brooks lab share price Management discussions

Management Discussion & Analysis

Companys turnover for financial year ended 2023 stood at Rs. 5553.80 lakhs comparison to previous year turnover of Rs. 7696.72 lakhs. {Rs in lakhs)

PARTICULARS	STANDALONE		CONSOLIDATED
	2022-23	2021-22	2022-23	2021-22
Turnover	5553.80	7696.72	6320.46	9118.46
Other Income	10.72	94.76	20.34	80.17
Total Income	5564.52	7791.48	6340.80	9198.63
Expenditure	6135.23	7509.28	8962.29	10543.63
Profit before Depreciation, Interest & Tax (PBDIT)	(570.71)	282.20	(2621.49)	(1345.00)
Financial Expenses (Interest)	76.67	66.97	218.32	309.69
Profit before Depreciation and Tax (PBDT)	(647.38)	215.23	(2839.81)	(1654.69)
Depreciation and Amortization	171.74	148.63	702.68	735.07
Profit before Tax (PBT)	(819.12)	66.60	(3542.49)	(2389.76)
Extraordinary items Gain / (Loss)	-	-	35.67	-
Net OCI Impact Gain / (Loss)	(3.29)	12.66	(3.29)	-
Share of Profit / (Loss) of Associate	-	-	(330.99)	-
Income Tax net of MAT credit Income / (Expense)	-	-	732.40	458.51
Profit after Tax	(822.41)	79.26	(3108.7	(1931.25)
Earnings per Share (in Rs.)	(3.32)	0.27	(12.57)	(7.82)

Revenues:

On a standalone basis, the companys turnover for the fiscal year ending on March 31, 2023, amounted to Rs. 5553.80 lakhs. This figure represents a decrease when compared to the previous years turnover of Rs. 7696.72 lakhs. This decline attributed to various factors, including the impact of the Russia-Ukraine conflict, disruptions in the supply chain, and the volatility in API prices. Cost of material: The cost of materials consumed, when compared to revenue, has increased to 73% in FY23, as opposed to the 64% ratio observed in Fy22. Employment Cost: The employment cost has seen a noteworthy reduction of Rs. 126.07 lakhs, which accounts for a 9.85% decrease when compared to the preceding fiscal year ending on March 31, 2022. Finance Cost: The finance cost has witnessed an increase of Rs. 9.70 lakhs in FY 2022-23 compared to the previous year. This increase is due to higher interest rates and increased utilization of financial facilities. Depreciation: Depreciation has increased by 23.11 lakhs, primarily attributed to the addition of new assets to the gross block. Industry Structure and Developments India is one of the leading manufacturing hubs for generics and the biggest exporter, with a competitive advantage in cost and availability of skilled manpower. Indian pharmaceutical companies are continuously investing in research and development activities to expand their presence. They have also been partnering with various multi-national companies to improve their reach and product portfolio. Pharma Industry majorly depends on the regulatory approvals. We are in process of getting the approvals from many foreign countries and we are expecting to secure more international approvals in coming year.

Opportunities- Domestic market is growing at a rapid pace owing to increasing awareness, growing insurance penetration and Government support. Moving into value-added healthcare solutions is the next big opportunity for Indian pharma companies. Export Market Our sales are primarily from Domestic market on contractual basis. Currently, we are focusing on International Market as it is growing faster than Domestic market. We have filed product registration to various countries to boost the sales and margins. We have received various approvals in RoW markets and exports have been started. Expansion of Critical Care Segment The company has expanded its operations to cover more territories in the Branded Generics sector, focusing particularly on the Critical Care division. This expansion has been supported by a highly skilled field force of 100+. Notably, we have achieved successful launches of approximately 70 brands since 2019, with an impressive compounded annual sales growth rate of 50%. Our product portfolio includes high-end antibiotics in both oral and injectable forms, as well as pain management medications, among other pharmaceutical offerings. Strategic Arrangement: The Company looks for opportunities in order to expand its product line through strategic arrangement. The Company in past entered into a joint venture agreement with a strategic partner who have understanding and international reach and strong track record and presence in many regulated countries. This was a significant step to aggregate mutual synergies and speedup the Companys footprints in international markets like Europe and America, together with a more accomplished and experienced partner. The strategic arrangement will transform the companys credibility in those territories and open up more business opportunities. It shall also enhance the manufacturing capabilities of the company with more innovative products, as a result of fresh investments and richer experience coming in from strategic partner. Outlook Outlook for Domestic Market According to IBEF, Indian pharmaceutical industry is known for its generic medicines and low-cost vaccines globally. Transformed over the years as a vibrant sector, presently Indian Pharma ranks third in pharmaceutical production by volume. The Pharmaceutical industry in India is the third largest in the world in terms of volume and 14th largest in terms of value. The Pharma sector currently contributes to around 1.72% of the countrys GDP. The Indian Pharmaceutical industry is currently ranked third in pharmaceutical production by volume after evolving over time into a thriving industry growing at a CAGR of 9.43% since the past nine years. This impressive growth is an outcome of a series of sound legislation and economic environment, timely actions, and to a greater extent, the motive of welfare of the masses. Outlook for International Markets The total spending and global demand for medicines will increase over the next five years to approximately $1.9 trillion by 2027, according to a new report titled Global Use of Medicines 2023. According to IBEF, Indian pharmaceutical sector supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK. Presently, over 80% of the antiretroviral drugs used globally to combat AIDS {Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms. India is rightfully known as the “pharmacy of the world” due to the low cost and high quality of its medicines. The global market size of pharmaceutical products is estimated to cross over the US$ 1 trillion mark in 2023. The Company thrives to grow at a similar pace in the international markets. The Company continued to focus on increasing its operational efficiencies and optimising costs to mitigate the risks arising out of tightening rules by the local governments, evolving regulatory environment and volatility in the currency exchange rates. To augment the growth in these markets, the Company is focusing on with more international approvals in coming year to have multifold increase in sales. Internal Control System and their adequacy Brooks believes that internal control is a prerequisite for governance and that business plans should be exercised within a framework of checks and balances. The Company has a well-established internal control framework, which is designed to continuously assess the adequacy, effectiveness and efficiency of financial and operational controls. The management is committed to ensuring an effective internal control environment, commensurate with the size and complexity of the business, which provides an assurance on compliance with internal policies, applicable laws, regulations and protection of resources and assets.

Human Resources Policy Mission Statement

HR supports and upholds Brooks goals by nurturing a Positive and Engaging work environment while identifying and responding to the changing needs of the Organization and our Society. Vision Statement Brooks Human Resources department will serve as a Guardian for Excellence and Leadership through: ? Improving Organizational Effectiveness e Innovative HR solutions eo Attract, Retain and Develop the talent ? Extraordinary Quality of services ? Building collaborative partnerships (HR as Business Partner) ? Develop a Robust Employee engagement plan for the staff & wage workforce through multiple engagement initiatives across the year. Core values of HR Department v" Focused Approach We advance Brooks mission by thinking and acting in the best interests of the organization and the workforce; in particular, when developing policies, processes, programs and delivering services. \v" Innovative HR at Brooks would be dedicated to Quality, Excellence and Continuous improvement. We work to ensure the Brooks remains competitive in its Human Resources policies and practices by actively seeking and developing best practices, methods and approaches. v Being Professional We adhere to high professional standards of quality, competency and conduct. We act with honesty and integrity. We anticipate and are proactive, collegial and collaborative in our work. We remain current in professional practice. vv" Accountable We are accessible and answer to stakeholders for results in accordance with policies, standards, commitments and principles. We document, measure and report performance and evaluate program effectiveness. v" Transparent We balance requests to share information clearly and openly while respecting the security of confidential and perscnal information entrusted to the department. v" Employees We have 296 peoples employed on the payroll of the Company. Risk management For its operations the Directors believe that, the company has laid down internal financial controls to be followed by the company; and that such internal financial controls are adequate and were operating effectively for Risk Management. Risk & Concerns: Risk is a potential event or non-event, the occurrence or non-occurrence of which can adversely affect the objectives of the Company. Impact of risks could either be monetary that is impact on business profits due to increase in costs, decreasing revenue amongst others or non-monetary which is delay in securing regulatory approvals, reputational damage etc. The Company is susceptible to risks arising out of our business strategy, succession planning and decision on innovation or product portfolio. If there is any significant unfavorable shift in industry trend or pattern of demand, our returns on investments might get affected. We have risks associated with clients and prospective clients dispositions.

We operate in regulated, semi regulated countries with their own specific complex operating environments. In addition, this business landscape is dynamic and constantly evolving. This brings to the fore a multitude of risks which are closely monitored, mapped, and mitigated. By effectively identifying, assessing, and mitigating risks we strive to enhance our resilience, drive sustainable growth, and maximise value creation. Regulators across the globe strictly monitor the pharmaceuticals manufacturing facilities. Governing laws across the globe are becoming increasingly stringent over time, with severe penalties or actions in the event of non-compliance or violations to regulatory standards. In the scenario, where we or any of our suppliers fail to comply with such regulations, there could be a regulator-enforced shutdown of concerned production facilities, withdrawal of drug approvals previously granted, failure or delay in obtaining approvals for new products, prohibition on the sale or import of noncomplying products etc. Such impact would significantly affect the delivery of our objectives. Given the evolving nature and regulatory complexities relating to Injectables production, there is a continuous challenge in meeting the regulatory requirements. This might also lead to additional requirements from the regulators before granting commercialization approval. The additional requirements would not only increase our financial commitments but also shift the launch timelines, there by impacting Company strategy. In addition to the above, other key risks relating to our current operations include human capital risk such as loss of key personnel, timely replenishment of critical vacant roles, reliance on third party sole suppliers or service providers including reliance on regional suppliers, disruption of operations from natural disasters, risk arising out of strategic projects, foreign exchange fluctuations, changing landscape of statutory regime etc. At BROOKS, Risk Management is a key strategic focus for the Members of Board. All key functions of the Company are independently responsible to monitor risks associated with in their respective areas of operations such as production, supply chain, marketing, finance, accounting, treasury, legal, human resource and others areas like health, safety and environment. Brooks Lab Operations: Manufacturing: The upgradation of injectables was carried out at the Baddi facility to focus on high profit international markets. All facilities and production lines are upgraded regularly to meet current cGMP, Safety, Health and Environmental Standards. Various initiatives are taken towards energy and water conservation. The Companys journey towards achieving operational excellence across functions was driven through its efforts through automation of operations & upgrading the facility to qualify for higher regulatory approvals. Environment, Health & Safety (EHS) Brooks is committed to comply with high standards of environment, health and safety performance and is an integral to its working. Brooks ensures that each employee strives to achieve EHS excellence. QualityBrooks assures a culture of compliance and follows systematic interventions to consistently meet and exceed quality standards. Brooks is committed to enhance its quality management systems to meet and exceed the current expectations of regulatory authorities such as CDSCO, FDA Philippines, NAFDAC Nigeria, Kenya, Yemen, Cambodia, Ivory Coast, Vietham , WHO, etc. Its state-of-the-art manufacturing facilities at Baddi is cGMP compliant in conformity with national and international standards. Brooks locks forward for implementation of robust and effective quality management systems for continuously monitoring through quality metrics and internal audits. THREATS, RISKS AND CONCERNS for Brooks Operations: Drug Price Control: The Health Ministry keeps on revising the list of Drugs under price control. It is likely that the Government may bring more drugs and formulations under price control or change the mechanism of calculating the ceiling price of the drugs, which are under the ambit of the revised policy, which in turn will affect the net margins of the Company. Generics: The Government of India is continuously bringing in policies to shift the market towards generic products. The implementation of this process requires action by all stakeholders. This may have impact on future business strategies of the Company. Manufacturing & Supplying Risk: Although a major portion of the Companys finished formulations and injectables are being manufactured at in-house facilities, the Company also depends on its suppliers for sourcing of its raw materials. Any significant disruption at in-house facilities or any of its suppliers locations due to economic, political & social factors or any other event may impair the Companys ability to meet the markets demand on a timely basis. In addition, the Companys manufacturing capabilities could be impacted by quality deficiencies in the products, which its suppliers provide, leading to impact on its financial performance.

New capital investments:

The Company has earmarked all capital investments in FY 2022-23 towards marketing of our products in domestic & international market. Company has started with own marketing team in entire country except in southern states of India in a phased manner. Company is in process of registration of its products in various countries by filing Dossiers in regulated markets and semi regulated markets to capture sales in these markets, these are procedural steps which have to be followed and these steps take its own time, but processes are being followed actively. critical Care Division (CCD) captures domestic market and sales of our (CCD) is growing on yearly basis. Currency fluctuation risks: Foreign currency risks arise out of overseas operations and financing activities. Exchange rate volatility significantly impacts earnings and net equity because of invoicing in foreign currencies, expenditure in foreign currencies, foreign currency borrowings and translation of financial statements of overseas subsidiaries into Indian rupees. The Company has a defined foreign exchange risk management framework to manage these risks excluding translation risks. International Taxation: As the Company has potential tax exposure resulting from application of varying laws and interpretations, which include intercompany transactions with related parties in relation to various aspects of business. Although the Company believes its cross border transactions between affiliates are based on internationally accepted practices, tax authorities in various jurisdictions may have different views or interpretations and subsequently challenge the amount of profits taxed in their jurisdiction resulting into increase in tax liability including interest and penalties causing the tax expenses to increase.For and on Behalf of the Board.

Financial Ratios As at March 31, 2023

Ratio	Basis of Ratio	Numerator	Denominator	Ratio Numerator		Denominator	Ratio	Variance	Reason for Major
		Current Period	Current Period	Current Period	Previous Period	Previous Period	Previous Period	%	Variance
Current Ratio	Current Assets/ Current Liabiliites	2,760.63	3,302.13	0.84	3,703.52	3,546.45	1.04	(19.94)	Decrease in current ratio led by substantial decrease in current assets.
Debt-Equity Ratio	Total Debt/ Shareholders Equity	566.35	5677.89	0.10	492.29	6,500.30	0.08	31.71	Increase in Debt equity ratio led by higher CC utilisation and reduction in networth due to the Current year losses.
Debt Service Coverage Ratio	Earnings available for debt serivce!/ Debt Service?	(570.71)	68.84	(8.29)	282.19	216.38	1.30	(735.70)	Negative earnings this year compare to positive earnings last year.
Return on Equity Ratio	Net profit after taxes / Average Shareholders Equity	(819.12)	6,089.10	(0.13)	66.60	6,460.67	0.01]	(1,404.93)	Losses in current year compare to profit in last year and reduction in networth due to current year losses.
Inventory turnover Ratio	Cost of Goods SoldR/ Average Inventories	4,045.73	1,394.54	290]	4927.93	1,448.31	340	(14.74)	NA
Trade Receivables turnover Ratio	Net Credit Sales / Average Trade Receivables	5,553.80	1,389.45	400]	7,696.72	1,231.28	6.25	(36.06)	Decrease in ratio led by reduction in sales and increase in average receivable balance compare to last year.
Trade Payables turnover Ratio	Net Credit Purchases / Average Trade Payables	3,518.60	2455.87	143]	5,354.16	1,956.65	2.74	(47.64)	Decrease in ratio led by reduction in purchases and increase in average payable balance compare to last year.
Net capital turnover Ratio	Net Sales / Working Capital*	5,553.80	(541.50)	(10.26)	7,696.72	157.07	49.00	(120.93)	Decrease in sale and negative working capital led to such variation.
Net profit Ratio	Net Profit/Net Sales	(819.12)	555380	(0.15)	66.60	7,696.72	0.01	(1,804.42)	Losses this year compare to profit last year.
Return on Capital employed	Earning before Interest and taxes/ Capital EmployedR	(751.34)	6,224.35)	(0.12)	126.14	6,464.21	0.02	(718.61)	Negative earnings this year compare to positive earnings last year.
Return on investment”	Dividend Income plus Gain and loss on revaluation of Investment/Average Investment Cost	121	6.21	0.19	411	4.00	1.03	(81.08)	Lower return compare to last year

1 Earnings available for debt service = Net profit after tax + finance costs + depreciation & amortisation expense + loss on sale of fixed assets

2 Debt Service = Interest & lease payments + principal payments

3 Cost of Goods Sold = Cost of materials consumed + Purchases of stock-in-trade + Changes In inventories of finished goods (incl. stock-in-trade) and work-in-progress

“Working Capital = Total Current Assets - Total Current Liabilities

5 Capital Employed = Tangible Networth + Total debt + Deferred Tax liability

? Tangible Networth = Total assets - Total liabilities - Intangible assets

7 Return on investment = Excluding investment in subsidiary and associates

For Brooks Laboratories Limited

	sd/-
	Kaushalya Singh
Place: Baddi	Whole Time Director
Date: 23.08.2023	DIN: 09244596