Alembic Ltd Management Discussions

Industry Perspective vis-a-vis Company

The Company operates primarily in the manufacture of Bulk Drugs and Real Estate Business.

(A) Segment-wise Performance, Industry structure and Developments, Outlook and Opportunities & Concerns, Risk and Threat:

a) Bulk Drugs Business:

The Company continues to do production of bulk drugs, mainly of generic APIs & their intermediates on job work basis. This year, the manufacturing business has faced increased challenges due to a limited number of molecules, declining selling prices of its proprietary API molecules, and reduced sales volumes in the low- margin job-work segment.

The business requires substantial capital requirements to modernize its assets. However, its prime city-center location and thin profit margins render the necessary capital commitment economically unviable. Despite our best efforts, this business is barely sustainable and confronts an uncertain future.

b) Real Estate Business:

The real estate sector in India exhibited notable expansion throughout FY 2023-24, encompassing residential, commercial and retail segments.

Residential sales reached a decadal high, with average property prices in the Tier I towns experiencing a notable increase. The growth in Tier II and Tier III towns in India has also been robust and promising, with these cities playing a significant role in driving the expansion of the real estate sector. Relocation of industries and housing hubs to these cities, government investments in infrastructure, availability of cheaper rental and land costs has aided growth. Additionally, the cost advantages, better work-life balance, and affordable housing options in Tier II cities have attracted a major shift of the workforce, further boosting the real estate potential in these areas.

Despite some moderation in the tech sectors contribution, the commercial office space sector in India has witnessed robust growth, driven by strong demand, increased sustainability focus, and diversification across sectors. Demand has been driven by sectors like BFSI, manufacturing/industrial, and consulting, with Global Capability Centers (GCCs) in Tier I towns.

The situation in Tier II towns for commercial and retail real estate has been equally encouraging. Tier II towns are emerging as significant growth frontiers for both commercial and retail real estate, driven by economic growth, infrastructure development, government initiatives, changing consumer behavior, and the affordability and potential these cities offer for businesses and investors. The entry of major corporates, start-ups, SMEs, and companies in sectors like fintech and e-commerce into Tier II cities is driving demand for office spaces and flexible workspaces, leading to a rise in leasing activities. The retail sector in Tier II cities is experiencing a revolution, with the development of premium malls attracting both domestic and international retail brands, transforming traditional marketplaces into modern shopping destinations.

The prices of steel and cement, crucial construction materials, exhibited moderate volatility in the FY 2023-24, initially surging and then stabilizing. Overall, after significant increases in previous years, prices have returned to a more stable level, with a slight uptick. Despite the increasing demand for unskilled labor and rising labor costs, the industry has been able to sustain its growth activities in the current financial year due to the controlled increase in the cost of other inputs and the rise in selling prices driven by demand.

Your Company has made good progress on its various projects. VEDA-II, one of the Companys ongoing residential projects, is expected to begin deliveries during the first quarter of FY 2025. The Companys upscale premium residential projects, such as Townhouse24, The Villas and The Gardens have also witnessed decent demand. During the year, the Company has also started deliveries in Townhouse 24 and The Villas. The Company has plans to launch another housing project with 3BHK and 4BHK configurations called The Park Crescent, which is expected to add to the Companys success.

The Company has enriched its commercial leasing portfolio over the past year and remains steadfast in its commitment to further strengthen this aspect of its business. During the year, two commercial office buildings have been leased to marquee clients, which will contribute to consistent cash flow generation for the next couple of years. Your Company is also actively developing mixed-use projects that incorporate high street retail, food courts, restaurants, and entertainment zones.

The Alembic City campus and Alembic Art Districts city center remain highly favored by visitors, effectively capturing their target demographic. This underscores the Companys adeptness at crafting appealing and inventive environments. Within our lush green campus, every element has been designed to human scale, ensuring ease of access and connectivity among commercial office spaces, retail outlets and residential areas, thus fostering a harmonious environment.

The Company has consistently demonstrated its agility in responding to shifting market conditions, a quality that has been pivotal in its ability to overcome the challenges inherent in the real estate industry. By remaining focused on delivering projects of exceptional quality, it has strengthened its standing as a developer known for its niche offerings. This commitment to excellence has been instrumental in maintaining its position as a preferred choice among discerning customers in the real estate market.

(B) Finance:

The gross revenue of the Company was 15,225.00 Lakhs for the year under review as compared to 12,315.76 Lakhs for the previous year ended 31^st March, 2023. The Company registered a net profit of 9,288.80 Lakhs as compared to net profit of 7,927.03 Lakhs for the previous year ended 31^st March, 2023.

(C) Key Financial Ratios:

Key financial ratios are provided in the Notes to Financial Statements at Note no. 36(U), with the reasons for major variations, if any.

(D) Internal Control Systems and Adequacy:

The Company maintains a system of well-established policies and procedures for internal control of operations and activities.

The Company has appointed Internal Auditors for the Bulk Drugs division and Real Estate division to ensure proper system of Internal Controls and its adequacy. Further, the real estate business has concurrent auditors for joint measurement verifications and quality audit.

The reports of Internal Auditors are presented on regular basis before the Audit Committee and their recommendations are implemented.

(E) Human Resource Intervention

The company has effectively streamlined its workforce to an optimal size. It has also devised a strategic plan for leadership development, collaborating with reputed agencies and implementing developmental programs in alignment with the plan. The annual internal employee comfort survey consistently yields reassuring results, reflecting the managements dedicated efforts towards enhancing employee engagement. Moreover, the Company has extended the option of remote work to those who can effectively carry out their responsibilities from home, striking a favorable balance between safety and productivity. As a result, teams are operating with elevated motivation and optimal efficiency.

(F) Health, Safety, Security and Environment

Health, Safety, Security and Environment is always looked at with its due seriousness along with our business activities and all employees are adequately trained for taking up their individual job accountability. Alembics operations are well- resourced & they comply with the stringent & new norms of Health, Safety, Security and Environment.

Safety audits are carried out regularly by independent government approved consultants for the regular operations and the newly introduced plastic, e-waste, bio wastes categories as well. Environmental audits and hazop-studies were also carried out and the statutory reports of our compliances are submitted to regulators periodically for their review and inputs. Efforts are made at all levels to conserve energy and resources.

For and on behalf of the Board of Directors,	Sd/-
Registered Office:	Chirayu Amin
Alembic Limited	Chairman
CIN: L26I00GJI907PLC000033	(DIN: 00242549)
Reg. Off.: Alembic Road, Vadodara - 390 003.
Tel : +91 265 6637000
Email Id: alembic.investors@alembic.co.in
Website: www.alembiclimited.com
Date: 13th May, 2024
Place: Vadodara