Topic: Relationship of SANOFI Ltd with Nifty 50
Author: Shubham Meshram (Roll No. 0222096)
Introduction: Sanofi India Limited is one of the entities through which Sanofi operates in India. It was incorporated in May 1956 under the name Hoechst Fedco Pharma Private Limited. Over the years, its name was changed to Hoechst Pharmaceuticals Private Limited, Hoechst India Limited, Hoechst Marion Roussel Limited and Aventis Pharma Limited. Today, it employs more than 3,000 employees across India.
Objective: To calculate the beta of Sanofi India ltd and find out its significance.
Views and reviews
SANOFI MD Rodolfo Hrosz’s comments post (May, 2023) : Starting with Sanofi India Limited, a brief overview for those that aren’t totally familiar with the business. We have a long history in the country, 67 years of presence in India, a top four multinational company, pharmaceutical industry. Our revenues of INR26.2 billion in 2022, top five – ours are in the top 300 of total pharmaceutical market in India. We export to 28 plus countries around the world, developing and developed countries. We have one strong GMP compliant manufacturing site in Goa, 5 billion tablets produced from that facility, 12 Indian CMOs, Contract Manufacturing Organizations that work with us for the Indian market and for the exports as well. We cater to 3,000 distributors and 100,000 pharmacies, very strong activity in CSR and ESG.
SANOFI CFO Vaibhav Karandikar comments post (May, 2023): I think one point also that we want to stress and which we have mentioned during the last call as well is the dividend payout ratios and we talked about India for India strategy in Q3, ’22 and we also shared that with you during the last investor call. Largely, the strategy focus on global and local innovation and partnerships, which is essentially meaning an organic path to growth for Sanofi, which we are pursuing. And therefore, we said that we would be able to maintain our payout ratios, which as you can see are gradually increasing and the last payout ratio was at 85%. This translates into a dividend yield of almost 3%, 3.5% for our shareholders. And that’s something which is a key factor under India for India, which we wanted to share with you. And this is something that one needs to keep in mind as we move along in terms of our payout ratios going forward.
Data Collection
The data for the period July 1, 2022 to June 30, 2023 has been downloaded from NSE’s website and Friday’s closing price was found out. The weekly returns of Nifty 50 are represented as X and that of SANOFI Ltd as Y.
Data Analysis
Y = 0.0948 + 0.3009X
tstat = (0.9572)
N = 50
R2 = 0.0187
F = 0.9163
The above equation shows the relationship between Nifty 50 (X) and SANOFI Ltd (Y). The positive sign means there is a positive relationship, which means if X rises, Y also rises and vice-versa. If Nifty 50 (X) rises by 1 unit, SANOFI Ltd (Y) rises by 0.3009 units. N means there are 50 observations. The t-stat for b is 0.9572, which means b is statistically not significant at 5% level. R2 = 0.0187 means that 1.87% of SRF Ltd (Y) is explained by Nifty 50 (X) and the balance 98.13% is error due to the variables which are not in the model.
Since the F = 0.9163 is less than the tabulated F value (F 0.05,1DF,48DF = 4.043), the overall model is statistically not significant at 5% level.
Conclusion
Since the beta of SANOFI Ltd is 0.301, the shares of the company are good for a long-term investment.