This project takes a closer look at the financial performance of Aurobindo Pharma, using different financial tools and techniques. We dive into aspects like the company's liquidity, profitability, solvency, and efficiency over four years (2021–2024), by examining key financial statements such as the balance sheet, income statement, and cash flow statement. For the study, several methods include ratio analysis, common size analysis, comparative analysis, and trend analysis to evaluate financial stability and growth patterns. The results provide insights into the company’s financial health, pointing out strengths, weaknesses, and areas where improvements can be made. This study acts as a useful resource for investors, management, and stakeholders to help them make knowledgeable financial decisions.
Table of Contents
1 Introduction
2 Literature Review
3 Methodology
4 Results and Discussion
5 Conclusion
References
Annexure
Table
3.1.1.1 Table showing the current ratio from 2021 to 2024
3.1.1.2 Table showing quick ratio from 2021 to 2024
3.1.2.1 Table showing operating profit ratio from 2021 to 2024
3.1.2.2 Table showing net profit margin ratio from 2021 to 2024
3.1.2.3 Table showing return on asset ratio from 2021 to 2024
3.1.3.1 Table showing debt to equity ratio from 2021 to 2024
3.1.3.2 Table showing interest coverage ratio from 2021 to 2024
3.1.3.3 Table showing debt to asset ratio from 2021 to 2024
3.1.4.1 Table showing stock turnover ratio from 2021 to 2024
3.1.4.2 Table showing working capital turnover ratio from 2021 to 2024
3.1.4.3 Table showing debtors turnover ratio from 2021 to 2024
3.2.1 Table showing common size balance sheet for the years 2024 and 2023
3.2.2 Table showing common size balance sheet for the year 2022 and 2021
3.3.1 Table showing comparative balance sheet for the year 2024 and 2023
3.3.2 Table showing comparative balance sheet for the year 2024 and 2023
3.4 Table showing trend analysis for the year 2022 to 2024 taking 2021 as the base year
3.5.1 Table showing cash flow from operating activities for 2021 to 2024
3.5.2 Table showing cash flow from operating activities for 2021 to 2024
3.5.3 Table showing cash flow from operating activities for 2021 to 2024
Abstract
This project takes a closer look at the financial performance of Aurobindo Pharma, using different financial tools and techniques. We dive into aspects like the company's liquidity, profitability, solvency, and efficiency over four years (2021–2024), by examining key financial statements such as the balance sheet, income statement, and cash flow statement. For the study, several methods include ratio analysis, common size analysis, comparative analysis, and trend analysis to evaluate financial stability and growth patterns. The results provide insights into the company’s financial health, pointing out strengths, weaknesses, and areas where improvements can be made. This study acts as a useful resource for investors, management, and stakeholders to help them make knowledgeable financial decisions.
1. Introduction
Financial analysis is the process of evaluating a company’s financial statements to assess its performance, financial health, and potential for future growth. By examining key components such as income statements, balance sheets, and cash flow statements, stakeholders can make informed decisions about investment, credit, and management strategies. Financial analysis serves as a vital tool for ensuring sustainable operations and aligning business goals with market realities.
The primary objectives of financial analysis include assessing profitability, liquidity, solvency, and operational efficiency. Key tools and techniques used in financial analysis include ratio analysis, trend analysis, and cash flow analysis. Ratio analysis provides insights through metrics such as the liquidity ratio, solvency ratio, profitability ratio, and activity turnover ratio enabling stakeholders to measure financial health in quantitative terms. Liquidity ratios measure a company’s ability to meet its short-term obligations using its most liquid assets, with the current ratio being a common example.
Solvency ratios assess a company’s ability to meet its long-term debt obligations and maintain financial stability over time. Profitability ratios are financial metrics used to evaluate a company’s ability to generate profit relative to its revenue, assets, or equity. Activity turnover ratios measure how efficiently a company utilizes its assets, such as inventory or receivables, to generate sales. These ratios, such as net profit margin and return on equity, measure operational efficiency and overall financial success.
Trend analysis is a financial analysis technique used to evaluate a company’s performance over a specific period by identifying patterns and changes in key financial metrics. This method helps stakeholders forecast future performance, assess the effectiveness of strategies, and make informed decisions based on historical trends.
Cash flow analysis is a critical tool for evaluating a company’s ability to generate sufficient cash to meet its financial obligations and support growth. By examining the inflows and outflows of cash across operating, investing, and financing activities, this analysis provides a clear picture of a company’s liquidity and operational efficiency. Positive cash flow indicates the ability to cover expenses, invest in opportunities, and repay debt, while negative cash flow can signal financial distress. Cash flow analysis also helps in assessing the sustainability of earnings, as it focuses on actual cash movement rather than accounting profits. This insight is vital for investors, creditors, and management to ensure long-term financial stability.
Comparative analysis is a method used to evaluate and compare financial data, performance, or metrics of two or more financial years. By analyzing key indicators such as profitability, efficiency, and growth, it highlights relative strengths, weaknesses, and trends. This approach is useful for benchmarking a company's performance. Comparative analysis aids in identifying areas for improvement and making strategic decisions based on relative performance. It is widely used by investors, analysts, and business managers for decision-making and strategic planning.
A common size statement is a financial analysis tool that expresses each line item in a financial statement as a percentage of a base figure, such as total revenue or total assets. This method allows for easy comparison of financial data across periods. Common size statements are typically used for income statements, where each expense is shown as a percentage of total sales, or for balance sheets, where assets and liabilities are expressed as a percentage of total assets. This approach helps in identifying trends, evaluating financial structure, and benchmarking performance.
Ultimately, financial analysis bridges the gap between raw financial data and actionable insights. It aids in identifying strengths, weaknesses, opportunities, and risks, providing a basis for sound strategic, investment, and operational decisions. In today’s dynamic business environment, financial analysis remains essential for evaluating company performance, ensuring financial stability, and driving long-term growth.
2. Review of Literature
Shah Dipak J. (2017) in his paper said that “A Study on Financial Structure Analysis of Selected Pharmaceutical Companies of Gujarat” Conclusion: The extent of the proprietor’s assets is more prominent than that of the obligation support and the extent of the store's subsidizing is more noteworthy than the value capital of the organization. The general proportion of their assets and obligation subsidies was 72% and 28%, respectively.
Dr. Pratap Singh and Sheela (2019)
“A comparative study of the performance of selected Indian pharmaceutical companies with the reference of liquidity.” Conclusion: This study measures the liquidity position of the selected companies by using liquidity ratios, performance ratios, and efficiency ratios. This study concludes that different liquidity indicators of different selected pharmaceutical companies are significantly different.
Ahmed Mahdi Abdulkareem (2020)
"Financial Performance of Indian Pharmaceutical Companies: Analysis of Leverage and Cost of Capital".
Conclusion: The analysis revealed significant differences in operating, financial, and combined leverage, as well as cost of capital among selected pharmaceutical companies. Notably, Sun Pharma demonstrated strong performance, while Lupin underperformed across all metrics during the study period.
Chaturvedi and Malhotra Research
"Comparative Financial Analysis of Multinational and Domestic Pharmaceutical Companies in India"
Conclusion: Multinational companies exhibited better financial performance due to global market reach, while domestic firms were competitive in cost efficiency.
A. Jalaludeen and M. Marimuthu
"Financial Strength and Weakness of Selected Pharmaceutical Companies"
Conclusion: Highlighted robust asset management practices but pointed out high leverage as a critical weakness.
Objective of the study
1. To evaluate the liquidity and profitability position of Aurobindo Pharma.
2. To prepare common size and comparative size balance sheets of the current year and previous year to scrutinize the financial health of the company.
3. To interpret the cash flows from operating, investing, and financing activities.
Scope of the study
The scope of this project involves analyzing financial ratios to evaluate liquidity, profitability, solvency, and efficiency, alongside conducting common size analysis to standardize financial statements and identify key drivers. It includes examining cash flow statements to assess liquidity and financial flexibility, performing trend analysis to identify growth patterns and predict future performance, and comparing the company’s financial results with peers or industry benchmarks to evaluate competitiveness and market positioning.
3. Methodology
Research Design
The study follows a case study research design and employs a quantitative and descriptive research design to analyze as it is based on numerical financial data and aims to describe and interpret the financial trends of Aurobindo Pharma over four years (2021-2024). The research focuses on examining liquidity, profitability, solvency, and overall financial health efficiency through financial ratio analysis, trend analysis, comparative analysis, and cash flow interpretation.
2. Data Collection
· Secondary Data: The study is based on financial data obtained from Aurobindo Pharma’s published annual reports, financial statements, and other relevant company disclosures.
· Sources: Data is collected from official company reports, industry publications, and other credible financial databases.
The research is based on secondary data collected from:
- Aurobindo Pharma’s Annual Reports (2021-2024)
- Financial Statements (Balance Sheet, Income Statement, and Cash Flow Statement)
- Industry Reports and Regulatory Filings (SEBI, RBI, and company disclosures)
3. Analytical Tools & Techniques
· Ratio Analysis: Liquidity ratios (Current Ratio, Quick Ratio), Profitability Ratios (Operating Profit Margin, Net Profit Margin, Return on Assets), and Solvency Ratios (Debt-to-Equity Ratio, Interest Coverage Ratio, Debt-to-asset Ratio).
· Common Size Analysis: Financial statements are converted into percentage format to assess structural changes over time.
· Comparative Analysis: Year-over-year comparisons of financial statements to understand growth patterns.
· Trend Analysis: Identification of financial trends using key financial metrics to predict future performance.
· Cash Flow Analysis: Examination of cash flows from operating, investing, and financing activities to assess financial flexibility.
Type of Project: Financial Analysis Study
This project falls under the category of financial analysis and performance evaluation, which is a key aspect of corporate financial management. The study focuses on assessing the financial health, stability, and efficiency of Aurobindo Pharma by analyzing its financial statements over multiple years.
Nature of the Project
1. Quantitative Research
The project is data-driven, relying on numerical financial data extracted from annual reports.
2. Descriptive and Analytical Study
The research describes key financial indicators such as liquidity, profitability, solvency, and efficiency. It goes beyond description by analyzing trends and drawing conclusions based on comparative financial data.
3. Applied Research
The study has practical implications for investors, management, and financial analysts by providing insights into Aurobindo Pharma’s financial position. It can help stakeholders make informed decisions regarding investment, credit, and strategic planning.
Relevance of the Project
This type of project is crucial in corporate finance, investment analysis, and strategic financial planning. It helps businesses and investors assess a company's financial stability, profitability potential, and long-term sustainability.
Limitations of the study
1. Time constraint: insufficient time to conduct in-depth analysis of multiple years of data.
2. Limited access to resources: limited access to journals and books or data needed for research.
3. Interdependence of ratios: ratios are often interlinked, which affect one another making the analysis more complex
4. Limited ratios analysis: we cannot get a complete picture of the company’s financial health only by focusing on a few ratios.
4 Results and Discussion
3.1 RATIO ANALYSIS
3.1.1 LIQUIDITY RATIO
3.1.1.1 CURRENT RATO
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3.1.1.1: Table showing the current ratio from 2021 to 2024
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Figure3.1.1.1: Figure showing the current ratio from 2021 to 2024
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INTERPRETATION: The current ratio is a key financial metric that assesses a company’s ability to settle its short-term liabilities using its current assets. For Aurobindo Pharma, the ratio has declined from 2.35 in 2022 to 1.38 in 2024, this indicates a weaker liquidity position over time. A current ratio greater than 1 indicates that the company possesses sufficient current assets to cover its obligations.
QUICK RATIO
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3.1.1.2: Table showing quick ratio from 2021 to 2024
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Figure3.1.1.2:Figure showing quick ratio from 2021 to 2024
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INTERPRETATION: The quick ratio measures a company’s ability to meet its short-term obligations using only its most liquid assets, excluding inventory. Aurobindo Pharma’s quick ratio fell from 1.55 in 2022 to 0.93 in 2024, this indicates that it has a greater reliance on inventory to fulfill short-term commitments. A ratio below 1 implies that the company may struggle to meet its liabilities without converting inventory into cash.
PROFITABILITY RATIO
3.1.2.1 OPERATING PROFIT RATIO
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3.1.2.1: Table showing operating profit ratio from 2021 to 2024
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3.1.2.1: Figure showing operating profit ratio from 2021 to 2024
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INTERPRETATION: The operating profit margin assesses profitability before interest and taxes. It followed a similar trend to net profit margin, starting high in 2021 (26.49%), dipping in 2022 (15.16%), and recovering in 2023 (19.28%) and 2024 (22.57%). This indicates fluctuations in operational efficiency and cost management.
NET PROFIT MARGIN
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3.1.2.2: Table showing net profit margin ratio from 2021 to 2024
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3.1.2.2: Figure showing net profit margin ratio from 2021 to 2024
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INTERPRETATION: This ratio reflects the percentage of revenue that translates into net profit. It was strongest in 2021 (19.63%) but dropped in 2022 (12.90%) and slightly improved in 2023 (14.50%). By 2024, the ratio recovered to 18.35%, showing enhanced cost control and profit efficiency.
RETURN ON ASSETS
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3.1.2.3: Table showing return on asset ratio from 2021 to 2024
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3.1.2.3: Figure showing return on asset ratio from 2021 to 2024
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INTERPRETATION: The return on assets (ROA) of Aurobindo Pharma fluctuated from 2021 to 2024. It was highest in 2021 at 13.39%, indicating strong profitability. The ROA declined to 6.74% in 2022 and further dropped to 4.89% in 2023, reflecting reduced efficiency. In 2024, it improved to 7.76%, suggesting a partial recovery.
3 SOLVENCY RATIO
3.1.3.1 DEBT TO EQUITY RATIO
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3.1.3.1: Table showing debt to equity ratio from 2021 to 2024
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3.1.3.1: Figure showing debt to equity ratio from 2021 to 2024
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INTERPRETATION: The Debt-Equity ratio has consistently declined from 3.19% in 2021 to 0.94% in 2024, indicating a significant reduction in the company’s reliance on debt financing In 2021, the higher ratio of 3.19% suggests that the company was more dependent on borrowed funds, which could have increased financial risk due to higher interest payments and repayment obligations. By 2022 and 2023, the ratio dropped to 1.77% and 1.92%. In 2024, the ratio further decreased to 0.94%, reflecting strong financial stability and lower dependence on external borrowings.
INTEREST COVERAGE RATIO
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3.1.3.2: Table showing interest coverage ratio from 2021 to 2024
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3.1.3.2: Figure showing interest coverage ratio from 2021 to 2024
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INTERPRETATION: The interest coverage ratio measures a company's ability to cover interest expenses using its operating profit (PBIT). While the ratio was highest in 2021 (26.49), it declined in 2022 (15.16) and 2023 (19.28) before rising again in 2024 (22.57). The increase in interest charges in 2024 is mainly due to an increase in global interest rates which has impacted the ratio, indicating a higher interest outflow.
DEBT TO ASSET RATIO
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3.1.3.3: Table showing debt to asset ratio from 2021 to 2024
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3.1.3.3: Figure showing debt to asset ratio from 2021 to 2024
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INTERPRETATION: Aurobindo Pharma’s debt-to-asset ratio decreased from 0.17 in 2021 to 0.08 in 2022, slightly increased to 0.16 in 2023, and dropped again to 0.11 in 2024. The lower ratio in 2022 and 2024 indicates reduced financial risk and better asset financing through equity. The slight increase in 2023 suggests a temporary rise in borrowing, which was later managed effectively.
3.1.4 ACTIVITY RATIO
3.1.4.1 STOCK TURNOVER RATIO
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3.1.4.1: Table showing stock turnover ratio from 2021 to 2024
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3.1.4.1: Figure showing stock turnover ratio from 2021 to 2024
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INTERPRETATION: Aurobindo Pharma’s stock turnover ratio fluctuated from 1.57 in 2021 to 1.41 in 2022, 1.25 in 2023, and improved to 1.77 in 2024. The dip in 2022 and 2023 suggests slower inventory movement, potentially due to higher stock because of COVID-19, Freight movement was affected due to the Panama Canal Issue and Political Disturbances in the Middle East Countries. However, the rise in 2024 indicates improved inventory management, leading to faster stock turnover and better sales efficiency.
3.1.4.2 WORKING CAPITAL TURNOVER RATIO
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3.1.4.2: Table showing the working capital turnover ratio from 2021 to 2024
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3.1.4.Figure showing working capital turnover ratio from 2021 to 2024
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INTERPRETATION: The working capital turnover ratio declined from 3.02 in 2021 to 2.01 in 2022 and 1.89 in 2023, before significantly increasing to 4.03 in 2024. The decrease in earlier years suggested inefficiencies in utilizing working capital, while the sharp rise in 2024 reflects improved operational efficiency and effective management of current assets and liabilities.
DEBTORS TURNOVER RATIO
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3.1.4.3: Table showing debtors turnover ratio from 2021 to 2024
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3.1.4.3: Figure showing debtors turnover ratio from 2021 to 2024
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INTERPRETATION: The debtor’s turnover ratio was 1.01 in 2021, dropped to 0.80 in 2022, increased to 1.07 in 2023, and slightly declined to 0.90 in 2024. The low ratio in 2022 indicated slower receivable collection, which could impact cash flow. While there was an improvement in 2023, the decrease in 2024 suggests the need for better credit collection policies to maintain liquidity.
3.2 COMMON SIZE BALANCE SHEET ANALYSIS
3.2.1: Table showing common size balance sheet for the year 2023 and 2024
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INTERPRETATION: -
1. Equity Increase: Total equity rose from 71.97% in 2023 to 78.41% in 2024, indicating improved financial stability and reduced reliance on liabilities.
2. Liability Reduction: Non-current liabilities decreased from 1.38% to 0.74%.
3. Current liabilities: reduced from 26.62% to 20.85%, showcasing better management of obligations.
4. Emphasis on Non-Current Assets: Non-current assets increased from 60.33% to 71.22%, driven by higher financial asset investments. Property, plant, and equipment decreased, likely due to asset disposals or depreciation.
5. Decline in Current Assets: Current assets fell from 39.76% to 28.78%, primarily due to a reduction in inventories and financial assets, reflecting operational improvements.
The company demonstrates greater reliance on equity, reduced liabilities, and a shift towards long-term asset investments, indicating enhanced financial health.
3.2.2: Table showing common size balance sheet for the year 2021 and 2022
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INTERPRETATION: -
1. Equity Increase: Total equity rose by approximately 7.66% from the previous year (i.e. 2021), reflecting improved shareholder confidence and reinvestment)
2. Liability Reduction: Total current liabilities decreased by 6.93% indicating effective debt and reduction in financial obligations.
3. Current liabilities reduced by 38.19% suggesting better management of obligations.
4. Emphasis on Non-Current Assets: Non-current assets increased about 8.44% indicating ongoing investments in long-term growth.
5. Decline in Current Assets: Current assets remain stable in 2022 compared to 2021. this reflects a decrease in liquidity position, which could impact short-term financial operations
The data reflects a cautious operational strategy, with significant reductions in both non-current and current assets. Continuous monitoring of trends for maintaining financial stability.
3.3 COMPARATIVE BALANCE SHEET ANALYSIS
3.3.1: Table showing comparative balance sheet for the year 2023 and 2024
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INTERPRETATION: -
1. Total Equity also increased, reflecting stronger internal funding for the company.
2. Non-current liabilities dropped significantly by ₹1,597.1 million (-46.61%), which points to reduced long-term obligations.
3. Current liabilities fell by ₹14,339.1 million (-41.84%), driven primarily by a reduction in Financial Liabilities (-₹14,193 million or -21.95%).
4. Non-current assets increased by ₹28,210.3 million (82.32%). This was primarily driven by growth in: Financial Assets, which rose by ₹40,807.8 million (37.85%).
5. Other Non-Current Assets, increased substantially, possibly due to new investments or acquisitions.
6. Current assets declined by ₹27,258.6 million (-79.54%)
The company has improved its financial standing by reducing liabilities and focusing on strategic investments. While the shift from tangible to financial assets may drive growth in the long term, the decline in physical assets and inventories must be monitored to avoid potential operational constraints.
3.3.2: Table showing comparative balance sheet for the year 2021 and 2022
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INTERPRETATION
1. Total equity went up by ₹11,927.3 million, which is a 7.49% rise. This bump is due to an increase in reserves and retained earnings, showing that the company is in good shape financially.
2. Non-current liabilities decreased by ₹2,051.6 million (-40.40%), reflecting reduced long-term borrowings and tax obligations.
3. Current liabilities declined by ₹25,756.1 million (-38.12%), largely due to the elimination of tax liabilities, though financial liabilities increased. Total liabilities fell by ₹15,880.4 million (-6.85%), indicating better debt management.
4. Non-current assets rose by ₹9,128.6 million (8.41%), driven by a substantial increase in financial assets (+₹21,787.6 million or 40.14%) and intangible assets.
5. On the flip side, current assets dropped by ₹25,009 million, about 20.27%. We saw important cuts in inventories, down by 30.68%, and financial assets decreased by 13.24%. This likely means the company is operating more efficiently.
3.4 TREND ANALYSIS
3.4: Table showing trend analysis for the year 2022 to 2024 taking 2021 as the base year
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3.4.1 Figure showing total equity position from 2021 to 2024
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INTERPRETATION:
Total Equity increased from 107.49 (2022) to 123.85 (2024), which indicates strong financial growth driven by higher retained earnings and reserves. The rise in other equity from 32.89 (2022) to 37.91 (2024) reflects improved profitability. This indicates a stronger financial position and shareholder value enhancement.
3.4.2: Figure showing the position of noncurrent liabilities from 2021to 2024
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INTERPRETATION: Non-Current Financial Liabilities declined significantly from 81.4 (2022) to 28.9 (2024), suggesting a reduction in long-term debt obligations. This indicates improved debt management that could be due to repayments. The trend reflects a shift toward a less debt-reliant capital structure.
3.4.3: Figure showing the position of current liabilities from 2021 to 2024
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INTERPRETATION: The current financial liabilities increased from 62.17 in 2022 to 100.85 in 2023 before declining to 78.71 (2024), showing fluctuations in short-term borrowings. The peak in 2023 may indicate a temporary liquidity need or working capital adjustments. The decline in 2024 suggests partial repayment, reducing short-term debt pressure.
3.4.4: Figure showing the position of noncurrent assets from 2021 to 2024
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INTERPRETATION: Non-current assets grew from 108.41 in 2022 to 165.07 in 2024, indicating increased long-term investments. The rise in financial assets from 140.15 (2022) to 273.83 (2024) suggests a shift towards financial investments rather than capital expenditures.
3.4.5: Figure showing the position of current assets from 2021 to 2024
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INTERPRETATION: We see that the current assets remained relatively stable, moving from 79.73 in 2022 to 80.78 in 2023 before slightly decreasing to 58.68 in 2024 reflecting controlled short-term asset management. The overall trend indicates efficient working capital management with an emphasis on long-term financial stability.
3.5 CASH FLOW STATEMENT ANALYSIS
3.5.1 Operating Activities
3.5.1: Table showing cash flow from operating activities for 2021 to 2024
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3.5.1: Figure showing cash flow from operating activities for 2021 to 2024
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INTERPRETATION: The company generates positive cash flow from operations every year. The highest cash flow was recorded in 2022 at 37,267.1 million, indicating strong operational efficiency. Operating cash flows declined in 2023 and 2024, with 2024 reaching 17,148.0 million, suggesting possible challenges in revenue generation or increased operational expenses.
3.5.2 Investing Activities
3.5.2: Table showing investing activities for the year 2021 to 2024
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3.5.2: Figure showing investing activities for the year 2021 to 2024
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INTERPRETATION: Aurobindo Pharma made significant investments in 2023, with an outflow of (34,576.2) million, which may indicate acquisitions, expansion, or infrastructure development. Investment spending was also high in 2021 (₹26,487.3 million) and 2022 (₹16,135.1 million). In 2024, investing outflows dropped to ₹1,599.6 million, indicating a shift toward conserving cash.
3.5.3 Financing Activities
3.5.3: Table showing financing activities for the year 2021 to 2024
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3.5.3: Figure showing financing activities for the year 2021 to 2024
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INTERPRETATION: The company raised significant financing in 2023 (17,194.8 million), possibly from debt or equity issuance. In 2022 and 2024, there were large outflows, indicating repayment of loans, dividends, or share buybacks. The (18,370.3 million) financing outflow in 2024 suggests a strategic reduction in financial liabilities. Financing outflows were minimal in 2021 (₹280.6 million), suggesting limited financial restructuring that year.
FINDINGS OF THE STUDY
FINDINGS
1. Ratio Analysis
· Liquidity Ratios are declining:
- The current ratio fell from 2.35 in 2022 to 1.38 in 2024, and the quick ratio dropped from 1.55 to 0.93.
- Indicates lower liquid assets to cover short-term liabilities, which may impact immediate financial obligations.
· Profitability Ratios show improvement:
- Net profit margin increased from 12.9% in 2022 to 18.35% in 2024, indicating better cost control.
- The operating profit margin also rose, reflecting improved efficiency in managing expenses.
- ROA jumped from 12.17% in 2022 to 17.35% in 2024, showing that the company is getting better at using its assets to make profits
· Solvency Ratios reflect reduced financial risk:
- The debt-to-equity ratio declined from 3.19 in 2021 to 0.94 in 2024, reducing reliance on external debt.
- The interest coverage ratio improved, showing the company is in a better position to meet interest obligations.
- The debt-to-asset ratio declined from 0.16 in 2023 to 0.11 in 2024, showing lower reliance on external borrowings, which reduces financial risk.
· Activity Ratios show mixed results:
- The stock turnover ratio improved to 1.77 in 2024, indicating faster inventory movement.
- Debtors’ turnover ratio declined to 0.90 in 2024, suggesting slower collection from customers.
- The working capital turnover ratio jumped from 1.89 in 2023 to 4.03 in 2024, signaling stronger efficiency in managing short-term assets to generate revenue.
2. Comparative Balance Sheet Analysis
· Increase in Total Equity:
o The company’s equity has also increased a lot, which suggests they’re doing well with funding themselves and reinvesting their earnings.
· Reduction in Liabilities:
o Non-current liabilities decreased by 46.61%, and current liabilities dropped by 41.84%, improving financial stability.
· Growth in Non-Current Assets:
o Increased investments in financial assets suggest a shift toward long-term investments.
o The decline in property, plant, and equipment investments suggests a reduced focus on capital-intensive expansion.
· Decline in Current Assets:
o Inventories and financial assets decreased, which could impact liquidity.
o While lower inventory suggests better sales efficiency, it also raises supply chain risks.
3. Common Size Balance Sheet Analysis
· Equity Share Increased from 71.97% to 78.41%, indicating reliance on internal funding instead of debt.
· Reduction in Liabilities:
o Non-current liabilities dropped from 1.38% to 0.74%.
o Current liabilities fell from 26.62% to 20.85%.
o Suggests better debt management and reduced financial burden.
· Shift Toward Non-Current Assets:
o Non-current assets increased from 60.33% to 71.22%, driven by financial investments.
o Investment in property, plant, and equipment declined, indicating a shift in asset allocation.
· Decline in Current Assets:
o Current assets dropped from 39.76% to 28.78%, raising liquidity concerns.
4. Trend Analysis
· Equity growth indicates a strong financial foundation, increasing from 107.49 in 2022 to 123.85 in 2024.
· Declining Non-Current Liabilities:
- Financial liabilities dropped from 81.4 in 2022 to 28.9 in 2024, showing active debt repayment.
· Current Financial Liabilities Fluctuated:
o Increased in 2023 (100.85) but declined in 2024 (78.71), indicating efforts to manage working capital.
· Investments in Financial Assets Increased, signaling a shift toward financial over capital investments.
· Reduction in Inventories and Short-Term Assets, suggesting better demand and supply chain management.
5. Cash Flow Analysis
· Declining Operating Cash Flows:
o Cash flow from operations fell from ₹37,267.1 million in 2022 to ₹17,148.0 million in 2024.
o Indicates slower revenue growth or higher operational expenses.
· Sharp Reduction in Investing Outflows:
o Investing cash outflows dropped from ₹34,576.2 million in 2023 to ₹1,599.6 million in 2024.
o Suggests the company is limiting expansion investments and focusing on cash preservation.
· Significant Outflows in Financing Activities:
o ₹18,370.3 million in financing outflows in 2024, due to loan repayments, dividend payments, or share buybacks.
o Inflows in 2023 (₹17,194.8 million) indicate new debt issuance.
5. CONCLUSION
The financial statement analysis of Aurobindo Pharma (2021-2024) reveals a company with steady revenue growth but declining profit margins due to rising costs and competitive pricing pressures. While the company benefited from increased pharmaceutical demand during COVID-19, post-pandemic challenges such as higher raw material costs, regulatory scrutiny, and supply chain disruptions have impacted profitability. Despite these challenges, the company has maintained a stable liquidity position and improved its debt management, indicating financial resilience.
Aurobindo Pharma’s key financial concerns include declining net profit margins, regulatory risks from the U.S. FDA, and intense competition in the generic drug market. The trend analysis and ratio findings suggest that while revenue growth is strong, cost pressures have limited profit expansion. To overcome these challenges, the company must optimize costs, explore new markets, and diversify its product portfolio by investing in high-margin specialty drugs. It's important to strengthen our compliance measures. This will help us avoid fines and keep everything running smoothly.
References.
WEBSITES:
1. www.aurobindo.com
2. https://en.wikipedia.org/wiki/Aurobindo_Pharma
3. https://www.globaldata.com/company-profile/aurobindo-pharma-ltd/
4. https://centres.weforum.org/centre-for-health-and-healthcare/organization-details/aurobindo-pharma/001b0000005h5jHAAQ
5. https://markets.ft.com/data/equities/tearsheet/profile?s=AUROPHARMA%3ANSI
6. https://www.marketscreener.com/quote/stock/AUROBINDO-PHARMA-9059028/ratings/?utm_source
7. https://scholar.google.com/
8. https://www.researchgate.net/
ANNEXURE
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- M. Arul Jothi (Author), 2024, Decoding Aurobindo Pharma’s Financial Health. A Four-Year Analytical Study (2021–2024), Munich, GRIN Verlag, https://www.grin.com/document/1580262
