celestial biolabs

CONTENTS

ABSTACT………………………………………….. 02

CHAPTER - I

INTRODUCTION……………………………………………03

OBJECTIVES OF THE STUDY…………………………….06

SCOPE AND SIGNIFICANCE OF THE STUDY…………..07

METHODOLOGY…………………………………………...08

LIMITATIONS OF THE STUDY…………………………...09

CHAPTER – II

INDUSTRY PROFILE……………………………………….10

CHAPTER – III

COMPANY PROFILE………………………………………..14

CHAPTER – IV

FINANCIAL ANALYSIS OVERVIEW……………………...17

CHAPTER – V

FINANCIAL ANALYSIS AND INTERPRETATION……….22

CHAPTER – VI

FINDINGS………………………………………………………

SUGGESTIONS…………………………………………………

CONCLUSIONS……………………………………………….43

BIBILOGRAPHY……………………………………………...44

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ABSTRACT

The Indian biotechnology industry has become an attractive destination for foreign companies largely due to the increasing amount of governmental support. The budgetary allocation to the department of biotechnology has tripled in the last five years. The department’s budget is forecasted to increase further, as the biotechnology industry is expected to help India achieve an average growth rate of 9% during its current 11th five year country plan.

The project was conducted to know about the bio pharma industry in India and to know about the Celestial Labs Ltd. The financial performance of the company is analyzed and how the company is performing in the past few years.

One of the main findings was that the company having a considerable increase in total profit which shows the operating efficiency of the company. The main suggestions was the company should keep the working capital as ideal, if it is high, indicates the wastage of money otherwise inadequate working capital.

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INTRODUCTION

Finance is regarded as the lifeblood of a business enterprise. The test of success of business enterprise is its ability to earn profits and continue its operation and growth. Profit earning is considered essential for the survival of business. A business needs profits not only for existence but also for its expansion and diversification. Profitability is barometer for measuring efficiency and economic prosperity of a business enterprise.

Financial statements:

Financial statements are the basis for decision making by the management as well as other outsiders who are interested in the affairs of the firm such as investors, creditors, customers, suppliers, financial institutions, employees, government researchers and general public. It is a collection of data organized according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm.

The term financial statement generally refers to two statements:

1) The position statement or the balance sheet2) Income statement or the Profit and Loss Account

The primary objective of financial statement is to assist in decision making.

Other objectives are:

1) To provide reliable financial information about resources and obligation of a business firm.

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2) To provide reliable information about changes in such economic resources and obligations.

3) To provide financial information that assist in net earning potentials of business activity.

4) To provide financial information that assist in estimating the earning potentials of business.

5) To disclose, to the extent possible other information related to the financial statement that is relevant to the needs of the users of these statements.

Financial analysis:

Financial analysis is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of the balance sheet and Profit and Loss account. The management of the firm can undertake financial analysis or by other parties outside the firm like owners, creditors and other interested parties like bankers, journalists, legislatures, politicians etc. Accounting to Myers, Financial statement analysis is largely a study of relationship among the various financial factors in a business as disclosed by the trend of these factors as shown in a series of statements.

For the purpose of analyses individual items are studied; their interrelationships with other related figures established, the data is sometimes rearranged to have better understanding of the information with the help of different techniques or tools for the purpose. Analyzing financial statements is a process of evaluating relationship between component parts of financial statements to obtain a better understanding of a firm’s position and performance. The analysis is financial statements thus refers to the treatment of the information contained in the financial statements in way so as to afford a full diagnosis of the profitability and financial position of the firm

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concerned. For this purpose financial statements are classified methodically, analyzed and compared with the figures of previous years or other similar firms.

The purpose of financial analysis is to diagnose the information contained in financial statement so as to judge the profitability and financial soundness of the firm. Just like a doctor examines his patient by recording his body temperature, blood pressure etc., before making his conclusion regarding the illness and before giving his treatment. A financial analyst analyzes the financial health or weakness of an enterprise. The financial analyst has also to be careful, about the impact of price level changes, window dressing of financial statements changes, in according policy of a firm, accounting concept and personal judgment.

The future plan of firm should be laid down by the management in view of the firm’s financial strength and weaknesses. The nature of financial analysis will differ depending up on the purpose of the analyst. The creditors are interested to know about the liquidity position of the firm; the suppliers of the long-term debt are interested in knowing about the firm’s profitability.

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OBJECTIVES OF THE STUDY

The objectives of the study are:-

To evaluate the overall financial performance of CELESTIAL BIO LAB LIMITED.

To assess the liquidity and solvency on CELESTIAL BIO LAB LIMITED.

To get an idea about the profitability and solvency of CELESTIAL BIO LAB LIMITED.

To analyze the long-term financial position of CELESTIAL BIO LAB LIMITED.

To make suitable suggestions for improvement, for the future benefit of CELESTIAL BIO LAB LIMITED.

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SCOPE AND SIGNIFICANCE OF THE STUDY

Scope of the study:

This study concentrates on the financial performance of CELESTIAL BIO LAB LIMITED.

Significance of the study:

Profitability is an indication of the efficiency with which the operations of the business are carried on. The main objective of this study is to evaluate the general financial performance CELESTIAL BIO LAB LIMITED.

Financial analysis is helpful for providing guidelines to the guidelines to the management and assists them to take future decisions. This analysis helps the management to assess their financial position. This study also helps the general public to evaluate the performance of the company achieving in social objectives.

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METHODOLOGY

The methodology used involves method used for collecting the data. The data collection involved two types of data.

1) Primary data2) Secondary data

This study majorly based on secondary data.

Primary data:

Primary data is the data which is collected by the researcher directly from his observations and experiences. For example, if the researcher conducts a survey for the collected of data then it is known as primary data.

We have got the data from the employees of the company.

Secondary data:

Secondary data is data that has already been collected and collated by somebody for some reason other than the current study. It can be used to get a new perspective on the current study, to supplement or compare the work or to use parts of it, as another study may prove costly and time consuming.Secondary data can further be divided into two parts. Qualitative data includes biographies, personal letters, diaries, records, documents, published material, computer database, policy statements, etc. Quantitative data would have market research, census, and Economic documents, planning documents or specimens. The list is endless and once the type of secondary data is identified, it becomes easy to locate the source.

Here we have collected the secondary data from internet, books and reports.

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LIMITATIONS OF THE STUDY

Since the project is done in only two months duration, we could

not go indepth into all the aspects affecting the financials of the company.

There are no companies which are matching with the exact profile of this company. Hence, comparison with peers is also a challenge to our study.

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INDUSTRY PROFILE

The bio pharma market having grown at 16.5% from 2004’s revenue of $60.7 billion was valued at $70.8 billion in the year 2005 (Vision Gain report 2005). At present, the US is dominating the biotech market. The major thrust in biotechnology is in bio-pharmaceuticals, with more than 350 products under various phases of advanced clinical trials. In the US alone, more than 90 new products have been approved by the FDA, while more than 2000 products are under development. India being on the threshold of biotech revolution has 280 biotech and 180 bio suppliers contributing to the total biotech market worth $1.07billion. The Indian biotech industry in 2004-05 registered revenues of Rs. 4,745 crore recording a 36% growth compared to the previous year. This sector offers good growth potential. Drug molecule development and allied services are growth areas in bio pharma industry and successful product innovations results in company commanding good premium in the market.

These are exciting times for the Indian biotechnology industry. The industry has doubled in size within the last two years buoyed by a strong growth in biotech exports. In the year 2006-07, it passed the USD 2 billion mark in revenues and registered a 31% growth rate as compared to the fiscal year of 2005-06. The Indian biotechnology industry offers immense potential for investments thanks to its large marketplace, strong government support and low-cost English speaking professionals. The industry currently has around 340 companies which employ 25,000 technologists and the latter is expected to double by the year 2010.

The biotechnology market in India consists of agricultural biotechnology, industrial biotechnology, bioinformatics, biopharmaceuticals and biotechnology related services, with the last two being the main pillars of growth.

The biopharma sector leads the pack having generated 70% of the total industry’s revenue. Domestic firms dominate this sector, accounting for fourteen of the top twenty firms.

The biopharma sector is comprised of 130 companies involved mainly in the production of vaccines, therapeutic drugs, animal biologicals, statins and diagnostics. Vaccine production is the most profitable, with five of the top ten companies in the biopharma segment dealing primarily in vaccines.

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Interestingly enough, even though there is a large domestic market for such products, the Indian biopharma sector is export-driven, with exports accounting for more than 58% of revenue in 2006.

Bioservice is another fast-rising segment in the Indian biotechnology industry, recording a growth of 70% in revenues in 2005-06. Bioservices mainly include clinical research and contract research organizations (CRO) and to some extent, custom manufacturing. There are 70 companies in the sector offering services in areas such as data management, clinical trials, site management, bio-equivalence, toxicity studies and knowledge process outsourcing for pharmaceutical companies.

Nascent attractiveness

The Indian Government plans to follow the American biotechnology industry model, where governmental investment only accounts for 20% of the industry’s total funding. Hence, the government has come out with a list of incentives to attract foreign direct investment into the biotechnology industry. These incentives include a 150% weighted tax deduction on R&D expenditure; a three-year excise duty waiver on patented products; and 100% foreign equity investments in the manufacturing of all drugs (except recombinant DNA products and cell targeted therapies).

Currently the top three biotech hubs are located in Bangalore, Hyderabad and Pune. Bangalore today is the most popular choice for most biotech companies due to its highly developed infrastructure and networking options. More than half of biotech firms based in India can be found in and around Bangalore. Leveraging on a well-trained talent-pool, MNC’s such as Novo Nordisk and Reametrix have set up operations there. Indian Department of Biotechnology’s budget increases threefold over last five years.

India’s scientific knowledge pool stands at 3 million graduates, 700,000 post-graduates and 1,500 PhD’s. A comparison of several countries shows that these numbers are increasing in India annually at a faster rate than in other countries. India is estimated to add 690,000 graduates annually which is significantly higher than in China, Japan, the United States, or Europe.

Key Indian opportunities for outsourcing are available in bio-processing, drug discovery and in clinical research. The cost differential for drug discovery between the United States and India is around 75%. In India, a drug discovery process may be around USD 200 million in versus USD 800 million in the US. India has now become a key destination for outsourced biotechnology R&D. Clinical trials cost 30% less to carry out in India than in Australia and about 50% less than in the US.

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On average for 2005, the starting annual salary for an Indian PhD biotechnology scientist in India with no experience was USD 15,000, whereas a counterpart in the United States or Singapore would cost around USD 80,000 and 64,000 respectively. However, the growing demand for talent against a short supply is increasing India’s labor costs. As a result, any cost advantage is dwindling fast.

Usual suspects

There are several complications that may arise as a result of operating in India. These include operational disruptions caused by worker disputes, interrupted power supplies, and antiquated transport infrastructure in many regions. Also animal rights activists, religious and cultural barriers may disrupt operations given the Indian reverence for certain animals such as cows, monkeys and snakes.

The main problems that foreign investors face include the presence of bureaucracy, corruption, the lack of precise ethical regulations and inadequate intellectual property (IP) protection and enforcement. The Indian biotechnology sector is governed by five central ministries and six state ministries which have created lot of red tape complications when it comes to ruling decisions and new product launches. A new product launch, for example, has to clear not only the district and state ministries but by also several national regulatory bodies.

Finally, there is a lack of IP protections to guard against corporate theft and copycats. In the past, many Indian biotech firms faced theft either from their employees, running away with vital product data, or by the hacking of their databases by external parties. In an industry where a single product can spell success, stolen ideas translate to millions of dollars. Although India has a proper English-based legal system, many employers are unwilling to take their employees to court due to the slow judiciary process. India has begun to tackle its copyright troubles with recent changes in intellectual property regulations. For example, there has been a restructuring of patent laws to focus on product protection rather than only process protection. This allows companies to patent their final product and as well as the processes that lead up to that product. This reduces the opportunity for copying and is the right start in the improvement of IP regulations in India.

India’s biotechnology industry is on a roll. It has already a strong global presence, producing the fourth largest volume of products in the world. Revenues could increase to a formidable USD 25 billion by 2015. India’s vast pool of skilled manpower, huge patient base and relatively low costs drives many global biotech giants to partner, acquire or outsource to Indian companies. Likewise, some of the

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larger Indian companies have even begun acquiring foreign entities in the Unites States and Europe, to retail their products and expand product offerings.

The success of Indian companies in reducing the prices of drugs, has made most multinationals realize that it is now impossible to ignore India. A good illustration: Hyderabad-based Shantha Biotechnics, which offers a combination vaccine for Hepatitis-B for USD 2 per dose versus USD 5 per dose by MNC’s such as Chiron.

Major improvements are needed for India’s biotech industry to surge. First, there needs to be more protection and enforcement of intellectual property rights. Secondly, regulations to control the testing of products on unsuspecting patients need to be put in place. Lastly, the government needs to streamline all of the biotechnology activities under one body, to simplify proceedings and to create some transparency for investors in the industry.

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COMPANY PROFILE

CELESTIAL BIO LABS LIMITED was incorporated as a Private Limited Company on November 19, 1997 as "Celestial Technologies Private Limited". The subscribers to the memorandum were Mr. Rajani Kanth Katragadda and Mr. Vijay Marur. The company was later converted into a Public Limited Company under the name "Celestial Technologies Limited" on December 6, 1999 and has been subsequently renamed as "CELESTIAL BIO LABS LIMITED" effective from February 13, 2004. The present promoter of the company is Mr. Aditya Narayan Singh. The Original promoters sold their holding to the present promoter on 7.11.1998.

CELESTIAL BIO LABS LIMITED is a Hyderabad based ISO 9001-2000 certified company. It has been providing customized enterprise solutions, bioinformatics services and also involved in development of biopharmaceuticals and industrial enzymes. CELESTIAL BIO LABS is in contact with Centre for Cellular & Molecular Biology (CCMB) under the aegis of Council for Scientific and Industrial Research, Ministry of Science and Technology, Government of India and Indian Institute of Chemical Technology (IICT), premier chemical and Biological Institutions in Hyderabad to work on collaborative research projects to be funded by Department of Science and Technology New Delhi. The in-house research and development centre of CELESTIAL BIO LABS is recognized by the Department for Scientific and Industrial Research, Ministry of Science and Technology, New Delhi.

Major Events in the history of the Company are given below:

In the Year 1997 company is incorporated. In the year 1999 Conversion of Private Limited Company to Public Limited Company and Change of Management has taken place. 2004 ISO Certification 2004 Development of a denovo drug design tool" CELSUITE" 2004 Change of name from Celestial Technologies Limited to Celestial Labs Limited 2004 Developed a bio-molecule to treat Vitiligo 2005 Designed a bio- molecule to treat multi cancer.

The company has developed a de novo drug design tool "CELSUITE" to aid the pharma industry in discovering new molecules for curing different diseases. This tool will enable the company not only to design new molecules for its own purpose but also to provide the bio-informatics services to the various pharma and biotech companies. This tool has filed for protection of the IPR under the Copy Right Act vide Dairy no 147-151 /05 on 20.06.2005 to the department.

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Based on the company's in silico expertise (applying bioinformatics tools), the company has developed therapeutic molecules to treat Leucoderma and multiple cancers. The cloned molecules are being subjected for purification by the wet lab procedures at the company's collaborative Institute, Department of Microbiology, Osmania University, Hyderabad.

In the industrial biotechnology area, the company has signed the technology transfer agreement with IMTECH Chandigarh (a very reputed Council of Scientific & Industrial Research organization) for the manufacture of two industrial enzymes - alpha Amylase and alkaline Protease. Initially these would be marketed in India and later overseas.

The company has initiated setting up of a biotechnology facility to develop its drug molecules and manufacture industrial enzymes. This facility would also include the research laboratories for carrying out further R & D activities to develop new related products for reducing wrinkles / stretch marks and acceleration of wound healing from the same chemical structure of vitiligo. The proposed facility will be set up at Shapoorji Pallonji Biotech Park in Genome Valley at Hyderabad in Andhra Pradesh.

The company has also plans to cater to the laboratory process outsourcing by using innovative platform technologies/services in the field of analytical laboratory and bio-computational systems. The company is positioned to drive innovations and support activities in post genome advancements via clinical trials (CT) and laboratory process outsourcing (LPO) to be a significant player in personalized medicine in select disease areas.

2009- Celestial BIO Labs Ltd has informed that the Board of Directors of the Company by a resolution passed by circulation has appointed Mr. Subhash C Srivastava as an Additional Director of the Company w.e.f. April 15, 2009.

R&D Activities:

Celestial will always continue to upgrade packaged ERP and Bioinformatics’ tools to meet the latest requirement of various clients. Celestial is in advance stage of clinical trials of new bio peptide molecules applicable for the treatment of

Vitilogo Psoriasis

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Wound Healing Anti Wrinkles Wrinkles and skin aging Skin Tan

Celestial is in the process of developing formulations particularly by taking the molecules that has become of patatents combining with new herbal and enzyme ingredients to improve the efficacy and reduce the side effects of new combination drugs.

Major strengths:

Technical expertise Process adherence Domain knowledge Quality policies Better ROI Market competence

Modules of SAP been implemented:

Financial Accounting Customer Relationship Management Sales & Distribution Global Trade Services Supply Chain Management Material Management Work Flow Industry solutions for Public Sector

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Source: Celestial Biolabs, Annual Report, 2008-2009

FINANCIAL ANALYSIS OVERVIEW

Nature of Financial Statements

Financial statements are prepared for the purpose of presenting a periodical review or report by the management and deal with the state of investment in business and result achieved during the period under review. They reflect a combination of recorded facts, accounting conventions and personal judgements. Only those facts, which are recorded in the business books, will be reflected in the financial statements. For example, fixed assets are recorded in the books at cost price and shown in the balance sheet at cost price irrespective of their market and realizable price. Again, financial statements are prepared by following certain principles, which are in use from a long time. For example, the conservatism principles indicates that all the anticipated losses are to be provided whereas all the anticipated profits are to be taken into account while preparing financial statements. Such conventions will not reflect the true position of the business, as the actual position of the business will definitely be better as compared to the position depicted from the financial statements.

The following points reflect truly the nature of the financial statements of the business entities:

i. These are reports or summarized review about the performance, achievements and weakness of the business.

ii. These are prepared at the end of the accounting period so that the various parties may take decisions of their future action in respect of the relationship with the business.

iii.The reliability financial statements depend on the reliability of accounting data. These statements can not be said true and fair representatives of the strength or profitability. There are numerous frauds and defalcations in accounts.

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iv.The figures in the financial statements are a combination of recorded facts. There may be certain development and factors which may be very important for the business, are not taken into account, as these are not recorded in the routine of the accounting. Moreover, fixed assets are recorded values without taking into consideration the change in their value due to the fluctuations.

v. These statements are to be prepared as per accounting standards and conventions.

vi.These statements are influenced by personal judgement of the accountant though he is expected to be more objective in his approach. These judgements may relate to valuation of inventory, depreciation of their fixed assets and while making distinction between capital and reserves.

Types of Financial Analysis

A distinction between various types of analysis on the basis of:

A. Material use B. Objectives of analysisC. According to the modus operandi of the analysis

On the basis of material use

1. External dataThis analysis is done by the outsiders who do not have access to the detailed informal accounting records of the business firm. The outsiders include investors, creditors, potential government agencies and the general public. The position of the external analyst has been improved in recent times owing to government regulations requiring business undertaking to mate available detailed information to the public through audited accounts.

2. Internal analysis

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The internal analysis is accomplished by those who have access to the books of accounts and all other information relate to the business analysis for managerial purpose is the internal type of analysis and is conducted by employees and executives of the enterprise as well as governmental and cost agencies, which may have a major regulatory and jurisdiction over the business.

On the basis of objectives of analysis

On the basis of objectives, financial analysis is divided into two.

1. Short term analysisThis analysis is mainly concerned with the working capital analysis. In the short run, a company must have ample funds readily available to meet its currents needs and sufficient borrowing capacity to meet the contingencies. In short term analysis current assets and current liabilities are analysed and liquidity is determined.

2. Long term analysisIn long term analysis, a company must earn a minimum amount sufficient to maintain a reasonable rate of return on the company and to beat the cost capital. Thus in the long term analysis, the long run stability and earning potentiality of the company is analysed.

On the basis of modus operandi of analysis

There are 2 types of financial analysis based on modus operandi.

1. Horizontal Analysis –it refers to comparison of financial data of a company for several years.

2. Vertical Analysis (static analysis)- it refers to study of various items to the financial statements one accounting period.

TOOLS OF FINANCIAL ANALYSIS

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The analysis and interpretations of financial statements is used to determine the financial position and results of operation as well.1. Comparative statement-

These are statements of different periods of time It shows a. Absolute figures of comparing yearsb. Changes in absolute figure c. Absolute data in terms of percentages

I. Comparative balance sheet - it is study of the trend of the same items and computed items in two or more in balance sheets of the same business enterprise on different dates.

II. Comparative income statement- it gives the results of the operation of a business and progress of business over a period of time.

2. Trend analysis- The financial statements may be analyzed by computing trends of series information. It determines the direction upwards or downwards and involves the computation of percentage relationship that each statement items bears to the same item I base year.

3. Common size statement- These are shown in analytical percentages. The figures are shown as percentages of total assets, total liability and total sales.a. Common size balance sheet – a statement in which balance sheet are

expressed as the ratio each asset to total asset and the ratio each liability to total liabilities.

b. Common size incomes statement - the items in income statement can be shown as percentage of sales to show the relation of each item to sales.

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4. Funds flow statement- The funds flow statement is designed to analyze the change in the financial condition of business enterprise between two periods. One word ‘fund’ is use to denote working capital.

5. Cash flow statement- It is a statement of changes in financial position of firm on cash basis.a. It enumerates net effects of the various business transactions on cash

and takes in to account receipts and payment of cashb. It summarizes the causes of changes in cash position of a business

enterprise between dates of balance sheets.

6. Ratio analysis- A ratio is an expression of the quantitative relationship between two numbers.a. It is technique of analysis and interpretations of financial statements.b. It is the process establishing an interpreting various ratios for helping

in making certain decisions.

7. Marginal costing- The institute of cost and management accountants London has defined “the ascertainment of marginal costs and of the effect on profit of changes in volume or type of input”.

8. Standard costing- a. A predetermined cost which is calculated from management’s

standards of efficient operation and the relevant necessary expenditureb. A technique of cost accounting which compares the standard cost of

each product or service with actual cost to determine the efficiency of the operation so that any remedial action may be taken immediately.

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Company financial performance

Celestial Bio labs Ltd. announced unaudited earnings results for the fourth quarter and full year ended March 31, 2010. For the quarter, the company reported net profit from ordinary activities after tax of INR 3.68 million or INR 0.31 per diluted share on net sales/income from operations of INR 51.45 million against net profit from ordinary activities after tax of INR 14.64 million or INR 1.31 per diluted share on net sales/income from operations of INR 54.47 million in the same period of last year. Profit from operations before interest and tax was INR 4.36 million against INR 15.30 million in the same period of last year. Profit before tax was INR 4.13 million against INR 14.80 million in the same period of last year. For the full year ended March 31, 2010, the company reported net profit from ordinary activities after tax of INR 59.27 million or INR 4.94 per diluted share on net sales/income from operations of INR 246.21 million against net profit from ordinary activities after tax of INR 53.10 million or INR 4.74 per diluted share on net sales/income from operations of INR 192.51 million in the same period of last year. Profit from operations before interest and tax was INR 71.37 million against INR 60.53 million in the same period of last year. Profit before tax was INR 70.98 million against INR 59.87 million in the same period of last year.

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Comparative Balance Sheet

Balance Sheet

------------------- in Rs. Cr.

-------------------

Celestial Labs Sun Pharma Cipla Dr Reddys Labs Ranbaxy Labs

Mar '09 Mar '09 Mar '09 Mar '09 Dec '09Sources Of Funds

Total Share Capital 11.19 103.56 155.46 84.20 210.21

Equity Share Capital 11.19 103.56 155.46 84.20 210.21

Share Application Money 0.00 0.00 0.00 0.00 175.85

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 52.48 5,047.86 4,186.32 5,174.90 3,748.54

Revaluation Reserves 0.00 0.00 8.97 0.00 0.00Networth 63.67 5,151.42 4,350.75 5,259.10 4,134.60

Secured Loans 0.01 23.60 2.79 2.60 175.83

Unsecured Loans 0.75 0.00 937.45 637.70 3,172.55

Total Debt 0.76 23.60 940.24 640.30 3,348.38

Total Liabilities 64.43 5,175.02 5,290.99 5,899.40 7,482.98

Application Of Funds

Gross Block 32.79 1,061.90 2,693.29 2,157.30 2,620.92

Less: Accum. Depreciation 1.96 362.64 700.80 946.50 1,027.52

Net Block 30.83 699.26 1,992.49 1,210.80 1,593.40

Capital Work in Progress 23.43 75.95 366.32 411.20 414.92

Investments 0.00 2,694.59 81.32 1,865.10 3,833.69

Inventories 1.80 486.74 1,398.32 735.10 1,230.48

Sundry Debtors 2.37 680.03 1,837.15 1,419.70 1,534.65

Cash and Bank Balance 0.11 20.17 52.84 84.30 25.56

Total Current Assets 4.28 1,186.94 3,288.31 2,239.10 2,790.69

Loans and Advances 7.06 311.42 1,131.10 1,331.20 1,967.65

Fixed Deposits 0.00 1,245.30 0.16 300.10 728.56Total CA, Loans & Advances 11.34 2,743.66 4,419.57 3,870.40 5,486.90

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 1.77 696.34 1,177.00 1,163.30 3,082.89

Provisions 1.38 342.10 391.71 294.80 763.03

Total CL & Provisions 3.15 1,038.44 1,568.71 1,458.10 3,845.92

Net Current Assets 8.19 1,705.22 2,850.86 2,412.30 1,640.98

Miscellaneous Expenses 1.98 0.00 0.00 0.00 0.00

Total Assets 64.43 5,175.02 5,290.99 5,899.40 7,482.99

Contingent Liabilities 0.00 85.36 730.75 1,934.80 261.05

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Book Value (Rs) 56.88 248.72 55.86 312.17 94.16

According to the available data, the industry rivals like Sun Pharma, Cipla, Ranbaxy, Dr. Reddy etc. are well established players in the market. On comparison with Celestial Biolabs, which is a small player in the industry, but highly diversified in the field of Pharma, Bio-technology, Software etc. shows a commendable performance in the past years.

One of the point to be noted is that the other rivals have invested substantial amount in investment compared nil to Celestial Biolabs.

Another major aspect of the analysis would be the comparison of current liabilities to provisions in different firms. Celestial Biolabs has provided a significant amount for provisions compared to liabilities when compared to Cipla and Ranbaxy.

On the whole, Celestial Biolabs has a long way to go in the industry and need to establish strong based to compete with the fellow peer members of the industry.

Source: moneycontrol.com

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Celestial Biolabs Limited Balance Sheet 2005-09

Celestial Labs

Balance Sheet

------------------- in Rs. Cr.

-------------------

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 5.69 6.19 6.19 11.19 11.19

Equity Share Capital 5.69 6.19 6.19 11.19 11.19

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 5.92 8.37 14.63 47.82 52.48

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Networth 11.61 14.56 20.82 59.01 63.67

Secured Loans 0.00 0.04 1.28 0.12 0.01

Unsecured Loans 0.00 0.30 0.60 0.70 0.75

Total Debt 0.00 0.34 1.88 0.82 0.76

Total Liabilities 11.61 14.90 22.70 59.83 64.43

Application Of Funds

Gross Block 6.16 7.03 7.68 12.51 32.79

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balanceCL05200503200903200903

Less: Accum. Depreciation 0.86 1.12 1.42 1.68 1.96

Net Block 5.30 5.91 6.26 10.83 30.83

Capital Work in Progress 0.00 0.00 0.00 12.10 23.43

Investments 0.00 0.00 0.00 0.00 0.00

Inventories 0.00 0.00 0.00 0.00 1.80

Sundry Debtors 2.99 3.89 4.69 8.12 2.37

Cash and Bank Balance 0.31 0.55 0.54 0.89 0.11

Total Current Assets 3.30 4.44 5.23 9.01 4.28

Loans and Advances 0.58 0.90 4.24 27.14 7.06

Fixed Deposits 0.00 0.00 0.00 0.00 0.00

Total CA, Loans & Advances 3.88 5.34 9.47 36.15 11.34

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 0.35 1.49 1.53 1.84 1.77

Provisions 0.00 0.01 0.00 1.34 1.38

Total CL & Provisions 0.35 1.50 1.53 3.18 3.15

Net Current Assets 3.53 3.84 7.94 32.97 8.19

Miscellaneous Expenses 2.78 5.16 8.51 3.94 1.98

Total Assets 11.61 14.91 22.71 59.84 64.43

Contingent Liabilities 0.00 0.00 0.00 0.00 0.00

Book Value (Rs) 20.42 23.52 33.63 52.72 56.88

.

26

According to the comparative Balance sheet analysis for the Y-o-Y 2008-2009, one can observe that the reserves has increased by 9.7% upto Rs 52.48 crores.

Adding to this positive growth of the firm is a significant change in the networth by 7.89% with a slight decrease in the total debt by 7.3% upto Rs 76 lakhs.

On the asset side, there is a tremendous growth in the net block by 184.6%. Supporting the above change is Capital Work in Progress, increasing by 93.6%. On the contrary there is marginal decrease in Sundry Debtors, Cash and Bank Balance, Total Current Assets, Loans and Advances.

Net Current Assets have also decreased by 75.15%. An addition of inventories in the year 2009 shows an inclination of the firm towards a strategic position in the market.

In all, the Book Value of Celestial Labs from the past five years shows a steady increase hence, provides an excellent long term investment opportunity.

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Key Financial Ratios ------------------- in Rs. Cr.

-------------------

Mar '05 Mar '06 Mar '07 Mar '08Mar '09

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00 10.00

Dividend Per Share -- -- -- 1 0.5Operating Profit Per Share (Rs) 5.54 7.19 10.8 9.75 6.68

Net Operating Profit Per Share (Rs) 14.16 16.5 22.81 18.06 17.2Free Reserves Per Share (Rs) 5.53 5.18 9.89 39.2 45.11

Bonus in Equity Capital -- -- -- -- --Profitability Ratios

Operating Profit Margin(%) -- 43.55 47.36 53.98 38.84

Profit Before Interest And Tax Margin(%) -- 41.06 45.18 52.69 37.42

Gross Profit Margin(%) -- 43.54 47.34 52.69 37.42

Cash Profit Margin(%) -- 34.6 38.58 51.04 34.52

Adjusted Cash Margin(%) 39.19 43.08 46.86 51.04 34.52

Net Profit Margin(%) 33.2 32.11 36.41 44.2 27.58Adjusted Net Profit Margin(%) -- 32.11 36.41 44.2 27.58Return On Capital Employed(%) -- 22.33 22.96 15.92 9.53

Return On Net Worth(%) 23.08 22.53 24.7 16.22 8.6Adjusted Return on Net Worth(%) 30.34 34.9 41.76 16.22 8.6

Return on Assets Excluding Revaluations 22.4 19.99 21.22 14.18 7.86

Return on Assets Including Revaluations 22.4 19.99 21.22 14.18 7.86Return on Long Term Funds(%) 23.14 22.33 22.96 15.92 9.53

Liquidity And Solvency Ratios

Current Ratio 11.03 3.55 6.19 11.37 3.61

Quick Ratio 11.03 3.55 6.19 11.37 3.04

Debt Equity Ratio -- 0.02 0.09 0.01 0.01

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keyfinratioCL05200503200903200903

Long Term Debt Equity Ratio -- 0.02 0.09 0.01 0.01

Debt Coverage Ratios

Interest Cover -- 2,106.13 1,692.52 2,076.78 93.45

Total Debt to Owners Fund -- 0.02 0.09 0.01 0.01

Financial Charges Coverage Ratio 412.62 461.36 559.6 141.96 48.3

Financial Charges Coverage Ratio Post Tax 412.62 457.38 554.69 135.22 43.93

Management Efficiency Ratios

Inventory Turnover Ratio -- -- -- -- 10.69

Debtors Turnover Ratio 3.35 2.97 3.29 3.15 3.67

Investments Turnover Ratio -- -- -- -- 10.69

Fixed Assets Turnover Ratio 1.76 3.59 4.25 -- 0.79

Total Assets Turnover Ratio -- 0.84 0.71 0.34 0.34

Asset Turnover Ratio 2.37 2.39 2.87 1.62 0.79Average Raw Material Holding -- -- -- -- --Average Finished Goods Held -- -- -- -- --

Number of Days In Working Capital 157.85 135.1 202.39 587.23 153.42

Profit & Loss Account Ratios

Material Cost Composition -- -- -- -- --

Imported Composition of Raw Materials Consumed -- -- -- -- --

Selling Distribution Cost Composition 6.31 7.7 6.69 5.34 5.62

Expenses as Composition of Total Sales 80.99 88.97 93.61 90.99 69.61

Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit -- -- -- 14.65 12.33

Dividend Payout Ratio Cash Profit -- -- -- 12.69 9.85

Earning Retention Ratio 100 100 100 85.35 87.67Cash Earning Retention Ratio 100 100 100 87.31 90.15

Adjusted Cash Flow Times -- 0.08 0.28 0.08 0.11

Earnings Per Share 4.71 5.3 8.3 7.98 4.74

Book Value 20.42 23.52 33.63 52.72 56.88

29

The net operating profit of the company was continuously increasing till 2007 and it started decreasing from then. The Net Profit Margin has been steadily increased to till 44.2 in 2008 and started decreasing. Return on capital employed was slightly increased from 2006 to 2007 and then started decreasing with rapid rate. Return on net worth was fluctuating between the years 2005-07 but there was rapid fall in the period 2007-09.current ratio had a tremendous fall in 2006 and there was a slight increase in 2006_09 and again it decreased to 3.61 in 2009. Quick ratio also had an same impact as current ratio had .

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Operating Profit Margin %

Mar '06 Mar '07 Mar '08 Mar '090

10

20

30

40

50

60

43.5547.36

53.98

38.84

operating profit margin %

operating margin profit %

The graph of operating profit margin depicts that the margin has drastically decreased after March’08. The above decrease in the profit margin may signify that management policies are enforced for necessary maintenance and depreciation.

The above mentioned assumption is if regarded to be right, then this proves company’s long term perspective in the business. But on the other hand, it also proves that the company is high financial risk. In order to increase the profit margin, company may have to cut on wages or comprise on other factors of production, else it will be a difficult call on its growth.

31

Gross Profit Margin %

Mar '06 Mar '07 Mar '08 Mar '090

10

20

30

40

50

60

43.5447.34

52.69

37.42

gross profit margin%

gross profit margin%

Similar to operating profit margin, the gross profit margin has also decreased drastically after 2008. This shoes inability of a firm for effectively utilizing its resources. Hence, in this case of Celestial Biolabs, it shows inefficiency to utilize its resources like intellectual capital, technology and other variables to provide a good quality service.

In pharmaceutical industry it is very necessary for a firm to provide superior quality services in order to mild survive. Hence, it is doubtful about company’s future client prospect.

32

Net Profit Margin %


101520253035404550

33.2 32.1136.41

44.2

27.58

net profit margin %

net profit margin %

The net profit margin also shows a similar trend as the above two ratios. The relatively lower profit margin shows a lower safety of margin. This may lead to decline in sales and erase in profits.

The company needs to increase the net profit margin for better pricing policies in such a competitive industry.

33

Return on Net Worth %


5

10

15

20

25

30

23.08 22.5324.7

16.22

8.6

return on net worth%

return on net worth%

Return on net worth, shows a tremendous decrease from 24.7% to 8.6% in the last three years. A decrease in shareholders equity is not a positive sign, but it also provides an entry point for fresh investors and may base out at the current level.

The decrease in the owner’s equity that the current investors will stay with the company till it reaches the desired level and also allows fresh investments to flow in.

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Current Ratio


2

4

6

8

10

1211.03

3.55

6.19

11.37

3.61

current ratio

current ratio

The zig-zag graph of current ration signifies a dynamic cash flow, a positive sign for the company. The company is in a better position financially on this matter but not when compared to previous year. Hence, it shows a probability to grow to higher levels.

35

Quick Ratio


2

4

6

8

10

1211.03

3.55

6.19

11.37

3.04

quick ratio

quick ratio

A quick ratio of 1:1 is considered to be favorable but in the case of Celestial Biolabs, it is much more. For every rupee in liability there is minimum a rupee in quick assets.

36

Interest Coverage Ratio

Mar '06 Mar '07 Mar '08 Mar '090.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

2,106.13

1,692.52

2,076.78

93.45

interest coverage ratio

interest coverage ratio

The interest coverage ratio has fallen to very low levels in March’09.

It shows firms lower ability to pay interest on long term borrowings and give dividends on preference shares. Presently, the firm has a lower ability to meet interest obligations.

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Debtors Turnover Ratio


0.5

1

1.5

2

2.5

3

3.5

4

3.352.97

3.29 3.15

3.67

debtors turnover ratio

debtors turnover ratio

This is the only ratio which has shown an upside, but unfortunately its higher value has a negative correlation on their ability to pay.

Ideal ratio is 2.1, and the lowest it has touched is 2.97, hence the company’s ability to pay is in a very bad condition.

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Fixed Assets Turnover Ratio


0.5

1

1.5

2

2.5

3

3.5

4

4.5

1.76

3.59

4.25

0

0.79

fixed assets turnover ratio

fixed assets turnover ratio

Such a lower value of the ratio, which stands at 0.79 shows lower efficiency of the firm to use its assets in generating sales. Hence, the company needs to take serious steps in utilizing it s resources and other factors of production in order to generate better sales.

39

Earnings per share/ Book Value


10

20

30

40

50

60

4.71 5.38.3 7.98

4.74

20.4223.52

33.63

52.7256.88

Earnings Per ShareBook Value

Earnings per share shows a formation of a corrective base. It has given presumably decent earnings to shareholders. It might be lower in current times, but a base formation provides strong support level.

A significant increase in the book value depicts increase in company’s assets and better future growth. This kind of rise in book value clears all the doubts on the other financial ratios and explain for not so impressive nature of its financial performance.

40

FINDINGS

Celestial Bio lab has shown credible performance in the past. At present the company shows potential for a higher performance.

The company has to work on its pricing policies and competitive strategies to stand out of the herd.

The most impressive aspect about Celestial Biolabs is its strength to withstand the global financial turmoil. Even in the times of credit crunch and global crisis, Celestial Biolabs performed extremely well on financial aspects.

According to the, operating profit margin, the firm shows a slightly higher financial risk in the short term.

The gross profit margin also depicts that in the recent times there has not been effective utilization of resources.

The net profit margin shows a lower safety of margin, resulting in challenging pricing policy during the short term.

Even return on net worth gives a graph of lower shareholder equity, hence opening opportunity for fresh equity investments.

The current ratio provides a very positive sign for the firm. It not only confirms dynamic cash flow but also an opportunity to grow in the longer term.

Quick ratio is higher than the standards and hence is favorable in nature.

Interest Coverage ratio, depicts a lower ability to pay interest on long term borrowings and dividends on preference shares.

As of now there is a lower ability to generate sales in the shorter run, but has a growth option in future, according to fixed assets turnover ratio.

SUGGESTIONS41

Celestial Biolabs has established itself as an effective player in the market. In order to maintain the present status and increase its financial performance, it should concentrate on generating more sales by enforcing competitive pricing, which is only possible with a higher fixed asstes.

As for now, company need not worry about its payment of interest on long term borrowings and dividend payments as it has a bright future and a strong financial base.

CONCLUSION

42

Celestial Biolabs is established by renowned scientist from ICRISAT, Dr. A.N. Singh, and can be valued very high on its intellectual capital.

The company’s share price movements shows a corrective formation which is also supported by Earnings per share value. As EPS has formed a base and has provided strong support for the company.

There is a constant increase in the book value which depicts a constant growth in company’s financials.

The final conclusion would state that Celestial Biolabs, is an attractive investment opportunity for long term, but investors should be cautious in investing with a short term objective.

43

BIBILOGRAPHY

http://www.celestialbiolabs.com/

http://www.celestiallabs.com/service_port.html

http://www.asiahealthcareblog.com/2009/06/12/new-elephant-on-the-block/

http://moneycontrol.com

44

http://www.asiahealthcareblog.com/2009/06/12/new-elephant-on-the-block/

http://www.celestiallabs.com/service_port.html

http://www.celestialbiolabs.com/

celestial biolabs

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