must
for the growth of the economy. Regular supply of power without any power cut would
boost the production. Banking and financial sectors also should be sound enough to
provide adequate support to the industry. Good infrastructure facilities affect the stock
market favorably.

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2. INDUSTRY ANALYSIS
An industry is a group of firms that have similar technological structure of production
and produce similar products and Industry analysis is a type of business research that
focuses on the status of an industry or an industrial sector (a broad industry
classification, like "manufacturing"). Irrespective of specific economic situations,
some industries might be expected to perform better, and share prices in these
industries may not decline as much as in other industries. This identification of
economic and industry specific factors influencing share prices will help investors to
identify the shares that fit individual expectations
Industry Life Cycle: The industry life cycle theory is generally attributed to Julius
Grodensky. The life cycle of the industry is separated into four well defined stages.

Pioneering stage: The prospective demand for the product is promising in this
stage and the technology of the product is low. The demand for the product
attracts many producers to produce the particular product. There would be
severe competition and only fittest companies survive this stage. The
producers try to develop brand name, differentiate the product and create a
product image. In this situation, it is difficult to select companies for
investment because the survival rate is unknown.

Rapid growth stage: This stage starts with the appearance of surviving firms
from the pioneering stage. The companies that have withstood the competition
grow strongly in market share and financial performance. The technology of
the production would have improved resulting in low cost of production and
good quality products. The companies have stable growth rate in this stage and
they declare dividend to the shareholders. It is advisable to invest in the shares
of these companies.

Maturity and stabilization stage: the growth rate tends to moderate and the
rate of growth would be more or less equal to the industrial growth rate or the
gross domestic product growth rate. Symptoms of obsolescence may appear in
the technology. To keep going, technological innovations in the production
process and products should be introduced. The investors have to closely
monitor the events that take place in the maturity stage of the industry.

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Decline stage: demand for the particular product and the earnings of the
companies in the industry decline. It is better to avoid investing in the shares
of the low growth industry even in the boom period. Investment in the shares
of these types of companies leads to erosion of capital.

Growth of the industry: The historical performance of the industry in terms of


growth and profitability should be analyzed. The past variability in return and growth
in reaction to macro economic factors provide an insight into the future.
Nature of competition: Nature of competition is an essential factor that determines
the demand for the particular product, its profitability and the price of the concerned
company scrips. The companies' ability to withstand the local as well as the
multinational competition counts much. If too many firms are present in the organized
sector, the competition would be severe. The competition would lead to a decline in
the price of the product. The investor before investing in the scrip of a company
should analyze the market share of the particular company's product and should
compare it with the top five companies.
SWOT analysis: SWOT analysis represents the strength, weakness, opportunity and
threat for an industry. Every investor should carry out a SWOT analysis for the chosen
industry. Take for instance, increase in demand for the industrys product becomes its
strength, presence of numerous players in the market, i.e. competition becomes the
threat to a particular company. The progress in R & D in that industry is an
opportunity and entry of multinationals in the industry is a threat. In this way the
factors are to be arranged and analyzed.

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3. COMPANY ANALYSIS
In the company analysis the investor assimilates the several bits of information related
to the company and evaluates the present and future values of the stock. The risk and
return associated with the purchase of the stock is analyzed to take better investment
decisions. The present and future values are affected by a number of factors.
Competitive edge of the company: Major industries in India are composed of
hundreds of individual companies. Though the number of companies is large, only
few companies control the major market share. The competitiveness of the company
can be studied with the help of the following;

Market share: The market share of the annual sales helps to determine a
companys relative competitive position within the industry. If the market
share is high, the company would be able to meet the competition successfully.
The companies in the market should be compared with like product groups
otherwise, the results will be misleading.

Growth of sales: The rapid growth in sales would keep the shareholder in a
better position than one with stagnant growth rate. Investors generally prefer
size and growth in sales because the larger size companies may be able to
withstand the business cycle rather than the company of smaller size.

Stability of sales: If a firm has stable sales revenue, it will have more stable
earnings. The fall in the market share indicates the declining trend of
company, even if the sales are stable. Hence the stability of sales should be
compared with its market share and the competitors market share.

Earnings of the company: Sales alone do not increase the earnings but the costs and
expenses of the company also influence the earnings. Further, earnings do not always
increase with increase in sales. The companys sales might have increased but its
earnings per share may decline due to rise in costs. Hence, the investor should not
only depend on the sales, but should analyze the earnings of the company.
Financial analysis: The best source of financial information about a company is its
own financial statements. This is a primary source of information for evaluating the
investment prospects in the particular companys stock. Financial statement analysis
is the study of a companys financial statement from various viewpoints. The
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statement gives the historical and current information about the companys operations.
Historical financial statement helps to predict the future and the current information
aids to analyze the present status of the company. The two main statements used in the
analysis are Balance sheet and Profit and Loss Account.
The balance sheet is one of the financial statements that companies prepare every year
for their shareholders. It is like a financial snapshot, the company's financial situation
at a moment in time. It is prepared at the year end, listing the company's current assets
and liabilities. It helps to study the capital structure of the company. It is better for the
investor to avoid a company with excessive debt component in its capital structure.
From the balance sheet, liquidity position of the company can also be assessed with
the information on current assets and current liabilities.
Ratio analysis: Ratio is a relationship between two figures expressed mathematically.
Financial ratios provide numerical relationship between two relevant financial data.
Financial ratios are calculated from the balance sheet and profit and loss account. The
relationship can be either expressed as a percent or as a quotient. Ratios summarize
the data for easy understanding, comparison and interpretations.
Ratios for investment purposes can be classified into profitability ratios, turnover
ratios, and leverage ratios. Profitability ratios are the most popular ratios since
investors prefer to measure the present profit performance and use this information to
forecast the future strength of the company. The most often used profitability ratios
are return on assets, price earnings multiplier, price to book value, price to cash flow,
and price to sales, dividend yield, return on equity, present value of cash flows, and
profit margins.
a) Return on Assets (ROA)
ROA is computed as the product of the net profit margin and the total asset turnover
ratios.
ROA = (Net Profit/Total income) x (Total income/Total Assets)
This ratio indicates the firm's strategic success. Companies can have one of two
strategies: cost leadership, or product differentiation. ROA should be rising or keeping
pace with the company's competitors if the company is successfully pursuing either of
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these strategies, but how ROA rises will depend on the company's strategy. ROA
should rise with a successful cost leadership strategy because the companys
increasing operating efficiency. An example is an increasing, total asset, turnover ratio
as the company expands into new markets, increasing its market share. The company
may achieve leadership by using its assets more efficiently. With a successful product
differentiation strategy, ROA will rise because of a rising profit margin.
b) Return on Investment (ROI)
ROI is the return on capital invested in business, i.e., if an investment Rs 1 crore in
men, machines, land and material is made to generate Rs. 25 lakhs of net profit, then
the ROI is 25%. The computation of return on investment is as follows:
Return on Investment (ROI) = (Net profit/Equity investments) x 100
As this ratio reveals how well the resources of a firm are being used, higher the ratio,
better are the results. The return on shareholders investment should be compared with
the return of other similar firms in the same industry. The inert-firm comparison of
this ratio determines whether the investments in the firm are attractive or not as the
investors would like to invest only where the return is higher.
c) Return on Equity
Return on equity measures how much an equity shareholder's investment is actually
earning. The return on equity tells the investor how much the invested rupee is
earning from the company. The higher the number, the better is the performance of the
company and suggests the usefulness of the projects the company has invested in.
The computation of return on equity is as follows:
Return on equity = (Net profit to owners/value of the specific owner's
Contribution to the business) x 100
The ratio is more meaningful to the equity shareholders who are invested to know
profits earned by the company and those profits which can be made available to pay
dividend to them.

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d) Earnings per Share (EPS)


This ratio determines what the company is earning for every share. For many
investors, earnings are the most important tool. EPS is calculated by dividing the
earnings (net profit) by the total number of equity shares.
The computation of EPS is as follows:
Earnings per share = Net profit/Number of shares outstanding
The EPS is a good measure of profitability and when compared with EPS of similar
other companies, it gives a view of the comparative earnings or earnings power of a
firm. EPS calculated for a number of years indicates whether or not earning power of
the company has increased.
e) Dividend per Share (DPS)
The extent of payment of dividend to the shareholders is measured in the form of
dividend per share. The dividend per share gives the amount of cash flow from the
company to the owners and is calculated as follows:

Dividend per share = Total dividend payment / Number of shares outstanding


The payment of dividend can have several interpretations to the shareholder. The
distribution of dividend could be thought of as the distribution of excess
profits/abnormal profits by the company. On the other hand, it could also be
negatively interpreted as lack of investment opportunities. In all, dividend payout
gives the extent of inflows to the shareholders from the company.
f) Dividend Payout Ratio
From the profits of each company a cash flow called dividend is distributed among its
shareholders. This is the continuous stream of cash flow to the owners of shares, apart
from the price differentials (capital gains) in the market. The return to the
shareholders, in the form of dividend, out of the company's profit is measured through
the payout ratio. The payout ratio is computed as follows:
Payout Ratio = (Dividend per share / Earnings per share) * 100

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The percentage of payout ratio can also be used to compute the percentage of retained
earnings. The profits available for distribution are either paid as dividends or retained
internally for business growth opportunities. Hence, when dividends are not declared,
the entire profit is ploughed back into the business for its future investments.
g) Dividend Yield
Dividend yield is computed by relating the dividend per share to the market price of
the share. The market place provides opportunities for the investor to buy the
company's share at any point of time. The price at which the share has been bought
from the market is the actual cost of the investment to the shareholder. The market
price is to be taken as the cum-dividend price. Dividend yield relates the actual cost to
the cash flows received from the company. The computation of dividend yield is as
follows
Dividend yield = (Dividend per share / Market price per share) * 100
High dividend yield ratios are usually interpreted as undervalued companies in the
market. The market price is a measure of future discounted values, while the dividend
per share is the present return from the investment. Hence, a high dividend yield
implies that the share has been under priced in the market. On the other hand a low
dividend yield need not be interpreted as overvaluation of shares. A company that
does not pay out dividends will not have a dividend yield and the real measure of the
market price will be in terms of earnings per share and not through the dividend
payments.
h) Price/Earnings Ratio (P/E)
The P/E multiplier or the price earnings ratio relates the current market price of the
share to the earnings per share. This is computed as follows:
Price/earnings ratio = Current market price / Earnings per share
This ratio is calculated to make an estimate of appreciation in the value of a share of a
company and is widely used by investors to decide whether or not to buy shares in a
particular company. Many investors prefer to buy the company's shares at a low P/E
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ratio since the general interpretation is that the market is undervaluing the share and
there will be a correction in the market price sooner or later. A very high P/E ratio on
the other hand implies that the company's shares are overvalued and the investor can
benefit by selling the shares at this high market price.
i) Debt-to-Equity Ratio
Debt-Equity ratio is used to measure the claims of outsiders and the owners against
the firms assets.
Debt-to-equity ratio = Outsiders Funds / Shareholders Funds
The debt-equity ratio is calculated to measure the extent to which debt financing has
been used in a business. It indicates the proportionate claims of owners and the
outsiders against the firms assets. The purpose is to get an idea of the cushion
available to outsiders on the liquidation of the firm.

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CHAPTER-III
INDUSTRY PROFILE
& COMPANY PROFILE

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INDUSTRY PROFILE
Finance is the pre-requisite for modern business and financial institutions play a vital
role in the economic system. It is through financial markets and institutions that the
financial system of an economy works. Financial markets refer to the institutional
arrangements for dealing in financial assets and credit instruments of different types
such as currency, cheques, bank deposits, bills, bonds, equities, etc.
Financial market is a broad term describing any marketplace where buyers and sellers
participate in the trade of assets such as equities, bonds, currencies and derivatives.
They are typically defined by having transparent pricing, basic regulations on trading,
costs and fees and market forces determining the prices of securities that trade.
Generally, there is no specific place or location to indicate a financial market.
Wherever a financial transaction takes place, it is deemed to have taken place in the
financial market. Hence financial markets are pervasive in nature since financial
transactions are themselves very pervasive throughout the economic system. For
instance, issue of equity shares, granting of loan by term lending institutions, deposit
of money into a bank, purchase of debentures, sale of shares and so on.
In a nutshell, financial markets are the credit markets catering to the various needs of
the individuals, firms and institutions by facilitating buying and selling of financial
assets, claims and services.

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CLASSIFICATION OF FINANCIAL MARKETS

Financial markets

Organized markets

Capital Markets

Unorganized markets

Money Markets

Industrial Securities
Market

Money Lenders,
Indigenuos Bankers

Call Money Market

Primary Market

Commercial Bill
Market

Secondary market

Treasury Bill Market

Government
Securities Market
Long-term loan
market

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Capital Market
The capital market is a market for financial assets which have a long or indefinite
maturity. Generally, it deals with long term securities which have a period of above
one year. In the widest sense, it consists of a series of channels through which the
savings of the community are made available for industrial and commercial
enterprises and public authorities. As a whole, capital market facilitates raising of
capital.
The major functions performed by a capital market are:
1. Mobilization of financial resources on a nation-wide scale.
2. Securing the foreign capital and know-how to fill up deficit in the required
resources for economic growth at a faster rate.
3. Effective allocation of the mobilized financial resources, by directing the same
to projects yielding highest yield or to the projects needed to promote balanced
economic development.
Capital market consists of primary market and secondary market.
Primary market: Primary market is a market for new issues or new financial claims.
Hence it is also called as New Issue Market. It basically deals with those securities
which are issued to the public for the first time. The market, therefore, makes
available a new block of securities for public subscription. In other words, it deals
with raising of fresh capital by companies either for cash or for consideration other
than cash. The best example could be Initial Public Offering (IPO) where a firm offers
shares to the public for the first time.
Secondary market: Secondary market is a market where existing securities are traded.
In other words, securities which have already passed through new issue market are
traded in this market. Generally, such securities are quoted in the stock exchange and
it provides a continuous and regular market for buying and selling of securities. This
market consists of all stock exchanges recognized by the government of India.

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Money Market
Money markets are the markets for short-term, highly liquid debt securities. Money
market securities are generally very safe investments which return relatively low
interest rate that is most appropriate for temporary cash storage or short term time
needs. It consists of a number of sub-markets which collectively constitute the money
market namely call money market, commercial bills market, acceptance market, and
Treasury bill market.

Derivatives Market
The derivatives market is the financial market for derivatives, financial instruments
like futures contracts or options, which are derived from other forms of assets. A
derivative is a security whose price is dependent upon or derived from one or more
underlying assets. The derivative itself is merely a contract between two or more
parties. Its value is determined by fluctuations in the underlying asset. The most
common underlying assets include stocks, bonds, commodities, currencies, interest
rates and market indexes. The important financial derivatives are the following:

Forwards: Forwards are the oldest of all the derivatives. A forward contract
refers to an agreement between two parties to exchange an agreed quantity of
an asset for cash at a certain date in future at a predetermined price specified
in that agreement. The promised asset may be currency, commodity,
instrument etc.

Futures: Future contract is very similar to a forward contract in all respects


excepting the fact that it is completely a standardized one. It is nothing but a
standardized forward contract which is legally enforceable and always traded
on an organized exchange.

Options: A financial derivative that represents a contract sold by one party


(option writer) to another party (option holder). The contract offers the buyer
the right, but not the obligation, to buy (call) or sell (put) a security or other
financial asset at an agreed-upon price (the strike price) during a certain period
of time or on a specific date (exercise date). Call options give the option
to buy at certain price, so the buyer would want the stock to go up. Put options

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give the option to sell at a certain price, so the buyer would want the stock to
go down.

Swaps: It is yet another exciting trading instrument. Infact, it is the


combination of forwards by two counterparties. It is arranged to reap the
benefits arising from the fluctuations in the market either currency market or
interest rate market or any other market for that matter.

Foreign Exchange Market


It is a market in which participants are able to buy, sell, exchange and speculate on
currencies. Foreign exchange markets are made up of banks, commercial companies,
central banks, investment management firms, hedge funds, and retail forex brokers
and investors. The forex market is considered to be the largest financial market in the
world. It is a worldwide decentralized over-the-counter financial market for the
trading of currencies. Because the currency markets are large and liquid, they are
believed to be the most efficient financial markets. It is important to realize that the
foreign exchange market is not a single exchange, but is constructed of a global
network of computers that connects participants from all parts of the world.

Commodities Market
It is a physical or virtual marketplace for buying, selling and trading raw or primary
products. For investors' purposes there are currently about 50 major commodity
markets worldwide that facilitate investment trade in nearly 100 primary
commodities. Commodities are split into two types: hard and soft commodities. Hard
commodities are typically natural resources that must be mined or extracted (gold,
rubber, oil, etc.), whereas soft commodities are agricultural products or livestock
(corn, wheat, coffee, sugar, soybeans, pork, etc.)

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INDIAN FINANCIAL MARKETS

India Financial market is one of the oldest in the world and is considered to be the
fastest growing and best among all the markets of the emerging economies.
The history of Indian capital markets dates back 200 years toward the end of
the 18th century when India was under the rule of the East India Company.
The development of the capital market in India concentrated around Mumbai
where no less than 200 to 250 securities brokers were active during the second
half of the 19th century.
The financial market in India today is more developed than many other sectors
because it was organized long before with the securities exchanges of
Mumbai, Ahmadabad and Kolkata were established as early as the 19th
century.
By the early 1960s the total number of securities exchanges in India rose to eight,
including Mumbai, Ahmadabad and Kolkata apart from Madras, Kanpur,
Delhi, Bangalore and Pune. Today there are 21 regional securities exchanges
in India in addition to the centralized NSE (National Stock Exchange) and
OTCEI (Over the Counter Exchange of India).
However the stock markets in India remained stagnant due to stringent controls on the
market economy that allowed only a handful of monopolies to dominate their
respective sectors. The corporate sector wasn't allowed into many industry segments,
which were dominated by the state controlled public sector resulting in stagnation of
the economy right up to the early 1990s. Thereafter when the Indian economy began
liberalizing and the controls began to be dismantled or eased out; the securities
markets witnessed a flurry of IPOs that were launched. This resulted in many new
companies across different industry segments to come up with newer products and
services.

26

A remarkable feature of the growth of the Indian economy in recent years has been
the role played by its securities markets in assisting and fuelling that growth with
money rose within the economy. This was in marked contrast to the initial phase of
growth in many of the fast growing economies of East Asia that witnessed huge doses
of FDI (Foreign Direct Investment) spurring growth in their initial days of market
decontrol. During this phase in India much of the organized sector has been affected
by high growth as the financial markets played an all-inclusive role in sustaining
financial resource mobilization. Many PSUs (Public Sector Undertakings) that
decided to offload part of their equity were also helped by the well-organized
securities market in India.
The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter
Exchange of India) during the mid 1990s by the government of India was meant to
usher in an easier and more transparent form of trading in securities. The NSE was
conceived as the market for trading in the securities of companies from the large-scale
sector and the OTCEI for those from the small-scale sector. While the NSE has not
just done well to grow and evolve into the virtual backbone of capital markets in India
the OTCEI struggled and is yet to show any sign of growth and development. The
integration of IT into the capital market infrastructure has been particularly smooth in
India due to the countrys world class IT industry. This has pushed up the operational
efficiency of the Indian stock market to global standards and as a result the country
has been able to capitalize on its high growth and attract foreign capital like never
before.
The regulating authority for capital markets in India is the SEBI (Securities and
Exchange Board of India). SEBI came into prominence in the 1990s after the capital
markets experienced some turbulence. It had to take drastic measures to plug many
loopholes that were exploited by certain market forces to advance their vested
interests. After this initial phase of struggle SEBI has grown in strength as the
regulator of Indias capital markets and as one of the countrys most important
institutions.

27

FINANCIAL MARKET REGULATIONS


Regulations are an absolute necessity in the face of the growing importance of capital
markets throughout the world. The development of a market economy is dependent on
the development of the capital market. The regulation of a capital market involves the
regulation of securities; these rules enable the capital market to function more
efficiently and impartially.
A well regulated market has the potential to encourage additional investors to partake,
and contribute in, furthering the development of the economy. The chief capital
market regulatory authority is Securities and Exchange Board of India (SEBI).
SEBI is the regulator for the securities market in India. It is the apex body to develop
and regulate the stock market in India It was formed officially by the Government of
India in 1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired by
C B Bhave, SEBI is headquartered in the popular business district of Bandra-Kurla
complex in Mumbai, and has Northern, Eastern, Southern and Western regional
offices in New Delhi, Kolkata, Chennai and Ahmedabad. In place of Government
Control, a statutory and autonomous regulatory board with defined responsibilities, to
cover both development & regulation of the market, and independent powers has been
set up.
The basic objectives of the Board were identified as:

to protect the interests of investors in securities;

to promote the development of Securities Market;

to regulate the securities market and

For matters connected therewith or incidental thereto.

Since its inception SEBI has been working targeting the securities and is attending to
the fulfillment of its objectives with commendable zeal and dexterity. The
improvements in the securities markets like capitalization requirements, margining,
establishment of clearing corporations etc. reduced the risk of credit and also reduced
the market.
28

SEBI has introduced the comprehensive regulatory measures, prescribed registration


norms, the eligibility criteria, the code of obligations and the code of conduct for
different intermediaries like, bankers to issue, merchant bankers, brokers and subbrokers, registrars, portfolio managers, credit rating agencies, underwriters and others.
It has framed bye-laws, risk identification and risk management systems for Clearing
houses of stock exchanges, surveillance system etc. which has made dealing in
securities both safe and transparent to the end investor.
Another significant event is the approval of trading in stock indices (like S&P CNX
Nifty & Sensex) in 2000. A market Index is a convenient and effective product
because of the following reasons:

It acts as a barometer for market behavior;

It is used to benchmark portfolio performance;

It is used in derivative instruments like index futures and index options;

It can be used for passive fund management as in case of Index Funds.

Two broad approaches of SEBI is to integrate the securities market at the national
level, and also to diversify the trading products, so that there is an increase in number
of traders including banks, financial institutions, insurance companies, mutual funds,
primary dealers etc. to transact through the Exchanges. In this context the introduction
of derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000 AD
is a real landmark.
SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively
and successively (e.g. the quick movement towards making the markets electronic and
paperless rolling settlement on T+2 bases). SEBI has been active in setting up the
regulations as required under law.

STOCK EXCHANGES IN INDIA


29

Stock Exchanges are an organized marketplace, either corporation or mutual


organization, where members of the organization gather to trade company stocks or
other securities. The members may act either as agents for their customers, or as
principals for their own accounts.
As per the Securities Contracts Regulation Act, 1956 a stock exchange is an
association, organization or body of individuals whether incorporated or not,
established for the purpose of assisting, regulating and controlling business in buying,
selling and dealing in securities.
Stock exchanges facilitate for the issue and redemption of securities and other
financial instruments including the payment of income and dividends. The record
keeping is central but trade is linked to such physical place because modern markets
are computerized. The trade on an exchange is only by members and stock broker do
have a seat on the exchange.
List of Stock Exchanges in India
Bombay Stock Exchange
National Stock Exchange

14. Magadh

OTC Exchange of India

15. Mangalore

Regional Stock Exchanges

16. Meerut

1. Ahmedabad

17. Pune

2. Bangalore

18. Saurashtra Kutch

3. Bhubaneswar

19. Uttar Pradesh

4. Calcutta

20. Vadodara

5. Cochin
6. Coimbatore
7. Delhi
8. Guwahati
9. Hyderabad
10. Jaipur
11. Ludhiana
12. Madhya Pradesh
13. Madras
30

BOMBAY STOCK EXCHANGE

A very common name for all traders in the stock market, BSE, stands for Bombay
Stock Exchange. It is the oldest market not only in the country, but also in Asia. In the
early days, BSE was known as "The Native Share & Stock Brokers Association." It
was established in the year 1875 and became the first stock exchange in the country to
be recognized by the government. In 1956, BSE obtained a permanent recognition
from the Government of India under the Securities Contracts (Regulation) Act, 1956.
In the past and even now, it plays a pivotal role in the development of the country's
capital market. This is recognized worldwide and its index, SENSEX, is also tracked
worldwide. Earlier it was an Association of Persons (AOP), but now it is a
demutualised and corporatised entity incorporated under the provisions of the
Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualization)
Scheme, 2009 notified by the Securities and Exchange Board of India (SEBI).
BSE Vision
The vision of the Bombay Stock Exchange is to "Emerge as the premier Indian stock
exchange by establishing global benchmarks."
BSE Management
Bombay Stock Exchange is managed professionally by Board of Directors. It
comprises of eminent professionals, representatives of Trading Members and the
Managing Director. The Board is an inclusive one and is shaped to benefit from the
market intermediaries participation.
The Board exercises complete control and formulates larger policy issues. The day-today operations of BSE are managed by the Managing Director and its school of
professional as a management team.
BSE Network

The Exchange reaches physically to 417 cities and towns in the country. The
framework of it has been designed to safeguard market integrity and to operate with
transparency. It provides an efficient market for the trading in equity, debt instruments
and derivatives. Its online trading system, popularly known as BOLT, is a proprietary
system and it is BS 7799-2-2002 certified. The BOLT network was expanded,
nationwide, in 1997. The surveillance and clearing & settlement functions of the
Exchange are ISO 9001:2000 certified.
BSE Facts
BSE as a brand is synonymous with capital markets in India. The BSE SENSEX is the
benchmark equity index that reflects the robustness of the economy and finance. It
was the

First in India to introduce Equity Derivatives

First in India to launch a Free Float Index

First in India to launch US$ version of BSE Sensex

First in India to launch Exchange Enabled Internet Trading Platform

First in India to obtain ISO certification for Surveillance, Clearing &


Settlement

'BSE On-Line Trading System (BOLT) has been awarded the globally
recognized the Information Security Management System standard
BS7799-2:2002.

First to have an exclusive facility for financial training

Moved from Open Outcry to Electronic Trading within just 50 days

BSE with its long history of capital market development is fully geared to continue
its contributions to further the growth of the securities markets of the country, thus
helping India increases its sphere of influence in international financial markets.

NATIONAL STOCK EXCHANGE OF INDIA LIMITED


The National Stock Exchange of India Limited has genesis in the report
of the High Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions (FIs)
to provide access to investors from all across the country on an equal footing. Based
on the recommendations, NSE was promoted by leading Financial Institutions at the
behest of the Government of India and was incorporated in November 1992 as a taxpaying company unlike other stock Exchange in the country.
On its recognition as a stock exchange under the Securities Contracts (Regulation)
Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market
(WDM) segment in June 1994. The Capital Market (Equities) segment commenced
operations in November 1994 and operations in Derivatives segment commenced in
June 2000.

NSE GROUP
National Securities Clearing Corporation Ltd. (NSCCL)
It is a wholly owned subsidiary, which was incorporated in August 1995 and
commenced clearing operations in April 1996. It was formed to build confidence in
clearing and settlement of securities, to promote and maintain the short and consistent
settlement cycles, to provide a counter-party risk guarantee and to operate a tight risk
containment system.
NSE.IT Ltd.
It is also a wholly owned subsidiary of NSE and is its IT arm. This arm of the NSE is
uniquely positioned to provide products, services and solutions for the securities
industry. NSE.IT primarily focuses on in the area of trading, broker front-end and
back-office, clearing and settlement, web-based, insurance, etc. Along with this, it
also provides consultancy and implementation services in Data Warehousing,

Business Continuity Plans, Site Maintenance and Backups, Stratus Mainframe


Facility Management, Real Time Market Analysis & Financial News.
India Index Services & Products Ltd. (IISL)
It is a joint venture between NSE and CRISIL Ltd. to provide a variety of indices and
index related services and products for the Indian Capital markets. It was set up in
May 1998. IISL has a consulting and licensing agreement with the Standard and
Poor's (S&P), world's leading provider of investible equity indices, for co-branding
equity indices.
National Securities Depository Ltd. (NSDL)
NSE joined hands with IDBI and UTI to promote dematerialization of securities. This
step was taken to solve problems related to trading in physical securities. It
commenced operations in November 1996.
NSE Facts

It uses satellite communication technology to energize participation from


around 400 cities in India.

NSE can handle up to 1 million trades per day.

It is one of the largest interactive VSAT based stock exchanges in the world.

The NSE- network is the largest private wide area network in India and the
first extended C- Band VSAT network in the world.

Presently more than 9000 users are trading on the real time-online NSE
application.

Today, NSE is one of the largest exchanges in the world and still forging ahead. At
NSE, we are constantly working towards creating a more transparent, vibrant and
innovative capital market.

OVER THE COUNTER EXCHANGE OF INDIA


OTCEI was incorporated in 1990 as a section 25 company under the companies Act
1956 and is recognized as a stock exchange under section 4 of the securities Contracts
Regulation Act, 1956. The exchange was set up to aid enterprising promotes in raising
finance for new projects in a cost effective manner and to provide investors with a

transparent and efficient mode of trading Modeled along the lines of the NASDAQ
market of USA, OTCEI introduced many novel concepts to the Indian capital markets
such as screen-based nationwide trading, sponsorship of companies, market making
and scrip less trading. As a measure of success of these efforts, the Exchange today
has 115 listings and has assisted in providing capital for enterprises that have gone on
to build successful brands for themselves like VIP Advanta, Sonora Tiles & Brilliant
mineral water, etc.
Need for OTCEI:
Studies by NASSCOM, software technology parks of India, the venture capitals funds
and the governments IT tasks Force, as well as rising interest in IT, Pharmaceutical,
Biotechnology and Media shares have repeatedly emphasized the need for a national
stock market for innovation and high growth companies.
Innovative companies are critical to developing economics like India, which is
undergoing a major technological revolution. With their abilities to generate
employment opportunities and contribute to the economy, it is essential that these
companies not only expand existing operations but also set up new units. The key
issue for these companies is raising timely, cost effective and long term capital to
sustain their operations and enhance growth. Such companies, particularly those that
have been in operation for a short time, are unable to raise funds through the
traditional financing methods, because they have not yet been evaluated by the
financial world.

COMPANY PROFILE
Kotak Mahindra Bank

Type
Traded as
Industry
Founded
Headquarters
Key people
Products
Net worth
Website

Public
BSE: 500247
NSE: KOTAKBANK
Banking, Financial service
1985 (as Kotak Mahindra Finance Ltd)
Mumbai, India
Uday Kotak (Founder & Executive Vice Chairman)
Deposit accounts, Loans, Investment services, Business banking solutions,
Treasury and Fixed income products etc.
19,785 crore (US $3.21 billion)(June 2014)
www.kotak.com

Kotak Mahindra Bank (BSE: 500247, NSE: KOTAKBANK) is an Indian


financial service firm established in 1985. It was previously known as Kotak
Mahindra Finance Limited, a non-banking financial company. In February 2003,
Kotak Mahindra Finance Ltd, the group's flagship company was given the license to
carry on banking business by the Reserve Bank of India (RBI). Kotak Mahindra
Finance Ltd. is the first company in the Indian banking history to convert to a bank.
Today it has more than 26,000+ employees and Rs. 10,000 crore in revenue.[2]
Mr. Uday Kotak is Executive Vice Chairman & Managing Director of Kotak
Mahindra Bank Ltd. In July 2013 Mr. C. Jayaram and Mr. Dipak Gupta, whole time
directors of the Bank, were appointed the Joint Managing Directors of Kotak
Mahindra Bank. Dr. Shankar Acharya is the chairman of board of Directors in the

company. The Bank has its registered office at Nariman Bhavan, Nariman Point,
Mumbai.

History
It bought stressed assets from a number of banks, at full loan value of Rs 1,000 crore
in 2005.[3] In January 2013, the bank reported a 32% rise in net profit to Rs188 crore
for the quarter ended December 2012 against Rs. 142 crore the corresponding quarter
last year.[4] Kotak Mahindra bank also reached the top 100 most trusted brands of
India in The Brand Trust Report published by Trust Research Advisory in 2013.
The group specializes in offering top class financial services catering to every
segment of the industry. The various group companies include.

Kotak Mahindra Capital Limited

Kotak Mahindra Securities Limited

Kotak Mahindra Inc

Kotak Mahindra (International) Limited

Global Investments Opportunities Fund Limited

Kotak Mahindra(UK) Limited Kotak Securities Limited

Kotak Mahindra Old Mutual Life Insurance Company Limited

Kotak Mahindra Asset Management Company Limited

Kotak Mahindra Trustee Company Limited

Kotak Mahindra Investments Limited

Kotak Forex Brokerage Limited

Kotak Mahindra Private-Equity Trustee Limited

Group Structure
Kotak
Mahindra Bank

Kotak
Mahindra
Capital
Company

Kotak
Securities

Kotak
Mahindra
Investments

Kotak Mahindra
Securities

Kotak
Mahindra
Prime

Kotak
Mahindra
Asset
Management
Company

Kotak Mahindra (UK)

Kotak Mahindra
( International)

Kotak Mahindra Inc.

Global Investment
Opportunities Fund

Kotak
Mahindra
Trust
Company

BOARD OF DIRECTORS

Dr. Shankar Acharya, Non-Executive Chairman


(DIN: 00033242)
Dr. Shankar Acharya, B.A. (Hons.) from Oxford University and Ph.D. (Economics)
from Harvard University, aged 68 years, has considerable experience in various fields
of economics and finance. He is a Honorary Professor at the Indian Council for
Research on International Economic Relations (ICRIER) and a Member of the Court
of Governors at the Administrative Staff College of India (ASCI). He was Chief
Economic Adviser, Ministry of Finance, Member, Securities and Exchange Board of
India (SEBI) and Member, Twelfth Finance Commission. He has held several senior
positions in the World Bank, including Director of World Development Report (1979)
and Research Adviser. He was re-appointed as the Non-Executive Chairman of the
Bank at the Annual General Meeting held on 19th July 2012 for a period of three
years with effect from 20th July 2012.
He is on the Board of Eros International Media Ltd. and South Asia Institute for
Research and Policy (Private) Limited, Sri Lanka. During 2013-14, Dr.Acharya was
the Chairman of the Audit Committee of the Bank, Member of the Audit Committee
of Eros International Media Limited and the Chairman of the Shareholders'
Grievance/Investors' Relations Committee of Eros International Media Ltd.

Mr. Uday Kotak, Executive Vice-Chairman and Managing Director


(DIN: 00007467)
Mr. Uday Kotak, aged 55 years, holds a Bachelors degree in Commerce and an MBA
from Jamnalal Bajaj Institute of Management Studies, Mumbai. He is the Executive
Vice-Chairman and Managing Director of the Bank and its principal founder and
promoter. Under Mr. Kotak's leadership, over the past 28 years, Kotak Mahindra
group established a prominent presence in every area of financial services from stock
broking, investment banking, car finance, life insurance and mutual funds. Mr. Kotak
is the recipient of several prestigious awards. He is a member of the Government of
India's high level committee on Financing Infrastructure, the Primary Market
Advisory Committee of SEBI, Member of the Board of Governors of Indian Council
for Research on International Economic Relations, National Institute of Securities
Markets and National Council of CII.

Mr. C. Jayaram, Joint Managing Director


(DIN: 00012214)
Mr. C. Jayaram, B. A. (Economics), PGDM-IIM, Kolkata, aged 58 years, is Joint
Managing Director of the Bank and currently heads the wealth management business
and international operations for Kotak Mahindra group. He also oversees the
alternative investments business which includes private equity funds and real estate
funds, as well as the institutional equities business. He has varied experience of over
36 years in many areas of finance and business and was earlier the Managing Director
of Kotak Securities Limited. He has been with the Kotak Group for 24 years and has

been instrumental in building a number of new businesses at Kotak Group. Prior to


joining the Kotak Group, he was with Overseas Sanmar Financial Ltd.

Mr. Dipak Gupta, Joint Managing Director


(DIN: 00004771)
Mr. Dipak Gupta, B.E. (Electronics), PGDM-IIM, Ahmedabad, aged 53 years, is the
Joint Managing Director of the Bank and has over 28 years of experience in the
financial services sector, 22 years of which have been with the Kotak Group. He is
responsible for Group HR, administration, infrastructure, operations and IT. He is also
responsible for asset reconstruction business of the Bank. Mr. Dipak Gupta was
responsible for leading the Kotak Group's initiatives into the banking arena. He was
the Executive Director of Kotak Mahindra Prime Limited. Prior to joining the Kotak
Group, he was with A. F. Ferguson & Company for approximately six years.

Mr. Asim Ghosh


(DIN: 00116139)
Mr. Asim Ghosh, aged 66 years, is the President and Chief Executive Officer of
Husky Energy Inc. He has a B.Tech, IIT Delhi and MBA from the Wharton School,
University of Pennsylvania. Mr. Ghosh commenced his career in consumer goods
marketing with Procter & Gamble in the U.S. and Canada and worked subsequently
with Rothmans International as a Senior Vice President of Carling O'Keefe Breweries,
then one of Canada's major breweries. He moved to Asia in 1989 as CEO of the Frito
Lay (Pepsi Foods) start up in India. Thereafter, he was in executive positions with
Hutchison in Hong Kong and India for 16 years. He continued as the CEO of the

predecessor company of Vodafone India Limited till 31st March 2009 and as a NonExecutive Director till 9th February 2010. He serves on the Board of Husky Energy
Inc., other Husky Group Companies, some Hutchison Whampoa Group Companies
and the Canadian Council of Chief Executives.

Mr. Prakash Apte


(DIN: 00196106)
Mr. Prakash Apte, B.E. (Mechanical), aged 59 years, is presently the Chairman of
Syngenta India Limited, one of the leading agri business companies in India. Mr.
Apte, in a career spanning over 36 years has considerable experience in various areas
of management and business leadership. During more than 16 years of very successful
leadership experience in agri business, he has gained varied knowledge in various
aspects of Indian Agri Sector and has been involved with many initiatives for
technology, knowledge and skills up gradation in this sector, which is so vital for
India's food security. He was instrumental in setting up the Syngenta Foundation India
which focuses on providing knowledge and support for adopting scientific growing
systems to resource poor farmers and enabling their access to market. He is a Director
of Syngenta Foundation India and Kotak Mahindra Old Mutual Life Insurance
Limited. Mr. Apte is a member of Audit Committee of Bank and Syngenta India
Limited.

Mr. Amit Desai


(DIN: 00310510)
Mr. Amit Desai, B.Com, LLB, aged 55 years, is an eminent professional with 33 years
of experience. He is also on the Board of Kotak Mahindra Trustee Company Limited.

Mr. Narendra P. Sarda


(DIN: 03480129)
Mr. N.P. Sarda, B.Com, F.C.A., aged 68 years, is a Chartered Accountant for more
than 40 years. He is a former partner of M/s. Deloitte Haskin & Sells, Chartered
Accountants, the past President of the Institute of Chartered Accountants of India (in
1993) and was a public representative Director of the Stock Exchange, Mumbai
(BSE).

Prof. Mahendra Dev


(DIN: 06519869)
Prof. S. Mahendra Dev, PhD from the Delhi School of Economics, aged 56 years is
currently Director and Vice Chancellor, Indira Gandhi Institute of Development
Research (IGIDR), Mumbai, India. He was Chairman of the Commission for
Agricultural Costs and Prices (CACP), Govt. of India, Delhi. He was Director, Centre

for Economic and Social Studies, Hyderabad for 9 years during 1999 to 2008. He has
done his Post-doctoral research at Yale University and was faculty member at the
Indira Gandhi Institute of Development Research, Mumbai for 11 years. He has been
a member of several government committees including the Prime Minister's Task
Force on Employment and Rangarajan Commission on Financial Inclusion. He has
received honors for eminence in public service. He is the Chairman of the Committee
on Terms of Trade on agriculture constituted by the Ministry of agriculture, Govt. of
India. He is also member of the newly constituted Expert Panel on poverty estimates
chaired by Dr. C. Rangarajan.

Mrs. Farida Khambata


(DIN: 06954123)
Mrs. Khambata, is currently Global Strategist of Cartica Management, LLC and a
member of its Investment Committee. She was earlier with International Finance
Corporation (IFC) and was a member of IFC's Management Group, the senior
leadership team of IFC. In her last position at IFC she served as Regional Vice
President in charge of all operations in East Asia and the Pacific, South Asia, Latin
America and the Caribbean and the Global Manufacturing Cluster. Mrs. Khambata
joined IFC in 1986 from the World Bank where she managed pension fund assets.

YEAR MILESTONE
1986

Kotak Mahindra Finance Limited starts the activity of Bill Discounting

1987
1990
1991

Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market
The Auto Finance division is started
The Investment Banking Division is started. Takes over FICOM, one of

1992

India's largest financial retail marketing networks


Enters the Funds Syndication sector
Brokerage and Distribution businesses incorporated into a separate company

1995

- Kotak Securities. Investment Banking division incorporated into a separate


company - Kotak Mahindra Capital Company
The Auto Finance Business is hived off into a separate company -Kotak
Mahindra Prime Limited (formerly known as Kotak Mahindra Primus

1996

Limited). Kotak Mahindra takes a significant stake in Ford Credit Kotak


Mahindra Limited, for financing Ford vehicles. The launch of Matrix
Information Services Limited marks the Group's entry into information

1998
2000

distribution.
Enters the mutual fund market with the launch of Kotak Mahindra Asset
Management Company.
Kotak Mahindra ties up with Old Mutual plc. For the Life Insurance
business.
Kotak
Securities

launches

its

on-line

broking

site

(now

www.kotaksecurities.com).
Commencement of private equity activity through setting up of Kotak
2001

2003

Mahindra Venture Capital Fund.


Matrix sold to Friday Corporation
Launches Insurance Services
Kotak Securities Ltd. was incorporated
Kotak Mahindra Finance Ltd. converts to a commercial bank - the first

2004

Indian company to do so.


Launches India Growth Fund, a private equity fund.
Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra

2005

Prime (formerly known as Kotak Mahindra Primus Limited) and sells Ford

2005

credit Mahindra.
Launches a real estate fund
Bought the 25% stake held by Goldman Sachs in Kotak Mahindra Capital

2008
2010
2011
2012

Company and Securities


Launched a Pension Fund under the New Pension System
Kotak Mahindra Bank Ltd. Opened a representative office in Dubai
Entered Ahmedabad Commodity Exchange as anchor investor
Ahmedabad Derivatives and Commodities Exchange, a Kotak anchored

2013

enterprise, became operational as a national commodity exchange.


Kotak Mahindra Bank Ltd entered into a Business Cooperation arrangement
with CIMB Group Sdn Bhd, Malaysia.

Awards
Recent achievements
At Kotak Mahindra Group we take a client-centric view and constantly innovate to
provide you with the best of services and infrastructure. We have regularly received
accolades that stand testimony to our success in this endeavour. Some of our recent
achievements are:
BANKING

ICAI Award
Excellence in Financial Reporting under Category 1 - Banking Sector for the
year ending 31st March, 2012

Asiamoney
Best Local Cash Management Bank 2012

IDG India
Kotak won the CIO 100 'The Agile 100' award 2012

IDRBT
Banking Technology Excellence Awards Best Bank Award in IT Framework
and Governance Among Other Banks' - 2011
Banking Technology Award for IT Governance and Value Delivery, 2010

IR Global Rankings
Best Corporate Governance Practices - Ranked among the top 5 companies in
Asia Pacific, 2011

FinanceAsia
Best Private Bank in India, for Wealth Management business, 2011

Kotak Royal Signature Credit Card


Was chosen "Product of the Year" in a survey conducted by Nielsen in 2011

IBA Banking Technology Awards


Best Customer Relationship Achievement - Winner 2010 & 2011
Best overall winner, 2009
Best IT Team of the Year, 4 years in a row from 2008 to 2011
Best IT Security Policies & Practices, 2009

Euromoney
Best Private Banking Services (overall), 2011

Emerson Uptime Champion Awards


Technology Senate Emerson Uptime Championship Award in the BFSI
category, 2010

The February 2014 edition of The Banker magazine, from The Financial
Times (UK) stable, published the following global recognition to Kotak
Mahindra Bank, on a study by Brand Finance Banking 500:
Ranked 245th among the worlds top 500 banks
Brand valuation of around half a billion dollars (US$ 481 million)
Brand rating of AA+
Ranked among the top 5 Best Ranked Companies for Corporate Governance
Practices in IR Global Ranking

WEALTH MANAGEMENT

Awarded in multiple categories in Euromoney Private Banking Survey 2014:


o
o
o
o
o
o
o

Among Top 5 - Best Family Office Services Provider, Asia


Best Range of Advisory Services
Best Corporate Advisory for Private Banking Clients
Best Bespoke Wealth Planning
Private Equity Investment
Equity portfolio management
Specialised Services for Inherited Wealth and Businesses

Awarded Best Private Bank India by FinanceAsia Country Awards for


Achievement 2013

MISCELLANEOUS

Best Local Trade Bank in India


The UK based Trade & Forfaiting Review awarded Kotak Mahindra Bank Ltd.
the Bronze Award in the category of Best Local Trade Bank in India at the
TFR Awards 2013.

LACP Vision Awards 2012 for Annual Report 2012-11


Platinum Award - Best among Banking Category, APAC
Gold Award - Most Creative Report, APAC
Ranked No. 21 among Top 50 Reports, APAC
Ranked No. 87 among the World's Top 100 Annual Reports

Businessworld
'Most Valuable CEO' overall, 2012 awarded to Mr. Uday Kotak, Executive
Vice Chairman & Managing Director

CNBCTV 18
'Best Performing CFO in the Banking/Financial Services sector by CNBCTV
18 CFO Awards 2012 awarded to Mr. Jaimin Bhatt

GIREM
GIREM awarded Kotak Realty Funds Group, the "Investor of the Year" Award
for 2011

IBA Banking Technology Awards


Best Use of Business Intelligence - up, 2010
Best Enterprise Risk Management - Runner up, 2010

The Great Places to Work Institute, India


Best Workplaces in India, 2010

Hewitt
10th Best Employer in India, 2009, 2010 & 2011

Financial Insights Innovation Award


Best Innovation in Enterprise Security Management in the Asia Pacific
Region, 2011

Frost & Sullivan


Best Passenger Vehicle Finance Company in India, 2008

CNBC TV 18
Indian Business Leader of the Year, 2010 awarded to Uday Kotak, Executive
Vice Chairman & Managing Director

INTERNATIONAL ASSET MANAGEMENT

Global Investor (Editorial Award)


Asian Asset Manager of the Year, 2011

ASSET MANAGEMENT

ICRA Mutual Fund Awards 2011


Kotak Liquid (Regular Plan) - Ranked as a Seven Star Fund for its 1 year
performance
Kotak Flexi Debt Fund - Ranked as a Five Star Fund for its 1 year
performance
Kotak Flexi Debt Fund - Ranked as a Five Star Fund for its 3 year
performance
Kotak 30 - Ranked as a Five Star Fund for its 3 year performance

INVESTMENT BANKING

FinanceAsia
Best Investment Bank in India, 2012
Best Equity House in India, 2012
Best Broker in India, 2012

Asiamoney
Best Domestic Equity House, 2012
Best Local Brokerage in the Asiamoney Brokers Poll 2012

Global Finance
Best Investment Bank in India, 2012

Euromoney Real Estate Poll


Best Bank for Equity Finance in India, 2012

Asset Asian Awards


Best Domestic Investment Bank, 2012

FinanceAsia Country Awards for Achievement


Best Investment Bank in India, 2008, 2009, 2010, 2011 & 2012
Best Equity House in India, 2010 & 2012

Asiamoney Best Domestic Bank Awards


Best Domestic Equity House, 2010, 2011 & 2012

IFR Asia
India Equity House of the Year, 2010

Global Finance
Best Investment Bank in India, 2010, 2011 & 2012

Asset Asian Awards


Best Domestic Investment Bank, 2008, 2009, 2010 & 2011

KOTAK INSTITUTIONAL EQUITIES

Awarded Indias Best Local Brokerage in the Asia money Brokers Poll, 20138th year in a row. Also adjudged, #1 for Most Independent Research
Brokerage among all domestic and foreign brokerages, #2 for Best Overall
Country Research among all domestic and foreign brokerages; #2 for Best
Analyst among all domestic and foreign brokerages, #3 for Best Overall Sales
Services among all domestic and foreign brokerages

Ranked #3 in Institutional Investors All-India Research Team survey - 2013.


Kotak Institutional Equities enjoys four first-place positions in The Best
Analysts of the Year in the survey, which is twice as many as any other firm

Awarded Best Brokerage House - India in The Asset Country Awards 2013

KOTAK MAHINDRA CAPITAL COMPANY

Awarded Best M&A House in India by Euro money Awards for Excellence
2013

Awarded Best Domestic Equity House by Asia money 2013

Awarded Best Domestic Investment Bank in The Asset Country Awards 2013

Awarded Securities Advisory Firm of the Year in India in Corporate INTL


Global Awards 2014

SECURITIES

FinanceAsia
Best Broker in India - 2012

CNBC Financial Advisor Awards


Best Performing Equity Broker, 2010 & 2011

Asiamoney Brokers Poll


Best Local Brokerage, 2008, 2009, 2010 & 2011
Best Analyst in India Sanjeev Prasad, 2005, 2008, 2009, 2010 & 2011

FinanceAsia Country Awards for Achievement


Best Broker in India, 2008, 2011 & 2012

Thomson Extel Surveys Awards


India's Leading Equity House, 2009

SuperBrands Council of India


Business Superbrand India, 2010

Won NSDL Star Performers Award 2013 -Top Performer in New Accounts
Opened (Non-Bank Category)

Awarded Best Equity Broking House - Dun & Bradstreet Equity Broking
Awards 2013

Awarded Depository Participant of the Year - Dun & Bradstreet Equity


Broking Awards 2013

CHAPTER-IV

DATA ANALYSIS
& INTERPRETATION

ANALYSIS OF PHARMACEUTICAL SECTOR


To understand this industry for the purpose of investment we need to analyze it by the
following approach:
Fundamental Analysis (E.I.C Approach)
a. Economy analysis
b. Industry analysis
c. Company analysis

Fundamental Analysis
Fundamental analysis is the study of economic, industry and company conditions in
an effort to determine the value of a company s stock. Fundamental analysis typically
focuses on key statistics in company s financial statements to determine if the stock
price is correctly valued.
Most fundamental information focuses on economic, industry and company statistics.
The typical approach to analyzing a company involves three basic steps:
1. Determine the condition of the general economy.
2. Determine the condition of the industry.
3. Determine the condition of the company.

1. ECONOMY ANALYSIS
Economic analysis is the analysis of forces operating the overall economy a country.
Economic analysis is a process whereby strengths and weaknesses of an economy are
analyzed. Economic analysis is important in order to understand exact condition of an
economy.
The Centre for Monitoring Indian Economy (CMIE) has estimated Indias gross
domestic product (GDP) to expand at 9.2 per cent in 2014-11 as compared to the
growth of 7.4 per cent in 2013-10. Overall growth in industrial output was 10.8 per
cent year-on-year (y-o-y) in October 2014. The growth in the industrial sector is
expected to increase at 9.4 per cent in 2014-11, as compared to 9.2 per cent in 201310. According to a survey by the Confederation of Indian Industry (CII) and ASCON,

around 50 segments (out of 127) in the manufacturing sector grew by 39 per cent,
entering the 'excellent growth' category, during April-December 2014-11 compared to
29 sectors (22.9 per cent) in April-December 2013 which shows a marked
improvement. Also, services sector is projected to expand by 10 per cent as compared
to 8.6 per cent last year, led by the trade and transport segment. The major turnaround
is expected from the agriculture and allied sector, which is being projected to grow by
5.7 per cent in 2014-11. As per Use-based classification, the Sectoral growth rates in
October 2014 over October 2013 are 7.7 per cent in Basic goods, 22 per cent in
Capital goods and 9.5 per cent in Intermediate goods. The Consumer durables and
Consumer non-durables have expanded by 31 per cent and 0.1 per cent respectively in
the reported month.
The industrial output registered a robust growth of 10.8 per cent year-on-year (y-o-y)
in October 2014. Among the three major constituents of the IIP, manufacturing and
electricity recorded higher growth rates of 11.3 per cent and 8.8 per cent in October as
against their corresponding levels of 10.8 per cent and 4 per cent for the
corresponding month in 2013. The third constituent mining index registered 6.5 per
cent in October 2014.
The Economic scenario
Foreign injections amounted to US$ 6.4 billion in October 2014, which was almost 25
per cent of the total inflows in the stock market registered so far in 2014. The net
foreign fund investment crossed the US$ 100 billion mark on November 8 2014, since
the liberalization policy was implemented in 1992. As per the data given by SEBI, the
total figure stood at US$100.9 billion, wherein US$ 4.78 billion were infused in
November itself. The humungous increase in investment mirrors the foreign investors
faith in the Indian markets. FIIs have made investments worth US$ 4.11 billion in
equities and poured US$ 667.71 million into the debt market.
Data sourced from SEBI shows that the number of registered FIIs stood at 1,738 and
number of registered sub-accounts rose to 5,592 as of November 10, 2014.

As on December 17, 2014, India's foreign exchange reserves totalled US$ 294.60
billion, an increase of US$ 11.13 billion over the same period last year, according to
the Reserve Bank of India's (RBI) Weekly Statistical Supplement.
Moreover, India received foreign direct investment (FDI) equity worth US$ 12.39
billion during April-October, 2014-11, taking the cumulative amount of FDI inflows
during April 2000 - October 2014 to US$ 179.45 billion, according to the Department
of Industrial Policy and Promotion (DIPP).
The services sector comprising financial and non-financial services attracted 21 per
cent of the total FDI equity inflow into India, with FDI worth US$ 2,163 million
during April-October 2014, while telecommunications including radio paging, cellular
mobile and basic telephone services attracted second largest amount of FDI worth
US$ 1,062 million during the same period. Metallurgical industries were the third
highest sector attracting FDI worth US$ 920 million followed by power sector which
garnered US$ 729 million during the financial year April-October 2014.

Exports from India have increased by 26.8 per cent year-on-year (y-o-y) to
touch US$ 18.9 billion in November 2014, urging the Government to exude
confidence that overall shipments in 2014-11 may touch US$ 215 billion. For
the April-November 2014 period, exports have grown by 26.7 per cent to US$
140.3 billion, while imports totaled up to US$ 222 billion, expanding 24 per
cent.

India's logistics sector is witnessing increased activity. According to the Indian


Shipping ministry, the country's major ports handled 44.4 million tones of
cargo during September 2014, 4.5 per cent higher as compared to 5.9 per cent
growth in September 2013. Leading consultants Frost&Sullivan, as cited by
The Economic Times, are expecting traffic to boost at Indian ports from 814.1
million tones (MT) to 1,373.1 MT from 2014 to 2015 at a CAGR of 11 per
cent. The study group has underlined three key trends in the sector, namely,
increase in containerized cargo, increased private sector participation and
traffic diversion toward minor ports.

Foreign Tourist Arrivals (FTA) in India during the period of JanuaryNovember 2014 were 4.93 million as compared to the FTAs of 4.46 million

during the same period of 2013, showing a growth of 10.4 per cent. The
Foreign Exchange Earnings (FEE) during the period of January-November
2014 were US$ 12.88 billion as compared to US$ 10.67 billion during the
same period of 2013, registering a growth rate of 20.7 per cent, according to
data released by the Ministry of Tourism.

The total telephone subscriber base in the country reached 742.12 million as
on October 31, 2014, taking the overall tele-density to 62.51, according to the
figures released by the Telecom Regulatory Authority of India (TRAI). Also
the wireless subscriber base increased to 706.69 million.

The average assets under management of the mutual fund industry stood at
US$ 160.44 billion for the month of September 2014, according to the data
released by Association of Mutual Funds in India (AMFI).

As per NASSCOMs Strategic Review 2014, the Indian IT-BPO sector


continues to be the fastest growing segment of the industry and is estimated to
aggregate revenues of USD 73.1 billion in FY2014, with the IT software and
services industry accounting for USD 63.7 billion of revenues.

The cumulative production of vehicles in India grew by 32.4 per cent upto
August 2014 as compared to the same period in 2013, Mr B S Meena,
Secretary, Ministry of Heavy Industry, reported. Passenger vehicles,
commercial vehicles and two-wheeler segments had all recorded impressive
growth rates of 32 per cent, 49 per cent and 31 per cent, respectively during
the period upto August 2014.

According to the Gem and Jewellery Export Promotion Council, jewellery


shipments were worth US$ 23.57 billion in April-November 2014, registering
a rise of 38.25 per cent as compared to US$ 17.05 billion in the corresponding
period of 2013.

According to the Ministry of Civil Aviation, passengers carried by domestic


airlines from January-November, 2014 were 46.81 million as against 39.35
million in the corresponding period of year 2013, thereby registering a growth
of 18.9 per cent.

According to Ernst & Young (E&Y), a global consultancy firm, India is


expected to receive more than US$ 7 billion in private equity (PE) investments
in 2014, on the back of robust economic growth. According to research firm

VCCEdge, mergers and acquisition (M&A) deals worth US$ 54.6 billion have
been signed till December 15, 2014, significantly more than the previous high
of US$ 42 billion achieved in 2011.

The HSBC Market Business Activity Index, which measures business activity
among Indian services companies, based on a survey of 400 firms, rose to 60.1
in November 2014 from 56.2 in October 2014.

Agriculture
Agriculture is one of the strongholds of the Indian economy and accounts for 14.6 per
cent of the country's gross domestic product (GDP) in 2013-10, and 10.23 per cent
(provisional) of the total exports. Furthermore, the sector provided employment to 55
per cent of the work force.
India's agriculture and allied sector grew by 3.8 per cent in the first six months of the
current fiscal (2014-11). Capital investment in agriculture has increased from US$ 1.2
billion in 2011-08 to US$ 3.26 billion in 2014-11 (inclusive of State Plan Scheme
Rashtriya Krishi Vikas Yojana), as per a Ministry of Agriculture press release dated
August 3, 2014.
In the Union Budget 2014-11, the Finance Minister, Mr Pranab Mukherjee made the
following announcements for the agriculture sector.

US$ 86.89 million is provided to increase the Green Revolution to the eastern
region of the country comprising Bihar, Chattisgarh, Jharkhand, Eastern up,
West Bengal and Orissa.

US$ 65.17 million has been provided to organise 60,000 pulses and oil-seed
villages in rain-fed areas in 2014-11 and provide an integrated intervention for
water harvesting, watershed management and soil health to improve
productivitiy of the dry land farming areas.

Banks have been consistently meeting the targets set for agricultural credit
flow in the past few years. For the year 2014-11, the target has been set at US$
81.47 billion.

In addition to the 10 mega food park projects already being set up, the
government has decided to set up five more such parks.

External commercial borrowings are available for cold storage for


preservation or storage of agricultural and allied products, marine products
and meat.

Growth potential story

The data centre services market in the country is forecast to grow at a


compound annual growth rate (CAGR) of 22.7 per cent between 2013 and
2014, to touch close to US$ 2.2 billion by the end of 2014, according to
research firm IDC Indias report published in March 2014. The report further
stated that the overall India data centre services market in 2013 was estimated
at US$ 1.39 billion.

According to a report by research and advisory firm Gartner published in


March 2014, the domestic BPO market is expected to grow at 25 per cent in
2014 to touch US$ 1.2 billion by 2014. Further, the BPO market in India is
estimated to grow 19 per cent through 2014 and grow to US$ 1.8 billion by
2014. According to the report, the domestic India BPO services market grew
by 7.3 per cent year-on-year in 2013.

The BMI India Retail Report Quarter 3, 2014 released in May 2014, forecasts
that total retail sales will grow from US$ 353 billion in 2014 to US$ 543.2
billion by 2015.

According to a report titled 'India 2020: Seeing, Beyond', published by


domestic broking major, Edelweiss Capital in March 2014, stated that India's
GDP is set to quadruple over the next ten years and the country is likely to
become an over US$ 4 trillion economy by 2020.

India will overtake China to become the world's fastest growing economy by
2018, according to the Economist Intelligence Unit (EIU), the research arm of
London-based Economist magazine.

Economic Survey 2013-10 Highlights


According to the Economic Survey 2013-10, tabled in Parliament on February 25,
2014 by the Union Finance Minister, Mr Pranab Mukherjee, the economy is expected
to grow at 7.2 per cent in 2013-10. The expected growth comes on the back of the
growth momentum witnessed in Q2 2013-10 estimates, when the economy recorded a
GDP growth of 7.9 per cent as against 7.5 per cent in the corresponding quarter of
2012-09. The industrial and the service sectors are growing at 8.2 and 8.7 per cent
respectively, as per the advance estimates of gross domestic product (GDP) for 201310, released by the Central Statistical Organisation (CSO).
The Economic Survey estimates:

Growth rate of GDP at factor cost expected to be 7.2 per cent.

Growth in the manufacturing sector has more than doubled from 3.2 per cent
in 2012-09 to 8.9 per cent in 2013-10.

Growth of private investment demand picked up in 2013-10.

Savings rate as a percentage of GDP in 2012-09 stood at 32.5 per cent.

Growth rate of capital formation as a percentage of GDP in 2012-09 stood at


34.9 per cent.

Foreign Exchange Reserves in 2013-10 as of December 31, 2013 stood at US$


283.5 billion.

Financing, insurance, real estate and business services have retained their
growth momentum at around 10 per cent in 2013-10.

The main highlights of the survey are:

The recovery in GDP growth for 2013-10, as indicated in the advance


estimates, is broad based. Seven out of eight sectors/sub-sectors show a
growth rate of 6.5 per cent or higher. Sectors including mining and quarrying;
manufacturing; and electricity, gas and water supply have significantly
improved their growth rates at over 8 per cent in comparison with 2012-09.

The construction sector and trade, hotels, transport and communication have
also improved their growth rates over the preceding year.

Strong growth in automobiles, rubber and plastic products, wool and silk
textiles, wood products, chemicals and miscellaneous manufacturing; modest
growth in nonmetallic mineral products.

The opening of the telecom sector led to rapid growth in subscriber base. From
only 54.6 million telephone subscribers in 2003, the number increased to
429.7 million at the end of March 2013 and further to 562 million as of
October 31, 2013 showing an addition of 96 million subscribers during the
period from March to December 2013.

There has been improvement in the balance of payments (BoP) situation


during H1 of 2013-10 over H1 of 2012-09, reflected in higher net capital
inflows and lower trade deficit.

Net capital flows to India at US$ 29.6 billion in April-September 2013


remained higher as compared to US$ 12 billion in April-September 2012.

During fiscal 2013-10, foreign exchange reserves increased by US$ 31.5


billion from US$ 252 billion in end March 2013 to US$ 283.5 billion in end
December 2013.

Growth rate of gross fixed capital formation in 2013-10 has recovered, as per
the revised National Accounts Statistics (NAS).

Turnaround in merchandise export growth witnessed in November 2013,


which has been sustained in December 2013.

2. INDUSTRY ANALYSIS (PHARMACEUTICAL)


India's pharmaceutical industry is now the third largest in the world in terms of
volume and stands 14th in terms of value. According to data published by the
Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, the total
turnover of India's pharmaceuticals industry between September 2012 and September
2013 was US$ 21.04 billion. Of this the domestic market was worth US$ 12.26
billion.
The Indian pharmaceuticals market is expected to reach US$ 55 billion in 2020 from
US$ 12.6 billion in 2013, according to a report India Pharma 2020: Propelling access
and acceptance, realising true potential by McKinsey & Company. The report states
that the market has the further potential to reach US$ 70 billion by 2020 in an
aggressive growth scenario.
Moreover, according to an Ernst & Young and industry body study, the increasing
population of the higher-income group in the country, will open a potential US$ 8
billion market for multinational companies selling costly drugs by 2015. Besides, the
report said the domestic pharma market is estimated to touch US$ 20 billion by 2015,
making India a lucrative destination for clinical trials for global giants.
Further, IMS Health India, which tracks drug sales in the country through a network
of nationwide drug distributors, estimates the healthcare market in India to reach US$
31.59 billion by 2020.
Growth
The Indian pharmaceutical market reached US$ 10.04 billion in size, with a valuewise growth rate of 20.4 per cent over the previous years corresponding period on a
Moving Annual Total (MAT) basis for the 12 months ended July 2014, according to
data from IMS Health India.
Cipla maintained its leadership position in the domestic market with 5.27 per cent
share, followed by Ranbaxy. The highest growth in the domestic market was for
Mankind Pharma, which grew 37.2 per cent. Leading companies in the domestic
market such as Sun Pharma (25.7 per cent), Abbott (25 per cent), Zydus Cadila (24.1

per cent), Alkem Laboratories (23.3 per cent), Pfizer (23.6 per cent), GSK India (19
per cent), Piramal Healthcare (18.6 per cent) and Lupin (18.8 per cent) had impressive
growth during July 2014, shows the data.
According to the All India Organisation of Chemists and Druggists (AIOCD), the
pharmaceuticals industry in India will grow by over 100 per cent over the next two
years.
"The people are increasingly becoming health conscious and the sell of all types of
medicines, particularly anti-biotic, will zoom up in the coming years. We expect the
business to double by 2014", as per JS Shinde, President, AIOCD.
According to Shinde, the pharmaceutical industry is currently growing at the rate of
12 per cent, but this will accelerate soon. The sale of all types of medicines in the
country stands at US$ 9.61 billion, which is expected to reach around US$ 19.22
billion by 2014.
India's domestic pharmaceutical market is valued approximately at US$ 12 billion in
2014, and has shown a strong growth of 21.3 per cent for the 12 months ending
September 2014, as per consulting firm Pricewaterhouse Coopers (PwC). It estimates
that over the next 10 years, the domestic market will grow to US$ 49 billion, at a
compounded annual growth rate (CAGR) of 15 per cent.
Further, a RNCOS report titled 'Booming Pharma Sector in India' projects that the
formulations industry is expected to prosper parallel to the pharmaceutical industry. It
is expected that the domestic formulations market in India will grow at an annual rate
of around 17 per cent in 2013-10, owing to increasing middle class population and
rapid urbanisation.
Diagnostics Outsourcing/Clinical Trials
According to the research published by RNCOS titled 'Indian Diagnostic Market
Analysis' published in January 2014, the Indian diagnostic services are projected to
grow at a CAGR of more than 20 per cent during 2013-2014.

Some of the major Indian pharmaceutical firms, including Sun Pharma, Cadilla
Healthcare and Piramal Life Sciences, had applied for conducting clinical trials on at
least 12 new drugs in 2014, indicating a growing interest in new drug discovery
research.
Generics
According to Mr Srikant Kumar Jena, Union Minister of State for Chemicals and
Fertilisers, India tops the world in exporting generic medicines worth US$ 11 billion
and currently, the Indian pharmaceutical industry is one of the world's largest and
most developed.
Moreover, as per a press release by research firm RNCOS in May 2014, the report
titled Booming Generics Drug Market in India' projects the Indian generic drug
market to grow at a CAGR of around 17 per cent between 2014-11 and 2014-13. Mr
Anand Sharma, Union Minister of Commerce and Industry and Lim Hng Kiang,
Minister for Trade and Industry, Singapore , have signed a 'Special Scheme for
Registration of Generic Medicinal Products from India' in May 2014, which seeks to
fast-track the registration process for Indian generic medicines in Singapore.
According to Lim Hng Kiang, "What we have agreed is that if your (Indian) generics
have already cleared the regulations of one of the five countries/ regions - US,
Canada, the European Union, UK or Australia - Singapore will take that as 'already
cleared' and we will import it (the generic medicines) without any additional
clearances."
Mr Sharma said, "This (understanding) will facilitate quick registration and approvals
(of Indian generic drugs) in Singapore. It is a major movement forward. One-fourth of
the world's generics come from India. This has ensured easy availability of life-saving
medicines particularly where affordability has been an issue."
Government Initiative
100 per cent foreign direct investment (FDI) is allowed under the automatic route in
the drugs and pharmaceuticals sector including those involving use of recombinant
technology. (DIPP). The Government plans to set up a US$ 639.56 million venture

capital (VC) fund to give a boost to drug discovery and strengthen the pharma
infrastructure in the country.
According to Mr Ashok Kumar, Secretary, Department of Pharmaceuticals, the
Government had issued an expression of interest (EoI) for technical and financial bids
for the selection of a global level consultant (GLC) for the preparation of a detailed
project report (DPR) in order to develop India as a drug discovery and pharma
innovation hub by 2020. The Drugs and Pharmaceuticals Manufacturers Association
has received an in-principle approval for its proposed special economic zone (SEZ)
for pharmaceuticals, bulk drugs, active pharmaceutical ingredients (APIs) and
formulations to be located at Nakkapalli mandal in Visakhapatnam district, according
to a government press release.
According to Mr Srikant Kumar Jena, Union Minister of State for Chemicals and
Fertilisers, the Department of Pharmaceuticals has prepared a "Pharma Vision 2020"
for making India one of the leading destinations for end-to-end drug discovery and
innovation and for that purpose provides requisite support by way of world class
infrastructure, internationally competitive scientific manpower for pharma research
and development (R&D), venture fund for research in the public and private domain
and such other measures. The government plans to open 3,000 Jan Aushadhi stores,
which sell unbranded generic drugs at heavy discounts to branded drugs, in the next
two years
Investment
The healthcare sector has attracted growing investor support in 2014 with nearly a
tenth of the total private equity funding going to this sector. In the third quarter the
calendar year 2014, a total of US$ 2,047 million was invested across 88 deals, of
which 9 per cent were healthcare deals, according to research firm Venture
Intelligence.
Further, in October 2014, the pharma, healthcare and biotech sector witnessed five
merger and acquisition transactions (M&A) worth US$ 250 million, according to
global consultancy firm Grant Thornton.

The drugs and pharmaceuticals sector has attracted FDI worth US$ 1,825.43 million
between April 2000 and September 2014, according to data published by Department
of Industrial Policy and Promotion (DIPP).
Some of the major investment developments in the sector include:

Hyderabad-based Natco Pharma plans to raise US$ 22.22 million to fund its
expansion plans and research activities.

Private equity major Sequoia Capital has made its first investment in the
pharmaceutical sector in the country by investing US$ 15.86 million into
Celon Labs, which will use the funds to double its manufacturing facility.

Belgium based Helvoet Pharma, part of the Daetwyler Group is setting up its
first greenfield production facility in Khandala Industrial Area, phase I (SEZ),
on Pune- Bangalore Highway, near Pune. The company has invested US$
26.56 million for the plant.

Swiss Pharma major Lonza AG, would invest around US$ 55.33 million
through its Indian subsidiary in a phased manner in Genome Valley project,
Hyderabad, said Stefan Borgas, CEO, Lonza.

Chennai-based Bafna Pharmaceuticals plans to raise around US$ 4.43 million


for its future expansion by issuance of warrants and shares.

Hyderabad Menzies Air Cargo Private Limited, a joint venture between GMR
Hyderabad International Airport Limited (GHIAL) and Menzies Aviation, has
launched India's first airport-based pharma zone, a dedicated pharmaceutical
cargo storage and handling facility, at Hyderabad. The project involved an
investment of US$ 1.22 million.

Road Ahead
According to a report by PwC in April 2014, India will join the league of top 10
global pharmaceuticals markets in terms of sales by 2020 with the total value reaching
US$ 50 billion.

3. COMPANY ANALYSIS
The company analysis shows the long-term strenght of the company that what is the
financial position of the company in the market, where it stands among its competitors
and who are the key drivers of the company, what are the future plans of the company,
what are the policies of government towards the company and how the stake of the
company divested among different groups of people.
Here, I have taken five companies namely Cipla, Dr. Reddys, Glaxo SmithKline,
Lupin and Ranbaxy for the purpose of fundamental analysis.

Cipla
Cipla Limited engages in the manufacture and sale of pharmaceutical products in
India and internationally. The company offers various prescription pharmaceutical
products for various diseases; and animal health care products, including aqua
products, disinfectants and sanitizers, equine products, feed and feed additives, herbal
products, dog treats and chews, poultry products, products for companion animals and
livestock animals, and surgical products and equipment.
It also provides over the counter products comprising child care, eye care, food
supplements, foot care and hair care, health drinks, sweeteners, nutraceuticals and
tonics, oral hygiene, pain care, probiotics/indigestion, sports care/muscle building,
vitamins and minerals, and skin care products, as well as cough, cold, and flu
products.
In addition, the company offers bulk drugs, which include active pharmaceutical
ingredients and drug intermediates; and flavors to food and beverage, and
pharmaceutical industries for use in fruit juices, medicinal liquids, baked goods, and
oral hygiene products, as well as fragrances for various applications in personal care
products, laundry detergents, and room fresheners.

Further, it provides agrochemicals, including pesticides; and technology services,


which

comprise

consulting,

project

appraisal,

engineering,

plant

supply,

commissioning, training, operational management, support, and quality control


services. The company was founded in 1935 and is based in Mumbai, India.
Dr. Reddys
Established in 1984, Dr. Reddys Laboratories (NYSE: RDY) is an emerging global
pharmaceutical company. As a fully integrated pharmaceutical company, the company
provides affordable and innovative medicines through its three core businesses:

Pharmaceutical Services and Active Ingredients, comprising its Active


Pharmaceuticals and Custom Pharmaceuticals businesses;

Global Generics, which includes branded and unbranded generics; and

Proprietary Products, which includes New Chemical Entities (NCEs),


Differentiated Formulations, and Generic Biopharmaceuticals.

The company products are marketed globally, with a focus on India, US, Europe and
Russia. Dr. Reddys conducts NCE research in the areas of metabolic disorders,
cardiovascular indications, anti-infectives and inflammation.
The companys strong portfolio of businesses, geographies and products gives it an
edge in an increasingly competitive global market and allows it to provide affordable
medication to people across the world, regardless of geographic and socio-economic
barriers.
Glaxo SmithKline
GlaxoSmithKline Pharmaceuticals Limited, a research-based healthcare and
pharmaceuticals company, provides prescription medicines and vaccines worldwide.
Its product portfolio comprises prescription medicines that range across therapeutic
areas, such as anti-infectives, dermatology, gynecology, diabetes, oncology, analgesic,
anti-inflammatory, anti-parasitic, gastrointestinal, endocrine, immunosuppressant,
nutritional, central nervous system, and cardiovascular and respiratory diseases; and
vaccines for the prevention of various diseases, including hepatitis A, hepatitis B,
invasive disease caused by H, influenza, chickenpox, diphtheria, pertussis, tetanus,

rotavirus, and cervical cancer. The company was founded in 1924 and is based in
Mumbai, India.
Lupin
Lupin Limited, a pharmaceutical company, produces a range of generic and branded
formulations, and active pharmaceutical ingredients. It offers various formulations
principally in the cephalosporins, cardiovascular, central nervous system, anti-asthma,
anti-tuberculosis, diabetology, dermatology, GI, and other therapy markets.
The company also provides contract research and manufacturing services. Its contract
manufacturing products include aryl piperazines, benzhydryl derivatives, optically
active building blocks, and other products. The company sells its products in
approximately 70 countries worldwide. Lupin Limited was founded in 1968 and is
headquartered in Mumbai, India.

Ranbaxy
Ranbaxy Laboratories Limited, a pharmaceutical company, engages in manufacturing
and trading formulations, active pharmaceuticals ingredients and intermediates,
generics, and drug discovery and consumer health care products. Its products are used
for the treatment of chronic and lifestyle diseases in the areas of cardiovascular,
central nervous system, respiratory, dermatology, orthopedics, nutritional, and
urology, as well as anti-infectives, musculoskeletal, and gastrointestinal areas.
The company also involves in the discovery and development of drug molecules in
the areas of infectious diseases, metabolic diseases, inflammatory diseases, oncology,
and anti-malaria therapies. In addition, it offers financial services. The company has
operations in North America, Latin America, Europe, the Commonwealth of
Independent States countries, Africa, the Asia Pacific, and the Middle East. It has
collaborative research programs with GlaxoSmithKline and Merck.

The company was incorporated in 1961 and is headquartered in Gurgaon, India.


Ranbaxy Laboratories Limited operates as a subsidiary of Daiichi Sankyo Company,
Ltd.
Cipla- Balance sheet
------------------- in Rs. Cr.
Balance Sheet

Sources of Funds
Total Share Capital
Equity Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Application of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Total Assets
Contingent Liabilities
Book Value (Rs)

------------------Mar 13
Mar14
12 mths
12 mths

Mar 10
12 mths

Mar 11
12 mths

Mar 12
12 mths

59.97
59.97
1,913.98
9.32
1,983.27
51.27
417.64
468.91
2,452.18

155.46
155.46
3,071.84
8.97
3,236.27
7.25
116.31
123.56
3,359.83

155.46
155.46
3,591.39
8.97
3,755.82
16.98
563.55
580.53
4,336.35

155.46
155.46
4,186.32
8.97
4,350.75
2.79
937.45
940.24
5,290.99

160.58
160.58
5,744.54
8.97
5,914.09
0.41
4.66
5.07
5,919.16

1,366.67
310.06
1,056.61
87.01
22.43
957.00
875.96
44.45
1,877.41
414.84
0.03
2,292.28
733.84
272.31
1,006.15
1,286.13
2,452.18
1,600.75
65.83

1,799.71
411.64
1,388.07
73.19
117.80
978.60
1,028.78
56.33
2,063.71
695.81
75.16
2,834.68
643.78
410.13
1,053.91
1,780.77
3,359.83
1,586.64
41.52

2,201.79
540.43
1,661.36
233.12
94.75
1,120.49
1,393.91
79.12
2,593.52
1,150.30
0.16
3,743.98
980.05
416.81
1,396.86
2,347.12
4,336.35
1,664.58
48.20

2,693.29
700.80
1,992.49
366.32
81.32
1,398.32
1,837.15
52.84
3,288.31
1,131.10
0.16
4,419.57
1,177.00
391.71
1,568.71
2,850.86
5,290.99
730.75
55.86

2,895.44
884.27
2,011.17
684.24
265.10
1,512.58
1,552.71
60.32
3,125.61
2,357.29
0.52
5,483.42
1,177.11
1,347.66
2,524.77
2,958.65
5,919.16
423.87
73.55

Cipla Profit & Loss account


------------------- in Rs. Cr.

Income
Sales Turnover

Profit & Loss account


Mar 10
12 mths

Mar 11
12 mths

Mar 12
12 mths

3,103.62

3,656.92

4,293.95

------------------Mar 13
12 mths
5,295.33

Mar14
12 mths
5,657.85

Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Total Expenses
Operating Profit
PBDIT
Interest
PBDT
Depreciation
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Total Value Addition
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)
Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)

122.27
2,981.35
112.20
94.35
3,187.90

94.93
3,561.99
100.68
-30.73
3,631.94

90.66
4,203.29
134.92
41.37
4,379.58

61.04
5,234.29
-139.51
113.55
5,208.33

52.16
5,605.69
125.71
184.09
5,915.49

1,564.11
63.08
150.76
170.63
354.33
78.90
2,381.81
693.89
806.09
16.07
790.02
80.18
709.84
0.00
709.84
102.20
607.64
817.70
155.46
21.80

1,754.89
86.71
184.59
186.47
418.34
78.43
2,709.43
821.83
922.51
11.16
911.35
103.37
807.98
0.00
807.98
139.95
668.03
954.54
155.46
26.42

2,162.48
96.90
255.45
233.90
547.10
96.66
3,392.49
852.17
987.09
18.05
969.04
130.68
838.36
0.00
838.36
136.93
701.43
1,230.01
155.46
26.42

2,513.11
91.71
271.33
262.65
887.28
76.92
4,103.00
1,244.84
1,105.33
52.23
1,053.10
151.79
901.31
0.00
901.31
124.50
776.81
1,589.89
155.46
26.42

2,687.54
92.15
318.87
259.67
867.98
182.64
4,408.85
1,380.93
1,506.64
28.30
1,478.34
165.25
1,313.09
11.90
1,324.99
243.50
1,081.49
1,721.31
160.58
26.67

2,998.70
20.26
100.00

7,772.91
8.59
100.00

7,772.91
9.02
100.00

7,772.91
9.99
100.00

8,029.21
13.47
100.00

65.83

41.52

48.20

55.86

73.55

DR REDDYS Balance Sheet


------------------- in Rs. Cr.
Balance Sheet

Sources of Funds
Total Share Capital
Equity Share Capital
Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Application of Funds

Mar 10
12 mths

Mar 11
12 mths

------------------Mar 12
Mar 13
12 mths
12 mths

38.35
38.35
2,223.79
2,262.14
145.13
778.74
923.87
3,186.01

83.96
83.96
4,289.40
4,373.36
1.92
327.98
329.90
4,703.26

84.09
84.09
4,727.72
4,811.81
3.40
458.91
462.31
5,274.12

84.20
84.20
5,174.90
5,259.10
2.60
637.70
640.30
5,899.40

Mar14
12 mths
84.40
84.40
5,830.20
5,914.60
0.80
562.40
563.20
6,477.80

Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Total Assets
Contingent Liabilities
Book Value (Rs)

1,052.90
491.08
561.82
112.92
911.36
443.10
581.22
25.50
1,049.82
723.61
625.44
2,398.87
624.25
174.70
798.95
1,599.92
3,186.02
2,409.27
294.95

1,291.19
609.15
682.04
280.61
966.99
487.58
1,055.70
148.60
1,691.88
1,028.56
1,308.11
4,028.55
731.96
522.97
1,254.93
2,773.62
4,703.26
1,896.92
260.45

1,750.21
762.80
987.41
245.71
2,080.71
640.93
897.71
67.19
1,605.83
1,272.02
470.15
3,348.00
786.36
601.38
1,387.74
1,960.26
5,274.09
1,892.55
286.12

2,157.30
946.50
1,210.80
411.20
1,865.10
735.10
1,419.70
84.30
2,239.10
1,331.20
300.10
3,870.40
1,163.30
294.80
1,458.10
2,412.30
5,899.40
1,934.80
312.17

2,425.70
1,110.10
1,315.60
745.40
2,652.70
897.40
1,060.50
47.90
2,005.80
1,321.40
320.10
3,647.30
1,543.80
339.40
1,883.20
1,764.10
6,477.80
2,016.10
350.30

DR REDDYS Profit & Loss account


------------------- in Rs. Cr.
Profit & Loss account
Mar 10
12 mths
Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Total Expenses
Operating Profit
PBDIT

------------------Mar 13
12 mths

Mar 11
12 mths

Mar 12
12 mths

Mar14
12 mths

2,101.97
98.71
2,003.26
95.98
36.72
2,135.96

3,872.92
89.66
3,783.26
233.95
23.23
4,040.44

3,428.40
84.51
3,343.89
197.29
93.87
3,635.05

4,080.40
80.90
3,999.50
212.20
64.10
4,275.80

4,469.60
74.00
4,395.60
254.00
117.30
4,766.90

792.87
48.23
205.85
74.95
567.59
33.42
1,722.91
317.07
413.05

1,144.82
57.83
299.04
155.63
777.06
44.76
2,479.14
1,327.35
1,561.30

1,347.33
77.12
366.28
130.35
896.54
37.44
2,855.06
582.70
779.99

1,534.00
90.00
412.50
105.90
1,117.90
45.30
3,305.60
758.00
970.20

1,599.40
104.10
516.40
117.30
1,036.60
50.60
3,424.40
1,088.50
1,342.50

Interest
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Total Value Addition
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)
Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)

24.63
388.42
111.33
13.31
263.78
-0.01
263.77
52.64
211.12
930.04
38.35
5.38

51.96
1,509.34
133.50
18.16
1,357.68
-0.02
1,357.66
188.99
1,176.86
1,334.32
62.97
10.70

14.69
765.30
161.99
20.71
582.60
-0.06
582.54
108.88
475.22
1,507.73
63.06
10.72

27.40
942.80
193.60
19.70
729.50
-0.10
729.40
168.60
560.90
1,771.60
105.30
17.80

16.00
1,326.50
222.40
19.30
1,084.80
-0.10
1,084.70
238.70
846.10
1,825.00
190.00
31.60

766.95
27.53
100.00
294.95

1,679.12
70.09
75.00
260.45

1,681.73
28.26
75.00
286.12

1,684.69
33.29
125.00
312.17

1,688.45
50.11
225.00
350.30

Glaxosmithkline Balance Sheet


------------------- in Rs. Cr.

Sources of Funds
Total Share Capital
Equity Share Capital
Reserves
Networth
Unsecured Loans
Total Debt
Total Liabilities
Application of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Total Assets

Mar 10
12 mths

Mar 11
12 mths

------------------Mar 12
Mar 13
12 mths
12 mths

Mar14
12 mths

84.70
84.70
863.90
948.60
4.85
4.85
953.45

84.70
84.70
1,110.01
1,194.71
5.54
5.54
1,200.25

84.70
84.70
1,276.21
1,360.91
5.77
5.77
1,366.68

84.70
84.70
1,456.39
1,541.09
5.65
5.65
1,546.74

84.70
84.70
1,674.45
1,759.15
5.42
5.42
1,764.57

253.11
171.54
81.57
15.37
913.06
218.13
67.39
47.53
333.05
169.93
0.00
502.98
268.97
290.55
559.52
-56.54
953.46

253.63
167.83
85.80
8.66
1,139.41
240.95
60.45
28.68
330.08
206.40
6.35
542.83
258.29
318.15
576.44
-33.61
1,200.26

266.71
179.24
87.47
5.43
1,333.32
205.96
37.77
45.91
289.64
188.87
109.08
587.59
254.59
392.55
647.14
-59.55
1,366.67

282.15
191.75
90.40
9.95
751.87
228.38
57.94
43.79
330.11
236.86
862.75
1,429.72
280.71
454.51
735.22
694.50
1,546.72

289.18
196.37
92.81
21.36
190.91
253.02
53.73
74.75
381.50
187.35
1,597.85
2,166.70
324.25
382.96
707.21
1,459.49
1,764.57

Contingent Liabilities

142.49

264.97

208.40

258.47

208.47

Glaxosmithkline Profit & Loss account


------------------- in Rs. Cr.
Profit & Loss account
Mar 10
12 mths
Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Preoperative Exp Capitalised
Total Expenses
Operating Profit
PBDIT
Interest
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Total Value Addition
Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)
Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)

------------------Mar 13
12 mths

Mar 11
12 mths

Mar 12
12 mths

Mar14
12 mths

1,579.58
105.51
1,474.07
262.55
-0.54
1,736.08

1,681.07
139.14
1,541.93
254.01
22.58
1,818.52

1,721.12
142.54
1,578.58
241.51
-16.80
1,803.29

1,762.64
86.28
1,676.36
216.03
2.33
1,894.72

1,924.27
40.13
1,884.14
91.39
32.41
2,007.94

637.26
16.61
156.06
28.97
167.56
44.37
0.00
1,050.83
422.70
685.25
1.67
683.58
15.73
0.00
667.85
5.84
673.69
171.62
502.08
413.57
0.00
237.17
33.26

651.18
19.23
153.87
40.35
143.93
43.80
0.00
1,052.36
512.15
766.16
1.35
764.81
15.85
0.00
748.96
6.70
755.66
194.23
545.51
401.18
0.00
262.58
36.83

616.40
20.54
151.45
43.33
136.31
12.27
0.00
980.30
581.48
822.99
1.35
821.64
16.16
0.00
805.48
-38.87
766.61
211.46
537.66
363.90
0.00
304.93
51.82

653.26
24.75
173.05
46.55
140.68
12.27
0.00
1,050.56
628.13
844.16
0.53
843.63
16.34
0.00
827.29
0.50
827.79
231.54
576.57
397.31
0.00
338.81
57.58

728.65
24.66
209.71
52.03
182.82
10.02
0.00
1,207.89
708.66
800.05
0.37
799.68
16.37
0.00
783.31
2.72
786.03
253.59
512.29
479.24
0.00
254.11
40.13

847.03
59.28
280.00
111.99

847.03
64.40
310.00
141.05

847.03
63.48
360.00
160.67

847.03
68.07
400.00
181.94

847.03
60.48
300.00
207.68

Lupin Balance Sheet


------------------- in Rs. Cr.
Balance Sheet

Sources of Funds
Total Share Capital
Equity Share Capital

Mar 10
12 mths

Mar 11
12 mths

Mar 12
12 mths

40.14
40.14

80.34
80.34

82.08
82.08

------------------Mar 13
12 mths
82.82
82.82

Mar14
12 mths
88.94
88.94

Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Application of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Total Assets
Contingent Liabilities
Book Value (Rs)

603.81
643.95
428.65
483.95
912.60
1,556.55

808.07
888.41
390.91
473.64
864.55
1,752.96

1,234.97
1,317.05
560.88
404.67
965.55
2,282.60

1,292.48
1,375.30
565.12
379.79
944.91
2,320.21

2,441.61
2,530.55
704.00
202.81
906.81
3,437.36

835.06
192.66
642.40
25.21
9.50
310.29
348.39
11.62
670.30
239.99
444.18
1,354.47
402.27
72.76
475.03
879.44
1,556.55
99.41
160.42

951.71
237.90
713.81
82.55
5.86
402.07
479.30
17.78
899.15
247.95
335.00
1,482.10
464.96
66.40
531.36
950.74
1,752.96
89.34
110.57

1,155.05
291.98
863.07
68.95
292.49
625.85
632.26
11.45
1,269.56
260.46
203.63
1,733.65
567.28
108.28
675.56
1,058.09
2,282.60
72.47
160.46

1,331.37
355.75
975.62
116.31
473.87
715.88
709.06
9.36
1,434.30
383.31
2.77
1,820.38
923.58
142.39
1,065.97
754.41
2,320.21
114.41
166.06

1,616.52
425.13
1,191.39
140.83
724.07
713.70
916.59
36.53
1,666.82
665.79
0.89
2,333.50
785.62
166.81
952.43
1,381.07
3,437.36
113.70
284.51

Lupin Income Statement


------------------- in Rs. Cr.

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost

Profit & Loss Account


Mar 10
12 mths

Mar 11
12 mths

Mar 12
12 mths

------------------Mar 13
12 mths

1,717.43
64.50
1,652.93
1.10
30.05
1,684.08

2,051.70
65.91
1,985.79
146.29
42.59
2,174.67

2,661.62
86.23
2,575.39
114.57
184.17
2,874.13

2,997.49
42.79
2,954.70
13.19
25.46
2,993.35

3,723.96
33.87
3,690.09
-14.12
-1.98
3,673.99

826.85
73.25
155.72

1,004.11
90.26
187.50

1,346.25
109.26
241.82

1,351.62
123.83
334.47

1,596.77
141.68
376.55

Mar14
12 mths

Other Manufacturing Expenses


Selling and Admin Expenses
Miscellaneous Expenses
Total Expenses
Operating Profit
PBDIT
Interest
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Total Value Addition
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)
Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)

49.15
234.36
40.28
1,379.61
303.37
304.47
34.24
270.23
40.35
0.00
229.88
-3.40
226.48
47.48
182.72
552.76
26.09
3.66

63.37
301.55
48.03
1,694.82
333.56
479.85
41.70
438.15
46.37
0.00
391.78
0.89
392.67
94.69
302.06
690.71
40.17
6.83

82.93
383.83
54.16
2,218.25
541.31
655.88
42.15
613.73
56.11
0.00
557.62
-0.56
557.06
114.26
443.38
872.00
82.08
14.04

102.73
444.21
49.18
2,406.04
574.12
587.31
49.99
537.32
66.35
0.00
470.97
0.40
471.37
54.41
416.97
1,054.42
103.53
17.59

115.15
562.13
54.72
2,847.00
841.11
826.99
36.76
790.23
81.57
0.00
708.66
-1.08
707.58
59.73
648.93
1,250.23
120.07
20.12

401.41
45.52
65.00
160.42

803.45
37.60
50.00
110.57

820.81
54.02
100.00
160.46

828.20
50.35
125.00
166.06

889.44
72.96
135.00
284.51

Ranbaxy Balance Sheet


------------------- in Rs. Cr.
Balance Sheet

Sources of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Application of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets

------------------Mar 13
12 mths

Mar 10
12 mths

Mar 11
12 mths

Mar 12
12 mths

Mar14
12 mths

186.22
186.22
0.28
2,190.80
2,377.30
353.49
676.31
1,029.80
3,407.10

186.34
186.34
0.88
2,162.79
2,350.01
224.29
2,954.31
3,178.60
5,528.61

186.54
186.54
1.18
2,350.68
2,538.40
365.07
3,137.96
3,503.03
6,041.43

210.19
210.19
175.66
3,330.92
3,716.77
162.07
3,563.30
3,725.37
7,442.14

210.21
210.21
175.85
3,748.54
4,134.60
175.83
3,172.55
3,348.38
7,482.98

1,799.32
599.35
1,199.97
432.84
762.78
890.93
806.62
30.48
1,728.03

2,133.57
699.54
1,434.03
301.88
2,679.95
954.91
1,013.75
27.06
1,995.72

2,261.48
791.96
1,469.52
327.42
3,237.55
976.07
882.91
69.38
1,928.36

2,386.75
930.07
1,456.68
428.77
3,618.03
1,198.52
1,024.54
49.86
2,272.92

2,620.92
1,027.52
1,593.40
414.92
3,833.69
1,230.48
1,534.65
25.56
2,790.69

Loans and Advances


Fixed Deposits
Total CA, Loans & Advances
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Total Assets
Contingent Liabilities

594.94
86.11

581.18
44.09

882.99
111.07

2,351.98
1,885.08

1,967.65
728.56

2,409.08
983.57
413.99
1,397.56
1,011.52
3,407.11
202.40

2,620.99
985.57
522.67
1,508.24
1,112.75
5,528.61
159.40

2,922.42
1,177.35
738.14
1,915.49
1,006.93
6,041.42
201.00

6,509.98
3,840.11
731.20
4,571.31
1,938.67
7,442.15
252.85

5,486.90
3,082.89
763.03
3,845.92
1,640.98
7,482.99
261.05

63.82

63.03

68.01

84.24

94.16

Book Value (Rs)

Ranbaxy Income Statement


------------------- in Rs. Cr.
Profit & Loss account
Mar 10
12 mths
Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Total Expenses
Operating profit
PBDIT
Interest
PBDT
Depreciation
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Total Value Addition
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)

------------------Mar 13
12 mths

Mar 11
12 mths

Mar 12
12 mths

Mar14
12 mths

3,727.05
86.56
3,640.49
122.25
30.96
3,793.70

4,218.98
53.86
4,165.12
-28.65
44.70
4,181.17

4,344.39
51.37
4,293.02
551.13
40.66
4,884.81

4,676.21
24.17
4,652.04
-1,587.64
115.59
3,179.99

4,797.49
15.90
4,781.59
485.66
33.96
5,301.21

1,567.55
69.55
298.38
67.09
1,339.12
144.32
3,486.01
185.44
307.69
26.41
281.28
101.33
179.95
12.72
192.67
-22.34
212.04
1,918.46
316.67
44.41

1,708.23
80.70
328.45
79.52
1,234.42
146.23
3,577.55
632.27
603.62
58.44
545.18
106.75
438.43
19.34
457.77
62.43
380.54
1,869.31
316.89
44.44

1,861.17
90.35
420.04
82.60
1,341.03
123.90
3,919.09
414.59
965.72
93.43
872.29
118.73
753.56
35.46
789.02
156.69
617.72
2,057.93
317.15
53.90

2,049.30
108.83
472.65
94.65
1,402.77
383.26
4,511.46
256.17
-1,331.47
145.83
-1,477.30
154.47
-1,631.77
17.76
-1,614.01
-574.24
-1,044.80
2,462.16
0.00
0.00

1,916.58
109.57
582.50
89.94
1,306.25
158.07
4,162.91
652.64
1,138.30
39.47
1,098.83
148.20
950.63
111.42
1,062.05
488.86
571.98
2,246.33
0.00
0.00

Shares in issue (lakhs)


Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)

3,724.42
5.69
170.00

3,726.87
10.21
170.00

3,730.71
16.56
170.00

4,203.70
-24.85
0.00

4,204.17
13.61
0.00

63.82

63.03

68.01

84.24

94.16

RATIO ANALYSIS OF CIPLA, DR REDDYS,


GLAXOSMITHKLINE, LUPIN AND RANBAXY
EARNINGS PER SHARE
EARNINGS PER SHARE
YEARS
CIPLA
DR REDDYS
GLAXOSMITHKLIN
E
LUPIN
RANBAXY

Mar 10
20.26
27.53

Mar 11
8.59
70.09

Mar 12
9.02
28.26

Mar 13
9.99
33.29

Mar14
13.47
50.11

59.28
45.52
5.69

64.40
37.60
10.21

63.48
54.02
16.56

68.07
50.35
-24.85

60.48
72.96
13.61

Interpretations
EPS measures the profit available to the equity shareholders per share, that is, the
amount that they can get on every share held. CIPLA and DR Reddys have been
recording a consistent growth in the EPS over the last five years. GlaxoSmithKline
has also registered a consistent EPS of around 60% in the last five years. Though
fluctuating, LUPIN has also delivered good EPS with the maximum of Rs. 73 in

2014. RANBAXY is the only odd player in the group registering a negative EPS in
2013 though recovered sharply in 202.

SALES
SALES
CIPLA
DR REDDYS
GLAXOSMITHKLIN
E
LUPIN
RANBAXY

In Rs.Cr

Mar 10
3,103.62
2,101.97

Mar 11
3,656.92
3,872.92

Mar 12
4,293.95
3,428.40

Mar 13
5,295.33
4,080.40

Mar14
5,657.85
4,469.60

1,579.58
1,717.43
3,727.05

1,681.07
2,051.70
4,218.98

1,721.12
2,661.62
4,344.39

1,762.64
2,997.49
4,676.21

1,924.27
3,723.96
4,797.49

Interpretations
All the five companies have shown a positive trend in sales over the past five years.
Though slowdown in the economy brought hurdles, healthcare companies are the least
effected and have potential to grow in future as lots of products are still to add in their
portfolio. Moreover increased demand in foreign market also seems to be a positive
signal for better future.

DIVIDEND PER SHARE


DIVIDEND PER SHARE
YEARS
CIPLA
DR REDDYS
GLAXOSMITHKLIN
E
LUPIN
RANBAXY

Mar 10
2.00
5.00

Mar 11
2.00
3.75

Mar 12
2.00
3.75

Mar 13
2.00
6.25

Mar14
2.00
11.25

31.00

36.00

40.00

30.00

31.00

6.50
8.50

5.00
8.50

10.00
8.50

12.50
--

13.50
--

Interpretations
CIPLA has declared a consistent dividend of Rs.2 per share over the last five years.
Dr Reddys has been registering a good growth in the last two years. Glaxo Smith
Kline has also been consistent in declaring the dividends. Lupin has also been
registering a good growth in declaring the dividends. Again, RANBAXY is the only
odd player without declaring any dividends.

RETURN ON INVESTMENT (ROI)


Return on Investment
YEARS
CIPLA
DR REDDYS
GLAXOSMITHKLIN
E
LUPIN
RANBAXY

Mar 10
30.78
9.33

Mar 11
20.70
26.91

Mar 12
18.72
9.87

Mar 13
17.89
10.66

Mar14
18.31
14.30

52.93

45.66

39.51

37.41

29.12

28.37
8.92

34
16.19

33.66
24.34

30.31
-29.5

25.64
14.44

Interpretations
ROI is one of the most important ratios used for measuring the overall efficiency of a
firm and determines whether the investments in the firms are attractive or not. Glaxo
Smith Kline has the best ROI of nearly 30% followed by Lupin with 25.64%. Cipla,
Ranbaxy and Dr Reddys have a ROI of 18.31%, 14.44% and 14.30 respectively.

DIVIDEND PAYOUT RATIO

DIVIDEND PAYOUT RATIO


YEARS
CIPLA
DR REDDYS
GLAXOSMITHKLIN
E
LUPIN
RANBAXY

Mar 10
29.17
20.71

Mar 11
27.22
6.25

Mar 12
25.92
15.52

Mar 13
23.41
21.94

Mar14
17.31
26.19

53.86

54.88

66.35

68.75

57.43

16.28
170.28

15.55
94.95

21.67
60.06

29.04
--

21.6
--

Interpretations
Dividend payout ratio is the percentage of earnings paid to shareholders in dividends.
It provides an idea to an investor of how well earnings support the dividend payments.
All the companies have been following a consistent dividend payout ratio over the last
five years, though there is a fall seen in the last year.

CHAPTER V
FINDINGS, SUGGESTIONS
& CONCLUSION

FINDINGS
From the data analysis and interpretations of the ratios of five companies viz. Cipla,
DR Reddys, Lupin, Glaxosmithkline and Ranbaxy, the following findings have been
given:

CIPLA and DR Reddys have been recording a consistent growth in the EPS
over the last five years. GlaxoSmithKline has also registered a consistent EPS
of around 60% in the last five years. Though fluctuating, LUPIN has also
delivered good EPS with the maximum of Rs. 73 in 2014. RANBAXY is the
only odd player in the group registering a negative EPS in 2011 though
recovered sharply in 2014.

All the five companies have shown a positive trend in sales over the past five
years. Though slowdown in the economy brought hurdles, healthcare
companies are the least effected and have potential to grow in future as lots of
products are still to add in their portfolio. Moreover increased demand in
foreign market also seems to be a positive signal for better future.

CIPLA has declared a consistent dividend of Rs.2 per share over the last five
years. Dr Reddys has been registering a good growth in the last two years.
Glaxo Smith Kline has also been consistent in declaring the dividends. Lupin
has also been registering a good growth in declaring the dividends. Again,
RANBAXY is the only odd player without declaring any dividends.

Glaxo Smith Kline has the best ROI of nearly 30% followed by Lupin with
25.64%. Cipla, Ranbaxy and Dr Reddys have a ROI of 18.31%, 14.44% and
14.30 respectively.

All the three companies had a more or less stable dividend payout ratio since
2009.

SUGGESTIONS
By analyzing the pharmaceutical sector with the help of fundamental analysis, it has
been revealed that this industry has a lot of potential to grow. So recommending
investing in pharmaceutical industry with no doubt is going to be a good and smart
option because this industry is booming like never before not only in India but all
over the world.

Except for Ranbaxy, all the other companies seem to be a good bet for
investment.

Glaxosmithkline with the maximum Rate of Return is recommended for buy


in the long run. The company also pays the maximum dividend compared to
its peers.

Lupin follows Glaxosmithkline in terms of ROI and Dividend and it can also
be recommended for a buy.

RANBAXY for some reasons had been lagging behind in the race and can be
avoided in the short run.

Few Suggestions for Right Stock Selection


There are three factors which an investor must consider for selecting the right stocks.

Business: An investor must look into what kind of business the company is
doing, visibility of the business, its past track record, capital needs of the
company for expansion etc.

Balance Sheet: The investor must focus on its key financial ratios such as
earnings per share, price-earning ratio; debt-equity ratio, dividends per share
etc and he must also check whether the company is generating cash flows.

Bargaining: This is the most important factor which shows the true worth of
the company. An investor needs to choose valuation parameters which suit its
business.

Investment rules

Invest for long term in equity markets

Align your thought process with the business cycle of the company.

Set the purpose for investment.

Long term goals should be the objective of equity investment.

Disciplined investment during market volatility helps attains profits.

Planning, Knowledge and Discipline are very crucial for investment.

CONCLUSION
The outlook for Indian pharma sector for 2014 is stable. Earnings and profitability of
Indian generic-based pharmaceutical companies will benefit from continued demand
for generics. Strong revenue visibility coupled with stable operating profitability
margins and limited capex spending would result in stable credit profiles for Fitchrated entities. However, liquidity would remain a concern for the sector mainly on
account of high working capital requirements.
US market is expected to be the main growth driver for the demand of generics. It is
also expected that Indian pharmaceutical companies to see earnings visibility from the
domestic markets and the positive prospects of outsourcing. The increasing interest
towards generics among global innovator companies to either set shop in India or
forge alliances and partnerships with Indian pharmaceutical companies will be
additional revenue triggers for the sector.
During FY11, the margins of Indian pharmaceutical companies will mostly remain
stable driven by increasing scale in the generic segment. This is also expected to
continue into FY12. Fitch expects the profitability of Indian pharmaceutical
companies to continue to benefit from better geographic and product mix, as well as
from higher capacity utilization levels. Despite the positives that would guide margin
expansions, competition and subsequent price erosions could limit the expected
improvement.
Working capital levels for the sector are more likely to remain high and would most
likely have a negative impact on the liquidity profiles of smaller pharmaceutical
companies. For larger and mid size pharmaceutical companies, size, scale and track
record will enable them to raise finance and better manage their liquidity.
Downside risks to the outlook could be on account of regulatory and litigation risks.
Fitch notes that regulatory risks emanating from quality issues will have a significant
impact on the earnings visibility of Indian pharmaceutical companies.
Furthermore, litigation risks stemming from Para IV and First-to-File filing will have
a negative impact on profitability. Other concerns that plague the industry range from

delays in attaining product approvals, intensifying competition and price controls. All
these factors if and when materialized could also have a negative impact on the sector.

BIBLIOGRAPHY
Text Books
Security Analysis and Portfolio Management by Punithavathy Pandian, Vikas
Publications.
Security analysis and portfolio management by V.A. Avadhani
Financial Markets and Services by Gordon and Natarajan, Himalaya
Publications.
Financial Management by Shashi K Gupta and R. K Sharma, Kalyani
Publications.
Newspapers
Economic times
Business line
Websites

www.nseindia.com

www.bseindia.com

www.investopedia.com

www.moneycontrol.com

www.indiainfoline.com

www.sebi.gov.in

www.yahoofinance.com

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