To assess the financial performances of Pharmaceutical companies few literatures were reviewed. Bhunia,A. (2010) concluded that liquidity position of KAPL and RDPL was quite strong and the predicted that Indian pharma industry would witness an increase in market share. Sheela, C.S. & Karthikeyan, K. (2012) showed the impact and value of DuPont model drivers on return on equity. The study compared the financial performance of top three companies which are Cipla, Ranbaxy and Dr Reddy’s Lab and found that Cipla had highest return on equity which was done by reducing its expenses and cost. Altaf, N. & Ahmad, F.  (2019) discussed about working capital financing and its relation with financial performance and found that it is guided by inverted U-shaped curve.

Priyadharshini & Rajeshwari (2021) analysed profitability and liquidity of Sun Pharma and Divi’s Laboratories to reveal that the companies were performing well but there was a scope of growth in the industry. Panigrahi, Ashok (2019) analysed financial performance by studying the relationship between profitability ratios of five leading pharma companies and found a significant relation between them. However, the study focused mainly on profitability only for performance analysis. 

From the above literature review it is found that most of the articles had used ratio analysis tool to assess the financial health and the following points were came into picture

1. Some articles had showed the relationship between leverage and profitability of a firm.

2. Some articles had studied how liquidity and solvency ratios influence profitability.

3. Some articles assessed the performance of the companies based on DuPont analysis.

4. Some articles studied the dependence of profitability on working capital.

Research Gap

1. Most of the studies showed dependence of working capital or leverage only on the profitability but has not assessed the overall performance of the firm.

2. Further the studies had not done Principal Component analysis to find out leading ratios which had influenced liquidity, profitability, efficiency and Capital structure of the company.

Findings: From the analysis of financial performance of Sun Pharma Ltd. through ratio analysis over the study period 2016-17 to 2020-21 it is found that all the liquidity ratios have gradually improved over the study period; but in each year they are below the standard norm except quick ratio in last year (see Table-1). This implies that Sun Pharma has taken aggressive policy in liquidity management to maximize its profitability.

Table-1: Liquidity Analysis

Table-2: Principal Component analysis of Liquidity Position

Further form principal component analysis of three liquidity ratios, it is found that as per Kaiser criterion (KMO.726) the principal factor is current ratio, because Eigen value is more than 1. From Bartlet Test of Sphericity (BTO) it is found that BTO=12.61 and it is significant at 1% probability level, which implies Principal Component Analysis is well fitted here Again, from regression analysis it is found that operating profit and liquidity are negatively related, though it is insignificant.

Profitability Analysis: In profitability analysis I have used three ratios namely gross margin, operating margin and net profit margin ratio. From profitability analysis it is found that all the ratios have fluctuated from time to time. They are in rising trend up to 2020 but decreases in year 2021, except gross margin ratio. But fluctuation of net margin is much higher than gross margin. This implies indirect expenses growth in the study period is much higher.

Table-3: Profitability Analysis

Table-4: Principal Component analysis of Profitability Position

Further from principal component analysis of three profitability ratios, it is found that as per Kaiser Criterion (KMO-.606) the principal factor is Gross margin ratio, because Eigen value is more than 1. From Bartlet Test of Sphericity (BTO) it is found that BTO=6.723 and it is significant at 1% probability level, which implies Principal Component Analysis is well fitted here

Again, from regression analysis it is found that operating profit and liquidity are negatively related, though it is insignificant.

Efficiency Analysis:

For efficiency analysis in Table-3, it is found that asset turnover is in rising trend over the study period; in inventory turnover ratio also, it is in rising trend except last year 2021which may be due to pandemic Covid-19. In receivable turnover it is in decreasing trend except year 2021.

Table-5: Efficiency Analysis:

Table-6: Principal Component analysis of Efficiency Position

 Further from principal component analysis of three Efficiency ratios, it is found that as per Kaiser Criterion (KMO.455) the principal factor is Asset Turnover ratio, because Eigen value is more than 1. From Bartlet Test of Sphericity (BTO) it is found that BTO=9.076 and it is significant at 5% probability level, which implies Principal Component Analysis is well fitted here

In regression analysis it is found that operating profit and asset turnover is positively related though insignificant.

Capital Structure Analysis:

From Table-4 it is found that Debt ratio and debt to equity ratio had fluctuated from time to time over the study period; but interest coverage ratio has risen. In each year debt to equity ratio is more than 50% which implies that the company has taken debt capital advantage to maximise its return. Also the debt ratio is less than 1 or 100% which means that the company owns more assets than liabilities and can meet its obligations by selling its assets if needed so it’s in less risky position.

Table-7: Leverage ratios

 Table-8: Principal Component analysis of Capital Structure Position

 Further from principal component analysis of three Efficiency ratios, it is found that as per Kaiser Criterion (KMO.498) the principal factor is Debt ratio, because Eigen value is more than 1. From Bartlet Test of Sphericity (BTO) it is found that BTO=21.463 and it is significant at 1% probability level, which implies Principal Component Analysis is well fitted here

From regression analysis it is found that operating profit and debt ratio is positively related though insignificant.

Market Value Analysis:

Table-9: Market value ratios

 Table-10: Principal Component analysis of Capital Structure Position

For market value ratios it is found that except for the second year it is in rising trend over the study period. It is seen that the company is overvalued since its book value is much less than its yearly market value share prices. From Price earnings ratio it is found that they have fluctuated over the period which implies volatility in share price of the company. Earnings per share of the company is negative for the first year but it increased significantly over the years except for year 2021 for which may be because the company was less efficient in that particular year due to the Covid-19 pandemic.

Further from principal component analysis of three Market value ratios, it is found that as per Kaiser Criterion (KMO-.518) the principal factor is Debt ratio, because Eigen value is more than 1. From Bartlet Test of Sphericity (BTO) it is found that BTO=4.824, but it is insignificant at 10% probability level, which implies Principal Component Analysis is not well fitted here.