Akums Drugs & Pharmaceuticals Ltd Management Discussions

Economic Overview

Global Economic Review 1

The global economy exhibited resilience despite early concerns about a potential recession driven by supply chain issues, geopolitical tensions in the West and inflationary pressures, achieving a growth rate of 3.3% in CY 2024. In CY 2024, emerging markets and developing economies grew faster than advanced economies with a growth rate of 4.3% and 1.8% respectively. This expansion in global economic activity was supported by a decline in global inflation, which fell from 6.8% in CY 2023 to 5.7% in CY 2024.

Thedeclineininflationwaslargelyattributedtotheimplementation of stringent monetary policies by central banks and an expansion in energy supply, both of which played a crucial role in stabilising price levels and sustaining economic growth. Despite concerns over potential stagflation and recession, economic activity maintained a steady pace of expansion, supported by robust government expenditure and resilient household consumption.

The United States (US) economy has demonstrated surprising resilience amid global disinflation trends. Emerging markets have also demonstrated strength as they navigated a complex and challenging economic landscape. The US Federal Reserve has implemented a series of interest rate cuts to further stimulate economic growth. By reducing borrowing costs, these measures aim to enhance consumer spending, boost business investments and sustain economic momentum.

In the forthcoming years, the global economic outlook remains positive as central banks transition toward more expansionary monetary policies and inflationary pressures continue to subside across various regions. Global GDP growth is projected to stabilise at 2.8% in CY 2025 and 3.0% in CY 2026, signalling a gradual economic recovery despite persistent geopolitical challenges. The emerging markets and developing economies are expected to increase by 3.7% in CY 2025 while the advanced economies are projected to grow by 1.4% during the same period. Moreover, emerging economies such as the Philippines and South Africa are set for strong growth, driven by sectoral strengths and rising consumption. The projected growth in the global economy will be supported by the declining global inflation level to 4.3% in CY 2025 and 3.6% in CY 2026. Moreover, as per the expectations, the global inflation level is anticipated to meet its target level faster in advanced economies than in the emerging market and developing economies.

The anticipated easing of monetary policies is expected to create a more favourable environment for sustained economic expansion. While challenges persist—particularly geopolitical tensions and structural constraints in key emerging markets such as China—the overall outlook indicates that sustained government initiatives and a commitment to medium-term fiscal consolidation will play an important role in fostering a stable and inclusive growth trajectory.

Further to this, the international trade is anticipated to remain positive and grow by 3.2% in CY 2025 driven by healthy exports of both manufactured goods and services from the Asian economies. The global inflation level is anticipated to decrease further to 4.3% in CY 2025, offering a favourable business environment globally.²

Indian Economic Review

Indias economy continues to be the fastest-growing major economy, with an estimated 6.5% GDP expansion in FY 2024-25³. The growth in the domestic economic activity was supported by declining inflation level from 5.4% in FY 2023-24⁴ to 5.2% in FY 2024-25. This resilience stems from strategic government policies, strong private consumption and rising investments. Along with this, there has been a significant rise in private final consumption within the economy, accompanied by a strong increase in adoption of e-commerce among individuals.

The governments focus on fostering a business-friendly environment, particularly through increased foreign direct investment (FDI) in manufacturing, has further propelled growth. In FY 2025, India attracted USD 81.04 billion in FDI, marking a increase from FY 2024, with key beneficiaries including manufacturing and retail.

The ‘China+1 strategy, ‘Make in India and targeted policy interventions played a pivotal role in driving domestic manufacturing activity throughout the year. The expansion of manufacturing not only strengthened core industries but also had a ripple effect on niche sectors such as pharmaceuticals.

To further accelerate growth, the Indian government strategically implemented the Production-Linked Incentive (PLI) scheme, allocating INR 15,000 crore to support domestic manufacturers. This initiative aimed to enhance financial backing, diversify pharmaceutical production portfolios and upgrade manufacturing facilities, reinforcing Indias position as a global manufacturing hub⁵.

The Indian economy is expected to sustain positive growth in the coming years, driven by strong investment activities and increased public expenditure by the government. As per IMF, India has surpassed Japan to become the worlds fourth-largest economy. India is now positioned to displace Germany to become the third-largest economy by FY 2028. Furthermore, India is closely observing the evolving global tariff scenario, while crafting a calibrated response.

Akums has entered into a Memorandum of Understanding with The Government of Republic of Zambia through Ministry of Health situated at Ndeke House, in Lusaka Province for Local Manufacturing of medicines and to recognise the existing collaboration between the Zambian Government and Akums in the field of medicines and medical supplies and to strengthen collaboration between the entities. Further to this, Akums and Zambia Government is working on signing of the definitive agreement to set up a manufacturing facility at Zambia.

Key Performance of the Company in FY 2024-25

Received a patent for its room temperature stable oral suspension of Hydroxyurea to manage sickle cell disease

Received exclusive rights for manufacture and market products innovated by Triple Hair Inc. Commercial production of the new injectable facility in Haridwar

Signed memorandum of understanding (MoU) with the Government of Zambia for local manufacturing of medicines

Received exclusive rights for manufacture and market products innovated by Caregen Co. Ltd., a leading South Korean company in Nutraceuticals segment

Entered into an agreement with one of the leading global pharmaceutical companies for the manufacture and supply of selected pharmaceutical formulations in the European market, with a composite value of approximately 200 million Euro

Key Strengths

Varied clientele

The diversified client base of the Company consists of pharmaceutical companies, nutraceutical companies, wellness companies, healthcare providers as well as central and the state government. This benefits the Company by supporting its sustainable growth and minimising its reliance on a single industry.

Rapidly growing R&D capabilities

With a strong leadership position in the Indian CDMO industry, the Company offers differentiated products and services. This is strongly supported by the Companys consistency in improving its R&D and innovation facilities.

IPO Listing: A Landmark Moment for Akums

On the 6^th of August 2024, Akums Drugs and Pharmaceuticals was listed on NSE India Limited and BSE Limited, with a fresh issue of 1,00,14,727 shares and face value of INR 2 per share. The price band for the IPO was set within the range of INR 646 to INR 679 per share. The Company raised INR 6800 Million as fresh issue portion through this listing, aiming to support the Companys inorganic growth and repayment of debts.

Pharmaceutical Industry

Global Pharmaceutical Industry

Fuelled by increased consumer spending and the stabilisation of inflation levels in the US and European Union (EU), CY 2024 has proven to be a pivotal year for the global pharmaceutical industry. This resurgence was marked by the resumption of clinical trials, driven by the heightened demand for safe and effective pharmaceutical solutions. Despite the persistent volatility in the global economic landscape, the industry effectively navigated challenges, including escalating geopolitical tensions, rising inflation and supply chain disruptions. The global pharmaceutical market reached a size of USD 1,763.90 billion in CY 2024⁹.

Throughout the reporting year, the global pharmaceutical industry placed a strong emphasis on the development of innovative therapies, thereby enhancing the solutions provided to patients. Strategic collaborations between pharmaceutical companies and regulatory bodies played a crucial role in fostering sustainable growth within the industry.

The global pharmaceutical market is projected to reach a size of USD 1,922 billion by CY 2028⁷. The Asia Pacific region is expected to lead the generic drug market, followed by Europe, North America, Latin America, Africa and the Middle East. The continued digital transformation of the industry will further drive productivity, enabling enhanced data collection and supporting more informed decision-making. As the industry continues to expand, key players are expected to prioritise the enhancement of their market presence, resulting in a significant increase in mergers and acquisitions activities in the coming years.

Indian Pharmaceutical Industry

The Indian pharmaceutical industry is globally regarded as the ‘Pharmacy of the World for its ability to meet the global demand for vaccines and essential medicines. It is ranked as the 13^th largest pharmaceutical industry by value and the third largest by volume, globally. Additionally, the sector accounts for 60% of the worlds vaccines and it supplies more than 20% of the global generic medicines industry⁸. Over time, the industry has significantly enhanced its innovative capabilities, reinforcing its role as a key player in the international pharmaceutical market. In the reporting year, there was a marked increase in research and development activities among leading pharmaceutical companies, underscoring the sectors continued advancement and contribution to global healthcare.

Further to this, the growth was principally fuelled by an increased demand across both Tier 1 cities and rural markets, reflecting the expanding reach and accessibility of pharmaceutical products throughout the country. Since the pharmaceutical sector is regulated, every stage of the process—from medicine production to marketing—is regulated to guarantee that patients have access to safe and efficient products.

The R&D activities undertaken by the industry have had a significant positive impact on the overall growth and revenue generation during the reporting year. By leveraging cost-effective R&D initiatives, the industry has enabled key pharmaceutical players to optimise their operational costs. Moreover, collaborations and partnerships between Indian companies and global industry leaders have played a significant role in supporting the R&D efforts throughout the year, enhancing innovation and strengthening the industrys competitive position.

The Indian industry witnessed healthy foreign direct investment, amalgamation and collaboration. Additionally, the number of Abbreviated New Drug Applications (ANDA) to the United States Food and Drug Administration (US FDA) increased over the years. Presently, India has the largest number of US FDA approved manufacturing sites. This significantly boosts the global confidence in Indian manufactured drugs and pharmaceutical products.

In addition, the domestic pharmaceutical industry has emerged as one of the preferred sectors for global investors. Recognising this potential, the Indian government has permitted 100% foreign direct investment (FDI) through the automatic route, further facilitating investment and fostering growth within the sector.

In the coming years, the Indian pharmaceutical industry is projected to experience significant growth, with an expected market size of USD 130 billion by 2030⁹. The forecasted growth of the industry is expected to be driven by strong support from the Indian government, coupled with expanded collaborations with public and private research institutions. Further to this, the volume of clinical trials is projected to increase, with the clinical trials market forecast to attain a value of USD 3.37 billion, representing a compound annual growth rate (CAGR) of 8.6% from 2025 to 2030.⁷ Additionally, the sector is expected to witness a rise in investments in APIs, which is likely to further bolster exports in the coming years.

Contract Development and Manufacturing Organisation (CDMO)

Global CDMO

The CDMO sector plays a pivotal role in facilitating drug development and clinical trial activities. In CY24, the global CDMO industry reached a market size of USD 184.90 billion, with the Asia Pacific region making a substantial contribution to the industrys growth¹⁰. Moreover, the API segment accounted for the largest share in the CDMO in CY24.

The growth of the CDMO industry is driven by the enhancement of pharmaceutical manufacturing standards, the introduction of new therapies and the rising demand for personalised medicines. Additionally, CDMOs have adopted sustainable manufacturing practices and implemented automation to further enhance productivity and operational efficiency.

The pharmaceutical CDMO sector is projected to reach a market size of USD 368.70 billion by 2034, reflecting a CAGR of 7.2% from 2024 to 2034. Furthermore, the Finished Dosage Formulation (FDF) development segment is projected to grow at a CAGR of 7.9% from 2024 to 2034¹¹. From a regional perspective, North America is expected to emerge as the fastest-growing market in the coming years, driven by its well-established pharmaceutical industry and advanced infrastructure.

Indian CDMO

The Indian CDMO industry has achieved notable success, making it a preferred destination among global pharmaceutical players seeking outsourcing services. The Indian industry is well known for its ability to produce high-quality generics. Its growth can be attributed to rising demand for generic drugs and biosimilars, as well as the increasing tendency among pharmaceutical companies to outsource manufacturing activities. Cost-efficient manufacturing capabilities, skilled workforce and robust pharmaceutical infrastructure have also driven the growth in the Indian CDMO industry. Along with this, Indias strong position for the production of generic drugs has also enabled the growth in the Indian CDMO industry. It is necessary for the pharmaceutical manufacturers to abide by the provisions of Schedule M of DCR as prescribed by GMP guidelines in compliance with the international GMP standards of the World Health Organisation (WHO-GMP). This has positively affected the contract manufacturing activities between Indian and foreign players in the industry. Furthermore, the contract manufacturing services lead the CDMO industry in India because of the capability for large-scale production of pharmaceutical products. During the reporting year, there existed a trend where the Indian CDMO players heavily invested in technological advancements such as continuous manufacturing and bioprocessing. The presence of both established and emerging players in the CDMO industry makes it heavily competitive. Moreover, strategic partnerships and mergers have further increased the competition in the industry.

Shifting geopolitical dynamics have led major economies, such as the US, to seek alternatives beyond China for diversifying the pharmaceutical supply chain and benefitting the Indian CDMO industry. Along with this, the increasing global demand for biologics is anticipated to offer the Indian CDMO with growth opportunities. The contract manufacturing services are projected to grow at a CAGR of 14.6 % through 2031 supported by cost efficiency, high-quality production and increased global outsourcing¹². Additionally, the expansion of CDMO activities in India will be further supported by various initiatives undertaken by the Indian government to strengthen manufacturing capabilities within the pharmaceutical sector.

CDMO

The CDMO is the flagship business of Akums and it contributes three-fourths of the groups revenue. In the reporting year, the Company operated 13 manufacturing plants to assist its CDMO manufacturing activities.

Branded Formulations

Akums market has a wide range of branded formulations, including gynaecology, cardiology and paediatrics. In the reporting year, the Company sold its brands with the help of well-established domestic marketing strategies and a robust distribution network.

Generic Formulations

Akums, through its several wholly-owned subsidiaries, provides generic products through trade channel. The focus is on supplying affordable, high-quality products to PAN India network of distributors.

Export of pharmaceutical formulations – Akums

With the help of its dedicated export marketing Company, Akums markets its products to more than 70 countries across a range of dosage and therapeutic areas.

API

Akums has a long expertise in safely manufacturing high-quality APIs to meet the specific needs of its customers. Over the years, the Company has made significant investments to enhance the manufacturing facilities that adhere to the global regulatory standards, to assist in the Companys API manufacturing activities.

Key Financial Highlights

S. No. Financial KPIs	Unit	Year ended 31-Mar-25	31-Mar-24	Note reference
(a) Revenue from operations	(INR in million)	41,181.58	41,781.82
(b) EBITDA	(INR in million)	5,018.98	1,570.10	Note 1
(c) EBIT	INR ( in million)	3,485.35	313.70	Note 2
(d) EBIT margin	%	8.36%	0.74%	Note 3
(e) Profit for the year	INR ( in million)	2,203.30	7.90
(f) Segment results before depreciation	INR ( in million)
- CDMO		4,181.64	4,866.92
- API		-428.02	-455.14
- Branded & Generic Formulations		970.61	590.58
(g) Segment results before depreciation margin	%			Note 4
- CDMO		13.03%	14.90%
- API		-19.52%	-21.42%
- Branded & generic formulations		14.05%	8.45%
(h) Adjusted EBITDA#	(INR in million)	4,980.31	5,147.84	Note 5
(i) Adjusted EBIT#	(INR in million)	3,446.68	3,891.44	Note 6

Key Financial Highlights

S. No.	Financial KPIs	Unit	Year ended 31-Mar-25	31-Mar-24	Note reference
(a)	Fixed asset turnover ratio	Times	2.95	3.30	Note 7
(b)	Debt-equity ratio	Times	0.00	0.69	Note 8
(c)	Return on equity	%	7.40%	0.11%	Note 9
(d)	Return on capital employed	%	14.45%	3.37%	Note 10
(e)	Adjusted Return on equity#	%	7.27%	17.19%	Note 11
(f)	Adjusted Return on Capital employed#	%	14.29%	16.94%	Note 12
(g)	Adjusted EBITDA margin	%	11.9%	12.2%	Note 13
(h)	Adjusted EBIT margin	%	8.27%	9.24%	Note 14
(i)	EBITDA margin	%	12.04%	3.73%	Note 15
(j)	Profit after tax margin	%	5.28%	0.02%	Note 16

# Calculated without considering the computation of fair value of the put option liability. The Put option liability arose as a result of buyback obligation on account of certain exit rights granted to Ruby QC Investment Holdings Pte. Ltd. by our Company, under the shareholder agreement, dated October 3, 2019, entered among our Company and the Promoters. This put option liability or the buyback obligation is recognised as a financial liability and is re-measured at each accounting date and has been recognized as fair value changes to the financial instrument in the Consolidated Financial Information in accordance with Ind AS 109 "Financial Instruments applicable to our Company. On May 29, 2024, Ruby QC Investment Holdings Pte. Ltd. waived its exit right, which required our Company to buy back the Equity Shares held by Ruby QC Investment Holdings Pte. Ltd., or any portion thereof, in accordance with applicable law.

Notes:

(1) EBITDA refers to sum of EBIT and depreciation and amortization expense.

(2) EBIT refers to earnings before interest and tax, calculated as the sum of restated profit/(loss) before share of profit/(loss) of associates and exceptional items for the year and finance costs.

(3) EBIT margin is calculated as EBIT divided by total income.

(4) Segment results before depreciation margin is calculated as segment results before depreciation from each segment divided by revenue from operations from that segment.

(5) Adjusted EBITDA is calculated as the sum of restated profit for the year, tax expenses, finance costs, depreciation and amortization expense, fair value changes to financial instruments, share of profit/ (loss) of associates and exceptional items.

(6) Adjusted EBIT is calculated as the sum of our restated profit/(loss) before share of profit/(loss) of associates and exceptional items for the year, finance costs and fair value changes to financial instruments.

(7) Fixed asset turnover ratio is calculated as revenue from operations divided by fixed assets at the end of the year. Fixed assets includes Property, plant and equipment, Capital work-in-progress, Other intangible assets and Intangible assets under development (8) Debt-equity ratio is calculated by dividing total debt (including both current and non-current borrowings) by equity attributable to equity holders of the parent.

(9) Return on equity is calculated by dividing restated profit for the year by total equity.

(10) Return on Capital Employed is calculated as EBIT divided by capital employed (i.e. sum of total equity and net debt). Net debt is calculated as total debt (including both current and non-current borrowings) less cash and cash equivalent, bank balance other than cash and cash equivalents and fixed deposits with remaining maturity of more than 12 months.

(11) Adjusted return on equity is calculated by dividing the sum of profit after tax for the year and fair value changes to financial instrument by the sum of total equity and put option liability.

(12) Adjusted return on capital employed is calculated as Adjusted EBIT divided by capital employed (i.e. sum of total equity, net debt and put option liability). Net debt is calculated as total debt (including both current and non-current borrowings) less cash and cash equivalent, bank balances other than cash and cash equivalents and fixed deposits with remaining maturity of more than 12 months.

(13) Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by total income.

(14) Adjusted EBIT margin is calculated as Adjusted EBIT divided by total income.

(15) EBITDA margin is calculated as EBITDA divided by total income.

(16) Profit after tax margin is calculated as the percentage of restated profit after tax for the year divided by total income.

Human Resource (HR)

The Companys human resources are a critical asset in ensuring the successful execution of the Companys operations. As of FY 2024-25, the Company has employed a total of 17,500+ employees. The high retention rate reflects the Companys commitment to fostering a conducive work environment and its ability to attract, retain and nurture a highly skilled talent pool.

The Company places significant emphasis on continuous learning and professional development, equipping employees with the necessary skills to enhance their competencies and remain aligned with industry advancements. Through structured training programmes and upskilling initiatives, Akums ensures that its workforce remains agile, innovative and well-prepared to contribute effectively to the Companys sustained growth and operational excellence.

Risk Management

Key Risks	Mitigation Strategies
The Companys performance is closely linked to prevailing economic conditions. Consequently, any adverse fluctuations in key economic indicators, such as inflation levels and interest rates, may pose challenges to the Companys operations and overall business performance.	The net cash positive strategy followed by the Company helps it to effectively navigate any adverse impact in the economy, including fluctuations in the economy. Furthermore, it passes the increased input costs on to the clients, such that the fluctuations in the raw materials have a minimal impact on the Companys operations.
Ongoing geopolitical shifts have the potential to influence international trade, which may, in turn, affect the Companys export revenue and weaken its competitive position in global markets.	The Company has a diverse global presence, limiting its reliance on a single location. This also limits its vulnerability to shifts in the region-specific global economic landscape. Additionally, imports account for only 6% of the Companys sales, offering a natural hedging.
Akums relies on the efficient procurement of raw materials to sustain its operations. Any disruptions in the supply chain or obstacles to the seamless acquisition of raw materials may adversely impact the Companys productivity.	The Company has numerous sources for procuring key ingredients. In addition, efficient supply chain management is being integrated, including the maintenance of surplus inventories to satisfy the needs. These procedures enable the Company to effectively mitigate the risk posed by interrupted procurement operations.
Any disruptions in the Companys manufacturing capabilities may adversely affect its business operations and overall efficiency.	Currently, the manufacturing capacity for each API product exceeds the market requirement by more than 160%. This additional capacity helps to reduce risk associated with manufacturing disruptions.
Akums operates in a highly competitive market, wherethepresenceofkeyplayersmayexertpricing pressure, potentially affecting the Companys market share and overall competitiveness	Implementing efficient strategies such as effective sourcing, cost optimisation, better R&D, a strong emphasis on quality and a customer-focused approach allows the Company to stay ahead of the competition.
The Company is obligated to comply with all applicable legal and regulatory requirements to safeguard its operations and protect its profitability from potential disruptions.	Given the importance of regulatory compliance, the Company follows industry standards, quality control procedures and legal frameworks. This allows the Company to reduce the risks associated with regulatory violations and legal penalties. In addition, the Company has introduced a number of tools to digitise its compliance tracking system.
It is imperative for the Company to effectively manage its financial strategies, as any disruption in cost optimisation or capital allocation could significantly impact profitability and hinder the long-term sustainable growth of the Company.	Akums implements financial measures such as quality budgeting and forecasting, as well as careful monitoring of operational cash flow and free cash flow. Also, adopting an effective capital allocation strategy by reviewing the performance of existing investments helps to mitigate risks associated with inefficient financial management.

Subsidiary Update

The Company incorporated a wholly owned subsidiary, Akums Healthcare UK Limited, on March 18, 2025, in the United Kingdom, to expand its international footprint and strengthen its presence in the global healthcare market.

Company Outlook

Given the sustained long-term demand for outsourced drug development and manufacturing, it is expected that Akums performance and profitability will be positively influenced through the implementation of effective strategies. Moreover, the Companys continued efforts to strengthen its relationships with its client base by providing the necessary formulations and therapies will remain crucial to driving growth. Additionally, Akums plans to commence commercial production at its newly acquired land for the Jammu plant by 2026-27, which is expected to significantly enhance the organisations volume productivity and contribute to its long-term growth.

Internal Control and Adequacy

The Company has a strong internal control system in place to guarantee that all divisions run smoothly. This system is well-suited to the Companys type and scope of operations, providing for effective financial monitoring while also assuring legal and regulatory compliance. As a result, it increases overall operational efficiency. The Company has been using compliance tool all across the group for tracking and monitoring all types of compliance which helped in devising the proper mechanism for good compliance management. Internal audits are conducted on a regular basis by certified accounting firms to ensure transparency and accountability. The Audit Committee of the Board of Directors receives the findings from these audits, as well as any corrective actions performed. The committee carefully evaluates these reports, evaluating the adequacy and efficacy of internal control procedures.

Cautionary Statement

The Management Discussion and Analysis (MDA) section may include forward-looking statements regarding potential future developments. However, these projections and forecasts are subject to a range of known and unknown risks, which could significantly impact actual outcomes. Variations in the broader economic environment may introduce unforeseen challenges and uncertainties that could affect the organisation and its operations. The insights presented in these projections are derived from a combination of internal and external data, forming the basis for certain facts and figures provided. It is important to acknowledge that the estimates used in these projections inherently carry a degree of uncertainty.