Financial Accounting

CIPLACaring for life

Balance Sheet Analysis

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AGENDAOverview – CIPLA Significant accounting policiesShare price analysisCash flow statement analysisDupont analysis and comparison- Aurobindo Laboratories Ltd- Dr. Reddy’s Laboratories Ltd

Comparison with industry average- PE Ratio- EPS

Analysis- BOD’s report

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OVERVIEW - CIPLA

Founded in 1935– Dr K A Hamied sets up "The Chemical,

Industrial and Pharmaceutical Laboratories Ltd.”

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SIGNIFICANT ACCOUNTING POLICIES

• Basis of Accounting• Use of Estimates• Principles of

Consolidation• Fixed Assets • Borrowing Costs• Depreciation • Inventories • Foreign Exchange

Transactions • Employee Benefits

• Research and Development • Expenditure on Regulatory

Approvals • Investments • Revenue Recognition• Income Tax • Impairment of Assets • Government Grants • Provisions and Contingent

Liabilities

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SHARE PRICE ANALYSIS

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57Rs. 250.00

Rs. 260.00

Rs. 270.00

Rs. 280.00

Rs. 290.00

Rs. 300.00

Rs. 310.00

Rs. 320.00

Rs. 330.00

Cipla

Cipla

1 5 9 13 17 21 25 29 33 37 41 45 49 53 5714000.00

15000.00

16000.00

17000.00

18000.00

19000.00

20000.00

Sensex

Sensex

CIPLA.XLSX9.8% Decline

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SHARE PRICE ANALYSIS

1 5 9 13 17 21 25 29 33 37 41 45 49 53 5714000.00

15000.00

16000.00

17000.00

18000.00

19000.00

20000.00

Sensex

Sensex

1 5 9 13 17 21 25 29 33 37 41 45 49 53 570

100

200

300

400

500

600

Ranbaxy

Ranbaxy

RANBAXY.XLSX7.7% Decline

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CASH FLOW ANALYSIS• In the current period the company’s Cash & Cash

equivalents have increased almost 38.28% to 84.13 crore from 60.84 crore, this hints that the spending have decreased to that extent in the current year.

• Since there was a reduction of 41.68% in the sale of other investments it shows that company is holding on to investments.

• The statement shows that the company has purchased investments worth 5228.18 crore a decrease of 41.6% compared to last year.

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CASH FLOW ANALYSIS• The outflow for fixed asset investment has also

increased by 29.93% as compared to last year. This gives an indication about more Investments in infrastructure by the company recently.

• 4.06% decrease is seen in dividends received on Investments.

• The company has sold major fixed assets (a 229.9% increase compared to last year) recently as is evident from sales proceeds from Fixed Assets.

• Last year subsidiaries paid back 17.6 crore but this year company has given 204.47 crore to subsidiaries.

• 224.33 % increase in inventory from last year.

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DUPONT ANALYSIS

CIPLA

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DUPONT ANALYSIS

CIPLA AUROBINDO DR. REDDY’S

ROTA 14.64% 15.59% 15.4%

TURNOVER 78.64% 79.09% 77.24%

OPERATING PROFIT

18.6% 19.72% 20.02%

CURRENT ASSET

LEVERAGE

130.6% 123.85% 115.72%

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EARNINGS PER SHARE

EPSNo. Of Shares

PAT (in crore)=

Glenmark Aurobindo Dr. Reddy’s

PAT 2121.78 5938 8934No. of Shares 270272053 291121290 168845585EPS 78.51 203.97 529.12

INDUSTRY AVERAGE = 270.53

PAT No. of Shares EPS

CIPLA 960.39802921357

11.96

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P/E RATIO

Glenmark Aurobindo Dr. Reddy’s

Mkt. Price/Share

283.6 195.9 1638.55

EPS 78.51 203.97 529.12

P/E Ratio 3.61 0.96 3.10

P/EEPS

STOCK PRICE=

INDUSTRY AVERAGE = 2.56

Mkt. Price/Share

EPS P/E Ratio

CIPLA 321.05 11.96 26.84

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ANALYSIS - BOD’s REPORT• Domestic turnover rose by 12 per cent while export income

went up by 16 per cent. Profit after tax for the year was 960 crore compared to 1081 crore last year, excluding the one-time sale of the I-pill brand last year. Sales & Other Income 7000 crore

• There was a dip in operating margins of about 3 per cent, as a percentage of total revenue. This was mainly due to lower technical fees (60 crore compared to 150 crore last year)

• In April 2010, the Company commenced commercial production of pharmaceutical formulations at the Special Economic Zone (SEZ) project, at Indore, Madhya Pradesh. The total investment for this project is about 900 crore.

• Cipla’s fixed asset grew to 4200 crore from 3600 crore.• Cipla’s share holder fund reduced from 6800 crore to 5900

crore.

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ANALYSIS - BOD’s REPORT• During the year under review, almost 55 per cent of the

total income originated from international markets. • On the occasion of Cipla’s Platinum Jubilee, the Company

announced setting up of the Cipla Foundation by contributing a sum of 5 crore.

• The Directors recommend a final dividend of Rs. Per share on 80,29,21,357 equity shares of Rs.2 each for the year 2010-11 amounting to Rs. 160.58crore.

• The total dividend payout for the year 2010-11 inclusive of dividend tax would aggregate to Rs.261.53 crore.

• CIPLA contributed significant net foreign exchange earnings to the tune of USD 420 million.