“Analyzing the Financial Performance of the Selected Pharmaceutical Companies in India Using DuPont Analysis”

Abstract

This study attempts basically to measure the financial performance of the Pharmaceutical Industry taking top 5 companies like Cipla ltd, Dr Reddy’s laboratories ltd, Sun pharmaceuticals industries ltd, Divi’s laboratories and Gland Pharma for a period of 5 years from 2017 to 2021. In order to achieve our goals in this paper we have measured the ratios of ROE, ROA applying the DuPont analysis, which have been demonstrated with the aim of tables to show the change periodically. DuPont analysis (ROI and ROE)) is an important tool for judging the operating financial performance. It is an indication of the earning power of the firm. DuPont Model which is based on analysis of Return on Equity (ROE) & Return on Investment (ROI). The return on equity disaggregates performance into three components: Net Profit Margin, Total Asset Turnover, and the Equity Multiplier. Return on Investment consists of Assets Turnover and Profit Margin. The return on investment consists of Assets Turnover (Operating Income X Total Assets) and Profit Margin (EBIT X Operating Income). From the study it if found that Divi’s laboratories financial performance is high followed by Gland pharma followed by Dr. Reddy’s Laboratories then Cipla ltd and then Sun pharmaceuticals industries ltd. The five companies are significant at their level. In conclusion, ROE & ROI is the most comprehensive measure of profitability of a firm. It considers the operating and investing decisions made as well as the financing and tax related decisions