Alembic Pharmaceuticals Ltd Management Discussions

THE ECONOMIC SCENARIO

GLOBAL ECONOMY

The most recent projection follows from the world economy doing better in 2024 than in 2023. Furthermore, the GDP grew more than expected in 2023, taking care of structural vulnerabilities and short-term risks. The global economy displayed remarkable resilience, with inflation declining steadily and growth holding up. Further, the world GDP grew more than anticipated in 2023.

Global inflation is expected to decrease from 5.7% in 2023 to 3.9% in 2024. Despite this, price pressures remain high in several countries, and any escalation of geopolitical tensions may lead to a resurgence in inflation.

The global economy faces low growth prospects, persistently high interest rates, intensifying geopolitical conflicts, sluggish international trade and mounting climate disasters. These obstacles could significantly hinder global economic progress. However, growth could be more potent if households spend more of the excess savings accumulated during the pandemic. According to the United Nations

World Economic Situation and Prospects (WESP) 2024, global economic growth is projected to slow from an estimated 2.7% in 2023 to 2.4% in 2024, falling below the pre-pandemic growth rate of 3.0%. Fast-growing Asian economies remain the primary drivers of global growth.

Also, global inflation is anticipated to decrease even more, from 5.7% in 2023 to 3.9% in 2024.

INDIAN ECONOMY

India has emerged as a powerful force in the global economy, solidifying its position as the worlds fifth-largest economy. This is due to its strong economic foundations, thriving domestic demand, careful financial management, high saving rates and favourable demographic trends. Indias economy performed well in 2023, defying global challenges. The GDP grew at a healthy rate of 7.6%, exceeding forecasts and making India the fastest-growing major economy. This growth was driven by strong domestic demand, particularly in rural areas, and a robust manufacturing sector that saw double-digit growth in key areas like steel and automobiles. Infiation also eased throughout the year, falling to a multi-year low. There were some headwinds, however, with exports slowing down due to the weak global trade environment. Overall, 2023 was a year of positive economic performance for India, setting the stage for continued growth in the coming years. The Indian economy is expected to remain robust in 2024. Most analysts predict healthy growth. The UN Trade and Development (UNCTAD) projects a 6.5% expansion, making India the worlds fastest-growing major economy. Factors supporting growth include a large young workforce, ongoing digitisation and a focus on infrastructure investment. Potential hurdles include the upcoming general elections, which may cause temporary slowdowns, and managing inflation, which currently sits at 5%.

THE PHARMACEUTICAL SECTOR WORLD PHARMA SCENARIO

The global use of medicines has increased by 14% in the past five years, with an expected additional 12% growth by 20281. This growth is estimated to increase the annual use of medicines to 3.8 trillion defined daily doses.

The pharmaceutical industry is expected to face unique challenges and opportunities in 2024. The industry is undergoing a significant transition marked by substantial expenditures, technological developments, the expiration of essential patents, growing inter-organisational collaboration and an encouraging regulatory environment. These factors stimulate innovation and reshape the pharmaceutical sector, paving the way for new trends and advancements. Outlook: Recent advancements in medication have led to significant improvements in patient treatment, particularly in oncology, endocrinology and immunology. These positive developments have contributed to better growth prospects by introducing innovative products and have aided in offsetting exclusivity losses.

Medicine use is anticipated to increase more rapidly in Latin America and Asia over the next five years than in other regions. China, India and the

Asia-Pacific region are expected to experience substantial volume growth, with a compound annual growth rate of over 3%. Meanwhile, Western Europe, North America and Japan, higher-income regions with well-established healthcare systems, will experience slower volume growth.

Spending on pharmaceuticals is predicted to surge by over 30% in North America, Eastern and Western Europe, Latin America, Africa and the Middle East, shifting towards more expensive products and population-driven volume growth.

Source:

Institute – January 2024 (Global Use of Medicines 2024) (Outlook to 2028)

THE U.S. MARKET

The U.S. pharmaceutical market is anticipated to generate US$636.90 billion in revenue by 20241. Oncology drugs are expected to capture the largest market share, with a predicted market volume of US$114.60 billion in the same year. The demand for targeted therapeutics and personalised medicine is surging in the U.S. pharmaceutical industry.

Forecasts indicate that the market will increase at a consistent annual rate of 5.96% between 2024 and 2028, reaching a market volume of US$802.80 billion. It is important to note that the U.S. is anticipated to lead the global pharmaceutical market in revenue worth US$636.90 billion in 2024. India is one of the largest exporters of generic drugs globally. As per the Indian Brand Equity Foundation (IBEF), the country accounts for 30% of the overall generic medicines supplied to the U.S. from all over the world. This makes the U.S. a vast market which offers unlimited growth potential.

Underlying macroeconomic factors2:

Several macroeconomic factors, such as modifications to government healthcare laws and regulations, technological advancements and changing consumer demographics, impact the U.S. pharmaceutical market. The market is anticipated to expand in the coming years due to innovations and rising demand for customised care.

Concerns over Rising Costs: With healthcare becoming increasingly expensive, generic drugs are emerging as a powerful tool for managing costs while maintaining effective treatment. The a_ordability of generic drugs makes them an attractive choice for patients and healthcare providers.

Patent Expirations: The expiration of patents on brand-name drugs creates a fertile ground for generic manufacturers to introduce bioequivalent alternatives, increasing competition and potentially lowering medication costs.

PAST AND FUTURE3

The competitive pressures in the U.S. generics business intensi_ed following the peak in the previous upcycle (Patent Cli_) in 2015. Pricing deteriorated as players fiercely competed for market share in older products. The entry of new players, including many from India, led to further turmoil in the already competitive segment.

More recently, there was significant inventory build-up in the channel during COVID-19 due to apprehensions about the availability of medicines. However, as COVID subsided, the inventory in the system led to significant price erosion in the U.S. generics segment. With the normalisation of inventory, the intensity of price erosion has reduced.

The other positive is that the U.S. generics market has also experienced drug shortages due to selective exits by players in the unprofitable product segments and underinvestment in product development. This shortage may contribute to a pricing upcycle in the U.S. generics market.

Further, another upcycle trend is starting to play out – the genericisation of small molecule patented drugs. The Indian pharmaceutical industry is poised to tap the significant opportunity in the ‘small molecule patented drugs segment, opening up for generics through 2023-26. The generics market opening up for ‘small molecule patented drugs will allow Indian generic drug manufacturers to break into previously unavailable avenues.

Source: 1Statista 2Linkedin 3Businesstoday

THE EUROPEAN MARKET

The European pharmaceutical market is anticipated to generate US$194.90 billion in revenue by 2024. Oncology drugs comprise the largest market segment in this area, with a projected market volume of US$37.80 billion by 2024. Sales are anticipated to expand at a CAGR of 6.25% between 2024 and 2028, reaching a market volume of US$248.40 billion by that year. Research and development in the pharmaceutical industry are booming in Germany, emphasising novel treatments and personalised medicine. Europes pharmaceutical industry has proliferated in recent years, and various trends and innovations have shaped the sector.

Trends in the market: Generic medications constitute the majority of sales in the German pharmaceutical sector, as the nations stringent drug price laws have created a very competitive industry. The French market is characterised by a high concentration of small and medium-sized businesses focusing on specialised markets like cancer and rare health ailments. In contrast, the UK market is highly centralised, with a small number of large corporations controlling a significant portion.

Local special circumstances: In Italy, the Government controls a large portion of the pharmaceutical industry and determines medicine prices. As a result, the market is now highly fragmented. The Spanish market is known for its high degree of innovation, as seen by the substantial investments made by numerous enterprises in R&D. As a result, the nation is now home to numerous biotech startups.

Underlying macroeconomic factors:

Numerous factors, such as Government policy, healthcare spending and population demographics, affect the European pharmaceuticals business. The need for medications to manage chronic illnesses like diabetes and heart disease is rising as the population ages. In addition, governments are looking for ways to reduce costs as healthcare spending keeps rising, which has resulted in further regulation of drug prices. Finally, there is uncertainty regarding the future of drug regulation in Europe due to the UKs exit from the EU, which may have a defining impact on the business.

THE LATAM MARKET

Large portions of private voluntary and out-of-pocket insurance expenditures drive total spending in Latin American countries like Brazil and Argentina. In Chile and Uruguay, on the other hand, the majority of the health sectors funding is provided by publicly mandated and sponsored programmes. The expenditures of certain Latin American nations, such as Argentina, Brazil, Uruguay and Chile, are comparable to those of high-income nations with universal coverage, which often allocate 8% to 11% of GDP to healthcare. Despite providing good quality treatment, healthcare costs in countries like Mexico, Columbia and Panama are much lower than in the U.S.

THE AUSTRALIAN MARKET

Australias pharmaceutical industry is expected to generate US$10.16 billion in revenue by 2024. Oncology drugs comprise the largest of the major market segments, with a projected market volume of US$2.01 billion in 2024. From 2024 to 2028, the pharmaceutical industry is anticipated to increase at an annual rate of 6.76%, with a market volume of US$13.20 billion. Innovative and customised drugs are in high demand in Australias pharmaceutical industry.

Australia has seen a consistent increase in the demand for pharmaceuticals in recent years.

Local special circumstances: The pharmaceutical sector in Australia is subject to strict government regulations, resulting in a relatively stable market. However, growing healthcare expenditures have strained the Governments Pharmaceutical Benefits Scheme (PBS). This has prompted a closer examination of drug costs and a drive to utilise generic and biosimilar medications more frequently.

Underlying macroeconomic factors: The Australian economy has grown steadily in GDP and has had low unemployment in recent years. However, as the nations population ages, the healthcare system is getting strained, driving an increased emphasis on chronic illness management and preventive treatment. Furthermore, the COVID-19 pandemic has brought attention to the importance of a robust healthcare system, which could eventually result in additional resources being invested in the pharmaceutical sector.

THE MENA MARKET

In a report by TechSci Research titled "Middle East & Africa Pharmaceuticals Market – By Country, Competition, Forecast and Opportunities, 2028," the outlook for the pharmaceutical industry in the Middle East and Africa appears promising. This market is projected to experience a high CAGR during the forecast period. This growth is attributed to the regions continuous development of healthcare systems, aiming to address various medical conditions through the increased production of pharmaceutical products. The Middle East healthcare market is growing at 10%, twice as fast as the global market. It is dominated by Saudi Arabia, Iran, Israel, Egypt and the UAE, which cover more than 85% of the Middle East market.

Government laws significantly impact the pharmaceutical industry in the Middle East and Africa. The focus on lowering healthcare expenses and strengthening the local economy is noteworthy. For instance, by banning the import of branded medications, the Saudi Arabian Government has been aggressively encouraging the use of generic medications. The strategy promotes domestic manufacturing of generic medications, which lowers healthcare costs.

Saudi Arabia has outlined an ambitious strategy for transforming the life sciences and healthcare sector in the coming years. Saudi Arabia is home to over 140 pharmaceutical companies, and several foreign partners from China, India and the U.S. recognise the sectors growing potential and invest in MENA manufacturing facilities.

Given that the local pharmaceutical market is expected to grow to US$60 billion by 2025 due to rising healthcare costs, rising medication demand and a high concentration of pharmaceutical companies and healthcare professionals, the financial benefits of such diversification initiatives are evident.

INDIAN PHARMACEUTICAL SECTOR

The pharmaceutical sector in India is of great importance to the pharmaceutical sector worldwide. Indian pharmaceuticals are favoured globally for their affordable prices and superior quality, earning them the title ‘pharmacy of the world.

The Indian pharma industry has grown from US$35.41 billion in FY18 to US$49.78 billion in FY23 and is likely to reach US$57 billion by FY25. Globally, the Indian pharma industry has a strong footprint in the generics segment. Pharma exports and the domestic market contribute equally to the Indian pharma Industry.

API segment: About 500 India-based API firms constitute around 8% of the worldwide API industry. Positioned as the worlds third-largest API producer, India supplies 57% of APIs listed on the WHO prequalified catalogue, showcasing its pivotal role in the global pharmaceutical market.

Generic formulations: India is the largest provider of generic medicines globally, occupying a 20% share in global supply by volume. The industry manufactures about 60,000 different generic brands across 60 therapeutic categories. More than half of Africas generic needs are met by India. India also serves roughly 40% of the U.S. generic demand and 25% of the UK pharma demand.

Resources: Home to over 3,000 pharmaceutical companies, India boasts the largest US-FDA-compliant pharma plants outside the U.S. The country also boasts a robust network of over 10,500 manufacturing facilities and a highly skilled labour pool.

Performance: The Indian

Pharmaceutical Industry (domestic and exports) registered a CAGR of 6%-8% during FY18-FY23, contributing 8% growth in exports and 6% growth in the domestic market during the same period.

Despite sustained pricing pressures in the U.S. generics market, formulation companies could sustain their margins to around 22% in FY23 due to focus on complex and speciality products. In FY24, the Indian pharma sector reported superior performance due to several factors, such as improved performance in the US generics market, robust performance in branded markets, moderation in raw material costs, and market share gains in recently launched products.

Government initiatives: The Indian Government assisted pharmaceutical companies with its Production Linked Incentive (PLI) scheme, which aims to improve Indias manufacturing capacity for high-value products and promote self-reliance. Additionally, the Government is creating three bulk drug parks in the states of Gujarat, Himachal Pradesh and Andhra Pradesh) to facilitate a steady supply of bulk drugs to Indian formulators.

Estimates: In recent times, pharmaceutical companies have strategically increased their presence in chronic therapies, focused on new product launches, and ventured into new therapies to capitalise on market opportunities.

Pharma companies with a focus on the U.S. business should register healthy business growth strongly due to the normalisation of base business prices, field force expansion and the introduction of new products despite pricing challenges, intense competition and stricter regulatory compliance requirements, India-focused pharma players would report stable growth driven by deferred acute demand, an uptick in the chronic segment and new product launches.

KEY EMERGING TRENDS IN 2024

Consolidation in the Hospital Sector:

The acquisition of smaller independent private hospitals (in both metropolitan centres and Tier-2 and 3 cities) would be the primary goal of PE firms, MNCs and other prominent national hospital chains. This trend is already apparent and is caused by several factors, including a lack of succession planning among family-owned private hospital promoters, profitability issues stemming from hospital bed compliance with EWS reservation requirements, general difficulties in competing with more significant players for the purchase of medications and equipment, and a shortage of skilled labour, etc.

Increased Indigenisation of

Manufacturing in India: In India, there is a greater emphasis on domestic production of medical equipment and parts. The Public Procurement Order (PPO), which requires government agencies to buy local goods, the Government e-Marketplace, the successful PLI programme and the planned enhancement of MedTech clusters are just a few of the initiatives launched by the Government.

Advent of Digital Healthcare Technology: Digital technology will find increased usage across various healthcare areas, including Diagnosis Technologies (e.g., AI in medical imaging and smart wearables for real-time diagnostics), service delivery enhancement (pathology workflow automation and omnichannel diagnostics service platforms), optimising healthcare delivery (e.g., Big Data Analytics of patient data at Hospital Labs) and Point of Care Testing (PoCT) in remote areas.

Increased focus on compliance and quality standards: Following the introduction of Class C and D device standards by CDSCO in 2024, the medical device industry will come under intense regulatory scrutiny (with Class A and B going online in 2023). This will ensure that testing and validation procedures and consistent quality standards are followed. Similarly, when NABL and QCI accreditations become more widely used, there will be a greater focus on standardising diagnostic labs. Outlook: The Indian pharmaceutical industry is a formidable global force today, shaping global health outcomes. By leveraging its inherent strengths in manufacturing, digital talent and favourable demographics (in terms of youth preponderance), India has the potential to become a global life-sciences innovation hub and grow its market to US$120-130 billion by 2030 and US$400-450 billion by 2047. (Source: Mint, September 2023).

BUSINESS PERFORMANCE

1. INDIA BRANDED BUSINESS

India branded business, a strong pillar for Alembic, reported a healthy performance in FY24-registering high single-digit growth and outperforming the sectoral growth. The Companys product basket comprises branded formulations addressing diverse acute and speciality therapies. Alembic has garnered a 1.5% market share (Source: IQVIA MAT MAR 24). Within its portfolio, some brands are leading names in their product category. In FY24, the acute segment performed relatively better than the market, and the speciality segment grew by 7% over FY23-primarily supported by an impressive performance by the gynaecology, antidiabetic and ophthalmology segments.

New launches continued to do well, with promising future launches across key segments.

The Animal segment reported a robust growth of over 27% in FY24. The noteworthy highlight was that the Company added human resources with a new division in livestock with a 350-person headcount.

With niche product launches and renewed vigour, the Company expects to sustain its growth over the coming years while outpacing the industry growth.

OUTPERFORMING THE BROADER MARKET

	FY24 Growth Comparison
Therapy	APL	Market*	Net Growth
Gynaecology	16.10%	7.80%	8.30%
Gastrointestinal	12.10%	8.50%	3.60%
Anti Diabetic	19.00%	17.20%	1.80%
Ophthalmology	28.10%	8.30%	19.70%
Antibiotics OS	1.20%	0.00%	1.20%
Antibiotics OL	-8.50%	-10.40%	1.90%
Cold and Cough	0.30%	-2.00%	2.30%

2. INTERNATIONAL GENERICS BUSINESS

Alembic is present in 41 nations globally, with the US market being the most prominent and revenue-accretive. In recent years, price erosion in the US market forced the Company to sharpen its focus on other global markets to manage business risks. For the US market, the Company is working on launching more complex products leveraging diverse delivery platforms.

THE US GENERICS BUSINESS

After about two years of significant volatility, the Companys performance in the U.S. market was encouraging from a topline and bottom-line perspective.

Despite continuing pricing erosion owing to growing competitive intensity, the US generics business grew by 10% over the previous years levels. The Company focused on launching new products this year and improving efficiencies and execution in the mid-term.

Alembic launched 27 new products in diverse therapies, of which 15 were from its new, FDA-approved facilities. The new launches included products catering to oncology, ophthalmology, inhalation and dermatology therapies. Alembic continued to strengthen its supply chain, enabling it to effectively capitalise on opportunities arising from supply chain disruptions in the U.S.

Further, Alembic continued to strengthen its product pipeline. It filed 15 ANDAs and received approvals on 19 filings (including four tentative approvals) during FY24. The ANDA pipeline was at 63 as of March 31, 2024, under various stages of approval.

THE ROW GENERICS BUSINESS

The RoW business segment reported a stellar performance for another fiscal buoyed by considerable volume growth in almost all the geographies of its presence. Additionally, favourable regulatory tailwinds in some nations facilitated improved sales volumes. Alembics established markets, namely Europe, Canada and Australia performed well, providing considerable impetus for the Companys growth. The Companys strategy of developing the B-2-B model (implemented in FY23) has worked well in Europe. Favourable regulatory tailwinds in Australia helped the Company to grow volumes.

The Companys subsidiaries in Chile and Mexico are working aggressively on product registrations and expect to contribute positively to business growth in the coming years.

The Company will continue strengthening its presence in diverse markets to position the RoW segment as a vital business driver.

3. API BUSINESS

The API business has shown a remarkable growth of 7% compared to the previous year despite the price erosion observed across the industry. The Company has been consistently expanding its product portfolio and development pipeline, with a special focus on oncology products. The team has been relentlessly optimising manufacturing processes, increasing productivity and debottlenecking capacities to meet the surging demand.

Moving forward, the Company is committed to improving its profitability by increasing the share of high-value products in its sales mix and targeting markets that offer superior margins.

OUR VALUE CREATION ENGINE

Alembics business model is the foundation for effectively implementing and driving a sustainable business strategy. The business model is built on the foundation of team patience and perseverance to create growth levers for the future. It encourages and inspires employees and partners to strive for excellence in their work, keeping ethics, transparency and good governance practices in mind.

MANUFACTURED CAPITAL	Manufacturing units	9
Infrastructure created and equipment used for manufacturing products. Our state-of-the-art pan-India infrastructure provides a superior mind-to-market cycle.	Gross Block	Rs 3,875.20 crore
FINANCIAL CAPITAL
	Net Debt	Rs 310 crore
Funds available to create value through production processes, or funds generated by operations. We have a strong financial position with a low debt equity ratio of 0.06x and maintain a sharp focus on efficient capital allocation.	Capital Employed	Rs 4,990.58 crore
INTELLECTUAL CAPITAL
Knowledge and experience that helps graduate our business model to stand out of the clutter. Our thirst for knowledge and our confidence to walk the road less travelled helps in developing innovative products and developing processes.	R&D investment	Rs 474.92 crore
HUMAN CAPITAL
The skills, knowhow, capabilities, experience, diversity and level of motivation of direct and contractual employees. We promote innovative thinking in our people and equip them with the right development tools and trainings.	Employees on roll People benefits	14,800+ Rs 1,446.29 crore
SOCIAL & RELATIONSHIP CAPITAL
Trust-based, mutually beneficial relationships with key stakeholders such as investors, customers, vendors, society and government, among others, which play a vital role in our success.	CSR spend on projects Shareholders	Rs 13.19 crore 76,567
NATURAL CAPITAL
Natural resources such as air, water, energy, land and biodiversity, which are either utilised by us or impacted by our operations. We continuously endeavour to reduce the load of our operations on the Earth.	Fresh Water consumption Energy consumption	7,16,710 KL 10,88,323 GJ

VALUE CREATION

APPROACH OUTCOME

STRATEGIC BLUEPRINT		New products commercialised
1) The U.S. generics business
Increase the product basket with a wider therapeutic presence across diverse delivery platforms.	MANUFACTURED CAPITAL	India Branded Business	15-20 (excluding animal health)
		US Generics Business	27
		RoW Generics Business	14
2) ROW generics business		Revenue	Rs 6,229 crore
Widen the geographic presence and extend the existing international generics product basket to increased number of geographies.		EBITDA	Rs 961 crore
	FINANCIAL CAPITAL	EBITDA margin	15%
		Net Profit	Rs 616 crore
3) India branded business
Increase the contribution from speciality therapies; increase the speciality therapies of presence.		Capital Employed (March 31, 2024)	Rs 4,991 crore
	INTELLECTUAL	Addition to development pipeline	60+ products ongoing as on date
4) R&D strategy	CAPITAL	ANDA filings	15
More incisive choice of molecules		DMF filings	1
to be developed to maximise the Return on Investment from research activities.	HUMAN CAPITAL
		Revenue per employee	Rs 3.49 Lac / month
5) HR strategy	SOCIAL & RELATIONSHIP CAPITAL	Dividend declared	550% i.e Rs11 per share
Emerge as an employer of preference.
6) Financial strategy
Focus on maximising the return on investment.		Recycled water utilisation	1,68,388 KL
	NATURAL CAPITAL	Recycled Waste (Includes Hazardous and Non-Hazardous)	15,975 MT tonnes
		Use of Renewable energy	2,01,587GJ

MANUFACTURED CAPITAL

The evolving pharmaceutical landscape necessitates the adoption of sustainable and efficient manufacturing practices to minimise environmental impact. It requires comprehensive strategies that optimise resource utilisation and navigate the complexities of a dynamic supply chain while fostering sustainable growth.

Alembic recognises the critical importance of this approach. The Company is unwavering in its commitment to continuous improvement across all our manufacturing facilities to infuse efficiency and quality. Its core values of excellence, teamwork, integrity and customer focus drive the team to produce high-quality and affordable medicines in an environmentally responsible manner.

Alembic operates advanced manufacturing facilities in Gujarat and Sikkim, where it manufactures Oral Solid Dosages (OSDs), injectables, ophthalmic, dermatology and oncology products and Active Pharmaceutical Ingredients (APIs) that cater to a huge array of therapeutic segments.

Its Gujarat facility focuses on manufacturing international generics and APIs, catering to global markets. The Sikkim facility specialises in developing branded generics tailored for the domestic market. To maintain operational excellence, Alembic prioritises disciplined investments in plant maintenance. This commitment ensures that all its facilities consistently operate at peak efficiency, guaranteeing optimal plant availability.

PANELAV, GUJARAT

- The cornerstone of Alembics operations is having both API and formulation facilities.

- F1 Formulation plant is a multi-capability facility that manufactures generic formulations for regulated and emerging markets globally.

- F2 is a dedicated block for oncology products (injectables and OSDs); it is capable of making complex injections using nanoparticle technology.

- This site also houses two dedicated units (API I & II) to produce Active Pharmaceutical Ingredients (API).

Initiatives during FY24

- Revamped the planning cycle, which helped increase production.

- Implemented an incisive study of the capacity to unearth gaps, which were utilised to address increased orders.

- Conducted a workforce analysis, optimising staffng across departments and shifts; it helped optimise the headcount while increasing per-person productivity.

- Revamped and upgraded old areas within the facility to align with compliance requirements.

- Achieved a significant reduction in breakdowns by revamping the preventive maintenance strategy and planning; it helped improve productivity and deliveries.

KARKHADI, GUJARAT

- Recently commissioned F3 facility for general injectables and ophthalmic formulations.

- Dermatology products, F5 (formerly produced under Aleor JV).

- An API unit (API III) caters to internal needs and external sales of APIs to other formulators.

Initiatives during FY24

- EIR for the F3 unit received in FY24.

- Commercialised a range of products for the U.S. market, including injectables and pre-filled syringes.

- Site transfer was successfully done for some ophthalmic products from CMO.

- Commissioned a new high-speed vial line, which expanded the units capabilities.

JAROD, GUJARAT

- F4 is a new greenfield facility for producing oral solid dosages and suspensions.

- The Company plans to transfer some products from the Panelav facility (F1) to decongest the main site.

Initiatives during FY24

- Transferred select products from the F1 facility to this facility to decongest the F1 facility.

- Delivered the first commercial production of certain products for the U.S. market.

- Plans to add capacity at this unit to manage the growing volumes from the U.S. market; this would commence operations in FY25.

- Investments are planned for adding a new bottle packing line and the capacity of the Fluidised Bed Processor.

SIKKIM

- This facility caters specifically to the domestic market, manufacturing branded formulations.

- Alembic plans to establish a new facility at Pithampur, Indore, to complement its facility at Sikkim and meet the growing demand.

FINANCIAL CAPITAL

Alembic understands that resource allocation is the lifeblood of a growing business. It ensures every rupee is allocated effectively, allowing the Company to seize opportunities and navigate challenges. The Companys prudent capital allocation translates into an increased return on investment and a stronger foundation for sustained growth.

FINANCIAL PERFORMANCE

Alembic registered a decent performance in FY24. Its topline increased by about 10% from _5,653 crore in FY23 to _6,229 crore in FY24, with growth in all business divisions and an exceptional performance by the ex-US vertical. EBITDA improved from _680 crore in FY23 to C961 crore in FY24 – an increase of 41% over the previous year – on the back of improved operating efficiencies and the launch of new products in all the markets of its presence. Reduced R&D expenses also contributed to the growth in EBITDA. Net profit for the year stood at _616 crore against _342 crore in FY23.

CASH FLOW MANAGEMENT

With our recent capacity and capability investments in place, the Company anticipates a sustained increase in free cash flow in the coming years. This positions it well to invest in growth initiatives and return value to shareholders. During the year, the Company repaid _205 crore in debt, reducing its total debt to _430 crore as on March 31, 2024. With the capex cycle largely completed, the Company expects its Net Cash flow from Business Operations to improve as it launches new products in different markets and aggressively markets them to generate the desired returns.

COST MANAGEMENT

Alembic is aware that cost management is the cornerstone of business profitability. To boost business profitability, the Company has undertaken the following measures.

- Calibrated its R&D expenses by _247 crore against the previous year.

- Increased reliance on renewable sources of energy would help cap energy costs.

- Continued to negotiate with its vendors for superior bargains.

- Focused on optimising the working capital cycle.

- Reduced its debt burden, which positively impacted interest costs. People cost for Alembic has increased owing to the recruitment of team members across divisions to manage the expanded business operations.

The Company considers this an investment that will deliver superior returns over the next few years.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Alembic prioritises strong internal controls to ensure smooth operations and activities. The Company maintains well-established policies and procedures, aiming to integrate all aspects of the organisation seamlessly. This includes strategic support functions like finance, human resources, and regulatory affairs, working hand-in-hand with core operations such as research, manufacturing, and the supply chain.

The Company has a robust internal audit system. This works alongside the external auditors to monitor compliance with legal regulations and operational standards. Ensuring statutory compliance is a top priority for Alembics entire leadership team. The Company has appointed M/s. Sharp & Tannan Associates LLP as internal auditors to further strengthen the internal controls. They assess the effectiveness of the internal control systems, recommend improvements, and bring any significant issues to the attention of the Audit Committee for review.

Risk management is also a key focus at Alembic. The Risk Management Committee and Board of Directors work together to evaluate and validate potential risks across the enterprise. Alembic prioritises clear and efficient documentation. Toward this end, the Company has implemented a company-wide document management system for core and strategic operations. Additionally, Alembic has achieved ISO 9001 and ISO 14001 certifications, demonstrating its commitment to standardised operating procedures at its operating facilities and other establishments. Alembic is dedicated to maintaining effective internal controls, adhering to statutory requirements, and continuously improving our operations through robust audit processes, risk management, and adherence to international standards.

OUTLOOK FOR TOMORROW

Alembic hopes to continue its growth momentum, driven by new products and geographies. The Indian branded business should maintain its performance, be platformed on new launches, and improve performance by the field force. The U.S. business has displayed marginal signs of recovery which augurs well for Alembic. The ex-U.S. business should continue its upward climb fueled by new product launches and geographic expansion. Moreover, as the new facilities are filled in with more products and higher volumes, their operating cost would be better absorbed, leading to enhanced profitability. The Company aims to generate higher liquidity from business operations to retire debt further and make Alembic increasingly Solid & Liquid.

HUMAN CAPITAL

At Alembic, we recognise our employees critical role in achieving success. We prioritise the well-being of our workforce and clients and the quality of our products. We have established core values to foster a dynamic environment that shapes our Companys culture.

Alembic is squarely focused on building a culture of creativity and excellence. We equip our employees with the necessary tools to realise their full potential and continuously improve. We understand the importance of continuous learning in the ever-evolving pharmaceutical industry. Investing in training and development opportunities ensures that the workforce remains skilled and adaptable. This commitment strengthens our human capital, allowing us to retain top talent to generate value for all stakeholders.

BUILDING A DIVERSE AND INCLUSIVE WORKPLACE

Alembic remains committed to creating a work environment where everyone can thrive. We value diversity and believe our employees unique talents and perspectives are essential for our success.

We judge all candidates and employees based solely on their merit and qualifications. This ensures fairness in recruitment, compensation and promotion opportunities, regardless of race, religion, caste, gender, sexual orientation, age and differently-abled individuals.

The Companys commitment to equal opportunity is embedded in its Code of Ethics & Conduct and Human Rights Policy. It believes that a diverse workforce fosters agility and is conducive to better adaptability to evolving business needs.

1. INDIA BRANDED BUSINESS

Alembic has a team of over 5,000+ Medical Representatives (MRs) who play a vital role in the success of its branded generics business. They are the driving force behind creating product awareness among healthcare professionals.

The Company empowers and updates its team with product knowledge, sectoral trends and technology tools to sharpen marketing skills and improve in-clinic performance.

INITIATIVES IN FY24

Technology intervention

- Equipped MRs with iPads for faster access to product information electronically for superior doctor interaction and improved in-clinic performance.

- Intensi_ed the use of technical tools for superior technical and data analysis, which helped in knowledge-backed and faster decision-making.

Knowledge sharing

- Introduced a hybrid training programme for new MRs, combining online and physical training. The initial training focused on the Company, the products, and the process, followed by an intense session on the nuances of medical marketing. The HR team continued to monitor the performance of new joinees with periodic assessments of their performance.

- Introduced ‘Train the Trainer programmes for building a pipeline of internal faculty for strengthening training capabilities; encouraged participation in certified programmes for building expertise on specific topics

Capability building y Encouraged cross-functional movement to allow team members to move between departments and locations – it helped in career growth and enhanced brand loyalty.

Leadership building

Continued the internal promotion programme based on a detailed assessment of skills and capabilities. The HR team developed a ‘Good to Excellence programme to fast-track star performers. Customised Individual Development follows this plan to increase the productivity of each identified member.

Team Recognition

- Introduced a programme to recognise teams based on prescription generation.

- Participated in the ‘Great Place to Work survey

Improving HR skills

- The HR functions and processes were transferred to a technology platform for superior efficiency, accuracy and transparency.

- Launched a six-month internal training programme to enhance the capabilities of the HR team.

PLANS FOR FY25

The HR team will also create a team to manage the operations of its Pithampur facility, which is expected to commence operations in FY25. Additionally, the HR team plans to implement a technology-based performance management system focusing on goal setting and reducing human bias. The team will analyse and plug in the gaps identified in the ‘Great Place to Work survey.

2. INTERNATIONAL GENERICS BUSINESS

The HR team at the Vadodara office looks into people management for its international business and operating facilities for these markets. During the year, the HR team made considerable efforts to improve the work environment, culture and people development.

- Made senior-level recruitment to manage the expanding business operations.

- Organised Town Hall meetings at manufacturing facilities to gather employee feedback on Company policies and suggestions for improving operations.

- Introduced initiatives towards work-life balance such as paternity leave, a five-day week at the corporate office, and a six-day week at the plant (First Saturday shifts have been eliminated at the plant).

- Intensi_ed the learning and development thrust by implementing several initiatives

- The Alembic Talent Pool programme continues, providing training and development opportunities for fresh graduates and postgraduates.

- Launched the Fresh Wave initiative to train additional entry-level employees across various functions.

- Set up a GMP lab to provide hands-on training for new hires.

- Hired a training manager to understand and identify training needs for existing employees, focusing on upskilling shop floor employees (including supervisors). y Created tools for identifying star performers in the team.

- Increased representation of women in our workforce with a focus on building gender diversity.

Entering the current year, the HR team plans to create a Celebration calendar that highlights special events to be celebrated for better team building. Also, because some manufacturing facilities have similar operations, the HR team will work on creating a fungible workforce.

INTELLECTUAL CAPITAL

RESEARCH & DEVELOPMENT (R&D)

The success and sustainability of innovation-based enterprises hinges on the strength of their R&D wing. The knowledge capital of the R&D unit creates its growth levers and profitability drivers. This is most critical for the pharmaceutical space, where innovation forms the bedrock of its relevance. Alembic recognises that intellectual capital is its critical differentiator, enabling the Company to ideate and develop innovative solutions for its customers and drive excellence within the organisation. The Company is ardently committed to fostering innovation and embracing complexity to propel its business forward. The R&D teams prowess in handling multiple high-end technologies and varied, complex chemistries showcases the zeal for innovation. The comprehensive intellectual capital helps serve diverse market needs and develop a wide range of solutions to increase Alembics domestic and global presence. The Companys R&D function comprises Formulation R&D and APIs R&D for adopting a focused approach to product development. The specialised teams for technology transfer and regulatory filings facilitate faster approval and commercialisation of its innovation assets. The Companys R&D team comprises 800+ highly skilled and experienced professionals who collectively drive the innovation agenda forward. These experts possess deep technical knowledge in advanced technologies and various chemistry platforms, allowing them to develop complex and challenging products that can address some of the debilitating ailments that impact the world. The Company has R&D units in Hyderabad and Vadodara. The Vadodara centre is the Companys flagship R&D facility. With a rich history of innovation, this facility specialises in addressing a multitude of healthcare needs.

1_ FORMULATION R&D _OSDs & INJECTABLES_

Alembic leverages a geographically distributed R&D network with centres in Vadodara and Hyderabad. This strategic placement fosters collaboration and expertise sharing.

With a rich history of innovation, Vadodara facility specialises in developing non-oncology treatments, addressing a multitude of healthcare needs.

The Hyderabad centre serves as a cutting-edge hub focused on oncology and non-oncology molecules. This dual focus allows Alembic to tackle complex diseases like cancer while continuing to develop medications for other prevalent conditions.

Alembics R&D department operates like a well-oiled machine, ensuring the development of high-quality products. Over the last few years, the Company has steadily built capabilities to develop products with challenging chemistries (solid dispersion products, prazole-type of products etc.). Having mastered these capabilities, the team is ready to make complex products for complex therapies. Alembic has institutionalised its R&D strategy of cherry-picking and working on products which align with its aspirations and capabilities, are complex in chemistry and difficult to make, and provide superior returns.

What kept us charged in FY24?

- Rebalanced our development product grid to increase the proportion of value-added products and enhance the utilisation of resources (man and machine). y Focused on maintaining a lean and efficient structure within the R&D units, which helped to optimise the R&D spending for the Company.

- Received 19 approvals during the year (including four tentative approvals); these products include OSDs, injectables, Derma and Ophthalmology.

- Filed 15 ANDAs with the U.S. FDA, which includes multi-therapy multi-products (OSDs, injectables, derma and ophthalmology).

- Undertook dossier extension activities where the approved dossiers (by the FDA) were filed in other non-U.S. markets; the team had initial success in Chile and Mexico with this initiative.

- Launched about 27 products in the U.S. market, comprising general and oncology injectables, which received a good response. y Received orders for two injectable products from Malaysia and Chile, which will be launched in FY25.

Our plan for FY25

The team plans to increase its filing speed while maintaining the quality of filings. Filings for the current year will comprise a mix of OSDs, injectables, and dermatology and ophthalmology products. The Injectable R&D team plans to file for about 7-8 products.

2_ R&D _API_

Alembics dedicated API (Active Pharmaceutical Ingredient) team plays a critical role in developing niche APIs that form the platform for its formulations. A highly motivated team focuses on developing APIs and filing Drug Master Files (DMFs) with the U.S. FDA.

It develops new polymorphs with product intellectual property, giving the Company a competitive advantage over peers in its business space. The API team has diligently invested time and effort in building expertise and capabilities to focus on developing complex APIs for Alembics multi-platform formulations. The dedicated peptide API unit develops complex APIs for injectable products for high-value, high-growth therapies.

What kept us charged in FY24?

-y Completed the risk assessment for Nitrosamine impurities in the existing product basket; the team validated some products at the commercial stage.

- Worked on developing a healthy product pipeline aligned with the Companys strategy in the formulation piece. A sizeable proportion of the products in the development and approval pipeline comprise products for oncology therapy; the development basket also comprises a good proportion of APIs for injectable products.

- Completed the validation batches for about 12-13 products, which will be filed in due course in alignment with the Companys priority.

- Invested in the LCMS equipment, which facilitated checking and analysing the Nitrosamine impurity in a faster and better way.

Our plan for FY25

- Strengthening our supply chain for seamless raw material availability.

- Focus on timelines and cost of molecule development.

- Launch some molecules that have healthy commercial prospects.

INFORMATION TECHNOLOGY (IT)

Information Technology (IT) plays a critical role in most businesses today. It functions like the nervous system of the enterprise, coordinating and facilitating essential tasks across the organisation. Recognising the escalating significance of technology in todays business world, Alembic has proactively established a robust IT foundation to streamline its daily operations. Continuously investing in modern solutions to remain at the forefront of the dynamic business landscape and enhance efficiency, the Company has also assembled a highly skilled IT team to manage the infrastructure and software, actively seeking and implementing tools to ensure seamless day-to-day operations. FY24 saw the development of a comprehensive IT security policy. This policy outlines best practices and protocols to safeguard sensitive company data. To ensure its effectiveness, the IT team trained Company & contractual employees. This training addressed user concerns and ensured everyone understood their role in maintaining a secure IT environment. Some of the solutions adopted by the Company include

1. MULTIFACTOR AUTHENTICATION _MFA_ FOR INTERNAL PORTAL

This adds an extra layer of security to logins. Users will need their password and a second verification factor, like a code from their phone, to access the internal portal. External users outside of the company are also secured with VPN layered access.

2. VULNERABILITY ASSESSMENTS

This involves proactively scanning internal and external systems for weaknesses that attackers could exploit. This helps identify and address potential security breaches before they occur.

3. UPDATED IT SECURITY POLICY

This document outlines the Companys guidelines for secure IT practices. Updating it ensures it reflects current threats and best practices.

4. MONITORING CRITICAL SERVERS AND SERVICES

This involves setting up a system to track activity on essential servers and applications. This allows for quick detection of suspicious activity and potential security incidents.

By implementing these measures, the Company has made its robust IT infrastructure stronger and more secure. This will help protect sensitive data, prevent unauthorised access, and ensure the smooth operation of critical systems.

SOCIAL CAPITAL

Alembic believes that its business growth is inextricably linked to the inclusive growth of the communities it is a part of. Its compassion and sense of duty drive the Companys contribution to the community. Alembic empowers its communities, providing them access to the necessities of life. The Company is committed to its social responsibilities and relentlessly works towards upliftment and welfare through various partnerships and associations. The Companys CSR policy directs actions and initiatives of projects within the ambit of its CSR committee to oversee the implementation of CSR initiatives and ensure their alignment with its values and objectives.

AREAS OF INTERVENTION

Education

Healthcare

Livelihood

Water

Sanitation

Community Infrastructure

EDUCATION

Alembic believes that education is one of the most important tools for changing ones life. It elevates a person as an individual with knowledge, skills and personality. Education makes a person eligible to secure a job and give his family a better life. The Company focuses on increasing education through multiple interventions to help the underprivileged population in rural areas move towards a better tomorrow.

Alembics Vikas Secondary and Higher Secondary School, established in 2002, provides free, high-quality education to underprivileged children in rural communities surrounding our Panelav facility. The Companys NIPUN Bharat-inspired project addresses educational challenges in Panchmahal and Vadodara districts. Focused on primary school students, the initiative enhances literacy, numeracy and life skills, fostering well-rounded development.

HEALTHCARE

Health is integral to human happiness and well-being, making an important contribution to economic progress. A healthy population has a longer and more productive lifespan.

Being a pharmaceutical company, Alembic realises the value of good health. It has taken up numerous initiatives to improve the health of communities living near the Companys operating facilities. Its flagship interventions are listed below. y The Swasthya Setu programme offers a holistic healthcare approach to 26 villages, impacting over 41,538 individuals. y The Suposhan programme tackles malnutrition in 26 villages across Jarod, Panelav and Karkhadi. The Company targets 53 Anganwadi centres to improve the nutritional status of 12,000+ beneficiaries.

LIVELIHOOD

Providing a livelihood for the underprivileged is crucial for breaking the poverty cycle, improving their overall well-being and opening doors to education and better opportunities for future generations. In a nutshell, it builds a stronger society.

The Companys flagship projects are the Farmer Empowerment Project and the Sneh Sakhi Stitching Drive. Under the Farmer Empowerment Project, the Company empowers over 1,200 farmers through sustainable agriculture training and cattle breeding.

The Sneh Sakhi project, a community-based intervention, empowers women through an industrial stitching micro-enterprise. After receiving skills training, the women formed a Self-Help Group to manage their stitching unit.

WATER

Clean water is a lifeline, especially for the underprivileged. Access to clean water frees them from health hazards and saves them from the hardship of sourcing clean water independently. This gives them some respite and time to do something productive. Clean water is the foundation for a healthier and more hopeful life, especially for those who struggle for it.

This reality has influenced the Company to undertake decisive steps towards providing clean water to the lesser privileged. It has installed 7 Water ATMs across Paldi, Lilora, Karkhadi and Jarod villages, benefitting over 20,000 residents. These ATMs leverage self-sustaining maintenance through user-collected proceeds managed by the local Panchayat.

SANITATION

Sanitation is a game-changer for villagers. It fosters a cleaner environment, reducing illness and improving the overall well-being of the entire community. The Companys sanitation initiative prioritised public health by constructing toilets in Jarod, contributing to 2,300 toilets built across communities over the past five years.

COMMUNITY INFRASTRUCTURE

Rainwater harvesting: A water resource assessment conducted across 48 villages in Vadodara and Panchmahal districts identified suitable locations for constructing 38 artificial recharge wells and 13 surface dams. These strategically placed structures aim to replenish groundwater reserves and address water scarcity. To initiate this plan, 15 artificial recharge wells were constructed during the financial year, with a projected annual recharge capacity of 7.5 crore litres.

Check dam: A successful earthen dam project in Parekhpura village captures and stores 6.37 crore litres of monsoon rainwater annually. This dam also facilitates groundwater recharge, infusing an estimated 1.91 crore litres annually. This project contributes to improved water security in the village.

NATURAL CAPITAL

Alembic believes that economic success and environmental well-being are not at odds – they are two sides of the same coin. It recognises that protecting our natural resources is essential for the health of humanity and the long-term growth of the business.

As a leading manufacturer of lifesaving medications, the Company understands the critical role a healthy environment plays in everyones lives. Clean air and water are fundamental to human well-being, and Alembic is committed to doing its part to ensure their preservation.

Across all its operations, Alembic prioritises environmental responsibility by exceeding regulations and even setting higher standards. The Company collaborates with its employees, partners and local communities to implement sustainable practices that safeguard the environment and ensure the businesss long-term success.

ENERGY MANAGEMENT

Alembic has adopted a two-pronged strategy towards energy management. One, the Company is focused on optimising energy consumption. For this, regular audits are undertaken to identify gaps and areas of improvement. The Company works to plug these gaps with sustainable solutions. These efforts have made a considerable difference in reducing overall energy consumption. Two, the Company is focused on increasing its reliance on renewable energy sources. In FY24, it invested in a 12 MW solar installation at village Bhatpur, near Vadodara, which caters to its operating units at the Panelav location. Alembic plans to invest in a second 12 MW solar installation at the same location to cater for its

Karkhadi facilities. These strategic investments will considerably increase the Companys dependence on renewable energy sources.

Further, the Company has committed to achieve Net Zero by 2040. As an important step in this direction, Alembic has enrolled with the SBTi to validate its Net Zero commitment.

Having inventoried its scope1 and scope2 emissions, Alembic has started calculating its Scope 3 emissions (emissions beyond its factory) under 15 prescribed categories. This will be a decisive step towards enabling it to draw a blueprint to reduce these emissions over the coming years.

WATER MANAGEMENT

Alembic is particularly mindful of the catastrophic challenges arising from water scarcity, initial signs of which are already surfacing in some regions of the world.

The Company has conducted a water audit at all its manufacturing facilities to identify potential water-saving areas. The Company has provided the relevant infrastructure and solutions to maximise water treatment and recycling. It has provided separate Sewage Treatment Plants (STPs) and E_uent Treatment Plants (ETPs) to separately treat its sewage water and use the same for gardening.

It has also provided RO plants at all its manufacturing locations to treat water and recover and recycle the e_uents generated from its operations to the maximum possible extent. All the water used by the Company is utilised or recycled back. No e_uent is discharged by the Company outside.

Fresh water consumption increased as the new facilities commenced operations in FY24. Regular awareness campaigns encourage optimal water use at all its usage points.

The Company is sensitive to new challenges of the Antimicrobial Resistance (AMR) issue and upcoming regulations in this direction. The Company has taken all care not to allow any of its antibiotic products to contaminate the environment in any manner.

Alembic is ardent in its commitment to water neutrality. For this, it has undertaken a study to identify the gaps which would serve as a platform for undertaking remedial measures over the coming years. According to the study, the Company would need about 50 additional recharge wells for rainwater harvesting to reach its target. The Company has already developed 82 recharge wells (proximate to the Karkhadi, Panelav, and Jarod facilities) and plans to create another 17 such wells in the current year (FY25). The investment will ensure that Alembic remains water-neutral despite a spike in freshwater consumption.

SOLVENT RECOVERY

Solvent recovery is critical for a pharmaceutical company. Recycling spent (used) solvent can lead to sizeable savings for any company. Alembic strengthened its efforts to increase the proportion of recycled solvents. During FY24, the Company worked on its solvent recovery plant and stripper efficiencies to improve the quantity and quality of solvent recovery. It also resulted in considerably higher savings for the Company.

SOLID WASTE MANAGEMENT

Alembic ensures the safe disposal of hazardous waste and demonstrates a commitment to sustainable waste management practices.

Alembic prioritises responsible waste management through a circular economy approach. The Company implements a 5R (Reduce, Reuse, Recycle, Recover, Rethink) strategy to minimise waste generation and maximise resource recovery.

It has installed screw presses in its ETPs for compacting the sludge; the moisture taken out is further treated and recycled. The compacted sludge is sent to designated landfills. The Company has partnered with cement manufacturers to utilise its high calori_c value wastes generated from manufacturing processes. E-waste is collected and sent to authorised recyclers.

Plastic Waste Management:

Alembic prioritises responsible waste management through a comprehensive plastic management plan. The Company has agreements with plastic waste recyclers to ensure the plastic waste generated from manufacturing operations is recycled and not put in landfills. As a responsible corporate, Alembic has tied up with an agency to collect plastic waste from its sold products all over India and recycle the same responsibly.

Alembic has also started a drive in its manufacturing operations to segregate mixed waste generated at source and separate recyclable items from mixed waste like waste liners, PPEs, shoe/head covers, paper, cardboards, etc. This has resulted in a better environmentally conscious culture development in its employees. The Company is also working on various software tools to reduce the consumption of paper waste. This includes software like LIMS, EBMR, LMS, WMS, Documentum, and TrackWise, in addition to its ERP system. The Company is also implementing ESG software to integrate the environment-related data of all sites in real-time. Looking at the evolving needs of various ESG regulations and requirements, the Company has reviewed and aligned all its corporate policies to the ESG goals. The Company has consolidated all its corporate policies in its new sustainability tab on its website.

CREATION OF A GREEN BELT

Green belts play a crucial role in environmental protection, offering a range of benefits for both the environment and human beings. Alembic continues to increase the green cover in and around its operating facilities and has set itself an ambitious target of planting 50,000 trees by 2027. The Company has adopted the Miyawaki technique for its plantation drive. This technique is used to grow dense, native forests in less space and in a relatively short period of time. It experimented with this technique to develop a sample Miyawaki forest of 2,000 trees, which was successful. The Company has undertaken an ambitious plan to increase its green cover from 20,000 to 50,000 trees in the next three years, utilising the same technique. This would have a positive impact on the climate of the surrounding neighbourhood and would go a long way in reducing the Companys carbon footprint.

RISK MANAGEMENT

As the business continually evolves with the changing market context, identifying, evaluating, and managing risks is Alembics top priority. The Company has established a strong risk management committee that oversees and implements risk mitigation measures.

The Companys risk management framework is developed to address its business needs while remaining simple and pragmatic. Below are the currently visible risks and mitigation measures that would help the Company minimise their impact on its business performance.

GROWING COMPETITIVE INTENSITY COULD POSE A CHALLENGE TO PROFITABLE BUSINESS GROWTH.

Mitigation measures

- Multiple revenue verticals help improve growth prospects.

- Launching new products and platforms would help improve prospects in the US markets.

- Launching new products and expanding the marketing footprint would fuel business growth for the non-US vertical.

- Focus on speciality therapies and new brand launches in the animal health space will continue to drive business growth.

INTENSIFYING GEOPOLITICAL ISSUES COULD IMPACT THE GLOBAL BUSINESS.

Mitigation measures

- A disturbed global landscape would impact almost all pharmaceutical companies, and Alembic would be no exception to this trend.

- The Company has a cushion of having a wide global presence across 78 nations. Moreover, its strong India Branded Business, helps it minimise the impact of global turmoil.

A ROBUST PIPELINE OF PRODUCTS IN THE DEVELOPMENT AND APPROVAL PIPELINE IS NECESSARY FOR BUSINESS GROWTH.

Mitigation measures

- Launched multiple products in all revenue verticals (branded generics in India and generics in the international market).

- Possesses a strong pipeline of products to sustain the launch run rate over the next 2-3 years.

- Continue to invest in R&D with a lower outlay, which has made product selection more focused on complex and challenging molecules.

ATTRITION OF KNOWLEDGE CAPITAL COULD IMPACT THE EXECUTION OF BUSINESS STRATEGIES.

Mitigation measures

- Reputation as a people-centric organisation helps in attracting good talent.

- The peoples policies and practices have helped it retain talent.

- Business growth of the Company and the Companys culture of pushing people out of their comfort zone to execute challenging projects has resulted in professional growth.

- An intense L&D calendar continues to enhance the knowledge capital.

ENVIRONMENT MANAGEMENT HAS ASSUMED A VERY CRITICAL ROLE IN BUSINESS SUSTAINABILITY.

Mitigation measures

- Sustainability has been deeply embedded into the operational edi_ce as the Company has set ambitious goals of achieving a water-positive position and Net Zero goals.

- It has made considerable investments in reducing the burden of its operations on the Earth.

- It has created a roadmap to achieve its articulated goals, which should see a more intense focus on reducing pollution and improving environmental management.

LIQUIDITY WOULD BE REQUIRED TO FUND GROWTH PROJECTS GOING FORWARD.

Mitigation measures

- Most of the capex has been completed, which should take care of the Companys growth aspiration for the next 3-5 years.

- Higher cash flow, which should be generated owing to a larger product basket and wider geographic presence, will reduce the Companys financial leverage – leading to a cash surplus position.

COMPLIANCE WITH THE DYNAMIC REGULATORY FRAMEWORK IN DIVERSE NATIONS IS VERY CRITICAL FOR SUSTAINED BUSINESS OPERATIONS AND GROWTH

Mitigation measures

- Products made for the international market are manufactured at US FDA-approved facilities.

- Separate teams are created to closely monitor the evolving regulatory and compliance norms and ensure that the operations align with the prevailing norms.