Course Code: ACC 506 Course Title: Financial Accounting and Analysis

Course Instructor:

Academic Task No.: Academic Task Title:

Date of Allotment: Date of submission:

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Evaluation Parameters:

Learning Outcomes: (Student to write briefly about learning obtained from the
academic tasks)

Declaration:
I declare that this Assignment is my individual work. I have not copied it from any other
student’s work or from any other source except where due acknowledgement is made
explicitly in the text, nor has any part been written for me by any other person.
Student’s Signature:

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Marks Obtained: _______________ Max. Marks: ______________
 RUBRIC
ACC506- Financial Accounting and Analysis
Student Name……………………………… Date………………………….
EVALUATION FAILS TO MEETS EXCEEDS SCORE
CRITERIA MEET EXPECTATIO EXPECTATIO
EXPECTATIO NS NS
NS
1. COMPANY (0 marks) (0.5 marks) (1 mark)
PROFILE (1 Marks)
Student is not Student is partly Student is
Prepare the basic aware of the aware of the updated about the
profile of the company company profile company profile company profile
(Not more than one and initiatives and initiatives and initiatives
page) (1mark) taken and shows taken and shows taken and shows
no insight into some insights insights into the
the functioning of into the functioning of the
the organization. functioning of the organization and
organization is aware of
important policy
initiatives and
developments in
the organization
(0-8 marks) (8-16 marks) (16-24 marks)
2.Do the company
analysis through Student is not Student is Student can
ratios able to analyze partially able to analyze the ratios
a. How the company the ratios and analyze the ratios and interpret the
has performed interpret the and interpret the position of
compared to the position of position of company,
last year? (10 company, company, including
Marks) including including indications where
indications where indications where the company is
the company is the company is lacking
lacking. lacking
b. How the company Correct data used
has performed Incorrect or Correct data used without any
compared to inappropriate with minimal errors, or
competitors? The data used for errors; generally assumption(s)
analysis is to be ratio calculation; correct made for
done by taking at incorrect comparison and unavailable data;
least the data of comparison and conclusions correct
two competitors conclusions drawn. comparison and
belonging to same drawn. conclusions
industry. (14 drawn.
marks)
c. On the basis (0-2marks) (2-3.5 marks) (3.5-5 marks)
information
collected and Student is not Student is Student is able to
analysis made able to make partially able to make investment
above, decide with investment make investment decision with
suitable reasons decision with decision with appropriate
whether you appropriate appropriate reasons.
would like to reasons. reasons.
invest in the
shares of the
company and
why/why not? (5
marks)

Scoring:
Below 15= Fails to Meet Expectations.
15-20= Meets Expectations.
20 Above= Exceeds Expectations
 INTRODUCTION TO THE COMPANY
Hikal Ltd. was established in 1988, Hikal is the partner of choice for: Pharmaceutical, Crop
protection, Research and Technology. Hikal is the first Indian life sciences company to
receive the Responsible Care certification granted by the International Council of Chemical
Associations (ICCA). The Company operates in geographical areas, including India, Europe,
the United States, Canada and South East Asia. Hikal has five manufacturing facilities in
India; 2 in Maharashtra, 2 in Gujarat and 1 in Karnataka and a Research & Technology centre
at Maharashtra (Pune).

MISSION: To create value through superior, chemical products and operate as a responsible
company. Building trust and respect of our customers, shareholders and employees using
science, technology and sustainable processes in harmony with the environment.

VISION: To be the leading global fine chemical company to the Pharmaceutical, Crop
Protection and Speciality Chemical Industries.

Chairman’s Message: We are combining technology and science with a focus on creating
more sustainable and efficient processes for products while reducing their environmental
impact.

Tagline: Just the right chemistry.

Key people: Jai Hiremath is the Founder and Chairman of Hikal and Sameer Hiremath is the
Joint Managing Director and the CEO of Hikal Ltd. Sham V. Wahalekar (Senior Vice
President – Finance and Company Secretary).

Products: Hikal Limited is engaged in the manufacturing of various chemical intermediates,

specialty chemicals, active pharmaceutical ingredients (APIs) and contract research activities.

FINANCIAL HIGHLIGHTS OF COMPANY

The current Stock Price of Hikal Ltd. is INR 144.75 crores and the Market Cap.is 1897.60 Cr.

Revenue: Rs.13, 000 million. The Net Sales Turnover of Hikal Ltd. was INR 871.86Crores
in 2015 and the company has now grown to a turnover of over INR 1589.61Crores in 2019.
The Net Sales Turnover of Hikal Ltd. was INR 871.86Crores in 2015 and the company has
now grown to a turnover of over INR 1589.61Crores in
 LIQUIDITY RATIOS

CURRENT RATIO

Table no. 1 (Comparison of Current Ratio of Hikal Ltd. in 2018 with that of Dr. Reddy Lab
and Abbott India Ltd.)

Hikal Ltd. Dr. Reddy Lab Abbott India Ltd.

Current Ratio 1.23 1.91 3.34

(March, 2018)

Sources:-

https://www.moneycontrol.com/financials/hikal/ratiosVI/H05#H05

https://www.moneycontrol.com/financials/drreddyslaboratories/ratiosVI/DRL#DRL

https://www.moneycontrol.com/financials/abbottindia/ratiosVI/AI51#AI51

INTERPRETATION:-

The Current ratios of Hikal Ltd. 1.23:1 that is less than the ideal current ratio 2:1; which
means 1.23 are the current assets against 1 current liability but the current assets are more
than current liabilities so they have sufficient current assets to pay off the current liabilities.
Also they have sufficient margin of safety to current liabilities. They can fulfil short term
obligations properly. They have satisfactory liquidity position.
COMPETITORS:

Dr. Reddy’s Lab: The Current ratio of Dr. Reddy Lab. is 1.91:1, that is less than the ideal
current ratio 2:1; which means 1.91 are the current assets against 1 current liability but the
current assets are more than current liabilities. Dr. Reddy Lab has sufficient current assets to
pay off the current liabilities. They have sufficient margin of safety to current liabilities. The
company has the ability to fulfil short term obligations properly and the company has
satisfactory liquidity position.

Abbott India Ltd.: The Current ratio of Abbott India Ltd. is 3.34:1 that is more than the
ideal current ratio 2:1; which means 3.34 is the current asset against 1 current liability. The
current assets are more than current liabilities. Abbott India Ltd. has sufficient current assets
to pay off the current liabilities. They have sufficient margin of safety to current liabilities.
The company has the ability to fulfil short term obligations properly and the company has
satisfactory liquidity position.

The Current ratio of Abbott India Ltd. is better than that of Hikal Ltd. and Dr. Reddy Lab.
Hikal Ltd. and Dr. Reddy Lab. should try to improve their current assets.
Quick Ratio

Table no. 2 (Comparison of Quick Ratio of Hikal Ltd. in 2018 with that of Dr. Reddy’s Lab
and Abbott India Ltd.)

Hikal Ltd. Dr. Reddy’s Lab. Abbott India Ltd.

Quick Ratio 0.69 1.52 2.46

(March, 2018)

Sources:

https://www.moneycontrol.com/financials/hikal/ratiosVI/H05#H05

https://www.moneycontrol.com/financials/drreddyslaboratories/ratiosVI/DRL#DRL

https://www.moneycontrol.com/financials/abbottindia/ratiosVI/AI51#AI51

INTERPRETATION:-

The quick ratio of Hikal Ltd. is 0.69:1, which means 0.69 are quick assets against 1 current
liability; the quick ratio of Hikal Ltd. is less than the ideal quick ratio 1:1. The quick assets
are less than the current liabilities. Hikal Ltd. has insufficient quick assets to pay off the
current liabilities. So, they have no margin of safety to current liabilities. Also it has
unsatisfactory short term solvency position. The liquidity position of Hikal Ltd. is
unsatisfactory.
COMPETITORS:

Dr. Reddys Lab.:

The quick ratio of Dr. Reddy’s Lab is 1.52:1, which means 1.52 are quick assets against 1
current liability, the quick ratio of Dr. Reddy’s Lab. is more than the ideal quick ratio1:1.The
quick assets of this company are more than the current liabilities so Dr. Reddy’s Ltd. has
sufficient quick assets to pay off the current liabilities. They have sufficient margin of safety
to current liabilities. The liquidity position of Dr. Reddy’s Lab. is satisfactory.

Abbott India Ltd:

The quick ratio of Abbott India Ltd. is 2.46:1, which means current assets are twice than the
current Liabilities. The quick ratio of Abbott India Ltd. is more than the ideal quick
ratio1:1.The quick assets of this company are more than the current liabilities so Abbott India
Ltd. has sufficient quick assets to pay off the current liabilities. They have sufficient margin
of safety to current liabilities. The liquidity position of Abbott India Ltd. is satisfactory.

The quick ratio of Dr. Reddy’s Lab. and Abbott India Ltd. is better than that of Hikal Ltd.
Hikal Ltd. should try to improve their quick assets.
 EFFICIENCY RATIOS

DEBTOR TURNOVER RATIO

Table no. 3 (Comparison of Debtor Turnover Ratio of Hikal Ltd. in 2018 with that of Dr.
Reddy’s Lab and Abbott India Ltd.)

COMPETITORS

DEBTOR TURN Hikal Ltd. Dr. Reddy’s Abbott India

OVER RATIO Lab. Ltd.
(MARCH 2018)
4.77 2.17 15.00

DEBT
COLLECTION
76 DAYS 168 DAYS 24 DAYS
PERIOD

Sources:

https://www.moneycontrol.com/financials/hikal/ratios/H05

https://www.moneycontrol.com/financials/drreddyslaboratories/ratios/DRL

https://www.moneycontrol.com/financials/abbottindia/ratios/AI51
INTERPRETATION:-

On an average Hikal Ltd. is collecting money from the debtors 5 times a year. The Debtor
Turnover Ratio is high of the company. Total collection made by Hikal Ltd. from the debtors
has been done in 76 days. Hikal Ltd. is quick and efficient in collecting money from debtors.
It is having an efficient collection policy. Also, Quick payment is made by the debtors of
Hikal Ltd. They have given/allowed shorter collection period to its debtors.

COMPETITORS

Dr. Reddy’s Lab.:

On an average Dr. Reddy’s Lab. is collecting money from the debtors 2 times a year. Total
collection made by Dr. Reddy’s Lab. from the debtors had been done in 168 days. The
company has low Debtor Turnover Ratio. The company is slow and inefficient in collecting
money from debtors. Dr. Reddy’s Lab is having inefficient collection policy and slow
payment is made by the debtors. They have allowed longer collection period to its debtors.

Abbott India Ltd.:

On an average Abbott India Ltd. is collecting money from the debtors 15 times a year. Total
collection made by Abbott India Ltd. from the debtors has been done in 24 days. The
company has very high Debtor Turnover Ratio and might have strict Credit Policy. The
company is very quick and efficient in collecting money from debtors. Abbott India Ltd. is
having efficient collection policy and quick payment is made by the debtors. They have
allowed very short collection period to its debtors.

Therefore; Abbott India Ltd. has highest Debtor Turnover Ratio compared to other two
companies.
 INVENTORY TURNOVER RATIO

Table No.4(Comparison of Inventory Turnover Ratio of Hikal Ltd. with Dr. Reddy Lab. and
Abbott India Ltd.)

COMPETITORS

INVENTORY Hikal Ltd. Dr. Reddy’s Abbott India

TURN OVER Lab. Ltd.
RATIO
(MARCH 2018) 4.29 5.04 5.65

INVENTORY
CONVERSION
85 72 64
PERIOD

Sources:
https://www.moneycontrol.com/financials/hikal/ratios/H05

https://www.moneycontrol.com/financials/drreddyslaboratories/ratios/DRL

https://www.moneycontrol.com/financials/abbottindia/ratios/AI51

INTERPRETATION

The Inventory Turnover Ratio of Hikal Ltd. is 4.29 which indicate that on an average,
stock/inventory is sold 4 times a year. Hikal Ltd. has high inventory turnover ratio. Hikal Ltd.
is efficient in managing its stock/inventory and it has fast moving stock/inventory. Also, the
stock/inventory of Hikal Ltd. is quickly converted into cash. The Inventory Conversion
Period indicates that Hikal Ltd. usually take 85 days to sell the stock in the market.
COMPETITORS

Dr. Reddy’s Lab:

The Inventory Turnover Ratio of Dr. Reddy’s Lab is 5.04 which indicate that on an average,
stock/inventory is sold 5 times a year. Dr. Reddy’s Lab has high inventory turnover ratio. Dr.
Reddy’s Lab. is efficient in managing its stock/inventory and it has fast moving
stock/inventory. Also, the stock/inventory of Dr. Reddy’s Lab. is quickly converted into cash.
The Inventory Conversion Period indicates that Dr. Reddy’s Lab usually take 72 days to sell
the stock in the market.

Abbott India Ltd.:

The Inventory Turnover Ratio of Abbott India Ltd. is 5.65 which indicate that on an average,
stock/inventory is sold 6 times a year. Abbott India Ltd. has high inventory turnover ratio.
Abbott India Ltd. is efficient in managing its stock/inventory and it has fast moving
stock/inventory. Also, the stock/inventory of Abbott India Ltd. is quickly converted into cash.
The Inventory Conversion Period indicates that Abbott India Ltd. usually takes 64 days to
sell the stock in the market.

It can be determined that all the three companies mentioned above have high Inventory
Turnover ratio.
 ASSETS TURNOVER RATIO

Table no. 4 (Comparison of Assets turnover ratios of Hikal Ltd. with Dr. Reddy’s Lab. and
Abbott India Ltd.)

COMPETITORS

Hikal Ltd. Dr. Reddy’s Lab Abbott India Ltd.

ASSETS
TURNOVER
1.08 0.66 2.14
RATIO

(March,
2018)

SOURCES:

https://www.moneycontrol.com/financials/hikal/ratios/H05

https://www.moneycontrol.com/financials/drreddyslaboratories/ratios/DRL

https://www.moneycontrol.com/financials/abbottindia/ratios/AI51
INTERPRETATION

Asset turnover ratio of Hikal Ltd. is 1.08 times, this means for every Return of Investment
of asset, Rs 1.08 of sales is generated by the company. Hikal Ltd. is not efficient enough to
manage its assets. The Company is not managing its assets efficiently to generate sales and
revenue.

COMPETITORS

Dr. Reddy’s Lab.:

Asset turnover ratio of Dr. Reddy’s Lab. is 0.66 times, this means for every return of
investment of asset, Rs 0.93 of sales is generated. Dr. Reddy’s Lab is not efficient enough to
manage its assets. The Company is not managing its assets efficiently to generate sales and
revenue.

Abbott India Ltd.:

Asset turnover ratio of Abbott India Ltd. is 2.14 times, this means for every return of
investment of asset, Rs 2.14 of sales is generated. Abbott India Ltd. is not efficient enough
to manage its assets. The Company is not managing its assets efficiently to generate sales
and revenue.

On comparison, it can be determined that Abbott India Ltd. is at better place in utilising its
fixed assets efficiently as it has Asset turnover ratio 2.14 times which is more than the
turnover ratios of Hikal Ltd. and Dr. Reddy’s Lab.
 PROFITABILITY RATIOS

OPERATING PROFIT RATIO

Table no. 6 (Operating profit ratio of Hikal Ltd. in 3 years.)

HIKAL LTD.

OPERATING 2018 2017 2016

PROFIT RATO
18.65 19.43 19.54

SOURCES: https://www.moneycontrol.com/financials/hikal/ratios/H05

INTERPRETATION

1. The operating profit ratio of Hikal Ltd. in 2018 is 18.65% on every sale by Rs.100 which
means the rest of the percentage 82% is the operating expense and 18.65 % is the operating
profit.
2. The operating profit ratio of Hikal Ltd. in 2017 is 19.43% on ever sales by Rs 100 which
means the rest of the percentage 80% is the operating expense and 19.43% is the operating
profit.
3. The operating profit ratio of Hikal Ltd. in 2016 is 19.54% on ever sales by Rs 100 which
means the rest of the percentage 80.46% is the operating expense and 19.54 % is the
operating profit.
 NET PROFIT RATIO

Table no.7(Net Profit Ratio of Hikal Ltd. in 3 years.)

HIKAL LTD.

NET PROFIT 2018 2017 2016

RATIO
5.95 6.96 4.46

SOURCES: https://www.moneycontrol.com/financials/hikal/ratios/H05

INTERPRETATION

1. The overall profitability of Hikal Ltd. in 2018 is 5.95%.

2. The overall profitability of is 2017 is 6.96%.
3. The overall profitability of is 2016 is 4.46%.

.
 OPERATING RATIO
Table No.8(Operating Ratio of Hikal in 3 years.)

HIKAL LTD.

NET PROFIT 2018 2017 2016

RATIO
 GROSS PROFIT RATIO

Table No.9(Gross Profit Ratio of Hikal Ltd.in 3 years)

HIKAL LTD.

GROSS PROFIT 2018 2017 2016

RATIO
12.4 12.62 12.27

Sources: https://www.moneycontrol.com/stocks/company_info/print_main.php

INTERPRETATION:

1) The Gross Profit Ratio of Hikal Ltd. in 2018 is 12.4%.

2) The Gross Profit Ratio of Hikal Ltd. in 2017 is 12.62%.

3) The Gross Profit Ratio of Hikal Ltd. in 2016 is 12.27%.

The Gross Profit Ratios of Hikal Ltd. of 3 years has been high which implies that the cost of
production is low and the sales are high.
 EARNING PER SHARE

Table no.10(Earning Profit Share of Hikal Ltd. in 3 years)

 SOLVENCY RATIO

DEBT – EQUITY RATIO (