A

SYNOPSIS
ON
“A STUDY OF LEVERAGES OF CIPLA LIMITED”
(For The Period 2016-2019)

SUBMITTED TO
Rashtrasant Tukdoji Maharaj Nagpur University,Nagpur
In Partial Fulfillment of the Requirement
For the Award of Degree of
Bachelor of Business Administration

SUBMITTED BY
RITIK SHARAD PATEL

ENROLL. No. :- 20183025504897

UNDER THE GUIDANCE OF

PROF. REENU MEHTA
(MBA, NET- (Management, Commerce), M.Com)

VMV COMMERCE,ARTS,JJP SCIENCE

COLLEGE,WARDHMAN NAGAR NAGPUR – 08

2018-2019
 CERTIFICATE

This is to certify that the project entitled. “A STUDY OF LEVERAGES OF

CIPLA LIMITED (for the period 2016-19)” In partial fulfillment of bachelor if
business administration final year degree examination, has not been submitted for
any other examination and does not form part of any other course undergone by the
candidate.

It is further certified that she has completed her project as prescribed by

Rashtrasant Tukadoji Maharaj Nagpur University, Nagpur.

Project Guided by Coordinator

PROF. REENU MEHTA PROF.MEENAL RAJDEV

Date :-
Place : Nagpur
 DECLARATION

I RITIK SHARAD PATEL hereby declare that the project entitled “A STUDY
OF LEVERAGES OF CIPLA LIMITED (for the period 2016-19)” has
completed by us in partial fulfillment of BBA final year (Bachelor of Business
Administration) final year degree examination as prescribed by RASHTRASANT
TUKADOJI MAHARAJ NAGPURUniversity. Nagpur and had not been
submitted any does not form the part of any other course undergone by us.

STUDENT’S SIGNATURE

Place :
 ACKNOWLEDGEMENT

With immense pride and sense of gratitude, I take this golden opportunity to
express our sincere regards to the coordinator PROF. MEENAL RAJDEV.

I am extremely thankful to my project guide PROF.REENU MEHTA for this

project guideline throughout theproject .our sincere regards to her for giving us her
outstanding guidance, enthusiastic suggestion and invaluable encouragement
which helped us to complete the project.

I’ll be failing in our duty if we do not thank the non-teaching staff of the college
for their cooperation

I would like to thank all who helped me us in making this project complete
successful one.

RITIK SHARAD PATEL

 INDEX

CHAPTER CHAPTER NAME PAGE NO.

No.

Executive summary
1 Introduction 1-20
 Introduction to Topic
 Company Profile

2 Objectives of the study 21-22

Research Methodology
 Research design
 Research Techniques
 Research method
 Sample Design
3  Sample Technique 23-29
 Sample Method
 Sample area
 Sample unit
 Scope
 Limitations
 Method of Data Collection
 Primary Data
 Secondary Data

4 Data Analysis & Interpretation 30-44

5 Conclusion, Suggestion & 45-47

Recommendation

6 Bibliography 48-49
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY

Cipla Company is the third largest two-wheeler manufacturer in India, with a

revenue of 15129 Cr INR (2018-19). The company has an annual production
capacity of 4 million 2 wheelers & 120,000 3 wheelers.CIPLA was established by
Thirukkurungudi Sundaram Iyengar.

Cipla Company is a multinational Pharmaceutical company headquartered at

Chennai, India. It is the third largest Pharmaceutical company in India with a
revenue of over 15,000,000 crore in 2018-19. The company has an annual sales of
3 million units and an annual capacity of over 4 million vehicles. Cipla Company
is also the 2nd largest exporter in India with exports to over 60 Countries.

Cipla has high operation leverage, we know that high operating leverage has
immense benefits for the company. As I can see from the data interpretation, Cipla
has maintained its operating leverage above 5% which is more than the market
average.

Operating leverage ratio means to maintain per unit cost at current level with
increased in overall sales. The data we can conclude that Cipla has maintain its per
unit cost over the year and posses investment opportunity for the new investors.
The expense of Cipla has been decreasing the year 2017. This helps the company
to increase its profit, sales of Cipla has also been increased over the year.

About financial leverage over a period of three years, that there is decrease in
financial leverage in 2019.It indicates that there is a financial risk to the company.
Financial leverage shows a relation between company’s assets with its financed
debt.

I can say from the data that debt of Cipla is quite high as compared to its assets. In
reality market investors tolerate high financial leverage ratio, as its also shows the
income which a company will get in future. It indirectly indicates companies
growth in future.

A Degree of Combined Leverage (DCL) is leverage ratio of that summarize the

combined effect that the degree of operating leverage and degree of financial
leverage have on Earning Per Share (EPS). Combined leverage of Cipla is decrease
in 2018 but is still maintain which is quite effective.
The Return On Equity has been increase over the years. The company should try to
increase this ratio to gain more equity shareholders. The return on assets ratio
shows a fluctuating trends over the period. The asset turnover ratio has been
fluctuating over a period.
 Chapter-1(A)
INTRODUCTION
INTRODUCTION

1. CONCEPT OF LEVERAGES:-
The use of fixed cost in order to increase the rate of return from an investment
one example of leverage is buying securities on margin. While leverages can
operate to increase rates of return, it also increases the amount a
WHAT DOES LEVERAGE MEAN?
(1)The use of various financial instruments or borrowed capital, such as margin,
to increase the potential return of an investment.
(2) The amount of debt used to finance a firm’s assets. A firm with significantly
more debt than equity is considered highly leveraged.

DEFINITION :-

“The employment of an asset or funds for which the firm pays a fixed cost or
fixed return.” -James Horne

Thus according to James Horne leverage results as the firm employing an asset
or source of funds which has a fixed cost (or return). The former may be termed
as “fixed financial cost”. It should be noted that fixed or return is the fulcrum of
leverage. If a firm is not required to pay fixed cost or return, there will be no
leverage. Since fixed cost or return has to be paid or incurred irrespective of the
volume of output or sales, the size of such cost or return has considerable
influence over the amount of profits available for the shareholders. When the
volume of sale changes, leverage helps in quantifying such influence. It may
therefore be defined as relative change in sales. A high degree of leverage
implies that there will large changes in profit due to a relatively small change in
sale and vice versa. Thus higher the leverage higher is the risk and higher is the
expected.

TYPES OF LEVERAGES :-

1. OPERATING LEVERAGE
2. FINANCIAL LEVERAGE
3. COMBINED LEVERAGE
TYPES OF LEVERAGES (EXPLANATION)

1. OPERATING LEVERAGE :-

The operating leverage may be defined as the tendency of the operating profit
to vary disproportionately with sale. It is said to exist when the firm has to pay
fixed cost regardless of volume of output or sale. The firm is said to have a
low operating leverage if it employs a greater amount of fixed cost and a small
amount of variable cost. On the other hand, a firm will have a low operating
leverage when it employs a greater amount of variable costs and a smaller
amount of fixed costs. Thus, the degree of operating leverage depends upon
the amount of fixed element in the cost structure.

SIGNIFICANCE OF OPERATING LEVERAGE:-

Analysis of operating leverage of a firm is very useful to the financial

manager. It tells the impact of changes in sales on operating income. A firm
has higher D.O.L. (degree of operating leverage) can experience a magnified
effect on E.B.I.T. for even a small change in sale level. Higher D.O.I. can
dramatically increase the operating profits. But if there is decline is sales level
E.B.I.T. may be wiped out and loss may be operated.
As explained earlier the operating leverage depends on fixed costs.
If the fixed costs are higher would also be firm’s operating leverage and its
operating risks. If operating leverage is high, it automatically means that the
breakevenpoint would also be reached at a high level of sales. Also, in the case
of higher operating leverage, the margin of safety would be low. Therefore, it
is preferred to operate sufficiently above breakeven point to avoid the danger
of fluctuations in sales and profit.
Operating leverage in a firm is a function of three factors:
1.The amount of fixed costs.
2.The contribution margin.
3.The volume of sale.
Of course, there will be no operating leverage, it there are no fixed operating
costs.

COMPUTATION:-

The operating leverage can be calculated by the following formula:

Operating leverage =Contribution
Operating profit
Operating profit here means “Earnings before interest and Tax”(EBIT)

Operating leverage may be favorable or unfavorable. In case the contribution

(i.e. sale less variable cost) exceeds the fixed cost there is favorable operating
leverage. In a reverse case, the operating leverage will be termed as
unfavorable.

2.FINANCIAL LEVERAGE:-

The finanacial leverage may be defined as the tendency of residual net income
to vary disproportionatly with operating profit. It includes the change that
takes place in the taxable income as a result of change in the operating income.
It signifies the existence of fixed interest fixed dividend bearing securities in
the total capital structure of the company. Thus the use of fixed interest
/dividend dealing securities are greater as compared to the equity capital the
leverage is said to be larger. In a reverse case the leverage will be said to be
smaller.

SIGNIFICANCE OF FINANCIAL LEVERAGE:-

Financial leverage helps the finance manager in designing the appropriate

capital structure. One of the objectives of planning an appropriate capital
structure is to maximize the return on equity shareholders funds or minimize
the earning per share.

Financial leverage is double edged sword. On the one hand it increases

financial risk. A high financial leverage means high fixed financial costs and
high financial risk i.e. as the dept. component in capital structure increases, the
financial risk also increase i.e. risk of in solvency increases.
The finance manager therefore is required to trade off i.e. has to bring
a balance between risk and return for determining the appropriate amount of
debt in capital structure of a firm. Thus the analysis of financial leverage is
most important tool in the hands of finance managers who are engaged in
financing the capital structure of business firm, keeping in view the objectives
of the firm.
 Limitations of financial leverage:-

1. Liquidity:-
Liquidity is the ability to turn the investment bank into cash in a relatively
short period of time. Real estate has a low level of liquidity. It may take
months or longer to cash out and sell the property, whereas stock can be
sold in a few days or even less time. Stocks have a high level of liquidity.

2. Risk:-
Risk is the change that things will not turned as planned. Real estate has a
large factor of calculated risk. It is slow moving market and generally
speaking, the loner time in market, less the risk. Using a high level of
leverage will also increase your financial risk is also concerned if your
property requires any management aspects.

3. Investment life cycle:-

The investment life cycle has three steps these are purchase, operation and
sales cycles. The key to a successful investment is to consider all of income
expected through each cycle and its timing to determine whether it is worth
the cost.

COMPUTATION:-
The computation of financial leverage can be done according to the following
methods:
1. Where capital structure consists of equity shares and debt. In such a case,
financial leverage can be calculated according to the following formula:-

Financial leverage =Operating Profit

Profit Before Tax
Where,
OP = Operating profit or earnings before Interest and Tax (EBIT)
PBT = Profit before tax but after interest
3. COMBINED LEVERAGE:-
As explained in the preceding pages operating leverage measures percentage
change in operating profit due to percentage change in sales. It explains
thedegree of operating risk. Financial leverage measures percentage change
intaxable profit (or EPS) on account of percentage change in operating profit
 (i.e.EBIT). Thus, it explains the degree of financial risk. Both these leverages
areclosely concerned with the firm's capacity to meet its fixed costs (both
operatingand financial). In case both the leverages are combined, the result
obtained willdisclose the effect of change in sales over change in taxable profit
(or EPS).
Composite leverage, thus express the relationship between revenue on account
of sale (i.e. contribution or sale less variable cost) and the taxable income. It
helps in finding out the resulting percentage change in taxable income on
account of percentage change in sales.
This can be computed as follows
Combimed leverage = Operating leverage X Financial leverage
Where,
C = CONTRIBUTION (i.e. SALES - VARIABLE COST)
OP = Operating profit or earnings before Interest and Tax
FL = Financial leverage

IMPACT OF LEVERAGE ON CAPITAL TURNOVER RATIO

AND WORKING CAPITAL RATIO
An increase in sales improves the net profit ratio, raising the return on
investment(R.O.I) to higher level. Students may rightly wonder that this
situation should beby the financial experts to measure the return to the owners
very attractive for the management, which may be tempted to try to
raisetheircapital turnover ratio increases, working capital ratio deteriorates. Thus
management cannot increases its capital turnover ratio beyond a certain limit.
The main reasons for a fall in ratios showing the working capital position due to
increase its turnover ratio is that as the activityincreases without a corresponding
rise in working capital, the working capital position became tight. As the sales
increases, both the current assets and currentliabilities increases but not in
proportion to the current ratio. The current ratio isto be maintained at 2, each
increase in sales must result in two fold rise in theCurrent assets as compared to
current liabilities, But this does not happen with theSame amount of funds;
hence a fall in the current ratio.
Therefore, it must be ensured that when the capital turnover ratio is sought to
beincreased, its effect on the working capital situation is to be carefully
considered.If current ratio and the acid test ratio are high, it is apparent that the
capital turnover ratio can be increased without any problem. However, it may be
veryrisky to increase capital turnover ratio when the working capital position is
notsatisfactory.
IMPORTANCE OF LEVERAGES :-
The operating leverage an financial leverage are the two quantitative tools used
by the financial experts to measure the return to the owners (viz. earnings per
share) and the market price of the equity shares. The financial leverage is
considered to be superior of these two tools, since it focuses the attention on the
price of the share which the management always tries to increase byincreasing
the net worth of the firm. The management for this purpose resorts to trading on
equity because when there is increase in EBIT then there is indefinitely in
raising the debt content in thetotal capital structure of the corresponding increase
in the price of the equity shares. However a firm cannot go indefinitely in
raising the debt content in the total capital structure of the company.
Ifa firm goes on employing greater proportion of debt capital,the marginal costof
debt will also go on increasing because the subsequent lenders will
demandhigher rate of interest.
The company's inability to offer sufficient assets and security will also stand
inthe way of further employment of debt capital.
Moreover, firm with widely fluctuating income cannot afford to employ a
highdegree of financial leverage.
A company should try to have a balance of the two leverages because they
havegot tremendous acceleration or deceleration effect on EBIT and EPS. It
may note that a right combination of these leverages is very big challenge for
themanagement. A proper combination of both operating and financial leverages
is a blessing for the firm's growth while an improper combination may prove to
be a curse.
A high degree of operating leverage together with a high degree of financial
leverage makes the position of the firm very risky.
This is because on the one hand it is employing excessively, assets for which it
hasto pay fixed cost and at the same time it is also using the large amount of
debt Capital.
 The fixed cost using towards assets and fixed interest charges bring a greater
riskto the firm. In case the earning falls the firm may not in a position to meet
itsfixed cost, Moreover, greater fluctuations in earnings are likely to occur
onamount of the existing of a high degree of operating leverage. Earnings to
theequity shareholders will also fluctuate widely on account of existence of
highdegree of financial leverage. Earnings to the equity shareholders will
alsofluctuate widely on account of existence of high degree of operating
leverage willresult in a more the proportionate change in operating profits even
on account ofa small change in sales. The presence of a high degree of financial
leverage causes a more then proportionate changes in EPS even on account of a
smallchange in EBIT. Thus, a firm having a high degree of financial leverage
and ahigh degree of operating leverage as to face the problems of inadequate
liquidityor insolvency in one or the other year. It does not, however, mean that a
firmshould opt for low degree of operating and financial leverages.
Of course, such lower leverage indicates the cautious policy of the management
but the firm will be losing many profits earnings opportunities. A firm
should,therefore, make all possible efforts to combine the operating and
financialleverages in a way that suits the risk bearing capacity of the firm.
It may be observed that a firm with high operating leverage should not have
ahigh financial leverage. In fact, it should have a low financial leverage.
Similarly,a firm having a low operating leverage will stand have a low operating
leveragewill stand to gain by having a high financial leverage provided it has
enoughprofitable opportunities for the employment of borrowed funds.
However, lowoperating leverage and high operating leverage is considered to be
an idealsituation for the maximization the profits with minimum of risks.

ADVANTAGESOFLEVERAGES:-
1.Itisanimportant tool inthehands of the financialmanagement.
2.Itcanmaximizethereturntoshareholdersifusedcarefully.
3.Thehighertheleveragefactor,thehigheristherateofreturn.
4.Increasesfluctuationsinthereturnonequity.
 Chapter – 1(B)
COMPANY PROFILE
 COMPANY PROFILE

Cipla Limited is an Indian multinational pharmaceutical and biotechnology

company, headquartered in Mumbai, India. Cipla primarily develops medicines to
treat respiratory, cardiovascular disease, arthritis, diabetes, weight control and
depression; other medical conditions. As of 17 September 2014, its market
capitalisation was ₹49,611.58 crore (US$7.0 billion), making it India's 42nd largest
publicly traded company by market value. On 23 April 2019, Cipla appointed Dr.
Raju Mistry as Global Chief People Officer.

It was founded by Khwaja Abdul Hamied as 'The Chemical, Industrial

& Pharmaceutical Laboratories' in 1935 in Mumbai. The name of the Company
was changed to 'Cipla Limited' on 20 July 1984. In the year 1985, US FDA
approved the company's bulk drug manufacturing facilities. Led by the founder’s
son Yusuf Hamied, a Cambridge-educated chemist, the company provided generic
AIDS and other drugs to treat poor people in the developing world. In 1995, Cipla
launched Deferiprone, the world’s first oral iron chelator.[7] In 2001, Cipla offered
medicines (antiretrovirals) for HIV treatment at a fractional cost (less than $350
per year per patient).

In 2013 Cipla acquired the South African company Cipla-Medpro, kept it as

a subsidiary, and changed its name to Cipla Medpro South Africa Limited. At the
time of the acquisition Cipla-Medpro had been a distribution partner for Cipla and
was South Africa's third biggest pharmaceutical company. The company had been
founded in 2002 and was known as Enaleni Pharmaceuticals Ltd. In 2005, Enaleni
bought all the shares of Cipla-Medpro, which had been a joint venture between
Cipla and Medpro Pharmaceuticals, a South African generics company, and in
2008 it changed its name to Cipla-Medpro.

Cipla has 34 manufacturing units in 8 locations across India and a presence

in over 80 countries. Exports accounted for 48% ₹4,948 crore (equivalent
to ₹63 billion or US$880 million in 2018) of its revenue for FY 2013-14. Cipla
spent INR 517 cr. (5.4% of revenue) in FY 2013-14 on R&D activities. The
primary focus areas for R&D were development of new formulations, drug-
delivery systems and APIs (active pharmaceutical ingredients). Cipla also
cooperates with other enterprises in areas such as consulting, commissioning,
engineering, project appraisal, quality control, know-how transfer, support, and
plant supply. As on 31 March 2013, the company had 22,036 employees (out of
which 2,455 were women (7.30%) and 23 were employees with disabilities
(0.1%)).[1] During the FY 2013-14, the company incurred ₹1,285 crore (equivalent
to ₹15 billion or US$220 million in 2018) on employee benefit expenses.

CIPLA LTD. (CIPLA) - COMPANY HISTORY

Cipla Ltd is one of the leading pharmaceutical companies in India. The

company focuses on development of new formulations and has a wide range of
pharmaceutical products. The product portfolio includes over 1500 products across
wide range of therapeutic categories.Cipla Ltd was incorporated in the year 1935
with the name Chemical Industrial & Pharmaceutical Laboratories Ltd. Khwaja
Abdul Hamied the founder of Cipla gave the company all his patent and
proprietary formulas for several drugs and medicines without charging any royalty.
On August 17 1935 Cipla was registered as a public limited company with an
authorized capital of Rs 6 lakh.In the year 1941 as the Second World War cuts off
drug supplies the company starts producing fine chemicals dedicating all its
facilities for the war effort. In the year 1952 the company set up first research
division for attaining self-sufficiency in technological development. In the year
1960 they started operations at second plant at Vikhroli Mumbai producing fine
chemicals with special emphasis on natural products. In the year 1968 the company
manufactured ampicillin for the first time in the country. In the year 1972 the
company started Agricultural Research Division at Bangalore for scientific
cultivation of medicinal plants. In the year 1976 they launched medicinal aerosols
for asthma. In the year 1980 the company won Chemexcil Award for Excellence
for exports. In the year 1982 the company started operations in their fourth factory
at Patalganga Maharashtra.

In the year 1984 they developed anti-cancer drugs vinblastine and vincristine
in collaboration with the National Chemical Laboratory Pune. Also they won Sir P
C Ray Award for developing in-house technology for indigenous manufacture of a
number of basic drugs. In the year 1985 US FDA approved the company's bulk
drug manufacturing facilities. In the year 1988 they won National Award for
Successful Commercialisation of Publicly Funded R&D. In the year 1991 the
company launched etoposide a breakthrough in cancer chemotherapy in association
with Indian Institute of Chemical Technology. Also they manufactured
antiretroviral drug zidovudine in technological collaboration with Indian Institute
of Chemical Technology Hyderabad. In the year 1994 the company commenced
commercial operations in their fifth factory at Kurkumbh Maharashtra. In the year
1997 they launched transparent Rotahaler the world's first such dry powder inhaler
device. In the year 1998 they launched lamivudine.
 The company becomes one of the few companies in the world to offer all
three component drugs of retroviral combination therapy.In the year 1999 the
company launched Nevirapine antiretroviral drug used to prevent the transmission
of AIDS from mother to child. In the year 2000 the company became the first
company outside the USA and Europe to launch CFC-free inhalers - ten years
before the deadline to phase out use of CFC in medicinal products.In the year 2002
the company set up four state-of-the-art manufacturing facilities in Goa. In the year
2003 they launched TIOVA (Tiotropium bromide) a novel inhaled long-acting
anticholinergic bronchodilator that is employed as a once-daily maintenance
treatment for patients with chronic obstructive pulmonary disease (COPD). Also
they commissioned second phase of manufacturing operations at Goa.

Awards and Recognition

 In 2012, Cipla received the Thomson Reuters India Innovation Award.

 Cipla won Dun & Bradstreet American Express Corporate Awards in 2006.
 In 2007, Forbes included Cipla in the 200 'Best under a billion' list of best small
Asian companies.
 In 1980, Cipla won Chemexcil Award for Excellence for exports.
 In 2015, Cipla stood third in the India's Most Reputed Brands (Pharmaceutical)
list, in a study conducted by BlueBytes, a leading Media Analytics firm in
association with TRA Research, a brand insights organization (both a part of
the Comniscient Group).
 Chapter–2
OBJECTIVEOFTHESTUDY
 OBJECTIVE OF THE STUDY

The objective of study is to understand the financial prospective of the firm.

1. To analyze leverage of Cipla Ltd.

2. To analyze the impact of leverages.
3. To Study the Growth of Cipla Ltd.
 Chapter – 3
RESEARCH METHODOLOGY
 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. It

May be understood as a science of studying how research is done scientifically.
Research methodology has many dimensions and researchmethods do constitute a
part of the research methodology. It is necessary for the researcher to know not
only the research methods but also methodology.
In research methodology one studies the various steps thatgenerally adopted by a
researcher in studying his research problem along with thelogic behind them. So it
is necessary for the researcher to design his methodologyfor his problem as the
same may different from problem to problem.
In research the scientist has to expose the research decisions toevaluation before
they are implemented. Researcher has to specify very clearlyand precisely what
decisions he selects and why he selects and why he selectsthem so that they can be
evaluated by others also.
Questions which are usually answered when one talk ofresearch methodology
concerning a research problem or study are:
 Why the research study has been undertaken.
 How the research problem has been designed.
 In what way hypothesis has been formulated
 Why the hypothesis has been formulated
 What data have been collected ?
 What particular method has been adopted and
 Why particular techniques of analyzing data has been used.

RESEARCH DESIGN
A research design is the arrangement of conditions for collection and analysis of
data in data in manner that aims to combine relevance to the research purpose with
economy in procedure.
Research design is needed because it facilities the smooth sailing of the various
research operations thereby making research as efficient as possible yielding
maximal information with minimal expenditure of effort, time and money.
Research design stands for advance planning of the methods to be adopted for
collecting the relevant data and the techniques to be used in their analysis is
keeping in view the objective of the research and the availability of staff, time and
money. The design helps the researcher to organize his ideas in a form whereby it
will be possible for the researcher to look for flaws and inadequacies. Preparation
of the research design should be done with great care as any error Init may upset
the entire project. Research design in fact has a great bearing on the reliability of
the results. The firm foundation of the entire edifice of the research work.

TYPES OF STUDY
The study conducted is a conclusive analytical statistical study. Conclusivebecause
after conducting the study, the researcher comes to decision which isprecise and
rational. The study is descriptive because it is in the analytical study,that the data is
collected for definite purpose is definite i.e. the data is collected,to find out the
effectiveness of the advertisement. The study is conclusivebecause after doing the
study the researcher comes to conclusion regarding aposition of the brand in the
minds of respondents of different age groups. Thestudy is statistical because
throughout the study all the similar samples areselected and grouped together
(similarity of ages thus forming a group).
Thus, this conclusive descriptive study is the best study for this purpose as it
provides the necessary information which is utilized o arrive at a concrete decision.
TOOLS USED
It is essential to use a systematic research methodology for the assessment of
aproject because without the use of a research methodology analysis of
anycompany or organization will not be possible.
It is worth a while to mention that I have used secondary data for the analysis,
thefollowing types of published data is used:
 Balance sheet
 Profit & loss A/c
 Newspaper, journals & periodic

Research Design :-
Application of Research
o Pure Research
o Applied Research
Objective of Research
Inquiry Mode of Research
o Structured Approach
o Unstructured Approach

Research Type :-

It is design to describe something the characteristics of users of a given product the

degree to which product use varies with income, ages, sex, and other
characteristics. It should not be concluded that such studies should be simply fact
gathering expeditions

Research Design :-
Research design is a pre planned sketch for the explanation of a problem. It is the
first step to take and the whole research. Study will conduct on the basis of the
research design. It gives us a due that how the further process would be 1 taking
place and how would be the research study carry into classification, interpretation
and suggestions. This is guideline for the whole Work

Research Technique :-
A researcher is using descriptive research for the research.

Research Method :-
A researcher is using analytical research method for the research.

Sample Method :-
Random sampling method is used by the researcher. This probability method is
often used during preliminary research efforts to get a gross estimate of the result,
without incurring the cost or time required to select a random sample.
SCOPE OF THE STUDY

 To the financial position and growth of the company on the basis of various
ratio analysis.

 To study of the profitability of the company.

 To study the current cost position and future cost position of the company.

LIMITATION
 Rate of inflation: if the rate o of inflation has changed in any of the periods
under review. This can mean that the numbers are not comparable across
periods. For example If the inflation rate was 100% in one year, sales would
appear to have doubled over the preceding year, when sales did not change
at all.
 Aggregation : this information in financial statement line item that are using
for a ratio analysis may have been aggregated differently in the past, so that
running the ratio analysis on a trend line does not compare the same
information through the entire trend period.
 Area: the data taken of Cipla is only in India

COLLECTION OF DATA :
1. Primary data:-
2. Secondary data:
1. Primary data:-Primary data can be collected through observation and survey,
for experimentsome quantitative measurement and requirement.
 By observation: the information obtain related to what if currently
happening and is not complicated by either the past behaviour or future
intentions.
 Personal interviews: the investigator follows a procedure and seek answer to
set a preconceived question through personal interviews
 Primary data collected by discussing with Questionnaire.
 Primary data collected by discussing with company officer.
We are using secondary data for our study.
2. Secondary data:-Secondary data are those which have already been collected
by someoneelse andhave already been passed through statistical process. In this
project report, both

Type of data have been used. Mainly, secondary data is used such as annual
reports.

 Annual Reports
 Internet
 Company journal
 Various books
 Company Annual Report
 There are numerous sources of secondary data. Each year quantity of
secondary source material expands at a tremendous rate. Examination of
secondary data is the simplest ad easiest procedure of research. The
secondary source of data is important in the earlier process of investigation
is usually based on secondary data.
 Data required was collected from the annual reports and other financial
statements published by company during last five years.
 Reference of textbooks relating working capital. General introduction to
specific topic has been elaborated referring to the textbooks having
specialization in the relevant subject,
 Collection of information was through published in the newspapers,
magazinesand borrowing the web in the internet.
 Ratios are directly calculated from the balance sheet of the company and
thecrossed-checked with the management.
 Standards could not be taken, as the same was not available for all the
ratios.
 Only few important key ratios have been for the analysis of the companies,
whichwere considered relevant for the project.
 The information collected from the above sources were primarily complied
to suitresearch study.
 After the compilation of these information and data, they were tabulated for
betterunderstanding and for future references.
 Once the data collected were tabulated in the required, the format findings
wereexplained or justified wherever necessary and deviation if any.
 Similarly, conclusion and suggestion were made from the above finding
 Chapter – 4

DATA ANALYSIS
AND
INTERPRETATION
DATA ANALYSIS AND INTERPRETATION
After the preliminaries to the collection of the data are given due
considerations,researcher is faced with one of the most difficult problem of
gathering the desired information or data.
Collection of data means the methods that are to be employed for obtaining the
required information from the units under research.
The method of collection of data depends upon the nature, object and scope of the
research on the one hand and availability of money and time on the other. It is of
prime importance on which data is to be collected for the analysis of the problem at
hand. However it is not possible to list the rules that can be universally applied for
data collection.
This is why it is said that in collection of statistical data
‘Common sense is the chief requisite & experiences the chief teacher’.
 DATA ANALYSIS AND INTERPRETATION
Cipla Ltd.
ROE

MEANING

Return on equity (ROE) is the amount of net income returned as a percentage of

shareholder equity. ROE measure a corporation’s profitability by revealing how
much profit a company generates with the money shareholder has invested.

Return on equity=NET INCOME /EQUITY

RETURN ON EQUITY
Incrore
Mar’17 Mar’ 18 Mar 19
NetIncome 11208.51 12308.68 15274.44
Equity 47.51 47.51 47.51
ROE 235.92 259.08 321.50
 350
321.5

300

259.08
250 235.92

200

150

100

50

0
2017 2018 2019

INTERPRETATION

The amount of net incomes returned as a percentage of shareholders equity. ROE

measures a corporation’s profitability by revealing how much profit to company
generate with the money shareholder have invested. ROE of the company is higher
in 2019.
 RETURN ONASSETS

IN CRORES
Mar’17 Mar’ 18 Mar 19
Net income 11208.51 12308.68 15274.44
Total asset 2716.80 3493.47 3917.39
ROA 4.126 3.523 3.899

Return on Assets=NET INCOME/TOTAL ASSETS

MEANING

Return on assets (ROA) is an indicator of how profitable a company is relative to

its total assets. ROA gives a manager, investor or analyst an idea as to how
efficient a company’s management is at using its assets to generate earnings.

4.2
4.126
4.1

4
3.899
3.9

3.8

3.7

3.6
3.523
3.5

3.4

3.3

3.2
2017 2018 2019

INTERPRETATION

ROA is an indicator of how profitable a company is relative to its total

assets. ROA gives an idea as to how efficient management is at using its
assets to generate earning. ROA of Cipla shows ups and downs in last five
years. According to analysis firm has to put more effort to utilize their assets
to generate more profits.

In crore
Mar’17 Mar’ 18 Mar 19
Net Sales 11104.66 12135.31 15129.66
Total Assets 2716.80 3493.47 3917.39
Assets Turnover 4.09 3.47 3.86
Ratio

Assets Turnover Ratio

4.2
4.09
4.1

3.9 3.86

3.8

3.7

3.6

3.5 3.47

3.4

3.3

3.2

3.1
2017 2018 2019
ASSETS TURNOVER RATIO=NET SALES/TOTAL ASSETS

ASSETS TURNOVER RATIO

MEANING
Assets turnover Ratio measure the value of a company’s sales or revenue generates
relatives to the values its assets. The assets Turnover Ratio can often be used as an
indicator of the efficiency with which a company is developing its assets
ingenerating revenue.

INTERPRETATION
Assets Turnover measures firm’s efficiency at using its assets in generation sales
and revenue the higher the number the letter. It’s also indicates price strategy;
profit margin have low profit margin tend to have high assets turnover, while those
with high profit margin have low assets turnover. Assets turnover ratio is
decreasing which shows that performance of using assets in generating sales
declined during the year 2018.

NET PROFIT MARGIN=GROSS PROFIT * 100/NET SALES

in crore
Mar’17 Mar’ 18 Mar 19
Net Profit 165.61 126.77 136.03
Net Sales 11104.66 12135.31 15129.66
Net Profit 0.015 0.010 0.009
Margin

Net Profit Margin

 0.016 0.015

0.014

0.012
0.01
0.01 0.009

0.008

0.006

0.004

0.002

0
2017 2018 2019

MEANING
Net Profit Margin is the percentage of revenue remaining after all operating
expenses, interest, taxes and preferred stock dividends (But not common stock
dividends) have been deducted from a company’s total revenue.
INTERPRETATION
Net Profit Margin goes down year after year. In 2017 net profit margin is 0.015
now it decrease up to 0.009 in 2019.

Operating Leverage
INCOME STATEMENT FOR YEAR 2016-17

( Rs in millions )

Mar’2016 Mar’2017
Profit Before Depreciation 636.91 904.48
Interest & Tax
(-) Depreciation 153.33 236.05
Profit Before Interest& Tax 483.58 668.43
(-) Interest 27.42 48.73
Profit Before Tax 456.16 619.70
(-) Tax 108.33 139.66
Profit After Tax 347.83 480.04
(+) Depreciation 153.33 236.05
Profit After Depreciation 501.16 716.09
Interest & Tax

Operating Leverage=Change in EBIT

Change in sales Revenue * 100184.85
= 1277.06 * 100
=14.47%

INCOME STATEMENT FOR YEAR 2017-18

(Rs in crore)
Mar’2017 Mar’2018
Profit Before Depreciation 904.48 1024.00
Interest & Tax 287.81
(-)Depreciation 236.05

Profit Before Interest & Tax 668.43 736.19

(-) Interest 48.73 43.95
Profit Before Tax 619.70 692.24
(-) Tax 139.66 140.60

Profit After Tax 480.04 551.64

(+) Depreciation 236.05 287.81
Profit After Depreciation & 716.09 839.45
Tax

Operating Leverage = Change in EBIT

Change in Sales Revenue * 100
= 67.76
1099.14 * 100
= 6.16%

Income Statement For Year 2018-19

(Rs in crore)
Mar’2018 Mar’2019
ProfitBefore Depreciation 1024.00 1269.52
Interest & Tax 287.81 338.73
(-) Depreciation
Profit Before Interest & 736.19 930.79
Tax
(-) Interest 43.95 56.62
Profit Before Tax 692.24 874.17
(-) Tax 140.60 216.05
Profit After Tax 551.64 658.12
(+) Depreciation 287.81 338.73
Profit After Depreciation 839.45 996.85
& Tax

Operating Leverage = Change in EBIT

Change in Sales Revenue * 100

= 194.6
2282.82 * 100
= 8.52%
16.00%
14.47%
14.00%

12.00%

10.00%
8.52%
8.00%
Operating Leverage
6.16%
6.00%

4.00%

2.00%

0.00%
2016-17 2017-18 2018-19
Financial Leverage
Income Statement For Year 2016-17
(Rs in crore)
Mar’2016 Mar’2017
Profit Before Interest 483.58 668.43
Tax 27.42 48.73
(-) Interest 108.33 139.66
(-) Tax
Profit after Tax 347.83 480.04
Number of Share 47.52 46.61
EPS 7.32 10.30

Financial Leverage = Change in EPS

Change in EBIT * 100
= 2.98
184.85 * 100
= 1.61%

Income Statement For Year 2017-18

(Rs in crore)
Mar’2017 Mar’2018
Profit Before Interest 668.43 736.19
Tax 48.73 43.75
(-) Interest 139.66 140.60
(-) Tax
Profit after Tax 480.04 692.24

Number of Share 46.61 58.91

EPS 10.30 11.75
 Financial Leverage = % Change in EPS
% Change in EBIT
= 1.45
67.76 * 100
= 2.14%

Income Statement For Year 2018-19

(Rs in crore)
Mar’2018 Mar’2019
Profit Before Interest 736.19 930.79
Tax
(-) Interest 43.75 56.62
(-) Tax 140.60 216.05
Profit after Tax 692.24 658.12

Number of Share 58.91 47.18

EPS 11.75 13.95

Financial Leverage = Change in EPS

Change in EBIT * 100
= 2.2
194.6
= 1.13%
2.50%

2.14%

2.00%

1.61%
1.50%

1.13%
Financial Leverage
1.00%

0.50%

0.00%
2016-17 2017-18 2018-19
Combined Leverage
YEAR 2016-17
Combined Leverage = Operating Leverage * Financial Leverage

= 14.47 * 1.61
= 23.30%
YEAR 2017-18
Combined Leverage = Operating Leverage * Financial Leverage

= 6.16 * 2.14
= 14.15%
YEAR 2018-19
Combined Leverage = Operating Leverage * Financial Leverage

= 8.52 * 1.13
= 9.63%

25.00% 23.30%

20.00%

15.00% 14.15%

Combined Leverage
9.63%
10.00%

5.00%

0.00%
2016-17 2017-18 2018-19
Operating, financial & Combined Leverage

25.00% 23.30%

20.00%

14.47% 14.15%
15.00%
Operating Leverage
Financial Leverage
9.63%
10.00% 8.52% Combined Leverage
6.16%

5.00%
1.61% 2.14%
1.13%
0.00%
2016-17 2017-18 2018-19
 Chapter – 5
CONCLUSION&
SUGGESTION AND RECOMMENDATIONS
 CONCLUSION

Operating leverage :
 It is observed that there is decrease in operating leverage in 2018 and then It is
increased in 2019.
 A low operating leverage indicates change in profit with respect to sales of the
company in year 2018.
 Low operating leverage is an account of increase in expenses of the company in
2018.
 Operating leverage is increased in 2019 that is an account of increase in sales
of the company.

Financial leverage :
 Over a period of three years, that there is decrease in financial leverage in 2019.
 It indicates that there is a financial risk to the company.

Combined leverage:
 Overall it can be observed that Cipla Ltd., has a low financial leverage &
high operating leverage. The company has fluctuate financial leverage &
interest payment position along with its borrowings for a period of three
years. The operating leverage is high which indicates a greater amount of
pressure on profitability due to a small change in sales. The company is
losing the benefits of trading on equity thereby having a low EPS position.
SUGGESTION AND RECOMMENDATIONS

A high operating leverage and a low financial leverage indicate that the
management is careful since the higher amount of risk involved in high operating
leverage has been sought to be balanced by low financial leverage. However, a
more preferable situation would be to have a low operating leverage and a high
financial leverage. A low operating leverage would automatically imply that the
company reaches its breakeven point at a low level of sales. Therefore, risk is
diminished. A highly cautious and conservative manager will keep its operating
and financial leverage at very low levels. This approach may, however, mean that
the company is losing profitable opportunities.
 CHAPTER-7
BIBLIOGRAPHY
 BIBLIOGRAPHY
BOOK

 Paul Bambrick – Santoyo, Leverage Leadership.

 Shawn Doyle –Jumpstart your Leadership, I0 JOLTS, To Leverage Your
Leadership.
 Robert S Kricheff – Leveraged Finance, Credit Analysis For Bonds and
Bank Debt.
 Sir William Maxwell, Mark Shenkman – Leveraged Financial Markets.
 Stephen J Antczak, Doughas J Lucas – Leveraged Finance.
 Karl Denninger, Charles Hugh Smith – LEVER-AGE.

WEB SITE
 www.ciplaltd.com
 www.googlebook.com
 www.wikipidia.com
 www.slideshare.co.in
 www.dmnews.com
 www.eventmarketer.com
 www.promomagazine.com
 www.marketingsherpa.com
 www.marketingprofs.com
 www.jobs. ciplaltd.com
 www. ciplaltd.com
Chapter – 10
BALANCE SHEET
 BALANCE SHEET

Cipla Previous Years »

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

Mar '19 Mar '18 Mar '17 Mar '16

12 mths 12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 161.14 161.02 160.90 160.68

Equity Share Capital 161.14 161.02 160.90 160.68

Reserves 15,620.77 13,952.50 12,639.61 11,825.20

Networth 15,781.91 14,113.52 12,800.51 11,985.88

Secured Loans 0.00 0.00 0.00 0.00

Unsecured Loans 0.00 174.43 324.33 1,131.81

Total Debt 0.00 174.43 324.33 1,131.81

Total Liabilities 15,781.91 14,287.95 13,124.84 13,117.69

Mar '19 Mar '18 Mar '17 Mar '16

12 mths 12 mths 12 mths 12 mths

Application Of Funds

Gross Block 5,985.30 5,629.64 5,089.81 4,240.43

Less: Revaluation Reserves 0.00 0.00 0.00 0.00

Less: Accum. Depreciation 1,795.99 1,309.29 854.23 414.32

Net Block 4,189.31 4,320.35 4,235.58 3,826.11

Capital Work in Progress 297.33 462.60 555.77 551.05

Investments 5,815.19 4,636.98 4,285.89 4,255.78

Inventories 2,868.41 3,037.98 2,653.50 2,918.47

Sundry Debtors 3,168.73 2,336.32 1,938.79 1,896.41

Cash and Bank Balance 174.56 227.53 58.46 53.01

Total Current Assets 6,211.70 5,601.83 4,650.75 4,867.89

Loans and Advances 1,905.28 2,073.21 1,879.23 1,738.22

Total CA, Loans & Advances 8,116.98 7,675.04 6,529.98 6,606.11

Current Liabilities 2,100.23 2,284.39 2,093.99 1,740.14

Provisions 536.67 522.63 388.39 381.22

Total CL & Provisions 2,636.90 2,807.02 2,482.38 2,121.36

Net Current Assets 5,480.08 4,868.02 4,047.60 4,484.75

Total Assets 15,781.91 14,287.95 13,124.84 13,117.69

Contingent Liabilities 4,801.99 4,505.33 4,733.92 4,735.02

Book Value (Rs) 195.88 175.30 159.11 149.19

Cipla Previous Years »

Standalone Profit & Loss

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

Mar '19 Mar '18 Mar '17 Mar '16

12 mths 12 mths 12 mths 12 mths

Income

Sales Turnover 12,374.01 11,444.81 10,974.58 12,117.72

Excise Duty 0.00 54.91 206.09 0.00

Net Sales 12,374.01 11,389.90 10,768.49 12,117.72

Other Income 585.33 259.13 136.78 273.30

Stock Adjustments -136.70 212.05 -56.27 -228.35

Total Income 12,822.64 11,861.08 10,849.00 12,162.67

Expenditure

Raw Materials 4,471.95 4,487.17 4,179.17 4,783.18

Power & Fuel Cost 264.93 239.01 206.28 207.56

Employee Cost 1,839.84 1,785.94 1,728.97 1,778.56

Selling and Admin Expenses 0.00 0.00 0.00 207.14

Miscellaneous Expenses 3,158.59 2,894.28 3,001.54 2,859.50

Total Expenses 9,735.31 9,406.40 9,115.96 9,835.94

Mar '19 Mar '18 Mar '17 Mar '16

12 mths 12 mths 12 mths 12 mths

Operating Profit 2,502.00 2,195.55 1,596.26 2,053.43

PBDIT 3,087.33 2,454.68 1,733.04 2,326.73

Interest 16.97 11.90 39.20 147.07

PBDT 3,070.36 2,442.78 1,693.84 2,179.66

Depreciation 569.72 529.61 499.97 442.69

Profit Before Tax 2,500.64 1,913.17 1,193.87 1,736.97

PBT (Post Extra-ord Items) 2,500.64 1,913.17 1,193.87 1,736.97

Tax 604.42 442.88 212.00 281.67

Reported Net Profit 1,888.41 1,468.52 974.94 1,462.30

Total Value Addition 5,263.36 4,919.23 4,936.79 5,052.76

Equity Dividend 281.97 160.94 160.87 180.92

Corporate Dividend Tax 0.00 28.33 32.71 0.00

Per share data (annualised)

Shares in issue (lakhs) 8,057.01 8,051.19 8,045.10 8,033.84

Earning Per Share (Rs) 23.44 18.24 12.12 18.20

Equity Dividend (%) 150.00 150.00 100.00 100.00

Book Value (Rs) 195.88 175.30 159.11 149.19