Financial Performance and Capital Structure of Top Pharmaceutical Companies in India

“Ms. Geetha Santhini S, MBA”

Sakthi Institute of Information and Management Studies, Pollachi

“Dr. R. Kavitha, Associate Professor”

Sakthi Institute of Information and Management Studies, Pollachi

ABSTRACT: This study analyzes the financial strength and capital structure of ten selected top pharmaceutical companies in India over the five-year period FY 2020-21 to FY 2024-25. Using secondary data from published annual reports, BSE filings, and financial databases, the study employs seventeen financial ratios spanning profitability, liquidity, efficiency, solvency, and capital structure dimensions. Comparative statistical techniques including hierarchical cluster analysis (Ward's method), Pearson's correlation analysis, and simple linear regression analysis are applied using R software (Version 4.6). The findings reveal that companies maintaining conservative, equity-dominated capital structures—namely Abbott India, Ajanta Pharma, Divi's Laboratories, Alkem Laboratories, and Pfizer—consistently achieved superior financial performance across all dimensions. Hierarchical cluster analysis grouped the ten companies into three distinct financial profiles based on their leverage and profitability characteristics. Regression analysis confirmed that a one-unit increase in the Debt-to-Equity Ratio reduces Return on Assets (ROA) by 13.443 units and Return on Equity (ROE) by 6.826 units. The correlation analysis reveals a moderate negative relationship between leverage and ROA (r = -0.5887). Although statistical significance was marginal due to the small sample size, the overall evidence strongly indicates that lower leverage is associated with stronger financial performance in the Indian pharmaceutical industry.

KEYWORDS: Capital Structure, Financial Performance, Leverage, Pharmaceutical Industry, India, Ratio Analysis, Cluster Analysis, Regression Analysis.