Anlon Healthcare Ltd Management Discussions

Management Discussion & Analysis

Economy

The global landscape is marked by a multitude of black swan disruptions from geopolitical developments to supply chain challenges to climate change and rapid technological advancements. The year began with an escalation in tariffs, unsettling global trade patterns, particularly for export-oriented entities. Today, we live in an era of unprecedented geopolitical conflicts, uncertainty in trade policies, the accelerated climate crisis and regulations, as well as, the societal impact of dynamically evolving areas such as artificial Intelligence raising significant concerns.

The war in West Asia has created multiple vortexes of headwinds. Amid daily swings in crude oil prices, global growth prospects for 2026 appear grim. Even if the war ends soon, rebuilding energy infrastructure in West Asia may take months, if not years. A surge in energy prices and its availability could lead to higher inflation, impacting demand and this in turn would hurt corporate profitability. It is therefore expected that Indias economic growth is going to be impacted in FY 2027.

The country will, however, remain among the fastest-growing major economies in FY 2027 despite headwinds from West Asia, supported by strong macroeconomic fundamentals as per the World Bank. In the said emerging backdrop, our nation demonstrates remarkable resilience to external risks, driven by strong domestic fundamentals and a stable and progressive policy framework. India continues to advance at an exceptional pace towards becoming an inclusive and sustainable developed economy.

Global Pharma market

The Indian pharmaceutical industry is known for its generic medicines and low-cost vaccines globally. India, recognised as the pharmacy of the world, supplies one in five generic medicines globally and has risen from seventh place in 2019 to currently third in global export volume. India has the largest number of USFDA-compliant plants outside the US and over 2,000 WHO-GMP approved facilities, exporting to 150+ countries.

The pharmaceuticals export during the FY 2026 had shown a growth of 2.1% which is currently worth about $1.6 trillion, with India contributing around 3% to 3.5%. Indias pharmaceutical industry is poised for significant growth, with its share in the global market expected to rise to 5% by 2030, according to a report by Bain & Company. A unique aspect of Indias pharma industry is that its export market is as large as its domestic market. Indian pharma exports play a crucial role in the countrys economy, making up 6% of total merchandise exports by value.

Anlon Healthcare Limited, having a wide range of product portfolio and state-of-the-art R&D facility, with decades of experience and understanding of the global markets, is well positioned to serve this opportunity which will help further to consolidate our position in the market.

Generics & Generic Formulation

In FY 2026, the global generic pharmaceuticals market continues expanding at a robust CAGR of 5% to 8% to meet rising global demand for affordable medication. The market is currently estimated to be approximately US$ 450 to US$ 500 billion with high growth expected in oncology, cardiovascular, and CNS therapeutic areas. The market is undergoing a structural transformation from simple oral solids to complex generics and biosimilars in this segment and looking for new opportunities in the near future in patent cliffs of blockbuster drugs.

The global pharmaceutical market is estimated to reach approximately US$ 1.72 trillion in 2026, representing a year-over-year increase of roughly 5.8% from 2025. US remains the leading market, accounting for nearly 45% of global revenue in 2026. The Asia Pacific region is witnessing the fastest growth, driven by rapid healthcare infrastructure improvements in China and India.

Indias drugs and pharmaceuticals exports stood at US$ 30.38 billion in 2025 as compared to US$ 27.82 billion in 2024. Indian drugs are exported to more than 200 countries in the world, with the US as the key market. Contract research and manufacturing services is becoming one of the fastest growing segments in the pharmaceutical and biotechnology industry. The pharmaceutical market uses outsourcing services from providers in the form of contract research organizations and contract manufacturing organizations.

To combat intense price erosion in traditional generics, your Company is pivoting R&D toward complex generics. These include modified-release formulations, long-acting injectable, and inhalation products which offer higher barriers to entry and more stable margins.

Active Pharmaceutical Ingredients ("API") market

API is a crucial segment of the pharma industry, contributing to around 35% of the market. India is the third-largest producer of API accounting for an 8% share of the Global API Industry. In December 2025, India announced a Rs. 60,000 crores API push to boost domestic pharmaceutical manufacturing and to cut import dependence.

The API division of your Company delivered a strong performance during FY 2026, even though alternate site qualification activities for API were accelerated to streamline commercial supplies as a part of the risk mitigation exercise. During the year, API domestic business accounted for 22% with Europe emerging as the key market for exports. Emerging markets faced pricing pressures and intense competition; however, business development initiatives taken with new molecules such as Montelukast, Ranolazine, Tadalafil, and Tizanidine are expected to provide fillip to your Companys future growth. Looking ahead with new product registrations in regulated markets such as Apremilast, Lacosamide, and Memantine, alongside cost-improvement initiatives on flagship molecules, we are confident of sustainable growth going forward.

Manufacturing Operations

Anlon Healthcare is a research-intensive manufacturing unit of Pharmaceutical Bulk Drugs and intermediates. Based in Rajkot, weve earned a global recognition for manufacturing products that adhere to the highest standards of quality. Our products comply with the regulatory requirements of leading health authorities such as FDA, PMDA, KFDA, cGMP, WHO-GMP. With exceptional R&D capabilities, advanced API manufacturing facilities, global regulatory accreditations, a strong product pipeline and speed-to-market competencies, ANLON is an ideal API partner.

We offer thorough technical and regulatory support across the entire production process, from project initiation to final production. Our manufacturing facility is equipped with high precision instruments that build quality at every stage of the process. We have experts at the helm of our organization, dedicated to safeguarding the quality and class of our products.

Owing to the emerging competitive climate of the pharmaceutical industry, weve been proactive in discerning ways to continually add customer value and augment our competency in business. This means that our products are continually upgraded to keep pace with the evolving dynamics of the global environment. With the range of high quality API and Advanced Drug Intermediates, ANLON has been successful in carving out a competitive niche in the market.

The global generic market, characterized by intense price competition, has profoundly impacted the Companys manufacturing strategy particularly in the last quarter of FY 2026. We saw operations rapidly turning less conducive, especially for export oriented pharmaceutical manufacturers as demand witnessed high volatility due to geopolitical uncertainty, tariff threats, trade barriers, and war situations, causing increased cost of goods sold due to supply chain disruptions.

However, several strategic initiatives were implemented across the plants during the year to increase our cost competitiveness:

1) Cost reduction initiatives for energy conservation and solvent recovery.

2) Optimum use of human capital with substantial reduction in overtime wages.

3) Increase in the batch sizes enabled an increase in the capacities and improved manufacturing processes that resulted in yield improvements.

4) Transition to eco-friendly and cost-efficient fuels continues by replacing conventional energy sources.

Safety remains a cornerstone of our operations, and we continued to foster safe work practices across our factories in FY 2026. This commitment has helped us maintain a record of zero fatalities and strive to prevent and reduce injuries. Our pledge to create a workplace that upholds the safety, health, and wellbeing of all our employees remains focused in all our activities.

We pride ourselves on our expansive global reach and our commitment to delivering high-quality pharmaceutical bulk drugs & intermediates to markets worldwide. Our strategic approach to Domestic & International operations ensures that our products are readily accessible across diverse regions, meeting the needs of our global clientele.

Anlon has, over the years, expanded its presence across the globe with key export markets being Europe, Turkey, Japan, Korea, Brazil, Russia & CIS countries, South & Central America, the Middle East & Northern Africa (MENA) region, and other Asian countries.

Opportunities & Threats

The global generic pharmaceuticals market continues to be a cornerstone of sustainable healthcare, where India has established itself as the leader in this space to meet rising global demand for affordable medication. As patent cliffs on major blockbuster drugs totalling over US$150 billion in near future, shall unlock further opportunities for the sector.

It is imperative for India to bolster its Research and Development ("R&D") capabilities, foster innovation, attain self-reliance in APIs and Key Starting Material, reinforce quality and compliance commitments and cement its status as a leading global destination for pharmaceutical innovation and manufacturing.

Geopolitical uncertainty has accelerated the "regionalization" of manufacturing. Major pharmaceutical players are exploring investments in US-based manufacturing to mitigate tariff risks, marking a strategic shift toward localizing production. The market is characterized by intense pricing pressure, high regulatory scrutiny, and frequent product shortages, especially in complex and niche therapeutic segments. However, it also presents lucrative opportunities for companies with strong operational execution, regulatory agility, and a broad pipeline of ANDAs.

Your Company is demonstrating its ability to adapt and focus on cost-effective manufacturing to address the challenges of policy volatility and take opportunity arising out of patent cliffs. To combat intense price erosion in traditional generics, the company is pivoting R&D towards complex generics. These include modified-release formulations, long-acting injectable, and inhalation products which offer higher barriers to entry and is expected to provide stable margins.

Research and Development ("R&D")

Research, Development and Quality Control are pillars of our continued growth over the years. We give equal importance to both these areas as one i.e. RnD leads to new product development required for growth of our business and profitability, whereas the other i.e. QC/QA to achieve customer quality standards for the continued supply of products required by the end user industries.

Anlon has dedicated in-house R&D facility and has a specialized team of more than 20 people across various sections including R&D, regulatory affairs, quality control, quality assurance and analytical development laboratory. Anlon currently has R&D laboratory equipped with:

- Modern Fume Hoods

- Autoclave

- High Vacuum Distillation Assembly

- Pilot plant assembly available in 100 ml to 250 litre by volume

- Vacuum Tray Dryers

- Hot air ovens.

- Rotary evaporators

- Fully equipped analytical laboratory to support the development, validation and Tech transfer activities.

- HS-GC

- HPLC

- GC

- FTIR

- UV

- Colorimeter

- Auto Titrator

Over the years Anlon has gained extensive experience with challenging reactions for the preparation of advance laboratory samples. We are specialized in following reactions:

- Grignard synthesis	- Reductions
- Epoxidation Reactions	- Bromination
- Friedel-Craft Reactions	- Chiral Reaction
- Alcylation and Alkylation	- C-C bond formation
- Reductive Amination	- Azide chemistry
- Phase Transfer Reactions	- Chlorosulfonation Reaction
- Sand Meyer Reactions	- Hydrolysis Reaction
- Cyclization Reactions	- Decarboxylation Reaction
- Halogenation	- Ullmann Reaction
- Oxidation Reactions

Anlon has the expertise and infrastructure available that creates a conducive work environment that inspires innovation at all levels. An impeccable adherence to quality and an uncompromising will to deliver promises, is what ANLON stands for.

Our ultramodern manufacturing facilities are cGMP compliant in accordance with various national and international standards. Acuity and precision are guaranteed owing to the high-tech, sophisticated instruments.

The Research & Development division is an indispensable asset to our company. It is not only aimed at improving the performance and efficacy of the existing products, but also developing new products that address the ever evolving needs of the market.

The cornerstone of our successful journey, rests undoubtedly, in the brain power of our highly skilled and dedicated employees. They are unrelenting in their commitment to ensuring that the highest quality is built into our products.

Quality consciousness is made to percolate in every stage of the production process. We are committed to providing the best-in-class drug development solutions that are cost-effective, sustainable and reliable.

Financial Performance

Standalone: During the year, your company has achieved revenue from operation of Rs.17,649.87 Lakhs as compared to previous year revenue from operation of Rs.12,028.66 Lakhs. Profit after tax was Rs.2,780.82 Lakhs during the year under review as compared to profit after tax of Rs.2,051.79 Lakhs of previous year.

Consolidated: During the year, your company has achieved revenue from operation of Rs.17,196.56 Lakhs. Profit after tax was Rs.2,908.81 Lakhs during the year.

The Company continues to maintain a strong focus on international markets, the Company has established its presence in the pharmaceutical formulations industry with a significant share of its revenue derived from regulated markets. The Company has invested in capacity expansion of API facility, which is expected to augment its growth going forward.

The manufacturing facilities of the Company are accredited by various regulatory authorities across the globe and your Company has a clean track record with respect to regulatory inspections including from USFDA. Nevertheless, the ongoing West Asia conflict may keep supply chain costs at elevated level in the near term, which may impact the margins.

Risk & Concern

The Indian pharma sector is fraught with many challenges, including geopolitical tensions, supply chain issues, pricing pressures and increased scrutiny by global regulatory agencies, among others that need to be overcome. The pharmaceutical industry faces numerous business risks, including regulatory compliance, supply chain disruptions and counterfeiting. Additionally, companies are exposed to product recalls and liability where their reputation stake is very high. Ensuring patient safety and maintaining high quality standards are also crucial, requiring careful risk assessment throughout the entire drug development and manufacturing process.

Digital transformation has redefined modern business, with application systems such as ERP, CRM, RPA, and AI platforms moving from just support functions to the backbone of operations, transactions, and reporting. While these systems enhance efficiency and scalability, they also introduce risks in cybersecurity.

Securing investments for R&D funding remains a formidable challenge due to the extensive financial commitments required over an extended period and the high risk of failure. Indias gross expenditure on R&D and innovation is relatively low, with the country allocating merely about 0.7% of its GDP to research, trailing in innovation / new discovery behind the developed and some of the emerging economies.

Your Company has formulated a risk assessment group wherein periodic review of risk assessments is carried out to identify weaknesses, addressing them early with proper documentation to strengthen compliance and regulatory audits. Risk mitigation through multi-site validation of critical products provides operational flexibility and the ability to respond to market disruptions. During the year, mitigation efforts continued further by having adequate insurance coverage against various risks including cybersecurity. The risk identified and measures being taken are presented to the Risk Committee for its review.

Outlook

Indias pharmaceutical industry is projected to experience substantial growth, with exports expected to reach US$ 350 billion by 2047 from current levels. The Indian pharmaceutical sector has around US$ 10 billion opportunity by 2029 as various blockbuster drugs would be going off patent.

India is also emerging as a key player in the global pharmaceutical supply chain, with its Contract Development and Manufacturing Organisation ("CDMO") industry set to double to US$ 14 billion by 2028, as per Macquarie. Indias fast-growing CDMO sector presents a major strategic opportunity for global pharma outsourcing and high-value drug development partnerships.

Reinvent and innovate will be the key mantra for the Indian pharma industry going forward as it looks to move from volume to value leadership, amid emerging challenges of inflation and pricing pressures in the global markets. R&D investment, market competitiveness and regulatory scrutiny are expected to shape the growth of generics and injectable products in the pharmaceutical industry.

The pharmaceutical industry is demonstrating its ability to adapt, focusing on high-impact innovation and cost-effective manufacturing. Green manufacturing and sustainable packaging are becoming strategic priorities rather than compliance exercises, as organisations are aiming to reduce energy consumption in intensive production processes.

Despite the challenges of policy volatility and patent cliffs, the strong demand for life-saving and chronic-care medicines guarantees long-term growth for the generic portfolio, which will be beneficial for your Company. In response to environmental regulations, Anlon Healthcare Limited is implementing eco-friendly packaging and reducing waste in its production.

However, the near-term outlook remains fragile as a rise in input costs, fueled by war-led supply chain disruptions, is likely to weigh on the performance of the companies. This divergence is especially pronounced in export-oriented entities which face higher freight costs and rising material costs which are harder to pass on, especially in an uneven demand environment

As we move in the new financial year, the balance between resilience and risk remains finely poised, external shocks—particularly those linked to energy and geopolitics—can quickly reshape market conditions and macro expectations. For turbulence to recede, we need the Middle East conflict to end quickly and clarity to emerge on the status of Indias trade ties with the US. The trajectory of the global economy will depend on the duration and intensity of the current conflict, even as domestic fundamentals provide a degree of stability.

Despite the challenges of pricing volatility, the strong demand particularly for generic medicines ensures a positive long-term outlook for the sector. Your Companys strategy for the coming year emphasizes vertical integration to control costs, expanding its portfolio including in oncology and investing in advanced, patient-friendly dosage forms. Artificial intelligence and machine learning are now used for excipient ratios, predict bioavailability and shorten the drug development life cycle to further optimise the cost.

Internal Control Systems

The Company places strong emphasis on internal controls as a critical component of its overall management control system. The Internal Audit and Information Technology functions play a vital role in ensuring that management is regularly informed about the adequacy and effectiveness of these controls. The Company has established a robust internal control framework, commensurate with its size and nature of operations. These controls ensure strict adherence to documented policies, guidelines, authorization protocols and approval procedures.

A comprehensive framework titled "IT Asset Allocation, Data Protection and Privacy Controls" is implemented and applicable to all employees, contractual staff, trainees, consultants, auditors, vendors, service personnel, and any individual with access to IT assets. The internal control system also includes key elements such as operational review meetings, risk management processes, and entity-level as well as process-level controls, supported by regular internal audits.

The Company has a well-defined Whistle Blower Policy that enables reporting of any misconduct or unethical behaviour. To further strengthen governance, an external firm of Chartered Accountants has been appointed as Internal Auditors. They conduct audits throughout the year to evaluate the effectiveness of internal controls, including Internal Financial Controls, and identify areas for improvement.

In addition, Statutory Auditors independently review and assess the internal control systems as part of their audit process. Their observations and recommendations are presented to the Audit Committee, ensuring timely corrective actions and continuous process improvements. Relevant suggestions are also shared with respective process owners for implementation.

All employees undergo a mandatory security induction program and are encouraged to report incidents via a 24x7 monitored mailbox. The Company has implemented advanced firewall systems and centralized Network Operations Centre monitoring to strengthen cybersecurity. Additionally, robust data restoration mechanisms are in place to ensure recovery within a few hours, supported by a comprehensive disaster recovery system for business applications and critical quality data.

Human Resources ("HR")

The HR Department exemplified a people-centric approach, aligning talent strategies with business growth, regulatory compliance, and cultural vibrancy. Through proactive workforce planning, innovative engagement initiatives, and robust capability building, HR drove operational excellence, delivered significant cost efficiencies, and achieved key regulatory milestones.

HR reviewed and aligned manpower requirements with business needs to optimize resource utilization. Your Company strategically on boarded apprentices through structured programs that met compliance standards and operational demands.

These efforts provided career-start opportunities for fresh talent, delivered structured learning to them in the pharma industry, enabled agile scaling through an "earn-while-you-learn" model, and strengthened industry-academia partnerships—building a resilient talent pipeline for sustained growth.

Monthly leadership meetings with key stakeholders—including plant heads, department heads, and senior executives—strategized business initiatives, reviewed projects, and addressed operational issues, yielding strong results. These forums offered clear visibility into operational challenges, talent gaps, growth objectives, production status, resource allocation, and risk mitigation. Outcomes included faster decision-making, enhanced cross-functional collaboration, and support for Anlons agile response to market demands.

New engagement activities strengthened team bonding, morale, and inclusivity. Highlights included shop-floor interactions, sports tournaments, spiritual/national/cultural events, family assimilation programs, and leadership sessions.

Technical and compliance modules achieved 100% coverage via shop floor sessions, Learning Management System (LMS) self-paced learning, Train-the-Trainer programs, skill development initiatives, and external nominations. Custom modules and workshops for certified trainers bolstered internal expertise. Amid rapid digital transformation, Anlon advanced HR processes through HRMS, LMS, online audit trails, and system integrations.

Well-being efforts featured annual health check-ups, mediclaim coverage, and other employee benefits. Compliance excellence featured zero major observations in major regulatory audits across locations and factory inspector audits, alongside seamless management of customer visits, town halls, and other events.

The workforce stood at 119 employees as of March 31, 2026, including 5.88% women.

Entering FY 2027, HR will build on this foundation by fostering a high-performance culture, sustaining strong momentum, and empowering talent. We remain dedicated to driving business progress with the right peoples strategies to achieve key objectives.

Cautionary Statement:

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward-looking statements. Actual results may differ materially from those expressed or implied due to various risks and uncertainties. Important factors that could make a difference to the Companys operations include global and Indian demand-supply conditions, finished goods prices, changes in government regulations & policies, tax regimes, economic conditions within India and the countries within which the Company conducts business and other such factors. The Company does not undertake to update these statements.

By order of the Board of Directors
Sd/-	Sd/-
Punitkumar Rasadia	Meet Vachhani
Managing Director	Whole Time Director
DIN: 06696258	DIN: 06695053
Place: Rajkot
Date: August 13, 2026