Abstract

The Indian pharmaceutical industry has made significant strides in the past five decades and is an important contributor to the provision of quality healthcare services in any economy. This paper studies the efficiency of selected top ten pharmaceutical companies by applying Data Envelopment Analysis (DEA) under constant return to scale (CRS) model and variable returns t ale (VRS) model. The inputs used in the study are assets, salaries, and wages. The outputs used are Return on Asset, and Net Profits. The study found Divis Laboratories and Sun Pharma to be most efficient under CRS and Sun Pharma was found to be most efficient under VRS models during 2019 – 2023.  Seven pharmaceutical companies were working under Increasing returns to scale, two were working under constant returns to scale and one was performing under decreasing returns to scale. Return on assets, Net Profit margin and Return on Capital Employed Ratio were used to study financial performance of the pharmaceutical companies. Abbot India had the highest return on assets (17.948%). Divis Labs had the highest Net Profit Margin (27.76%). Mankind Pharma led in Return on Capital Employed (27.524%), This result further adds to the result provided by DEA. Companies found to be efficient by DEA were found to have high performance standards. Also, through the regression analysis the impact of variables Return on Capital Employed (ROCE) and Net profits margin (NPM) on Return on Asset (ROA) was studied. Returns on Assets (ROA) are 93.6% dependent on Net profits margin and Return on Capital Employed. There is significant (p-value = 0.000) relationship between Return on Asset (ROA), Net profits margin (NPM) and Return on Capital Employed (ROCE).

Keywords: Pharmaceutical companies, Efficiency, Performance, Returns to scale, Data Envelopment Analysis (DEA), Regression Analysis.

Impact Statement

COVID -19 affected all industries but pharmaceutical industry was affected the most. This paper was undertaken to study the efficiency of the top pharmaceutical companies. The efficiency of pharmaceutical companies was studied by using selected financial indicators. Further this research work helped in differentiating the top pharma companies on the basis of under-utilisation and optimum utilisation of resources for selected financial parameters. 

About Authors

Dr Gagandeep Sharma

Dr Gagandeep Sharma is Associate Professor in Department of Economics, GGDSD College, Chandigarh. He has specialization in field of Statistics, Quantitative Methods, Management Science. He has expertise to use various statistical software viz SPSS, MINTAB, Excel Solver.  He is Coordinator of IGNOU Study Centre, Chandigarh. He is also a visiting faculty of University of the Fraser Valley, Abbostford, British Columbia, Canada. University of the Fraser Valley, Abbostford, British Columbia, Canada has also appointed him as a Member of Staff Selection Committee (SAC) for the appointment of regular faculty. He has authored 19 research papers and presented various papers in National and International seminars. He has authored 06 books also. He has acted as Resource Person in the 3-week Refresher Course in Research Methodology for Social Sciences organized by UGC – Academic Staff College, Himachal Pradesh University, Shimla and Orientation Programme (Economics) for PGT Economics organized by Jawahar Navodaya Vidyalaya Samiti, Ministry of Human Resource Development, Govt. of India.

Dr Divya Sharma

Dr Divya Sharma is Assistant Professor in Department of Commerce, DAV College, Chandigarh. She has twenty-one years teaching experience of under-graduate and post-graduate classes. She specializes in Finance and Banking. She is also a visiting faculty of University of the Fraser Valley, India. She has authored 18 research papers and presented various papers in National and International seminars. She has authored 02 books also. She has acted as sub-editor of research journal ‘Diviner’ published by D.A.V. College, Chandigarh. She is also qualified Company Secretary (CS).

Ms Shreshtha Singh

Shreshtha Singh, a final-year business administration student at the University of the Fraser Valley, Canada has actively contributed to several university projects, notably in the Student Company Program since 2021. With two consecutive internships at Qbiz, she gained practical industry insights.

In addition, Shreshtha serves as a team lead for the Skills and Training team in the Self…Quest to Serve program, a collaboration with Mehar Baba Charitable Trust, Bassi Pathana.

Currently, Shreshtha holds the position of Editor-in-Chief at the university magazine Fraser Crônica, concurrently serving as the Senior Advisor to the Board of Directors for the 10th Student Company Program.

Cite this Article

APA (7th ed.): Sharma, G., Sharma, D., & Singh, S. (2024). Efficiency and Performance of Top Indian Pharmaceutical Firms: A Comparative Analysis. Edumania-An International Multidisciplinary Journal, 2(2), 165–174. https://doi.org/10.59231/edumania/9045

Chicago (17th ed.): Sharma, Gagandeep, Divya Sharma, and Shreshtha Singh. “Efficiency and Performance of Top Indian Pharmaceutical Firms: A Comparative Analysis.” Edumania-An International Multidisciplinary Journal 2, no. 2 (2024): 165–174. https://doi.org/10.59231/edumania/9045.

MLA (9th ed.): Sharma, Gagandeep, et al. “Efficiency and Performance of Top Indian Pharmaceutical Firms: A Comparative Analysis.” Edumania-An International Multidisciplinary Journal, vol. 2, no. 2, 2024, pp. 165–174. https://doi.org/10.59231/edumania/9045.

Statements & Declarations

Peer Review: The scholarly quality and contribution of this comparative analysis of Indian pharmaceutical firms have been confirmed through a rigorous and independent peer-review process conducted by experts in the relevant fields.

Review Type: This article underwent a double-blind peer review, wherein the identities of the authors (Gagandeep Sharma, Divya Sharma, and Shreshtha Singh) and the reviewers were concealed from each other. The review was conducted by subject experts in economics, business performance analysis, pharmaceutical industry studies, and corporate finance.

Competing Interests: The authors, Gagandeep Sharma, Divya Sharma, and Shreshtha Singh, jointly and individually declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Data Availability: The datasets generated and analyzed during the current study, including financial data and performance indicators of Indian pharmaceutical firms, are available from the corresponding author, G. Sharma, upon reasonable request. The data are derived from publicly available annual reports and financial databases, which have been cited appropriately within the article.

Funding: This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors. The work was completed using the authors’ institutional resources at Goswami Ganesh Dutta Sanatan Dharma College, Chandigarh; D. A. V. College, Chandigarh; and personal scholarly efforts.

License: This article is an open-access article distributed under the terms and conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives (CC BY-NC-ND) 4.0 International License. This license allows others to download this work and share it with others for non-commercial purposes, as long as they credit the authors, but they cannot change it in any way or use it commercially.

Ethical Approval: Ethical approval was not required for this study, as it is based on secondary analysis of publicly available financial data and did not involve the collection of data from, or experimentation on, human subjects or animals. The work adheres to the highest standards of academic integrity and research ethics in economic and business research.

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