1 Shreyarth University, Ahmedabad, Gujarat, India
2 Parul University, Vadodara, Gujarat, India
3 Bhakta Kavi Narsinh Mehta University, Junagadh, Gujarat, India
This study examines the financial efficiency and profitability of leading Indian pharmaceutical companies over the period 2021–2025, focusing on key indicators such as revenue, net profit, return on equity, tax, and enterprise valuation (EV/EBITDA). Using secondary data from verified financial sources and applying statistical tools like descriptive analysis and one-way ANOVA, the research identifies patterns, similarities, and differences in performance across the selected firms. The findings show that while revenue, profitability, and valuation remain relatively stable, differences in tax payments indicate variations in financial management and efficiency. The study highlights the importance of strategic measures such as cost optimization, effective use of intellectual capital, and innovation-driven growth to improve financial performance, offering practical insights for managers and policymakers to strengthen competitiveness and ensure sustainable value creation in the pharmaceutical sector.
The Indian pharmaceutical industry plays a vital role in driving economic growth and healthcare innovation, with leading companies investing heavily in R&D, intellectual capital, and effective business strategies. This study examines the financial efficiency and profitability of major Indian pharmaceutical firms from 2021 to 2025, using key indicators such as revenue, net profit, return on equity, tax, and EV/EBITDA, while applying statistical methods to identify differences in performance. By drawing on earlier research on R&D efficiency, intellectual capital, and the impact of patents, the study provides a clear picture of the industry’s financial health and offers practical recommendations to enhance profitability, efficiency, and sustainable growth in an increasingly competitive global market.
In recent years, the Indian pharmaceutical industry has gained global recognition for its strong growth, innovation, and contribution to healthcare. Companies in this sector not only focus on producing essential medicines but also invest heavily in research and development to create new drugs that meet unmet medical needs. The financial performance of these firms is influenced by multiple factors, including their ability to manage costs, optimize resources, and leverage intellectual capital effectively.
REVIEW OF LITERATURES
Ledley, F. D., McCoy, S. S., Vaughan, G., & Cleary, E. G. (2020). Studies concluded that from 2000 to 2018, large pharmaceutical companies achieved significantly higher profit margins than other major S&P 500 firms, indicating stronger overall profitability. However, the difference becomes smaller when accounting for company size, year, and research and development expenses, suggesting that high profitability is partly linked to the industry’s investment in innovation.
Schuhmacher, A., Gassmann, O., & Hinder, M. (2016). This study highlighted with spending ranging from USD 3.2 to USD 32.3 billion between 2006 and 2014, the report emphasizes that research-based pharmaceutical corporations are becoming increasingly concerned about diminishing R&D efficiency. It highlights that strategic measures like portfolio risk management, cost reduction through outsourcing, and boosting innovation potential through open innovation models like knowledge generation, integration, and leveraging are all necessary to improve R&D efficiency.
Purohit, H., & Tandon, K. (2015). The study examines how Intellectual Capital (IC), a key driver of growth in knowledge-intensive industries like IT and pharmaceuticals, influences traditional financial performance measures such as profitability, productivity, and market valuation. Using Pulic's Value Added Intellectual Coefficient (VAIC) on 10 BSE 100 companies from 2008–2012, it highlights that IC, often unrecorded on balance sheets, plays a critical role in value creation beyond tangible assets.
Janodia, M. D., Rao, J., Pandey, S., Sreedhar, D., Ligade, V. S., & Udupa, N. (2009). Studies concluded that intellectual property rights, particularly patents, play a key role in promoting economic, social, and technological progress, with pharmaceutical patents being especially debated. This study examines how Indian pharmaceutical companies adapt to the product patent regime introduced after 2005, assessing its impact on their growth, R&D efforts, and strategies for survival.
OBJECTIVES OF THE STUDY
RESEARCH METHODOLOGY
1. Research Design
The nature of the current research is analytical and quantitative. Over a five-year period (2021–2025), it seeks to analyze and contrast the financial performance and profitability of some of the specified Indian pharmaceutical firms.
2. Data Collection
All secondary data used in the study came from verified, easily accessible financial sources, including the following: CMIE Prowess and Moneycontrol databases, company financial statements, annual reports of the companies that were selected, filings to the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), and other published financial journals and reports. For consistency, all financial data utilized in the analysis is given in Indian Rupees (? crores).
3. Variables Selected for Analysis
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Table 1: Variables Selected for Analysis |
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|
Category |
Variable |
Purpose |
|
Performance Indicator |
Revenue |
Measures overall business growth and market performance |
|
Profitability Indicator |
Net Profit |
Reflects profitability after expenses and taxes |
|
Efficiency Indicator |
Return on Equity (ROE) |
Evaluates shareholders’ return on invested capital |
|
Fiscal Indicator |
Tax |
Indicates tax burden and effective management |
|
Valuation Indicator |
EV/ EBITDA |
Represents enterprise valuation relative to earnings |
4. Tools and Techniques of Analysis
To test the hypotheses and determine the statistical significance of variations among companies, the following techniques were applied:
DATE ANALYSIS AND DATA INTERPRETATION
|
Table 2: Revenue |
|||||
|
Company/ Year |
2021 |
2022 |
2023 |
2024 |
2025 |
|
Aurobindo Pharma Ltd |
24774.62 |
23455.49 |
24855.38 |
29001.87 |
31723.73 |
|
Cipla Ltd |
19159.59 |
21763.34 |
22753.12 |
25774.09 |
27547.62 |
|
Dr. Reddy's Laboratories Ltd |
19047.5 |
21545.2 |
24669.7 |
28011.1 |
32643.9 |
|
Lupin Ltd |
11055.93 |
11771.67 |
11258.83 |
1466.5 |
16967.5 |
|
Sun Pharmaceutical Industries Ltd |
33496.14 |
38654.49 |
43885.68 |
48496.85 |
58578.44 |
|
Zydus Lifesciences Ltd |
14403.5 |
15265.2 |
17237.4 |
19547.4 |
23241.5 |
H?: There is no significant difference in the revenue of the selected Indian pharmaceutical companies
|
Table 3: ANOVA |
||||||
|
Source of Variation |
SS |
df |
MS |
F |
P-value |
F crit |
|
Between Groups |
4.62E+08 |
4 |
1.16E+08 |
0.815408 |
0.527398 |
2.75871 |
|
Within Groups |
3.54E+09 |
25 |
1.42E+08 |
|||
|
Total |
4E+09 |
29 |
||||
All of the chosen Indian pharmaceutical businesses had overall increase, according to the examination of revenue data from 2021 to 2025, with Sun Pharmaceutical Industries Ltd. and Dr. Reddy's Laboratories Ltd. leading in absolute revenue statistics. Although individual firms exhibit swings, the sector's total revenue performance appears to be reasonably stable, according to the ANOVA results (F = 0.815, p = 0.527), which demonstrate no statistically significant difference in revenue among these companies.
|
Table 4: Net Profit |
|||||
|
Company/ Year |
2021 |
2022 |
2023 |
2024 |
2025 |
|
Aurobindo Pharma Ltd |
5389.18 |
2678.36 |
1939.32 |
3186.13 |
3515.26 |
|
Cipla Ltd |
2401.3 |
2559.47 |
2835.49 |
4155.31 |
5291.05 |
|
Dr. Reddy's Laboratories Ltd |
1903.6 |
2112.2 |
4470.3 |
5563.2 |
5703.5 |
|
Lupin Ltd |
1258.62 |
-188.7 |
425.21 |
2326.09 |
3972.96 |
|
Sun Pharmaceutical Industries Ltd |
2284.68 |
3405.82 |
8560.84 |
9648.44 |
10980.1 |
|
Zydus Lifesciences Ltd |
2205 |
2326.4 |
2001.9 |
3831.4 |
4614.8 |
H?: There is no significant difference in the net profit of the selected Indian pharmaceutical companies
|
Table 5: ANOVA |
||||||
|
Source of Variation |
SS |
df |
MS |
F |
P-value |
F crit |
|
Between Groups |
53264223 |
4 |
13316056 |
2.559661 |
0.063426 |
2.75871 |
|
Within Groups |
1.3E+08 |
25 |
5202272 |
|||
|
Total |
1.83E+08 |
29 |
||||
While all companies saw growth overall, the net profit data from 2021 to 2025 reveals some notable differences in profitability trends. In 2022, Lupin Ltd. showed a negative profit, while Sun Pharmaceutical Industries Ltd. and Dr. Reddy's Laboratories Ltd. achieved the highest profits. These changes are not statistically significant at the 5% level, according to the ANOVA findings (F = 2.560, p = 0.063).
|
Table 6: ROE |
|||||
|
Company/ Year |
2021 |
2022 |
2023 |
2024 |
2025 |
|
Aurobindo Pharma Ltd |
24.32 |
10.77 |
7.18 |
10.63 |
10.67 |
|
Cipla Ltd |
13.12 |
12.07 |
11.96 |
15.43 |
16.9 |
|
Dr. Reddy's Laboratories Ltd |
11.06 |
11.35 |
19.35 |
19.74 |
16.85 |
|
Lupin Ltd |
6.77 |
-1.03 |
2.3 |
11.29 |
16.36 |
|
Sun Pharmaceutical Industries Ltd |
6.24 |
6.81 |
15.13 |
5.04 |
15.13 |
|
Zydus Lifesciences Ltd |
16.42 |
26.39 |
11.19 |
19.46 |
18.9 |
H?: There is no significant difference in the return on equity of the selected Indian pharmaceutical companies
|
Table 7: ANOVA |
||||||
|
Source of Variation |
SS |
df |
MS |
F |
P-value |
F crit |
|
Between Groups |
134.7267 |
4 |
33.68168 |
1.021747 |
0.420066 |
2.866081 |
|
Within Groups |
659.2961 |
20 |
32.96481 |
|||
|
Total |
794.0229 |
24 |
||||
While some companies, like Dr. Reddy's Laboratories Ltd. and Zydus Lifesciences Ltd., achieved relatively higher ROE in some years, others, like Sun Pharmaceutical Industries Ltd. and Lupin Ltd., experienced fluctuations, including negative or low returns in some periods, according to the Return on Equity (ROE) data from 2021 to 2025. Despite individual year-to-year changes, the ANOVA findings (F = 1.022, p = 0.420) show that there is no statistically significant difference in ROE across the chosen pharmaceutical businesses, indicating that shareholder returns are generally comparable throughout the industry.
|
Table 8: Tax |
|||||
|
Company/ Year |
2021 |
2022 |
2023 |
2024 |
2025 |
|
Aurobindo Pharma Ltd |
2009 |
725 |
684 |
1211 |
1582 |
|
Cipla Ltd |
888 |
933 |
1202 |
1546 |
1529 |
|
Dr. Reddy's Laboratories Ltd |
931 |
878 |
1541 |
1623 |
1954 |
|
Lupin Ltd |
371 |
28 |
101 |
458 |
864 |
|
Sun Pharmaceutical Industries Ltd |
514 |
1075 |
847 |
1439 |
2772 |
|
Zydus Lifesciences Ltd |
193 |
511 |
587 |
977 |
1411 |
H?: There is no significant difference in the tax of the selected Indian pharmaceutical companies
|
Table 9: ANOVA |
||||||
|
Source of Variation |
SS |
df |
MS |
F |
P-value |
F crit |
|
Between Groups |
3965791 |
4 |
991447.9 |
3.49952 |
0.021161 |
2.75871 |
|
Within Groups |
7082742 |
25 |
283309.7 |
|||
|
Total |
11048533 |
29 |
||||
In comparison to companies such as Lupin Ltd. and Zydus Lifesciences Ltd., Aurobindo Pharma Ltd., Sun Pharmaceutical Industries Ltd., and Dr. Reddy's Laboratories Ltd. paid substantially higher taxes in some years, according to tax data from 2021 to 2025. The ANOVA results (F = 3.500, p = 0.021) indicate a statistically significant difference in tax payments across these businesses, indicating that the sector's varying tax burdens are influenced by differences in profitability, tax planning techniques, and financial management methods.
|
Table 10: EV/EBITDA |
|||||
|
Company/ Year |
2021 |
2022 |
2023 |
2024 |
2025 |
|
Aurobindo Pharma Ltd |
8.95 |
7.94 |
7.27 |
9.98 |
9.31 |
|
Cipla Ltd |
14.64 |
6.93 |
13.08 |
17.07 |
14.5 |
|
Dr. Reddy's Laboratories Ltd |
18.2 |
17.01 |
10.32 |
11.62 |
10.11 |
|
Lupin Ltd |
21.32 |
81.28 |
25.55 |
20.64 |
16.31 |
|
Sun Pharmaceutical Industries Ltd |
15.36 |
19.3 |
19.51 |
26.75 |
23.62 |
|
Zydus Lifesciences Ltd |
14.79 |
11.46 |
12.97 |
18.18 |
12.52 |
H?: There is no significant difference in the enterprise value to earnings before interest, taxes, depreciation, and amortization of the selected Indian pharmaceutical companies
|
Table 11: ANOVA |
||||||
|
Source of Variation |
SS |
df |
MS |
F |
P-value |
F crit |
|
Between Groups |
375.2424 |
4 |
93.8106 |
0.500242 |
0.735769 |
2.75871 |
|
Within Groups |
4688.259 |
25 |
187.5304 |
|||
|
Total |
5063.501 |
29 |
||||
The chosen pharmaceutical businesses' EV/EBITDA data from 2021 to 2025 demonstrates oscillations; Lupin Ltd. exhibits a very high value in 2022, while other companies show more modest variances over time. The market views these companies' risk-return profiles as generally similar, and no single firm consistently commands a significantly higher enterprise valuation relative to earnings, according to the ANOVA results (F = 0.500, p = 0.736), which show that these differences are not statistically significant.
FINDINGS AND SUGGESTIONS
|
Table 12: Findings and Suggestions |
||||
|
Parameter |
Statistical Test Used |
Findings (Based on ANOVA Results) |
Interpretation |
Suggestions |
|
Revenue |
One-Way ANOVAF = 0.8154, p = 0.5274 |
p > 0.05 Fail to reject H? |
No significant difference in revenue among the selected companies. Revenue growth remained relatively stable across the sector during 2021–2025. |
Companies should focus on expanding market share through new product launches, export diversification, and R&D-driven growth to sustain revenue. |
|
Net Profit |
One-Way ANOVAF = 2.5597, p = 0.0634 |
p > 0.05 Fail to reject H? |
No significant difference in profitability among firms, although Sun Pharma showed consistently higher profits. |
Firms with lower profits (e.g., Lupin) should strengthen cost control and product mix strategies to improve margins. |
|
Return on Equity (ROE) |
One-Way ANOVAF = 1.0217, p = 0.4201 |
p > 0.05 Fail to reject H? |
No significant difference in ROE, implying comparable shareholder returns across firms. |
Management should enhance asset utilization and optimize capital structure to improve ROE performance. |
|
Tax |
One-Way ANOVAF = 3.4995, p = 0.0212 |
p < 0.05 Reject H? |
Significant difference in tax payments among companies, indicating varying profitability and tax planning efficiency. |
Companies should review their tax management strategies to ensure compliance and optimize post-tax profitability. |
|
EV/ EBITDA |
One-Way ANOVAF = 0.5002, p = 0.7358 |
p > 0.05 Fail to reject H? |
No significant difference in valuation multiples; the market perceives similar risk-return characteristics among firms. |
Firms should focus on improving operational efficiency and earnings quality to enhance valuation multiples. |
CONCLUSION
While variances in tax payments reveal inequalities in financial management and efficiency, the study indicates that top Indian pharmaceutical businesses exhibit generally constant financial performance in terms of revenue, profitability, and shareholder returns. Strategic actions including efficient cost management, portfolio optimization, and utilizing intellectual capital are essential for maintaining growth and profitability in the face of obstacles like declining R&D efficiency and escalating competition. These businesses may increase their market competitiveness and guarantee long-term value creation for stakeholders and shareholders alike by concentrating on innovation-driven strategies, operational effectiveness, and prudent financial planning.
REFERENCES
Dr. Vinod Parghi, Dr. Dhaval Zala, Dr. Dinesh Chavda, An Analytical Study of Financial Efficiency and Profitability in Leading Indian Pharmaceutical Companies, Int. J. of Pharm. Sci., 2025, Vol 3, Issue 10, 1437-1445. https://doi.org/10.5281/zenodo.17351912
10.5281/zenodo.17351912
