Biofil Chemicals & Pharmaceuticals Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENT

The industry is in the midst of a fundamental transformation, as the scale of operations is growing. The year 2022 will have pharma companies oriented to staying agile and resilient in regards to disruption bred by the fluctuating market demands and diverse customer needs. A Deloittes report states that the majority of pharmaceutical companies recognize evolving customers behaviors and attitudes as the most significant factors of transformation. Indeed, todays pharma clientele require revolutionary pharmaceutical solutions that will render drug development, discovery, prescription, and usage easier and more convenient.

As per Pharmaceutical Technology, a 2021 Global Data survey revealed that 70% of surveyed pharma industry clients anticipate drug development to be the most impacted in 2022 by smart technologies, like Artificial Intelligence (AI), Machine Learning (ML), and Natural Language Processing (NLP). These are more than the expectations of those on the receiving end, but also the overall tendency that will define pharmas 2022.

OPPORTUNITIES AND THREATS

The pharmaceuticals sector in the majority of the worlds markets experienced a growth spike in 2021, driven for the most part by vaccine production for Covid-19. This is likely to remain high in the coming years, as a large share of the worlds population has yet to be vaccinated. Ongoing production will also be required to supply booster jabs, as well as vaccinations modified to address new virus variants

The pharmaceutical industry has certainly had its challenges in the past year. The global pandemic created an unprecedented demand for vaccines, shut down many clinical trials and resulted in a global PPE shortage. And now, almost midway through 2021, the industry is still scrambling to catch up.

Although pharmaceutical companies have developed and begun to roll out a range of vaccines, this new phase doesnt mean anything is settling down in the industry. Rather, 2021 has delivered its own set of challenges.

Below are five of the most significant.

-Limited clinical trials during the pandemic

- The cost of innovation and fast evolution

- Supply chain disruptions

- Cultural focus on prevention, rather than treatment

- Developing new cures for presently incurable diseases

Your Company is major manufacturer and Traders of Ferrous Sulphate in its Crystal, Exsiccated & Granular form, Microcrystalline Cellulose Powder (MCCP) Cellulose Powder (CP).

Expansion of Companys Business

For expansion of business the Company has received clearance via EC identification Number EC 22B058MP119299 letter from State Environment Impact assessment Authority (SEIAA), Madhya Pradesh for Manufacturing of

1. Steriod and Harmones upto the production limit of 90 tons

2. API/ Intermediates upto the limit of 1800 tons

Beside this SEIAA Madhya Pradesh also enhanced the production limit of existing drug such as Diclofanec sodium, Aceclofenac, Mefemanic Acid, Fenbendazole along with Intemediates that belongs to Chemical Group such as 4- Nitro Benzyl Chloride, 3-Nitro Benzyl Chloride, Paranitrobenzyl Alcohol etc, manufactured by the company

Further Company is working on directions given by (SEIAA), Madhya Pradesh in terms of modification in factory which is expected to be completed by this Diwali for inspection so as to get final clearance from (SEIAA), Madhya Pradesh and will start new production by this December 2022 SEGMENT WISE PERFORMANCE

Your Company is multi segment Company as it deals in Pharmaceuticals and Chemicals products. During the year under review the performances in terms of revenue of the segments were as follows:- Pharma Unit

In the financial year 2020-21 revenue generated from Pharma Unit was Rs 2700.01 Lacs and in the year 2021-2022 the same unit generated revenue of Rs 1900.52 Lacs.

Chemicals Unit

In the financial year 2020-21 revenue generated from Chemical Division was Rs 875.03. Lacs and in the year 2021-22 the

same unit generated revenue of Rs 337.71 Lacs

OUTLOOK

Medicine spending in India is projected to grow 9-12% over the next five years, leading India to become one of the top 10 countries in terms of medicine spending.

Going forward, better growth in domestic sales would also depend on the ability of companies to align their product portfolio towards chronic therapies for diseases such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers, which are on the rise.

The Indian Government has taken many steps to reduce costs and bring down healthcare expenses. Speedy introduction of generic drugs into the market has remained in focus and is expected to benefit the Indian pharmaceutical companies. In addition, the thrust on rural health programmes, lifesaving drugs and preventive vaccines also augurs well for the pharmaceutical companies

The Union Cabinet has given its nod for the amendment of the existing Foreign Direct Investment (FDI) policy in the

pharmaceutical sector in order to allow FDI up to 100% under the automatic route for manufacturing of medical devices

subject to certain conditions.

The Indian drugs and pharmaceuticals sector received cumulative FDIs worth US$ 19.19 billion between April 2000-

December 2021.

Some of the recent developments/investments in the Indian pharmaceutical sector are as follows:

• In March 2022, Themis Medicare Ltd. (Themis), announced the approval of its antiviral drug VIRALEX by the Drug Controller General of India (DCGI).

• In November 2021, US-based Akston Biosciences announced that it would start the clinical trial of its second-generation COVID-19 vaccine AKS-452 in India soon.

• In October 2021, AstraZeneca India launched a Clinical Data and Insights (CDI) division to further strengthen its global presence and manage data-related aspects of its clinical trials.

• In September 2021, the Indian government contributed US$ 4 billion to the pharmaceutical and medical industries.

• In August 2021, Glenmark collaborated with SaNOtize to introduce spray for COVID-19 treatment in India and other

Asian markets.

• In August 2021, Uniza Group, an Ahmedabad-based pharmaceutical firm, signed an agreement with Lysulin Inc. (an US-based firm) to introduce Lysulin, a nutritional product for Indian consumers.

• In August 2021, Alkem Laboratories introduced Famotidine and Ibuprofen tablets to treat osteoarthritis and rheumatoid arthritis symptoms in the US.

• In July 2021, Generic Health (an Australia-based subsidiary of Lupin Limited) signed an agreement with Southern

Cross Pharma Pty Ltd. (SCP). Under this deal, Lupin will acquire 100% shares of SCP. The acquisition is expected to further strengthen Lupins foothold in Australia.

• In June 2021, Sun Pharmaceuticals acquired the patent license for Dapagliflozin from AstraZeneca. The company will be distributing and promoting the drug under the brand name Oxra.

• In June 2021, Lupin Ltd. announced its intention to enter the digital healthcare space in India. It incorporated Lupin Digital Health Ltd., a wholly owned subsidiary, to provide a digital therapeutics platform for medical practitioners and patients in the country.

• In May 2021, Cipla launched a real-time COVID-19 detection kit ViraGen that is based on multiplex polymerase chain reaction (PCR) technology.

• In May 2021, the Government of India invited R&D proposals on critical components and innovations in oxygen concentrators by June 15, 2021.

• In May 2021, Indian Immunologicals Ltd. (IIL) and Bharat Immunologicals and Biologicals Corporation (BIBCOL) inked technology transfer pacts with Bharat Biotech to develop the vaccine locally to boost Indias vaccination drive. The two PSUs plan to start production of vaccines by September 2021.

• In May 2021, Eli Lilly & Company issued non-exclusive voluntary licenses to pharmaceutical companies-Cipla Ltd., Lupin Ltd., Natco Pharma & Sun Pharmaceutical Industries Ltd.-to produce and distribute Baricitinib, a drug for treating COVID-19.

• In April 2021, the CSIR-CMERI, Durgapur, indigenously developed the technology of Oxygen Enrichment Unit (OEU). The unit can deliver medical air in the range of ~15 litres per minute, with oxygen purity of >90%. It transferred the technology to MSMEs-Conquerent Control Systems Pvt. Ltd., A B Elasto Products Pvt. Ltd. and Automation Engineers, Mech Air Industries and Auto Malleable.

• In April 2021, National Pharmaceutical Pricing Authority (NPPA) fixed the price of 81 medicines including off-patent antidiabetic drugs allowing due benefits of patent expiry to the patients.

• In February 2021, Aurobindo Pharma announced plans to procure solar power from two open access projects of NVNR

Power and Infra in Hyderabad. The company will acquire 26% share capital in both companies with an US$ 1.5 million

investment. The acquisition is expected to be completed by the end of March 2021.

• In February 2021, the Telangana government partnered with Cytiva to open a Fast Trak lab to strengthen the biopharma industry of the state.

• In February 2021, Glenmark Pharmaceuticals Limited launched SUTIB, a generic version of Sunitinib oral capsules, for the treatment of kidney cancer in India.

• In February 2021, Natco Pharma launched Brivaracetam for the treatment of epilepsy in India.

• In February 2021, the Russian Ministry of Health allowed Glenmark Pharmaceuticals to market its novel fixed-dose combination nasal spray in Russia.

• In January 2021, the Central government announced to set up three bulk drug parks at a cost of Rs. 14,300 crore (US$ 1,957 million) to manufacture chemical compounds or active pharmaceutical ingredients (APIs) for medicines and reduce imports from China.

• PharmEasy received US$ 300 million in July 2021 from its existing investors after acquiring Thyrocare, the diagnostic firm. These funds will be utilised to continue Thyrocares acquisition process. After the transaction is completed, the online pharmacy plans to float the company on the Indian Stock Exchange.

RISKS AND CONCERN

After one of the most chaotic years on record, pharmaceutical manufacturers are on track for recovery in 2021. However, despite recovering consumer confidence - and the end of the pandemic being in sight - the pharmaceutical industry still faces significant risk.

The COVID-19 pandemic exposed weaknesses in the industrys global supply chain and while consumer confidence is recovering, it is nowhere near normal levels just yet. Businesses in the sector are likely to face a number of major risks through the end of the year, six of which - including lower-than-average consumer confidence, pharmaceutical fraud, patent cliffs and growing customer expectations - are outlined below.

- Reduced demand for prescription medicine

- Growing competition from generic pharmaceuticals

- Pharmaceutical fraud

- Rising consumer expectations and difficulties managing brand health

- Data breaches and other cybersecurity threats

On the manufacturing side, increased use of internet-connected manufacturing technology - such as industrial IoT sensors

- may make manufacturing facilities more vulnerable to attack.

As cyberattacks become a more serious threat to the industry, investment in cybersecurity will need to increase. Companies will also need to implement better cybersecurity policies in the office and for remote workers, or run the risk of a costly data breach. Investments in IoT security may also be necessary for adopters of the technology.

- Supply chain disruptions

INTERNAL CONTROL SYSTEM

The Company has a reasonable system of internal control comprising authority levels and powers, supervision, checks and balances, policies and procedures so as to ensure orderly and efficient conduct of business, safeguard the assets of the business, prevent and detect fraud, ensure the completeness and accuracy of accounting records, to ensure the timely preparation of financial information. Further, the system is reviewed and updated on an on-going basis on recommendations as and when made by the Statutory Auditors, Internal Auditors and Independent Audit Committee of the Board of Directors. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During the financial year your company has achieved the turnover of Rs 3655.04 Lacs in comparison to previous years turnover of Rs. 2986.17 lacs and net profit of the company is Rs. 124.59 lacs in comparison to previous net profit of Rs. 123.35 lacs.

HUMAN RESOURCES

At Biofil we believe that "company grows when its people grow" and hence we continuously strives to emphasize creation of a conducive work environment and development of a robust and consistent approach towards talent management & leadership development. As on 31st March, 2022, Company had 47 employees.

DETAILS OF SIGNIFICANT CHANGES IN THE KEY RATIOS

As per the amendment made under Schedule V to the Listing Regulations read with Regulation 34(3) of the Listing Regulations, details key financial ratios and any changes in return on net worth of the Company are given below:

Particulars 2021-22 2020-21 Change
Debtors turnover 1.84 1.52 20.45
Inventory turnover 7.43 11.26 (34.00)
Interest coverage ratio 27.02 30.89 (12.54)
Current ratio 6.23 1.4 344.89
Debt-Equity ratio 0.12 1.05 (88.93)
Operating profit margin (%) 4.71 5.55 (15.11)
Net profit margin (%) or sector-specific equivalent ratio as applicable 3.12 3.47 (10.13)

Reason for change of 25% or more in Financial Ratios:

Inventory Turnover

Decrease in Cost of Goods Sold

Interest Current Ratio

Decrease in Creditor and other Current Liabilities

Debt Equity Ratio

Heavy decrease in Total Liabilities

DETAILS OF CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR

There was a change of (46.8%) in Return on Net Worth due to decrease in sales.

CAVEAT:

Some of the Statements in Management Discussion and Analysis describing companys objective may be "forward looking statement" within the meaning of applicable Securities Law and Regulations. Actual results may differ substantially or materially from those expressed or implied. Important factors that could influence companies operation include various global and domestic economic factors.