Ajanta Pharma Ltd Management Discussions

Economic Overview and Outlook

As per the International Monetary Fund report published in April 2025, the global trade tariff tensions and extremely high levels of policy uncertainty are expected to have a significant impact on economic activity. Based on information as of April 4, global growth is projected to drop to 2.8% in 2025 and 3% in 2026—down from 3.3% for both years in the January 2025 update. This is also much below the historical (2000-19) average of 3.7%.

Growth in advanced economies is projected to be 1.4% in 2025. Growth in the United States is expected to slow to 1.8%.

Growth in the Euro area is expected to slow by 0.2% point to 0.8%.

In emerging markets and developing economies, growth is expected to slow down to 3.7% in 2025 and 3.9% in 2026, with significant downgrades for countries affected most by recent trade measures, such as China.

Intensifying downside risks dominate the outlook. Ratcheting up a trade war, along with even more elevated trade policy uncertainty, could further reduce near and long-term growth.

Pharmaceutical Sector Overview

Branded Generics: High-Growth Opportunity in Emerging Markets

As per market research firm Research and Markets, the global branded generics market is forecast to grow from USD 261 billion in 2024 to nearly USD 376 billion by 2030, at a CAGR of 6.2%.

Emerging economies are experiencing rapid growth in non- communicable diseases (NCDs) like diabetes and cardiovascular disorders, fuelling demand for reliable, affordable medicines. Demographic and Economic Trends indicates that large, ageing populations and rising incomes are increasing healthcare consumption in Asia, Africa, and Latin America. On the other hand, though regulatory hurdles persist, improving standards and harmonisation are gradually making it easier for guality-focused companies to expand branded generics portfolios.

The Indian pharmaceutical market (IPM) specifically continues to deliver robust growth. As per PharmaTrac, IPM grew by 8.4% during FY 2025, led by price (5.6%) and new launches (2.4%) growth, while volume growth remained weak at 0.4% YoY. The IPMs value now exceeds Rs 2.24 trillion, with projections indicating the market will expand near 2 times over the next six to seven years, fuelled by rising chronic disease prevalence, improved healthcare access, and government support for local manufacturing and R&D.

Branded Generics remain the backbone of the Indian market, accounting for nearly 87% of value. However, the market is becoming more competitive, with price- led growth outpacing volume, and increased substitution by trade generics.

US Generics Market: Growth and Business Potential

The US Generics market remains a cornerstone of the pharmaceutical landscape, accounting for approximately 90% of all prescriptions dispensed in 2024, as per IQVIA. Despite this dominance, the pace of generic uptake for newly off-patent drugs has moderated compared to the rapid adoption seen a decade ago, with recent years showing lower and slower generic penetration following exclusivity loss.

As per Precedence Research, the US Generics drugs market size was estimated at USD 139 billion in 2024 and is predicted to increase from USD 146 billion in 2025 to approximately USD 232 billion by 2034, expanding at a CAGR of 5.2% from 2025 to 2034. This growth is underpinned by factors like rising chronic disease burden, cost advantages generics offer, etc.

Company Overview

Ajanta Pharma is a specialty pharmaceuticals formulation company with a well-diversified Branded Generics business spread across India, Asia, and Africa as also US Generics and Institutional business in Africa. In Branded Generics business, the Company has a strong chronic- focused product portfolio led by a first-to-market strategy and front-end presence which helps it outgrow the market. The Company is committed to investing in R&D for product innovations to meet the unmet medical needs by filling identified gaps.

Performance Highlights

The following analysis and discussion are based on the consolidated financials of the Company for FY 2025. It covers different business verticals as well as the consolidated financial position.

Branded Generics

The growth for the year was fuelled by an excellent performance of our branded generic business, which contributed 74% of overall revenue. This business is spread across India, Asia & Africa. This business exhibits assurance, sustainability and scalability in the long term.

Management Discussion and Analysis

Branded Generics	FY25 Sales (Rscr.)	FY24 Sales (Rscr.)	Growth (%)
India	1,452	1,308	n%
Asia	1,191	1,057	13%
Africa	750	585	28%
Total	3,394	2,949	15%

It was a very eventful year for India business with many new initiatives:

1. Addition of two new therapies i.e. Gynaecology and Nephrology with 200 MRs.

2. Significant expansion in existing therapies with addition of 250+ new MRs after a long gap of 7+ years.

3. Acguisition of three brands in pain management.

In India, sales grew by 11% surpassing IPM growth rate of 8% as per IQVIA MAT March 2025. The 300-basis points outperformance of the IPM came on the back of 32 new product launches, including 8 first-to-market, and consistent growth in the existing products.

This also helped the Company to retain its 26^th rank in IPM.

Exhibit 2: Industry vs. Ajanta Pharma Growth IQVIA MAT March 2025

Particulars	Mar-25	Mar-24
Indian Pharma (Rs cr.)	Rs 233,261	Rs 216,092
Industry	8%	8%
APL	11%	9%
APL Rank	26	26
Ophthalmology (Rs cr.)	Rs 4,508	Rs 4,295
Industry	5%	9%
APL	6%	12%
APL Rank	2	2
Cardiology (Rs cr.)	Rs 30,054	Rs 26,947
Industry	12%	10%
APL	11%	4%
APL Rank	17	17
Dermatology (Rs cr.)	Rs 16,301	Rs 14,859
Industry	10%	6%
APL	14%	17%
APL Rank	16	15
Pain Management (Rs cr.)	Rs 18,541	Rs 17,226
Industry	8%	8%
APL	11%	12%
APL Rank	27	28

The Branded Generics business in Asia and Africa consists of more than eight major therapeutic segments and we hold the leading position in all our sub- therapeutic segments.

Basket of More than 220 Products

Ajantas Asia business extends across the Middle East, Southeast Asia, and Central Asia, covering nearly 10 countries. We are strategically strengthening this business through increased investments in both product and people to drive accelerated growth. We have significantly expanded our product portfolio in the region with the launch of 25 new products, primarily in chronic therapies. This business saw a growth of 13% in the year and

contributed 26% to total sales. The growth was well-diversified in terms of new product launches, besides volume growth of existing products.

Our Africa business achieved an outstanding growth of 28%, driven by a continued strategic focus on expanding our chronic therapies portfolio in the region and successful launch of 13 new products. These initiatives are steadily building a strong foundation for a more sustainable and scalable business in the years to come. This business contributed 16% in total sales in the year.

The growth in FY 2025 was higher on the low base of FY 2024.

The US Generics

The US Generics recorded 9% growth for the year and contributed

23% to total sales. This growth was soft as all five new product launches occurring in the second half of the year, limiting their ability to contribute to the full-year performance. We have 47 products on the shelf and 22 ANDAs are awaiting approvals. During the year, we filed 6 ANDAs, received 6 final approvals and launched 5 products.

Africa Institutional

This business consists of anti-malarial products being distributed through multilateral aid agencies, which saw degrowth of 41% due to lower procurement by agencies and contributed 3% to total sales. This business has become a very small part in our overall business.

Operational and Financial Performance

During FY 2025, we significantly enhanced capital allocation to the Branded Generics business with accelerated product filing and enhanced ground presence. We have maintained our margins. This has added surety, scalability, and sustainability to the business.

Particulars	FY 2025	% to RO	FY 2024	% to RO	% Growth
Revenue from Operations	4,648	-	4,209	-	10%
EBITDA	1,260	27%	1,172	28%	7%
Profit Before Tax	1,189	26%	1,114	26%	7%
Net Profit	920	20%	816	19%	13%
Total Comprehensive Income	922	HT>20%	817	19%	13%

Revenue from Operations

Revenue from operations stood at Rs 4,648 cr. in FY 2025 against Rs 4,209 cr. in FY 2024, registering a growth of 10%.

Material Costs

Material cost moved to 23% in FY 2025 from 25% in FY 2024, an improvement of 200 basis points on the back of change in business mix and ease in few API prices.

Employee Expenses

Personnel expenses accounted for 23% of the revenue from operations in FY 2025 against 21% in previous year. Total cost stood at Rs 1,090 cr. in FY 2025 against Rs 900 cr. in FY 2024. Higher increase in the cost is due to one-time charge of about Rs 30 cr. for change in gratuity policy and additions of medical representatives in India.

Other Expenses

Other expenses stood at Rs 1,228 cr. in FY 2025 (26% of revenue from operations) against Rs 1,070 cr. in FY 2024 (25% of revenue from operations), a 100 basis point increase over the previous year due to increased SG&A expenses towards addition of new therapies and marketing divisions in India business. R&D cost was at Rs 224 cr. in FY 2025 against Rs 208 cr. in

FY 2024, which accounted for 5% of revenue from operations.

With our continued focus on Branded Generics business, we have allocated higher resources on product registrations, promotions, and the launch of new products, resulting in higher marketing expenses.

Operating Profit Margin

EBITDA in FY 2025 stood at Rs 1,260 cr. against Rs 1,172 cr. in FY 2024, a growth of 7% over the previous year. This positive performance was attributed to the combined benefits of contribution of business product mix and improvement in gross margins. EBITDA as % to revenue stood at 27%, which is among the best in the industry. We expect this to now remain at this level or see small improvement in coming years.

Other Income

Other Income stood at Rs 94 cr. in FY 2025 against Rs 85 cr. in FY 2024. Major component in both the years was the forex gain.

Net Profit Margin

Profit After Tax was at Rs 920 cr. in FY 2025 against Rs 816 cr. in FY 2024. PAT margins stood at 20% in FY 2025 against 19% in FY 2024.

Return on Net Worth

Return on Net Worth improved to 25% in FY 2025 against 23% in the previous year.

Return on Capital Employed

Return on Capital Employed stood at 32% in FY 2025 compared to 31% in FY 2024.

Balance Sheet

Non-current Assets

The non-current assets have gone up to Rs 2,172 or. in FY 2025 from Rs 1,907 or. in FY 2024. Our Capex was Rs 318 or. for the year from maintenance capex including new liguid plant at Pithampur, new office in Andheri and brand acguisition cost. The Capex including maintenance Capex for FY 2026 is estimated to be about Rs 300 cr.

Current Assets

Current Assets stood at Rs 2,843 cr. in FY 2025 against Rs 2,731 cr. in FY 2024. Receivables days saw significant improvement to 94 days from 109 in FY 2024 due to higher contribution from branded generics and factoring of few receivables. The absolute amount stood at Rs 1,183 cr. against Rs 1,247 cr. in FY 2024.

Inventory in terms of the number of days to sales has improved to 72 days in FY 2025 from 73 days in FY 2024 due to the easing of the supply chain. In absolute amounts, it has marginally increased to Rs 904 cr. in FY 2025 from Rs 828 cr. in FY 2024. Current Ratio for FY 2025 stood at 2.85 against 3.05 in FY 2024.

Shareholders Funds

Shareholders funds increased to Rs 3,790 cr. in FY 2025 from Rs 3,567 cr. in FY 2024. Earnings per share stood at Rs 74 in FY 2025 against Rs 65 in FY 2024. During the year, the Company paid Rs 701 cr. against Rs 642 cr. in FY 2024 through a combination of dividend and share buyback (including tax).

Non-current Liabilities

Non-current liabilities in FY 2025 stood at Rs 229 cr. against Rs 175 cr. in FY 2024, mainly consisting of deferred tax and lease liabilities. Increase in FY 2025 was mainly for change in gratuity policy and higher provision towards it.

Current Liabilities

Current liability stood at Rs 996 cr. in FY 2025 against Rs 896 cr. in FY 2024. Trade payable days reduced from 85 in FY 2024 to 75 in FY 2025.

Our strong balance sheet combined with a focus on cash conservation provides us the confidence that we will continue with our consistent performance.

Consolidated Cash Flow

The Company had a healthy cash flow during FY 2025; the snapshot of this is in Exhibit 6.

Exhibit 6

Particulars	FY 2025	FY 2024
Opening Cash and Cash Equivalents	129	330
Cash flows from:
a) Operating Activities	1,157	785
b) Investing Activities	(377)	65
c) Financing Activities	(734)	(1,051)
Closing Cash and Cash Equivalents	175	129

Empowered Team

We have moved into our world- class corporate head office Ajanta Tower at the heart of Mumbais one of the most bustling business districts Andheri East.

Our new head office is designed to nurture talent with advanced training infrastructure and foster collaboration with designated break out spaces. Also, it boasts of the best-in-class employee facilities with canteen, gymnasium, recreational zones to attract high guality talent in the industry.

Your Companys Human Resource Development efforts continue to shape Ajanta as a preferred place to work. These efforts were once again recognised with the Great Place to Work certification for the third consecutive year. Our people practices are now benchmarked globally. These include structured skill development, personality enhancement, and employee engagement through internal communication. Together, they contribute to a work environment that is positive and enabling.

Ajantaites are empowered to take ownership and deliver impact.

The Companys culture is anchored in four core values: Excellence, Transparency, Integrity, and Discipline. These principles guide over 11,000 employees in fulfilling the mission of delivering life-saving medicines to those in need.

The Company is committed to maintaining a safe, secure, and healthy workplace. Workforce productivity and performance are consistently reviewed to stay ahead of internal and industry benchmarks. Professional goals for individuals and teams are closely aligned with organisational objectives. This alignment ensures a clear sense of direction and reinforces purpose at every level.

Human resource initiatives focus on building an inclusive culture grounded in respect and fairness. Capability development, career progression, and safeguarding human rights remain key priorities. Creating a safe work environment is central to these efforts.

The Company supports the capabilities of differently abled employees and provides egual opportunities for contribution.

A zero-tolerance policy towards discrimination is strictly followed. The Occupational Health and Safety (OHS) framework across manufacturing facilities ensures that employees operate in a safe and compliant setting.

Risk Management

The risk management philosophy at Ajanta stems from the set of principles and framework embedded in our values for sustainable growth which prompts us to scale our business very responsibly. This keeps us prudent in capital allocation, thoughtful in our choice for markets and products, and conscious of impact we have on mother earth. Also, it keeps us very mindful of our own business practices to mitigate any known or unknown risks.

The business environment has always been dynamic and continuously shifting. But in the current environment of tariff- tensions, it is becoming more uncertain and complicated.

We operate across more than 30 highly regulated countries, each with its own intricate and unigue operational challenges.

This gives rise to a wide array of risks, which we proactively track, evaluate, and address through our comprehensive Enterprise Risk Management (ERM) framework. Through effective risk identification, analysis, and mitigation, we aim

to build resilience, support long-term growth, and optimise value creation.

Our ERM process involves collaboration with functional leaders to recognise both internal and external events that could negatively affect the Companys goals. It also includes ongoing surveillance of changes in internal and external contexts that could lead to new risks or threats. The key risks identified include regulatory compliance, currency risks, market competition, supply chain vulnerabilities, cybersecurity and data protection, macroeconomic and geopolitical factors, third-party risks and Environmental, Social, and Governance (ESG) concerns. The Risk Management Committee conducts an annual review of our risk management policy. Our ERM framework is vital in protecting the interests of the Company, its shareholders, and all stakeholders.

Internal Controls and Adequacy

Company has established a strong and dependable internal control system, as we consider it fundamental to sound governance. The internal control framework is structured to consistently evaluate the sufficiency, efficiency, and effectiveness of these controls. Management remains dedicated to maintaining an internal control environment appropriate to the scale and complexity of our operations. This ensures adherence to internal protocols, applicable laws and regulations, accuracy in record-keeping, efficient operations, safeguarding of assets and resources, and overall risk mitigation. The controls are designed to offer reasonable assurance.

The present system of Internal Financial Controls (IFC) complies with the Companies Act, 2013 and aligns with internationally recognised risk-based frameworks. Our Internal Audit (IA) function reports through CFO to the Chairperson of the Audit Committee, thereby preserving its independence and objectivity.

A specialised internal audit team, supported by external audit firms, works to safeguard and enhance organisational value by offering risk-based, impartial assurance, guidance, and insight.

The annual internal audit plan is developed from a well-defined Audit Universe, which includes all business areas, functions, risks, compliance needs, and control maturity levels. This plan is reviewed and approved by the Audit Committee at the start of each financial year. Every quarter, the Audit Committee is updated on significant control matters and the status of action taken on previous findings. The Committee engages with management, reviews the existing systems, and consults both internal and statutory auditors to understand their perspectives on the control environment.

The Company acknowledges that all internal control systems come with certain inherent limitations and therefore conducts periodic audits and evaluations to ensure continuous improvement and timely updates to these systems.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, and expectations may be forward-looking statements. Actual results may differ materially from those expressed or implied due to various risks and uncertainties. Important factors that could make a difference to the Companys operations include global and Indian demand-supply conditions, finished goods prices, changes in government regulations and policies, tax regimes, economic conditions within India and the countries within which the Company conducts business and other such factors. The Company does not undertake to update these statements.