DRIVERS OF VBM OF CIPLA

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DRIVERS OF VALUE-BASED METRICS OF CIPLA

The Value-based metrics are generally higher than the traditional metrics. This is because the value-based metrics consider the cost of capital and the present value of future cash flows. As a result, value-based metrics are a more accurate measure of a company's financial performance.

Drivers of Residual Income (RI) The primary driver of RI is operating income. Operating income is a company's income from its core business operations. It is calculated by subtracting operating expenses from revenue. In the case of Cipla, operating income has increased steadily from 2018 to 2022. 

This increase has been driven by a combination of factors, including increased sales, improved margins, and cost reductions. Another driver of RI is the cost of capital. The cost of capital is the minimum return a company must generate on its investments to satisfy its shareholders and creditors. In the case of Cipla, the cost of capital has remained relatively stable over the five-year period. 

This means that the company has generated a return on its investments greater than its cost of capital, contributing to the increase in RI.



Drivers of Economic Value Added (EVA) 

EVA is a value-based metric that measures how much value a company creates for its shareholders. It is calculated by subtracting the cost of capital from the return on invested capital (ROIC). ROIC is a measure of how efficiently a company is using its capital to generate income. 

In the case of Cipla, EVA has increased significantly from 2018 to 2022. This increase has been driven by a combination of factors, including increased operating income, improved ROIC, and a relatively stable cost of capital.

Drivers of Market Value Added (MVA) 

MVA is a value-based metric that measures the difference between the market value of a company's equity and the book value of its equity. It measures how much the market believes a company is worth above its book value. In the case of Cipla, MVA has increased significantly from 2018 to 2022. 

This increase has been driven by a combination of factors, including increased earnings, improved growth prospects, and a higher valuation multiple.

Location: Bengaluru, Karnataka, India

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