Alpa Laboratories Ltd Management Discussions

1. Economic Overview

The global economy navigated a year of moderate, uneven growth through 2025 and into 2026, shaped by elevated interest rates in several major economies, tariff-driven disruptions to international trade, and continuing geopolitical uncertainty. Inflationary pressures showed signs of easing across several developed markets, even as currency volatility and input cost pressures persisted in emerging economies.

Against this global backdrop, India continued to stand out as one of the fastest-growing large economies in the world, anchored by resilient domestic consumption, disciplined macroeconomic management, and sustained public investment in infrastructure and healthcare delivery systems. The Economic Survey 202526 reaffirmed Indias position as the third-largest pharmaceutical producer globally by volume, underlining the sectors continuing contribution to the countrys industrial and export strength.

2. Global Pharmaceutical Industry

The global pharmaceutical industry sustained its long-term growth trajectory through the year, notwithstanding headwinds such as looming patent expiries for several blockbuster molecules, tariff-related uncertainty affecting cross-border trade, and continuing pricing scrutiny in developed markets. The global medicine market is projected to grow at a 5% to 8% compound annual growth rate through 2030, reaching approximately USD 2.6 trillion, a forecast that has remained broadly stable despite these headwinds, underscoring the sectors underlying resilience.

Large global innovator companies continued to redirect R&D investment toward specialty and high-value therapeutic areas — oncology, immunology, and rare diseases in particular — even as generics and biosimilars retained their critical role in expanding access to affordable healthcare across cost-sensitive markets. The continuing adoption of artificial intelligence in drug discovery, coupled with the expansion of digital health platforms and precision medicine, is reshaping competitive dynamics across the value chain, compelling both large innovators and generics-focused manufacturers to invest in technology-led efficiency and quality systems.

3. Indian Pharmaceutical Industry

India retained its position as the Pharmacy of the World during the year, with pharmaceutical exports rising to approximately USD 31 billion in FY 2025-26, continuing a decade-long growth trend from around USD 14-15 billion in FY 2014-15. The Government of India has articulated a target of USD 50 billion in pharmaceutical exports by 2030, to be driven through quality enhancement, innovation, regulatory excellence, and diversification of export destinations, supported by an industrial base of over 10,500 manufacturing units producing more than 60,000 generic brands across 60 therapeutic categories.

Indias domestic pharmaceutical market, valued at approximately Rs. 5,20,000 crore (USD 60.32 billion) in 2026, is projected to grow to nearly Rs. 6,89,000 crore (USD 79.74 billion) by 2031, driven by rising healthcare awareness, expanding insurance coverage, and an increasing burden of lifestyle-related and chronic diseases. Continued Government support through the Production-Linked Incentive (PLI) scheme for bulk drugs and APIs, the Strengthening of Pharmaceutical Industry (SPI) scheme, and expanding public healthcare coverage under Ayushman Bharat continue to underpin the sectors long-term growth outlook, even as Indian manufacturers face intensifying scrutiny from global regulators such as the USFDA and EMA, and rising domestic price-control pressure under the NPPA framework.

4. Company Overview

Alpa Laboratories Limited is a WHO-GMP and ISO-certified pharmaceutical formulations manufacturer, engaged in the development, manufacture, and marketing of a diversified portfolio of Finished Dosage

Forms (FDFs) spanning ethical, generic, and OTC formulations, catering to both human and veterinary healthcare segments. The Companys business, comprising the manufacture and sale of Drugs and Chemicals, continues to be reported as a single operating segment, in accordance with the applicable Accounting Standards, with relevant disclosures provided in the Notes to the Financial Statements forming part of this Annual Report.

5. Review of Financial Performance

During the year under review, the Company recorded a Standalone Sales and Other Income of ^12,153.02 Lacs, compared to ?13,575.71 Lacs in the previous year, and a Consolidated Sales and Other Income of ?12,156.64 Lacs, compared to ?13,579.96 Lacs in the previous year — a decline of approximately 10-11% on both bases. Standalone Profit Before Tax stood at ?1,664.05 Lacs, against ?2,584.12 Lacs in the previous year, while Standalone Net Profit stood at ?1,406.91 Lacs, against ?1,982.90 Lacs in the previous year. On a Consolidated basis, Net Profit stood at ?1,412.59 Lacs, against ?1,965.27 Lacs in the previous year.

The decline in revenue and profitability during the year was primarily attributable to softer demand and heightened pricing pressure across certain product categories in both the domestic and export markets. Despite the moderation in topline performance, the Company continued to exercise financial discipline, maintaining low Finance Costs and a conservative capital structure with minimal reliance on external borrowings, reflecting the continued financial stability of its balance sheet.

6. Opportunities and Growth Drivers

The Company believes several structural trends continue to support its medium-to-long-term growth prospects:

> Export Market Expansion — Continued efforts to deepen presence in overseas markets, supported by Indias growing credibility as a reliable, quality-compliant pharmaceutical supplier globally.

> Institutional and Government Supplies — Rising participation in Government and institutional tenders, supported by the Companys compliance track record and manufacturing quality standards.

> Branded Generics Portfolio — Continued strengthening of the Companys branded generics business, aimed at improving margin resilience relative to purely tender-driven volumes.

> Complex Generics and Value-Added Formulations — Alignment with the broader industry shift toward higher-value, differentiated generic formulations, in line with trends observed across the Indian generics industry.

> Regulatory Compliance as a Differentiator — The Companys WHO-GMP and ISO-certified manufacturing facilities position it to benefit as global regulators continue to raise compliance benchmarks, favouring manufacturers with robust quality systems.

7. Risks, Threats and Concerns

The Company operates in an industry that, while structurally resilient, remains exposed to a range of risks that could impact its performance:

Risk Category		Nature of Risk
Regulatory Compliance &		Adverse inspection outcomes, delays in approvals, or changes in pricing/compliance policy affecting operations and product launches
Pricing Competition &		Intense competition, NPPA price controls, and tender-driven pricing pressure impacting margins
Raw Material Supply Chain &		Dependence on imported APIs exposing the Company to price volatility, supply disruption, and currency risk
Technological Disruption		Need for continuous investment in R&D and manufacturing upgrades to keep pace with biosimilars and digital health innovation
Global Market Exposure	Foreign exchange volatility, evolving trade/tariff regimes, and varying regulatory requirements across export markets
Litigation & IP	Exposure to patent, product liability, and regulatory noncompliance litigation
Talent & Operations	Retention of skilled talent in R&D, manufacturing, and compliance functions amid rising employee costs
Macroeconomic & Environmental	Inflation, interest rate movements, and tightening environmental/sustainability regulation

The Company maintains a structured internal control and risk management framework, overseen by the Audit Committee, to identify, assess, and mitigate these risks on an ongoing basis.

8. Internal Control Systems and their Adequacy

The Company maintains internal control systems commensurate with the size and nature of its operations, designed to safeguard assets, ensure reliability of financial reporting, and secure compliance with applicable laws and regulations. The Internal Audit function operates independently, reporting to the Chairman of the Audit Committee, and conducts periodic reviews of the efficacy of internal controls across manufacturing, financial, and compliance processes. Significant observations and the resulting corrective action plans are placed before the Audit Committee on a quarterly basis, ensuring continuous strengthening of the control environment.

9. Human Resources and Industrial Relations

The Company continues to regard its workforce as central to its long-term competitiveness, with HR policies focused on talent attraction, retention, and development, aligned with the Companys strategic priorities. During the year, the Company continued to invest in training and capability-building programmes, employee engagement initiatives, and workplace safety standards across its manufacturing locations. Industrial relations with the Companys workforce remained cordial through the year. Further details are provided under the Human Resources section of the Boards Report.

10. Outlook

While FY 2025-26 saw a moderation in the Companys financial performance amid broader pricing and demand pressures across the pharmaceutical sector, the Board remains confident in the Companys underlying fundamentals — a diversified product portfolio, WHO-GMP-compliant manufacturing infrastructure, an expanding international footprint, and a low-leverage balance sheet. With continued focus on export diversification, institutional supply channels, and its branded generics business, the Company believes it is well-positioned to work toward a return to sustainable, profitable growth in the coming years, in line with the broader growth trajectory anticipated for the Indian pharmaceutical industry.

11. Cautionary Statement

Statements in this Management Discussion and Analysis Report that describe the Companys objectives, projections, estimates, and expectations may constitute forward-looking statements within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed or implied, due to factors including but not limited to: competitive intensity in domestic and international pharmaceutical markets; fluctuations in foreign exchange rates and global macroeconomic conditions; changes in regulatory frameworks and government pricing policy; disruptions in supply chains and volatility in raw material availability and costs; the pace of technological change and associated intellectual property risks; and broader economic, political, and industry developments that remain outside the control of the Company. The Company undertakes no obligation to publicly update or revise any forward-looking statement, except as required by applicable law.