Hetero Med Solutions Ltd. January 2013
Executive Summary Company Description
• Hetero Med Solutions Ltd. is a pharmacy retail chain operating mostly in South India and is headquartered in Hyderabad • It operates as a subsidiary of Hetero Drugs Ltd., an Indian pharmaceutical company
Key Products and Services
• It provides various pharmacy retail services such as assistance from qualified & trained pharmacists, availability of a wide range of medicines, computerized billing system and patient education leaflets • It provides various benefits to corporate customers and Hetero Family Card holders
SWOT Analysis
• The company’s strong regional presence is one of its major strengths; however, its declining liquidity is one of the key areas of concern • The company can reap significant benefits from the attractive profit margins and strong growth in the pharmacy retail segment • However, the presence of a huge unorganized sector and counterfeit products may have an adverse affect on the growth prospects of the organization
Financial Profile
• Hetero Med Solutions Ltd. generated total revenues of INR a mn in the fiscal year (FY) 20‐‐ registering a y‐o‐ y increase of b per cent. It earned a net profit of INR c mn in FY 20‐‐ as compared to a net loss of INR d mn in FY 20‐‐ • The financial profile of the company includes the balance sheet and profit and loss account for FY 20‐‐, 20‐‐, 20‐‐ and 20‐‐ and the key ratios depicting the key financial figures for FY 20‐‐, 20‐‐ and 20‐‐, giving an insight into the company's financial performance
Industry Analysis
• Pharmacy retail market in India was estimated at INR e bn in FY 20‐‐ and is expected to grow at a CAGR of f per cent to reach INR g bn by FY 20‐‐ • Market is distinctly fragmented into organized and unorganized players with the unorganized market being valued at approximately INR h bn in 20‐‐, occupying i% of the total market, while organized market was valued at approximately INR j bn representing k% of the market • There will emerge a significant change in the market segmentation by 20‐‐ when organized retail will capture approximately l% market from the current m% share
Competitive Landscape
• Key competitors for the company can be enlisted as MedPlus Health Services Pvt. Ltd., Muthu Pharmacy Pvt. Ltd. 2
Contents
Hetero Med Solutions Ltd.
Executive Summary Factsheet Offices & Outlets Pharmacy Retail Services Key People SWOT Analysis Financial Profile Industry Analysis Competitive Landscape Recent News Appendix
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Factsheet Basic Information
Brief Description
Industry
• Hetero Med Solutions Ltd. (Hetero Pharmacy) is headquartered in Hyderabad and is a pharmacy retail chain operating mostly in South India
Corporate Address
• It is a subsidiary of Hetero Drugs Ltd., an Indian pharmaceutical company established in 19‐‐ which entered the pharmacy services in 20‐‐ as part of its integration strategy
Tel No.
• Within a year of its launch, Hetero Pharmacy grew to a network of over a pharmacies across Andhra Pradesh
Fax No. Website Year of Incorporation Ownership
E L P M A S
• With the parent company being a leading player in API’s and finished dosages, Hetero Pharmacy believes it can provide high quality services to its customers • It also has outlets at the Nizam’s Institute of Medical Sciences (NIMS) Punjagutta, Hyderabad and GMR international airport, Hyderabad
Revenue
• Hetero Pharmacy plans to reach b stores by 20‐‐
Fiscal Year End
• It provides special benefits to corporate clients and customers with ‘Hetero Family Card’
Auditor
• Hetero Pharmacy provides free home delivery of medicines as well as provides various offers on products being sold
Key Competitors
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Outlets – India (x/y) Serial No. 1
Region /State
No. of Outlets
Region 1
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Area
Phone
Address
Area 1
Serial No.
Region /State
No. of Outlets
Region 2
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Area
1
Area 1
2
Area 2
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Area 3
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Area 4
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Area 5
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Area 6
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Area 7
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Area 8
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Area 9
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Area 10
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Area 11
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Area 12
Phone
Address
SAMPLE 5
Ratio Analysis Key Ratio Analysis
Key Ratios Particulars
y‐o‐y change (20‐‐)
20‐‐
20‐‐
20‐‐
Profitability Ratios Operating Margin Net Margin Return on Equity Return on Working Capital Return on Assets Return on Fixed Assets
Cost Ratios Operating costs (% of Sales) Administration costs (% of Sales) Interest costs (% of Sales)
Liquidity Ratios
• The company’s operating margin increased by a percentage points y‐o‐y reaching b per cent in FY 20‐‐; the increase could be attributed to the management’s increasing emphasis on improving profitability by exercising inefficient cost management initiatives compared to that of the previous year • The return on equity increased by c percentage points y‐o‐y reaching d per cent in FY 20‐‐ indicating the company’s ability to use the reinvested earnings to generate additional profits
Profit Before Tax Margin Return on Capital Employed
20‐‐
E L P M SA
• Current ratio of the company decreased by e per cent y‐o‐y reaching f in FY 20‐‐, indicating poor cash flow management • Its cash ratio decreased by g per cent y‐o‐y to reach h in FY 20‐‐, indicating the company’s inability to pay‐off current obligations with its most liquid short term assets as compared to the previous fiscal year • Debt to equity ratio of the company increased by i per cent y‐o‐y reaching j in FY 20‐‐, indicating that the company is leveraging itself which is likely to increase its interest expenses
Current Ratio Cash Ratio
• The company’s asset turnover ratio increased by k per cent y‐o‐y to reach l in FY 20‐‐, indicating increased ability of the company to generate sales revenue with its total assets as compared to the previous fiscal year
Leverage Ratios Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio
• The company’s working capital turnover ratio increased by m per cent reaching n in FY 20‐‐ indicating that the company is being able to finance its day‐to‐day operations efficiently
Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover Source: Netscribes Analysis
Improved
Decline
Note: y‐o‐y change in Profitability and Cost Ratios is represented in percentage points
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Industry Analysis Pharmacy Retail Industry – Overview • Pharmacy retail market in India was estimated at INR a bn in FY 20‐‐ and is expected to grow at a CAGR of b per cent to reach INR c bn by FY 20‐‐ • Indian pharmacy retail market is ranked cth in terms of value and dth in terms of volume
Market Size & Growth INR bn X%
There are approximately e stores across the country
• Market is distinctly fragmented into organized and unorganized players • In 20‐‐, the unorganized market was valued at approximately INR f bn, occupying g% of the total market while organized market was valued at approximately INR h bn representing i% of the market Unorganized pharmacy retail market is growing at a CAGR of j% while organized pharmacy retail is expected to grow at a CAGR of k% There will emerge a significant change in the market segmentation by 20‐ ‐ when organized retail will capture approximately l% market from the current m% share
E L P M SA
• In India, pharmacies are the dominant distribution channel generating approximately n% of the overall pharmaceutical sales • Currently, approximately o% of drug sales is through the retail markets, while institutional sales are as low as p% • Some of the key drivers of this market are growth in the pharmaceuticals sector, increasing healthcare spending, changing disease profile and growth in the OTC segment • Some of the major trends observed in the pharmacy retail market are loyalty schemes, value‐added‐services, increasing tracking of counterfeit drugs, tele consultation services, rural expansion and health insurance plans being made available in pharmacy outlets
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2011
2012e
2013e
2014e
2015e
2016e
Market Segmentation Category 1
%
Category 2
0% 2011
2012e
2013e
2014e
2015e
2016e
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Competitive Landscape (/) Company Name
Player 1
Player 2
Description
• Player 1 owns India’s first exclusive hospital pharmacy chain – abc, and operates x pharmacies throughout the country • Outlets are in franchisee model with store formats including high street stores and shop in shops • Programme offers a premium range of gifts that translate to an effective discount of 20‐30% on medicinal purchases • Gives discount of v% on medicines and w% on general products • Provides free lab test vouchers on purchase of medicines • Launched an ecommerce site abc.com that provides a catalog of more than m Indian and international brands
• Player 2 has a strong presence in Chennai with s outlets spread across the city • It is the first pharmacy chain store to be approved by Pharmacy Council to give practical training to pharmacist students under regulation x of Education Regulation 19‐‐ • It has as many as r stockists • Provides free blood pressure and weight and height check ups at outlets • Gives free home delivery for all customers • Starting from early 19‐‐, the company has so far organized u free medical camps till date across Tamil Nadu
SAMPLE 8
Competitive Landscape (/) Competitive Scenario Company Name
Hetero
Player 1
Player 2
Financial Information (INR mn – FY 20‐‐) Total Revenue Net Profit/(loss) Number of Outlets Number of Stores Geographic Presence Andhra Pradesh Tamil Nadu Karnataka West Bengal Maharashtra Rest of India
SAMPLE
H: High; L: Low; M: Medium
Present Not Present 9
Appendix Key Ratio Definitions Operating Margin
(Operating Income/Revenues)*100
Measures company’s pricing strategy and operating efficiency
Net Margin
(Net Profit / Revenues) *100
Indicates the proportion of total revenues the company keeps as earnings
Profit Before Tax Margin
(Income Before Tax / Revenues *100
Measures pre‐tax income over revenues
Return on Equity (ROE)
(Net Income / Shareholders Equity)*100
Assesses a company's ability to generate profits with the shareholders’ funds
Return on Capital (ROCE)
EBIT / (Total Assets – Current Liabilities)*100
Indicates efficiency and profitability of a company's capital investments
Return on Working Capital
(Net Income / Working Capital) *100
Measures company’s profitability over its working capital
Return on Assets
(Net Income / Total Assets)*100
Indicates the company’s profitability relative to its total assets
Return on Fixed Assets
(Net Income / Fixed Assets) *100
Measures management’s efficiency of using the company’s fixed assets to generate earnings
Operating Costs (% of Sales)
(Operating Expenses / Sales) *100
Measures proportion of operating costs incurred for generating revenues
Administration Costs (% of Sales)
(Administrative Expenses / Sales) *100
Measures proportion of administration costs incurred for generating revenues
Interest Costs (% of Sales)
(Interest Expenses / Sales) *100
Measures proportion of Interest costs incurred for generating revenues
Current Ratio
Current Assets / Current Liabilities
Current Ratio measures a company's ability to pay its short‐term obligations
Cash Ratio
{(Cash & Bank Balance + Marketable Securities) / Current Liabilities)}
Measures a company’s ability to pay off current obligations through most liquid short‐term assets
Debt to Equity
Total Liabilities / Shareholders Equity
Indicates the proportion of equity and debt the company uses to finance its assets
Debt to Capital Ratio
{Total Debt / (Shareholders Equity + Total Debt)}
Evaluates the proportion of debt and equity in a company’s capital structure
Interest Coverage Ratio
EBIT / Interest Expense
Determines the company's ability to pay interest on outstanding debt
Fixed Asset Turnover
Sales / Fixed Assets
Indicates how efficiently the company’s fixed assets are used to generate revenues
Asset Turnover
Sales / Total Assets
Indicates how efficiently total assets are used to generate revenues
Current Asset Turnover
Sales / Current Assets
Indicates how efficiently current assets are used to generate revenues
Working Capital Turnover
Sales / Working Capital
Indicates how efficiently working capital is used to generate revenues
Capital Employed Turnover
Sales / Shareholders Equity
Indicates how efficiently equity is used to generate revenues
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