A Project Report On Ratio Analysis

Lupin Limited

Report submitted to
prof Mahesh Bendigeri

GENS GLOBAL BUSINESS SCHOOL, HUBLI By

Monica Thakur MBA13007049

Dec -2013

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EXECUTIVE SUMMARY Financial ratio analysis as the name suggests, is the evaluation procedure of the performance of the company. The evaluation is based on financial data and the data in the financial statements is used for the financial performance analysis. Financial ratio analysis is the process of evaluating the relationship between component parts of financial statement to obtain a better understanding of the companys position and performance. The financial statements extremely useful information to the extent the balance sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners equity, etc and the profit and loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the costs incurred during the year. The first task in the financial analysis is to select the information relevant to the decision under consideration from the total information contained in the financial statements. The second step involved in this is to arrange the information in a way to establish the relationship The final step is interpretation and drawing of inferences and conclusions. In short it is the process of selection, relation and evaluation. Financial ratio analysis is an important tool. The other tools include the comparative analysis (i.e., inter- firm comparison). Time series analysis of ratios, common size statement analysis, indexed statement analysis, Du-point analysis.

Financial statements provide summarized view of the financial position and operation of the company. Therefore, now a day it is necessary to all companies to know as well as to show the financial soundness i.e. position and operation of company to their stakeholders. It is also necessary to company to know their financial position and operation of the company. In this report I made an effort to know the financial position of Indusind Bank, by using the Annual Reports of the firm. The Financial analysis of this report will show the Strength and weakness of the Indusind Bank. Financial analysis will help the firm to take decision. Thus, we can say that, Financial
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Analysis is a starting point for making plans before using any sophisticated forecasting and planning.

TITLE OF THE PROJECT A STUDY ON FINANCIAL RATIO ANALYSIS LUPIN LTD. STATEMENT OF PROBLEMS Management problem As ratios provide a benchmark for companys against their own performance in industry. The company wants to study the ratios and compare its performance of past with the present performance with the help of ratio analysis, various items of financial statement that ensure their existence as well as their future progress.

Research Problem: To know the Financial Position of the company and its Liquidity Performance through comparing three years financial performance by applying different financial Ratios

NEED FOR THE STUDY The need for the study is to know the overall financial performance of the company since 3 years. The financial plan represents a blueprint of what the company proposes to do in the future. The study reveals the use of various accounting ratios to explain the profitability position. OBJECTIVES OF STUDY To know the LUPIN LTD financial performance based on ratios. To find out the company efficiency based on past and present profitability ratios

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 To study the liquidity position of the bank To improve its future performance by analyzing its financial statement

LIMITATIONS OF THE STUDY: The most important limitation of the study is that the study slowly depends on the published data and documents such as balance sheet and income statement. It was difficult to obtain confidential data from the concern department with a view point of secrecy that the company would like to observe.

METHODOLOGY:
The project information is collected from secondary data. Secondary Data: The various sources that were used for the collection of secondary data are Various text books were used to understand the concepts of financial analysis. Websites

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INDUSTRY PROFILE INTRODUCTION

Pharmaceuticals is a knowledge-based, technology-intensive industry that is uniquely placed to develop and commercialise the outcomes of Australias long term investment in medical research. The Australian pharmaceuticals industry comprises bio-medical research, biotechnology firms, originator and generic medicines companies and service related segments including wholesaling and distribution. The industry employed over 40,000 people (one third in manufacturing) in 2007-08 and turned over approximately $22 billion in 2009-10. It spent $1.02 billion on research and development in 2008-09 and exported $4.12 billion in the 200910 financial year. There are over 150 separate firms listed as suppliers to the Pharmaceuticals Benefits Scheme (PBS). The Australian market for pharmaceuticals is small in the context of global demand. While the PBS allows for universal access to prescription products, the size of the population means that sales are small. Australia's population represents around 0.3 per cent of the world yet consumes around one per cent of total global pharmaceuticals sales. Thus in 2009 Australia was the 12th largest pharmaceuticals market by sales, while being ranked 55th on population. The expenditure on the PBS by Government has more than doubled over the last ten years, from $3.2 billion in 1999-2000 to $8.3 billion (excluding patient contributions) in 2009-10. In 2009-10, the largest firm by PBS sales was Pfizer. Its sales represent 14.4 per cent of the value of total sales made to the PBS. The top 10 suppliers by sales contributed more than 67 per cent of the value of total sales made to the PBS. Alphapharm is the largest firm by number of prescriptions on the PBS (accounting for 14.3 per cent of all prescriptions dispensed under the PBS). The top 10 firms by the number of prescriptions account for a total of just over 70 per cent of total prescriptions written. These data suggest that the Australian market is serviced by a variety of suppliers which is consistent with the global industry structure.
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Australian industry developments have gained worldwide recognition. They include:

CSL's development of a Swine Flu (N1H1) vaccine Developments in discovering the Gardasil vaccine for Human Papilloma Virus through a partnership between Merck Sharp and Dohme and CSL Australian biotechnology company Cytopia's $274 million deal with Novartis to develop orally active, small molecule therapeutics targeting JAK3 kinase for the prevention of transplant rejection and the treatment of multiple indications in autoimmune diseases such as rheumatoid arthritis The development by Biota Holdings of the flu drug Relenza. Acrux's US$335 million deal (plus royalties) with Eli Lilly to market Acrux's US FDA approved Axiron. The Department encourages the development of an internationally competitive pharmaceuticals industry with policies which enhance the operating environment for the industry by:

Providing policy advice to the Minister for Innovation, Industry, Science and Research (Innovation) on developments in the global pharmaceuticals industry and how they might impact on the Australian operating environment Providing Secretariat support to the joint industry and Ministerial Pharmaceutical Industry Working Group Assisting in implementing the recommendations of the Pharmaceuticals Industry Strategy Group, in relation to increasing pharmaceuticals R&D, clinical trials and manufacturing in Australia Contributing to the Pharmaceutical Benefits Pricing Authoritys (PBPA) work on the pricing of pharmaceuticals for the PBS Working with key industry stakeholders including the Pharmaceuticals Industry Council.

The pharmaceuticals industry spans a spectrum of activity from the technology intensive R&D segment associated with innovative drugs through to the production of generic and over-the-counter medicines. The industry is dominated by horizontally and vertically integrated multinational entities and is more research intensive than most other industries. Worldwide industry sales are projected to grow strongly at 7.5 per cent per annum over the next five years. Espicom Business Intelligence estimate that the annual sales of
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pharmaceuticals will reach US$852 billion in 2009 and project it will reach US$1,158.5 billion in 2014. The markets driving this change will be:

Central/Eastern Europe, with 9.7 per cent growth per annum The Americas, with 7.3 per cent growth per annum Middle East and Africa, with 8.6 per cent growth per annum Asia/Pacific, with 4.9 per cent growth per annum Western Europe, with 6.8 per cent growth per annum. These data show that the global market for drugs is large and growing, that pharmaceuticals industry sales are concentrated in developed countries, that half of all sales are made by the top 10 global companies, but that there is still a reasonable degree of international competition at an industry level. Industry R&D activity Developing a new drug is expensive. Current estimates of the full cost of bringing a new chemical or biological entity to market are around US$1.3 billion. Longer development and approval times, larger and more complex clinical trials, increased expenditures on new technologies, and shifts in product portfolios towards riskier, more expensive therapeutic categories have contributed to a real increase in the development costs. Pharmaceuticals R&D expenditure is rising. Over the past two decades, the percentage of sales allocated to R&D has increased from 11.9 per cent in 1980 to an estimated 18 per cent in 2006 (for American owned firms). The number of products in development and the number of firms doing R&D are both rising; however R&D productivity continues to fall. The industry spent $1.02 billion on R&D in Australia in 2008-2009. With 0.3 per cent of the worlds population, Australia produces three per cent of global medical research and has a proud history of seven Nobel laureates in medicine:

Howard Florey (1945: development of penicillin) Frank Macfarlane Burnet (1960: research on organ transplantation) John Eccles (1963: research on the transmission of nerve impulses) Peter Doherty (1996: discoveries concerning the specificity of the cell mediated immune defence) Barry Marshall and J. Robin Warren (2005: discovery of the bacterium Helicobacter pylori and its role in gastritis and peptic ulcer disease).
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Elizabeth Blackburn (2009: research on telomeres, structures at the end of chromosomes that protect the chromosome). A feature of the Australian innovation system is the relatively high proportion of government expenditure on R&D. In the health and medical area, this funding is allocated through a variety of R&D providers and there is considerable interaction between these entities. The bulk of the funding is provided through:

The National Health and Medical Research Council (NHMRC) Specialised research institutes, eg. Baker, Garvan, Queensland Institute of Medical Research Universities The Commonwealth Scientific and Industrial Research Organisation (CSIRO) Hospitals Cooperative Research Centres (CRCs).

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Company Profile
Lupin Limited is an innovation led transnational pharmaceutical company producing a wide range of quality, affordable generic and branded formulations and APIs for the developed and developing markets of the world. The formation of Lupin in the year 1968 led to the vision and dream to fight life threatening infectious diseases and manufacture drugs of highest national priority. Lupin is one of the fastest growing Generic players globally. The company was named after the Lupin flower because of the inherent qualities of the flower and what it personifies and stands for.

Lupin first gained recognition when it became one of the worlds largest manufacturers of Tuberculosis drugs. Over the years, the Company has moved up the value chain and has not only mastered the business of intermediates and APIs, but has also leveraged its strengths to build a formidable formulations business globally.

Today, the Company has established global leadership position for its APIs and holds a firm grip in the Cephalosporins, Cardiovascular and Anti-TB space.

Lupin first gained recognition when it became one of the worlds largest manufacturers of Tuberculosis drugs. Over the years, the Company has moved up the value chain and has not only mastered the business of intermediates and APIs, but has also leveraged its strengths to build a formidable formulations business globally.

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Today, the Company has established global leadership position for its APIs and holds a firm grip in the Cephalosporins, Cardiovascular and Anti-TB space. Lupin continues to enjoy global market leadership in Rifampicin, Pyrazinamide and Ethambutol, as well as in Cephalosporins such as Cephalexin, Cefaclor and their Intermediates. In FY 2010, the Company continued to record significant growth in the 7-ADCA and 7-ACCA family of products.

Lupin Ltd. is a key supplier of anti-TB formulations to the Global Drug Facility (GDF) & maintained its premier position in the Anti-TB space during the current fiscal.

The Company has moved up the value chain since inception in terms of its products and geographies. Currently, it commands a formulation business of over Rs 13,502 mn spread across the globe. Lupin has created a strong foothold in the Advanced Markets of USA, Europe, Japan, Australia and Emerging markets of India and some of the other Rest of World countries. It has onshore and offshore presence of its products in 70 countries. Today, Lupin is the 5th largest and fastest growing generics player in the US (by prescriptions), the only Asian company to achieve that distinction. The company is also the fastest growing top 10 pharmaceutical player in India, Japan & South Africa. Its manufacturing units are located in Goa, Tarapur, Ankleshwar, Jammu, Mandideep, Indore, Aurangabad and Kyowa in Japan. Benchmarked to International standards, these facilities are approved by international regulatory agencies like US FDA, UK MHRA, Japans MHLW, TGA Australia, WHO, and MCC South Africa Business In formulations it offers wide range of products for treatment of Cephalosporins, CVS, CNS, Anti-Asthma, Anti-TB, Diabetology, Dermatology, GI, and many more. It constitutes 84% of Lupins business. It has presence in USA, Europe, Japan,
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Australia and emerging markets of India and some of the other rest of world countries. Formulations make up 81% of our overall revenue composition. In APIs segment it has a basket of product offerings for treatment of TB, Cardiovasculars, Cephalosporins and many more.

FINANCIAL STATEMENT
A financial statement is a organized collection of data according to logical and consistent accounting procedures. Its purpose is to convey understanding of some financial aspects of business firm. It may show a position at a moment in time as in the case of b/s or may reveal a series of activities over a given period of time as in case of income statement. Financial statement are prepared for the management to deal with, a. b. Status of investments. Results achieved during a given period under review a financial statement generally

refers to the following; 1) Income Statement: The income statement also termed as (profit or loss account) is

generally considered to be the most useful of all financial statements. It explains what has happened to a business as a result of operations between two balance sheet dates. It discloses the revenue realized from the sale of goods and the costs incurred in the process of producing the scheme. It tells the story of Progress or decline over given period and why and how an indicated result was achieved. 2) Balance Sheet: it is statement of financial position of a business at particular moment

of time and the claims of the owners and outside against those assets at that time. 3) Statement of Retained Earnings: the term retained earnings means the accumulated

excess of earnings over losses and dividends. The balance shown income statement is transferred to the balance through this statement. After making necessary appropriations. It is thus a connecting link between the B/s and income statement. This statement is also termed as project and loss appropriation account in case of companies.

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4)

Statement of Changes in Financial Position: the balance sheet shows the financial

condition of the business at a particulars moment of time while the income statement discloses the result of operations of business over a period of time. However for a better understanding of the affairs of the business, it is essential to identify the movement of working capital or cash in and out of the business. This information is available in the statement of changes in financial position of the business.

FINANCIAL RATIO ANALYSIS

Ratio analysis is a study of figures appearing in financial statements (Balance sheet and Profit and Loss statement). Such figures have accounting significance and related to each other in a manner that makes them mutually relevant. This aspect of the relativity is the central theme of ratio analysis. This stems from the fact that absolute numbers do not mean much unless compared one with another. The financial ratios therefore are used to express significant relationship which exists between accounting numbers obtaining on a financial statement. Ratios recognize the interrelationship which exists. The study of financial ratios is an invaluable guide to the management in analyzing the operations and the financial state of affairs of a business unit. Those who are concerned with the performance of a unit are interested in being informed about its profitability, liquidity and solvency. The ratio analysis is an attempt to obtain reliable indications in this respect. Thus viewed the ratio analysis, as a tool of financial statement analysis, has to be purposive and user oriented. Over the years the technique of ratio analysis has acquired more and more usefulness and has found, accordingly, more and more users. It is widely recognized that ratio analysis is an immensely valuable tool to highlight sensitive financial characteristics such as capital structure debt service, profitability, solvency, fund and cash flows etc. The exercise of ratio analysis has other important uses in the areas of audit, tax assessments, management control and budgeting and forecasting. NEED FOR CAUTION IN INTERPRETATION OF RATIOS Most of the ratios at best only give indications of a situation and as such they do not always lead to precise evaluations. The analysis of ratios only acts as a pointer to a possible

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disproportion. In order to avoid the possibilities of reaching unwarranted inferences it is essential: 1. 2. To select a proper ratio Not to study a ratio in isolation i.e. indications from two or more ratios can be studied

in conjunction. 3. To subject the financial variables to further investigation where acute disproportion is

indicated by a ratio. 4. 5. To call for further information relating to a financial data to verify its validity. To be aware of the fact that it is not possible to state as to what constitutes, as a

general rule, normal or ideal positions.

NEED FOR COMPARATIVE STUDY OF RATIOS

As in case of any financial number, ratio does not convey much meaning unless it is compared with a similar ratio relating to a past period or to any other firm. Thus if a firm had an operating profit ratio of 10% to its sales in 1999 this information by itself does not convey much. But it would become more meaningful if it was compared with the similar ratio in the year 1998 when it was 12% to its sales. One can then observe that the operating profit ratio has dwindled in 1999 as compared to 1998. Therefore ratios relating to a firm can be studied in comparison with similar ratios: 1) 2) 3) 4) 5) of the same firm relating to earlier periods of another firm representing industrial averages projected in the budgets set as targets

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ADVANTAGES OF FINANCIAL RATIO ANALYSIS

i)The financial ratio analysis serves as an invaluable aid to the management in analyzing the operations and state of affairs of a business enterprise, ii)The financial ratio analysis being an important tool of financial statement analysis, various groups of people interested in financial aspects an iii)enterprise (such as investors, lenders, employees, government, stock exchange authorities etc.,) use this with advantage for the purposes relevant to them, iv)This technique of financial statement analysis can be used with good effect in preparing budgets, forecasting and planning, projecting working capital requirements etc., v)It helps to analyze and reliably indicate financial health of a company by focusing on its profitability, liquidity and solvency, debt-servicing, utilization of resources etc., vi)Proper evaluation of performance and position is possible by comparing financial ratios of a firm with those of another firm or by comparing ratios of a firm for a period with those for another period. vii)It becomes easier to assign responsibilities to functional heads in a management team, viii)It helps in presenting plethora of accounting data in a systematic and more comprehensible manner.

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Financial data of lupin ltd Balance sheet

------------------- in Rs. Cr. -----------------Ma Mar Mar Mar'00 Mar '01 '02 '03

Mar '04

Mar '05

Mar '11

Mar '12

Mar '13

Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities

33.54 33.54

14.83 2.83

47.14 40.14 0 7 292.31 0 339.45 504.51 123.46 627.97 967.42 Mar '02

40.14 40.14 0 0 342.23 0 382.37 487.85 99.64 587.49 969.86 Mar '03

40.14 40.14 0 0 407.89 0 448.03 286.55 90.56 377.11 825.14 Mar '04

40.14 40.14 0 0 460.36 0 500.5 380.63 60.01 440.64 941.14 Mar '05

89.24 89.24

89.33 89.33

89.51 89.51

0 37.31 0 12 32.65 308.68 0 0 66.19 360.82 51.27 506.54 27.88 110.5 79.15 617.04 145.34 977.86 Ma Mar '00 Mar '01

0 0 0 0 0 0 3,063.42 3,645.08 4,757.20 0 0 0 3,152.66 3,734.41 4,846.71 637.46 580.82 411.3 342 411.83 143.99 979.46 992.65 555.29 4,132.12 4,727.06 5,402.00 Mar '11 Mar '12 Mar '13

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 &

111.32 30 81.32 5.32 0.89 13.44 35.58 1.59 50.61 24.85 0.92 76.38

444.48 511.39 48.3 396.18 40.97 11.92 146.37 299.68 6.88 452.93 233.08 8.42 694.43 70.84 440.55 21.21 10.4 143.28 325.74 13.03 482.05 251.94 6.6 740.59

580.9 640.41 714.85 1,869.09 2,335.41 2,762.91 95.25 485.65 10.72 8.51 141.86 338.78 7.99 488.63 300.84 6.8 796.27 123.2 517.21 17.17 8.91 215.3 215.83 4.83 435.96 201.14 10.21 647.31 155.91 558.94 69.81 9.37 248.08 235.39 13.33 496.8 174.81 4.45 676.06 514.46 1,354.63 442.09 680.88 841.11 1,234.28 37.46 2,112.85 621.32 0 2,734.17 627.93 1,707.48 357.33 687.29 1,123.56 1,490.80 19.2 2,633.56 773.05 0 3,406.61 749.26 2,013.65 240.12 688.04 1,330.83 1,874.27 20.12 3,225.22 878.7 0 4,103.92

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Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Key Financial Ratios

0 14.01 5.87 19.88 56.5 1.31 145.34

0 147.09 18.55 165.64 528.79 0 977.86

0 233.48 11.85 245.33 495.26 0 967.42

0 273.72 57.57 331.29 464.98 0 969.86

0 296.21 69.25 365.46 281.85 0 825.14

0 0 0 0 333.06 880.29 1,193.81 1,332.67 39.98 199.36 237.84 311.06 373.04 1,079.65 1,431.65 1,643.73 303.02 1,654.52 1,974.96 2,460.19 0 0 0 0 941.14 4,132.12 4,727.06 5,402.00

Mar '00 Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Operating Profit Margin(%) Profit Before Interest And Tax Margin(%) Gross Profit Margin(%) Cash Profit Margin(%) Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Net Profit Margin(%) Return On Capital Employed(%) Return On Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Return on Long Term Funds(%)

Mar '01

Mar '02

Mar '03

Mar '04

Mar '05

Mar '11

Mar '12

Mar '13

10 1 5.35

10 3.5 534.55

10 5 47.07

10 5 46.43

10 6.5 68.13

10 6.5 34.62 289.5 96.29 --

2 3 21.48 100.74 -44.99

2 3.2 23.05 120.56 -44.94

2 4 42.1 159.15 -44.85

17.34 2,958.56 222.86 256.56 293.25 5.88 -580 -40.1 -57.65 -82.35 --

30.84 23.42 15.38 9.83 11.18 3.46 3.17 10.42 3.15 2.94

18.06 15.81 11.14 9.35 10.16 7.15 7.79 13.63 16.64 20.6

21.12 18.49 14.31 10.63 11.32 8.05 8.73 17.29 21.26 23.21 82.82 82.82 21.3

18.09 15.63 12.29 9.5 10.08 7.08 7.65 16.82 19.11 20.52

23.23 20.67 19.2 14.8 14.69 12.34 12.24 30.24 32.58 32.3

11.95 9.01 10.44 10.02 10.03 7.19 7.2 12.38 16.86 16.87

21.32 18.93 19 20.25 20.25 17.95 17.95 21.07 25.69 25.67 70.66 70.66 25.8

19.11 16.65 16.66 14.91 14.91 14.92 14.92 19.05 21.53 17.99 83.61 83.61 23.28

26.45 24.26 24.34 19.73 19.73 17.63 17.63 32.52 26 26 108.3 108.3 36.03

19.34 1,100.70 19.34 1,100.70 11.62 17.55

95.26 111.61 124.69 95.26 111.61 124.69 20.64 39.22 17.48

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Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio

1.53 3.16 1.2 0.97 1.41 1.2 1.71 1.59

1.32 3.31 2.02 1.44 2.23 2.02 2.44 2.27

1.24 2.43 1.91 1.36 2.69 1.91 2.94 2.47

1.15 1.97 1.54 1.07 2.66 1.54 2.95 2.54

0.87 1.18 0.84 0.42 4.85 0.84 5.08 4.19

0.73 1.14 0.88 0.33 4.27 0.88 4.8 4.77

1.1 1.75 0.31 0.07 31.58 0.31 35.37 34.16

1.19 1.59 0.27 0.04 31.41 0.27 36.01 33.65

1.59 1.69 0.11 0.01 52.8 0.11 57.31 43.38

4.48 1.18 5.47 0.66 0.4 0.38

5.73 4.99 6.51 3.2 0.86 1.49

6.25 2.86 7.03 1.99 0.92 0.92

7.27 3.1 8.34 2.15 1.06 1.06

5.49 4.24 6.23 2.28 1.43 1.31

4.73 5.15 5.46 2.01 1.24 1.32

5.34 4.18 5.34 2.42 1.09 1.19

4.79 3.95 4.79 2.32 1.14 1.22

5.35 4.23 5.35 2.59 1.32 1.41

43.91 15.88 233.03

46.85 25.94 227.36

34.26 29.75

30.05 23.18

45.76 28.34 86.2

70.54 32.61 93.87

--139.32

--138.55

--126.07

199.3 162.54

46.44

51.33

48.55

53.07

50.37

51.76

42.74

44.15

41.05

22.23 0.99 21.05

41.29 10.23 27.7

41.83 10.74 34.66

42.71 7.63 40.23

57.76 9.39 48.96

52.9 9.26 49

42.58 -59.05

38.86 -60.25

38.35 -62.82

196.42 59.25

26.81 20.03

29.85 22.51

31.2 23.19

20.16 16.81

35.34 25.36

19.21 17.02

20.65 17.74

16.61 14.84

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Cash Profit Earning Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times

-114.18 39.23 11.75

75.45 81.26 7.23

72.51 78.86 6.19

71.16 78.14 5.65

79.67 83.07 2.17

64.71 74.67 3.74

80.78 82.98 1.07

75.28 79.34 1.23

83.39 85.16 0.39

Earnings Per Share Book Value

0.62 207.71 19.73 1,100.70

17.71 82.82

18.08 36.37 21.02 95.26 111.61 124.69

18.15 70.66

18.01 83.61

28.16 108.3

FINANCIAL RATIOS OR TYPES OF FINANCIAL RATIOS

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Financial ratios quantify many aspects of a business and are an integral part of financial statements analysis. Financial ratios are categorized according to the financial aspect of the business which the ratio measures, financial ratio can be divided for convenience into following different basic categories. 1. 2. 3. 4. 5. Liquidity Ratios Leverage Ratios Activity Ratios Profitability Ratios Other Ratios

LIQUIDITY RATIOS Liquidity Ratios refers to the firms ability to satisfy its short term obligations or current liabilities as they become due, liability will be usually of one year. It reflects the financial strength/solvency of a firm. A firm should ensure that it does not suffer from lack of liquidity and also that it does not have excess liquidity. A failure of company to meet its obligation due to lack of sufficient liquidity, will result in poor credit worthiness. A very high degree of liquidity is also bad because, idle asset earn nothing. The firm funds will be unnecessary tide up in current assets. Therefore, it is in necessary to strike a proper balance between high liquidity and lack of liquidity.The ratios which indicate the liquidity of a firm are i. Current Ratio, ii. Quick Ratio, iii. Interval Ratio, iv Net Working Capital Ratio, v. Absolute Liquidity Ratio.

Current ratio:
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Measures the ability of an entity to pay its near-term obligations usually as within one year. Though the ideal current ratio depends to some extent on the type of business, a general rule of thumb is that it should be at least 2:1. A lower current ratio means that the company may not be able to pay its bills on time, while a higher ratio means that the company has money in cash or safe investments that could be put to better use in the business. The current ratio is the ratio of the current assets and current liabilities. It is calculated by dividing current assets by current liabilities. Current Ratio= Current assets Current liabilities Year 2011 2012 2013 Current assets 145.34 977.86 967.42 Current liabilty 145.34 977.86 967.42 Total 290.68 1955.72 1934.84

Current ratio
2500 2000 1500 1000 500 0 2011 2012 2013 290.68 1955.72 1934.84

LEVERAGE OR CAPITAL STRUCTURE RATIOS: Leverage ratios look at the extent that a company has depended upon borrowing to finance its operations. As a result, these ratios are reviewed closely by bankers and investors. Most leverage ratios compare assets or net worth with liabilities. A high leverage ratio may increase a company's exposure to risk and business downturns, but along with this higher risk also comes the potential for higher returns. Some of the major measurements of leverage include:

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Debt-Equity Ratio:
This ratio shows the relationship between the borrowed capital and owners capital. This ratio shows relative claim of the creditors and shareholders against the assets of the company. Debt Equity Ratio =Long Term Debt Shareholders Equity

Year 2011 2012 2013

Debt Equity Ratio 1.2 2.02 1.91

Debt equity ratio

2.5 2 1.5 1 0.5 0 2011 2012 2013 1.2 2.02 1.91

Debt Ratio:
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Debt Ratio= Total Debt Total Assets

Year 2011 2012 2013

Debt Ratio 1.2 2.02 1.91

Debt equity ratio

2.5 2 1.5 1 0.5 0 2011 2012 2013 1.2 2.02 1.91

Proprietary Ratio: Proprietary Ratio= Proprietors Funds Total Assets

Year 2011 2012 2013

Proprietary ratio 866.06 1056.79 1349.21

Total 18488.58 22028.6 24668.54

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Proprietary ratio
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2011 2012 2013

866.06 1056.79 1349.21

PROFITABILITY RATIOS
There are many measures of profitability. As group, these measures enable the analyst to evaluate the firms profits with respect to a given level of sales, a certain level of assets, or the owners investment. Owners, creditors and management pay close attention to boosting profits. The management of the firm is naturally eager to measures its operating efficiency. Similarly the owners invest their funds in the expectation of reasonable returns. Profitability ratio measures the firms use of its assets and control of its expenses in order to generate an acceptable rate of return. Following are the ratio designed to provide answers to questions such as, i. ii. iii. iv. v. vi. Is the profit earned by the firm adequate? What rate of return does it represents? What is the rate of profit for various divisions and segment of firm What is the amount paid in dividends? What is the earning per share? What is the rate of return to equity shareholders and so on.

Profitability ratios can be determined on the basis of either sales or investment. The profitability ratios in relation to sales are

i. Gross Profit Margin

Gross profit is the difference between sales and the manufacturing cost of goods sold. The gross profit margin reflects the efficiency with which management produces each unit of

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product. This ratio indicates the average spread between the cost of goods sold and the sales revenue. A high gross profit margin ratio is a sign of good management. Sales Cost of Goods Sold -------------------------------------Sales

Gross Profit Margin =

Gross Profit = Sales Cost Of Goods Sold. Year 2011 2012 2013 Gross profit 21.32 19.11 26.45

30 25 20 15 10 5 0 2011

Gross profit

Series1

2012

2013

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ii. Operating Profit Margin The operating profit margin measures the percentage of each sales rupee remaining after all costs and expenses other than interest, taxes and preferred stock dividends are deducted. It shows the pure profit earned on each sales rupee. A high operating profit margin is preferred.

Operating Profit Margin =

Operating profit ---------------------------Sales

Year 2011 2012 2013

Operating Profit Margin

iii. Net Profit Margin The net profit margin measures the percentage of each sales rupee remaining after all cost and expenses, including taxes and preferred stock dividend, have been deducted, the higher the firms net profit margin, the better.

Profit After Tax Net Profit Margin = ------------------------Sales

year 2011 2012 2013

Net Profit Margin 17.95 14.92 17.63

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Net Profit Margin

20 18 16 14 12 10 8 6 4 2 0 2011 2012 2013

Series1

iv. Operating Expenses Operating expenses ratio explains the changes in the profit margin (EBIT to sales) ratio. A higher operating expenses ratio is unfavorable since it will leave a small amount of income to meet interest, dividends, etc. the operating expenses ratio is a yardstick of operating efficiency, but it should be used cautiously. It is affected by number of factors such as external uncontrollable factor, internal factor, employee and managerial efficiency all of which are difficult to analyze.

Operating Expenses Ratio =

Operating Expenses ------------------------------Sales Operating Expenses Ratio 21.48 23.05 42.1

Year 2011 2012 2013

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Operating Expenses Ratio

45 40 35 30 25 20 15 10 5 0 2011 2012 2013 21.48 23.05 42.1

Profitability in relation to investments is measured by following ratios.

v. Return on Investment / Return on Total Assets The term investment may be refer to total assets or net assets, the funds employed in net assets is known as capital employed which is equal to net worth + total debt. ROI = ROTA (Rate on Total Assets) RONA (Rate on Net Assets) EBIT ROI = ROTA = ---------------------------Capital Employed Year 2011 2012 2013 ROI 70.66 83.61 108.3

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ROI
120 100 80 60 40 20 0 2011 2012 2013 Series1

vi. ROE (Return on Equity) The return on common equity measures the return earned on the common stockholders investment in the firm. Generally, higher the return, the better. PAT ROE = ----------------Net Worth ROE Year 2011 21.07 2012 2013 19.05 32.52

ROE
35 30 25 20 15 10 5 0 2011 2012 2013 ROE

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Return on Total Assets: This measures the profitability in terms of relationship between net profit and the total assets. Return on Total Assets = Profit after Tax x 100 Average Total Assets Return on Total Assets 70.66 83.61 108.3

Year 2011 2012 2013

Return on Total Assets

120 100 80 60 40 20 0 1 2 3 Series1

Return on Equity: In this ratio profitability is measures by dividing the net profit after taxes by the average shareholders / equity. The average shareholders equity includes equity, reserves and surplus excluding miscellaneous expenditure. Return on Equity =Net Profit after Taxes x 100 Average Net Worth Return on Equity Year 2011 2012 2013 25.67 17.99 26

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DEBT TO TOTAL CAPITALIZATION RATIO:

This ratio determines the proportion of total capitalization, which is the firms permanent financing, that long term represents. Generally, firms with lower debt- total capitalization ratios are considered better credit risks because a larger equity cushion exists to protect creditors. Debt To Total Capitalization Ratio = Long Term Debt Long Term Debt+ Stockholders Equity Year 2011 2012 2013 Debt To Total Capitalization Ratio 20.25 14.91 19.73

INTERPRETATION The graph indicates that there is no more fluctuation in ratio i.e 0.648, 0.649 and 0.648 and it is same for the year 2011 and2013

Dividend per Share:

This ratio shows how much dividend is paid per share to the ordinary shareholders. Dividend per Share =Actual Dividend Paid To the Equity Shareholders Number of Ordinary Equity Shares Year 2011 2012 2013 Dividend per Share 3 3.2 4

This shows how much is retained in the business and how much is distributed amongst he shareholder

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Earnings per Share (E.P.S.):

Earnings per share gives the profitability from the point of view of the ordinary shareholders. It measures the profit available to the equity shareholders on per share basis. It is calculated by dividing the profits available to the equity shareholders by the total number of shares Earnings per Share = Net Profit Available To the Equity Shareholders Number of Ordinary Equity Shares Year 2011 2012 2013 Earnings per Share 18.15 18.01 28.16

Earning per share

30 25 20 15 10 5 0 2011 2012 2013

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Dividend Payout Ratios: It measures the relationship between the earnings belonging to the ordinary shareholders and the dividend paid to them. This is calculated by dividing the actual dividend paid by the net profit available to them. Alternatively, it can be found out by dividing the dividend per share by the earnings per share. Dividend Payout Ratio = Actual Dividend Paid to the Equity Shareholders Net profit available to the equity shares holder Dividend Payout Ratio Year 2011 2012 2013 19.21 20.65 16.61

Cost of deposits ratio Cost of deposits ratio = Interest paid on deposits Average deposits Cost of deposits ratio 42.58 38.86 38.35

Year 2011 2012 2013

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Suggestion

Lupin ltd must thoroughly study the accounts of the company where there is a chance of manipulation. The current assets to total assets is increased which means the company is paying more attention to its current assets. They should improve the utilization of current assets as it will be required for day to day business. Lupin ltd should have the schemes to entertain the demand for financial assistance from the businesses which are in need of small amount of loan facilities. Increase manpower (with credit and recovery skills) at the sector. It must follow some rules to improve it financial strength Accoriding return on total assets ratio the company is utilizing its total assets at optimum level to get higher profitability so it is advised to carry in same level.

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CONCLUSION
It has been an excellent opportunity for me to carry out the study on Ratio Analysis at
Lupin ltd. It has helped to a great extent to have an insight into the practical realities of the

subject. The project carried out Lupin ltd has provided me with an in depth knowledge insight into it also provided me an opportunity to study and analyze the various ratios. Though thisr has coin to coin competition t tis is providing a satisfied service to their customers and with the latest technology as well as the new strategies, it is coming up with new products keeping in mind about customers as a lay man and providing service to them , it is growing rapidly Findings and suggestions made in the report, if taken care of, will result in better performances of Lupin ltd.

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BIBLIOGRAPHY
Annual report of the company
Financial Management Financial Management M.Y Khan & P. K Jain Battacharaya

www.Google.com

www.lupin.com

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