Beta Drugs Ltd Management Discussions.

In terms of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 the Management Discussion and Analysis Report (MDAR) is structured as follows:

• Industry structure and developments

• Opportunities & Threats

• Segment-wise or product-wise performance

• Outlook

• Risk and Concerns

• Internal Control System

• Financial and operational performance

• Material Development in Human Resources

Some Statements in this discussion may be forward looking. Future performance may however differ from those stated in the management discussion and analysis on account of various factors such as changes in Government regulations, tax regimes, impact of competition, etc.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

According to the IMF, the global economy is estimated to expand by 5.45% in 2021 and 4.2% in 2022. These numbers are based on the fast approvals of vaccines which is likely to stimulate the economy later this year. However, the extent of recovery in different countries will be contingent on how fast the governments react and access to medical interventions.

This years projected growth follows a severe economic downturn in 2020 that has adversely impacted lives across the globe.

Based on the World Economic Outlook, the global growth contraction for 2020, expected at -3.5%, was 0.9 percentage point better than the growth expected in the previous forecast, primarily due to stronger than expected reboot in the second half of 2020.

As per IQVIA2, the worldwide medicine net market size is expected to reach more than $1 trillion by 2024, growing at a 5-year CAGR of 2-5%. The healthcare sector is estimated to account for the highest R&D spend in the coming few years. In the past, the surge in healthcare spending was driven by treatment for chronic diseases and untreatable disorders. However, the advent of COVID-19 temporarily pushed the R&D spending and shifted focus towards containing the viruss spread.

In the long term, the market will reward companies that invest in their R&D functions and adjust to changes in consumer preferences.

Beta Drugs is continuously increasing its spend on R&D and is building its capabilities so as to become nimble and responsive to market needs. Betas R&D strengths are in developing novel molecules that are going off patent in non-infringing processes and resolving complex chemistry challenges. The company is in the midst of developing new drug delivery systems, new dosage formulations and applying the latest technology for better processes. The Research centre is proficient in developing, scaling up and commercializing various dosage forms spread across tablets, capsules, oral liquids and injectables (solutions, suspensions, lyophilized, etc.)

The company has proven experience in managing complex product development Azacitidine Oral, Ready to Use Gemcitabine & Docetaxel. Its R&D expenditure almost doubled as compared to the last year.

Beta has a pipeline of twenty-three Oncology molecules which are going to be off-patent in the next five years. For all these molecules the work on getting its API manufactured in-house is already in advanced stages.

OPPORTUNITIES & THREATS:

During the last three years, the company has increased its focus on building its innovative product pipeline in the oncology space and be ready to realize significant growth opportunities both domestically and globally. Your Company has continued to be the preferred supplier of many leading OEMSs and has been successful in expanding its approval base, adding leading players from the industry. Therefore, we expect that your Company will continue to be in a position to gradually expand its market reach and improve its market share. The Company regularly insures all its assets to enable itself in case of any mis-happening. The Company has formed a risk management team which constantly monitors the Indian and international markets and guides the management of any sort of prevailing risk to the company. The commodities prices being internationally traded are affected by the global market demand and supply forces and the dollar rate. The risk management team plays a major role here. Moreover, the industry is labour oriented and business operations of the Company may be materially affected by strikes, lock outs or work stoppage.

The oncology market in India is growing at a better rate than the overall pharma industry growth. Since cancer is the second largest cause of death in the country, the Indian market is characterized by a huge demand for cancer drugs. It is a highly fragmented market with a large number of foreign and domestic players. The huge increase in the number of cancer cases, especially in lung cancer and breast cancer; changes in the cancer treatment scenario, development of alternative cancer therapies, increased cancer health insurance coverage and the increasing amount of foreign direct investment (FDI) is helping the market to grow.

The increased prevalence of cancer is primarily due to unhealthy lifestyles, and the increasing geriatric population. However, the high cost of products is hindering the market growth. This is where Beta is playing a pivotal role in making sure that patients across India have access to affordable cancer treatment/medicines. This has helped the company to gain market share from the large established multinational and domestic players.

Beta is currently among top 10 manufacturers of Oncology products

SEGMENT WISE OR PRODUCT WISE PERFORMANCE:

Your company has only one segment that is trading and manufacturing of pharmaceutical products.

OVERVIEW & OUTLOOK:

The Indian pharmaceutical industry has advanced steadily and evolved into a preferred destination for high-value pharma products and APIs for drug manufacturers worldwide. Top notch capabilities and advantageous market conditions over the last many years have ensured that India continues to be one of the most profitable pharma markets across the world. It remains an attractive destination for generic R&D and manufacturing of pharmaceuticals owing to its strong capabilities across the value chain.

Oncology drugs market is expected to grow at a fast clip across the world primarily driven by an ageing population and lifestyle changes making population susceptible to cancer. In India the Oncology drugs market is expected market to grow in double digits for the next many years to come. Therefore, Beta Drugs being a leader in the oncology segment has long runaway ahead both in terms of opportunities and growth.

Betas goal is to deliver best-in-class therapies to patients suffering from multiple forms of cancer and become the leader in Oncology or any other therapeutic segment it enters in the future. The quest to become the leader is predicated on differentiated science, helping us to launch new novel molecules and drug delivery systems. The company broadly has three sales segments: Branded Formulations, CRAMS, and Exports.

Our multiple segments of revenue provide us diversification benefits and substantial financial strength. Our financial strength enables us to reinvest in two key areas: building commercial capabilities both domestic and international and building a robust pipeline while expanding our technology capabilities.

Another key part of our strategy is accelerating our backward integration process. For all novel molecules to be launched in the future we would endeavor to make sure that the API is manufactured in-house. Backward integration provides cost competitiveness and supplies reliability thus impacting margins positively. Beta has got 14 acres allotted for 95 years lease in a special area allocated for API & intermediates in the vicinity of its current plants.

RISK AND CONCERNS:

Pharmaceutical industry is most regulated industry in whole word. Being pharmaceutical company we have to follow various government regulations. Change in regulatory norms in India or elsewhere in exporting countries shall effect the operation of Company.

INTERNAL CONTROL SYSTEM:

The Company has in place an adequate system of internal control commensurate with its size and nature of its business. These have been designed to provide reasonable assurance that all assets are safeguarded and protected against loss from unauthorized use or disposition and that all transactions are authorized, recorded and reported correctly and the business operations are conducted as per the prescribed policies and procedures of the Company. The Audit committee and the management have reviewed the adequacy of the internal control systems and suitable steps are taken to improve the same.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

During the year, Revenue of the Company increased by 57% i.e. from Rs. 8,006.76 lakhs to Rs 12,570.46 lakhs. Profit before tax increased by 104% i.e. from Rs. 988.11 lakhs to Rs.2016.16 lakhs. Profit after tax increased by 104.17% i.e. from Rs. 697.77 lakhs to Rs.1424.64 lakhs.

HUMAN RESOURCES DEVELOPMENT AND INDUSTRIAL RELATIONS:

Your Company firmly believes that its human resources are the key enablers for the growth of the Company and important asset. Hence, the success of the Company is closely aligned to the goals of the human resources of the Company. Taking into this account, your Company continued to Invest in developing its human capital and establishing its brand on the market to attract and retain the best talent. Employee relations during the period under review continued to be healthy, cordial and harmonious at all levels and your Company is committed to maintain good relations with the employees.

KEY FINANCIAL RATIOS

Following are ratios for the current financial year and their comparison with preceding financial year:

Sr. No. Ratios As at March 31, 2022 As at March 31, 2021 Variance Explanation for any change in the ratio by more than 25% as compared to the preceding year
1 Debtor Turnover 4.79 3.81 25.66% Due to increase in Sale by more than Rs. 45 crores.
2 Inventory turnover 10.25 7.66 33.76% Due to increase in COGS by Rs. 30 crores.
3 Interest coverage ratio 49.91 13.79 261.97% Due to increase in EBITA by Rs. 10 crores.
4 Current Ratio 2.43 2.47 -1.83% -
5 Debt-Equity Ratio 0.09 0.08 9.93% -
6 Operating Profit Margin(%) 16.48% 13.41% 22.90% -
7 Net Profit Margin(%) 11.41% 8.78% 29.94% The Net Profit is more than twice as compared to last year.

• Return on Net worth in financial year 2021-22 is 18.39% whereas it was 11% in the previous year, as Net Profit is more than twice as compared to last year therefore there is a variance of 67.15%.

CAUTIONARY STATEMENT:

Statement in this Management Discussion and Analysis Report, describing the Companys objectives, estimates and expectations may constitute Forward Looking Statements within the meaning of applicable laws or regulations. Actual results might differ materially from those either expressed or implied.

Dated: 30.08.2022 By Order of the Board of Directors
Place: Panchkula sd/-
Rahul Batra
Chairman & Managing Director
(DIN: 02229234)