PROJECT REPORTON

CORPORATE VALUATION

AT HYDERABAD STOCK EXCHANGE SECURITIES LIMITED

BY

DHARANI SOMASULA H.T. NO. 09QM1E0033

Submitted to JAWAHARLAL NEHRU TECHNOLOGY UNIVERSITY

In partial fulfillment for the award of the

MASTER’S DEGREE IN BUSINESS ADMINISTRATION

K.G. REDDY COLLEGE OF ENGINEERING & TECHNOLOGY(Affiliated to JNTU University)

CHILKUR (VILLAGE), MOINABAD (MANDAL),RANGA REDDY DISTRICT.

(2009-20011)

CERTIFICATE

This is to certify Ms. Dharani Somasula has carried out the project entitled “CORPORATE

VALUATION” Under my supervision, in partial fulfillment of the requirement for the award of

Master Degree in Business Administration (M.B.A) offered by JNTU University.

Vamshi Krishna Project Guide

Date:

ACKNOWLEDGEMENT

I take this opportunity to acknowledge, all the people who rendered their valuable advice

in bringing the project to fruition

At the outset, I acknowledge my parents and family, who are entirely responsible for

whatever I am today, and to the almighty for his showers of blessings, which we surely attribute

our success to.

I would also like to place on record my sincere thanks to Vamshi Krishna (Project

Guide) for their special guidance in doing this project successfully.

I also wish to thank to all my faculty members of K.G Reddy college of Engineering &

Technology and to all my friends & well wishers who has supported me all along in carrying out

this project.

I am thankful to the Management of Hyderabad Stock Exchange for their kind allowing

me to undertake this project and its various employees who lent their helping hand towards the

completion of the study. However, I am particularly indebted to Mr.Sarveshwar Reddy CEO of

Hyderabad Stock Exchange, for giving me the opportunity to undertake this project work in the

esteemed organization. I also thank to the project in charge Mr.Malleshwar for apprising me of

the situation with necessary background and helping me to complete this project.

DECLARATION

I DHARANI SOMASULA hereby declare that the project report submitted by me to K.G

REDDY COLLEGE OF ENGINEERING & TECHNOLOGY as a partial fulfillment for the

award of the Masters Degree in Business Administration of JNTU University is of my own

and it has not been submitted to any other institution or published any where before.

Further it is certified that this is an original work and any part of this work has not been

submitted for the award of any degree of any institution thereof.

DHARANI SOMASULA H.T.No. 09QM1E0033

CONTENTS

Page No

Chapter- I

1. Importance of the study ---------------------------------------------------------- 4

2. Objectives of the Study ---------------------------------------------------------- 6

3. Sources of Data & Methodology ------------------------------------------------ 7

4. Limitations of the Study ---------------------------------------------------------- 8

Chapter- ll

1. Profile of HSE ---------------------------------------------------------------------- 10

Chapter- lll

Industry & Companies Profiles:

1. Introduction of Pharmaceutical Companies ----------------------------------- 25

2. Aurobindo Pharmaceuticals Ltd ------------------------------------------------- 37

3. Dr. Reddy’s Laboratories Ltd ---------------------------------------------------- 40

Chapter- lV

1. Corporate Valuation --------------------------------------------------------------- 49

2. Analysis and Interpretation ------------------------------------------------------- 56

Chapter- V

1. Findings ------------------------------------------------------------------------------ 68

2. Conclusions & Suggestions ------------------------------------------------------- 70

3. Annexure ----------------------------------------------------------------------------- 72

4. Bibliography ------------------------------------------------------------------------- 80

EXECUTIVE SUMMARY

This project “Corporate Valuation” will give you a brief idea about Analyzing the

Balance Sheet and Profit and Loss Account of various pharmaceutical companies to know the

performance of the companies.

The Profit and Loss accounts and Balance Sheets of Aurobindo Pharmaceutical Limited

and Dr.Reddy’s Laboratories Limited are taken into account to know the firm’s value.

For the calculation of the value of the firm Discounted Cash Flow method has been

adopted. In this method following steps have been considered

1. Calculation of free cash flow,

2. Calculation of the cost of capital,

3. Calculation of Continuing value of the firm,

4. Calculation of firm value.

1. IMPORTANCE OF THE STUDY

Value maximization is the central theme in financial management. Owners of corporate

securities will hold management if they fail to enhance value. Hence all senior managers must

understand what determines value and how to measure it. While valuation was regarded as an

abstruse academic subject in the past, it is of considerable importance to managers now.

In the wake of economic liberalization, companies are relying more on the capital market,

acquisition and restructuring are becoming commonplace, strategic alliances are gaining

popularity, employee stock option plans are proliferating, and regulatory bodies are struggling

with tariff determination. In these exercises a crucial issue is: How should the value of a

company or a division thereof is appraised?

The goal of such an appraisal is essentially to estimate a fair market value of a company.

The most widely accepted the definition of fair market value was laid down by the Internal

Revenue Service of the US. It defined fair market value as “the price at which the property

would change hands between a willing buyer and a willing seller when the former is not under

any compulsion to buy and the latter is not under any compulsion to sell, both parties having

reasonable knowledge of relevant facts.” When the asset being appraised is “a company”, the

property the buyer and the seller are trading consists of the claims of all the investors of the

company. This includes outstanding equity shares, preference shares, debentures, and loans.

Valuation is the first step toward intelligent investing.

When an Investor attempts to determine the worth of her

shares based on the fundamentals, she can make informed

decisions about what stocks to buy or sell. Without

fundamental value, one is set adrift in a sea of random short-

term price movements and gut feelings.

VALUING A BUSINESS

Finding a value for a company is no easy task -- but doing so is an essential component of

effective management. The reason: it’s easy to destroy value with ill-judged acquisitions,

investments or financing methods. This module will take participants through the process of

valuing a company, starting with simple financial statements and the use of ratios, and going on

to discounted free cash flow methods and beyond.

How a business is valued depends on the purpose, so the second half of the day will be

devoted to implementation of the methods in different contexts -- such as valuing an acquisition

target, and valuing a company in distress, and using valuation in corporate restructuring

2. OBJECTIVES OF THE STUDY

1. To Study about Corporate Valuation of firms.

2. To know the value of firms using Discounted Cash Flow Technique (DCF).

3. To Calculate value of Dr Reddy’s Laboratories LTD and Aurobindo Pharmaceutical Ltd.,

4. To compare the values of the two firms.

3. SOURCES OF DATA AND METHODOLOGY

The study is based on purely secondary data and the data is taken from the Annual Reports

of the two companies for a period of four years ( 2008 – 11).The two companies taken for

analysis are AUROBINDO PHARMACEUTICALS LTD and Dr. REDDY’S

LABORATIRIES LTD.

The methodology includes

1. Discounted Cash Flow (FCF) technique, used to calculate the value of the two firms.

2. Percentages

3. Charts and Graphs

LIMITATIONS OF THE STUDY

1. Considering only the last 4 years Balance Sheet and Profit and Loss Account to evaluate

the value of the firm.

2. This study has been conducted only based on two companies namely (Dr. Reddy’s

Laboratories Limited, Aurobindo Pharmaceutical Limited), to examine the Financial

pattern of the Companies, which covers a period of four years from 2008-2011.

3. The major source of information being only through secondary source of data i.e. annual

reports of the company. As the information presented in such report is subject to

statutory obligation, business practices, accounting concepts and conventions and

generally Accepted standards of disclosure in the interest of the company and such

information may sometimes not reveal the correct Financial Positions of the company.

4. Using only Discounted Cash Flow Approach to find Firm Value.

5. Valuing a Firm using the Discounted Cash Flow Approach calls for forecasting Cash

Flows over an indefinite period of time for an entity that is expected to grow. This is

indeed a daunting proposition. Forecasting involves a good deal of Judgment and

Experience.

6. Continuing value formula of firm is based on assumptions.

INTRODUCTION OF THE STOCK EXCHANGE

Financial markets first came took prominence during the 17 th century at the start of the

industrial revolution. Business needed vast amount of capital to buy biggest premises and

machinery.

At the time of the industrial revolution there were few investors capable of supporting

business on the vast scale it required. The financial markets arose as result of several small

investors in industries. The first financial markets came about in Europe, to fund both the

industrial revolution and the expansion of the British Empire. The most common location for the

early financial markets was surprisingly in churches.

As the need of the financial trading grew, so did the places of the trading, in London for

example a lot of the London Stock Exchange. Financial markets today exist as a medium for

processing financial transactions. The most common form of financial trading is usually done on

stock exchange in the form of share dealing. Business generates extra investment capital by

releasing share onto the stock exchanges. While investor in shares make money by selling share

for a higher value than they are purchased for.

The majority financial markets are based in the financial capitals of the world such as the

London, New York and Stock Exchanges. Although the emergence of the interest has seen a rise

in the number internet stock exchange such as NASDAQ, as well as several on-line stockbrokers.

If we look at the London Stock Exchange (L.S.E) today, we can state the L.S.E is a

market place, which deal in:

Share trading.

Government bonds.

Debentures.

Insurance-Shot and long term.

Commodities

The way the LSE used to operate involved “Jobbers” and “stockbrokers”. Jobbers run

around the trading floor buying and selling shares for stockbrokers. The jobbers make money for

themselves by the difference between what stockbrokers are prepared to pay for shares and the

price at which they are actually bought and selling shares to the world at large. The system of the

LSE was little changed from the 1800’s until the 1980’s.

The LSE operated on a single capacity basis where it was there to provide information

about share values, while the stockbrokers simply bought and sold. The system worked fine until

the 1880’s where a result of increased public shares ownership meant a radical rethink of the

stock exchange.

The stock exchange needed to adopt a new approach. The statistics showed that during

the 1960’s there were 30 institutions that held most of the shares on sold on the stock exchange.

By 1981 the financial institutions held only 59% of shares.

The growth in the disposable income of society meant the stock exchange had to deal

with a much larger volume of transactions. The stock exchange decided to introduce dual

capacity into the trading floors, this is where the jobbers can now buy and sell shares like

stockbrokers while at the same time serving the stockbrokers. The function was designed to cope

with all the increased transactions.

The LSE is a private company, owned by its members, who are the stockbrokers who

compete against each other in share trading, bizarre.

THE HYDERABAD STOCK EXCHANGE

SECURITIES LIMITED

6-3-654,Somajiguda, Hyderabad – 500082

ORIGIN

Rapid growth in industries in the erstwhile Hyderabad State say efforts at starting the

Stock Exchange. In November, 1941 some leading bankers and brokers formed the share and

stock Brokers Association. In 1942, Mr. Gulab Mohammed, the Finance Minister formed a

Committee for the purpose of constituting Rules and Regulations of the Stock Exchange. Sri

Purushothamdas Thakur das, President and Founder Member of the Hyderabad Stock Exchange

performed the opening ceremony of the Exchange on 14.11.1934 under Hyderabad Companies

Act; Mr. Kamal Yar Jung Bahadur was the first President of the Exchange. The HSE started

functioning under Hyderabad Securities Contract Act of no.21 of 1352 under H.E.H. Nizam’s

Government as a Company Limited by guarantee. It was the 6th Stock Exchange recognized

under Securities Contract Act, after the premier Stock Exchanges, Ahmadabad, Bombay,

Calcutta, Madras and Bangalore Stock Exchange. All deliveries were completed every Monday

or the next working day.

The Securities Contracts (Regulation) Act, 1956 was enacted by the Parliament, passed

into Law and the rules were also framed in 1957. The Act and Rules were brought into force

from 20th February 1957 by the Government of India.

The HSE was first recognized by the Government of India on 29 th September 1958 as

Securities Regulation Act was made applicable to twin cities of Hyderabad and Secunderabad

from the date. In view of substantial growth in trading activities, and for the yeoman services

rendered by the Exchange, the Exchange was bestowed with permanent recognition with effect

from 29th September 1983.

The Exchange has a significant share in achievements of erstwhile State of Andhra

Pradesh to its present state in the matter of Industrial development.

OBJECTIVE

The Exchange was established on 18th October, 1943 with the main objectives to

create, protect and develop a healthy Capital Market in the State of Andhra Pradesh

to effectively serve the public and Investor’s interests.

The property, capital and income of the Exchange, as per the Memorandum and

Articles of Association of the Exchange, shall have to be applied solely towards the promotion of

the objects of the Exchange. Even in case of dissolution, the surplus funds shall have to be

devoted to any activity having to same objects, as Exchange or be distributed in Charity, as may

be determined by the Exchange or the High Court of judicature. Thus, in short, it is a Charitable

Institution.

The Hyderabad Stock Exchange Limited is now on its stride o completing its 62 nd year

in the history of Capital ‘Markers’ serving the cause of saving and investments. The Exchange

has made its beginning in 1943 and today occupies a prominent place among the Regional Stock

Exchanges in India. The Hyderabad Stock Exchange has been promoting the mobilization of

funds into the Industrial sector for development of industrialization in the State of Andhra

Pradesh.

GROWTH

The Hyderabad Stock Exchange Ltd., established in 1943 as a Non-profit making

organization, catering to the needs of investing population started its operations in a small way in

a rented building in Koti area. It had shifted into Aiyangar Plaza, Bank Street in 1987. In

September 1989, the then Vice-President of India, Hon’ble Dr. Shanker Dayal Sharma had

inaugurated the own building of the Stock exchange at Himayathnagar, Hyderabad. Later in

order to bring all the trading members under one roof, the exchange acquired still a larger

premises situated 6-3-654/A; Somajiguda, Hyderabad – 82, with a six storied building and a

constructed area of about 4,86,842 sft (including caller of 70,857 sft).

Constantly, there has been a tremendous perceptible growth which could be observed

from the statistics. The number of members of the Exchange was 55 in 1943,117 in 1993 and

increased to 300 with 869 listed companies having paid up capital of Rs.19128.95 croces as on

31/03/2000. The business turnover has also substantially increased to Rs.1236.51crores in 1999-

2000. The Exchange has got a very smooth settlement system.

GOVERNING BOARD

At present, the Governing Board consists of the following

MEMBERS OF THE EXCHANGE

Sri Hari Narayan Rathi

4-5-173, HASMATGUNJ,

SULTAN BAZAR, HYD-95

PH: 2475539/40

Sri Rajendra V. Naniwadekar

‘DEV-CHAYA’ 3-4-252/1,

KACHIGUDA, HYD – 057

PH: 27565016/27564154

Sri R.D. Lahoti

G-7, RAGHAVA RATNA TOWERS

CHIRAG ALI LANE, HYD – 01

PH: 23202791/2320265

SEBI NOMINEE DIRECTORS

Sri. N.S.Ponnunambi ---------------------Registrar of Companies [Govt. of India]

SULTAN BAZAR, KOTI, HYD – 195

PH:27201666/27209988

PUBLIC NOMINEE DIRECTORS

Dr. N.R. Sivaswamy (Chairman, HSE) ------------------Former CBDT Chairman

PLOT 113, H.NO.1038, ROAD NO.10

JUBLEE HILLS, HYD – 033

PH:23546824

Justice V. Bhaskara Rao ------------------------------ Retd.Judge High Court

H.NO. 17-127/145, EAST KALYANPURI

UPPAL, HYD – 39.

PH: 27201666/27209988.

Sri P. Muralimohan Rao (Mogili & co)--------------- Chartered Accountants

PLOT NO.632, ROAD NO.35

JUBLEE HILLS, HYD – 33.

PH: 23322119

Dr B.Brahmaiah -------------------------------------- G.M. JNIDB

404, SHRI SAIRAM RESIDENCY

JAIPRAKASH NAGAR, YELLAREDDYGUDA

HYD – 073. PHONE : 23000268

EXECUTIVE DIRECTOR

Sri S. SARVESHWAR REDDY

COMPUTERIZATION

The Stock Exchange business operations are equipped with modern communication

systems. Online computerization for simultaneously carrying out the trading transactions,

monitoring functions have been introduced at this Exchange since 1988 and the Settlement and

Delivery System has become simple and easy to the Exchange members.

The HSE On-line Securities Trading System was built around the most sophisticated

state of the art computers, communication systems, and the proven VECTOR Software from

CMC and was one of the most powerful SBT Systems in the country, operating in a WAN

environment, connected through 9.6 KBPS 2 wire Leased Lines from the offices of the members

to the office of the Stock Exchange at Somjiguda, where the Central System CHALLENGE-L

DESK SIDE SERVER made of Silicon Graphics (SGI Model no. D-95602-s2) was located and

connected all the members who were provided with COMPAQ DESKPRO 200/DESKTOP 5120

Computers connected through MOTOROLA 3265 v.34 MANAGEABLE STAND ALONE

MODEMS (28.8 kbps) for carrying out business from computer terminals located in the offices

of the members.

The HOST System enabled the Exchange to expand its operations later to other prime

trading centers outside the twin cities of Hyderabad and Secunderabad but also to link itself into

the inter-connected Market System (ICMS) proposed by the federation of Indian Stock Exchange

(FISE) to inter-connect various Regional Stock Exchanges in various states.

In the age of Electronic Trading, On-line information on rates from other major

markets was an essential input for efficiency. HSE provided On-line rates from BSE and NSE

which not only enhanced the ability of HOST terminals to attract the investors but also enable

the members to avail arbitraging opportunities between exchanges.

CLEARING HOUSE

The Exchange set-up a Clearing House to collect the Securities from all the Members

and distribute to each members, all the securities die in respect of every settlement. The whole of

the operations of the Clearing House were also computerized. At present through DP all the

settlement obligations are met.

INTER-CONNECTED MARKET SYSTEM (ICMS)

The HSE was the convener of a Committee constituted by the Federation of Indian

Stock Exchanges for implementing an Inter-connected Marker System(ICMS) in which the

Screen Based Trading systems of various Stock Exchange was inter-connected to create a large

National Market. SEBI welcomed the creation of ICMS.

The HOST provided the net-work for HSE to hook itself into the ISE. The ISE

provided the members of HSE and their investors, access to a large national network of Stock

Exchanges.

The Inter-connected Stock Exchange is a National Exchange and all HSE Members

could have trading terminals with access to the National Marker without any fee, which was a

boon to the Members of an Exchange/Exchanges to have the trading rights on National Exchange

(ISE), without any fee or expenditure.

ON-LINE SURVEILLANCE

HSE pays special attention to Marker Surveillance and monitoring exposures of the

members, particularly the mark to market losses. By taking prompt steps to collect the margins

for mark to market losses, the risk of default by members is avoided. It is heartening that there

have been no defaults by members in any settlement since the introduction of Screen Based

Trading.

IMPROVEMENT IN THE VOLUMES

It is heartening that after implementing HOST, HSE’s daily turnover has fairly

stabilized at a level of Rs. 20.00 crores. This should enable in improving our ranking among

Indian Stock Exchanges for 14th position to 6th position. We shall continuously strive to improve

upon this to ensure a premier position for our Exchange and its members and to render excellent

services to investors in this region. The number of transactions, turnovers of the Exchange,

number of listed companies and the paid up capital listed have grown up substantially as may

be seen from the following figures.

YEAR NUMBER OF

TRANSACTIONS

In Thousands

TURNOVERS

RS.In Crores

LISTED

COMPANIES

MARKET

CAPIT

Rs.In Crores

2010-11 515.949 587.75 236 2740.56

2009-10 421.985 676.00 274 10228.48

2008-09 603.635 984.46 372 13156.15

2007-08 860.642 1160.48 668 1858.71

2006-07 720.521 1107.30 727 20159.31

2005-06 240.64 479.98 851 22050.69

2004-05 427.83 1860.86 852 18705.10

2003-04 513.168 1269.90 856 18753.93

2002-03 513.440 1236.51 869 19128.95

2001-02 427.205 977.83 934 14717.08

2000-01 34.326 41.26

1999-00 4.203 4.58

1998-99 2.277 2.73 856 22126.65

1997-98 4.401 14.13 820 14456.95

SETTLEMENT GUARANTEE FUND

The Exchange has introduced Trade Guarantee Fund on 25/01/2000. This will insulate the

trading member from the counter-party risks while trading with another member. In other words,

the trading member and his investors will be assured of the timely completion of the pay-out of

funds and securities notwithstanding the default, if any, of any trading member of the Exchange.

The shortfalls, if any, arising from the default of any member will be met out of the Trade

Guarantee Fund. Several pay-ins worth of crores of rupees in all the settlements have been

successfully completed after the introduction of Trade Guarantee Fund, without utilizing any

amount from the Trade Guarantee Fund.

The Trade Guarantee Fund will be a major step in re-building this confidence of the

members and the investors in HSE. HSE’s Trade Guarantee Fund has a corpus of Rs.2.00 crores.

At present Rs. 3.20 Crores is stood in the credit of SGF.

The Trade Guarantee Fund had strict rules and regulations to be complied with by the members

to avail the guarantee facility. The HOST system facilitated monitoring the compliance of

members in respect of such rules and regulations.

CURRENT DIVERSIFICATIONS

A) DEPOSITORY PARTICIPANT

The Exchange has also become a Depository Participant with National Securities Depository

Limited (NSDL) and Central Depository Services Limited (CDSL)> Our own DP is fully

operational and the execution time will come down substantially. The depository functions are

undertaken by the Exchange by opening the accounts at Hyderabad of investors, members of the

Exchange and other Exchanges. The trades of all the Exchanges having On-line trading which

get into National depository Can also are settled at Hyderabad by this exchange itself. In short all

the trades of all the investors and members of any Exchange at Hyderabad in dematerialized

securities Can be settled by the Exchange itself as a participant of NSDL CDSL. The exchange

has about 15,000 B.O.accounts.

B) FLOATING OF A SUBSIDIARY COMPANY FOR THE MEMBERSHIP OF

MAJOR STOCK EXCHANGES OF THE COUNTRY

The Exchange had floated a Subsidiary Company in the name and style of M/s HSE

Securities Limited for obtaining the Membership of NSE and BSE. The Subsidiary had obtained

membership of both NSE and BSE. About 113 Sub-brokers may register with HSES, of which

about 75 sub-brokers are active. Turnover details are furnished here under.

YEAR NSE CASH

Rs. In Lakhs

NSE F&O

Rs. In Lakhs

BSE CASH

Rs.In Lakhs

2007-08 338236.81 -- --

2008-09 426143.50 16657.08 --

2009-10 617808.46 312203.56 17558.59

2010-11 484189.11 354370.71 39519.96

C) FACILITY TO TRADE AT NSE, DERIVATIVES TRADING, NET TRADING

ETC

The Exchange has incorporated a Subsidiary “HSE securities Limited” with a paid up capital

of Rs. 2.50 crores initially to take NSE Membership, so that the members of the exchange will

have access to the NSE’s Trading Screen as Sub-brokers, Derivatives Trading and Net Trading

etc. The Members of this Exchange will also have equal opportunity of participating in such

trading like any other NSE member.

1. INTRODUCTION OF PHARMACEUTICAL INDUSTRY

At the beginning of the 20th century, the pharmaceutical manufacturing industry consisted

mostly of small and regional companies; only a few manufacturers, such as Eli Lilly and Squibb,

had national presences. It was manufacturing process rather than research that characterized the

industry. Mahoney offered some facts that place the lack of concentration and size in the

American industry in perspective 3,512 firms failed between 1932 and 1934 at the height of the

Great Depression; in 1939 no single ethical drug manufacture had a sale volume as great as

Macy’s in New York or Hudson’s in Detroit; and the total sales volume for all 1,100

pharmaceutical companies was $150 million at the manufacturing level.

Era of Biological

The end of 19th century and beginning of 20th century saw the rise of biological as an

important part of the pharmaceutical industry. The discovery of some causative agents of disease

and the emerging science of bacteriology ushered in the era of biological. In the last decade of

the 19ih century diphtheria and tetanus antitoxins were prepared in laboratories in France and

Germany. Perhaps the most important product of the period was ant-diphtheria serum; it was an

effective therapy for one of the most feared childhood diseases of the day. In 1894 the H.K.

Mulford Company established the first biological laboratory in America in Philadelphia for the

production of a reliable antitoxin. By 1895 the New York City Board of Health Laboratories was

producing diphtheria antitoxin, as were health departments in other cities, including those in St.

Louis, Cincinnati, and Boston.

In 1901 tragedy struck in St. Louis when at least children died of tetanus after they received

contaminated diphtheria antitoxin that had been produced by the city’s health department.

Apparently, this situation was not unique. In Camden, N.J, numerous cases of tetanus were

reported in children in children who had been vaccinated for smallpox, and isolated reports were

received from other American and European cities. Ultimately, the need to regulate the interstate

sale of viruses, serums, toxins, and analogous products led the U.S. Congress to pass the

Biological Control Act of 1920. President Theodore Roosevelt and Drug Act, placing the

production of biological produce under the control of the forerunner of today’s Public Health

Service. Parke-Davis &Company and H.K. Mulford were among the first companies to produce

of biologics commercially. In 1902 Park-Davis would receive the first license to manufacture

biologics and Malford the second. Ernst Joseph Lederle resigned his position as director of the

New York Health Department to establish Lederle Antitoxin Laboratories in 1906, and biologics

licencenumber-17.

Food & Drug Act

The food &drug law of 1906 was passed primarily to control problems in the food

production industry. The law was expanded to cover drugs when the government could no longer

ignore problem in the proprietary pharmaceutical industry. However, the law’s requirements

only applied to interstate violations when a product was misbranded or adulterated. Harvey W.

Wiley’s Bureau of Chemistry in the U.S. Department of Agriculture was given responsibility for

enforcing the act. The Shirley Amendment of 1912 added the requirement that labels could not

contain any therapeutic statement “which is false and fraudulent”. The large, reputable national

companies with analytical laboratories were largely unaffected by the regulations and were, in

fact. Generally in favor of the regulations that were interested to curb abuses that discredited the

industry.

Federal Food, Drug and Cosmetic Act of 1938

The Food and Drug Administration was formed out of the predecessor Bureau of Chemistry

in 1931. In the fallowing years there were attempts to pass new legislation that would plug the

loopholes and strengthen the penalties of the 1906 act. However, these efforts received little

congressional support until another tragedy struck. Intending to introduce a liquid form of

sulfanilamide, Massengill, an old and respected firm, determined that diethlene glycol was a

satisfactory solvent. The company began selling Elixir of Sulfanilamide without testing it, a

number of people, mostly children, died as a consequence of the solvent’s toxicity. [Au: Please

provide a reference for the information in this paragraph. Under the1906 law Massengill could

only be prosecuted for mislabeling the product as an elixir, since it contained no alcohol. The

public outcry provided into interstate commerce. Importantly, it also establishes the requirement

for self-medication.

Research and Development

The American pharmaceutical industry of the early 20 th century was predominantly a

manufacturing industry. Individual companies started by serving a geographical region with an

assorted line of standard product or by championing a specific dosage from or manufacturing

process. The catalogs of the larger manufacturers ran to several hundred pages, and some

pharmacies would identify themselves as a supplier of Squibb products or those of Lilly, Wyeth,

or park- Davis. When one company brought a new product to market, it could be quickly copied

and supply by a number other companies. Innovation was not characteristic of industry.

World War I brought considerable changes to the pharmaceutical industry in the united states.

Numbers of German products had been patented and were being produced in the United states

under licensing arrangements. American scientists broke German patents for essential products,

such as salvarsan, procaine, and barbital. At the conclusion and auctioned. Sterling acquired the

rights to the Bayer aspirin trademark through this process.

A number of companies started doing research, first to differentiate themselves from other

producers and later to develop new products. At the beginning, research was largely limited to

sub standing claim of quality, purity, and assay. Lilly, Merck, Squibb, and others would later

establish their own research institutes, which functioned, as exceptions, such as insulin, the

major source of research were European companies and institution and American academic

institution. This situation changed after World War II.

World War II

At the beginning of World War II the United States was again depended on other countries

for essential raw materials and medicines. The world supply of medicinal grade quinine passed

to the control of the Japan’s in 1941. I.G. Farben patented Atabrine (quinacrine), a synthetic

alternative to quinine, in 1952 and supplied the chemical intermediates to Winthrop for final

production with the threat of war in 1940. Winthrop scientists learned how to make the

production from the raw material available in the United States and subsequently provided

millions of Atabrine tablets for Allied forces fighting in Malaria-ridden areas.

Pharmaceutical manufacturers worked together with the government on a number of projects

in support of the war effort. The two most notable examples were the production of dried plasma

and its constituents, the industry was able to device techniques and equipped to produce millions

of units of dried plasma from blood collected by the American Red Cross. By the end of the war

the American Red Cross had collected more than 13 million pints of blood, most of which was

processed into dried plasma and packaged for military use. Thirteen pharmaceutical companies

(Abbott, Armor, Ben, Venue, Cutter, Hyland, Lederle, Lilly, Park-Dives, Reichel,

Sharp&Dohme, Squibb, Upjohn&Wyeth) were involved in processing dried Plasma and albumin

for the military during the war Lilly alone processed more than two million units of dried

plasma. Penicillin was another triumph of team work. Initially research was undertaken by a

group of three coast companies (Merk, Pfizer and Squibb), but a group of companies based in the

Midwest (Abbot, Lilly, Park-Davis and Upjohn) quickly added their efforts as did three

companies unaffiliated with either group (Lederle, Reichel laboratories and Hyden Chemical). In

the 1043 total production was 425 million units and distribution was limited to the military. In

1944 the war production Board signed contracts with six companies (Ben, Venue, Cheplin,

Commercial Solvence, Cutter, Sterling and Wyeth) to boost production and in May the Board

established a civilian distribution mechanism. In June 1945 alone, 646 billion units were

produced.

INDIAN PHARMACEUTICAL INDUSTRY

“The Indian pharmaceutical industry is a success story providing

employment for millions and ensuring that essential drugs at

affordable prices are available to the vast population of this sub-

continent.”

Richard Gerster

The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered

units. It has expanded drastically in the last two decades. The leading 250 pharmaceutical

companies control 70% of the market with market leader holding nearly 7% of the market share.

It is an extremely fragmented market with severe price competition and government price

control.

The pharmaceutical industry in India meets around 70% of the country's demand for bulk

drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and

ingestible. There are about 250 large units and about 8000 Small Scale Units, which form the

core of the pharmaceutical industry in India (including 5 Central Public Sector Units). These

units produce the complete range of pharmaceutical formulations, i.e., medicines ready for

consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and

used for production of pharmaceutical formulations.

Following the de-licensing of the pharmaceutical industry, industrial licensing for most of

the drugs and pharmaceutical products has been done away with. Manufacturers are free to

produce any drug duly approved by the Drug Control Authority. Technologically strong and

totally self-reliant, the pharmaceutical industry in India has low costs of production, low R&D

costs, innovative scientific manpower, strength of national laboratories and an increasing balance

of trade. The Pharmaceutical Industry, with its rich scientific talents and research capabilities,

supported by Intellectual Property Protection regime is well set to take on the international

market.

ADVANTAGE INDIA

Competent workforce: India has a pool of personnel with high managerial and technical

competence as also skilled workforce. It has an educated work force and English is commonly

used. Professional services are easily available.

Cost-effective chemical synthesis: Its track record of development, particularly in the area of

improved cost-beneficial chemical synthesis for various drug molecules is excellent. It provides

a wide variety of bulk drugs and exports sophisticated bulk drugs.

Legal & Financial Framework: India has a 53 year old democracy and hence has a solid legal

framework and strong financial markets. There is already an established international industry

and business community.

Information & Technology: It has a good network of world-class educational institutions and

established strengths in information technology.

Globalization: The country is committed to a free market economy and globalization. Above all,

it has a 70 million middle class market, which is continuously growing.

Consolidation: For the first time in many years, the international pharmaceutical industry is

finding great opportunities in India. The process of consolidation, which has become a

generalized phenomenon in the world pharmaceutical industry, has started taking place in India.

THE GROWTH SCENARIO

India's US$ 3.1 billion pharmaceutical industry is growing at the rate of 14 percent per

year. It is one of the largest and most advanced among the developing countries.

Over 20,000 registered pharmaceutical manufacturers exist in the country. The domestic

pharmaceuticals industry output is expected to exceed Rs260 billion in the financial year 2002,

which accounts for merely 1.3% of the global pharmaceutical sector. Of this, bulk drugs will

account for Rs 54 bn (21%) and formulations, the remaining Rs 210 bn (79%). In financial year

2001, imports were Rs 20 bn while exports were Rs 87 bn.

STEPS TO STRENGTHEN THE INDUSTRY

Indian companies need to attain the right product-mix for sustained future growth. Core

competencies will play an important role in determining the future of many Indian

pharmaceutical companies in the post product-patent regime after 2005. Indian companies, in an

effort to consolidate their position, will have to increasingly look at merger and acquisition

options of either companies or products. This would help them to offset loss of new product

options, improve their R&D efforts and improve distribution to penetrate markets.

Research and development has always taken the back seat amongst Indian pharmaceutical

companies. In order to stay competitive in the future, Indian companies will have to refocus and

invest heavily in R&D.

The Indian pharmaceutical industry also needs to take advantage of the recent advances in

biotechnology and information technology. The future of the industry will be determined by how

well it markets its products to several regions and distributes risks, its forward and backward

integration capabilities, its R&D, its consolidation through mergers and acquisitions, co-

marketing and licensing agreements

The Indian pharmaceutical industry is highly regulated. The Government controls prices of

a large number of bulk drugs and formulations. Profit margins of players vary widely in both

domestic and export sales due to many factors.

DOMESTIC TRADE

More than 85% of the formulations produced in the country are sold in the domestic market.

India is largely self-sufficient in case of formulations. Some life saving, new generation under-

patent formulations continue to be imported, especially by MNCs, which then market them

in India. Overall, the size of the domestic formulations market is around Rs.160 bn and it is

growing at 10% p.a.

EXPORTS

Over 60% of India’s bulk drug production is exported. The balance is sold locally to other

formulators. India’s pharmaceutical exports are to the tune of Rs87bn, of which formulations

contribute nearly 55% and the rest 45% comes from bulk drugs. In financial year 2000, exports

grew by 21%. India’s pharmaceuticals imports were to the tune of Rs20.3bn in FY2001.

Imports have registered a CAGR of only 2% in the past 5 years. Import of bulk drugs have

slowed down in the recent years.

The exports of Pharmaceuticals during the year 1998-97 were Rs 49780 million. From a

meager Rs 46 crores worth of Pharmaceuticals, Drugs and Fine Chemicals exports in 1980-81,

pharmaceutical exports has risen to approximately Rs 6152 Crores (Prov.1998-99), a rise of

11.91% against the last year exports.

FUTURE PROSPECTS

As per WTO, from the year 2005, India will grant product patent recognition to all

new chemical entities (NCEs) i.e., bulk drugs developed then onwards. The Indian Government's

decision to allow 100 percent foreign direct investment into the drugs and pharmaceutical

industry is expected to aid the growth of contract research in the country. Technology transfer to

100 percent Indian subsidiaries of MNCs is expected only in 2005.

Indian pharmaceutical interests in making a mark on the global scene got a boost

when Dr. Reddy's licensed two of its anti-diabetic molecules to Novo Nordisk and when

Ranbaxy licensed its Novel Drug Delivery System (NDDS) of ciprofloxacin to Bayer. MNCs in

India faced the problem of having a very high DPCO coverage, weakening their bottom lines as

well as hindering their growth through the launch of new products. DPCO coverage is expected

to be diluted further in the near future benefiting the MNCs. New legislation is also expected in

the OTC segment increasing the number of brands in the Over the Counter (OTC) segment.

The Indian pharmaceutical industry is also getting increasingly U.S. FDA

compliant to

harness the growth opportunities in areas of contract manufacturing and research. Indian

companies such as Ranbaxy, Sun Pharma, and Dr. Reddy's are increasingly focusing on tapping

the U.S. generic market, projected to be around $18 billion by 2004.

RESEARCH & DEVELOPMENT

R&D is the key to the future of pharmaceutical industry. The pharmaceutical

advances for considerable improvement in life expectancy and health all over the world are the

result of a steadily increasing investment in research. There is considerable scope for

collaborative R & D in India. India can offer several strengths to the international R & D

community. These strengths relate to availability of excellent scientific talents who can develop

combinatorial chemistry, new synthetic molecules and plant derived candidate drugs.

R & D in the pharmaceutical industry in India is critical to find answers for some of

the diseases peculiar to a tropical country like India and also for finding solutions for unmet

medical needs. Industrial R & D groups can carry out limited primary screening to identify lead

molecules or even candidate drugs for further in vivo screening, pre-clinical pharmacology,

toxicology, animal and human pharmacokinetics and metabolic studies before taking them up for

human trials. In such collaborations, harmonized standards of screening can be assured following

established good laboratory practices.

The R & D expenditure by the Indian pharmaceutical industry is around 1.9% of the

industry’s turnover. This obviously, is very low when compared to the investment on R & D by

foreign research-based pharma companies. They spend 10 % - 16% of the turnover on R & D.

However, now that India is entering into the Patent protection area, many companies are

spending relatively more on R & D.

When it comes to clinical evaluation at the time of multi-center trials, India would provide

a strong base considering the real availability of clinical materials in diverse therapeutic areas.

Such active collaboration will be mutually beneficial to both partners. According to a survey by

the Pharmaceutical Outsourcing Management Association and Bio/Pharmaceutical Outsourcing

Report, pharmaceutical companies are utilizing substantially the services of Contract Research

Organizations (CROs).

Indian Pharmaceutical Industry, with its rich scientific talents, provides cost-effective

clinical trial research. It has an excellent record of development of improved, cost-beneficial

chemical syntheses for various drug molecules. Some MNCs are already sourcing these services

from their Indian affiliates.

The Pharmaceutical and Biotechnology Industry is eligible for weight deduction for R&D

expense up to 150%. These R&D companies will also enjoy tax holiday for 10 years. A

promotional research and development fund of Rs.150 crores is set up by the Government to

promote research and development in the pharmaceuticals sector.

2. AUROBINDO PHARMACEUTICAL COMPANY LIMITED

The company was born of a vision. Founded in 1986 by Mr. P.V. Ramaprasad Reddy,

Mr. K. Nityananda Reddy and a small, highly committed set of professionals, Aurobindo Pharma

became a public company in 1992. It commenced operation in 1988-89 with a single unit

manufacturing semi synthetic penicillin (SSPs) at Pondicherry.

Aurobindo Pharma had gone public in 1995 by listing its shares in various stock exchanges

in the country. The company is the market leader in the semi-synthetic penicillin drugs. It has a

presence in key therapeutic segments like SSPs, cephalosporin’s, antiviral, CNS, cardiovascular,

gastroenterology, etc.

Over the years, the company has evolved into a knowledge driven company. It is R&D

focused, has a multi product portfolio with multi country manufacturing facilities and is

becoming a marketing conglomerate across the world.

Aurobindo Pharma created a name for itself in manufacture of bulk actives, its area of core

competence. After ensuring a firm foundation of cost effective production capabilities and a

clutch of loyal customers, the company has entered the high margin specialty generic

formulations segment with a global marketing network.

The formulation business is systematically organized with a divisional structure, and has a

focused team for each key international market. Aurobindo believes in gaining volume and

market share in every business segment it enters.

The company has set up two state-of-the-art formulation plants. Aurobindo Pharma has

obtaining approvals from UK MCA, UK FDA and various regulatory bodies for these two plants.

This initiative would enter the developed markets.

The company has adopted cost efficient manufacturing processes and has continuously

widened the product portfolio. Older drugs have been replaced, and new introductions made to

meet the needs of society. There is a constant up gradation in product list. The company applies a

premium to remaining contemporary.

The company has forayed into custom synthesis business in a big way and has a dedicated

kilo lab to complement its current infrastructure in manufacturing and R&D. Aurobindo Pharma

has identified international operations as a major engine of growth and has hence expanded its

global network of marketing and manufacturing operations. Joint ventures\subsidiaries in China,

Brazil, and USA, will further expand its international franchise.

All the key indications of the company confirm the scorching pace of growth. For instance,

the turnover of Aurobindo Pharma has growth at a CAGR of 21 per cent, in the last four years

(FY 1999 to FY 2004). Similarly net profit grew at 32 per cent, in the same period. Over a period

Aurobindo Pharma has become a knowledge company with strong intellectual properly. It is now

positioned to ride the challenges with strengthened fundamentals.

MILESTONES

Major milestones of AUROBINDO PHARMACEUTICAL

COMPANY LIMITED are

2006 -07

Merger of APL Life Sciences Limited and Senor Organics Pvt. Limited the wholly owned subsidiary Companies with the Company.

Issue of USD 200 Million FCCBs. Achieved Turnover of Rs.23 billion. Establishment of a WOS for Research activities and another for manufacturing activities.

2005-06

Acquisition of Milpharm Limited through UK Subsidiary a generic formulation Pharmaceutical Company.

Acquisition of USFDA compliant cGMP facility in Dayton, New Jersey, USA. Best Management Award for the year 2005 from A.P Government. Issue of USD 60 Million FCCBs Termination of Joint Venture with Citadel

2004-05

Listed as one of Asia’s 100 best growth companies by Forbes Magazines.

Emerged as the largest producer of Semi-Synthetic Penicillin’s in the Continent and is

the Fourth Largest in the World.

Acquisition of sterile plant of Dee Pharma, Bhiwadi, Rajasthan Preferential issue of 25 lakhs shares to Promoters Establishment of a WOS for Marketing activity in USA and Canada

2003-04

Sub-division of shares from Rs.10/- to Rs.5/-

Preferential Issue of 23,70,000 shares to Merlion Fund (Standard Chartered Private

Equity)

2002-03

Preferential issue of 20 lakh shares to Promoters

Preferential issue of 20 lakh shares to Templeton

Merger of Ranit Pharma Limited and Calac Pvt. Limited with the Company

Establishment of a WOS for Marketing activity in the Netherlands

3. DR. REDDY’S LABORATORIES COMPANY LIMITED

Dr. Reddy’s Laboratories was founded by Dr Anji Reddy, a entrepreneur-scientist, in 1984.

The DNA of the company is drawn from its founder and his vision to establish India’s first

discovery led global pharmaceutical company. In fact, it is this spirit of entrepreneurship that has

shaped the company to become what it is today.

Dr Anji Reddy, having moved out of Standard Organics Limited, a company he had

successfully co-founded, started Dr. Reddy’s Laboratories with $ 40,000 in cash and $120,000 in

bank loan! The company with revenues of Rs.1947 crore (US $446 million), as of fiscal year

2005, was India’s second largest pharmaceutical company and the youngest among its peer

group.

The company has several distinctions to its credit. Being the first pharmaceutical company

from Asia Pacific (outside Japan) to be listed on the New York Stock Exchange (on April 11,

2001) is only one among them. And as always, Dr. Reddy’s chose to do it in the most difficult of

circumstances against widespread skepticism. Dr. Reddy’s came up trumps not only having its

stock oversubscribed but also becoming the best performing IPO that year.

Dr. Anji Reddy is well known for his passion for research and drug discovery. Dr. Reddy’s

started its drug discovery programme in 1993 and within three years it achieved its first

breakthrough by out licensing an anti-diabetes molecule to Novo Nordisk in March 1997. With

this very small but significant step, the Indian industry went through a paradigm shift in its

image from being known as just ‘copycats’ to ‘innovators’! Through its success, Dr. Reddy’s

pioneered drug discovery in India. There are several such inflection points in the company’s

evolution from a bulk drug (API) manufacturer into a vertically integrated global pharmaceutical

company today.

Today, the company manufactures and markets API (Bulk Actives), Finished Dosages

and Biologics in over 100 countries worldwide, in addition to having a very promising Drug

Discovery Pipeline. When Dr. Reddy’s started its first big move in 1986 from manufacturing and

marketing bulk actives to the domestic (Indian) market to manufacturing and exporting difficult-

to-manufacture bulk actives such as Methyldopa to highly regulated overseas markets, it had to

not only overcome regulatory and legal hurdles but also battle deeply entrenched mind-set issues

of Indian Pharma being seen as producers of 'cheap' and therefore ‘low quality’ pharmaceuticals.

Today, the Indian pharma industry, in stark contrast, is known globally for its proven high

quality-low cost advantage in delivering safe and effective pharmaceuticals. This transition, a

tough and often-perilous one, was made possible thanks to the pioneering efforts of companies

such as Dr. Reddy’s Laboratories.

Today, Dr. Reddy’s continues its journey. Leveraging on its ‘Low Cost, High Intellect’

advantage. Foraying into new markets and new businesses. Taking on new challenges and

growing stronger and more capable. Each failure and each success renewing the sense of purpose

and helping the company evolve.

With over 950 scientists working across the globe, around the clock, the company

continues its relentless march forward to discover and deliver a breakthrough medicine to

address an unmet medical need and make a difference to people’s lives worldwide. And when it

does that, it would only be the beginning and yet it would be the most important step. As Lao

Tzu wrote a long time ago, ‘Even a 1000 mile journey starts with a single step.’

ANALYSIS OF DR. REDDY’S LTD

History

Since its inception in 1984, DR. Reddy’s has chosen to walk the path of discovery and

innovation in health sciences. There has been a quest to sustain and improve the quality of life,

and they have has nearly two decades of creating safe Pharmaceutical solutions with the ultimate

purpose of making the world a healthier place. Their competencies cover the entire

Pharmaceutical value chain- API and intermediaries, finished dosages (branded and Generic) and

NCE research.

Their research center uses cutting edge technology and has discovered break through

Pharmaceutical solutions in selected therapeutic areas. In short span, they have filed 64 patents.

They are the first Indian company to out- license an NCE molecule for clinical trials. To

strengthen their research arm, they have set up a research subsidiary, Reddy Us therapeutics Inc,.

Atlanta, USA.

They export bulk actives branded formulations and generic formulations to over 60

countries. Their inherent strength lies in identifying relevant bulk drugs and formulations, and

selling them at affordable rates across the world. A few of their API such as Norfloxacin,

ciprofloxacin enjoy a large customer base. Their finished dosages have an enviable track record.

Some of them such as nise, omez, enam, ciprolet are among the top brands in India, and many

have become household names in near-regulated countries too. Their generic formulations have

also become very popular in quality- conscious regulated markets such as the US and Europe.

All this has been possible because of their innovative and sustained marketing efforts. They are

all set to spread their wings further and touch more lives across the globe.

VISION AND VALUES

CORE PURPOSE

“To help people lead healthier lives”

VISION

“To become a discovery led global pharmaceutical company”

VALUES They strive for excellence in everything they think, say and do. The values that

guide their thoughts and actions are:

1. Quality: They are dedicated to achieving the highest levels of quality in

everything they do to delight customers, internal & external, every time.

2. Respect for the Individual: They uphold the self-esteem and dignity of each other by

creating an open culture for expression of views and ideas.

3. Innovation & Continuous Learning: They create an environment of innovation and

learning that fosters, in each one of us, a desire to excel and willingness to experiment.

4. Collaboration &Teamwork: They seek opportunities to build relationship and leverage

knowledge, expertise and resources to create greater value across functions, business and

locations.

5. Harmony & Social Responsibility: They take utmost care to protect their natural

environment and serve the communities in which they live and work.

MILESTONES

Major milestones of Dr.Reddy’s Laboratories Limited are

2006

Acquires betapharm- the fourth-largest generics company in Germany for a total enterprise

value of € 480 million.

2005

Acquires Roche's API Business at the state-of-the-art manufacturing site

in Mexico with a total investment of USD 59 million.

Announces the formation of Perlecan Pharma: India’s First Integrated Drug Development

Company.

Announces India's first major co-development and commercialization deal

for its molecule Balaglitazone (DRF 2593), with Rheoscience.

Announces a unique partnership for the commercialization of ANDAs with

ICICI Venture.

2004

Acquires access to Drug Delivery Technology Platforms in the Dermatology segment

through the acquisition of Trigenesis

2003

Announces a 15-year exclusive product development and marketing agreement for OTC

drugs with Leiner Health Products in the US

Launches Ibuprofen, first generic product to be marketed under the “Dr. Reddy’s” label

in the US

2002

Conducts its first overseas acquisition – BMS Laboratories Limited and Meridian

Healthcare in UK

2001

Becomes the first Asia Pacific pharmaceutical company, outside Japan, to list on the New

York Stock Exchange. Listed with the symbol ‘RDY’ on April 11, 2001.

Out-licenses DRF 4158 to Novartis for up to US $55 million upfront payment

Launches its first generic product, Ranitidine, in the US market

Becomes the first Indian pharmaceutical company to obtain an 180-day exclusive

marketing rights for a generic drug in the US market with the launch of Fluoxetine 40 mg

capsules on August 3, 2001

2000

Dr. Reddy's Laboratories becomes India's third largest pharmaceutical company with the

merger of Cheminor Drugs Limited, a group company

Reddy US Therapeutics, a wholly-owned subsidiary, is established at Atlanta, US to

conduct target based drug discovery

1986

Dr.Reddy’s had gone for public issue.

1985

Dr.Reddy’s enters international market with the export of Methyldopa.

1984

Dr.Reddy’s is established with an initial capital of Rs.25lakhs.

BOARD OF DIRECTORS

Whole Time Directors

DR. Anji reddy-Chairmen

G. V. Prasad- Vice Chairmen and CEO

Satish Reddy- Chief Operating Officer

Independent and non whole time directors

DR. Omkar Gowsawmi

P.n. Devarajan

Ravi Bhootalingam

P.Satyanarayana Rao

Dr. v. Mohan

Dr. Krishna palepu

Anupam puri

STRATEGIC BUSINESS UNITS

Branded finished dosages

Generic finished activities

Bulk activities

Customs chemicals

Biotechnology

Critical care

Discovery research

1. CORPORATE VALUATION

Value maximization is the central theme in financial management. Owners of corporate

securities will hold management if they fail to enhance value. Hence all senior managers must

understand what determines value and how to measure it. While valuation was regarded as an

abstruse academic subject in the past, it is of considerable importance to managers now.

In the wake of economic liberalization, companies are relying more on the capital market,

acquisition and restructuring are becoming commonplace, strategic alliances are gaining

popularity, employee stock option plans are proliferating, and regulatory bodies are struggling

with tariff determination. In these exercises a crucial issue is: How should the value of a

company or a division thereof be appraised?

The goal of such an appraisal is essentially to estimate a fair market value of a company.

The most widely accepted the definition of fair market value was laid down by the Internal

Revenue Service of the US. It defined fair market value as “the price at which the property

would change hands between a willing buyer and a willing seller when the former is not under

any compulsion to buy and the latter is not under any compulsion to sell, both parties having

reasonable knowledge of relevant facts.” When the asset being appraised is “a company”, the

property the buyer and the seller are trading consists of the claims of all the investors of the

company. This includes outstanding equity shares, preference shares, debentures, and loans.

There are four broad approaches to appraising the value of a company:

1. Adjusted book value approach.

2. Stock and debt approach.

3. Direct comparison approach.

4. Discounted cash flow approach.

GUIDELINES FOR CORPORATE VALUATION

1. Understand how the various approaches compare

The discounted cash flow approach is ideally suited when

(a) Fairly credible business plans and cash flow projections are available for the explicit

forecast period of five to ten years or even more and

(b) The firm is expected to reach a steady state at the end of the explicit forecast period.

2. Use at least two different approaches

Every approach has its limitations. Hence exclusive reliance on a single approach may lead

to biases in valuation. Practical wisdom suggest that, in most real life valuations exercises, the

appraiser must use at least two different approaches. The final value indicator may be arrived at

by taking a weighted average of the valuation figures produced by two or more different

approaches. Weighting should be based on the judgment of the appraiser, not on a mechanical

formula.

3. Work with a value range

Valuation is an inherently imprecise, inexact, and uncertain exercise. Given an inescapable

indeterminateness characterizing valuation, it is naïve and foolhardy to attach great precision to

any single value estimate. A more sensible approach would be to look at two to three plausible

scenarios and define a value range, based on the value indicators for these scenarios, to take care

of the imponderables.

4. Go Behind Numbers

As we have seen, there are several value drivers, viz., invested capital, return on invested

capital, growth rate, and cost of capital. Often, appraisers have difficulty in getting a handle over

return on invested capital is mainly a function of entry barriers, the appraiser must go behind the

numbers and examine carefully entry barriers like economies of scale, product differentiation,

technological edge, access to distribution channels, patent protection, and governmental license.

5. Value Flexibility

The discounted cash flow approach to valuation is based on cash flows forecasted on the

basis of a current assessment of future prospects. This approach, in an important sense, is

incomplete as it does not take it to account the value of flexibility. Remember that the

management may change its policies in the light of future developments and can exercise a

variety of options suited to the needs of the unfolding environment. Flexibility and options are

quite valuable. To ignore them is to overlook an important source of value.

6. Blend Theory with Judgment

Valuing real company’s calls for combining theory, judgment, and experience. As Milton

Rock said: “In the end, even when armed with the results of various analyses such as DCF

values, secondary market trading levels, a history of comparable transactions, and estimates of

liquidation or replacement values, the evaluator moves from the arena of seeming precision and

science to the realm of judgment and art.”

7. Avoid Reverse Financial Engineering

In valuation exercises, the appraiser may sometimes start with a given value estimates and

then work backwards to specify the assumptions that produce the pre-determined value figure.

This may be referred to as ‘reverse financial engineering’. Obviously this is an elaborate attempt

to give a veneer of sophistication or provide pseudo-scientific justification for a foregone

conclusion. At best it is futile and at worst it is highly misleading. A professionally honest

appraiser should resist the temptation to do reverse financial engineering.

DISCOUNTED CASH FLOW APPROACH

Traditionally, the adjusted book value approach and the direct comparison approach were

used more commonly. From the 1990’s however, the discounted cash flow approach has

received greater attention, emphasis and acceptance. This is mainly because of its conceptual

superiority and its string endorsement by leading consultancy organizations. Valuing a firm

using the discounted cash flow approach is conceptually identical to valuing a capital project

using the present value method.

To sum up, valuing a firm using the discounted cash flow approach calls for forecasting cash

flows over an indefinite period of time for an entity that is expected to grow. That indeed a

daunting proposition. To tackle this task, the value of the firm is separated into two time periods.

VALUE OF THE FIRM = present value of cash flow during an explicit

forecast Period

+

Present value of cash flow after an explicit forecast

Period

The discounted cash flow approach to valuing a firm involves the following steps:

1. Forecast the cash flow during explicit forecast period.

2. Establish the cost of capital.

3. Determine the continuing value at the end of the explicit forecast period.

4. Calculate the firm value and interpret results.

1. FORECAST THE CASH FLOW DURING EXPLICIT FORECAST PERIOD

Calculating of free cash flow (FCF) is the post-tax cash flow generated from the operations of

the firm after providing for the investments in fixed assets plus net working capital required for

the operations of the firm.

FCF = NOPLAT-Net Investments

FCF = (NOPLAT + Depreciation) – (Net Investment + Depreciation)

Where Net Investment =

Net Fixed Assets at the + Net Current Assets at the

End of the year End of the year

_

Net Fixed Assets at the + Net Current Assets at the

Beginning of the year Beginning of the year

NOPLAT = EBIT – Taxes on EBIT

2. COST OF CAPITAL

Shareholders want to be suitably compensated for investing funds in the firm. The cost of capital

reflects what they expect. It is the discount rate used for converting the expected FCF into its

present value.

Cost of Capital(K) = [(%Ke*Ke) + (%kd*Kd)]

3. CONTINUING VALUE

It is the value of FCF beyond the explicit forecast period. Typically, the terminal value is the

dominant component in a company’s value.

FCFt + 1

CVt = ------------------

K - g

So where

CVt = Continuing value at the end of the year t

K = Weighted average cost of capital

g = Expected growth rate of FCF.

4. FIRM VALUE

The value of the firm is equal to the sum of the following components.

Present value of the free cash flow during the explicit forecast period

Present value of the continuing value

Value of non operating assets (which were ignored in FCF analysis)

Firm Value = PV (FCF) + PV (CV) + Non-operating assets.

AUROBINDO PHARMACEUTICAL COMPANY LTD

1. Calculation of Free Cash Flows

(Rs in crores)

Free Cash Flows

Years 2008 2009 2010 2011

Net Fixed Assets at

the end of the year

170.07 298.28 473 578.05

Net Current Assets at

the end of the year

420.12 530.88 728.38 786.14

Total 590.19 829.16 1201.38 1364.19

Net Fixed Assets at

the beginning of the

year

160.60 170.07 298.28 473

Net Current Assets at

the beginning of the

year

307.30 420.12 530.88 728.38

Total 467.9 590.19 8209.16 1201.38

Net Investment 122.29 238.97 372.22 162.81

NOPLAT 89.23 114.79 143.25 38.82

FCF -33.06 -124.18 -228.97 -123.99

FREE CASH FLOWS OF AUROBINDO PHARMACEUTICALS

(Rs in crores)

Years 2008 2009 2010 2011

FCF -33.06 -124.18 -228.97 -123.99

Free Cash Flows of Aurobindo

-33.06

-124.18

-228.97

-123.99

-250

-200

-150

-100

-50

0

1 2 3 4

Years

FCF Series1

INTERPRETATION

The FCF of Aurobindo has been decreasing over the period of the study. In the year 2008 it was -

33.06 and in 2011 it was -123.99.

CALCULATION OF COST OF CAPITAL (Aurobindo)

(Rs in crores)

Years 2008 2009 2010 2011

% of Equity

Shareholders Fund 361.36 533.39 756.37 788.59

Total Source of Fund 698.42 1096.69 1461.87 1708.69

Cost of Equity

Dividend 60.6 79.4 114.2 25.4

Shareholders Fund 698.42 1096.69 1461.87 1708.69

2008 2009 2010 2011

% of Debt

Loan Fund 336.0 525.47 618.39 829.12

Total Source of Fund 698.42 1096.69 1461.87 1708.69

2008 2009 2010 2011

Cost of Debt

Interest 42.39 42.59 32.24 39.99

Loan Fund 336.0 525.47 618.39 829.12

3.COST OF CAPITAL (Aurobindo)

(Rs in crores)

(% Ke*Ke)+(% Kd*Kd)

Years 2008 2009 2010 2011

% of Equity 0.51739 0.48636 0.51739 0.461517

Cost of Equity 0.08676 0.07239 0.078119 0.014865

Total 0.04488 0.03521 0.04041 0.00686

% of Debt 0.481085 0.47914 0.42301 0.485237

Cost of Debt 0.12616 0.08105 0.052135 0.048231

Total 0.06069 0.03883 0.02205 0.02340

Cost of Capital 0.10557 0.07404 0.06246 0.03026

% for Present Value 11% 7% 6% 3%

CONTINUING VALUE

Years 2008 2009 2010 2011

FCF -33.06 -124.18 -228.97 -123.99

K 11% 7% 6% 3%

G 26% 40% 45% 14%

Continuing Value = 1127.18

4. FIRM VALUE (Aurobindo)

(Rs in crores)

PV(FCF)

+PV(CV)

Years 2008 2009 2010 2011 Continuing

Value

FCF -33.06 -124.18 -228.97 -123.99 1127.18

Present Value 11% 7% 6% 3% 3%

Total -29.78 -108.46 -192.25 -110.16 1001.49

Total Firm Value = 560.84

Dr. REDDY’S LABORATORIES LTD

1. Calculation of Free Cash Flows (Dr. Reddy’s)

(Rs in crores)

Free Cash Flows

Years 2008 2009 2010 2011

Net Fixed Assets at

the end of the year

395.76 458.1 538.13 563.40

Net Current Assets at

the end of the year

1231.87 929.84 1025.7 1139.47

Total 1627.63 1387.94 1563.83 1702.87

Net Fixed Assets at

the beginning of the

year

348.35 395.76 458.1 538.13

Net Current Assets at

the beginning of the

year

1011.91 1231.87 929.84 1025.7

Total 1360.26 1627.63 1387.94 1563.83

Net Investment 267.37 239.69 175.89 139.04

NOPLAT 392.09 283.2 435.6 447.83

FCF 124.72 43.51 259.71 308.79

FREE CASH FLOWS OF Dr. REDDY’s LABORATORIES LTD

(Rs in crores)

Years 2008 2009 2010 2011

FCF 124.72 283.2 259.71 308.79

Free Cash Flow of Dr.Reddy's

124.72

283.2259.71

308.79

0

50

100

150

200

250

300

350

1 2 3 4

Years

FC

F fcf

INTERPRETATION

The Free Cash Flow of Dr. Reddy’s in 2008 was 124.72 crores and it increased to 283.2 crores

by 2009 and decreased to 259.71 crores by 2010 and it again increased to 308.79 crores by 2011.

Overall the FCF was increasing.

2. CALCULATION OF COST OF CAPITAL (Dr. Reddy’s)

(Rs in crores)

Year 2008 2009 2010 2011

% of Equity

Shareholders Fund 1806.92 2047.02 2047.01 2074.08

Total Source of Fund 1835.68 2105.24 2109.09 2149.97

2008 2009 2010 2011

Cost of Equity

Dividend 150 100 100 100

Shareholders Fund 1806.92 2047.02 2047.9 2074.08

2008 2009 2010 2011

% of Debt

Loan Fund 28.76 58.22 62.08 75.89

Total Source of Fund 1835.68 2105.24 2109.09 2149.97

2008 2009 2010 2011

Cost of Debt

Interest 6.05 4.23 1.48 9.96

Loan Fund 28.76 58.22 62.08 75.89

3. COST OF CAPITAL (Dr.Reddy’s)

(Rs in crores)

(% Ke*Ke)+(% Kd*Kd)

Years 2008 2009 2010 2011

% of Equity 0.984332 0.972345 0.970987 0.964701

Cost of Equity 0.083014 0.048851 0.048831 0.048214

Total 0.0817133 0.04750 0.047414 0.046512

% of Debt 0.015667 0.027654 0.02943 0.035298

Cost of Debt 0.2103616 0.072655 0.02384 0.131242

Total 0.003295 0.002009 0.000701 0.00463

Cost of Capital 0.085008 0.049509 0.048115 0.051142

% for Present Value 9% 5% 5% 5%

CONTINUING VALUE

Years 2008 2009 2010 2011

FCF 124.72 283.2 259.71 308.79

K 9% 5% 5% 5%

G 20% 15% 13% 9%

Continuing Value = -7719.75

4. FIRM VALUE (Dr.Reddy’s)

(Rs in crores)

PV(FCF)

+PV(CV)

Years 2008 2009 2010 2011 Continuing

Value

FCF 124.72 43.51 259.71 308.79 -7719.75

Present Value 9% 5% 5% 5% 5%

Total 114.42 39.46 224.35 254.04 -6351.09

TOTAL FIRM

VALUE

= -5718.82

COMPARISION OF VALUE OF THE FIRM’S

(Rs in crores)

Company AUROBINDO Dr.REDDY’S

value 560.84 -5718.82

Value of the Firms

560.84

-5718.82-7000

-6000

-5000

-4000

-3000

-2000

-1000

0

1000

Aurobindo Dr. Reddy's

Company

Val

ue

in C

rore

s

value

INTERPRETATION

The Value of Aurobindo Pharmaceutical Limited is 560.84 Crores and Dr. Reddy’s Laboratories

Limited is -5718.82 Crores. The Value of Aurobindo Pharmaceutical is greater than Dr. Reddy’s

Laboratories.

FINDINGS

FREE CASH FLOW

The FCF of Aurobindo Pharmaceutical has been decreasing over the period of the study. In the

year 2008 it was -33.06 crores and in 2011 it was-123.99 crores. Whereas the FCF of Dr.

Reddy’s has been increasing over the period of the study.In the year 2008 it was 124.72 crores

and in 2011 it was 308.79 crores.

COST OF CAPTIAL

The Cost of Capital of Aurobindo has been decreasing. It was 11% in the year 2008 and

decreased to 3% in the 2011. Whereas the cost of capital of Dr. Reddy’s also decreased and

remained constant. In the year 2008 it was 9% and decreased to 5% in 2009 and remained

constant at 5% in 2010 and 2011

CONTINUING VALUE

The Continuing Value of Aurobindo Pharmaceutical was positive at 1127.18 crores in the year

2011. Whereas the Continuing Value of Dr. Reddy’s was negative at -7719.75 crores in 2011.

VALUE OF THE FIRM

The value of Aurobindo Pharmaceutical was positive at 560.84 crores in 2011 and whereas the

value of Dr. Reddy’s was negative at -5718.82 crores in 2011.

The value of Aurobindo Pharmaceutical Ltd is higher than Dr. Reddy’s Laboratories

EQUITY DIVIDEND

The Equity Dividend of Aurobindo was 60.6 in 2008 and increased to 114.2 in 20010 and

decreased to 25.4 in 2011. Whereas Equity Dividend of Dr. Reddy’s has been increasing from 40

in 2007 to 150 in 2008 and remained constant at 100 from 2009 to 2011 the dividend of Dr.

Reddy’s is higher than Aurobindo.

CONCLUSIONS AND SUGGESTIONS

As the Corporate value of the firm Aurobindo Pharmaceutical Ltd has been showing higher

trend than the Dr. Reddy’s Laboratories Ltd, the investor should consider in investing

Aurobindo Pharmaceutical Ltd

The value of the Dr. Reddy’s Laboratories company is less than Aurobindo company,

hence it can suggested that the Dr. Reddy’ company should take considerable steps to

improve its overall firm value

Research and Technology: Research and Technology is back bone of the companies so

both companies should pay more attention to build effective tools to be used in research

and technology and widened it to the possible extend.

Marketing Strategies: The companies must develop more effective marketing strategies to

the greatest extent, which displays and meet customer’s requirement and help in meeting

the companies objectives and expectations.

Terms of offer: The investor must go through all the terms and conditions of the offer

document thoroughly and always deal in legal transactions.

The Investors has to make proper investments after making necessary calculations.

The Value of firm depends upon many factors. Some of them are

FCF - Free Cash Flow

K - Cost of Capital

g - Expected Growth rate of Free Cash Flow for ever

The FCF’s of Aurobindo Pharmaceutical were Negative over the period of the study (2008

– 2011), but it’s Value of Firm was positive at 560.84 crores. Whereas the FCF’s of Dr. Reddy’s

were Positive and increased over the period of study (2008 – 2011), but it’s Value of Firm was

negative at -5718.82 crores.

The reasons for above values may be due to changes in Cost of Capital and Growth Rate of

firms. The Cost of Capital of Aurobindo has decreased to 3% in 2011 from 11% in 2008 and the

Growth rate increased to 45% in 2010 and decreased to 14% by 2011. Whereas the Cost of

Capital of Dr. Reddy’s was 5% in 2011 and the Growth rate has decreased to 9% in 2011 from

20% in 2008.

ANNEXURE

Financial Analysis of Aurobindo Pharmaceuticals Ltd

Profit & Loss Accounts

(Rs in crores)

Years Mar-07 Mar-08 Mar-09 Mar-10 Mar-11

INCOME 12

mths

12

mths

12

mths

12

mths

12

mths

Sales Turnover 996.10 1037.7

2

1190.3

8

1341.0

7

1159.1

7

-Exercise Duty 46.91 62.37 76.46 81.18 74.15

Net Sales 949.1

9

975.3

5

1113.

92

1259.

89

1085.

02

Other Income 10.37 14.68 11.65 22.06 16.56

+Stock Adjustments 47.24 17.05 31.89 36.35 13.24

TOTAL INCOME(A) 1006.

80

1007.

08

1157.

46

1318.

30

1114.

82

EXPENDITURE

Raw Material 581.21 602.45 734.14 753.18 640.48

Purchase of Trading

Goods

115.63 64.72 20.63 33.90 16.96

Other Manufacturing

Exp

96.31 98.70 120.53 153.74 172.46

Payments to &

Provisions for

Employees

21.62 25.18 33.52 51.35 66.22

Administration &

Selling Expenses

44.86 43.23 42.78 87.31 95.3

TOTAL EXPENSES(B) 859.6

3

834.2

8

951.6 1079.

38

991.4

2

Operating profit

PBDIT (A-B) 147.1

7

172.8 205.8

6

238.9

2

123.4

-Interest 41.68 42.39 42.59 32.24 39.99

PBDT 105.4

9

130.4

1

163.2

7

206.6

8

83.41

-Depreciation 14.78 15.81 23.18 34.16 40.49

Profit Before Tax 90.71 114.6 140.0

9

172.5

2

42.92

-Extra-ordinary items - 10.0 - - -

PBT(post-ord- items) 90.71 104.6 140.0

9

172.5

2

42.92

-Tax 15.09 15.37 25.3 29.27 4.1

NET PROFIT 75.62 89.23 114.7

9

143.2

5

38.82

Earnings per share(rs) 33.82 33.89 22.73 26.54 6.91

Preference Dividend 1.9 - - - -

Equity Dividend 60.6 60.6 79.4 114.2 25.4

Balance Sheets of Aurobindo Pharmaceutical Ltd

(Rs in crores)

Years Mar-07 Mar-08 Mar-09 Mar-10 Mar-11

SOURCES OF FUNDS 12

mths

12

mths

12

mths

12

mths

12

mths

Total Share Capital 20.0 20.67 23.25 25.38 25.39

Equity Share Capital 20.0 20.67 23.25 25.38 25.39

Preference Share Capital 0 0 0 0 0

Reserves & Surplus 256.42 340.69 510.14 730.99 763.2

Share Capital Suspense 0.2 - - - -

Equity Share Warrants - 1.06 2.15 35.00 35.00

Secured Loans 137.45 181.4 406.57 514.61 624.4

Unsecured Loans 88.45 154.51 118.90 103.78 204.72

Deferred Tax Liability - - 35.95 52.11 55.98

TOTAL 502.52 698.42 1096.96 1461.87 1708.69

APPLICATION OF FUNDS

Gross Block 198.19 219.12 378.91 584.41 729.74

Less: Depreciation 37.59 49.05 80.63 111.41 151.69

Net Block 160.60 170.07 298.28 473.00 578.05

Capital Work-in-Progress 10.86 55.96 115.49 111.60 176.50

Investments 23.76 73.73 413.77 584.60 151.27

Current Assets Loans &

Advances

Inventories 172.99 125.46 203.52 259.64 323.58

Sundry Debtors 201.30 367.57 407.65 453.85 441.38

Cash & Bank Balances 4.55 11.13 33.15 37.41 13.8

Loans & Advances 63.75 70.45 107.07 149.45 213.47

Interest Accrued on

Investments

- 0.02 0.03 0.03 0.03

Other Current Assets - - - 0.34 0.02

442.59 574.63 751.42 903.72 992.28

Less: Current Liabilities 127.92 142.45 206.49 155.09 195.19

Provisions 7.37 12.06 14.05 20.25 10.99

135.29 154.51 220.54 175.34 206.14

Net Current Assets 307.3 420.3 530.88 728.38 786.14

Miscellaneous Expenditure - 0.65 - - -

TOTAL 502.52 698.42 1096.96 1461.87 1708.69

Financial Analysis of Dr. Reddy’s Ltd

Profit & Loss Acconts

(Rs in crores)

Years Mar-07 Mar-08 Mar-09 Mar-10 Mar-11

Income 12

mths

12

mths

12

mths

12

mths

12

mths

Sales Turnover 1565.7

4

1598.3

3

1740.2

0

1740.2

0

1825.0

8

-Exercise Duty 78.97 84.72 79.98 73.57 57.38

Net Sales 1486.7

7

1513.

61

1661.2

2

1666.6

3

1767.

70

Other Income 85.89 46.46 75.74 75.74 69.58

+Stock Adjustments 11.02 23.64 9.66 9.66 29.62

TOTAL INCOME(A) 1583.6

8

1583.

71

1746.6

2

1752.0

3

1866.

9

EXPENDITURE

Raw Material 402.71 426.82 526.81 590.96 574.04

Power & Fuel 32.84 38.12 41.23 43.96 45.35

Employee cost 100.59 126.63 153.83 153.84 182.36

other manufacturing

exp

83.008 105.39 131.28 230.15 293.30

Selling &

administration

expenses

282.3 248.06 444.74 169.52 186.59

Miscellaneous

expenses

149.82 40.64 69.43 34.56 23.98

preoperative exp

capitalized

0 0 0 0 0

TOTAL

EXPENSES(B)

1051.3

4

1085.

66

1367.3

2

1222.9

9

1305.

62

Operating profit 446.45 451.59 303.56 432.56 332.26

PBDIT (A-B) 532.34 498.0

5

379.3 529.04 561.2

8

-Interest 14.15 6.05 4.23 1.48 9.96

PBDT 518.19 492 375.07 527.56 551.3

2

-Depreciation 47.42 60.84 71.72 71.72 92.46

Profit before Tax 518.19 492 375.07 527.56 551.3

2

-Extra-ordinary items 47.42 60.84 71.72 71.72 92.46

PBT(post-ord- items) 470.77 431.1

6

303.35 455.84 458.8

6

-Tax 11.12 39.07 20.15 20.24 11.01

NET PROFIT 459.65 392.0

9

283.2 435.6 447.8

3

Earnings per

share(rs)

42.9 58.4 43.8 52.3 57.9

Preference Dividend 0 0 0 0 0

Book value(rs) 190.54 236.14 237.51 294.24 328.45

Equity Dividend 40 150 100 100 100

Balance sheet of Dr reddy’s Ltd

( Rs in crores)

YearsMar-07 Mar-08 Mar-09 Mar-10 Mar-11

Sources of fund 12 mths 12 mths 12 mths 12 mths 12 mths

Total share capital 38.26 38.26 38.26 38.26 38.26Equity share capital 38.26 38.26 38.26 38.26 38.26preference share capital 0 0 0 0 0Reserves 1419.73 1768.66 2008.76 2008.75 2035.82Revaluation Reserve 0 0 0 0 0Net worth(A) 1457.99 1806.92 2047.02 2047.01 2074.08

Secured loans(a) 5.3 4.29 35.64 36.45 56.24un secured loans(b) 8.52 24.47 22.58 25.63 19.65Total Debt(a+b)(B) 13.82 28.76 58.22 62.08 75.89Total Liabilities(A+B) 1471.81 1835.68 2105.24 2109.09 2149.97

Application of Funds

Gross Block 569.94 685.12 810.95 956.45 1035.65Less: Accum.Depreciation 221.56 289.36 352.85 418.32 472.25Net Block(I) 348.35 395.76 458.1 538.13 563.40

Capital work in progress(II) 47.61 51.41 105.25 145.36 186.32

Investments(III) 63.94 156.64 612.05 254.35 365.41Inventories 189.81 240.11 258.01 231.57 254.84Sundry Debtors 444.95 432.11 444.05 489.23 462.63Cash & Bank Balance 488.56 688.4 408.08 543.36 498.21Total current asset 1123.32 1360.96 11110.14 1264.16 1215.68Loans & Advances 135.88 201.28 233.56 287.36 331.42(+)Total CA, Loans & Advances (IV)

1259.20 1562.24 1343.70 1551.52 1547.1

Deferred credit 4.73 4.29 3.7 5.21 5.11Fixed deposit 0 0 0 0 0Current Liabilities 219.26 275.14 355.73 425.65 512.34(+)Provision 28.03 55.23 58.13 62.13 68.52Total CL & Provisions(VI) 247.29 330.37 413.86 487.78 580.86NET Current Assets 1011.91 1231.87 929.84 1025.7 1139.47

Miscellaneous Expenses(V) 0 0 0 0 0

Total Assets{(I:V)-VI 1471.81 1835.68 2105.24 2345.52 2541.36Contingent Liabilities 151.65 166.7 226.69 295.32 364.25

BIBLIOGRAPHY

Prasanna Chandra, “Financial Management”, Sixth Edition.

I.M.Panday, “Financial Management”.

Websites referred

www.auribindo.com

www.drreddys.com

www.google.com

www.cfmfin@hotmail.com

www.indiainfoline.com