Alvio Pharmaceuticals

Alvio was established in the year 2010 as a Chronic Therapy Division of Salud Care
India. Its main motive was to ease the daily pain and struggle of Cardiac and
Diabetic Patients. Alvio has been highly successful in achieving its objective by
providing high quality and affordable healthcare alternative to patients suffering from
chronic ailments.
Today Alvio Pharmaceuticals has strongly established in the wide Indian
Pharmaceuticals Market as a trusted source of high quality formulations. Alvio has
expanded its range from Chronic Therapy segments like Cardiovascular Medicines,
Anti-Diabetics to also include Acute Therapy Segments like Gastroenterology, Anti-
Infectives, Analgesics, and Anti-Allergics etc.
Alvio Pharmaceuticals has grown nationally as well as internationally. It is currently
marketing its products in over 16 states in India and more than 7 Countries
worldwide. With a team of over 300 highly motivated and trained professionals, Alvio
is always looking to expand its boundaries and aims to be within reach of every
single patient who needs quality medical care.
Alvio owes its success to continuous focus and development of drug release
technologies to provide better results and efficacy to the patients while adhering to
strict WHO GMP compliance and Manufacturing Practices.
Ratio Analysis with the industry:
1. Debt Equity Ratio
Debt to equity ratio= Debt/ Owners Equity
Debt equity ratio measures how much assets is financed by debt and how
much by shareholders equity.
The debt to equity ratio of Alvio Pharmaceuticals has increased massively
from 0.19 in 2016 to 2.52 in financial year 2017. This indicates that the
company was in dire need of debt to finance its operations which it could not
generate from its cash flow. This is not a good sign for the company because
an increase in debt could lead to huge increase in interest expenses.
However it also suggests that they are incurring less expenses as they are
paying relatively less equity dividend and other equity costs. Also, the industry
average is very low as compared to the companys average. So the company
may need to pay of its debt or increase its equity to come near the industry
average which will be profitable for its investors.

2. Current Ratio
Current Ratio: Current Assets/Current Liabilities

Current Ratio measures the ability of the company to pay off its short term
obligations using its current assets.

The current ratio of Alvio pharma is hovering around the industry average.
This indicates that the company projects lower liquidity than other players.
However, it is below the ideal ratio of 2:1. The ratio is decreasing for the
company from year 2016 to 2017 because of increase in current liabilities as a
result of hue increase in creditors and bills payables. Also there has been an
increase in trade receivables but it increased comparatively less than the
liabilities.

3. Fixed Assets turnover ratio:

Total income/ Fixed Assets
It measures how well a company uses its fixed assets to generate sales. An
investor must compare fixed asset turnover ratios within an industry to
analyze how efficiently a company uses its fixed assets.
The fixed assets turnover ratio is higher than the industry average which
signifies that if a company has a higher fixed asset turnover ratio than its
competitors, it shows the company is effectively using its fixed assets to
 generate sales better than its competitors. However, an investor must be
aware of fixed assets that are old and have accumulated depreciation. The
accumulated depreciation can falsely return a high fixed asset turnover ratio.
As far as depreciation is concerned, it is pretty low which suggests that the
fixed assets are not that old and so it doesnt falsely return a high fixed asset
turnover ratio. The ratio of 46.27 suggests that the company earns 46.27
rupees for every penny of fixed assets. The company is expanding and
modernising rapidly to compete with the international market.

4. Inventory Turnover ratio

Total Income/Average inventory

The inventory turnover ratio indicates how quickly a firm can convert its
inventory into cash. It is an important factor to analyse a pharmaceutical
company as it suggests how efficiently the current assets are managed.
The inventory turnover ratio is very high as compared to the industry average.
This suggests that the company is able to manage its current assets very
efficiently and is able to generate its sales very easily. The ratio of 12.44
suggests that the company holds the inventories for just 29-30 days with
themselves. The ratio has increases from 2016 to 2017 because of high
increase in sales of the company and a relatively low increase in the sundry
debtors.

5. Debtors Turnover Ratio

Net Credit Sales/ Avg Accounts Receivables
It depicts how quickly a firm can collect its debt. It can also be depicted as
Days Accounts Receivables Outstanding. That is, the number of days that
elapse between the time of sales and its collection.
The ratio for Alvio Pharma is 9.82, which is again higher than the industry
average. A ratio of 9.82 suggests that the average number of days needed for
Alvio to collect the cash is 37 days. A high receivables turnover ratio can
imply a variety of things about a company. It may suggest that a company
operates on a cash basis, for example. It may also indicate that the
companys collection of accounts receivable is efficient, and that the company
has a high proportion of quality customers that pay off their debts quickly. A
high ratio can also suggest that the company has a conservative policy
regarding its extension of credit. This can often be a good thing, as this filters
out customers who may be more likely to take a long time in paying their
debts. On the other hand, a companys policy may be too conservative if it is
too tight in extending credit, which can drive away potential customers and
give business to competitors. In this case, a company may want to loosen
 policies to improve business, even though it may reduce its receivables
turnover ratio.

6. Operating Profit Ratio:

= Operating Income/ Net Sales
This ratio will pinpoint the proportion of operating profits to total sales revenue
and also indicate the profitability rate achieved by the companys business.
Alvio Pharmaceuticals has a very similar operating profit ratio from the
industry. The companys ratio is hovering around 20% for the past 2 years
which is similar to the industrys average. However the ratio has increased for
the company from 15% in 2016 to 20.77% in 2017. This is because the
company has had a huge increase in revenue in the past year which was
proportionately higher than the increase in total sales. Also, Alvio Pharma
became a sole company in April 2016, because of which the sales and
revenue had a huge rise in a single year. The company is expecting for a
further increase in its sales for next 5 years.

7. Net Profit Margin:

= Profit after Tax/ Total Income
Net profit margin is the percentage of revenue remaining after all operating
expenses, interest, taxes and preferred stock dividends have been deducted
from a company's total revenue.
The net Profit Margin of Alvio Pharma has been hovering around 15-20%
which is similar to the industry average. This shows that the company is
generating enough profits from its total sales to cover its costs and use the
rest as retained earnings. However, the company may need to increase its
operations even further to bust the ratio and be profitable for the investors.
Conclusion:
Being in the industry as a sole company for just a single year, Alvio
Pharmaceuticals has shown a great potential to compete with the major
players in the market. However, there are some aspects which needs working
on, especially the collection period. They need to be strict there no matter how
much old the customers are. Also they have been earning super normal
profits in the year 2016-17 which will not last long. They need to be more
stable in their sales and expenses to ensure normal profits. But since it was
just a single year of their working as a sole company, we cannot analyse to
the best possible position for future suggestions. The company may take
feedback from the past beginnings of companies like Sun Pharma or Dr
Reddys when they were first introduced and may learn from their mistakes
and try not to repeat the same to get a better position in market, both
domestic as well as international.