manac project office 2003

7/27/2019 MANAC Project Office 2003

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PROJECT

on

DIVIS LABORATORIES LTD.

Submitted in partial fulfilment of the requirements for

Post Graduate Diploma in Management (PGDM)

Submitted to: Submitted by:

Mrs. Nidhi Sahore Mehul Yadav

Rohan Bahri

Naina Arora

Aditi Ahuja

Class of 2012

Section - B

Bharatiya Vidya Bhavans

Usha & Lakshmi Mittal Institute of Management

Copernicus Lane, Kasturba Gandhi Marg

New Delhi-110001


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October 2012

INDUSTRY OUTLOOK

The Pharmaceutical industry in India is the world's third-largest in terms of volume and

stands 14th in terms of value. According to Department of Pharmaceuticals, Ministry of

Chemicals and Fertilizers, the total turnover of India's pharmaceuticals industry between

2008 and September 2009 was US$ 21.04 billion. While the domestic market was worth US$

12.26 billion. Sale of all types of medicines in the country is expected to reach around US$

19.22 billion by 2012. Exports of pharmaceuticals products from India increased from US$

6.23 billion in 2006-07 to US$ 8.7 billion in 2008-09 a combined annual growth rate of

21.25%. According to Price Waterhouse Coopers (PWC) in 2010, India joined among the

league of top 10 global pharmaceuticals markets in terms of sales by 2020 with value

reaching US$ 50 billion.

The number of purely Indian pharma companies is fairly low. Indian pharma

industry is mainly operated as well as controlled by dominant foreign companies having

subsidiaries in India due to availability of cheap labour in India at lowest cost. Most pharma

companies operating in India, even the multinationals, employ Indians almost exclusively

from the lowest ranks to high level management. Mirroring the social structure, firms are

very hierarchical.

In terms of the global market, India currently holds a modest 1-2% share, but it has

been growing at approximately 10% per year. India gained its foothold on the global scene

with its innovatively engineered generic drugs and active pharmaceutical ingredients (API),

and it is now seeking to become a major player in outsourced clinical research as well as

contract manufacturing and research.

2
http://en.wikipedia.org/wiki/Pharmaceutical_industryhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Ministry_of_Chemicals_and_Fertilizers_(India)http://en.wikipedia.org/wiki/Ministry_of_Chemicals_and_Fertilizers_(India)http://en.wikipedia.org/wiki/PricewaterhouseCoopershttp://en.wikipedia.org/wiki/Pharmaceutical_industryhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Ministry_of_Chemicals_and_Fertilizers_(India)http://en.wikipedia.org/wiki/Ministry_of_Chemicals_and_Fertilizers_(India)http://en.wikipedia.org/wiki/PricewaterhouseCoopers


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DIVIS LABORATORIES LTD

Established in the year 1990, with Research & Development as its prime fundamental, Divis

Laboratories focused on developing new processes for the production of Active Pharma

Ingredients (APIs) & Intermediates. The company in a matter of short time expanded its

breadth of operations to provide complete turnkey solutions to the domestic Indian

pharmaceutical industry.

With five years of experience, expertise and a proven track-record of helping many

companies with its turn-key and consulting strengths, Divis Laboratories established its first

manufacturing facility in 1995.

Built on a 500 acre site at Hyderabad (Unit-I). the plant comprises of 13 multi-purpose

production blocks and has space for further growth and expansion. Divis Laboratories set up

its second manufacturing facility at Visakhapatnam (Unit-II). in the year 2002 on a 350 acre

site. The site has 14 multipurpose production blocks.

Both the facilities are primarily engaged in the manufacture of:

Active Pharmaceutical Ingredients (APIs) & Intermediates for Generics.

Custom Synthesis of API's and Advanced intermediates for discovery

compounds for pharma giants.

Building blocks for Peptides.

Building blocks for Nucleotides.

Carotenoids.

Chiral ligands.

Complete CGMP guidelines are complied with in both the plants. Our Unit1 at

Hyderabad was successfully inspected by the US FDA during September 2000, in

April 2004 and in February 2008. Our Unit-2 at Visakhapatnam was successfully

inspected by the US FDA during November 2006 and in April 2009. Divis also

undertakes FTE/Contract Research on process development for discovering new

compounds for leading MNCs across the world and partners with them for thesupply of APIs. The company is global in its outlook and benchmarks its quality

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standards to the best in the world.

Vision & Mission

A Vision To Excel

To maintain leadership in custom synthesis of APIs and Intermediates for health care and life

sciences industry and to be one of the top companies world-wide in the domain. To develop

generic APIs for the late life cycle needs of the Industry.

A Mission To Serve

To be a good corporate citizen and not only add value in our core competency areas of

Pharma but also serve the community at large through social, educational and environmental

initiatives that would establish strong foundations for a better tomorrow.

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Directors Report

Certification of Chairman and Managing Director and

Chief Financial Officer pursuant to Clause 49 of the Listing Agreement

Dr. Murali K. Divi, Chairman and Managing Director appointed in terms of the Companies

Act, 1956 and Mr. L.Kishore Babu, Chief Financial Officer of the Company to the best of our

knowledge and belief, certify that:

a. We have reviewed balance sheet and statement of profit and loss (consolidated and

unconsolidated) and notes on accounts as well as the cash flow statements and the

directors report :

i. do not contain any materially untrue statement or omit any material fact or

contain statements that might be misleading.

ii. together present a true and fair view of the companys affairs and are in

compliance with existing accounting standards, applicable laws and

regulations.

b. There are no transactions entered into by the company during the year which are

fraudulent, illegal or volatile of the companys code of conduct.

c. We accept responsibility for establishing and maintaining internal controls for

financial reporting and that we have evaluated the effectiveness of internal control

systems of the company pertaining to financial reporting and we have disclosed to the

auditors and the Audit Committee, deficiencies in the design or operation of such

internal controls, if any, of which we are aware and the steps we have taken or

propose to take to rectify these deficiencies.

d. We have indicated to the auditors and the Audit committee:

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i. Significant changes in internal control over financial reporting during the

year;

ii. Significant changes in accounting policies during the year and that the

same have been disclosed in the notes to the financial statements; and

iii. instances of significant fraud of which we have become aware and the

involvement therein, if any, of the management or an employee having a

significant role in the companys internal control system over financial

reporting for Divis Laboratories Limited.

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Significant Accounting Policies

Accounting Convention:

The financial statements are prepared under historical cost convention on the accrual basis of

accounting in accordance with generally accepted accounting principles in India and the

Accounting Standards issued under the relevant provisions of the Companies Act, 1956.

Fixed Assets and Depreciation:

i. Fixed assets are stated at cost of acquisition including freight, duties and

installation expenses and expenditure during construction where applicable and

net of CENVAT and Value Added Tax credit availed against Tax or cess paid on

such items.

ii. Depreciation on Fixed Assets is provided under Straight Line Method at the rates

and in the manner specified in Schedule XIV of the Companies Act, 1956.

iii. Depreciation is provided at one hundred per cent for assets costing less than

Rs.5,000/-

iv. Depreciation on Fixed Assets used for the Project under construction is included

under Unallocated Expenditure Pending Capitalization.

v. Revenue Expenditure incurred during the construction period of the Project is

shown under Unallocated Expenditure Pending Capitalization till the

commencement of the commercial production or their intended use and the same

is being capitalized by allocating to relevant assets in the ratio of their direct costs.

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Impairment of Assets:

The carrying amounts of the assets are being tested on annual basis for impairment so as to

determine the provision required for impairment loss if any or for reversal of the provision, if

any, required on account of impairment loss recognized in previous periods.

Investments:

i. Investments are classified into current and Long-term investments.

ii. Current investments are valued at lower of cost and fair value.

iii. Long-term investments are valued at cost of acquisition. Provision is made for

decline, other than temporary, in the value of investments.

iv. On disposal of an investment, the difference between its carrying amount and net

disposal proceeds is charged or credited to the statement of profit and loss.

Inventories:

Inventories are valued at lower of cost and net realizable value. The Cost of inventories is

being determined under weighted average cost method

Research and Development:

Revenue Expenditure incurred for Research and Development is written off in the same year.

Capital expenditure on Research and Development is shown as additions to Fixed Assets.

Excise Duty:

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Excise Duties recovered are included in "Gross Sales". Excise duty on despatches is shown as

an item of expense and deducted from Gross Sales. The value of closing stock of finished

goods includes excise duty paid / payable on such stocks wherever applicable.

Employee Stock Option Scheme:

In accordance with the Securities and Exchange Board of India guidelines, the excess of the

market price of the shares, at the date of grant of option under the employee stock option

scheme, over the exercise price is treated as employee compensation and the same is

amortized over the vesting period of the stock options.

Foreign Exchange Transactions:

i. Transactions in Foreign Exchange, other than those covered by forward contracts

are accounted for at the exchange rate prevailing on the date of transactions.

Exchange differences arising on foreign currency transactions settled during the

year are recognized in the Statement of Profit and Loss.

ii. Monetary assets and liabilities denominated in foreign currencies as at the balance

sheet date other than those covered by forward contracts are translated at the

yearend rates. The resultant exchange differences are recognized in the statement

of profit and loss.

iii. Non-monetary assets and liabilities are recorded at the rates prevailing on the date

of the transaction.

Employee Benefits:

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i. Short-Term Benefits: Short Term Employee Benefits, at the undiscounted

amount in the year in which the services have been rendered, are charged off to

the Statement of Profit and Loss.

ii. Long-Term Benefits: The contributions to Provident Fund and Employee State

Insurance Schemes, which are defined contribution schemes, to the relevant funds

administered and managed by the Central Government of India, are charged off to

the Statement of Profit and Loss as and when incurred. The Company has no

further obligations under these plans beyond its monthly contributions.

iii. Gratuity: The Company makes contribution to a scheme administered by the Life

Insurance Corporation of India to discharge the gratuity liabilities to the

employees. Annual Contribution to the fund as determined by the Life Insurance

Corporation of India is expensed in that year of contribution.

iv. Leave Encashment: The Company records its unveiled leave liability based onactuarial valuation using projected unit credit method. Actuarial gains / losses

arising during the year are recognized in the Statement of Profit and Loss.

Taxes on Income:

i. Tax Expense: Tax expense is the aggregate of current year income tax, deferred

income tax charged or credited to the Statement of Profit and Loss.

ii. Current Year Income Tax: The Provision for taxation is based on assessable

profits of the company as determined under the Income Tax Act, 1961. The

Company also provides for such disallowances made on completion of assessment

pending appeals, as considered appropriate depending on the merits of each case.

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iii. Deferred Income Tax: Deferred Income Taxes are recognized for the future tax

consequences attributable to timing differences between the financial statement

determination of income and their recognition for tax purposes. The effect of a

change in tax rates on deferred tax assets and liabilities is recognized in income

using the tax rates and tax laws that have been enacted or substantively enacted by

the balance sheet date. Deferred tax assets are recognized and carried forward

only to the extent that it has become reasonably certain or virtually certain, as the

case may be, that sufficient future taxable income will be available against which

such deferred tax assets can be realised.

iv. Minimum Alternate Tax (MAT) Credit: MAT credit is recognized, as an Asset

only when and to the extent there is convincing evidence that the Company will

pay Normal income tax during the specified year. In the year in which the

Minimum Alternative tax (MAT) credit becomes eligible to be recognized as an

asset in accordance with the recommendation contained in Guidance Note issued

by the Institute of Chartered Accountants of India, the said asset is created by way

of a credit to the statement of profit and loss and shown as MAT Credit

Entitlement. The Company reviews the same at each balance sheet date and writes

down the carrying amount of MAT Credit Entitlement to the extent there is no

longer convincing evidence to the effect that Company will pay Normal Income

Tax during the specified period.

Export Benefits:

Advance Licenses and Duty Entitlements against exports made by the company are

accounted in the books on their utilization / disposal. However, the value of unutilized

unconditional customs duty credit granted against Exports under Duty Entitlement Pass Book

Scheme is being provided in the Books of Account.

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Directors Report

Dear Shareholders, TAXATION

Your Directors have pleasure in placing before you the Twenty We made a provision of Rs. 40.48 crores towards Income-taxfirst Annual Report of the Company together with the Audited this year (including MAT credit utilization of Rs.1.28 crores.Accounts for the year ended 31st March 2011. Provision for last year amounted to Rs.40.80 crores including

FINANCIAL RESULTSa MAT credit utilization of Rs.9.60 crores.

An amount of Rs. 3.00 crores has been provided towards(Rs. in Crores)Deferred Tax Liability during the year as against Rs. 3.34 crores

Particulars 2010-11 2009-10 during the previous year.

Net Sales 1305.44 929.29 EQUITY CAPITAL

Other operating income 13.08 17.36 During the year, we allotted 4,50,965 equity shares of Rs.2

Other income 25.52 13.33 each to employees on exercise of their stock options.

As a result of the the allotment of shares under ESOP scheme,Total Income 1344.04 959.98the paid-up equity capital of the company has increased by

Expenditure 809.46 517.43Rs.0.09 crores to Rs.26.52 crores and an addition of Rs. 7.59

PBDIT 534.58 442.55 crores to the Share Premium Account.

Finance charges 2.18 2.76 EMPLOYEE STOCK OPTION SCHEME

Depreciation 53.35 51.45 The Employee Stock Option Scheme (ESOP 2006) approved

Profit before tax (PBT) 479.05 388.34 by the company provided for vesting of stock options in 4tranches. The fourth/last tranche under this Scheme was vested

Provision for tax on 13th March, 2010 and a majority of the options have been

Current Tax 39.20 31.20 exercised by the employees. There are 1,39,180 outstandingoptions yet to be exercised as at the end of the year.

MAT Credit Utilisation 1.28 9.60As per the provisions of Securities and Exchange Board of India

Deferred Tax 3.00 3.34(Employee Stock Option Scheme and Employee Stock Purchase

Profit after tax (PAT) 435.57 344.20 Scheme), Guidelines, 1999, disclosures with respect to Scheme

Earnings per Share (EPS) are given in the Annexure - I to this report.

a) Basic 32.90 26.40 SUBSIDIARIESYour company has two wholly owned subsidiaries viz., M/s.b) Diluted 32.88 26.35Divis Laboratories (USA) Inc., in USA and M/s. Divis

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During the year, Divi achieved a turnover of Rs.1305 crores as Laboratories Europe AG in Switzerland for marketing its

nutraceutical products and a greater reach to customers withinagainst Rs.929 crores during the previous year resulting in athese regions. While loss for current year at Divis Laboratoriesgrowth of 41%. Exports constituted 93% of total turnover as(USA) is Rs.0.63 crores, the loss at Divis Laboratories Europeagainst 91% during the last year. Profit after Tax (PAT) for theis Rs.5.66 crores.year amounted to Rs.436 crores as against Rs. 344 crores during

the last year, a growth of 27%. Auditors of these subsidiaries have observed that they have

Business has grown satisfactorily across all the segments, negative networth and suffer from deficiency of cash forcontinuing operations as a going-concern without the supportespecially during the second half. The issue of destocking ofof the parent. The losses in the subsidiaries are on account ofinventory at our customers seen during the last year is donelow level of operations at the subsidiaries. With the expectedwith and we see normal flow of business across the productincrease in the level of operations, the subsidiaries would beportfolio of the company.getting into cash profits shortly.

DIVIDENDDuring the year, we have enhanced the equity capital in Divis

Your Directors are pleased to recommend a dividend of Rs.10/- Laboratories (USA) Inc., by converting Rs.2.23 crores from outper equity share of Rs.2/- each, i.e., 500% for the year 2010-11 of the loans given to the subsidiary into equity capital. Wesubject to approval of members. would also be increasing the equity capital of Divis Laboratories

Europe AG during the next fiscal.

Auditors Report

To

The Members of

DIVISLABORATORIESLIMITED

1. We have audited the attached Balance Sheet of DIVIS LABORATORIES

LIMITED (the Company) as at 31st March 2011, the Profit and Loss

Account and also the Cash Flow Statement for the year ended on that date

annexed thereto. These financial statements are the responsibility of the

Companys management. Our responsibility is to express an opinion on

these financial statementsbased on ouraudit.

2. We conducted our audit in accordance with auditing standards

generally accepted in India. Those Standards require that we plan and

perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement. An audit

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includes examining, on a test basis, evidence supporting the amounts

and disclosures in the financial statements. An audit also includes

assessing theaccounting principles used and significant estimates made

by management, as well as evaluating the overall financial

statement presentation . We believe that our audit provides a

reasonablebasis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 ( the

Order) issued by the Central Government ofIndia in terms of Section

227(4A) of the Companies Act, 1956 ( the Act), we enclose in the

Annexure astatement on the matters specified in paragraphs 4 and 5 of

the said Order. Further to our comments in the Annexure referred to

above, we report that:

i. We have obtained all the information andexplanations, which to the

best of ourknowledge and belief were necessary for thepurpose

of our audit. In our opinion, proper books of account as required by

Law have been kept by the Company so far as appears from our

examination of thesebooks.

ii. The Balance Sheet, Profit and Loss Account and Cash Flow

Statement dealt with by this report are in agreement with the

books ofaccount.

iii. In our opinion, the Balance Sheet, Profit and Loss Account

and Cash Flow Statement dealt with by this report comply with

the Accounting Standards referred to in Section 211 (3C) of the

Act, 1956 to the extent applicable.

iv. On the basis of the written representations received from the

directors, as on 31.03.2011, and taken on record by the Board

ofDirectors, we report that none of the directors isdisqualified as

on 31 st March, 2011 from beingappointed as director in terms of

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clause (g) ofsub-section (1) of section 274 of the Companies Act,

1956.

v. In our opinion and to the best ofour information and according

to the explanations given to us, the said accounts read in

conjunction with the notes and accounting policies thereon

give the information required by the Act, in the manner so

required and give a true and fair view in conformity with

the accountingprinciples generallyaccepted in India:

a) in the case of Balance Sheet, of the state of affairs of the

Company as at 31st March,2011;

b) in the case of Profit and Loss Account, of the profit for the

year ended on that date; and

c) in the case of Cash Flow Statement, of the cash flows for

the year ended on that date.

Management Discussion and Analysis

Overview

The financial statements have been prepared in compliance with the requirements of the

Companies Act, 1956 and Generally Accepted Accounting Principles (GAAP) in India. The

management of Divis Laboratories accepts responsibility for the integrity and objectivity of

these financial statements as well as for various estimates and judgments used therein. These

estimates and judgments relating to the financial statements have been made on a prudent and

reasonable basis, in order that the statements reflect, in a true and fair manner, the state of

affairs and profits for the year. This report may also contain certain statements that the

company believes are or may be considered to be forward looking statements which are

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subject to certain risks and uncertainties.

Industry and Structure

The value of the global pharmaceutical market is expected to grow 5-7 percent in 2011, to

US$880 billion, compared with a 4-5 percent pace this year, according to IMS Health. IMS

expect the pharmerging markets to continue their rapid expansion next year and remain

strong sources of growth, and also see the potential for several significant innovative

treatment options that are becoming available for patients. Divergent growth rates are

expected for developed and pharmerging markets. As countries recover from the global

economic crisis at different rates, there is growing divergence in the pace of pharmaceutical

growth among major markets.

IMS Health is predicting that emerging markets will expand by $90 billion during 2009-13,

contributing about 48% of annual pharmaceutical market growth in 2013. This comes at a

time when the global multinational pharma firms are looking to these markets - with their

rising GDPs, expanding access to healthcare and improving intellectual property and

regulatory regimes - to fill the revenue gap felt in mature markets. By 2011, IMS expects the

eight emerging markets will have taken their place in the top 20 pharma world rankings.

In the emerging global competitive environment, the company is well positioned to cater to

the growing supply opportunities to the big pharma.

Company Infrastructure

Divi operates from its Headquarters and Registered Office at Hyderabad. The company has

three multi-purpose manufacturing facilities with a total reactor capacity of 4,500 cu.m., with

all support infrastructure like Utilities, environment management and safety systems.

The 1st Facility at village Lingojigudem, Choutuppal Mandal, Nalgonda district, about

60 KM from Hyderabad.

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The 2nd Facility is a 100% Export Oriented Unit at village Chippada,

Bheemunipatnam Mandal, Visakhapatnam Dist. about 30 KM from the port city of

Visakhapatnam on the east coast.

The 3rd facility is an SEZ Unit at village Chippada, Bheemunipatnam Mandal,

Visakhapatnam Dist.

A new facility called DSN SEZ Unit is being set up at our Pharma SEZ at village

Chippada, Bheemunipatnam Mandal, Visakhapatnam Dist., at an estimated cost of

Rs.200 crores. This facility has commissioned trial runs during the first quarter of the

year 2011-12.

The company has 4 Research Centres with the well defined functional focus on custom

synthesis, contract research for MNC companies as also future generics involving processes

like route design, route selection, establishing gram scale process and structural confirmation,

process optimization, impurity profile, pilot studies, pre-validation batches, validation of

process and transfer of technology to Plant, review efficiency of processes and ongoing

process. The company has constantly been augmenting capacities to cater to increasing

business needs.

Internal Control systems

The Company maintains a system of well established policies and procedures for internal

control of operations and activities, and these are continually reviewed for effectiveness. The

internal control system is supported by qualified personnel and a continuous program of

internal audit. The prime objective of such audits is to test the adequacy and effectiveness ofall internal control systems laid down by the management and to suggest improvements.

We believe that the companys overall system of internal control is adequate given the size

and nature of operations and effective implementation of internal control self assessment

procedures and ensure compliance to policies, plans and statutory requirements.

Divi encourages and recognizes improvements in work practices. The internal control system

of the company is also reviewed by the Audit Committee periodically. The Management duly

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considers and takes appropriate action on the recommendations made by the statutory

auditors, internal auditors and the independent Audit Committee.

Risks and Concerns

Divi lays emphasis on risk management and has an enterprise-wide approach to risk

management, which lays emphasis on identifying and managing key operational and strategic

risks. Through this approach, the company strives to identify opportunities that enhance

organisational values while managing or mitigating risks that can adversely impact its future

performance.

Divi is engaged in manufacture of generic APIs, custom synthesis of active ingredients for

innovator companies and other specialty chemicals like peptides and nutraceuticals. The

company constantly reviews its policies and procedures to adhere to conformity to the

various regulatory approvals for its manufacturing facilities, its commitment to IPR. The

company is very selective in its product portfolio with a focus on export markets within the

domain of its capabilities and does not transgress in unrelated expansions, diversification or

acquisitions.

The companys risk management and control procedures involve prioritization and

continuing assessment of these risks and devise appropriate controls, evaluating and

reviewing the control mechanism and redesigning it from time to time in the light of its

effectiveness.

Corporate Governance

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Report in line with the requirements of the stock exchanges under clause 49 of the Listing

Agreement, on the practices followed by the company and other voluntary compliances is

furnished below :

Corporate governance is the set of processes, customs, policies, laws and institutions

affecting the way a company is directed, administered or controlled. It is a system of

structuring, operating and controlling a company with a view to achieve long term strategic

goals to satisfy shareholders, creditors, employees, customers and suppliers.

Corporate governance is based on principles such as conducting the business with all

integrity and fairness, being transparent with regard to all transactions, making all the

necessary disclosures and decisions, complying with all the laws of the land, accountability

and responsibility towards the stakeholders and commitment to conducting business in an

ethical manner. Your Company adheres to the principles of corporate governance and

commits itself to accountability and fiduciary duty in the implementation of guidelines and

mechanisms to ensure its corporate responsibility to the members and other stakeholders.

Shareholding

Pattern

Category

As on 31.03.2011 As on 31.03.2010

No. of Shares % to share capital No. of Shares % to share capital

Promoters 69222900 52.21 69195600 52.36

Mutual Funds and UTI 17492497 13.19 18190891 13.77

Banks/Financial institutions 834652 0.63 313519 0.24

Foreign Institutional Investors 20306327 15.31 20453970 15.48

Private Corporate Bodies 11535922 8.70 9763127 7.39

Indian Public 11114870 8.39 11978397 9.06

Non-Resident Indians / Overseas Corporate Bodies 1164758 0.88 1335086 1.01Clearing Members 190626 0.14 59889 0.05

Trusts 1098 0.00 1456 0.00

Directors (Not having control over the Company) 731460 0.55 852210 0.64

Grand Total 132595110 100 132144145 100

Balance Sheet:

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Mar 2012(Rs Cr)

Mar 2011(Rs Cr)

Mar 2010(Rs Cr)

Mar 2009(Rs Cr)

Mar 2008(Rs Cr)

SOURCES OF FUNDS :

Share Capital26.55 26.52 26.43 12.95 12.91

Reserves Total 2148.25 1801.53 1515.65 1248.84 861.07

Equity Share Warrants 0.00 0.00 0.00 0.00 0.00

Equity Application Money 0.00 0.00 0.00 0.00 0.00

Total Shareholders Funds 2174.80 1828.05 1542.08 1261.79 873.98

Secured Loans 50.20 15.80 29.85 49.52 82.96

Unsecured Loans 5.24 7.24 3.00 3.12 3.12

Total Debt 55.44 23.04 32.85 52.64 86.08

Other Liabilities 7.90 12.43 0.00 0.00 0.00

Total Liabilities 2238.14 1863.52 1574.93 1314.43 960.06

APPLICATION OF FUNDS :

Gross Block 1091.63 885.34 832.65 782.49 641.92

Less: Accumulated Depreciation 353.44 295.61 242.98 192.82 145.05

Less: Impairment of Assets 0.00 0.00 0.00 0.00 0.00

Net Block 738.19 589.73 589.67 589.67 496.87

Lease Adjustment 0.00 0.00 0.00 0.00 0.00

Capital Work in Progress 181.99 104.33 23.76 19.50 63.08

Producing Properties 0.00 0.00 0.00 0.00 0.00

Investments 479.86 528.46 441.86 172.39 56.15

Current Assets, Loans & Advances

Inventories 650.97 543.07 479.57 395.91 275.65

Sundry Debtors 534.47 392.78 234.44 283.50 214.24

Cash and Bank 21.82 12.80 12.87 12.87 12.61

Loans and Advances 67.05 59.55 104.33 99.67 77.05

Total Current Assets 1274.31 1008.20 831.21 791.95 579.55

Less : Current Liabilities andProvisions

Current Liabilities 289.33 221.78 163.24 161.60 157.82

Provisions 208.21 167.92 96.43 48.91 36.47

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Total Current Liabilities 497.54 389.70 259.67 210.51 194.29

Net Current Assets 776.77 618.50 571.54 581.44 385.26

Miscellaneous Expenses not writtenoff

0.00 0.00 0.00 0.00 0.00

Deferred Tax Assets 1.58 3.21 1.81 1.15 1.17

Deferred Tax Liability 68.87 58.12 53.71 49.72 42.47

Net Deferred Tax -67.29 -54.91 -51.90 -48.57 -41.30

Other Assets 128.62 77.41 0.00 0.00 0.00

Total Assets 2238.14 1863.52 1574.93 1314.43 960.06

Contingent Liabilities 172.92 160.29 134.34 105.66 125.22

Profit loss account:

Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Income

Operating income 1,844.82 1,309.71 931.63 1,193.35 1,035.39

Expenses

Material consumed 787.89 543.17 310.99 459.26 426.24

Manufacturing expenses 108.52 78.31 55.44 60.28 48.77

Personnel expenses 145.16 112.06 93.22 89.34 65.92

Selling expenses 50.06 28.62 18.31 18.19 23.58

Administrative expenses 56.10 47.07 34.95 39.04 34.33

Expenses capitalised - - - - -

Cost of sales 1,147.73 809.23 512.91 666.12 598.84

Operating profit 697.09 500.48 418.72 527.23 436.55

Other recurring income 37.83 31.10 24.72 20.32 11.44

Adjusted PBDIT 734.92 531.57 443.44 547.56 447.99

Financial expenses 4.34 2.19 2.76 7.23 10.18

Depreciation 62.03 53.35 51.45 47.82 35.65

Other write offs - - - - -

Adjusted PBT 668.55 476.04 389.23 492.51 402.17

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Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Tax charges 148.05 43.48 44.14 34.09 29.54

Adjusted PAT 520.50 432.55 345.09 458.42 372.63

Non recurring items 26.51 3.02 -0.78 -34.17 -17.48

Other non cash adjustments -1.11 -0.01 -0.10 0.16 -1.59

Reported net profit 545.91 435.57 344.20 424.41 353.56

Earnings before appropriation 1,967.05 1,650.25 1,360.14 1,104.46 746.26

Equity dividend 172.55 132.60 79.29 38.91 25.82

Preference dividend - - - - -

Dividend tax 27.99 21.51 13.17 6.62 4.39

Retained earnings 1,766.50 1,496.14 1,267.68 1,058.93 716.05

Cash Flow Statement:

TURNOVER &

PROFIT

2011-2012 2010-2011 GROWTH

OPERATING

INCOME

1844.82 1309.71 41%

MATERIAL

COSUMED

787.89 543.17 45.05%

MANUFACTURING 108.52 78.31 38.5%

PERSONAL 145.16 112.06 29.5%

SELLING 50.06 28.62 74.91%

ADMINISTRATIVE 56.10 47.07 19.18%

COST OF SALES 1147.7 809.23 41.82%

OPERATING

PROFIT

697.09 500.48 39.28%

OTHER

RECURRING

INCOME

37.83 31.10 21.6%

ADJUSTED PBDIT 734.92 531.57 38.25%

FINANCIAL

EXPENSES

4.34 2.19 98.17%

DEPRECIATION 62.03 53.35 16.26%

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ADJUSTED PBT 668.55 476.04 40.43%

TAX CHARGES 148.05 43.48 240.5%

ADJUSTED PAT 520.50 432.55 20.33%

Dividend, Share Capital & Capital Employed:

2011-2012 2010-2011 GROWTH

DIVIDEND 172.55 132.60 30.12%

DIVIDEND RATE 6.49 5

DIVIDEND PAYOUT

RATIO

.38 .35

RETENTION RATIO .62 .65EQUITY SHARE 26.55 26.52 .113%

RESERVE & SURPLUS 2148.25 1801.53 19.24%

SECURED lOANS 50.20 20.16 149%

UNSECURED LOANS 2.56 2.88 (-11.11)%

GROSS FIXED ASSET 1091.63 885.34 23.3%

NET FIXED BLOCK 738.19 589.73 25.17%

GROSS CURRENT

ASSET

1335.53 1063.84 25.5%

NET CURRENT ASSET 760.12 603.58 25.93%

TOTAL ASSET 2227.56 1851.09 20.33%

CURRENT LIABILITY &

PROVISIONS

575.41 460.26 25.01%

Earnings before Depreciation, Interest and Taxes

(EBIDTA)

The EBIDTA of the company is increased from 531.56 to 734.92, it

increased almost by 38.25%.

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Equity Capital

The equity capital of the company is increased from 26.52 to 26.55.

DepreciationThe depreciation of the company is increased from 53.35 to 62.03 due to

which there is difference between cash operating margin & operating

margin.

Reserves

The reserves & surplus of the company is increased from 1801.53 to

2148.25. This shows that the company is at the growing stage because of

this the retention ratio of the company is high.

Taxation

The taxation of the company is increased from 43.48 to 148.05. the tax

charges of the company is increased by the great numbers due to which

instead of large operating income the PAT of the company is decreased.

Profit after Tax

The PAT of the company is increased from 432.55 to 520.50. The PAT

of the company is not increased much as a proportion of the operating

income due to high tax charges.

EPS

The EPS of the company is increased from 32.66 TO 39.22.

Dividend

The dividend of the company is increased from 132.60 to 172.55. But the

dividend pay-out ratio of the company is less as compared to the

retention ratio which shows that the company is at growing stage.

Fixed Assets

The fixed asset of the company is increased from 885.34 to 1091.63.

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Current Asset

The current asset of the company is increased from 1063.84 to 1335.53.

Liabilities

The liabilities of the company are increased from 460.26 to 575.41.

Long-Term Loans and Advances

The loans & advances of the company is increased from 23.04 to 52.46

which shows that the company has increased its borrowed funds.

Investment

The investment of the company is increased from 479.86 to 528.45

which indicate that the company is investing its funds on either in bonds

or in its sisters concerns.

Inventories

The inventories of the company are increased from the 543.07 to 650.97.

The capital work in progress is increased from 104.33 to 181.99.

Trade Receivables

The trade receivables of the company are increased from 392.78 to

534.47. This indicates that the companys large amount of money is

blocked.

The company is at the growing stage that is why the retention ratio of the company is higher

than the dividend payout ratio.

Key Financial Indicators:

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EPS = PAT- Preference Dividend

Weighted Average No. of Equity Shares Outstanding

2011-12: 520.50/13.25 = Rs. 39.28

2010-11: 432.55/13.25 = Rs. 32.642009-10: 345.09/13.25 = Rs. 26.04

Debt Equity Ratio = Long Term Debt

Total NW (Equity Shareholders Funds+ Preference Capital)

2011-12: 55.44/2174.80 = 0.025 times

2010-11: 23.04/1828.05 = 0.012 times

2009-10: 32.85/1542.08 = 0.021 times

2011-2012 2010-2011 2009-2010

EPS Rs. 39.28 Rs. 32.64 Rs. 26.04

DEBT EQUITY

RATIO

0.025 times 0.012 times 0.021 times

Profitability Ratios:

Gross Profit Margin = GP X 100

Net Sales

2011-12: (697.09*100)/1844.82 = 37.78%

2010-11: (500.48*100)/1309.71 = 38.21%

2009-10: (418.72*100)/931.63 = 44.94%

Operating Margin = Operating Income x 100

Net Sales

2011-12: (668.55*100)/1844.82 = 36.24%

2010-11: (476.04*100)/1309.71 = 36.35%

2009-10: (389.23*100)/931.63 = 41.78%

Pre Tax Margin = PBT x 100

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Net Sales

2011-12: (668.55*100)/1844.82 = 36.2%

2010-11: (476.04*100)/1309.71 = 36.3%

2009-10: (389.23*100)/931.63 = 41.78%

Net Margin = PAT X 100

Net Sales

2011-12: (520.50*100)/1844.82 = 28.2%

2010-11: (432.55*100)/1309.71 = 33.02%

2009-10: (345.09*100)/931.63 = 37.04%

2011-2012 2010-2011 2009-2010

GROSS PROFIT

MARGIN

37.78% 38.21% 44.94%

OPERATING MARGIN 36.24% 36.35% 41.78%

PRE TAX MARGIN 36.2% 36.3% 41.78%

NET MARGIN 28.2% 33.02% 37.04%

The difference between gross margin & cash operating income is due to the increase in the

other operating expenses. The difference between cash operating & operating margin is due

to amortization & depreciation. The difference between operating margin & pre-tax margin is

less due to the absent of interest & finance charges. The difference between pre-tax margin &

net margin is due to the presence of tax charges.

Although the operating income of the company is increasing by 41% but pat is increasing by

a very short difference due to the increase in the material consumed, manufacturing expense,

personal expense, selling expense & administrative expense and also because of the increase

in cost of goods sold.The company is not relying much on the borrowed funds.

Liquidity Ratios:

Current Ratio = Current Assets, Loans & Advances + Short-term Investments

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Current Liabilities + Provisions + Short-term Debt

2011-12: (1274.31+479.86)/497.54 = 2.32

2010-11: (1008.20+528.46)/389.70 = 2.31

2009-10: (831.21+441.86)/259.67 = 2.45

Quick Ratio =

Current Assets, Loans & Advances - Inventories + Short-term Investments

Current Liabilities + Provisions + Short-term Debt Net of Working Capital Limits

2011-12: (1274.31-650.97+479.86)/497.54 = 2.15

2010-11: (1008.20-543.07+528.46)/389.70 = 2.55

2009-10: (831.21-479.57+441.86)/259.67 = 3.05

2011-2012 2010-2011 2009-2010

CURRENT RATIO 2.32 2.31 2.45

QUICK RATIO 2.22 2.55 3.05

The current ratio of the company is good (2.32 & 2.31) and almost same in both the years

which indicate the adequacy of short term assets to meet the short term obligations of the

firm. The quick ratio and the current ratio of the company are almost identical due to

negligible inventory.

Asset Utilization Ratios:

Total Asset Turnover Ratio =

Net Sales

NW (Equity Capital + Reserves & Surplus Misc. Exp. not Written Off)

2011-12: 1844.82/2174.80 = 0.82 times

2010-11: 1309.71/1828.05 = 0.70 times

2009-10: 931.63/1542.08 = 0.60 times

Fixed Assets Turnover Ratio = Net Sales

Net Block of Fixed Assets

2011-12: 1844.82/1091.63 = 1.68 times

2010-11: 1309.71/885.34 = 1.48 times

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2009-10: 931.63/832.65 = 1.12 times

Inventory Turnover Ratio = Cost of Goods Sold (COGS)

Average Inventory2011-12: 1147.73/650.97 = 1.76 times

2010-11: 809.23/543.07 = 1.49 times

2009-10: 512.91/479.57 = 1.07 times

Average Holding Period = Inventory x 365

Cost of Goods Sold (COGS)

2011-12: (650.97*365)/1147.73 = 207.02 = 207 days2010-11: (543.07*365)/809.23 = 244.94 = 245 days

2009-10: (479.57*365)/512.91 = 341.27 = 341 days

Debtor Turnover Ratio = Net Credit Sales

Average Accounts Receivables

2011-12: 1844.82/534.47 = 3.45 times

2010-11: 1309.71/392.78 = 3.33times

2009-10: 931.63/234.44 = 3.97 times

Day Sales Outstanding = Receivables x 365

Credit Sales

2011-12: (534.47*365)/1844.82 = 105.74 = 106 days

2010-11: (392.78*365)/1309.71 = 109.46 = 110 days

2009-10: (234.44*365)/931.63 = 91.85 = 92 days

2011-2012 2010-2011 2009-2010

TOTAL ASSET TURNOVER

RATIO


FIXED ASSET TURNOVER

RATIO


INVENTORY TURN OVER

RATIO


AVERAGE HOLDING PERIOD 207 days 245 days 341 days

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DEBTORS TURNOVER RATIO 3.45 times 3.33 times 3.97 times

DAYS SALES OUTSTANDING 106 days 110 days 92 days

The fixed asset ratio, current ratio & inventory turnover ratio is good which indicates firm is

better utilizing its assets. But the average holding period & the days outstanding is much

higher which indicates that the inventories are not converted into the sales much frequently &

also the collection period of the company is much higher which is a negative indication.

Return Ratios:

Net Asset Value (NAV) = Equity Shareholders Funds

No. of Equity Shares Outstanding

2011-12: 2174.80/13.25 = 164.14

2010-11: 1828.05/13.25 = 137.97

2009-10: 1542.08/13.25 = 116.38

Return on Equity (ROE) = (PATPreference Dividend) x 100

Net Worth

2011-12: (520.50*100)/2174.80 = 23.93%

2010-11: (432.55*100)/1828.05 = 23.66%

2009-10: (345.09*100)/1542.08 = 22.38%

2011-2012 2010-2011 2009-2010

NAV Rs.164.14 Rs.137.97 Rs.116.38

ROE 23.93% 23.66% 22.38%

The ROE of the company is 23.93 % which indicates better utilization by the company to

generate return on shareholders fund & the company takes the better advantages of the

financial leverages.

Du Pont Analysis:

RONW = Net Profit Margin x NW Turnover

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(PATPreference Dividend) x 100 = (PAT - Preference Dividend) x 100 x Net Sales

Net Worth Net Sales Net Worth

2011-12: (520.50*100)/2174.80 = (520.50*100)/1844.82 x 1844.82/2174.80

23.93% = 28.21% x 0.85 times

2010-11: (432.55*100)/1828.05 = (432.55*100)/1309.71 x 1309.71/1828.05

23.66% = 33.02% x 0.72 times

2009-10: (345.09*100)/1542.08 = (345.09*100)/931.63 x 931.63/1542.08

22.28% = 37.04% x 0.60 times

2011-2012 2010-2011 2009-2010

(PROFITABILITY)*(EFFICIENCY) 28.2% * 0.85 times 33.02% * 0.72 times 37.04% * 0.60 times

23.97% 23.77% 22.22%

DUPONT analysis of the company is same for both the year. The DUPONT analysis

indicates the breakdown of the ROE. This shows that the ROE of the company is increasing

due to the three important factors that is the profitability, efficiency & leverages. Theprofitability of the company is increased & the efficiency of the company has also increased

but the leverages of the company has decreased.

Key Profitability Indicators:

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EPS:

Reserves & Surplus:

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Conclusion:

The ROE of the company is 23.93 % which indicates better utilization by the company to

generate return on shareholders fund & the company takes the better advantages of the

financial leverages. The company is gaining higher returns every year showing increased

returns.

The ROE of the company is increasing due to the three important factors that is the

profitability, efficiency & leverages. The profitability of the company is increased & the

efficiency of the company has also increased but the leverages of the company has decreased.

The company is not relying much on the borrowed funds.

Firm is utilizing its assets very good. But the average holding period & the days outstanding

is much higher which indicates that the inventories are not converted into the sales much

frequently & also the collection period of the company is much higher which is a negativeindication.

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1700

1800

1900

2000

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RESERVE &SURPLUS

Series 1

Series 2


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Overall Divis Laboratories Ltd. is enjoying strong and profitable position of the company in

the market.

manac project office 2003

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