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INTERNATIONAL JOURNAL OF MANAGEMENT (IJM)
ISSN 0976-6502 (Print)
ISSN 0976-6510 (Online) A STUDY IJM
Volume 7, Issue 2, February (2016), pp. 123-133
http://www.iaeme.com/ijm/index.asp ©IAEME
Journal Impact Factor (2016): 8.1920 (Calculated by GISI)
www.jifactor.com
FUNDAMENTAL ANALYSIS WITH SPECIAL REFERENCE TO
PHARMACEUTICAL COMPANIES LISTED IN NSE
Ms. J. Hema
Assistant Professor, P.S.R. Engineering College,
Sivakasi - 626140
V. Ariram
MBA Scholar, P.S.R. Engineering College,
Sivakasi - 626140
ABSTRACT
An investment analysis is essential for the benefit of risk reduction and maximizes the
gain. The investment analysis on stock market has two main approaches namely technical
analysis and fundamental analysis. This study is focused on fundamental analysis of
pharmaceutical companies listed in National Stock Exchange (NSE), which include selected
five companies for a period of five years from 2011 to 2015. The fundamental analysis
consists of three parts such as economic analysis, industry analysis and company analysis.
The economic analysis consists of economic indicators which influence the security market
like GDP, inflation, interest rate, foreign reserves, export and agricultural production for the
study period. An industry analysis includes industrial compound annual growth rate, sales,
revenue and global market share etc. For company analysis, various performance ratios such
as EPS, DPS, Net profit Margin, Debt to equity ratio etc., are used. Industry analysis shows
that the Indian pharmaceutical industry has high growth rate and company analysis revealed
that Lupin and Torrent pharma are financially viable during the study period.
Key words: Fundamental analysis, Indian Pharmaceutical Industry, GDP, Economic
Cite this Article: J. Hema and V. Ariram Fundamental Analysis with Special Reference to
Pharmaceutical Companies Listed in NSE. International Journal of Management, 7(2), 2016,
pp. 123-133.
http://www.iaeme.com/IJM/index.asp
1. INTRODUCTION
Fundamental analysis is a tool which is used to determine a security’s value by focusing on essential
factors that affect a company's actual business. An investor can use the fundamental analysis on
industries or the economy as a whole. The primary goal of fundamental analysis is to describe the
nature of an economy, industry and company that an investor can compare with the securities, with the
aim of figuring out what sort of position to take with that security in the future.
2. METHODS IN FUNDAMENTAL ANALYSIS:
Fundamental analysis is known as “researching the fundamentals/foundation”, but it does not reveal the
whole unless the analyst can know what fundamentals are. The various fundamentals can be grouped
123
J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies
Listed in NSE” – (ICAM 2016)International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 123-133 © IAEME Publication
into two categories like (i) Quantitative Factors - growth rate, revenue, debt and market capitalization
and (ii) Qualitative Factors - corporate governance, financial and information transparency,
stakeholder’s rights and structure of the board of directors.
3. APPROACHES OF FUNDAMENTAL ANALYSIS:
Fundamental analysis can be visualized by means of two approaches.
Top down Approach, Bottom up approach
3.1. Top down approach:
In top-down approach, the investors begin with the economic analysis by considering important factors
namely interest rates, inflation and then industry factors like growth rate and market share. If the first
two analyses are satisfied, the investor moves on to individual company analysis.
3.2. Bottom up approach:
In bottom-up approach, the investors focus directly on a company's basics or fundamentals. Analysis of
the company's products, its competitive position, and its financial status leads to an estimate of the
company's value in the market.
4. REVIEW OF LITERATURE
Literature review is a study involving a collection of literature in the selected area of research in which
the researcher has limited experience, and critical examination and comparison of them to have a better
understanding. It also helps the researchers to update the past data, data sources and results and identify
the gaps.
Mark P. Bauman (1996) conducted a study named, “A Review of Fundamental Analysis
Research in Accounting”. This paper has outlined the development of different accounting
valuation model and reviewed related empirical work.
Nikolaos Pavlou, George Blanas Department of Business Administration, TEI of Larissa, GR
Pavlos Golemis P&K Financial Services, S.A., Larissa Branch, GR (2006) conducted on “The
Application of Fundamental Analysis and Technical Analysis in the Athens Derivatives
Exchange (ADEX)”.
Prakash Tiwari & Hemraj Verma (2009) conducted a study on “A Fundamental Analysis of
Public sector Banks in India”. This article explains the position of the banks with reference to
various ratios.
Sugandharaj Kulkarni H.N.College of Commerce, Management Wing (2011) conducted on
“A study on fundamental analysis of ONGC”. The analysis of a company's fundamentals
involves getting deep into its financials, rather than day-to-day movement in its share price.
R. Amsaveni and S. Gomath (2013) conducted on “Fundamental Analysis of Selected FMCG
Companies in India”. This study aims to analyze the fundamental analysis of BSE listed
FMCG companies in India.
5. SCOPE OF THE STUDY
The study entitled as “A study on Fundamental analysis with special reference to Pharmaceutical
companies listed in NSE”. This study provides a precise presentation of data and guidelines to
individual investors as well as venture investors, portfolio managers to know broad aspects of
investment. This study is established to gain the knowledge about the economic factors such as GDP,
Inflation, Exchange rate & Interest rates, etc., and industry analysis like industrial growth rate, sales,
revenue, etc., and company analysis through its profit, debt, etc., by using descriptive statistics, ratio
analysis. This study has focused on the five pharmaceutical companies listed in NSE based on its
Market capitalization, sales, Net profit, Total assets and Debt.
6. NEED OF THE STUDY
Stock markets are the place to trade stock and securities; it operates as facilitator between investors and
borrowers of capital by means of pooling of funds, sharing business risk and transferring their wealth.
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J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies
Listed in NSE” – (ICAM 2016)International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 123-133 © IAEME Publication
Prices of the shares are changing in stock markets on a daily basis. These changes in share price may
associate with the changes in the underlying economic factors, industry performance and company’s
growth. Indian pharmaceutical industry is third largest producer in the world and is also one of the
most developed industries. India has nearly 24,000 pharmaceutical companies and expected to expand
at a CAGR of 15.92 per cent to US$ 55 billion by 2020. Hence large numbers of foreign Investors are
coming and investing in Indian Pharmaceutical sector due to its high potential growth in future.
Hence, the researcher selected this topic to make investments especially in pharmaceutical industry
based on the fundamental analysis.
7. OBJECTIVES OF THE STUDY
To describe the economic indicators influencing the securities market.
To analyse the growth of Pharmaceutical Industry.
To assess the performance of selected companies from Pharmaceutical Industry.
8. LIMITATIONS OF THE STUDY
1. This study focused only on quantitative factors such as GDP, inflation rates, exchange rates,
foreign exchange reserves, agriculture, industrial, service, currency markets & export growth
and it does not include qualitative factors.
2. The Fundamental analysis may not be achieved if developed countries influenced by
economic recession. Due to lack of experience and different perception amongst the analyst,
bias may occur.
9. RESEARCH METHODOLOGY
Research methodology generally referred as the systematic course of action carried out in project or
research study. Methodology gives a clear picture of suitable classification and service of the different
of the study as to arrive at a poor manifestation of the objectives, scope and limitation of the study.
9.1. Research design:
The research design implies that the overall strategy that you choose to integrate the different
components of the study in the particular. The researcher adopted analytical research for this study.
9.2. Analytical research:
Analytical research deals with research that involves critical analysing skills, the evaluation of reality
and information relative to the research being conducted. The data used in analysis of the selected
companies for a period of five years from 2011 to 2015 has been collected from the annual reports
published by the companies.
9.3. Sample selection criteria:
The selection criteria of companies are very important. This study considered the pharmaceutical
companies listed in the NSE, and which satisfied the following criteria has been selected.
High in Market capitalization, High in Sales , High in Net profit, High in Total assets, Low in Debt
10. DATA COLLECTION
10.1. Secondary data:
Secondary data is the data that have been already processed by and readily available from any other
sources. The secondary data required for the study was collected from books, journal, magazines and
various website. Financial statements are the raw data collected from various websites such as
www.karvyonline.com and www. moneycontrol.com
125
J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies
Listed in NSE” – (ICAM 2016)International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 123-133 © IAEME Publication
11. TOOLS USED FOR ANALYSIS
11.1. Descriptive statistics:
Descriptive statistics are used to describe the collected data in a study. They provide simple summaries
about the collected data and measures. Together with tables, they form basis of virtually every
quantitative analysis of data. These tables are including calculation date such as Compound Annual
Growth Rate (CAGR), skewness and Kurtosis to make conclusions.
11.2. Ratio analysis:
The ratios are being calculated by the aid of raw data available on the concerned financial statement of
the firm. The raw data encompasses yearly results and balance sheet of the selected companies. After
calculation of ratios, analysis of individual ratio is being examined. The ratios being calculated for the
purpose of analysis of financial performance are:
Earnings Per Share (EPS), Dividend Per Share, Return on capital employed, Net profit Margin,
Return on Equity(ROE) , Debt to Equity ratio , Inventory turnover ratio
11.3. Economic analysis:
Economic analysis is the process whereby the favourable and unfavourable factors of an economy are
analyzed through economic indicators. Economic indicators are vital tools in order to understand the
exact condition of an economy. The table 1 represents the economic indicators of our country, which
are useful to investors to make decision on their investment. The Gross Domestic Product (GDP) of
country is the main economic indicator to know about trend of the economy. The highest growth of
gross domestic product rate is one of the favourable factors to the stock market. The highest rate of
GDP was 8.3 percent on the year 2010-2011 and after the some depression in Indian economy, which
drops upto 5.1 percent. Gross domestic product rate for last three years (2012-2015) were in positive
trend, which indicates Indian economy travels in the right way. Another one main economic indicator
is Inflation, which must be decreased to boost the economy. The below table shows the rate of inflation
from year 2010-2015 and moved in the decreasing trend and achieved the CAGR at -10.05 percent.
Table 1
Compound Annual
2010- 2011- 2012- 2013- 2014-
YEAR growth rate (CAGR)
2011 2012 2013 2014 2015
(%)
GDP Growth (%) # 8.9 6.7 5.1 6.9 7.3 -3.89
Inflation Rate (%)
9 9 10.4 8.3 5.3 -10.05
#
Interest Rate (%)
9 9.25 9 9.25 8.75 -0.56
(Avg) #
Stock market (%) # 10.9 -10.5 8.2 18.9 24.9 17.97
Exchange Rate
44.53 50.88 54.28 60.02 62.29 6.94
(Rs/$) #
Foreign Reserves
30048 29873.9 30042.6 29809.2 32508.1 1.59
($ Mn) #
Foreign
Investments
42127 39231 46711 26386 73561 11.79
(FII,FDI&FPI) ($
in Mn) #
Exports (USD in
Bn) # 251 306 300 314 311 4.38
Agriculture
121 125.2 124.2 129.6 124 0.49
Production (%) #
Source: # Computed data
126
J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies
Listed in NSE” – (ICAM 2016)International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 123-133 © IAEME Publication
The lowest inflation rate helps to reduce the spending by investors. There are more benefits
through low inflation, commonly if inflation is low and stable the firms will be more confident and
optimistic to invest, this can lead to an expansion and supports higher rates of economic growth in the
future. The table 1 shows the stable interest rate on the years of 2010-2015 by the range between 8.75-
9.25 %. By reducing interest rates, this can help to minimize the spending on firm’s business
expansion, which also helps the long-term performance on economy.
An export plays an important role in the country’s economy and develops the level of economic
growth, employment and the balance of payments. Export instability may affect the economic growth
both positively and negatively. Increase in exports earnings introduces gains in the economy. An Indian
export grows at compound annual growth rate of 4.38% and also increase in exchange rate can boost
the revenue through exports, which influence in the compound annual growth rate of 6.94%.
India is mainly an agricultural country, which contributes about sixteen percent (16%) of total
GDP and ten percent (10%) of total exports. A proportion of India’s export trade is based on the
agricultural products, such as jute, tea, tobacco, coffee, spices, and sugar. It helps in increasing the
foreign exchange and Even though, with the growth of other sectors, the overall share of agriculture on
GDP of the country has decreased. Still, Agriculture continuously plays a dominant part in the overall
Indian economic scenario and table 1 indicates the agriculture production is growing at the lowest
compound annual growth rate of 0.49%.
The health of the economy of any country can be measured by growth of stock market. The table 1
shows the compound annual growth rate on foreign investments inflows at 11.59 %, which indicates
the confident on Indian stock market. The higher foreign investment inflow came in the year of 2014-
2015 about 73561 USD in million and same time foreign reserves also increased at 1.59% of
Compound annual growth rate.
12. INDUSTRY ANALYSIS
The Indian pharmaceuticals market share increased at a CAGR of 12.79 percent from 2005 to 2015 and
Pharmaceutical exports from India have grown at a CAGR of 21 per cent over the last decade. India’s
cost of production is significantly lower than that of the US and almost half of that of Europe, which
gives a competitive edge to India over others. Indian vaccines are exported to 150 countries. India
produces 40-70 percent of the WHO demand. India has been accredited with approximately 1,105
Certificates of Suitability to the monographs of the European Pharmacopoeia (CEP), more than 950
Therapeutic Goods Administration (TGA) approvals and 584 sites approved by US-Food and Drug
Association (USFDA). The Government of India is committed to setting up robust healthcare and
delivery mechanisms.
India accounts for 36.9 per cent (3,411) of the 9,296 Drug Master Files (DMFs) filed with the
USA, which is the highest outside of the USA (as on December 31, 2013). The drugs and
pharmaceuticals sector attracted cumulative FDI inflows worth US$ 13.32 billion between April 2000
and September 2015, according to data released by the Department of Industrial Policy and Promotion
(DIPP).
Table 3 Growth of Pharmaceutical Industry
Sales in (%) (Approx) Revenue (USD in Bn) Market share (%)
Year
# (Approx) # (Approx) #
2010-2011 11 12.7 6.8
2011-2012 13 13.7 8.4
2012-2013 14 14.7 9.5
2013-2014 16 15.3 10.3
2014-2015 19 15.8 11.1
CAGR
11.55 4.46 10.30
(%)
Source: # Computed data
127
J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies
Listed in NSE” – (ICAM 2016)International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 123-133 © IAEME Publication
The table-3 indicates the details regarding the sales, revenue generation and market share, which
shows the compound annual growth rate on sales by 11.55 percent. The table reveals highest sales
achieved in the year of 2014-2015 and the sales growth gradually increases from 11 % to 19%. The
revenue from Indian pharmaceutical industry also increases at a compound annual growth rate of 4.46
percent. The table-3 shows the highest revenue generation achieved in the year of 2015. The market
share also increasing from year by year, this shows compound annual growth rate of 10.30 percent.
Table 4 Government and Healthcares spending in Pharmaceutical industry, India
Year Government (USD in Bn) (Approx) # Healthcare(USD in Bn) (Approx) #
2010-2011 20 65
2011-2012 23 72
2012-2013 26 77
2013-2014 31 88
2014-2015 37 101
CAGR (%) 13.09 9.21
Source: # Computed data
The table-4 reveals the overall spending in year to year by both Government and Healthcare
companies. The government and healthcares spending is increasing at the rate of 13.09 and 9.21
percent respectively. The spending of government and healthcares is attained five year high in the year
of 2014-2015. These spending on a year by year implies that the growth of the industry by indirectly.
Table 5 Percentage of relative cost of production
Country US (Base rate) EUROPE INDIA
Percentage (%) 100 85 40
Source: Indian Brand Equity Foundation (IBEF) as on Aug’2013
The table 5 reveals the detail on the relative cost of production of Indian pharmaceutical industry
compared with US and Europe. The relative cost of production is lower than 60 and 45 percent
respectively with US and Europe.
13. COMPANY ANALYSIS
Company analysis is an important aspect of any business of a firm. It is vital to understand the financial
areas to help the investors to increase gain and reduce risk on investment.
14. EARNINGS PER SHARE (EPS):
The portion of a company's profit allocated to each outstanding shares of concerned firm. Earnings per
share serve as an indicator of a company's profitability.
Table 6
Company Lupin Glenmark pharma Cadila healthcare Cipla Torrent pharma
2010-2011 18.15 7.85 29.81 11.96 34.38
2011-2012 18.01 9.81 32.11 14 36.79
2012-2013 28.16 14.26 24.35 18.77 64.58
2013-2014 51.84 16 44.13 17.29 45.05
2014-2015 53.34 37.14 62.08 14.71 36.83
CAGR
24.06 36.46 15.8 4.23 1.39
(%)
Skewness 0.5 0.5 0.7 0.08 1.03
Kurtosis 1.49 1.5 2.18 1.68 2.7
128
J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies
Listed in NSE” – (ICAM 2016)International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 123-133 © IAEME Publication
The table 6 shows Earnings per share (EPS) for the year 2011-2015. From the table company
Glenmark pharma has the highest compound annual growth rate of earnings per share by 36.46 percent.
The Lupin has second highest growth rate at 24.06 percent and other companies Cadila healthcare,
Cipla and Torrent pharma stands for growth rate one by one. Hence, regarding skewness and kurtosis
which indicates Lupin has more positive than others by Earning per share (EPS).
15. DIVIDEND PER SHARE (DPS):
The sum of declared amount for every ordinary share issued. Dividend per share (DPS) is the total
dividends paid out over an entire period (including interim dividends) divided by the number of
outstanding shares issued.
Table 7
Company Lupin Glenmark pharma Cadila healthcare Cipla Torrent pharma
2010-2011 3 0.4 6.25 2.8 8
2011-2012 3.2 2 7.5 2 8.5
2012-2013 4 2 7.5 2 23
2013-2014 6 2 9 2 10
2014-2015 7.5 2 12 2 11.25
CAGR
20.11 37.97 13.94 -6.51 7.06
(%)
Skewness 0.46 -1.34 0.75 1.34 1.2
Kurtosis 1.64 3.25 2.4 3.25 3.03
Source: Companies annual report
The table 7 shows the dividend per share for the years of 2011-2015, which indicates the Glen
mark pharma has the highest compound annual growth rate of 37.97 percent. The Lupin has second
highest growth rate at 20.11 percent and other companies Cipla, Torrent pharma and Cadila healthcare
stands for growth rate one by one. But regarding skewness and kurtosis, which indicates Lupin has
more positive than others by Dividend per share (DPS).
16. RETURN ON CAPITAL EMPLOYED RATIO
It is a useful parameter for measuring the relative profitability of companies after taking into account
the amount of capital used.
Table 8
Company Lupin Glen mark pharma Cadila healthcare Cipla Torrent pharma
2010-2011 23.53 15.43 28.56 16.49 26.95
2011-2012 22.41 14.22 21.34 19.44 28.01
2012-2013 31.81 17.6 17.36 20.92 32.62
2013-2014 38.18 14.06 18.4 17.97 31.58
2014-2015 36.64 13.22 23.13 14.58 22.32
CAGR
9.26 -3.04 -4.13 -2.43 -3.7
(%)
Skewness -0.12 0.71 0.55 -0.11 -0.36
Kurtosis 1.28 2.3 2.12 1.71 1.93
Source: Companies annual report
The table 8 shows the Return on capital employed for the years of 2011-2015, which indicates
Lupin has the highest compound annual growth rate of 9.26 percent. Other companies Glenmark
pharma, Cipla, Torrent pharma and Cadila healthcare shows the negative growth rate. But regarding
skewness and kurtosis, which indicates Lupin has more positive than others by Return on capital
employed.
129
J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies
Listed in NSE” – (ICAM 2016)International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 123-133 © IAEME Publication
17. NET PROFIT MARGIN
Net profit margin is the percentage of revenue remaining after all expenses have been deducted from
sales. The measurement reveals the amount of profit that a business can bring out from its total sales.
Table 9
Company Lupin Glenmark pharma Cadila healthcare Cipla Torrent pharma
2010-2011 14.82 15.36 15.35 15.64 12.29
2011-2012 12.24 11.44 12.36 16.29 10.53
2012-2013 13.63 12.42 10.27 18.17 13.47
2013-2014 16.27 9.08 11.12 13.74 15.86
2014-2015 18.81 7.16 13.29 10.4 16.13
CAGR
4.88 -14.16 -2.84 -7.84 5.59
(%)
Skewness 0.34 0.09 0.35 -0.48 -0.16
Kurtosis 1.97 1.88 1.95 2.15 1.26
Source: Companies annual report
The table 9 shows the Net profit margin for the years of 2011-2015, which indicates the Torrent
pharma has the highest compound annual growth rate of 5.59 percent. The Lupin has second highest
growth rate at 4.88 percent and other companies Cipla, Glenmark pharma and Cadila healthcare shows
negative growth rate. But regarding skewness and kurtosis, which indicates Torrent pharma and Lupin
has more positive than others by Net profit margin.
18. RETURN ON EQUITY RATIO:
The amount of net income returned as a percentage of shareholders equity. Return on equity measures a
firm’s profitability by revealing how much profit generates with shareholders have invested.
Table 10
Company Lupin Glenmark pharma Cadila healthcare Cipla Torrent pharma
2010-2011 29.49 20.64 37.42 15.38 29.15
2011-2012 23.79 20.74 27.51 16 25.63
2012-2013 28.52 23.81 23.69 18.55 33.09
2013-2014 30.26 18.87 25.18 14.56 39.94
2014-2015 30.41 15.89 29.92 11.33 34.19
CAGR
0.62 -5.1 -4.37 -5.93 3.24
(%)
Skewness -1.11 -0.14 0.76 -0.24 0.14
Kurtosis 2.87 2.19 2.39 2.33 1.99
Source: Companies annual report
The table 10 shows the Return on equity for the years of 2011-2015, which indicates the Torrent
pharma has highest compound annual growth rate of 3.24 percent. The Lupin Company has the second
highest growth rate at 0.62 percent and other companies Cipla, Glenmark pharma and Cadila healthcare
shows negative growth rate. But regarding skewness and kurtosis, which indicates Torrent pharma has
more positive than others by Return on equity.
19. DEBT EQUITY RATIO
The Debt equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity
and debt used to finance a firm's assets.
130
J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies
Listed in NSE” – (ICAM 2016)International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 123-133 © IAEME Publication
Table 11
Company Lupin Glenmark pharma Cadila healthcare Cipla Torrent pharma
2010-2011 0.33 1.66 0.47 0.08 0.38
2011-2012 0.37 1.23 0.78 - 0.39
2012-2013 0.19 0.83 0.91 0.11 0.41
2013-2014 0.08 1.1 0.66 0.12 0.5
2014-2015 0.05 0.97 0.55 0.16 1.01
CAGR
-31.44 -10.19 3.19 14.87 21.59
(%)
Skewness 0.09 0.66 0.18 0.22 1.24
Kurtosis 1.32 2.34 1.68 1.95 3.08
Source: Companies annual report
The table 11 shows the Debt equity ratio for the years of 2011-2015, which indicates the Lupin has
lowest compound annual growth rate of -31.44 percent. The Glenmark pharma has the second lowest
growth rate at -10.19 percent and other companies Cipla, Torrent pharma and Cadila healthcare shows
high growth rates. The growth rate must be decreased gradually for better performance. But regarding
skewness and kurtosis, which indicates Lupin has more positive than others by Debt equity ratio.
20. INVENTORY TURNOVER RATIO
The inventory turnover ratio is a key parameter for evaluating just how efficient management is at
managing company inventory and generating sales from it.
Table 12
Company Lupin Glenmark pharma Cadila healthcare Cipla Torrent pharma
2010-2011 4.88 3.65 5.77 3.32 4.35
2011-2012 4.11 5.1 4.92 3.79 5.08
2012-2013 4.98 5.94 5.24 3.47 3.48
2013-2014 5.3 6.44 5.39 3.53 4.17
2014-2015 5.14 5.22 5.74 3.03 4.37
CAGR
1.04 7.42 -0.1 -1.81 0.09
(%)
Skewness -0.95 -0.5 -0.24 -0.18 -0.05
Kurtosis 2.72 2.23 1.69 2.16 2.4
Source: Companies annual report
The table 12 shows the Inventory turnover ratio for the years of 2011-2015, which indicates the
Glenmark pharma has highest compound annual growth rate of 7.42 percent. The Lupin has second
highest growth rate at 1.04 percent and Torrent pharma stands on third by 0.09 percent and other
companies Cipla and Cadila healthcare are shows negative growth rate. Hence, regarding skewness and
kurtosis, which indicates Glenmark pharma has more positive than others by Inventory turnover ratio.
21. FINDINGS
21.1. Economic Analysis
Gross domestic product (GDP) and Inflation rate shows that positive on the economy for the year from
(2010-2015). The Indian stock market gave 17.97 percent of CAGR on the period of (2010-2015).
Foreign inflow such as FDI, FII & FPI shows that 11.79 percent of CAGR during the years of (2010-
2015). Indian exports were increased at the rate 4.38 percent of CAGR and Agricultural production
shows that 0.49 percent CAGR during the years of (2010-2015).
131
J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies
Listed in NSE” – (ICAM 2016)International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 123-133 © IAEME Publication
21.2. Industry Analysis
The pharmaceutical industry sales data moved in 11.55 percent of CAGR. An industry revenue data
reveal that 4.46 percent of CAGR and Indian market share indicates 10.30 percent of CAGR.
21.3. Company Analysis
Earnings per share (EPS) and Dividend per share shows reveals that Lupin has most positive growth
rate by 24.06 percent and 20.11 percent of CAGR. Return on capital employed shows that Lupin has
the highest growth rate of 7.26 percent of CAGR. The net profit margin ratio shows that Torrent
pharma and Lupin has most positive growth rate than other companies. Return on Equity ratio shows
that Torrent pharma has 3.24 percent of CAGR. Debt to Equity ratio shows that Lupin has a most
positive about its financial health. Inventory turnover ratio shows that Glenmark pharma has positive
on its inventory management.
22. SUGGESTIONS AND RECOMMENDATIONS
The government could increase an agricultural production of country may decrease the
inflation rate to boost Gross domestic product, which also can support the economic growth.
The Indian pharmaceutical industries have good sales growth and global market share and
revenue growth also reveals that much growth and pharmaceutical industry still stands under
developing industry, so which may reduce the cost of production through the latest
technologies to increase the revenue.
As an investor who should be aware about economical environment, market condition,
Industry policy and RBI policy, etc., and also they should focus on both internal and external
factors regarding the company before going to investment.
23. CONCLUSION
Fundamental analysis is the useful tool for investment through by analysing the macroeconomic
factors, industry condition and the company’s financial situation and so on. The study revealed that
economic analysis by the Gross Domestic Product (GDP), Inflation, Interest rates, Foreign exchange
rates, Foreign reserves, Foreign inflows, Exports and Agricultural production has a positive growth rate
during the study period. From the Industry analysis shows that the Indian pharmaceutical industry has a
high growth rate and its sales and net profit also shows increasing trend and the company analysis
revealed that its financial performance through the financial ratios, which indicates that Lupin and
Torrent pharma are financially in satisfactory position during the study period. Through the
fundamental analysis, investor can relate the possible factors to ensure investment risk and expect a
reasonable return. But the fundamental analysis does not advice to investors for investment by basis on
buying and selling of a particular security. So the investors can take only the decision whether the
investment is to be worth or not. The main motto of fundamental analysis is to reduce the risk and
maximize the return on investment.
REFERENCE
[1] Mark P. Bauman (1996) conducted a study named, “A Review of Fundamental Analysis
Research in Accounting”. This paper has outlined the development of different
accounting valuation model and reviewed related empirical work.
[2] Nikolaos Pavlou, George Blanas Department of Business Administration, TEI of Larissa,
GR Pavlos Golemis P&K Financial Services, S.A., Larissa Branch, GR (2006) conducted
on “The Application of Fundamental Analysis and Technical Analysis in the Athens
Derivatives Exchange (ADEX)”.
[3] Prakash Tiwari & Hemraj Verma (2009) conducted a study on “A Fundamental Analysis
of Public sector Banks in India”. This article explains the position of the banks with
reference to various ratios.
[4] Sugandharaj Kulkarni H.N.College of Commerce, Management Wing (2011) conducted
on “A study on fundamental analysis of ONGC”. The analysis of the company's
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J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies
Listed in NSE” – (ICAM 2016)International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 123-133 © IAEME Publication
fundamentals involves getting deep into its financials, rather than day-to-day movement
in its share price.
[5] R. Amsaveni and S. Gomath (2013) conducted on “Fundamental Analysis of Selected
FMCG Companies in India”. This study aims to analyze the fundamental analysis of BSE
listed FMCG companies in India.
Websites Reference
[6] http://dbie.rbi.org.in
[7] http://www.worldbank.org
[8] http://www.karvyonline.com
[9] http://www.moneycontrol.com
[10] http://financials.morningstar.com
[11] http://www.focus-economics.com
[12] http://www.financialexpress.com
[13] http://www.pharmsource.com/
[14] http://www.ibef.org
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