Global economy
Overview
The global economic growth was estimated at a slower 3.4% in 2022, compared to 6% in
2021 (which was on a smaller base of 2020 on account of the pandemic effect). The
relatively slow global growth of 2022 was marked by geopolitical disruptions,
unprecedented inflation, pandemic-induced slowdown, higher interest rates, global
liquidity squeeze and quantitative tightening.
The challenges of 2022 translated into moderated spending, disrupted trade and
increased energy costs. Global inflation was 8.7% in 2022, among the highest in decades.
US consumer prices increased about 6.5% in 2022, the highest in four decades. The Federal
Reserve raised its benchmark interest rate to its highest in 15 years. The result is that
the world ended in 2022 concerned that the following year would be slower.
Outlook
The global economy is expected to grow 2.8% in 2023, influenced by the ongoing
disruptions. Concurrently, global inflation is projected to fall marginally to 6.6%.
Despite these challenges, there are positive elements within the global economic
landscape. Approximately 70% of the global economy demonstrates resilience, with no major
financial distress observed in large emerging economies. Despite high inflation, the US
economy demonstrated robust consumer demand in 2022. Driven by these positive factors,
global inflation is likely to be still relatively high at 4.3% in 2024. Interestingly,
even as the global economy is projected to grow less than 3% for the next five years,
India and China are projected to account for half the global growth.
(Source: IMF)
Indian economy
Overview
Even as the global conflict remained geographically distant from India, ripples
comprised increased oil import bills, inflation, cautious government and a sluggish equity
market. Indias economic growth was 7.2% in FY 2022-23. India emerged as the second
fastest-growing G20 economy in FY 2022-23. India overtook UK to become the fifth-largest
global economy. India surpassed China to become the worlds most populous nation.
(Source: IMF, World Bank)
Outlook
There are green shoots of economic revival, marked by an increase in rural growth
during the last quarter and an appreciable decline in consumer price index inflation to
less than 5% in April 2023. India is expected to grow around 6-6.5% (as per various
sources) in FY 2023-24, catalysed in no small measure by the governments 35% capital
expenditure. The growth could also be driven by broad-based credit expansion, better
capacity utilisation and improving trade deficit.
(Source: IMF data, RBI data, Union budget 2023-24 data, CRISIL report, Ministry of
Trade & Commerce, NSO data)
Overview of industries we operate in
Pharmaceuticals
Global pharmaceutical industry overview
The global pharmaceutical industry has experienced significant growth in the last two
decades. The market size of the worldwide pharmaceutical industry was pegged at USD
1,098.52 billion in 2022, which is expected to reach USD 1,115 billion in 2023. The market
is further expected to continue the growth momentum at a CAGR of 5.8% during FY 2023-28,
reaching USD 1,478 billion by 2028.
The global rating agency, Fitch Ratings has given the pharmaceutical and biotech sector
a neutral sector outlook, indicating Fitchs estimate of a favourable operating
environment in 2023, despite inflationary pressures and the environment of increased
interest rates. Fitch anticipates a return to normalcy in the industrys demand after a
brief period of disruption, with fundamentals once more supporting long-term growth
assumptions in the sector and favourable secular trends like a growing and ageing
population, an increase in the prevalence of chronic diseases and greater access to
healthcare globally.
(Source: Statista)
Growth drivers
Increasing medication use: Over the past decade, the use of medications has increased
by 36% ( measured in daily dosage). Although growth is anticipated to moderate through
2027, it is expected to increase by roughly 8% from 2022 to more than 3.4 trillion doses.
(Source: IQVIA research report)
COVID-19s impact on medicine use: Post-pandemic effects continues to have an impact on
pharmaceutical markets globally, with an estimated $500 billion increase in the net
cumulative pharmaceutical market from 2020 to 2027, primarily due to Covid related drugs
and vaccines. The global market growth is expected to return to pre-pandemic levels by
2024.
Indian pharmaceutical industry overview
The Indian pharma industry has been rightfully recognised as ‘the pharmacy of the
world as it consistently supplies medicines worldwide. Indias domestic pharmaceutical
market is estimated to grow to USD 65 billion by FY 2024-25 from the estimated USD 41
billion in FY 2022-23 at a growth rate of CAGR 10% and is further expected to reach USD
130 billion by FY 2029-30. This robust growth is driven by COVID-19-induced demand for
critical drugs and other supplies. The Indian Pharmaceutical industry is a prominent
player in the global pharmaceutical market, with a market share of 3rd
worldwide in production volume and 14th by value. India is a major exporter of
pharmaceuticals, with over 200+ countries served by Indian pharma exports. For the period
FY 2022-23, export of drugs and pharma products stood at USD 25.39 billion up by 3.25%
from the previous year
(Source: India ratings, BQ prime)
Growth drivers
Growing demand for generic drugs: The demand for affordable generic drugs has been
increasing globally and India is one of the worlds largest exporters of generic drugs.
The Indian pharma industry has been able to capitalise on this demand by producing
high-quality generic drugs at affordable prices, the Indian generic drugs market stood at
USD 24.53 billion in FY 2022-23 and is expected to grow at a steady compound annual growth
rate (CAGR) of 6.97% during the forecast period for FY 2023-30.
(Source: Pharmabiz.com)
Robust FDI inflow: In FY 2022-23, FDI in the pharmaceutical sector increased by 45.4%
to USD 2.05 billion, compared to USD 1.41 billion in the previous year, due to relaxed
investment regulations allowing up to 100% FDI for greenfield investments and up to 74%
for brownfield investments.
Increasing healthcare spending: Indias health expenditure is 2.1% of GDP in FY
2022-23. With increasing healthcare spending and a growing middle class, the domestic
market is expected to continue to drive growth in the pharma industry.
Strong research and development capabilities: India improved its ranking in the Global
Innovation Index (GII) 2021 report to climb to 46th from 81st in
2015. The Indian pharma industry has invested heavily in research and development, leading
to the development of innovative drugs and treatments.
(Source: World Intellectual Property Organisation)
Increasing exports: The Indian pharma industry exports its products to over 200
countries worldwide. Indias pharma exports witnessed a staggering growth of 138% from FY
2013-14 till FY 2022-23. With the increasing demand for affordable healthcare, especially
in emerging markets, the export market is expected to continue to grow.
Increasing investment in healthcare infrastructure: Indias public expenditure on
healthcare is expected to reach 2.5% of GDP by 2025. The Indian government is investing
heavily in healthcare infrastructure, including hospitals, clinics and research centers.
This is expected to increase demand for pharmaceutical products.
Rise in demand for healthcare insurance: The Indian health insurance market size
reached USD 120.1 billion in 2022 and is expected to reach USD 219.1 billion by 2028,
exhibiting a growth rate (CAGR) of 10.64% from FY 2023-28. An increased health insurance
coverage will further increase pharmaceutical consumption.
(source: IMAC group)
Government initiatives
Pradhan Mantri Jan Arogya Yojana (PM-JAY): The pharmaceutical industrys growth is
fueled by initiatives like PMJAY, the worlds largest health assurance scheme. Its core
aim is to provide an annual health cover of H5 Lakhs per family, encompassing secondary
and tertiary care services. This substantial healthcare support creates a significant
demand for pharmaceutical products and services, driving the industrys expansion.
Pradhan Mantri Bhartiya
Janaushadhi Pariyojana (PMBJP): The availability of quality generic medicines at
affordable prices through the PMBJP has contributed to the establishment of over 9000
Janaushadhi Kendras throughout the country. These initiatives play a crucial role in
ensuring accessible healthcare options, promoting the pharmaceutical industrys growth.
PLI Schemes: The announcement of an additional outlay of H197,000 Crores for the
pharmaceutical PLI scheme in 13 key sectors such as active pharmaceutical ingredients,
drug intermediaries and key starting materials.
Scheme for bulk drug parks: Three bulk drug parks in Himachal Pradesh, Gujarat, and
Andhra Pradesh have received approval with a financial outlay of H3,000 Crores. The scheme
is set to be operational by FY 2024-25. This strategic move is expected to boost domestic
pharmaceutical manufacturing capabilities.
APIs
Global industry overview
The global active pharmaceutical ingredients market size was valued at USD 222.4
billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 5.90%
from 2023 to 2030. The advancements in active pharmaceutical ingredient (API)
manufacturing and the rising prevalence of chronic diseases such as cardiovascular disease
and cancer can be attributed to the growth. Government policies, as well as changes in
geopolitical situations, are driving the market growth. Furthermore, many governments have
developed plans and provided incentives to encourage the production of API. The North
American market currently holds the highest revenue share of 38.80% in 2022, driven by
increasing R&D spending on cancer and lifestyle-related diseases. Asia Pacific is
expected to have the fastest CAGR of 7.1% during the forecast period, primarily due to
low-cost API production from countries such as China and India, and rising healthcare
spending. Europe is also expected to grow significantly, driven by an increase in research
funding and the presence of key market players.
(Source: grandviewresearch.com)
Indian industrial overview
India is a big producer of APIs and accounts for 8% of the global API industry. The
Indian active pharmaceutical ingredient market is expected to grow at a staggering rate of
13.7% from FY 2022-26. There are a lot of difierent APIs made in India and it contributes
57% of APIs that are pre-qualified by the World Health Organisation(WHO). The reason
Indias API market is so lucrative is because of its strong domestic market, advanced
chemical industry, skilled workforce, stringent quality and manufacturing standards and
low costs.
(source: Candle Partners report for FY 2022-23)
Nutraceuticals
Global nutraceuticals market overview
The global nutraceuticals market size reached a value of about USD 485.78 billion in
2022. During the forecast period of FY 2023-28, the market is expected to grow at a CAGR
of 8.20% to attain a value of USD 779.48 billion by 2028. The increasing demand for health
supplements is a major driving factor for the market. With the availability of multiple
approved products in the market, various options for consumers are expected to aid the
nutraceutical market development. The market value is likely to inflate during the
forecast period due to the rising investments by key players in the market for the
development of innovative and improved products. High investment in research and
development is also expected to aid manufacturers in the production process and positively
impact the technology used in production.
(Source: expertmarketresearch.com)
Growth drivers
Rising metabolic disorders: The prevalence of metabolic disorders is on the rise and
this is fuelling the growth of the nutraceuticals market. More than 30% of the US
population has metabolic syndrome. This is expected to lead to increased demand for
nutraceuticals, which in turn will fuel market growth.
(Source: US National Cholesterol Education Program and International Diabetes
Federation)
Sport and health supplements: The growth of sports and health supplements will work
together to support the growth of the Nutraceutical industry. People are becoming more
aware of the benefits of health supplements for various medical concerns, which is driving
demand for nutraceutical products.
The post-pandemic The pandemic served as a significant wake-up call, prompting a shift
towards aligning health needs for better nutrition quality, combating fraudulent health
claims and reducing substandard marketing. With heightened consumer interest in healthy
nutritional supplements, there has been an increased demand for zinc, vitamin D, vitamin
C, and mineral-rich foods, leading to a surge in nutraceutical product sales. According to
a 2020 survey by the Council for Responsible Nutrition, 77% of U.S. adults take dietary
supplements, with 87% believing that supplements can play a crucial role in maintaining or
improving their health.
Indian nutraceuticals market
Between 2023 and 2025, the nutraceuticals market is projected to grow at an impressive
rate of 21%, reaching a market size of approximately USD 18 billion by 2025. The promising
opportunities in the Indian market have attracted the attention of numerous international
nutraceutical firms. Additionally, Indian consumers emphasis on product quality and
eficacy over price further contributes to the markets expansion. These factors are
expected to fuel continued growth in the coming years.
Growth drivers
Shifting mindset towards proactive/preventive healthcare post-COVID: The COVID-19
pandemic has prompted a shift in peoples attitudes towards health, with a more proactive
approach. This has led to significant growth in the preventive healthcare sector, which is
expected to reach USD 197 billion by 2025 in India.
Ingredients backed by research and application: The active ingredients used in
supplements are natural extracts and their levels are backed by adequate scientific
research and evidence. Advances in chemical engineering allow for harnessing these
ingredients in an effective manner, expanding the availability of new compounds to enable
natural health.
Customer experience and product innovation: The nutraceutical industry is making
supplements available in various forms such as tablets, gummies, chewable and mixes,
making them easy to consume on the go. Nutraceutical brands are also selling experiences
and not just products by helping customers understand what they are ingesting.
Biotechnology - Enzymes
Global market review
The enzymes market experienced substantial growth in 2022, with a valuation of USD
12.46 billion. Projections indicate further expansion, with the market size expected to
reach USD 20.5 billion by 2030, reflecting a compounded annual growth rate (CAGR) of 6.5%
from 2022 to 2030.
The industrys growth is attributed to several factors, including heightened consumer
awareness about health, increased demand for food and beverages and technological
advancements. The applications of enzymes span various sectors, from food and fragrance to
pharmaceuticals, oleochemicals, leather and biodiesel industries.
(Source: grandviewresearch.com)
Indian market review
The India enzymes market was valued at USD 390.68 million in
FY 2022-23 and is expected to grow at a CAGR of 8.67% during the forecast period of FY
2022-23 to FY 2029-30.
Technological advancements and product innovations are key factors influencing the
market.
(Source: techsciresearch.com)
Indian real-estate sector review
Indias real estate industry is pegged to grow at a compound annual growth rate (CAGR)
of 9.2% during FY 2023-28. Indian real estate market is poised to touch H65,000 Crores by
2025 and is expected to contribute to 13% of the countrys GDP. Indian real estate sector
is projected to have delivered about 82 million square feet in FY 2022-23. The growth is
attributed to increasing business activity, improved job markets and higher income levels,
which is expected to lead to a rise in real estate demand. The governments initiative for
‘Housing for All through the Pradhan Mantri Awas Yojana, along with infrastructure
mega-projects like highways, new airports and metros, will further stimulate the growth of
real estate holdings.
According to the union budget FY 2023-24, the budget for PM Awaas Yojana was boosted by
66% to more than 79,000 Crores which aims to provide assistance to construct 2.95 Crores
pucca houses with basic amenities. Tier 2 and Tier 3 markets will also grow rapidly,
generating substantial returns for investors and prospective buyers are already
considering these areas as alternatives to crowded and densely populated cities. The
construction development sector in India saw a foreign direct investment equity inflow of
approximately USD 125 million in FY 2022-23.
The real estate sector, particularly the warehousing industry, holds promise with the
growth of Indias e-commerce industry and government incentives like the PLI scheme.
Although rising interest rates raise concerns, there is a rising demand for larger,
luxurious homes and vacation houses. Tax breaks offered by the central government for
homebuyers and state government initiatives to waive stamp duty and registration fees
further support the industrys growth. Overall, the real estate sector is anticipated to
remain stable and robust, due to government support fostering its development.
(source: fianancialexpress.com)
Company overview
Fermenta Biotech Limited is a well-established company that has been in operation for
over seven decades The Company has a diverse range of products and services that cater to
various industries such as pharmaceuticals, dietary and nutritional supplements, food and
beverage fortification, animal feed, veterinary and rodenticides. One of Fermentas key
areas of expertise is the manufacturing of Vitamin D3 in all its formats. The Company has
a sustainable supply chain, which is a significant advantage in todays global market.
Fermentas range of Vitamin D3 variants has an optimal mix between human and animal
nutrition products, making it suitable for a wide range of applications. Apart from its
Vitamin D3 products, Fermenta also manufactures APIs for muscle relaxants and
anti-flatulent applications. The Company delivers innovative enzymes used in the
manufacturing of active pharmaceutical ingredients and provides environmental solutions
for wastewater treatment and management.
Fermentas legacy properties in Thane and Worli in Mumbai provide the Company with a
significant rental income stream. This additional source of revenue complements its core
business activities and strengthens its financial position. The Company signed a
development agreement with Mextech Property Developers LLP for construction of
residential-cum-commercial buildings in the rest of its freehold Thane land. The Company
will receive from Mextech affordable luxury residential apartments on an area-sharing
basis aggregating 120,000 square feet (RERA carpet area) along with mutually agreed
amenities. The Company reported the execution of sale transactions of its IT/ITES
building, Thane One. As on the date of this report, the Company sold a substantial part of
the IT/ITES building to third parties; a part of the proceeds were utilised to repay
outstanding loans related to the IT/ ITES building. The sales proceeds were fair and
reasonable vis-?-vis the market value of similar ofice premises in the neighbouring
areas of Thane.
Areas that we aim to grow in
Rice fortification
Fortified rice kernels are rice grains that have been enriched with additional
micronutrients. This fortification process helps to increase the nutritional value of
rice, making it a healthier food option for consumption. Fortification of rice increases
the amount of nutrients in food and promotes good health. Fortified rice kernels look and
taste similar to normal rice and can be mixed with regular rice. In India, fortified rice
is being specifically developed to address the problem of malnutrition and anemia.
Edible oil fortification
Edible oil fortification is a process that involves adding micronutrients to edible
oils to improve their nutritional value. This practice is becoming increasingly popular
due to the widespread use of cooking oil. By enhancing the nutritional content of oil,
fortification is seen as a feasible strategy to moderate micronutrient deficiency.
Furthermore, oil fortification is a cost-eficient strategy that has a wide reach and can
help moderate micronutrient deficiency. All types of edible oils, including soybean, palm
oil, groundnut, cottonseed and mustard, can be fortified, making it a versatile and
accessible solution for addressing micronutrient malnutrition.
Milk fortification
India is the largest milk producer in the world, with an estimated production of over
200 million tonnes of milk per year. Fortified milk contains vitamins and minerals,
typically vitamins D and A and it can also be fortified with other nutrients, depending on
the countrys dietary requirements. Studies on the benefits of consuming fortified milk
have shown encouraging results.
Our strengths
Established track record and strong R&D: The Company has consistently demonstrated
its expertise by consistently adding capacity to meet the growing demands. Additionally,
Fermenta has an established in-house research and development (R&D) team to enhance
its process and product technologies, thereby gaining a competitive edge in the industry.
Market leader: Fermenta holds a leadership position in the Vitamin D3 segment, being
one of the three global players to receive a Certificate of Suitability from the European
Directorate for the Quality of Medicines. With an increasing demand for Vitamin D3, the
Company has focused on expanding its production capacity and has established a significant
presence in the global market
Established clientele in the domestic and export markets: Fermenta has expanded its
export market presence since 2010 with Vitamin D3 variants exported to 60 countries,
including the USA, UK, European Union, Australia and New Zealand. FBL is a preferred
vendor for various pharmaceutical multinationals globally and has a well-established and
reputed client base in the pharmaceutical industry.
Risk management
| Geographical risk |
Mitigation: The Company operates in more than 60 |
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countries. To increase its reach and lessen the effects of a |
| The Companys revenue generation |
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slowdown in any one location, the Company is also investing |
| potential can be restricted to a few |
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in other geographical areas. |
| geographies which could hamper growth |
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| in the event of a localised slowdown. |
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| Finance risk |
Mitigation: Fermentas bank balance stood at H 35.24 Crores |
| The Companys inability to acquire long- |
and its net debt-equity ratio stood at 0.51x as on March 31, |
| term funds at a competitive cost could |
2023; average cost of funds stood at 9.58%. The Company |
| hamper its expansion and reinvestment |
continuously explores funding options and maintains |
| plans. |
a healthy balance sheet to support its expansion and |
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reinvestment plans. |
| Regulatory risk |
Mitigation: The Company evaluates the consistency of the |
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relevant rules throughout all of its operations. The Company |
| Changes in the regulatory environment |
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maintains constant communication with regulatory agencies |
| might lead to operational disruption. |
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to comprehend the effects of any changes to take pre-emptive |
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steps to minimise operational disruptions. |
| Competition risk |
Mitigation: The Company primarily trades in markets with |
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significant entry barriers that are regulated. The Company |
| Entry of new players could lead to intense |
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also focuses on innovation and R&D to develop differentiated |
| competition affecting the topline. |
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products and services that offer value to customers. |
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Additionally, the Company seeks to establish long-term |
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relationships with customers by offering quality products and |
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services. |
| Environment risk |
Mitigation: The Company oversees activities to guarantee |
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total adherence to relevant laws. The Companys objectives |
| The Companys business might affect the |
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include developing technology and equipment, setting up |
| environmental ecosystem, resulting in |
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training courses on environmental topics and providing |
| possible censure or closure. |
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information on operations with significant environmental |
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impacts (management of waste materials and chemical |
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substances). The Company is also dedicated to lowering its |
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carbon footprint and integrating sustainable practices into |
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every aspect of its operations. |
Internal control systems and their adequacy
At Fermenta, we are proud to say that we have some of the best internal control
procedures in place that are commensurate with our size and operations. Our Board of
Directors is responsible for our internal control system and sets the guidelines to ensure
its adequacy, effectiveness and application. We want to emphasise that our internal
control system is designed to ensure management eficiency, measurability and
verifiability. We aim to provide reliable accounting and management information, comply
with all applicable laws and regulations and protect our assets. This is crucial in
identifying and managing our risks, including those related to operations, compliance,
economic factors and finance. At Fermenta, we believe that having a robust internal
control system is critical to achieving our objectives and ensuring accountability. It
helps us prevent fraud and errors, enhance the reliability of financial reporting and
ultimately contribute to our continued market leadership. We hope that our commitment to
managing risks and ensuring accountability inspires other organisations to prioritise
their internal control procedures and take the necessary steps to protect their assets.
Human resources
Fermentas successful human resource practices have reinforced our market leadership.
We invest in both formal and informal training, as well as on-the-job learning to enhance
the skills and knowledge of our employees. We also prioritise engagement with our
employees by providing an enriched and challenging workplace and by encouraging regular
dialogues with management. Fermenta focuses on creating leaders from within the Company.
By identifying and developing employees with leadership potential, Fermenta strengthens
its prospects for long-term success. This approach not only benefits the Company but also
provides opportunities for professional growth and advancement for employees. The employee
strength of Fermenta is 550 as of March 31, 2023, Our investment in employees and emphasis
on internal leadership development have contributed to continued market leadership.
Cautionary statement
This statement made in this section describes the Companys objectives, projections,
expectations and estimations which may be forward-looking statements within the meaning of
applicable securities laws and regulations.
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