shivalik rasayan ltd Management discussions


A. Agro Chemical Opportunities in Global Market

The increasing population and consequent rise in food demand are expected to propel the growth of the agrochemicals market going forward.

The Global Agrochemicals market size grew from $241.85 billion in 2022 to $259.4 billion in 2023 at a compound annual growth rate (CAGR) of 7.3%. The agrochemicals market size is expected to grow to $334.12 billion in 2027 at a CAGR of 6.5%.

The future of Agrochemicals looks bright, considering global population growth, growing imperative to protect against crop losses and increase yields, rising consumer demand for sustainably produced food, and the role of agrochemicals in tackling climate change.

Creating differentiation through innovation will remain the key strategy for SRL going forward. The agricultural chemical industry outlook will continue to hinge on strategies for tackling future disruptions that impact current revenue streams.

B. Indian Agrochemical Industry

The Indian agrochemicals market size reached a value of almost USD 6 billion in the year 2022. The market is further expected to grow at a CAGR of 8.5% between 2023 and 2028 to reach a value of almost USD 9.82 billion by 2028.

The Indian agrochemicals market is a significant region, contributing to the growth of the Asia Pacific agrochemicals market. The Asia Pacific region is growing at the fastest rate on a global basis due to the enormous consumption of pesticides for farming activities.

Opportunities and Challenges in Indian Market

The Indian agrochemicals market is driven by the rising population within the Country, which has led to maintaining sufficiency in agricultural practices, further boosting the use of Indian agrochemical products for farming activities. The industry is positively influenced by the Indianization of the agrochemical industry, which has fueled the sales of agrochemical products. Other factors affecting the growth of Indian agrochemical industry include an increase in the population growth, rising need for food production, and economic growth. The Agro-Chemical industry is growing at the CAGR of 8-10% and will reach USD 8.1 billion by 2025. Despite the potential and the crucial role played by the agrochemical industry, it faces several challenges that hinder its growth and profitability. One of the significant

issues is the slow pace of the registration process for new molecules, leading to high R&D and time costs. To thwart this challenge, the government and regulatory authorities must intervene to streamline the registration process and ensure that registration is granted within one year.

Another issue confronting the sector is the increasing cost of raw materials. India imports nearly 50% of its technical grade requirement from China, which pressures margins due to macroeconomic factors and high inventory resulting from seasonal demand. Undoubtedly, agrochemicals are vital not just for Indian agriculture but also for its economy. The sector has been doing its best to partner the Countrys agricultural growth. However, it is imperative to focus on bringing reforms and innovations in technology, irrigation, marketing, taxation & finance, and the quality of agriinputs. Only then will the Country bolster its position as an agricultural and economic power.

C. API (Active Pharmaceutical Ingredients) Industry Growth Opportunities

The Global Active Pharmaceutical Ingredients (API) market size is expected to reach USD 308.96 billion by 2028, registering a CAGR of nearly 6.30% during the forecast period 2022-2028.

The Active Pharmaceutical Ingredient (API) market is experiencing rapid growth due to the rising burden of chronic diseases across the globe, especially among the geriatric population.

According to the World Health Organisation (WHO), non-communicable diseases (NCDs) account for 71% of all deaths globally, with more than 15 million people dying from NCDs between the ages of 30 and 69 years. Cardiovascular diseases, cancers, respiratory diseases, and diabetes are among the leading causes of NCD deaths. As the occurrences of these diseases are increasing, the demand for more precise and effective drugs is also on the rise. This trend is expected to support the growth of the API market in the coming years.

The rising prevalence of infectious diseases and chronic disorders globally is expected to boost the demand for APIs. The increase in per capita healthcare expenditure in emerging countries and the rise in diagnosis rates is driving the demand for pharmaceutical drugs. This demand is also expected to drive the demand for generic and branded products in the active pharmaceutical ingredient market.

In summary, the Active Pharmaceutical Ingredient market is growing due to the increasing demand for therapeutic drugs, innovation in the industry, and the rising prevalence of chronic diseases worldwide. The market is presenting potential opportunities for pharmaceutical industry to produce dosage forms in high-end therapy areas such as oncology and cardiovascular diseases.

Business Overview

The Company is strategically focused on expanding its presence in both the Agrochemicals and APIs markets. This entails sourcing from a diverse network of trusted suppliers and providing customers with a wide range of high-quality products at flexible and affordable costs.

a. API- Shivalik Rasayan Limited is aggressively involved in developing efficient, economical process and development for Oncology & NonOncology Active Pharmaceutical Ingredients (APIs). R&D team has developed 12 API products, 2 Agro Chemical molecules and 2 Advanced Intermediates of Agro Chemicals which are meant as an import substitute to China. Further, Company was granted two US patents for the manufacture of (1) Highly Pure Fingolimod Hydrochloride and (2) Highly Pure Temozolomide, published by USPTO in December 2022.

The API plant has completed validation of 8 Oncology API products and has validated 5 No Oncology API products on the site till date. Out of these, SRL has received WHO-GMP Certificate for 6 Oncology and 2 Non-Oncology API products. Further, the Company has submitted its first US Drug Master File (USDMF) to USFDA and also has submitted CEP for 4 API to EDQM.

Also, the Company is creating a separate facility in its existing Active Pharmaceutical Ingredient (API) plant at Plot No. D-2/CH/41/A, GIDC Industrial Estate, Dahej-II, Pin-392140, Distt. Bharuch (Gujarat) to manufacture Diabetology and Cardiovascular APIs for Domestic Market.

During the year, under review a Chinese Company has approached SRL to manufacture (in India) and market three APIs (in China). The dossier for one of the molecules has been submitted to Chinese Regulatory Authority, NMPA, and dossiers for rest of the two are under evaluation by this party. SRL is also in advance stage of discussion to develop Ibrutinib and Lenvatinib API to major Japanese customers.

b. Agrochemicals- The new Agro & Specialty Chemical plant at Dahej-III expects to be commissioned by September, 2023. Further our R&D team has developed a non-infringing process for newer

agro chemical & intermediates like Azoxystrobin Technical, Chlorantraniliprole Technical (CTPR), Trifloxystrobin Technical, Dinotefuran and Pymetrozine. These products shall be taken up for production in the new plant, once ready.

Also, Company have already submitted application for 34 new product registrations (Agro Chemicals) with Central Insecticides Board & Registration Committee (CIB&RC) approvals for which are expected over the next 18-24 months.

You will appreciate that the current revenue stream of your Company is coming from the existing Agro Chemical plant of Dehradun despite an enormous increase in the operating expenditure (OPEX) on account of R&D and API plant, the Company has consistently reported steady operating margins over the last several quarters. We are confident to generate handsome revenue growth with decent profit margins once both the plants start generating revenues.

Human Resources

Shivalik Rasayan Limiteds human resource policies have reinforced its market leadership. The Company invests in on-the-job learning and creates a positive work environment with challenging job profiles and open communication with management. This has led to a high employee retention rate, promoting internal leadership and enhancing future prospects. As of March 31,2023 the Companys total number of payroll employees was 256.

Internal Control System

The Company has a robust system of internal controls comprising authority levels and powers, supervision, checks and balances, policies and procedures. The system is reviewed and updated on an on-going basis. The Company continuously upgrades its internal control systems by measures such as strengthening of IT infrastructure and use of external management assurance services. The Company has in place a well-defined internal audit system whereby the internal audit is performed across locations of the Company and the results of the audit findings are reviewed by the audit Committee.

For Shivalik Rasayan Limited

Sd/-

Rahul Bishnoi

Place: New Delhi

Chairman

Dated: 08.08.2023

(DIN 00317960)