Turkish Journal of Computer and Mathematics Education Vol.12 No.2 (2021), 199 - 202
199 Research Article
Sun Pharmaceutical Industries Ltd: A Study of Financial Movement during Pandemic
Times
Dr. Abhishek Tripathi
HoD and Associate Professor, University School of Business-Industry Collaborated Program, Chandigarh University, Mohali, Punjab.
Article History: Received: 11 January 2021; Accepted: 27 February 2021; Published online: 5 April 2021
_____________________________________________________________________________________________________ Abstract: Sun Pharmaceutical Industries Ltd is the Indian MNC based in Mumbai with largest market capitalization amongst
the Indian Pharma companies. The study focuses on the study of the various parameters of financial performance and risk measurement of Sun Pharmaceuticals Industries Ltd during the challenging time of Covid era. The financial variability of return using the Value at Risk concept based on the historical movement of the daily return has been analyzed to understand the trend of the risk related to the variability in return. Also, the trend analysis has been used to analyze the movement of various fundamental financial parameters like Net Income, Operating Income Margin, Net Income Margin.
___________________________________________________________________________
1. IntroductionIndian Pharmaceutical sector is supplier of 50% of the global pharma demand. It fulfills 25% of the pharmacy demand in the UK and 40% of generic drugs demand of USA. India also provides second largest workforce in the world towards the pharmacy industry. Indian domestic pharmaceutical market turnover has touched Rs. 140,000 crore which is approx US$ 20.03 billion in 2019, which is an increment of 9.8% which stood at Rs. 129.000 crore which is approx US$ 18.12 billion in 2018. In May 2020, pharmaceutical sector sales turnover got a hike of 9% to Rs. 10,342 crore (US$ 1.47 billion).
India is exporter to more than 200 countries with US being the biggest market for the Indian pharmacy. India accounts for 20% of the generic drugs supply globally, hence it is largest player in the field of generic medicines globally. Sun Pharmaceuticals is an Indian multi-national company with headquarter at Mumbai, founded in 1983. It has market capitalization of 1.463 Trillion. The company offers products in various therapeutic areas, such as cardiology, psychiatry, diabetology, neurology and gastroenterology.
About 70% of the company’s sales are made out of exports, primarily the United States. The US in itself accounts for about 50% of the company’s sales turnover, hence is the single largest market.
2. Literature Review
Ogbru (2009) studies concluded that in the near future the pharmaceutical sector will be a huge consumer of capital investments for research which many affect the profitability situation of the companies in the sector adversely.
Bhunia and Sarkar (2011) used various financial ratios to predict the financial well being of the pharmaceutical firm in India. They found that few ratios can be used to predict the financial well being of the companies of this sector.
The profitability studies of the Indian Companies in the pharmacy sector was done by Sheila and Karthikeyan (2012). They consluded that Cipla was the company having strongest financial performance out of all the companies on which the study was conducted. They also recommended that Return on Equity and Return on Investment are the most comprehensive measure for profitability of a firm.
The profitability of the pharmaceutical companies in India was also studies by Vataliya (2012). Cipla was found to be leading in terms of financial performance amongst the selected companies. Also, Cipla was found to be the most consistent player in the field in terms of the financial performce.
Similarly, the financial performance of the US based Pharmacy Industry was analyzed and studies by Karamehic (2013). He remarked that financial performance will decline in the coming future.
3. Objective
• Study movement of the fundamental financial parameters of Sun Pharmaceuticals Industries Ltd during the Covid Era.
• Study of the movement of the risk associated with the stock price movement of Sun Pharmaceuticals during the Covid Era.
4. Hypothesis
Total Income Ho: Total Income does not vary significantly in quarters during Covid times H1: Total income differs significantly in quarters during Covid times.
Dr. Abhishek Tripathi
200 Operating Profit Margin
Ho: Operating Profit Margin does not vary significantly in quarters during Covid times H1: Operating Profit Margin differs significantly in quarters during Covid times. Net Profit Margin Ho: Net Profit Margin does not vary significantly in quarters during covid times.
H1: Net Profit Margin varies significantly in quarters during covid times. Value at Risk
(VaR)
Ho: VaR Measure is increased showing the higher risk on periodic returns. H1: VaR Measure is reduced showing lower risk on periodic returns.
5. Research Methodology
1. Trend analysis has been used to analyze the movement of total income, operating profit margin and net profit margin.
2. Value at Risk Method using historical data is used to analyze the risk associated with stock price movement. Movement of Financial Parameters during pandemic times:
QUARTERLY 12/2020 09/2020 06/2020 03/2020
Total Income 9,151.73 8,808.91 7,739.04 8,287.17
Total Income Growth (%) 3.89 13.82 -6.61 0.15
Total Expenses 6,962.58 6,858.45 9,870.99 7,657.95
Total Expenses Growth (%) 1.52 -30.52 28.9 11.62
EBIT 2,189.15 1,950.46 -2,131.95 629.22
EBIT Growth (%) 12.24 - -438.82 -55.51
Profit after Tax (PAT) 1,913.41 1,812.79 -1,655.60 492.76
PAT Growth (%) 5.55 - -435.99 -51.66
EBIT Margin (%) 23.92 22.14 -27.55 7.59
Net Profit Margin (%) 20.91 20.58 -21.39 5.95
Basic EPS (₹) 7.72 7.56 -6.9 1.67
Trend Analysis:
QUARTERLY 12/2020 09/2020 06/2020
Total Income 3.89% 13.82% -6.61%
Total Income Growth (%)
-71.85% -309.08% -4506.67%
Total Expenses 1.52% -30.52% 28.90%
Total Expenses Growth (%)
-104.98% -205.61% 148.71%
EBIT 12.24% -191.49% -438.82%
Profit after Tax (PAT)
5.55% -209.49% -435.99%
EBIT Margin (%) 8.04% -180.36% -462.98%
Net Profit Margin (%)
1.60% -196.21% -459.50%
Sun Pharmaceutical Industries Ltd: A Study of Financial Movement during Pandemic Times
201 Total Income: The total income decreased in the first quarter (April-June 2020). However, it picked up in the next two quarters and has registered a growth of 13.82% and 3.89% in June – September 2020 and September - December 2020 respectively.
Operating Profit Margin: The operating profit has been negative in the second quarter. However, it has experienced negative growth for the first two quarters of the year.
Net Profit Margin: Net profit Margin has been negative for first two quarters. It has shown a shine of recovery in the September – December quarter.
Value at Risk (VaR):
VaR is a statistical and financial parameter that quantifies the level of financial risk faced by a company, portfolio or position over a specified time period. VaR is always calculated at certain confidence level. Hence, if any VaR is concluded using 95% confidence level means that out of 100 days of trading there can be 5 days where the loss can go to the measured percentage of VaR.
Return Movement:
Quarter Total Return Average Daily Return VaR at 95%
confidence level
March – June 2020 29.28% 0.37% 6.75%
Dr. Abhishek Tripathi
202
October – December 2020 14.81% 0.25% 3.80%
The Value at Risk shows the downward trend for last three quarters. Hypothesis Testing
Parameter Ho H1 Remark
Total Income Rejected Accepted Significantly different
Operating Profit Margin Rejected Accepted Significantly different Net Profit Margin Rejected Accepted Significantly different
Value at Risk Rejected Accepted Reducing VaR showing decreasing risk on periodic returns.
6. Conclusion
The study period has been challenging time for the pharmaceutical industry in general and Sun Pharmaceuticals in particular. Year 2020 has been challenging for the businesses at the all the parts of the world. The study has analysed the movement of key financial indicators of Sun Pharmaceuticals. It has been found that there is been severe variability in the key financial indicators like Total Income, EBIT Margin %, PAT Margin% and VaR.
The effect of pandemic in the pharma business can be easily seen in the various results which have been obtained during the process of the study. The Value at Risk with 95% confidence level shows the improvement trend showing the improving level of risk.
References
1. Kheradmand, A. & Bahar, M. N. (2013). Analysis of Financial Statements: Case Study: Elder And Fdc Pharmaceutical Companies. International Journal of Research Finance and Market, 3(5), pp. 32-43. 2. Nair, J. (2013). Performance Analysis and Solvency Prediction of Indian Pharma Companies. International
Journal of Marketing, Financial Services & Management Research, 2(5), pp. 34-43.
3. Nsiah, F. & Aidoo, P. (2015). Financial Performance of Listed Pharmaceutical Companies on Ghana Stock Exchange. Research Journal of Finance and Accounting. Vol.6, No.2.
4. Ogbru, O., 2009. http://www.medicinenet.com/script/main/art.asp?articlekey=18892. [Online] Available at: http://www.medicinenet.com [Accessed 2 8 2014].
5. Vataliya, K.S. (2012). Profitability and Consistency Analysis of Pharmacy Sector in India. International Journal of Financial Research. Vol. 3, No. 3 – URL: http://dx.doi.org/10.5430/ijfr.v3n3p17
