shree pacetronix ltd Management discussions

CAVEAT

Shareholders are cautioned that certain data and information in the report is external to the Company and is included in this section. Though these data and information are based on sources believed to be reliable, no representation is made on their accuracy or comprehensiveness. Further, though utmost care has been taken to ensure that the opinions expressed by the management here in contain their perceptions on most of the important trends having a material impact on the Companys operations, no representation is made that the following presents an exhaustive coverage on and of all issues related to the same. The opinions expressed by the management may contain certain forward-looking statements in the current scenario, which is extremely dynamic with risks and uncertainties. Actual results, performances, achievements or sequence of events may be materially different from the views expressed herein. Shareholders are hence advised to conduct their own investigation and analysis of the information contained or referred to in this section before taking any action with regard to their own specific objectives. Further, the discussion following herein reflects the perceptions on major issues as on date and the opinions expressed here are subject to change without notice. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this section, consequent to new information, future events, or otherwise.

GLOBAL MARKET

The global market for medical device companies is definitely a promising one. As advancements in technology and healthcare continue to evolve, the demand for innovative medical devices is on the rise.

In recent years, the medical device industry has experienced significant growth, driven by factors such as an aging population, increased prevalence of chronic diseases, and a growing focus on personalized medicine. This has created a vast market with ample opportunities for companies to make their mark.

Additionally, emerging markets, such as India, are also contributing to the growth of the medical equipment industry. These regions are witnessing an increase in healthcare spending and infrastructure development, creating a demand for modern medical equipment.

India is the 4th largest Asian medical devices market after Japan, China, and South Korea, and among the top 20 medical devices markets globally.

To increase export of medical devices in the country, the Ministry of Health and Family Welfare (MOHFW) and Central Drugs Standard Control Organisation (CDSCO) implemented the following initiatives:

The medical devices industry in India consists of large multinationals as well as small and medium enterprises (SMEs) growing at an unprecedented scale.

The medical devices market in India has the potential to increase at a 37% CAGR and reach $50 bn by 2025.The current market size of the medical devices industry in India is estimated at nearly $11 bn.

According to the World Health Organization, an estimated 17.9 million people die due to cardiovascular diseases worldwide, each year. This represents 31% of global deaths, which are majorly due to heart attack and stroke. Thus, the growing burden of cardiovascular diseases globally, along with the technological advancements in the development of novel pacemakers, is expected to drive the cardiac pacemakers market growth over the forecast period.

Furthermore, Indian pacemaker market was valued at USD 223.55 million in 2018 and is expected to attain USD 437.56 million by 2026, at a CAGR of 8.9%.

GROWTH DRIVERS / OPPORTUNITIES

The opportunity in the global market for pacemakers is tremendous and promising. With the increasing prevalence of cardiac diseases and the growing geriatric population worldwide, the demand for pacemakers is expected to rise in the coming years.

The Company is one among the Corporates which is operating in global market for Pacemaker. Pacemakers are medical devices that are used to impart electrical pulses to the heart, so as to ensure normal heart rate. Pacemakers are used to treat patients who are suffering from heart conditions, such as heart failure and arrhythmias. These devices are implanted under patients chest by cardiologist to deal with various indications and used for the treatment of heart medical complications/conditions.

The cardiac pacemaker market is being aided by the growing pacemaker market, which reached a volume of about 1.27 million units in 2020. The pacemaker industry is further expected to grow at a CAGR of 2% in the forecast period of 2022-2027 to reach a volume of approximately 1.44 million units by 2026.

Cardiac Pacemaker Market in India is expected to grow at a healthy rate as people are becoming more aware and cardiac pacemakers are also becoming more user friendly with added features. Also, cardiac pacemakers have become more affordable helping the market to grow even further.

The Pacemaker market is driven by the factors, such as the increase in prevalence of cardiovascular diseases, the prevalence of heart disease, Aging Population, changing demographics i.e. as more people reach close to sixty years of age they are likely to develop some heart complications thus increasing the demand for cardiac pacemakers, technological developments in pacemakers that minimize the chances of heart failure, and improved efficiency of devices. Additionally, assistance from government bodies, favourable reimbursement Policies, increased government expenditure for research and development, is expected to enhance the market potential in several countries. Therefore, such initiatives from the government are expected to help the market and the patients in their treatment which will drive the Pacemakers market growth also.

Further, compared to other western countries penetration of cardiac pacemaker is less in India-hence, providing ample opportunities for growth for the manufacturers.

The Government of India has allocated Rs. 89,155 crore in union budget for the pharmaceutical and healthcare sector under the Union Budget 2023-2024.‘Atma Nirbhar Bharat mission is providing an impetus to Indias vision of becoming a global manufacturing hub for medical devices. Recent initiatives for instance, The Production Linked Incentive Scheme (PLI) and Promotion of Medical Devices Parks Scheme are a testimony to this.

RESTRAINTS, THREATS, RISK AND CONCERNS:

The medical device industry market is very dynamic and the key drivers impacting this sector are healthcare expenditure, technological development, aging population, and chronic diseases. Further emerging trends that impact the medical device industry include the changing medical technology landscape, software as a differentiator in medical devices, as well as design and manufacturing of patient portable or smaller devices. Stringent government rules and regulations for the development & manufacture of medical devices could hinder the growth of the market.

The healthcare supplies industry continues to face significant challenges both in India and internationally with the volume and complexity of change having greatly intensified the implication of risk. Regulatory risks, which are an inherent threat in the industry, are compounded by evolving regulations, new legislation and increased enforcement. To provide affordable healthcare, the Company will fully cooperate and partner with the Government on efforts focused towards ensuring access and increasing affordability of medicines while maintaining strong commitment on quality.

Impact of COVID-19 in the industry

Medical device manufacturers have not escaped the pandemics impact,theCOVID-19 pandemic had severely affected patients suffering from cardiovascular disease and has led to a slowdown in the growth of the cardiovascular market. The spread of COVID-19 had triggered a humongous economic impact on the healthcare and medical device industry. Also, Due to the high rate of infection and the lack of treatment, many countries are suffering and continue to carry a heavy burden on both their economies and health care systems. Many countries had previously closed down and stopped trading with other countries, using travel restrictions, etc., which has led to a slowdown in the markets for large companies around the world.

However, COVID-19 has also changed the scenario of doing business. It has opened massive opportunities for the healthcare sector in tele-consultation, AI-based diagnostics and remote healthcare management. The Healthcare sector has become more focused on innovation and technology over the past two years of change. 80 per cent of healthcare systems are aiming to increase their investment in digital healthcare tools in the coming five years.

RISK FACTORS:

Risks associated with pacemaker system implant include, but are not limited to, infection at the surgical site and/or sensitivity to the device material, failure to deliver on time due to various factors.

Though it is not possible to completely eliminate various risks associated with the business of the Company, efforts are made to minimize the impact of such risks on the operations of the Company. The Company has put in place various internal controls for different activities so as to minimize the impact of various risks.

The following broad categories of risks to the business objectives are:-

1. Political and Economic Risk

The Company continuously evaluates the political and economic scenario across the globe.

2. Compliance Risks

Medical Device industry is one of the most dynamic industries across the globe. Changes in regulations by leading regulatory bodies to ensure the quality of the products have compelled the medical device companies to modify their compliance practices. The Company is committed to compliance.

3. Operational Risks

Inherent risks to business operations such as production capacities, quality assurance, customer demands, material availability, human safety and skilled manpower. Operational risks are assessed primarily in terms of process design and its effectiveness.

4. New product risk:

New product development and launch involves substantial expenditure, which may not be recovered due to several factors including development uncertainties, increased competition, regulatory delays lower than anticipated price realizations, delay in market launch and marketing failure.

In highly regulated business, the requirement to obtain regulatory approval based on a products safety, efficacy and quality before it can be marketed for an indication in a particular country, as well as to maintain and comply with licenses and other regulations relating to its manufacture and marketing, are particularly important. The submission of an application to regulatory authorities (which vary, with different requirements, in each region or country) may or may not lead to the grant of marketing approval.

SEGMENT- WISE OR PRODUCT WISE PERFORMANCE:

The Company is engaged in only one segment i.e. manufacturing of pacemakers. Company has generated revenue of Rs. 2019.35 Lakhs during the financial year. However, the Company is continuously striving to improve its operational functionality and spread its geographical operational area.

OUTLOOK

The global pacemakers market is being driven by an aging population and rising incidences of cardiac ailments, as well as technological advancements in the healthcare sector. Furthermore, the government is shaping the global pacemakers sector by taking fruitful steps and increasing reimbursement policies on a global scale.

Overall, the evolving landscape of cardiovascular diseases, coupled with technological advancements and expanding markets, presents a significant professional opportunity for Pacemaker manufacturers in the global market. By continuously innovating, focusing on emerging economies, and building strategic partnerships, companies can position themselves at the forefront of cardiac treatment, driving growth and contributing to the overall well-being of patients worldwide.

Currently, Majority of the players operating in the Indian market are foreign companies. Stiff competition exists among these players. Your Company is looking forward to cover major Indian market in coming years. Further, the Company is serving to other Countries also and panning to reach far beyond Indian boundaries. This will also help our nation to save crucial foreign exchange.

Your Company will remain focused on its agenda of superior revenue growth, cost consciousness and improving the overall margin profile of the Company simultaneously focusing on the welfare of the society being its most concerned responsibility.

We have already reached a milestone of over 1,00,500 implants in India and beyond. This has been truly possible through the continued commitment to Research and Development and a vision to serve our people.

The Prime Ministers ‘vocal for local mantra has also brought out the significance for our local brands to have a global presence. India is the biggest and the fastest-growing market in the world for the majority of the product categories. With a more than 30 years of experience, we continue to aspire with great zeal and vigour to realize our PMs mission of "Make in India" and "Self Reliance".

The Government of India is taking supportive measures such as promoting indigenous manufacturing of high-tech medical devices, production-linked incentive schemes (PLIs) on medical devices, boosting new medical devices park, etc., to boost overall growth of the domestic medical devices market in India.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The company has proper internal control system which provides adequate safeguards and effective monitoring of the transactions. The Company has comprehensive internal financial controls system for all major processes including financial statements to ensure reliability of reporting. The Company has appointed an internal auditor which carries out audit throughout the year. The Audit Committee of the Company regularly reviews the reports of the internal auditor and recommends actions for further improvement of the internal controls. The statutory auditors while conducting the statutory audit, review and evaluate the internal controls and their observations are discussed with the Audit committee of the Board. The system also helps management to have timely data on various operational parameters for effective review. It also ensures proper safeguarding of assets across the Company and its economical use. The internal financial controls system of the Company is commensurate with the size, scale and complexity of its operations. The system and controls are periodically reviewed and modified based on the requirement.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During the year 2022-23, the Company has generated operational revenue of Rs. 2019.35Lakhsduring the financial year against the revenue of Rs. 902.65 Lakhs in the Previous Financial Year. The Companys has earned a profit of Rs. 324.76Lakhs as compared to profit of Rs. 65.20Lakhs in previous Financial Year. The overall performance of the Company in the current year is increased as compared to the performance of the Company in Previous Year. The Company is highly working on its commitments and growth. The Companys management is making regular efforts for improving operating efficiencies and increases its performance.

HUMAN RESOURCES / INDUSTRIAL RELATIONS

The human resource plays a vital role in the growth and success of an organization. The Company has maintained cordial and harmonious relations with employees across various locations. The Company has built a competent team to handle challenging assignments. As on 31^st March, 2023, there were 59 permanent employees on the roll of the Company. Our Company shares good industrial relations which improves the morale of the employees. Employees work with great zeal with the feeling in mind that the interest of employer and employees is one and the same i.e. to increase production. Every worker feels that he is a co-owner of the gains of industry. Complete unity of thought and action is placed in organization. It has increased the place of workers in the society. During the year, the Company has taken several initiatives to further strengthen its human resource base to meet its current & future growth plans. The Company strives to enhance the technical, work related and general skills of employees on a continuous basis. There was unity of purpose among the employees to continuously strive for all round improvements in work practices & productivity Industrial relations were cordial throughout the year at all locations.

During this Global COVID-19 Pandemic, the Company is taking utmost care of its employees and work force like sanitisation, social distancing, mandatory wearing of facemask and hand gloves, safe commuting facility, thermal check at the gate, maintaining proper hygiene.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Details of significant changes (i.e. change of 25% or more as compared to immediately previous financial year) in key financial ratios, along with detailed explanations are as follows:

PARTICULARS	RATIO IN F.Y.	RATIO IN F.Y.	% OF CHANGE	EXPLANATIONS
	2022-2023	2021-2022		FORMATERIAL CHANGE (CHANGE OF 25% ORMORE)
1. Debtors Turnover Ratio	3.61	1.96	Increase by 84.07%	Due to Increase in turnover
2. Inventory Turnover Ratio	8.69	4.99	Increase by 74.16%	Due to Increase in turnover
3. Interest Cover age Ratio	16.55	4.11	Increase by 302.68%	Due to Increase in turnover
4. Current Ratio	1.87	1.67	Increase by	Not Applicable
			12.11%
5. Debt Equity Ratio	0.04	0.09	Decrease by 58.92%	Due to increase in profit
6. Operating Profit Margin	24.23	12.96	Increase by 86.96%	Due to increase in profit
7. Net Profit Margin	16.08	7.22	Increase by 122.61%	Due to increase in turnover, resulting increase in profit

CHANGES IN RETURN ON NETWORTH

Return on net worth for FY 2022-2023 is 39.74% whereas return on net worth for FY 2021-2022 was 10.48%. Return on net worth is higher for the year ended 31^st March, 2023 due to increase in the profit after tax as compared to previous year.

DISCLOSURE IN ACCOUNTING TREATMENT

In the preparation of financial statements, no different treatment from that prescribed in applicable Accounting Standard has been followed.

		For and on behalf of the Board of
		Shree Pacetronix Limited
Date: 14/08/2023
Place: Pithampur
	Atul Kumar Sethi	Akash Sethi
	Managing Director	Joint Managing Director
	(DIN:00245685)	(DIN: 08176396)