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Fundamental analysis with special reference to pharmaceutical companies listed in NSE

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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.

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  1. 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)
  2. 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. 124 J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies Listed in NSE” – (ICAM 2016)
  3. 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)
  4. 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)
  5. 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)
  6. 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)
  7. 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)
  8. 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)
  9. 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)
  10. 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 132 J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies Listed in NSE” – (ICAM 2016)
  11. 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 133 J. Hema and V. Ariram, “Fundamental Analysis with Special Reference to Pharmaceutical Companies Listed in NSE” – (ICAM 2016)
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