Alpa Laboratories Ltd Management Discussions

To,

The Shareholders

Caveat

This report may contain certain forward-looking statements based on managements perceptions of current business environment, industry trends, and economic outlook. These statements are subject to risks, uncertainties, and assumptions, and actual results may differ materially. While utmost care has been taken in preparing this analysis, shareholders are advised not to place undue reliance on such statements. Shareholders, investors, and readers are therefore advised not to place undue reliance on these forward-looking statements, as they are not predictions of future performance but rather indicative assessments made under current circumstances. The Company undertakes no obligation to publicly update, amend, or revise these statements in light of subsequent developments, events, or changes in circumstances, unless specifically required by law.

Industry Structure and Development

The global pharmaceutical industry continued its resilient growth trajectory in FY 2024-25, despite facing macroeconomic challenges such as supply chain disruptions, inflationary pressures, and tightening regulatory oversight. The global pharmaceutical market is currently valued at USD 1.65 trillion in 2024, and is expected to reach nearly USD 2.35 trillion by 2030, reflecting a strong compound annual growth rate of 6-6.2%. This growth is being driven by an increase in aging populations, the rising prevalence of chronic diseases, innovation in biologics, and expansion into emerging markets. The industry also witnessed accelerated adoption of digital health technologies, artificial intelligence (AI) in drug discovery, and precision medicine. India has emerged as a global hub for generic medicines, contributing to nearly 20% of global supply by volume. Policy support through the Production-Linked Incentive (PLI) scheme, focus on self-reliance (Atmanirbhar Bharat), and expanding healthcare infrastructure are further strengthening Indias position.

Global Economic Outlook

The global economy showed moderate but resilient growth in 2024, despite persistent geopolitical uncertainties, high interest rates, and supply chain disruptions. IMF projects global GDP growth at ~3.2% in 2025, with inflation moderating to 4.4%. The year 2024-25 unfolded against a backdrop of complex global economic realities, marked by moderate but uneven growth, persistent inflationary pressures, and significant geopolitical challenges. While the global economy expanded at a steady pace, the aftereffects of prolonged disruptions in supply chains and energy markets continued to create volatility in trade and manufacturing. The pharmaceutical industry, however, remained relatively resilient as healthcare demand continued to rise across both developed and developing economies. Increased life expectancy, the prevalence of chronic and lifestyle diseases, and growing awareness around preventive healthcare ensured that the sector remained insulated from broader economic uncertainties. At the same time, the industry faced challenges in the form of higher input costs, currency fluctuations, and stricter regulatory oversight in international markets. Global regulators, particularly the USFDA and EMA, continued to raise the bar on quality, compliance, and transparency, compelling pharmaceutical companies worldwide to focus on efficiency, reliability, and long-term sustainability of operations.

Indian Economic and Industry Landscape

India continued to reinforce its position as the worlds fastest-growing large economy, driven by robust domestic consumption, stable macroeconomic policies, and a steady rise in government expenditure on infrastructure and healthcare. The Indian pharmaceutical sector, a key contributor to the countrys exports and industrial output, retained its standing as the “pharmacy of the world” by supplying affordable and high-quality generic medicines across geographies. The Indian pharma sector continued strengthening its global footing: pharma exports surged past USD 30.47 billion in FY 2024-25, marking a 9% year-on-year increase from about USD 27.85 billion in the prior fiscal year. Notably, exports to the United States grew by around 14%, with March 2025 alone witnessing export value climb over 30% year-on-year to USD 3.68 billion. As India continues to consolidate as the worlds “pharmacy,” the domestic pharmaceutical market·estimated at about USD 50 billion in FY 2023- 24·is expected to grow further, potentially reaching USD 130 billion by 2030.

Key Trends in the Pharmaceutical Industry

The pharmaceutical industry is undergoing a transformative phase, driven by rapid scientific advancements, evolving patient needs, and structural changes across global healthcare systems. Several macro-trends are expected to redefine the sector over the coming decade, presenting both opportunities and challenges for industry participants.

Global Pharmaceutical Industry Trends

> Expansion of Specialty Medicines

Specialty medicines, particularly biologics, cell therapies, and gene therapies, are rapidly gaining share in the global market. By 2028, they are projected to account for over 45% of worldwide pharmaceutical spending. Therapeutic areas such as oncology, immunology, and rare diseases are leading this growth, reflecting the industrys focus on high-value, precision-driven treatments. This shift is redefining R&D priorities, pricing models, and patient care strategies worldwide.

> Rise of Generics and Biosimilars

While specialty drugs dominate global spending, generics and biosimilars continue to play an essential role in expanding healthcare access, particularly in cost-sensitive markets. According to IQVIA, biosimilars alone are expected to generate US$ 186 billion in cumulative savings by 2028, easing financial pressure on healthcare systems. For countries like India, this trend creates significant opportunities to strengthen their position as a global hub for affordable and quality-driven medicines.

> Precision Medicine and Personalised Treatments

Advances in genomic data, biomarkers, and targeted therapies are enabling highly personalised healthcare solutions. The focus is increasingly shifting from a uniform treatment model to tailored interventions based on individual patient profiles, especially in oncology, immunology, and rare diseases. This trend not only enhances treatment efficacy but also improves patient adherence and outcomes, setting new benchmarks for innovation-led healthcare delivery.

> Digital Health Integration

The rapid adoption of digital health tools is transforming the way patients, providers, and pharmaceutical companies interact. Telemedicine, wearable devices, and Al-powered health platforms are enabling real-time monitoring, strengthening treatment adherence, and generating valuable real-world evidence. For pharma companies, this integration offers an opportunity to deepen patient engagement and optimize product lifecycle management while supporting healthcare systems in achieving better outcomes.

> Artificial Intelligence in Drug Discovery

AI has emerged as a game-changer in drug discovery and development, significantly reducing timelines and enhancing accuracy in candidate selection. By predicting drug-target interactions, streamlining clinical trial design, and optimising molecule discovery, AI is accelerating the innovation cycle. This is expected to bring breakthrough therapies to market faster and at lower costs, reshaping how companies approach R&D investment strategies.

> Emerging Market Growth

Emerging economies such as China, India, and Brazil are expected to remain critical growth drivers due to rising investments in healthcare infrastructure, an expanding middle class, and aging populations. India, in particular, continues to play a dual role·serving as a global supplier of affordable generics and vaccines, while also witnessing robust domestic demand supported by government healthcare initiatives and private investment.

> Rising Global R&D Investments

Global R&D spending reached approximately US$ 200 billion in 2023 and is projected to grow by 5-7% annually over the next few years. Investments are being directed towards clinical trials, gene editing technologies, next-generation biologics, and advanced drug delivery systems. This surge underscores the industrys commitment to innovation, but it also intensifies competition and requires companies to balance long-term scientific pursuit with financial discipline.

Indian Pharmaceutical Industry Trends

> Strong Global Position in Generics and Vaccines

India accounts for 20% of the global generic medicine supply and is the largest vaccine producer by volume. With exports crossing USD 27 billion in FY 2024, India has reinforced its role as the “Pharmacy of the World.”

> Government Policy Support and PLI Scheme

The Indian government has introduced Production-Linked Incentive (PLI) schemes to boost local API, bulk drug, and medical device production. These initiatives aim to reduce import dependence and strengthen Indias pharmaceutical value chain.

> Growing Domestic Market

Indias pharmaceutical market, valued at over USD 55 billion in FY 2024, is expected to grow at a CAGR of 10-12% over the next five years. Rising healthcare awareness, expanding insurance coverage, and increasing lifestyle-related diseases are major growth drivers.

> Healthcare Infrastructure Expansion

Investments in hospitals, diagnostics, and public health programs are creating new opportunities for pharmaceutical companies. The governments Ayushman Bharat scheme and rising private sector participation are widening access to affordable medicines.

> Focus on Specialty and Complex Generics

While traditional generics continue to dominate, Indian companies are increasingly focusing on complex generics, injectables, biosimilars, and specialty formulations to capture higher-value markets and meet evolving global demand.

> Rising R&D and Innovation

Indian companies are steadily increasing investments in R&D, particularly in biosimilars, novel drug delivery systems, and niche therapies. Collaborations with global pharma and biotech firms are further accelerating innovation.

> Regulatory Strengthening and Global Compliance

Indian manufacturers are under heightened scrutiny from USFDA, EMA, and WHO. While compliance requirements have become stricter, they also present opportunities for companies with robust quality systems to differentiate themselves globally.

Performance Snapshot

During the financial year under review, the Company achieved a Standalone Total Income of ?13,575.71 Lacs as against ?12,361.29 Lacs in the previous financial year, reflecting a growth of 9.82%. This steady performance demonstrates the Companys resilience and its continued progress on the growth trajectory.

The Company has been consistently working towards expanding its presence in overseas markets, thereby enhancing its export revenues and diversifying its geographic footprint. The strategic entry into new international markets has contributed positively to the topline growth and will remain a key driver in the coming years.

Further, the Company has also witnessed a notable increase in orders from Government institutions and departments during the year as compared to the previous period. This development not only underscores the trust reposed in the Companys quality standards and compliance practices but is also expected to contribute meaningfully to future revenues.

Overall, the Company is moving on a strong and sustainable growth path with an emphasis on international expansion, government supplies, and strengthening its branded generics portfolio, which will enable it to achieve new milestones in the pharmaceutical industry.

Segment Reporting

The Companys primary business lies in the manufacture and sale of Drugs and Chemicals, which constitutes a single reportable segment. Accordingly, no separate segment reporting is required. The relevant disclosures as prescribed under the applicable Accounting Standards have been provided in the Notes to the Financial Statements, forming part of this Annual Report.

Threats, Risks and Concerns

The pharmaceutical industry continues to present significant opportunities; however, it is equally exposed to various risks and challenges that may impact the performance of the Company. Alpa Laboratories Limited has a robust internal control and risk management framework in place to identify, monitor, and mitigate such risks. Some of the key risks and concerns are highlighted below:

1. Regulatory and Compliance Risks

The pharmaceutical sector is highly regulated across global markets. Any adverse inspection outcomes, delay in obtaining regulatory approvals, or changes in government policies and compliance requirements can affect manufacturing operations, exports, and product launches.

2. Pricing Pressure and Competition

The industry faces intense pricing pressure due to competition from domestic players, multinational corporations, and generic manufacturers. Government price controls under NPPA (National Pharmaceutical Pricing Authority) and tender-based supply contracts further impact margins.

3. Raw Material and Supply Chain Risks

Dependence on imported Active Pharmaceutical Ingredients (APIs) and key raw materials exposes the Company to volatility in prices, supply shortages, and foreign exchange fluctuations. Global supply chain disruptions, such as those caused by geopolitical tensions or pandemics, remain a concern.

4. Technological Disruptions

Rapid advancements in biotechnology, biosimilars, and digital healthcare pose a dual challenge. While they open new avenues, they also demand continuous investment in R&D, manufacturing upgrades, and adoption of new technologies to remain competitive.

5. Global Market Risks

As the Company expands into overseas markets, it is exposed to risks related to foreign exchange volatility, varying regulatory regimes, trade restrictions, and changing geopolitical dynamics, which may affect exports and profitability.

6. Litigation and Intellectual Property Risks

Pharmaceutical companies are prone to litigation risks relating to patents, product liability, and regulatory non-compliance. Any unfavourable legal outcomes could impact financial performance and reputation.

7. Operational and Manpower Risks

Dependence on skilled professionals, rising employee costs, and labour compliance issues may create operational challenges. Retaining talent in R&D, manufacturing, and compliance functions remains a critical concern.

8. Macroeconomic and Environmental Risks

Broader risks such as inflation, interest rate fluctuations, environmental regulations, and climate-related factors (including sustainability mandates) may have a direct or indirect bearing on business operations.

Despite these risks, the Company is confident that its diversified product portfolio, focus on compliance, expansion into overseas markets, and strong customer relationships will enable it to mitigate challenges and continue on a sustainable growth path.

Human Resources

Human resources are among the most valuable assets of the Company and play a pivotal role in driving its growth and long-term success. At Alpa Laboratories Limited, we firmly believe that a motivated, skilled, and engaged workforce is the foundation of sustainable performance. The Company, therefore, accords the highest priority to attracting, nurturing, and retaining talent in alignment with its organizational goals and vision.

The Company takes immense pride in its diverse human capital, which comprises individuals from varied professional, cultural, and geographic backgrounds. Guided by the core values of integrity, innovation, collaboration, and excellence, our employees consistently demonstrate commitment, dedication, and resilience, thereby contributing significantly to the Companys achievements.

During the year under review, the Company continued to invest in training, skill enhancement, and employee engagement initiatives aimed at fostering a culture of continuous learning and performance orientation. Various measures were also undertaken to ensure the well-being and safety of employees, with particular emphasis on occupational health standards and workplace safety practices.

As of 31st March, 2025, the Company had 453 permanent employees, compared to 410 employees at the end of the previous year, reflecting an increase of approximately 10.48%. This growth in the workforce demonstrates the Companys expanding scale of operations, new market penetration, and commitment to strengthening its talent pool to support future business needs.

The management remains confident that with the continued focus on employee development, inclusive workplace practices, and transparent communication, Alpa Laboratories Limited will be able to retain its best talent and attract new professionals, ensuring the sustained success of the organization.

Results of Operations for FY 2024-25 as compared with FY 2023-24

Cautionary Statement

Certain statements made in this Management Discussion and Analysis Report may constitute “forward-looking statements” within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed or implied, as they are dependent on a number of factors such as the intensity of competition in both domestic and international pharmaceutical markets, fluctuations in foreign exchange rates and global macroeconomic conditions, changes in regulatory frameworks and government policies relating to pricing and compliance, supply chain disruptions and variations in raw material availability and costs, rapid technological advancements and risks relating to intellectual property, as well as broader economic, political, and industry- specific developments that remain beyond the control of the Company.