Assessing the Various Components of the Dupont Model in the Financial Performance of the Indian Pharmaceutical Industry

Abstract

This study attempts basically to measure the financial performance of the Pharmaceutical Industry taking the top five Indian companies like Sun Pharmaceutical Industries Limited, Divis Laboratories Limited, Cipla Limited, Aurobindo Pharma Limited, and Torrent Pharmaceuticals Limited for the period 2017-2022. In order to achieve the goals in this paper, the researcher have measured the ratios of ROE, ROA applying the DuPont analyses, which have been demonstrated with the aim of tables to show the change periodically. DuPont analysis (ROI and ROE)) is an important tool for judging the operating financial performance. It is an indication of the earning power of the firm. DuPont Model which is based on analysis of Return on Equity (ROE) & Return on Investment (ROI). The return on equity disaggregates performance into three components: Net Profit Margin, Total Asset Turnover, and the Equity Multiplier. Return on Investment consists of Assets Turnover and Profit Margin. The return on investment consists of Assets Turnover (Operating Income X Total Assets) and Profit Margin (EBIT X Operating Income). From the study, it is found that Sun pharmaceutical Financial performance is high followed by Cipla, Divis, Aurobindo Pharma, and then Torrent pharma. The five companies are significant at their level. In conclusion, ROE & ROI is the most comprehensive measure of profitability of a firm. It considers the operating and investing decisions made as well as the financing and tax-related decisions.