Impact of Intangible assets on Profitability and Capital structure of Listed IT and Pharma Companies in India

Abstract

Indian IT and Pharmaceutical sectors had tremendous growth till 2008-09 and started facing newlinegrowth challenges due to 2008-09 recession and various other challenges faced by the newlinerespective sectors leading to moderated growth. Apart from increasing investments in research and development, there were many mergers and newlineacquisition by Indian IT companies with in India. There have been more than 150 outbound newlinedeals completed by Indian IT companies including many US and European technology newlinecompanies in the first half of the second decade. Similarly Indian Pharma sector which was newlinemore of generic drug industry has started to transform into innovative and speciality player. newlineIndian Pharma sector has started investment in research to come up with new drugs. Apart from newlineinnovation, Indian Pharma sector has already started looking at the other ways to grow by way newlineof acquisitions keeping in mind Readily available approved ANDAs(abbreviated new drug newlineapplications), API (active pharmaceutical ingredients), marketed products, pipeline products, newlinenew portfolio of drugs. newlineAs a result of these developments there are many types of intangible assets / resources, either newlineinternally generated or acquired as a part of acquisition or takeover of other firms in Indian IT newlineand Pharmaceutical sectors. This research tries to understand and investigates how efficiently newlinethese intangible assets are being leveraged and what s empirical impact these intangible assets newline(Goodwill, technical-scientific know how, Intellectual property rights, Copyrights, design, newlineproduct know-how, special processes, softwares / programmes, brand, patents, client and newlinevendor relationship, client contracts, licensing agreements etc.,) have on the financial newlineperformance of the organization particularly operating profit and the profit after tax of the newlineorganizations. Additionally this research also empirically analyses how these intangible assets newline(present in balance sheet) impact the capital structure of the firms and what s the impact of newlineequity part of capital structu