INTRODUCTION AND OVERVIEW OF PHARMACEUTICAL INDUSTRY
The pharmaceutical industry plays a unique role in improving the lives of the patients.
It is also one of the worlds fastest growing industries and amongst the biggest
contributors to the world economy.
CMS estimates retail spending on prescription drugs at 9.2% of NHE in 2018 and projects
that this share will fall to 9.0% by 2028. We estimate that non - retail drug spending
accounted for an additional 4.5% of NHE in 2018, growing to 4.9% by 2028.
INDIAN ECONOMY
As per the World Banks latest India Development Report, India remains one of the
fastest growing major economies in the world, despite challenging global environment. As
per the National Statistical Office (NSO), the countrys real GDP growth during FY23 is
estimated at 7.2%, as compared to 9.1% in FY22. The recent economic growth in India can be
attributed to the resurgence of private consumption, which has replaced export stimulus as
the primary driver of growth. With near-universal vaccination coverage, consumer sentiment
has improved, resulting in a surge in spending on contact-based services such as
restaurants, hotels, shopping malls, and cinemas. Production activity and capacity
utilisation growth have been observed across various sectors.
INDUSTRY STRUCTURE AND DEVELOPMENT
The active pharmaceutical ingredients market size is slated to grow by $ 60.56 billion
between 2020-2024. Asia was the largest market for API in 2019, and the region will
continue to offer maximum growth opportunities to market vendors during 2020-2024. The
growing partnerships between Asian API manufacturers and global vendors, along with policy
revamp in the region, preferring intellectual properties, will significantly encourage the
API market growth in Asia. Almost 66% of the markets growth will originate from Asia.
Japan, China, and India are the key markets for active pharmaceutical ingredients in Asia.
The increased healthcare expenditure by the urban population and rapid surge in the aged
population are influencing the APIs market growth, which has led to an increase in the
number of DMF filings for APIs.
SMEs IN THE PHARMA INDUSTRY
The MSME sector is one of the major generators of employment and is also a significant
contributor to the overall growth of the countrys economy. The MSME sector contributes
Rs. 20 lacs crores to Goods & Services, contributing to 40 per cent of GDP of India.
Similarly, in Indian Pharma industry, about 60 per cent of the manufacturing is
contributed by MSMEs within an annual turnover of approximately Rs. 60,000 crores or $9
billion which is an integral part of predominantly formulations and to an extent API
industry more so for intermediates. The industry is extremely fragmented with
approximately 24,000 units in the MSME sector accounting for 70 per cent of production by
volume and 50 per cent by value on ex-factory basis. SMEs contribute to almost 90 per cent
to domestic formulation and about 50 per cent to exports.”(Source: Express Pharma)
INDIAN PHARMA INDUSTRY
The pharmaceutical industry in India, US$40 billion by value, is worlds 3rd largest by
overall volume and worlds largest as provider of generic medicines, with 20% and 3.5%
share of total global pharmaceutical exports by volume and value respectively to more than
200 countries and territories, as in 2022. With industry standards compliant, mega
production capabilities and a large number of skilled domestic workforce, Indian exports
meet the standards and requirements of highly regulated markets of USA, UK, European Union
and Canada. According to the Department of Pharmaceuticals and Ministry of Chemicals &
Fertilizers, domestic pharmaceutical market turnover reached Rs.129,015 crore (US$18.12
billion) in 2018, growing 9.4 per cent year-on-year and exports revenue was US$17.28
billion in FY18 and US$19.14 billion in FY19.
As of 2022, most of pharmaceuticals made in India are low cost generic drug which
comprise most of pharmaceutical exports of India. Patented medicines are imported. active
pharmaceutical ingredients (APIs) are imported from China (66% supplies by volume worth
US$2.4 billion) and Germany (US$1.6 billion) as well as from US, Italy and Singapore. To
foster an Atmanirbhar Bharat by enhancing the R&D, Make in India product development
and high-value production capabilities, import substitution and domestic manufacture of
APIs, the government has introduced a US$2 billion incentive program which will run from
2021-22 to 2027-28. In 2019 the Department of Pharmaceuticals announced that as a part of
the Make in India initiative, drugs for local use and exports must have 75% and 10% local
APIs respectively and a bill of material must be produced for verification.
SEGMENT-WISE PERFORMANCE
The operation of the Company consists of a single segment. Our Company deals in bulk
drugs. Hence, Accounting Standard (AS-17) on Segment Reporting issued by the Institute of
Chartered Accountants of India does not apply.
OUTLOOK
The likely duration, intensity and spread of the corona virus has brought in a lot of
uncertainty into the global and domestic economic outlook. The concerns have transformed
from the initial impact of imports from China on the domestic supply chains to the
domestic and external demand shock.
The duration of the same remains uncertain with social distancing and lockdowns raising
the prospects of production shutdowns and job losses in some sectors. A revival in
domestic investment is likely to be hindered, given the increased risk aversion on a
global scale, and renewed concerns about resilience of the financial sector.
In the near term, the negative impact of the Covid-19 outbreak on economic growth and
sentiment may be modestly mitigated by higher government spending, a brighter outlook for
crop yields and emergency stockpiling of essential items. Furthermore, the fall in
commodity prices would provide mild cushioning to earnings in the near term, which
provides some comfort.
FACTORS THAT MAY AFFECT OUR RESULT OF OPERATIONS
Our financial conditions and results of operations are affected by numerous factors
inter alia-
• Growth of unorganized sector and threat from local regional players;
• Change in freight and forwarding charges;
• General economic and business conditions;
• Our Companys ability to successfully implement our growth strategy;
• Fluctuation in Exchange rates;
• Prices of raw materials we consume and the products we manufacture;
• Changes in laws and regulations relating to the industry in which we operate;
• Changes in political and social conditions in India.
PANCHSHEEL ORGANICS SWOT ANALYSIS
- STRENGTHS
• Extensive experience in specialty chemicals and pharmaceutical intermediates;
• Stronger sustainability and compliance framework with thrusts to continuously
improving and adding on to it;
• Export sales in more than 15 countries;
• Sound manufacturing capability of APIs;
• Strategic location of manufacturing units with easy access to raw materials and
utilities.
- WEAKNESS
• Products are highly dependent on the availability of raw materials;
• Macro factors may expose various risks impacting the growth;
• Global nature of operations like unfavorable currency movements, etc, expose the
business to losses.
- OPPORTUNITIES
• Domestic Markets
The Company has a wide range of pharmaceutical products in its portfolio. The Company
tries and taps every lawful opportunity coming its way and follows a focused approach and
increases marketing efforts. All these have resulted in increased growth of the Company in
the recent years. In the coming years, it shall strive hard to build a strong reputation
for themselves and carve a niche for our products.
• International Markets
The Company is continuously trying to build a large overseas business and revenue from
export business accounts for a sizeable component of Companys total turnover. The Company
is continuously tapping potentially new markets and exporting a wide range of products to
these countries.
- THREATS
• Due to emergence of corona virus, API production has been hampered in China,
which has impacted the Companys supply chain;
• Other low-cost countries such as China and Israel are affecting outsourcing
demand for Indian pharmaceutical products;
• Entry of foreign players (well-equipped technology-based products) into the
Indian market;
• Drug Pricing: The domestic pharmaceutical industry is very much dependent on the
governments Drug Pricing Policy. It is important for the Government to introduce free and
fair competition rather than arbitrary drug control measures to decide prices of essential
drugs.
This will ensure that Companies like us can manufacture and market all the vital
lifesaving drugs at economical prices;
• Rising Costs and Availability of Materials;
• The prices of many APIs and intermediates have risen significantly due to
restriction in production by various Chinese manufacturers. Other factors contributing to
such price hike are rise in price of petroleum-based products, frequent shortages and
general inflationary conditions.
All these adversely affect the production schedules and overall margins of our
Companys products.
a. RESULTS OF OPERATIONS:
The break-up of Revenue and Costs of the Company is as given below:
PARTICULARS |
Financial year ended March 31, 2023 |
Financial year ended March 31, 2022 |
INCOME(A) |
|
|
Sales & income from Operations: |
|
|
Domestic |
1,01,63,33,201.00 |
66,68,74,276.00 |
Export |
1,54,54,134.00 |
23,461,857.00 |
Total Sales |
1,03,17,87,335.00 |
69,03,36,133.00 |
Less : Excise Duty |
0 |
0 |
Add: Other Income: |
|
|
Other operating Income |
1,18,27,127.23 |
8,94,423.00 |
TOTAL INCOME |
1,04,36,14,462.23 |
69,12,29,556.00 |
EXPENDITURE(B) |
|
|
Operating Expenditure |
67,80,19,619.00 |
43,37,51,441.00 |
Administrative and other expenditure |
10,73,20,336.00 |
11,45,44,980.00 |
Finance Charges |
54,66,100.00 |
28,88,958.00 |
(Increase)/ Decrease in stocks |
(1,26,62,501.00) |
(3,55,44,682) |
Depreciation for the Year |
1,57,98,497.00 |
1,24,53,771 |
TOTAL |
85,29,20,336.14 |
57,72,47,495 |
Profit Before Tax |
19,06,94,086.51 |
11,39,83061 |
Less: Current tax |
5,11,39,799.75 |
(3,19,90,000.00) |
Excess or short income tax provision |
|
(13,73,043.00) |
Deferred Tax |
(11,46,411.58) |
2,16,452.00 |
Profit after T ax |
14,07,00,698.34 |
8,35,81,557.00 |
(1) Total Income:
Our revenue has Increased from Rs. 69,12,29,556 to Rs 1,04,36,14,462.23. as compared to
previous year 2022-23. Sales in the domestic market have increased, however it has
increased in the export market. The overall sales have however decreased.
(2) Operating Expenditure:
The operating expenditure has Increased from Rs. Rs. 43,37,51,441.00 to Rs.
67,80,19,619.00 as compared to previous financial year 2021-22.
(3) Administrative and other Expenditures:
The administrative expenses have decreased from Rs. 11,45,44,980.00 to Rs.
10,73,20,336.00 as compared to previous financial year 2021-22.
(4) Depreciation:
The Depreciation cost has increased from Rs. 1,24,53,771 in Financial Year 2021-22 to
1,57,98,000 current year.
(5) Net Profit:
Net profit for the financial year 2021-22 is Rs. 14,06,99,000
b. OTHER FACTORS:
(1) Known trends or uncertainties
The world economy has witnessed an unprecedented economic crisis causing severe
recessionary trends in various countries, but Indian pharmaceutical industry remained less
affected compared to other sectors.
(2) Future relationship between costs and revenues
The Company doesnt see substantial increase in labor cost or other costs related to
the product, except that raw material prices may go up in the near future due to rise in
commodity prices. However, any increase in raw material prices would be duly covered in
the sales price of the product.
(3) Dependence on Single or few suppliers / Customers
The Customer base of the Company is very strong it does not deal with a single customer
or supplier. The Company has a very cordial relationship with all the customers and
suppliers with whom they have been dealing since a very long time.
(4) Significant developments subsequent to the last financial year
In the opinion of the Directors, there are no significant changes since the date of the
last financial statements, which could materially affect the operations, and profitability
of the Company.
TRANSACTION(S) IN WHICH THE MANAGEMENT IS INTERESTED IN THEIR PERSONAL CAPACITY
During the year, there are no materially significant related party transactions entered
into with the management that may have potential conflict with the interest of the
Company.
For more details, refer Notes to the Financial Statements.
CAUTIONARY STATEMENT
Statements in this Management Discussion and Analysis Report describing the Companys
objectives, projections, estimates and expectations, may be ‘forward looking
statements and are within the meaning of the applicable laws and regulations. Actual
results might differ substantially or materially from those expressed and implied.
Important developments that could affect the Companys operations include a downtrend in
the international market, fall in onsite, offshore rate and significant changes in
political and economic environment, environment standards, tax laws, litigations and labor
relations.
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