Auro Laboratories Ltd Management Discussions

A. INDUSTRY STRUCTURE AND DEVELOPMENTS

Global Pharma Industry Review:

Pharmaceuticals play an important role in public health and economic development. They are crucial for the prevention and treatment of chronic diseases, thereby improving quality of life and supporting economic growth.

The global pharmaceuticals market size was valued at USD 1,999.24 billion in 2025. The market is projected to grow from USD 2,150.17 billion in 2026 to USD 4,035.35 billion by 2034, exhibiting a CAGR of 8.19% during the forecast period. North America dominated the pharmaceuticals market with a market share of 44.81% in 2026.

The market is witnessing significant growth, driven by factors such as increasing demand for innovations and technologies in the healthcare sector, rising cases of various chronic and life-threatening diseases. Metformin is one of the most thoroughly researched, cost-effective, and safe molecules in medical history

Indian Pharma Industry Review:

Indias pharmaceutical sector is a global leader in the production of generic drugs and vaccines. According to Bain & Co, the Indian pharmaceutical market stood at Rs. 4,71,295 crore (US$ 55 billion) in 2025 and is expected to grow to Rs. 10,28,280-11,13,970 crore (US$ 120-130 billion) by 2030.

Recognised as the ‘pharmacy of the world, India supplies one in five generic medicines globally and has risen from seventh place in 2019 to third in global export volume.

Indian pharmaceutical firms have a Rs. 85,690 crore (US$ 10 billion) opportunity by 2029 as 15 blockbuster drugs with combined revenue of Rs. 9,59,728 crore (US$ 112 billion) go off-patent. Non-prescription OTC drugs may soon be sold at general stores, pending licensing. India is the third-largest producer of APIs, manufacturing over 500 types and supplying 57% to WHOs prequalified list.

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.

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, finished product is an oral antihyperglycemic drug used in the management of type 2-diabetes.

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.

The facility has recently completed capacity expansion for the metformin and other products. Consequently, production volume expected to grow significantly. The benefit of recent capacity expansion is expected to reflect in the future quarter.

B. OPPORTUNITIES, THREATS, OUTLOOK, RISKS AND CONCERNS

Opportunities:

(a) Growing demand, with a projected market value nearing $2 billion, the escalating incidence of Type 2 diabetes, obesity, and off-label usage continuously drives up baseline API requirements worldwide. The expansion of this market is fundamentally supported by the escalating global burden of metabolic disorders and the established cost-effectiveness of the drug which cements its status as a preferred first-line therapy. Expanding geriatric populations and increasing obesity rates further necessitate consistent pharmaceutical supply to address chronic care needs.

(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.

(d) Continuous Manufacturing: Adopting continuous manufacturing processes enables API manufacturers to reduce operational costs, lower energy usage, and increase yield for powdered Metformin

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

Further, formulation project will be effective this year to enable optimum utilisation of resources utilizing companys own produced APIs.

Outlook:

The escalating global prevalence of Type 2 Diabetes Mellitus serves as the primary catalyst for the Metformin Hydrochloride market, necessitating an immense volume of first-line therapeutics to manage chronic hyperglycemia. As healthcare systems strive to control this epidemic, the demand for Metformin remains robust due to its established efficacy and pivotal role in treatment protocols.

The rising incidence of obesity and sedentary lifestyles significantly propels market expansion by expanding the demographic susceptible to metabolic syndrome. Excess adiposity is a critical risk factor that often necessitates early pharmaceutical management, where Metformin is increasingly utilized for its weight-neutral properties alongside glycemic control.

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, 2026, your company boasted a workforce of 78 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. 3073.98 Lakhs for the year ended March 31, 2026.

G. FINANCIAL PERFORMANCE:

A detailed financial overview of the Company for the FY 2025-2026 is available in the first page of the Boards Report forming part of this Annual Report.

H. KEY FINANCIAL RATIOS

Sr No. Particulars	Current Year	Previous Year	Change %	Reasons where Varriance is more than 25%
1 Current Ratio (Current Assets/Current Liability)	1.08	1.00	8.38%	-
2 Debt-Equity Ratio	1.37	1.05	30.38%	Due to Increase in debt the ratio has increased
3 Debt Service Coverage Ratio	2.21	0.09	2380.02%	Due to increase in Profit the ratio has improved
4 Return on Equity Ratio (Net Profit after Taxes/ Average Shareholders Equity)	7.91%	4.28%	84.86%	Due to increase in Profit the ratio has improved
5 Inventory Turnover Ratio (Cost of Goods Sold /Average Inventory )	0.70	2.01	-64.89%	Due to increase in Inventories the ratio has declined.
6 Trade Receivables Ratio (Revenue from Operation/Average Trade receivables)	3.32	2.28	45.45%	Due to increase in revenue the ratio has improved.
7 Trade Payables Ratio (Net Credit Purchases / Average Trade Payable)	2.93	0.74	293.69%	Due to decline in Trade payables the ratio has improved.
8 Net Capital Turnover Ratio ( Revenue from Operations /Net Working Capital)	13.91	-151.81	-109.16%	Due to increase in revenue the ratio has increased.
9 Net Profit Ratio (Net profit /(Loss) After Tax /Revenue from operation )	11.49%	9.48%	21.25%	-
10 Return on Capital employed (EBIT / Capital Employed plus Deffered Tax Liabilities)	19.86%	3.83%	419.13%	Due to increase in Profit the ratio has improved
11 Return on Investment (Interest Income/Average Loans & Fixed Deposit Investment)	7.43%	6.02%	23.46%	-

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, June 30, 2026	Chairman and Managing Director
	DIN: 00230784