A. INDUSTRY STRUCTURE AND DEVELOPMENTS Global Pharma Industry Review:
The world pharmaceutical industry is one of the top performing industries globally. New
medications are constantly being developed, approved and marketed, resulting in
significant market growth. Other market growth drivers include the aging population, as
seniors use more medicines per capita and there is a rise in the prevalence and treatment
of chronic diseases.
Revenue in the Pharmaceuticals market is projected to reach US$1,163.00bn in 2023 and
an annual growth rate (CAGR 2023-2027) of 5.39%, resulting in a market volume of
US$1,435.00bn by 2027.
https://www.statista.com/outlook/hmo/pharmaceuticals/worldwide
Indian Pharma Industry Review:
The Indian pharmaceutical industry ranks third globally in pharmaceutical production by
volume and is known for its generic medicines and low-cost vaccines. India is one of the
biggest suppliers of low-cost vaccines in the world. Major segments of Indian
Pharmaceutical Industry include generic drugs, OTC medicines, bulk drugs, vaccines,
contract research & manufacturing, biosimilars and biologics. Because of the low price
and high quality, Indian medicines are preferred worldwide, making it “pharmacy of
the world”.
The Pharma sector currently contributes to around 1.72% of the countrys GDP. The
Indian pharma industry has grown at a compounded annual growth rate of 9.43% since the
past nine years. According to the Indian Economic Survey 2021, the domestic market is
expected to grow 3x in the next decade. The pharmaceutical industry in India is expected
to reach $65 billion by 2024 and to $120-130 billion by 2030.
Key Trends in the Pharma Industry
Changing Government and Regulatory Landscape- Tightening of policy and faster
regulatory approvals are increasing competition, requiring companies to be right first
time. With increased vigilance from regulators, a focus on quality assurance and control
has become even more critical.
Shifting Industry Dynamics- shift from “Make in India” to “Develop in
India”, increased globalization, a focus on value addition versus pricing, and change
from a competitive to collaborative mind-set
Emergence of New Go-to-Market Models- managing multiple channels and consumers is
becoming increasingly critical. The rising role of pharmacists vs. physicians, and patient
empowerment are drivers.
Digital: Backbone of Transformation- To remain competitive, companies need to
demonstrate agility in responding to the changing relationship dynamics triggered by new
digital players, and invest in data and analytics capabilities.
Active pharmaceutical ingredient:
Active pharmaceutical ingredient (API) is a part of any drug that produces its effects.
These are known as Bulk Drugs. Some drugs, such as combination therapies, have multiple
active ingredients
to treat different symptoms or act in different ways. They are produced using highly
technological industrial processes, both during the R&D and the commercial production
phase.
Global API Market
The global active pharmaceutical ingredients market size was valued at USD 222.4
billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 5.90%
from 2023 to 2030. The growth can be attributed to the advancements in active
pharmaceutical ingredient (API) manufacturing and the rising prevalence of chronic
diseases, such as cardiovascular diseases and cancer. Favorable government policies for
API production, along with changes in geopolitical situations, are boosting market growth.
The API market is undergoing immense changes due to supply chain disruption by COVID-19.
Countries such as India are being preferred over China for the export of API owing to
geopolitical situations and the demand to reduce dependence on China for API products.
Furthermore, governments of many countries have formulated plans and granted incentives to
promote the production of API.
(https://www.grandviewresearch.com/industry-analysis/active-pharmaceutical-ingredients-market)
Indian API market
The Indian active pharmaceutical ingredients (APIs) market stood at $11.807 billion in
financial year 2021 (FY2021) and is expected to grow at a compound annual growth rate
(CAGR) of 12.24 percent during the forecast period (2021 to 2027).
The key factors boosting the growth of the active pharmaceutical ingredients market are
the rising drug research, rapid technological advancements and development activities for
drug manufacturing, the increasing importance of generics, and the increasing uptake of
biopharmaceuticals. However, the unfavourable drug price control policies across various
nations and high manufacturing costs are expected to hinder the markets growth.
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:
The India Oral Anti-Diabetic Drug Market size is expected to grow from USD 1,636.90
million in 2023 to USD 1,944.12 million by 2028, at a CAGR of 3.50% during the forecast
period (2023-2028).
https://www.mordorintelligence.com/industry-reports/india-oral-anti-diabetic-drug-
market#:~:text=The%20India%20Oral%20Anti%2DDiabetic,by%20almost%2025%25%20in%20India.
The global Metformin Hydrochloride market was valued at USD 257.5 million in 2023 and
is anticipated to reach USD 342.3 million by 2030, witnessing a CAGR of 4.1% during the
forecast period 2023-2030.
https://www.marketwatch.com/press-release/2030-metformin-hydrochloride-market-size-share-2023-06-
14#:~:text=The%20global%20Metformin%20Hydrochloride%20market%20was%20valued%20at%20USD%20257.5,the%
20forecast%20period%202023%2D2030.
In view of the same, the company is well placed to grow as the demand for the product
grows coupled with the fact that this product is the fundamental product to control Type-2
Diabetes.
Threats & Concerns:
There is significant competition from other Generic manufacturers both within India and
foreign, however the markets and volumes are quite large. Further, the governments
actions towards price controls on pharmaceutical products might affect the price of the
products in the coming times. The ongoing geopolitical crises have led to supply chain
disruptions and rising cost of raw materials. Your company is also prone to these
near-term risks.
Strengths
The company has an established customer base in India and in various foreign countries
that will enable it to further enhance their growth.
Outlook:
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. KEY FINANCIAL RATIOS
Ratio |
Formula |
FY 2023 |
FY 2022 |
Variance |
Debt-Equity Ratio (times) |
Total Borrowings/Shareholders equity |
0.19 |
0.44 |
-57.10% |
EBITDA % |
EBITDA/Revenue from operations |
10.08% |
11.24% |
-10.29% |
Current Ratio (times) |
Current assets/ current liabilities |
1.97 |
1.87 |
5.23% |
Return on Net |
Profit after Tax (excl. exceptional)/ |
7.14% |
9.02% |
-20.88% |
Worth (%) |
Shareholders equity |
|
|
|
Debtors turnover ratio (days) |
Sale of products/ Average trade receivables |
5 |
6 |
-23.92% |
Inventory turnover (times) |
Cost of Goods sold/ Average inventories |
8.35 |
11.42 |
-26.88% |
Operating profit margin (%) |
Profit from Operations/Sale of Products |
8.05% |
9.24% |
-12.85% |
Net profit Margin (%) |
Profit after Tax (excl. exceptional)/ Revenue from operations |
4.62% |
5.59% |
-17.45% |
Reasons where Variance is More than 25%
Inventory turnover ratio- Due to higher raw material stock Debt equity ratio- Improved
due to repayment of short-term loans
Return on Net worth-Decrease in ROE decline in operating margin. This was due to
inability to pass on the increased raw material price to customers and due to high freight
charges.
E. 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. 52,89,42,003 for the year ended March 31,
2023.
F. FINANCIAL PERFORMANCE
A detailed financial overview of the Company for the FY 2022-2023 is available in the
first page of the Boards Report forming part of this Annual Report.
G. 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.
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
(Sharat Deorah)
CIN: L33125MH1989PLC051910
Chairman and Managing Director
Mumbai,
August 23, 2023
DIN: 00230784
+91-9892691696
