3B Blackbio DX Ltd Management Discussions

Economic Overview

Global economy has experienced three major events since 2020

• Pandemic leading to contraction of global output

• Geo-political development in Eastern Europe, Middle East Countries and APAC resulting in a worldwide surge of inflation

• Action by Central banks across economies to curb inflation through interest rate hikes

Domestic Economy - India continues to solidify its position as the fastest-growing major economy globally. The nations economic recovery from the pandemic has been both swift and substantial, with the fiscal year 2022-23 witnessing an accelerated expansion. According to the Reserve Bank of India (RBI) reports, the Indian economy grew at a robust rate of 7.6% during the 2023-24 financial year (April 2023 to March 2024), up from 7.0% in the previous year. This marks the third consecutive year of growth exceeding 7%.

This impressive performance is underpinned by strong investment demand, supported by the healthy financial conditions of banks and corporations, a government emphasis on capital expenditure, and prudent monetary, regulatory, and fiscal policies. Notably, the resilience of the Indian economy has been evident in the rebound of private consumption, which has successfully replaced export-driven stimuli as the primary growth driver. This increase in private consumption has also spurred production activity, leading to higher capacity utilization across various sectors.

The resurgence in consumption has been significantly aided by the near-universal vaccination coverage administered by the government, which has effectively facilitated the return of economic activity. Despite these advancements, the economy has faced the challenge of managing inflation. The Central Bank has implemented various policy measures to address inflationary pressures, reflecting the underlying strength and adaptability of the Indian economic framework.

Overall, the continued robust growth rate highlights the solid fundamentals of Indias economy and its capacity to maintain its leading position among major economies worldwide.

1. Industry Structure and Developments

Agrochemical

The Indian agrochemicals market is poised for significant growth, expected to increase from USD 7.90 billion in 2023 to USD 12.58 billion by 2028, representing a CAGR of 9.75% during the forecast period. This growth is driven by the rising population and increasing affluence, which are shifting consumption patterns and amplifying the demand for both higher agricultural production and nutritional quality. Challenges such as shrinking arable land and crop losses due to pest attacks are critical issues that the agrochemical industry helps address by enhancing agricultural output.

Pesticides continue to dominate the agrochemicals segment, with emerging trends including price premiums and innovative, eco-friendly production methods. There is a growing emphasis on balancing the effective use of chemicals with minimizing their environmental impact. The Central Governments focus on promoting sustainable agricultural practices is driving an increased adoption of biopesticides, which now represent 15% of the market.

According to the Federation of Indian Chambers of Commerce and Industry, the Indian government has identified the agrochemical industry as a key sector for global leadership, with a projected growth rate of 810% through 2025. This recognition underscores the sectors potential and supports its anticipated growth throughout the forecast period.

The sales in agrochemicals division increased by over 14% with Rs.1,368.51 Lakh in FY 2023-24 compared to Rs.1,199.76 Lakh in FY 2022-23 due to increase in export sales.

The companys agrochemicals division maintains a steadfast commitment to government procurement, primarily facilitated through electronic tenders on platforms such as GeM. Additionally, the division diligently endeavors to expand its customer base into previously untapped regions. Presently, the Agro business operates with minimal debt, consistent with prior projections. Sales within the agrochemical sector remain stable. Furthermore, the company is intensifying efforts to enhance brand recognition for its offerings in micro fertilizers, bio fertilizers, and public health products.

Molecular Diagnostics

According to the various reports, Indias Molecular Diagnostics Market is projected to grow at a CAGR of 8.15% - 8.50% during the forecast period from 2025 to 2032. This robust growth can be attributed to several factors, including the increasing prevalence of infectious diseases, increasing cancer and genetic disorders, rising awareness and acceptance of personalized medicine and companion diagnostics, and significant advancements in molecular techniques. Additionally, improvements in healthcare infrastructure, increased healthcare expenditure, and growing demand for early and accurate disease diagnosis are also stimulating market growth. Government initiatives promoting precision medicine and genetic testing further contribute to the markets expansion.

The field of molecular diagnostics is evolving rapidly, with significant technological advancements enhancing diagnostic accuracy and efficiency. Techniques such as polymerase chain reaction (PCR) and next-generation sequencing (NGS) are at the forefront of this transformation. PCR, known for its sensitivity and specificity, is widely used for detecting infectious agents and genetic mutations. NGS allows for comprehensive genetic analysis, enabling the detection of mutations and variations associated with various diseases, including cancers and inherited disorders.

Overall, the molecular diagnostics field is undergoing rapid evolution, characterized by technological advancements and an expanding range of applications. The sectors growth is supported by a confluence of factors including disease prevalence, technological innovation, increased healthcare investment, and supportive government policies. As these trends continue, the market for molecular diagnostics in India is set to achieve significant growth, reflecting its critical role in modern healthcare.

The diagnostics division of your company is engaged in Design, Development Manufacturing and Commercialization of qPCR tests, Rapid tests, NGS based Molecular Diagnostic Kits and Extraction Kits for reliable testing on patient samples.

With the largest range of Indian IVD and CE-IVD products in the molecular diagnostics segment and our growing portfolio, we are considered as one of the leading molecular diagnostic kit manufacturers not only in India but also in the international markets.

In the molecular diagnostics division, our sales have been increasing at a rate of 25%-30% as evident in the numbers below. We have been consistently growing in our Non-COVID sales for the past four (4) years.

Sales: 3B BlackBio Dx Limited - Standalone - Diagnostic Business (Non-COVID)* *Sales for FY 2020-21 have not been considered as it was COVID Year.

However, the total sales including COVID for the Molecular Diagnostics division was Rs.6,085.20 Lakh in FY 2023-24 against Rs.5,051.61 Lakh in FY 2022-23 (including sales from the UK subsidiary - TRUPCR? Europe Limited).

International Business / Exports

TRUPCR? assays have garnered widespread acceptance in more than 60 countries spanning the UK, Europe, the Middle East, APAC, LATAM, and North America (including the United States and Canada). Efforts are underway to continuously enhance our global presence by appointing new channel partners in various countries, thereby augmenting our international reach.

Product registrations have been successfully completed in several countries, with ongoing processes in many others to comply with respective medical devices regulations. These registrations facilitate streamlined market access and preference in the identified regions.

Participation in the international tenders, both independently and through our distributors, has resulted in securing annual rate contracts for our assays in select markets across the Middle East, Southeast Asia, and Europe. These contracts fortify our market position and contribute to the overall value of our business on a global scale. Moreover, ongoing discussions with prominent international distributors for various projects are underway, with anticipated materialization in the fiscal year 2024-25.

Concurrently, efforts to expand our footprint into previously unexplored markets through targeted marketing initiatives are expected to yield tangible results in the upcoming financial year. Thanks to our persistent efforts, we are experiencing significant traction in the Middle East market, evidenced by a consistent influx of orders from prominent countries. This positive reception underscores the effectiveness of our strategies in penetrating and establishing a strong presence in this region.

We are exploring partnerships in the untapped markets which demonstrates a forward-thinking approach to expanding our footprint and capturing new opportunities. Overall, our efforts are well-planned and strategic that will help in positioning our company for continued success in the global market.

Our export business, particularly in non-COVID sales, has increased by over 25% from the previous fiscal year. This growth aligns well with our expected growth rate, indicating the effectiveness of our strategies and market initiatives.

Sales: Export - 3B BlackBio Dx Limited - Standalone - Diagnostic Business (Non-COVID)* PERFORMANCE OF THE UK SUBSIDIARY

Our UK Subsidiary, TRUPCR? Europe Limited growth to over 50% of revenue is a significant milestone, especially when its driven by successful expansion efforts in new markets. Our UK team has been proactive and strategic in their approach to European expansion.

The revenue growth over the past year is a tangible validation of our continuous efforts. Its evident that the strategic investments and focus on enhancing operations are yielding positive results. With this momentum, theres certainly potential for even greater success in the coming calendar year.

RAPID KIT VERTICAL (LATERAL FLOW TECHNOLOGY)

The Rapid Kit manufacturing plant is ready & we are optimizing the products in R&D which have market the potential, other than the COVID Testing Kits. We have received the CDSCO approval for Rapid Tests for detection of Anti-Microbial Resistance, Dengue NS1 and Dengue IgG/IgM. We will keep on adding products as and when they are ready from the R&D.

NEXT-GEN SEQUENCING (NGS) VERTICAL

The company has started reviving the NGS vertical by revalidations and also developing more parameters, keeping in mind the global markets.

We launched our NGS based "TRUNGS? Solid Tumor Panel" for detection of SNVs, Indels, CNVs and RNA fusions in 35 marker genes and hotspots in 6 pharmocogenomics genes associated with solid tumors such as lung, gastro-intestinal/colorectal, breast, liver and ovarian tumors. We have added a few more products in this portfolio which includes PAN-MYELOID NGS Panel, BRCA Plus Kit & Endometrial Cancer Panel.

DIGITAL PCR (NEW R&D)

Continuing our journey for R&D, our team has been working on the development of assays based on Digital PCR (dPCR) technology which enables absolute quantification of target nucleic acids.

By leveraging the capabilities of dPCR technology, our R&D team has the opportunity to develop innovative assays that address key challenges in healthcare & biotechnology. This could lead to the development of valuable diagnostic tools with significant impact on disease detection, treatment monitoring, and research advancements.

We are hopeful to launch the TRUdPCR (digital PCR) assays in Q3 of FY 2024-25.

SUMMARY

The company has become a market leader in India in the molecular diagnostic segment. The consolidated revenue of the company stands at ^7,412.47 Lakh in the FY 2023-24 against ^6,183.60 Lakh in the FY 202425.

2. Outlook & Opportunities

The field of molecular diagnostics is evolving rapidly, with significant technological advancements enhancing diagnostic accuracy and efficiency. Techniques such as polymerase chain reaction (PCR) and next-generation sequencing (NGS) are at the forefront of this transformation. PCR, known for its sensitivity and specificity, is widely used for detecting infectious agents and genetic mutations. NGS allows for comprehensive genetic analysis, enabling the detection of mutations and variations associated with various diseases, including cancers and inherited disorders.

Currently, the molecular diagnostic market is dominated by multinationals and highly metro centric. But with the launch of economical indigenous kits and putting of new PCR diagnostic centres in smaller towns, the reach to people will increase along with awareness, which will spark huge growth potential in coming year. The company has scaled up well and its diagnostics kits of several parameters are in good demand among the customers. The company is expanding further into new molecular diagnostic technologies which are the need of the current market scenario.

3. Discussion on Financial Performance with Respect to Operational Performance / Segment-Wise or Product-Wise Performance

The company has become a market leader in India in the molecular diagnostic segment. The consolidated revenue of the company stands at ^7,412.47 Lakh in the FY 2023-24 against ^6,183.60 Lakh in the FY 202223. The EBITDA stand at ^4,551.38 Lakh in the FY 2023-24 against ^3,637.09 Lakh and PAT stand at ^3,210.12 Lakh against ^2,593.70 Lakh.

Financial Performance (Standalone)

Financial Performance (Consolidated)

*Net of GST

4. Risk and concerns

Development of Molecular Diagnostic Market is a slow process, as it requires investments to create new set ups / convince existing customers with free samples to switch their suppliers and brand establishing by word of mouth. Thus, one needs to exist for a long time period in this market to reap the rewards.

The agrochemical industry is depended on monsoon and pest attack. With global warming weather pattern is becoming unpredictable, which is a risk.

5. Threats

6. Internal Control Systems and their Adequacy

The company has an elaborate system of internal controls to ensure optimal utilization of companys resources and protection thereof, facilitating accurate and speedy compilation of accounts and management information reports and compliance with laws and regulations. The company has a well-defined organization structure, authority levels and internal guidelines and rules for conducting business transactions. The internal Auditors and companys internal audit department conduct regular audits to ensure adequacy of internal control system, adherence to management instruction and compliance with laws and regulations of the country as well as to suggest improvements.

7. Human Resources

The Company firmly believes that Human Resources and knowledge capital are vital for business success and creating value for stakeholders. The Company recognizes the fact that people drive business success, strengthening its efforts to build leadership at all levels. It emphasizes on the freedom to express views, competitive pay structure, performance-based reward system and growth opportunities and internal job opportunities, critical assignments within the organization for career options for the employees. The industrial relations at both the units have remained quite cordial with total dedicated efforts from employees.

The total number of employees as on 31st March 2024 was 76.

8. Details of Significant Changes (i.e., Change of 25% or More as Compared to the Immediately Previous Financial Year) in Key Financial Ratios, along with Detailed Explanations therefore, including

9. Details of any Change in Return on Net Worth as Compared to the Immediately Previous Financial Year along with a Detailed Explanation thereof

10. Cautionary Statement

The Management Discussion and Analysis report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors.