Auro Laboratories Ltd Management Discussions

A. INDUSTRY STRUCTURE AND DEVELOPMENTS

Global Pharma Industry Review:

The global pharmaceutical industry witnessed a transformative phase in the past year, driven by scientific breakthroughs, demographic shifts, evolving patient needs and rapid digitalisation. Amidst evolving global health demands and economic pressures, the industry strengthened its foundation for long-term growth while adapting to structural changes across regions and therapeutic segments.

In 2024, global medicine spending continued its upward trajectory, reflecting a growing demand for chronic care, specialty treatments and innovative therapies. Total pharmaceutical spending remains on course to exceed US$ 2.3 Trillion by 2028, supported by a projected CAGR of 5 8%. While volume growth plateaued in 2023, it is expected to grow at an average rate of 2.3% through 2028, driven by emerging markets such as China, India, Southeast Asia and Latin America. These regions are poised to drive the next phase of global demand, in contrast to mature markets such as North America, Western Europe and Japan, where per capita consumption levels are already high and future growth is expected to moderate.

Indian Pharma Industry Review:

India ranks as the 3^rd largest producer by volume and approximately 14^th by value globally in pharmaceuticals. The industry supplies over 50% of the worlds vaccines, nearly 40% of the US generic drug market, and about 25% of all medicines in the UK. The domestic pharmaceutical market is projected to grow to 2.38 lakh crore (~US$30 billion) in 2025, reflecting robust 8.2% YoY growth. The Indian pharmaceutical industry is currently valued at US$50 58 billion (FY 2023 24), with projections estimating growth to US$120 130 billion by 2030, and potentially up to US$450 billion by 2047. Domestic and export revenues are broadly balanced: exports reached US$27 billion, led by formulations (70%) and APIs/intermediates (~20%), while domestic consumption was around US$23.5 billion. The industry is expected to grow 2.2 2.4? by 2030, increasing its global share to about 5% (from ~3 3.5%). India is the largest supplier of generic medicines by volume, accounting for ~20% of global generic exports and over 60% of global vaccine production

Active pharmaceutical ingredient:

The Active Pharmaceutical Ingredient (API) is the vital, biologically active compound in pharmaceutical products driving therapeutic effects. Whether chemically synthesized or sourced from nature, APIs play a pivotal role globally in the pharmaceutical supply chain, serving as the foundation for drug development and manufacturing. As the pharmaceutical industry evolves towards cutting-edge therapeutics and innovative delivery systems, the demand for sophisticated APIs is likely to increase.

Business Overview:

Auro Laboratories Limited has been manufacturing and providing generic Active Pharmaceutical Ingredients (API) since its inception in 1992. Currently, the company is specializing in producing Anti Diabetics like Metformin HCL. It is the first-line treatment for type 2 diabetes.

The Company is headquartered in Mumbai and it has its manufacturing facility at Palghar in Maharashtra. The facility has all the required certifications from Indian authorities and European registration organization. The business has grown over the past many quarters and the results are indicative of the investments and planning done by the company over the past few years.

Anti Diabetics:

Diabetes is a chronic disease that occurs when the body cannot effectively use the produced insulin or the pancreas does not produce sufficient insulin. Diabetes is of two types: type 1 and type 2. About 90% of people with diabetes have type 2 diabetes. According to government and private organizations operating in the diabetes industry, diabetes is considered one of the top fatal diseases. The rising prevalence of diabetes worldwide is expected to drive the global market growth by 2027.

Metformin hydrochloride is the raw material of finished product metformin hydrochloride drugs. That is the API metformin hydrochloride. Metformin Hydrochloride finished product is an oral antihyperglycemic drug used in the management of type 2-diabetes.

B. OPPORTUNITIES, THREATS, OUTLOOK, RISKS AND CONCERNS

Opportunities:

(a) Growing demand for anti-diabetic APIs, backed by escalating global prevalence of diabetes.

(b) International credentialing advantage, including EU-GMP, WHO-GMP, and CEP, opening access to stringent markets

(c) CDMO potential, offering contract manufacturing and regulatory services to global pharma partners.

Threats & Concerns:

(a) Raw material volatility and competitive pricing pressure from larger API suppliers.

(b) Stringent regulatory expectations require ongoing compliance and audit readiness.

(c ) Export dependencies vs. domestic market demand fluctuations.

Strengths:

The company with existing registrations and regulatory approvals has an established customer base in India and in various foreign countries that will enable it to further enhance their growth.

Further, the enhanced manufacturing capacity is due to come online this year and enable us to cater to the increased demand from current and prospective customers.

Outlook:

The rise in the aging population is one of the major drivers of the pharmaceutical API manufacturing market. As the aging population increases, the demand for pharmaceutical drugs also increases. API acts as a specialty drug in these medicines to cure a particular disease.

The rise in chronic conditions is expected to propel the pharmaceutical API manufacturing market going forward. Chronic conditions, also known as chronic diseases, refer to long-term health conditions that last for extended periods, often for a persons entire life, and typically cannot be cured completely. The quality, effectiveness, and safety of the medication depend largely on the API used. Pharmaceutical API manufacturing helps to produce essential medications for managing chronic diseases.

The outlook is positive for the company considering its product mix, market conditions and the expected increase in the demand of its Anti-Diabetic product. The focus is to operate with the highest Environment, Health and Safety standards, while improving efficiencies, unit costs and ensuring business continuity.

C. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Companys defined organizational structure, documented policy guidelines and adequate internal controls ensure efficiency of operations, compliance with internal policies, applicable laws and regulations, protection of resources and assets and accurate reporting of financial transactions. The Company continuously upgrades these systems in line with best available practices.

D. HUMAN RESOURCES

Human resources continue to be one of the critical assets of the organization. Attracting relevant talent remains the Companys key focus. It pays special attention to training, welfare and safety of its people, strengthening human capabilities. As of March 31, 2025, your company boasted a workforce of 55 employees, diligently working and dedicated to the companys goals.

E. INVESTOR RELATIONS AND ENGAGEMENT:

Investor Relations (IR) is playing an increasingly important role in todays volatile world in enabling companies to manage investor expectations. The objectives of Companys investor relations activities are to boost confidence and develop a long-term relationship of trust with stakeholders including Shareholders, Investors & Analysts, through true and fair disclosure of information. To pursue these objectives at all times, your Company continuously discloses necessary information.

F. SEGMENT WISE OR PRODUCT-WISE PERFORMANCE

The Company is a single segment Company engaged in the business of Bulk Drugs. The Companys revenue from operations stands at Rs. 1939.84 Lakhs for the year ended March 31, 2025.

G. FINANCIAL PERFORMANCE

A detailed financial overview of the Company for the FY 2024-2025 is available in the first page of the Boards Report forming part of this Annual Report.

H. KEY FINANCIAL RATIOS

Particulars	FY 24-25	FY 23-24	Variance (%)
1 Current ratio (in times)	0.99	1.29	-22.88%
2 Debt Equity ratio (in times)	1.05	0.63	67.49%
3 Debt service coverage ratio (in times)	0.09	0.37	-75.65%
4 Inventory Turnover Ratio (in times)	2.01	6.12	-67.22%
5 Trade receivables turnover ratio (in times)	2.28	4.14	-43.09%
6 Trade payables turnover ratio (in times)	0.74	3.71	-79.98%
7 Net capital turnover ratio (in times)	-151.28	7.75	-2058.30%
8 Return on Equity (ROE) (%)	4.28%	18.57%	-76.96%
9 Net profit ratio (%)	9.48%	14.53%	-34.75%
10 Return on capital employed (%)	3.83%	17.93%	-85.51%
Return on Investment (ROI) (%)
11 Quoted	0.00%	0.00%	0.00%
Unquoted	0.00%	0.00%	0.00%

1) Current ratio has reduced due to reduction in inventory and cash and cash equivalents.

2) Debt Equity ratio has increased due to borrowings taken for expansion project to increase the production capacity.

3) Debt service Coverage ratio has reduced, even though Profit after taxes before Interest & Depreciation has increased, due to increase in debt taken for expansion project to increase the production capacity.

4) Inventory Turnover ratio reduced due reduced purchase resulting in reduced cost of goods sold.

5) Trade receivables Turnover ratio reduced due to increase in trade receivables arising from delay in export receivable.

6) Trade payables Turnover ratio improved due to import payment terms.

7) Net Capital Turnover ratio decreased due to reduction in working capital.

8) Return on Equity reduced due to reduced in Profit after tax.

9) Net Profit ratio reduced due to reduced in Profit after tax.

10) Return on Capital employed reduced due to reduced in earnings after interest and taxes.

CAUTIONARY STATEMENT

Management discussion and analysis report contains statements which are forward looking based on assumptions. Actual results may differ from those expressed or implied due to risk and uncertainties which have been detailed in this report. Several factors as listed in this report could make significant difference to the Companys operations. Investors, therefore, are requested to make their own independent judgments and seek professional advice before taking any investment decisions.

	For and on behalf of the Board of Directors
	Auro Laboratories Limited
CIN: L33125MH1989PLC051910	(Sharat Deorah)
Mumbai, August 23, 2025	Chairman and Managing Director
	DIN: 00230784