PROJECT REPORT ON WORKING CAPITAL MANAGEMENT BY

ANKIT GARG 11PBA011 A Study conducted at RANBAXY PHARMACEUTICALS LTD Under the guidance of ASSTT. PROF. POONAM BASSI In partial fulfillment of the MASTER DEGREE OF BUSINESS ADMINISTRATION (MBA) AT

BADDI UNIVERSITY OF EMERGING SCIENCES AND TECHNOLOGY

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DECLARATION
I, Ankit Garg student of Baddi University of Emerging Sciences and Technology, School of Management Studies, hereby declare that project report on WORKING CAPITAL MANAGEMENT is the record of original work carried out by me and the information provided in the study is authentic to the best of my knowledge. This report has not been submitted to any other University or Institution for the award of any degree. Nothing is copied in this project, if anything is found to be copied, I will be solely responsible for that.

ANKIT GARG

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PREFACE
Businesses face ever increasing pressure on costs and growing Financing requirements as a result of intensive competition in globalize markets. Many of them are therefore considering ways of making themselves more efficient. In identifying possible options it is important not to focus exclusively on income and expense items, but also to take the balance sheet into account. Improvements to the existing capital structure can free up valuable resources and bring increased efficiency. Active working capital management is an extremely effective way to increase enterprise value. Optimizing working capital results in a rapid release of liquid resources and contributes to an improvement in free cash flow and to a permanent reduction in inventory and capital costs. The attempt is aimed to analyze the various aspects of working capital management of Ranbaxy and compare it with that of Dr Reddys and with industry standards. By adopting various calculation and analysis and then making interpretation with the solution of specific problem, best efforts on giving appropriate suggestion to the company have been made. To this context various methods and techniques like ratio analysis, statistical tool and working towards the optimal level of working capital, estimation of working capital and various ratios have been used to draw an exact picture of company.

ABSTRACT
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A project work is a mandatory requirement for the Business Management Program. This type of study aims at exposing the young prospective executive to the actual business world. This project gives me knowledge about the working capital of the company. Working capital refers to the funds required for day to day operations of the organization. It is very effective way to judge a companys cash flow prospects, as cash is like blood life for any company. The report initially begins with the company profile, followed by the detailed analysis of company, like businesses of the company, products offered by the company, financials of the company, etc The report involves a lot of research to understand what exactly working capital is, why companies require working capital, what are the ideal ratios for Working Capital a Company should maintain, etc. The purpose is to develop an action plan that creates such a working capital that will upgrades and standardize the quality of business analysis. Various tools, including financial tools, are used in this project to calculate and compare the financial position of the company, e.g. ratio analysis, SWOT analysis, etc.

TABLE OF CONTENTS
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CHAPTER-1 Introduction Industry Profile Organizational profile Working capital CHAPTER-2 Need and Scope of study Objective of study CHAPTER-3 Literature review CHAPTER-4 Methodology CHAPTER-5 Financial performance of Ranbaxy Liquidity Ratios Profitability Ratios Liquidity Analysis Ratio Analysis Credit Analysis & Policies CHAPTER-6 Limitations Finding of Study Recommendations and Suggestions Conclusion CHAPTER-7
Bibliography

06 07 10 16

23 24

25

27

31 35 37 40 45

51 52 54 59

Appendices

60 61

CHAPTER-1
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INTRODUCTION
A firm is required to maintain a balance between liquidity and profitability while conducting its day to day operations. Liquidity is a precondition to ensure that firms are able to meet its short-term obligations and its continued flow can be guaranteed from a profitable venture. The importance of cash as an indicator of continuing financial health should not be surprising in view of its crucial role within the business. This requires that business must be run both efficiently and profitably. In the process, an asset-liability mismatch may occur which may increase firms profitability in the short run but at a risk of its insolvency. The purpose of this project is to examine the trends in working capital and its impact on firms performance. The trend in working capital needs and profitability of firm is examined to identify the causes for any significant differences. The rest of the report is organized as follows: It starts with the Industry profile & then a detailed introduction of the company. The following section of the report looks briefly at the theoretical underpinnings and the relevant literature which attempts to explain the link between poor performance and working capital management. After that, the analysis part covers in depth analysis of working capital of Ranbaxy. Finally the conclusion is made & it has been observed that the overall structure of working capital of the co. is good and it is a growing concern. The company uses various techniques to maintain its working capital. Some suggestions have been given on the basis of the conclusion.

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INDUSTRY PROFILE
Industry Definition 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 subcontinent. Richard Gerster
The Indian Pharmaceutical Industry today is in the front rank of Indias science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology.

Facts about the Role of Pharmaceutical Industry in Indian Gross Domestic Product (GDP):
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Indian Pharmaceutical Industry ranks fourth in the world, pertaining to the volume of sales. The estimated worth of the Indian Pharmaceutical Industry is US$ 6 billion. The growth rate of the industry is about 13% per year. Almost most 70% of the domestic demand for bulk drugs is catered by the Indian Pharma Industry. The Pharma Industry in India produces around 20% to 24% of the global Generic drugs. The Indian Pharmaceutical Industry is one of the biggest producers of the Active Pharmaceutical Ingredients (API) in the international arena. The Indian Pharma sector leads the science-based industries in the country. Around 40% of the total pharmaceutical produce is exported. 55% of the total exports constitute of formulations and the other 45% comprises of bulk drugs. The Indian Pharma Industry includes small scaled, medium scaled, large scaled players, which totals nearly 300 different companies. As per the present growth rate, the Indian Pharma Industry is expected to be a US$ 20 billion industry by the year 2015. The multinational companies, investing in research and development in India may save up to 30% to 50% of the expenses incurred The cost of hiring a research chemist in the US is five times higher than its Indian counterpart.

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 in Pharmaceutical Industry.

THE GROWTH SCENARIO India's US$ 3.1 billion pharmaceutical industry is growing at the rate of
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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 2011, which accounts for merely 1.3% of the global pharmaceutical sector. Of this, bulk drugs will account for Rs 54 billion (21%) and formulations, the remaining Rs 210 billion (79%). In financial year 2012, imports were Rs 20 billion while exports were Rs87 bn.

The above graph shows the percentage of pharmaceutical products export by various countries.

INTRODUCTION TO RANBAXY

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Ranbaxy Laboratories Limited (Ranbaxy) is

a research based international pharmaceutical company serving customers in over 150 countries. For more than 50 years, we have been providing high quality, affordable medicines trusted by healthcare professionals and patients across geographies.
Ranbaxy Laboratories Ltd. was incorporated in June 1961, in the name of M/S LEPITIT RANBAXY LABORATORIES LTD and it commenced its business in MARCH 1962, in technical and financial collaboration with an international company named LEPTIT SPA, MILAN, ITALY. Ranbaxy Laboratories Pvt. Ltd. merged with Leptit Ranbaxy Laboratories Pvt. Ltd. in 1962 Ranbaxy and company also merged with this company in 1966. The collaboration arrangement with M/S LEPTIT was terminated in 1966; after which Indian nationals acquired the entire share capital of the company. Therefore the word Leptit was removed from the name of the company. The name is known as RANBAXY LABORATORIES LIMITED. In 1973 the company issued shares to the general public and became a full fledged PUBLIC LIMITED COMPANY . At present Ranbaxy have four plants for the manufacture of bulk drugs two at Mohali, one at Dewas (M.P) AND Another at Toansa near ROPAR. At

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present, Ranbaxy is the second most Indian company engaged in the manufacturing of Pharmaceuticals, Bulk Drugs and Fine Chemicals.

Mission
Enriching lives globally, with quality and affordable pharmaceuticals

Vision
"Achieve significant business in proprietary prescription products With a strong presence in developed markets"

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VALUES OF RANBAXY LABORATORIES LIMITED

1. Achieving customer satisfaction is fundamental to our business 2. Provide products and services of the highest quality 3. Practice dignity and equity in relationships and provide opportunities 4. 5. 6.

7.

for our people to realize their full potential Ensure profitable growth and enhance wealth of the shareholders Foster mutually beneficial relations with all our business partners Manage our operations with high concern for safety and environment Be a responsible corporate citizen

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OBJECTIVES OF RANBAXY LABORATORIES LTD.

1. 2. 3. 4. 5. 6. To be a leader in the Pharmaceutical industry. To be a profitable company with a steady growth in earnings. To set an example as a socially responsible company. To diversify in health care related areas. To strive for excellence and continuous improvement in all spheres. To improve the quality of life of people by providing better services and quality products.

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JOINT VENTURE OF THE COMPANY.

2000 Ranbaxy files IND Application for Asthma Molecule- RBx4638, after successful completion of pre-clinical studies. Ranbaxy acquires Bayers Generics business (trading under the Name of Basics) in Germany. Ranbaxy forays into Brazil, the largest pharmaceutical market in South America and achieves global sales of U.S. $ 2.5 million in this market. Ranbaxy took a significant step forward in Vietnam by initiating the Setting up of a new manufacturing facility with an investment of U.S. $ 10 million. Ranbaxy achieved a turnover of U.S. $ 502 million for the year 2002 and moved closer to achieving a target of 1 billion dollar by 2004. Receives approval from FDA to market Midazolam Hydrochloride Syrup 2 Mg base/ ml. Ranbaxy receives and approval from FDA to manufacture and market Cefpodoxime Proxetil for Oral Suspension, Lisinopril + Hydrochlorothiazide Tablets Us, Terazosin Hydrochloride Capsules and Amoxcillin Oral suspension USP.Heralding the companys entry into the Indian OTC market. Ranbaxy received the economic times award for corporate excellence-for the company for year. Ranbaxy signed an agreement to acquire RPG (Aventis) SA along with its fully owned subsidiary, OPIH SARL, in France
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2001

2002

2003

2004 2005

Ranbaxy launched its first range of herbal projects. Acquisition of additional stake in Ranbaxy Pharmaceutical Ltd., Brazil Ranbaxy announced the acquisition of Be-Tabs Pharmaceuticals (Pty) Limited Acquired by the Japanese giant, the $9.62 billion Daiichi Sankyo, ranked No. 3 in Japan

2008

BRIEF INTRO OF RANBAXY PLANTS IN INDIA

In the chemical division, various bulk drugs are manufactured. The chemical division had three units in Punjab. One is located at Toansa, two are located at Mohali and one unit is located at Dewas near Indore in Madhya Pradesh, where Ciprofloxacine is manufactured. In the plant of the chemical division, various drugs like Antibiotics, Anti-malarial, Antibacterial and Antiulcer are manufactured. One of the older plants of Ranbaxy was closed after the accident in June 2003.the second one is still working The 1991, the Toansa plant started functioning in 1992 and the Dewas plant started functioning in 1999. Various plant heads independently manage all these plants. In each unit, separate facilities with respect to the manufacture of drugs, along with their manufacturing areas have been provided. This is required to reduce the chances of any cross contamination under the drug laws and to comply with good manufacturing practices. At Mohali plant, separate blocks have been provided for the preparation of each drug .The Toansa, Mohali and Dewas plants are planned in such a way that their system, facilities, manufacturing practices and standards meet the requirements of FDA. Mohali Plant also mainly in the manufacturing of Active Pharmaceutical Ingredients (API). The Plant is divided into two plant areas A8 and A9

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WORKING CAPITAL MANAGEMENT

INTRODUCTION
As levers of financial management go, none bears more weight than working capital. The viability of every business activity rests on daily changes in receivables, inventory and payables. Its the lifeblood of the business, and every managers primary task to keep it moving and put shareholders capital to work efficiently and effectively. Working Capital is the capital used for the day-to-day operations in the organization. It denotes the money that circulates in the organization for smooth functioning of the organization. Good management of working capital will generate cash, help to improve the profits, solidify the relationships with suppliers and customers, and reduce risks. This project was undertaken to analyze the working capital policies, working capital management of the company and to reduce down their problems and finding the solutions with respect to the working capital management of the company. Working in an organization, especially with a brand like RANBAXY the main objective is to learn maximum from the intellectually stimulating mentors and multi-dimensional colleagues in the organization.
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 To study and compare the working capital of RANBAXY with its competitors in the industry To see whether the company is prepared with enough working capital to face any kind of contingencies. To assess Liquidity position, Long term solvency, operational efficiency, and overall profitability of RANBAXY

Value Addition for the company

A well designed and implemented working capital management is expected to contribute positively to the creation of a firms value The purpose of this project is to examine the trends in working capital management and its impact on firms performance. This project would help Ranbaxy in comparing its financial status with its competitors. The in depth analysis might bring out some key issues that may be ignored but may prove significant for the company. Various analyses conducted for analyzing the working capital will prove beneficial to the company. Working Capital: Working Capital includes the current assets and current liabilities areas of the balance sheet. Working Capital can be called by its alternative name - "Net Current Assets. Working Capital Management is the process of planning and controlling the level and mix of current assets of the firm as well as financing these assets. It may be regarded as a life blood of a business; its effective provision can do much to ensure the success of a business, while its efficient management may lead not only to loss of profits but loss to ultimate downfall in a going concern. Analysis of working capital is of major importance to internal and external analysis because it is closely related to the current day-to-day operations.

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WORKING CAPITAL INCLUDES FOUR BALANCE SHEET ITEMS

Stock - stocks of raw materials, partly completed production and finished goods awaiting sale. Debtors - amounts owed to the company, mainly from customers in respect of sales made on credit. Creditors - amounts owed BY the company, mainly to suppliers of raw materials, services (electricity, water, telephone, rent, etc.) but also, possibly, unpaid tax demands, unpaid dividends and other items. Cash - bank balances, cash holdings and short-term investments.

The three major characteristics of current assets are: They have a short life span. Cash balances are held only for a week or so. They are rapidly transformed into other assets form.

Some of the decisions taken in working capital management are:

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An adequate supply of raw materials. Cash to meet the operational payments. The ability to grant credit to customers. Investment in various current assets. Appropriate sources of fund to finance current assets. Proportion of long term and short term funds to finance current assets.

Objective of Working Capital Management:

Two fold objective of working capital management Maintenance of working capital, and Availability of ample funds at the times of need.

Uses of Working Capital:

The typical uses of working capital are as follows: Adjusted net loss from operations Purchase of non-current assets: Repayment of long-term debt (debentures or bonds) and short-term debt (bank borrowing) Redemption of redeemable preference shares Payment of cash dividend.

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ADVANTAGES OF ADEQUATE WORKING CAPITAL

Increase in debt capacity and goodwill: Adequate working capital represents the financial soundness of the company. If one company is financially sound it would be able to pay its creditors timely and properly. It will increase companys goodwill. Thus a firm with adequate working capital can raise requisite funds from market, borrow short-term credit from banks, and purchase inventories of raw materials, etc., for the smooth operation of its business. Increase in production efficiency: With adequate working capital the firm can smoothly carryout research and development activities and thus adds to its production efficiency. Exploitation of favorable opportunities: In the presence of adequate working capital, a company can avail the benefits of favorable opportunities. Adequate working capital will help the company to have bulk purchases, seasonal storage of raw material etc., which would reduce the cost of production. Meeting contingencies and adverse changes: A company can easily face certain business and economic crises. A company having adequate
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working capital can successfully meet contingencies such as business oscillations, financial crisis arising from heavy losses etc. Available cash discount: Maintenance of adequate working capital enables a company to avail the advantage of cash discount by making cash payments for to the suppliers of raw materials and merchandise. Attractive Dividend to Shareholders: It enables the company to offer attractive dividend to the shareholders so that sense of security and confidence will increase among them. It also increases the market value of its shares.

DISADVANTAGE OF INADEQUATE WORKING CAPITAL

Loss of goodwill and creditworthiness: As the firm fails to honor its current liabilities it loses it goodwill and creditworthiness among its creditors. Firm cant make use of favorable opportunities : The firm fails to undertake the profitable projects, which not only prevent the firm from availing the benefits of favorable opportunities but also stagnate its growth. Adverse effects of credit opportunities: The firm also fails to avail the attractive credit opportunities but also stagnate its growth. Operational inefficiencies: It leads the company to operating inefficiencies, as day-to-day commitments cannot be met. Effects on financial capacity: Inadequacy of working capital also weakens the shock-absorbing capacity of the firm because it cannot meet
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the contingencies arising from business oscillations, financial losses, due to shortage of working capital. Non-achievement of Profit Target: The firm cannot implement operational plans due to unavailability of fund, which will lead to nonachievement of profit targets.

Dangers of Redundant working capital

Low rate of return on capital Decline in Capital and Efficiency Loss of Goodwill and Confidence Evils of Over-Capitalization Destruction of Turnover Ratio

Company must have adequate working capital pursuant to its requirements. It should neither be excessive nor inadequate. Both situations are dangerous. While inadequate working capital adversely affects the business operations and profitability, excessive working capital remains idle and earns no profits for the company. So company must assure its working capital is adequate for its operations.

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CHAPTER-2 NEED OF THE STUDY

Working capital management plays a vital role in any organization and one should have a thorough knowledge about the working capital position. In view of this context, I have undertaken this study and it would be a great advantage to the company also to know its working capital.

SCOPE OF THE STUDY

Scope of the study was confirmed to internal environment only. The study based on the secondary data collected from annual report, internet etc. . Financial statement analysis is the process of identifying the financial position of the company. After duly recognizing the importance of financial statement analysis of this topic has been chosen as the focus of the project.

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OBJECTIVES OF THE STUDY

Primary objective:
o

To find out the working capital position of the company for the last five financial years.

Secondary objective: o To know the liquidity position of the firm. o To study the profitability of the company

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CHAPTER-3 REVIEW OF LITERATURE

Working capital policy refers to the firm's policies regarding 1) target levels for each category of current operating assets and liabilities, and 2) how current assets will be financed. Generally good working capital policy (i.e. under conditions of certainty) is considered to be one in which holdings of cash, securities, inventories, fixed assets, and accounts payables are minimized. The level of accounts receivables should be used as a means of stimulating sales and other income. Previous literature on working capital management has found a negative association, overall, between level of working capital and operating performance as measured by operating returns and operating margins (Peterson and Rajan, 1997). Under conditions of certainty (i.e. sales, costs, lead times, payment periods, and so on, are known), firms have little reason to hold more working capital than a minimum level. Larger amounts would increase the level of operating assets, increase the need for external funding, resulting in lower return on assets and a lower return on equity, without any increase in profit. However the picture changes when uncertainty (i.e. uncertain growth) is introduced (Brigham and Houston, 2000). Larger amounts of cash, securities,
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accounts receivables, marketable securities, inventories, and fixed assets will be needed to support increased sales Required levels will be based on expected sales levels and expected order lead times. Additional holdings may be needed to enable the firm to deal with departures from the expected values. Further, firms will also attempt to increase their accounts payable balances as a means of financing increased levels of current operating assets. Firms which are in high growth stages will face the challenge of maintaining the necessary level of operating assets to support subsequent growth, while at the same time attempting to maintain adequate performance indicators. This study focuses on understanding how IPO companies manage their working capital and other balance sheet items to support subsequent growth. This study supports the existing literature on working capital and contributes to the existing literature by examining a sample of firms (i.e. recent IPO firms) which have a wider range of growth levels than non-IPO firms. Our study examines the impact of working capital management on the operating performance and growth of new public companies. The study also examines these relationships under three categories of growth (i.e. negative growth, moderate growth, and high growth). The study also examines other selected firm characteristics in light of working capital management: firm operating and financial risk, amount of debt, firm size, and industry. An underlying theme of this study is that high growth certainly does not ensure high operating performance. Consistent with prior research (Peterson and Rajan, 1997) this study provides further evidence that good working capital management is positively associated with better operating performance. Higher levels of accounts receivable are associated with higher operating performance, in all three of the growth rate categories. The study also finds that maintaining control over levels of cash, securities, inventory, fixed assets, and accounts payables is associated with higher operating performance. We find that firms which are experiencing very high growth will hold higher levels of cash, securities, inventory, fixed assets, and accounts payable to support the high growth. The study suggests that these firms are sacrificing operating performance (accepting lower operating returns) to support the high growth. This, in turn, increases financial and operating risk for these firms. Perhaps IPO firms should stay more focused on their operating performance, while maintaining more moderate growth levels

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Another aspect of this study is that it fills a void in the initial public offerings literature. Recent literature finds that new public companies underperform the market after going public. Ritter in his 1991 paper reports substantially lower stock returns for IPO firms between 1975 and 1984 than for a size-andindustry-matched sample of seasoned firms. Since then there is a growing literature explaining IPO underperformance as related to agency cost (Smith, 1990), institutional holdings (Field, 1995), venture capital (Jain and Gompers, 1997; Jain and Kini, 2000), market timing of IPO (Benninga, 2004), and earnings management (Teho et al., 1998; Ahmad-zaluki et al., 2008). However, there is no study linking the working capital management and post-IPO performance. Our paper tries to fill the void. The findings of this study would be interesting to investors and creditors of new public companies.

CHAPTER-4 RESEARCH METHODOLOGY

A study by analyzing the trends of working capital of the firm and to examine the possible causes for any significant differences. The data has been collected from the financial statements. For the purpose of this study, profitability is measured by Return on Total Assets (ROTA), which is defined as profit before interest and tax divided by total assets. A comprehensive measure of profitability is best captured by computing the return on total assets which is equal to the total liabilities of the firms, made up mainly of equity capital and current liabilities. All important ratios have been calculated to know the financial health of the company with the help of past trends, mainly profitability & return ratios considered in section I of analysis part. All important components of working capital have been analyzed in detail i.e., Inventory, Cash, and Payables etc The methodology to be adopted is as follows:
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 Collection of financial data of RANBAXY and Dr Reddy from annual reports and companys internal resources. Computation of various financial ratios and comparing them with standards and with each others. Analyzing the trends of working capital of the firm and to examine the possible causes for any significant differences. Various tools of analysis like Ratio analysis etc to be applied. All important components of working capital to be analyzed in detail i.e. Receivables, Inventory, Cash, Payables and Operating cycle. Making comparison of the above computations with that of Dr Reddys and industry standards. Analysis of results, drawing conclusions and giving recommendations.

CHAPTER-5 FINANCIAL PERFORMANCE OF RANBAXY

Profit after Tax (PAT) - Rs in crore

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Sales (Rs in crore)

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Though the Sales of the company had been on a constant increase over the last 4 years, there was a sudden fall in the Profit After Tax in 2011. The key reason for the sudden fall in PAT is Miscellaneous Expenses occurred in the company .

Comparison with the Industry Standards

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The following financial comparison has been made keeping in view the scale of operations of the company and the Industry Standards. The Industry standards have been taken from Centre for Monitoring Indian Economy (CMIE), March 2012. The following is the list of Company taken for Comparison: 1. Dr Reddys Laboratories 2. Ranbaxy Laboratories Ltd. For any company functioning in the free market, its important how best it operates but this is equally important that how it performs via-a-via its rivals i.e. other similar companies in the market. Here, to find out about Ranbaxy, a comparison has been made with Dr Reddys Laboratories operating on comparable size to see whether Ranbaxy is following industry norms or not or whether Ranbaxy is doing better (or worse) compared to its rivals. Its liquidity position has been compared by considering Working Capital Turnover Ratio, Current Ratio and Quick Ratio and further Profitability of Ranbaxy with Dr Reddys Laboratories have been compared by considering Return on Capital Employed and Earnings per share.

Liquidity Ratios
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The liquidity refers to the availability of cash and cash convertible assets with an organization to meet its short-term obligations i.e. creditors and other Current Liabilities. Any company's liquidity may vary due to seasonality, the timing of sales, and the state of the economy. But liquidity ratios can provide small business owners with useful limits to help them regulate borrowing and spending.

1. Working Capital Turnover Ratio

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It is a measurement comparing the depletion of working capital to the

generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales. A company uses working capital to fund operations and purchase inventory . These operations and inventory are then converted into sales revenue for the company . The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations. In a general sense, the higher the working capital turnover, the better it is because it means that the company is generating a great degree of sales as compared to the money it utilizes.
2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Ranbaxy Dr reddy industrystd 1.73 1.40 1.68

From the Industry comparison, it is apparent that Ranbaxy is low than the Industry standards in 2012 which implies that the sales generated by Ranbaxy Laboratories has been less than the cost incurred to generate those sales.

2. Current Ratio

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The current ratio of Ranbaxy has been compared with Dr Reddys Laboratories for the year 2012. A Current ratio measures the ability of an entity to pay its near-term obligations. Though the ideal current ratio depends to some extent on the type of business, a general rule of thumb is that it should be at least 2:1. The higher the current ratio, the greater the "cushion" between current obligations and a firm's ability to pay them. A lower current ratio means that the company may not be able to pay its bills on time, while a higher ratio means that the company has money in cash or safe investments that could be put to better use in the business. The ideal Current ratio to be maintained by the pharmaceutical cannot be accurately assessed because the scale of operations and the inventory size has been different for all the concerns in the Industry. According to CMIE Industry Standards the current ratio for 2011 is 1.46
1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Ranbaxy Dr reddy industrystd 0.82 1.50 1.48

As per the above graph, the Current ratio maintained by Ranbaxy in 2012 is above the normal industry standards.

3. Quick Ratio
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Quick Ratio also known as "Acid Test Ratio is an even conservative measure of liquidity. The ratio expresses the degree to which a company's current liabilities are covered by the most liquid current assets. Here Quick assets include all current assets except inventories.
1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Ranbaxy Dr reddy industrystd 0.30 1.13 1.58

A high ratio indicates under stocking and low ratio indicates over stocking. Stock is excluded because it may take time to be converted into cash. Quick ratio measures those assets, which are immediately converted into cash without much loss. Though there is no way to measure an ideal Quick ratio but as a rule of thumb, it should be at least 1:1. From the above comparison, it can be inferred that a Ranbaxys Current liabilities is less than the Dr Reddys Laboratories .

Profitability Ratios
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Profit is the difference between revenue and expenses over a period of time. The profitability ratios are calculated to measure the operating efficiency of the company. 1. Return on Capital Employed A return on capital employed, also called earning power is a measure of business performance which is not affected by interest charges and tax-burden. It abstracts away the effect of capital structure and tax factor and focuses on operating performance. Return on Capital employed = Profit Before Tax / Total Assets
30.00 25.00 20.00 15.00 23.94 10.00 5.00 0.00 Ranbaxy Dr reddy 19.88

As compared to Dr Reddys Laboratories, Ranbaxy has less Capital employed.

2. Earnings per Share(EPS)

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EPS states a corporation's profits on a per share basis. It can be helpful in further comparison to the market price of the stock. It is an index of profitability from shareholders point of view. The higher the earning per share, the more attractive will be the investment plan.

Earnings per share = Profit after tax / Number of equity shares

60.00 50.00 40.00 30.00 20.00 10.00 0.00 -10.00 1.08 Dr reddy Industry Std

53.81

-3.84 Ranbaxy

From the Industry comparison, it is clear that the earnings per share for the Equity Shareholders of Ranbaxy are negative. The main reason for the figure of EPS being negative is the drastically low Profits it has incurred in the year 2012.

LIQUIDITY ANALYSIS OF RANBAXY LABORATORIES LIMITED

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Liquidity of any company is the indicator as to how the company is placed with reference to its capacity to meet its current financial obligation. This means that here we have to consider the current assets which can be easily converted into cash to meet its immediate financial obligations or dues. Liquidity position of Ranbaxy Laboratories Limited has been analyzed in the following paragraphs based on different measures.

Current Assets
Ranbaxy has a growth of around 275% in current assets over the period of five years. From Rs 2272.92 crore in 2008 company has increased its current assets to 6002.50 crore.
7,000.00 6,000.00 5,412.08 5,000.00 4,000.00 3,000.00 2,000.00 1,000.00 0.00 2008 2009 2010 2011 2012 2,272.92 6,002.50

2,790.69

2,804.98

Current Liabilities
From 2008 to 2012, current liabilities for Ranbaxy Laboratories have increased from Rs 4571.31 Cr to Rs 6284.26 with average current liabilities over this period being Rs 5406.67 Cr. As we see here, growth rate for current liabilities
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in this period has been 140 % which is half than the growth of current assets which shows that current liabilities have increased at slower pace than its corresponding assets.
6,000.00 5,157.68

5,000.00

4,000.00

3,840.11 3,082.89 2,491.08 3,227.24

3,000.00

2,000.00

1,000.00

0.00 2008 2009 2010 2011 2012

Net Working Capital

Net working capital is an important measure which itself indicate margin of safety or cushion of protection provided to the creditors. As the following diagram shows, the company has negative net working capital in 2008 and 2009 and then net working capital start increasing. The greater the amount of
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net working capital, the greater the liquidity of the firm. NWC of the company increased from Rs -1567.19 to Rs 2775.26 Cr. Net working capital in the year 2008 is negative because increase in current liabilities is more than the current assets which has let to decline in Net working capital.
3000 2500 2000 1500 1000 500 0 -500 -1000 -1500 -2000 -1567.19 2008 -291.8 2009 2010 313.9 254.4 2011 2012

2775.26

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Ratio Analysis
Even though above analysis based on composition provide some indicator to the liquidity position of the company, these do not show the extent of margin of safety provided for current creditors. For this, ratio analysis has been done as follows:

Current Ratio
Relationship between current assets and current liabilities is shown by current ratio. It basically measures company's ability to meet its short term obligation out of its short term resources. Higher the current ratio, the greater is the assurance of the ability to pay the current liabilities and vice versa. However, even though a higher value of current ratio is good for the creditors against their credit, it may not be good for the management as it will indicate poor financial planning and over capitalization. In normal circumstances, hypothetical norm of 2:1 is supposed to be a good current ratio and if the current ratio for the company is less than that, the solvency or liquidity of the company becomes questionable.
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 2011 2012 0.8 1.16 1.18 1.4 1.22

As it is evident from the graph that the company had an average current ratio of 1.2 over the period of five years from 2008 to 2012. However, as it is clear from the data that it varied from 1.4 to 0.8 which shows a variation over the years. Further, a current ratio of less than 2 is normally not supposed to be good as such it can be considered the company passed through a difficult phase of liquidity.
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Quick Ratio or Acid Test Ratio

Current assets sometime also include a high amount of slow moving inventory or which may not move at all which means that even though current ratio of a company is very high, even though it may not be in a position to meet its immediate liabilities. For that, an analysis of quick ratio is also needed which shows the extent of cushion provided from the quick assets to the current creditors. This ratio excludes the inventory and bank overdraft, which are normally difficult to realize at short notice. Quick ratio is defined as the ratio of quick assets to quick liabilities. Under normal circumstance, an ideal quick ratio of 1:1 is supposed to be good enough which will reflect a satisfactory current financial condition.

1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 2011 2012 0.86 0.89 0.9 0.95 1.6

Above data for Ranbaxy Laboratories indicates that Acid Test Ratio for the period under study has consistently been below 1 except for 2010 where it was highest of 1.6. It shows that the company has a healthy liquidity position in this period. As such, considering the above data, it can be said that companys immediate payment position was satisfactory and its liquid assets were adequate to meet its short term obligations.

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Inventory to Sales Ratio or Inventory Turnover Ratio

Relationship between the sales and average stock kept by the company is normally reflected by the Inventory to Sales Ratio which is also called as Inventory Turnover Ratio. This is also an indicator for the liquidity of the concern as it will reflect the rate at which inventories are being converted into sales and subsequently cash. A higher inventory to sales ratio will show higher efficiency on the part of the management and vice versa. Following graph shows that Inventory Sales Ratio varied from 4.07 in 2008 to 3.66 in 2012. On an average, the value of Inventory Sales Ratio remained 4.0 for this period, the inventory management of the company can be said to be satisfactory from 2008 to 2012

4.82 4.07 4.05 3.95 3.66

0 2008 2009 2010 2011 2012

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Debtors to Sales Ratio or Debtors Turnover Ratio

A company adopts a policy for credit and collection and this is important to find out how the debtors are performing over the year. Debtors to Sales Ratio or Debtors Turnover Ratio is the indicator of number of times the debtors are turned over during the year. Since debtors constitute a major element of current assets, the credit and collection policy of a concern must be under continuous watch. The liquidity of a firm depends upon the quality of debtors to a great extent. Debtors Turnover Ratio measures the rapidity or slowness of debtors collectability. Generally, the higher the value of the debtors turnover ratio, the more efficient is the management of assets. As has been seen in the following graph, initially debtors to sales ratio for Ranbaxy in 2008 was 4.88 and in 2012 it goes to 2.46. This shows that the debtor's turnover ratio in the Ranbaxy is not a good sign from the liquidity point of view.

4.88 3.99

3.74

3.09 2.46

0 2008 2009 2010 2011 2012

Current Assets to Sales Ratio

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Current Assets Turnover Ratio or Current assets to sales ratio is applied to measure the turnover and profitability of the total current assets employed to conduct the operations of a firm. This is calculated by dividing the amount of sales by the amount o f current assets. This will give an overall impression of how rapidly the total investment in current assets is bring turned. Lower the turnover of the current assets, the worse is the utilization of current assets and vice-versa. This is to say that analysis of current assets to sales ratio over a period of time will show the overall efficiency of the working capital management of the company. Following graph shows that the company over the period of time has reduce its efficiency as it is reflected by the figures that Current Assets to Sales Ratio has decline from 2.14 in 2008 to 0.97 in 2012. It shows that the decreased volume of current assets in relation to sales was put in a commercially cautious manner.
2.5 2.14 2

1.5

1 0.64 0.5 0.67

0.98

0.97

0 2008 2009 2010 2011 2012

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CREDIT ANALYSIS
Besides establishing credit standard, a firm should develop procedures for evaluating credit applicants. The second aspect of credit policy of a firm is credit analysis and investigation. There are two steps involved in the credit investigation. Obtaining Credit Information Analysis of Credit Information

Obtaining of credit information

The first step in credit analysis is obtaining credit information on which to the base evaluation of a customer. The sources of information are: Internal Sources: Usually company requires their customers to fill various forms and documents giving details about financial operations. Some times company also asks for references. Another source of internal information is the records of the firm contemplating an extension of credit. External Sources: Some of the external sources of information are Financial Statements Bank References Trade References Credit Bureau Reports

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Analysis of credit information

Once the credit information has been collected from different sources, it should be analyzed to determine the credit worthiness of customer. The analysis should cover two aspects. Quantitative Analysis The assessment of the quantitative aspects is based on the factual information available from the financial statements, past records of the firm and so on. First step in this assessment is to prepare an aging schedule to calculate average age of accounts payable. Another method is ratio analysis, i.e. calculation of liquidity, profitability and debt capacity ratios, of the applicant. These ratios will help to find out financial strength of applicant. Qualitative Analysis This type of assessment is based on subjective judgment. It covers quality of management, references from suppliers, banks and other reports prepared by special credit bureaus. On the basis of all these things analysis will be drawn under qualitative analysis.

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CREDIT TERMS
Other important decision in receivables management is related to terms of credit. The stipulations under which goods are sold on credit are referred as credit terms. These are relates to the repayment of the amount under the credit sale. Credit terms have three components: Credit Period Cash Discount Cash Discount Period

Credit Period
It is the duration of time for which trade credit is extended during this period the overdue amount must be paid by the customer.

Cash Discount
This is the amount for which the customer can take advantage of by making early payment. Sometimes company offer its customer a condition that if they will pay amount early than the scheduled the time than they will get some discount. This is called cash discount. Cash discount provided by the company can affect the sales volume, average collection period and profits of the company.

Cash Discount Period

It refers as duration during which the cash discount can be availed of. It is directly related to sales generally. For instance, if company increases its cash discount period than its average collection period will also increase. With the increase in average collection period sales level is also increases.

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CREDIT POLICIES
Collection policies refer to the procedures followed to collect the account receivables when, after the expiry of the credit period they become due. It includes two aspects: (i) Degree of collection efforts and (ii) Type of collection efforts.

Degree of Collection efforts

It refers what degree of efforts; company is using to collect its receivables. If company use strict efforts than bad debts costs will decline, and average collection period will also reduce. But cost involved in this kind of strategy is comparatively high. Also sales volume can be decline with this policy. On the other hand, lenient efforts are just opposite to strict efforts. So company has to decide that method in which overall cost is low and revenue is high.

Type of collection efforts

The methods available are Telephone calls for personal contacts Letters including reminders Personal Visits Help of Collection agencies Legal Action

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CREDIT POLICY OF RANBAXY

As we know that a manufacturing company is frequently deals with debtors and most of its sales are credit sales. A huge amount of capital is blocked in to receivables. Therefore to make an effective credit policy is very important for the company. Ranbaxy is, like many other companies, involves in both kinds of sales i.e. domestic as well as exports. It have different credit policies for both domestic and export customers. For domestic customers: Most of the domestic sales of Ranbaxy are based on advance payment. Some part of contract money is received in advance and then sale is made. Remaining amount is received later on. Generally, the credit period allowed by Ranbaxy is up to 45 days but sometimes it went up to 60 days also (only via prior approval of management). Company also doesnt plan for any bad debts losses, but if any bad debt happen than it has to be written off fully. For obtaining information related to the new applicants only internal sources are used. As company generally deals with blue chip companies or old customers, it is not a difficult job to obtain information about them. No external source is used by Ranbaxy. And for the analysis part, company use both qualitative and quantitative tools. As per qualitative tool, company generally go for market reputation and past record of customer and for quantitative tool, company use the size of order, financial position of customer etc. As far as collection efforts are concerned, company generally uses lenient efforts. But in some cases company also go for strict methods. Ranbaxy normally uses all types of collection efforts like letters including reminders, telephone calls, personal visits & legal actions. But company doesnt take help of collection agencies. The collection cost is very nominal in domestic sales and difficult to determine. Whereas capital cost is equal to the cost of working capital which is not determined because of confidentiality.
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For Export Sales: From the sale data of Ranbaxy it was found that around 66% of sales are based on exports. Therefore it is very important area for planning. Exports are based on letter of credit. A foreign company who want to purchase the material from Ranbaxy sent an LC first. Than on the basis of that LC, export order is made. Copy of that order is sent to corporate office and head office at Gurgaon and New Delhi respectively.. From the manufacturing plants, the material is dispatched as per the export order and LC is sent to bank for collection. Banks collects the amount and transfers it to Ranbaxys account. No other credit policy is present for export sale of Ranbaxy. Collection cost is around 0.5 1 % of export order. Capital cost is here also equal to the working capital cost.

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CHAPTER-6 LIMITATIONS OF STUDY

Availability of the financial data was very limited which is not disclosed due to sensitive nature for the company. The year ended for Ranbaxy is December, and that of Dr Reddys is March. So figures taken are past 4 years but 3 months difference is there in the corresponding figures. The main component of working capital is cost of capital, which is not described in the project because of confidential nature. External environment influence was not considered while doing the theoretical standard rather than the industrial standard because of unavailability of any such specific standard. Lack of availability of plant related data to finance department which acted as a limitation for the project.

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FINDINGS OF STUDY
There is a huge investment in working capital at Ranbaxy Laboratories Limited, as it has a large production cycles. The company follows a steady production policy and hence there are no seasonal variations. Aggressive policy of more profitability, more risk is followed, which is an ideal situation as far as the strategy for working capital financing is concerned. Ranbaxy has a good earning record; thus it enjoys great confidence of the suppliers, as it is looked upon favorably. As far as components of working capital are concerned, on the domestic front, sales have increased as well as the finished goods inventory has also increased. The increase in the current ratio of 2012 as compared to that of the previous year indicates that the liquidity position of the company is improving. The inventory turnover ratio of the company is not very high. It should try to achieve a quicker movement of stock into sales. There is an inverse relationship between sales and working capital at Ranbaxy Laboratories Limited.

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WORKING CAPITAL TURNOVER RATIO

In general higher the ratio, more efficient is the management. Since Ranbaxy Laboratories Limited has a low working capital ratio, it should look carefully into this area to ensure its effective utilization.

DEBTORS TURNOVER RATIO

After analysis of the debtors turnover ratio, it was found out that Ranbaxy Laboratories Limited has a low debtors turnover ratio, which may be a result of a liberal and inefficient credit and collection policy. This involves the risk of bad debts and the burden of high interests. This is another area that should be looked into.

INVENTORY TURNOVER RATIO

After analysis of this ratio, we can conclude that Ranbaxy Laboratories Limited is holding an unfavorable quantity of inventory. Since, the inventory turnover ratio is not very high, we can conclude that the management of inventory is not very efficient because the stocks are not sold very frequently, as a result of which a large amount of money is required to finance the working capital requirement.

QUICK RATIO
Ranbaxy has a satisfactory liquidity position.

CURRENT RATIO
A current ratio of 2:1 is considered to be a satisfactory. If the current ratio is 2 or more, it means that the company is adequately liquid and has the ability to meet its current obligations. A lower current ratio indicates that the company may be trading beyond its capacity. Ranbaxy Laboratories Limited has a satisfactorily high current ratio but at same time it may mean that the company has idle cash which when invested can yield returns to the company.

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RECOMMENDATIONS AND SUGGESTIONS

Pertaining to Working Capital Management:
Management of the company would be interested in every aspect of the financial analysis. It is their overall responsibility to see that the firms resources are most effectively and efficiently utilized to ensure a sound financial position of the company. The financial policy of working capital management policy of the company has to be revised. The firm follows an aggressive policy as far as working capital management is concerned. According to this policy, Risk and Profitability should be increased and the liquidity should be reduced. Though the company has increased risk and reduced liquidity, the profitability has not increased. This is an area into which the management needs to look. Future forecasts of cash should also be made effectively in order to meet unexpected requirements. As far as the inventory position is concerned, the company doesnt have a sound position. Better the quality, lesser would be the work-in-process. The rejected stock has to go through further modifications until the quality department approves it. This therefore remains as work-inprocess and increases the value of the work-in-process. Speeding up the quality checks can reduce the holding time of finished goods. Efforts should be made to keep the norms up to date. Thus a quarterly review is suggested. Norms should be as realistic as possible as to give a correct estimate of the inventory levels. The firm should make consistent efforts to increase its earnings in order to move towards the path of growth. It is suggested that the firm should neither have too high nor too low debtor turnover ratio.

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 There is an increase in the current ratio suggesting that there may be idle funds with the company. It is therefore recommended that the company should invest the excess cash in marketable securities. This would be more profitable than holding idle cash. It may also be mentioned that there is no rule of thumb or standard ratio. The norms may be different depending upon the nature of the industry and business condition. Ranbaxy should focus on maintaining its consistency or increasing it as there is a decline in their Operating Profit from last 3 years. It can be done by increasing its sales and decreasing its operating costs. If companys operating profit will increase, then it will help in increasing its overall profitability. Companys return ratios also need a check. Turnover ratios are decreasing but not up to that extent. Dr. Reddys, its nearest competitor have better turnover ratios which mean that Ranbaxy has scope to lower down its assets to maintain the same level of sales or increase its sales on the same level of assets. As it was clear that company have high liquidity in its capital structure, it means a close observation is required for the benefits of share holders. It should channelize its investments towards those areas where returns would be higher. The company should try to reduce its inventory holding to lower down the holding cost & increase its Raw Material Turnover. It can also help in lower down the operating cycle. The company should also try to reduce its Average collection period to It can also help in lower down the operating cycle. Company can make some improvements in their credit policy. Currently they take advance before delivering the consignment. They can increase the credit period as well, currently it is 45 to 120 days depending upon different parties and their creditworthiness.
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 As far as the cash management is concerned, its difficult to suggest anything because I believe that companys cash planning is very good. All the time company looks for new investment opportunities in the market on a reasonable rate of return. The reduction in inventory holding period can be done by more outsource manufacturing. As companys international sales are high (66%) and company should focus the domestic markets as well, as demand for healthcare products is increasing in Indian market. Also it is their social responsibility to provide maximum benefits to its domestic customers.

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Pertaining to Work Culture and Working Conditions:

Besides improving the working efficiency of the employees, it is important that the morale of the employees at work should be kept up through the following methods: They could be provided with rigorous training periodically so that they can be well versed with the technology rather than confining their knowledge to their domain only.

They could be provided with regular incentives both monetary and non-monetary so that they have a positive attitude towards their work. On the contrary, this negative attitude becomes a bottleneck for the employees and the swiftness of the system as a whole.

Employees are required to give output rather than putting in time at their workplace. Measures should be adopted to measure their performance rather than measuring their work hours. They can be given deadlines both for a work and the time. For this, timings could be made flexible. It is the inter-dependency of the employees which makes their working rigid and lowers their efficiency. This could be removed or at least minimized by regular training and improving the working conditions for the staff.

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Pertaining to Technology:
The following changes need to be inculcated in the provision of technology to the employees: The machines provided to the employees are not up to the mark. There is no uniformity in the speed and compatibility of systems. The systems should be regularly upgraded. This would have an impact on the working efficiency of the employees. The number of machines on the floor at accounts department needs to be increased because the existing systems are not able to do the needful. The SAP system is over-loaded due to exhaustive usage. This needs to be corrected by taking the required measures. It can be rectified by changing or adding a server for supporting SAP in Ranbaxy.

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CONCLUSION
The study taught me the practical implementation of Working Capital techniques. The working capital management in Ranbaxy Pharmaceutical Pvt. Ltd. is done on very extensive scale. Due to implementation of ratio analysis, it has become easy to do the working capital management. The recorder level system was also followed earlier but due to busy schedule, they could not review it so we did this job for them. Decisions related to working capital are taken primarily by executives in sales, purchase and finance departments. Usually, raw material policies are shaped by purchasing and production executives, work in progress are influenced by the decision of production executives, and finished goods inventory are evolved by production and marketing executives. In Ranbaxy Pharmaceutical, working capital management is practiced on regular basis. The manager and executives are well versed with working capital management.

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CHAPTER-7 BIBLIOGRAPHY
Books Referred: I M Pandey, Financial Management, Ninth Edition, Vikash Publishing House Pvt Ltd. Dr.S.N.Maheshwari, Financial Management, Second Edition, Sultan Chand & Sons. Ravi M. Kishore, Cost Accounting,2008 Edition, Taxmann Allied Servises Pvt. Ltd

REFERENCES: http://www.moneycontrol.com/financials/ranbaxylaboratories/balance-sheet/RL http://www.ranbaxy.com/about-us/overview/ http://www.moneycontrol.com/stocks/company_info/print_main.php http://www.moneycontrol.com/financials/drreddyslaboratories/balance-sheet/DRL

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Appendices Balance Sheet Of Ranbaxy

Standalone Balance Sheet ------------------- in Rs. Cr. ------------------Dec '12 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 211.46 211.46 1.11 0.00 1,709.51 0.00 1,922.08 944.18 3,819.43 4,763.61 6,685.69 211.00 211.00 0.67 0.00 1,713.16 0.00 1,924.83 229.59 4,103.94 4,333.53 6,258.36 210.52 210.52 6.60 0.00 4,915.28 0.00 5,132.40 195.39 4,065.33 4,260.72 9,393.12 210.21 210.21 175.85 0.00 3,748.54 0.00 4,134.60 175.83 3,172.55 3,348.38 7,482.98 210.19 210.19 175.66 0.00 3,330.92 0.00 3,716.77 162.07 3,563.30 3,725.37 7,442.14 Dec '11 12 mths Dec '10 12 mths Dec '09 12 mths Dec '08 12 mths

Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances 3,118.22 1,124.69 1,993.53 159.60 3,131.17 1,731.84 1,435.89 2,834.77 6,002.50 1,683.14 3,094.07 1,222.07 1,872.00 222.62 3,410.79 1,655.23 3,689.95 66.90 5,412.08 2,382.72 2,857.63 1,145.52 1,712.11 330.18 3,804.44 1,489.91 1,292.63 22.44 2,804.98 1,470.45 2,620.92 1,027.52 1,593.40 414.92 3,833.69 1,230.48 1,534.65 25.56 2,790.69 1,967.65 2,386.75 930.07 1,456.68 428.77 3,618.03 1,198.52 1,024.54 49.86 2,272.92 2,351.98

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Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

0.00 7,685.64 0.00 3,227.24 3,057.02 6,284.26 1,401.38 0.00 6,685.68 341.45 45.42

1,871.14 9,665.94 0.00 5,157.68 3,755.31 8,912.99 752.95 0.00 6,258.36 297.50 45.60

2,689.85 6,965.28 0.00 2,491.08 927.82 3,418.90 3,546.38 0.00 9,393.11 276.13 121.74

728.56 5,486.90 0.00 3,082.89 763.03 3,845.92 1,640.98 0.00 7,482.99 261.05 94.16

1,885.08 6,509.98 0.00 3,840.11 731.20 4,571.31 1,938.67 0.00 7,442.15 252.85 84.24

Profit & Loss A/c Of Ranbaxy

Standalone Profit & Loss account ------------------- in Rs. Cr. -------------------

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Page 64 of 68

Dec '12

Dec '11

Dec '10

Dec '09

Dec '08

12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses 2,453.09 230.91 1,019.59 132.19 0.00 2,074.10 0.00 5,909.88 6,331.46 27.91 6,303.55 -124.07 49.25 6,228.73

12 mths

12 mths

12 mths

12 mths

7,709.17 22.58 7,686.59 -3,990.57 135.72 3,831.74

5,687.33 40.96 5,646.37 562.45 161.43 6,370.25

4,797.49 15.90 4,781.59 485.66 33.96 5,301.21

4,676.21 24.17 4,652.04 -1,587.64 115.59 3,179.99

2,523.08 194.98 845.24 112.69 1,579.37 1,283.54 0.00 6,538.90

2,181.22 132.75 608.28 96.68 1,332.70 185.14 0.00 4,536.77

1,916.58 109.57 582.50 89.94 1,306.25 158.07 0.00 4,162.91

2,049.30 108.83 472.65 94.65 1,402.77 383.26 0.00 4,511.46

Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend

442.92 318.85 296.98 21.87 186.16 0.00 -164.29 0.00 -164.29 -1.94 -162.34 3,456.78 0.00 0.00

1,283.41 -2,707.16 69.44 -2,776.60 274.08 7.83 -3,058.51 15.44 -3,043.07 6.69 -3,052.05 4,015.82 0.00 0.07

1,271.03 1,833.48 54.19 1,779.29 228.35 0.00 1,550.94 21.88 1,572.82 415.48 1,148.73 2,355.55 0.00 84.21

652.64 1,138.30 39.47 1,098.83 148.20 0.00 950.63 111.42 1,062.05 488.86

256.17 -1,331.47 145.83 -1,477.30 154.47 0.00 -1,631.77 17.76 -1,614.01 -574.24

571.9865 -1,044.80 Page of 68 2,246.33 0.00 0.00 2,462.16 0.00 0.00

Key Financial Ratios

Dec '12 Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Operating Profit Margin(%) Profit Before Interest And Tax Margin(%) Gross Profit Margin(%) Cash Profit Margin(%) Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Net Profit Margin(%) Return On Capital Employed(%) Return On Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations 7.02 3.91 4.07 6.17 6.17 -2.47 -2.47 7.68 -8.45 11.39 45.42 16.66 12.90 13.10 16.92 16.92 -39.11 -39.11 17.81 -158.61 53.97 45.60 22.35 17.77 18.31 16.55 16.55 19.74 19.74 12.82 22.41 14.33 121.74 13.62 10.31 10.52 4.53 4.53 11.72 11.72 8.03 14.44 1.84 94.16 5.39 2.03 2.07 16.25 16.25 -22.02 -22.02 2.52 -29.50 17.40 84.24 5.00 -10.47 149.05 -69.44 5.00 0.00 30.36 182.15 36.04 69.59 5.00 2.00 29.98 134.10 112.02 69.75 5.00 -15.50 113.73 88.90 69.85 5.00 -5.97 110.67 80.80 69.86 Dec '11 Dec '10 Dec '09 Dec '08

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

45.42 7.68 1.22 0.95 2.48 2.48 1.73 2.48 2.36 1.08

45.60 33.50 0.80 0.90 2.25 0.73 16.05 2.25 20.11 -38.90

121.74 15.00 1.40 1.60 0.83 0.57 22.22 0.83 26.44 26.41

94.16 9.02 1.18 0.89 0.85 0.68 15.24 0.85 18.99 19.25

84.24 2.94 1.16 0.86 1.05 0.80 1.29 1.05 2.35 -5.11

3.66 2.46 3.66 2.06 0.95 0.97 --80.03 38.91 63.93 -62.68

4.82 3.09 4.82 2.67 1.27 0.98 116.14 27.55 35.26 32.82 58.74 6.72 72.61

3.95 3.99 3.95 2.13 0.61 0.67 134.51 40.24 226.11 38.63 50.65 7.42 67.06

4.05 3.74 4.05 2.00 0.66 0.64 137.88 35.02 123.55 40.08 65.79 7.74 65.59

4.07 4.88 4.07 2.14 0.64 2.14 121.93 34.66 150.02 44.05 51.56 12.84 61.34

---100.00 11.76

---100.01 3.28

8.54 7.13 86.64 89.81 4.42

--100.00 100.00 15.13

---100.00 4.83

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Dec '12 Earnings Per Share Book Value -3.84 45.42

Dec '11 -72.32 45.60

Dec '10 27.28 121.74

Dec '09 13.61 94.16

Dec '08 -24.85 84.24

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