Caplin Point Lab Management Discussions

Global Economy

The global economy is expected to grow at a slower pace in 2023 and 2024 than in 2022. The IMF has forecast global growth of 2.8% in 2023 and 3.0% in 2024, down from 3.4% in 2022.

Persistently high inflation, which averaged about 9 per cent in 2022, has prompted aggressive monetary tightening in many developed and developing countries. Rapid interest rate hikes, particularly by the Federal Reserve in the United States of America, have had global spill over effects, triggering capital outflows and currency depreciations in developing countries, increasing balance of payment pressures and exacerbating debt

sustainability risks. Financing conditions have tightened sharply amid high levels of private and public debt, pushing up debt-servicing costs, constraining fiscal space and increasing sovereign credit risks. Rising interest rates and diminishing purchasing power have weakened consumer confidence and investor sentiment, further clouding near-term growth prospects for the world economy. Global trade has softened to tapering demand for consumer goods, the protracted war in Ukraine and continued supply chain challenges.

Despite the slowdown, there are some bright spots in the global economy. The United States is expected to continue to grow at a healthy pace, and emerging markets and developing economies are expected to grow at a faster pace than advanced economies. Inflation is also expected to remain elevated in 2023 and 2024. The IMF has forecast inflation of 6.6% in advanced economies and 8.7% in emerging markets and developing economies in 2023. The main risks to the global economic outlook are: (i) A prolonged war in Ukraine, which could lead to a further escalation of energy and food prices and a more pronounced slowdown in global growth; (ii) A more aggressive tightening of monetary policy in major economies, which could lead to a recession; (iii) A sharp slowdown in China, which could have a significant impact on global trade and investment.1

1 Source: IMF report.

Indian Economy

The World Bank now fears that the ongoing slump in global economic growth will likely result in a "lost decade." Despite this gloom, many market analysts believe that this could well be Indias decade. And there are enough reasons and data to back this claim. Recent data revisions by India suggest the economy has fared better than previously believed despite continuing global uncertainties. The International Monetary Fund (IMF) expects India to grow by 5.9% in FY 2023-24 and by an average rate of 6.1% over the next five years.

Growth is expected to be constrained by slower consumption growth and challenging external conditions. Rising borrowing costs and slower income growth will weigh on private consumption growth, and government consumption is projected to grow at a slower pace due to the withdrawal of pandemic-related fiscal support measures. The Future growth will be contingent on investment. Growth in investments will be critical to meet Indias rising demand and ensure noninflationary growth in the long run. The inability to build up capacity would mean that India will have to suppress demand, failing which will result in inflation spiralling up. The challenge is several headwinds have kept investors at bay, and may likely continue doing so, at least in the near term.

Although headline inflation is elevated, it is projected to decline to an average of 5.2 percent in FY23/24, amid easing global commodity prices and some moderation in domestic demand. The Reserve Bank of Indias has withdrawn accommodative measures to rein in inflation by hiking the policy interest rate. Indias financial sector also remains strong, buoyed by improvements in asset quality and robust private-sector credit growth.


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 - Outlook through 2027 from the IQVIA Institute for Human Data Science.

The underlying growth rate of 3-6% in spend will be driven by new drug launches and wider use of recently launched brands despite efforts by players to constrain their budgets, and the impact of lower cost options.

Increased use of medicine: Medicine use - measured in defined daily doses - grew by 36% over the past decade, driven by increased access to medicines. However, growth is projected to slow through 2027 and reach a total of more than 3.4 trillion doses, up about 8% from the 2022 level. Highest volume growth

is expected in Latin America, Asia and Africa, driven by a mix of population growth and expanded access, while North America and Europe will see very low growth. Per capita medicine varies by region with Japan and Western Europe having more than double the use of most other regions.

Spending and growth by regions: The global medicine market — using invoice price levels — is expected to grow at 3-6% CAGR through 2027 to about $1.9 trillion with diverging trends by region. Growth in developed economies continues at relatively steady rates with new products offset by patent expiries; Latin America, Eastern Europe and parts of Asia are expected to grow strongly from volume and greater adoption of novel medicines. The U.S. market growth, on a net price basis, is forecast to adjust -1 to 2% CAGR through 2027, down from 4% CAGR for the past five years. The impact of exclusivity losses will increase to $140.7 billion over five years, including significant biosimilar introductions in 2023 and 2024. New brand spending in the U.S. is projected to be higher than the last five years but will be a smaller share of total spending. Key elements of the Inflation Reduction Act (IRA) are expected to impact medicine pricing and cost sharing among stakeholders, even though the specific impact is yet to be determined as no baseline has been established and the detailed plans for implementation of IRA for medicine pricing and cost sharing have not been provided.

Impact of COVID-19 on the use of medicines: COVID-19 continues to have an impact on pharmaceutical markets globally and is estimated to expand the net cumulative pharmaceutical market by $500 billion from 2020 through 2027, mostly linked to vaccines. Disruptions in demand for many other medicines, due to delayed diagnoses, continue to play out although global market growth is forecast to return to prepandemic projected levels by 2024. All regions around the world have exceeded previously projected first- wave vaccination rates while booster utilization is lagging. This creates substantial uncertainty about the future of the pandemic and the potential risks of re-emergence of infections, especially in regions of the world with the lowest immunization and booster rates.

Growth in spending on specialty medicines: Specialty medicines will represent about 43% of global spending in 2027 and 56% of total spending in developed markets. Global spending on cancer drugs is expected to reach $370 billion by 2027, with growth accelerating from the launch and use of novel drugs and limited new biosimilar impact. Immunology spending growth will slow to 3-6% through 2027 from price reductions associated with biosimilar competition as volume growth continues at 12% annually. New therapies for

rare neurological disorders, Alzheimers and migraines are expected to drive spending growth in neurology.

Biotech spending: Biotech will represent 35% of spending globally and will include both breakthrough cell and gene therapies, as well as a maturing biosimilar segment. Major advances are expected to continue, especially in oncology and immunology. The outlook for next-generation biotherapeutics includes a definitively uncertain range of clinical and commercial successes.


Pharma businesses are reorganising their business models, rationalising biopharma manufacturing, improving financial decisions, reducing human error, boosting performance, and speeding up time to market thanks to AI and big data technologies. Each stage of the pharmaceutical value chain, including drug development, clinical trials, logistics, commercialization, marketing, and pharmacovigilance, benefits from the technologies synergistic interaction.

In 2022, it was noted that there had been an increase in alliances and collaborations between major pharmaceutical companies and suppliers of AI technology. For instance, Sanofi and Exscientia collaborated to create a pipeline of precision-engineered pharmaceuticals for oncology and immunology therapies early this year. With the help of Exscientias end-to-end AI- driven platform and real patient samples, the firms have teamed up once more to create about 15 novel specific molecular options against oncology and immunology illnesses.


Blockchain technology has steadily established itself as a significant new technology in the pharmaceutical industry. Each record, event, or transaction is kept in sequential, verifiable blocks on an open, decentralised, secure public ledger. A secure and convenient method of legitimate information sharing between enterprises is provided by blockchain.

Blockchain has a huge impact on the production of pharmaceuticals, the tracking and verification of medical supplies, the prevention of record fraud, and research and development. Its use is expected to grow in the future years. With data, the system enhances end- to-end supply chain visibility. Blockchain fills the gaps between stakeholders by giving everyone a precise, realtime perspective of the supply chain, which is essential for ensuring the resilience of manufacturing and the supply chain.

The General Data Protection Regulations (GDPR) and the Drug Supply Chain Security Act (DSCSA) of the FDA are anticipated to go into full effect in 2023. To comply with these rules, the pharmaceutical industry will need blockchain technology to enhance traceability and visibility throughout the value chain.


Tailor-made or precision medicine offers immense promise for curing a wide range of illnesses, with the worldwide custom medicine industry predicted to rise to USD 717 billion by 2025. Particularly in terms of illness treatment and prevention, customised medicine has a lot of potential to advance healthcare in the future.

Research and development processes for customised medicine have advanced significantly as a result of recent advancements in big data, artificial intelligence, and genomic testing. Due to the availability of data, improvements in processing power, and artificial intelligence (AI), researchers may now create customised treatments using a constantly expanding collection of medical data.

Digitalization has become essential in all areas for pharmaceutical businesses to maintain leadership, deliver accurate results, and improve operations. Companies that stay at the forefront of technical advancements are those that continue to pave the way and open up new chances in the healthcare sector.2

The Pharmaceuticals market shows solid growth, which is mainly driven by innovative drugs and an increasing demand for healthcare, especially in emerging countries. Compared to the revenue generated by prescription drugs, OTC pharmaceuticals only play a minor role. The market for prescription drugs, for its part, is dominated by original products. This means that the larger number of OTC products, generics, and biosimilars sold cannot counterbalance the significantly higher prices of original products.

The Pharmaceuticals market is characterized by disruptions due to innovative drugs and expiring patents. Research and development, which involves large costs as well as high risks and considerable uncertainties, is the main market driver. In general, the Pharmaceuticals market is highly regulated. It is usually characterized by strict approval processes and strong patent legislation. Regulations, the availability and approval of drugs, and the period of exclusivity vary greatly from country to country.

Oncology Drugs is by far the largest market segment. In terms of regional share, the U.S. dominates the market, with Europe, Japan, and China also playing a significant role. The different segments have been affected very differently by the COVID-19 pandemic. While vaccines and antiviral drugs against the virus are generating additional revenue, and the development of mRNA drugs has received a boost, most pharmaceutical fields have been negatively impacted, mainly due to fewer new patients and barriers to healthcare access. After a shock in 2020, growth rates are back to pre-pandemic levels in most segments.3


The Pharmaceutical industry in India is significantly contributing to healthcare globally. The Department of Pharmaceuticals has estimated the current size of the industry is about USD 41 Bn including drugs and medical devices.

India continues to play a substantial role in manufacturing various important, high-quality and cost-efficient medicines for Indian and global markets. The Pharmaceutical industry in India has unique characteristics with the domination of branded generics, local brands and low-price levels with intense competition.

Known as the "Pharmacy of the World", India plays a major role in the manufacturing and supplying of medicines globally. The pharma exports from India reach more than 200 countries in the world. Indian medicines are preferred around the world because of their high quality and low price. India is among the top 10 formulation exporting countries in the world, 4th largest by volume and 10th largest by value.

India is also the largest "generic only" exporter in the world, accounting for 20% of the global exports in generics.

The Pharmaceuticals industry has shown tremendous progress in terms of infrastructure development, technology base and a wide range of products. The industry has developed GMP Certified (Good Manufacturing Practices) facilities to produce different dosage forms.

India has the second-highest number of United States Food and Drug Administration (USFDA) approved facilities and labour costs in India are lower than other manufacturing hubs by up to 40%.

Despite recent headwinds, the Pharmaceutical industry in India has grown rapidly. India is likely to become one of the top 3 Pharmaceutical industries by 2030.

Generic penetration in high-value healthcare markets (e.g., US) is growing significantly, with India supplying over 20% of the demand in major geographies.4


We are possibly the only mid-sized company in Indias pharmaceutical sector to be engaged in the R&D and manufacture of finished formulations, APIs, clinical research, front-end generic presence in Latin America, brand marketing in Francophone Africa and a USFDA/EU- GMP approved injectable facility. The Companys unique business model has helped generate the resources to build world-class infrastructure. The Companys debt- free and cash surplus situation positions it attractively to address the opportunities of the future.

One of the main reasons for the success can be attributed to the wide range of products offered across diverse geographies.

We have approx. 4000+ products registrations across the globe with 700+ pharmaceutical formulations & over 36 therapeutic sections.

CAPLIN AT A GLANCE Our Growth engines

Caplins core business which is focused on Latin America and Francophone Africa is expected to grow at above industry-average pace with margins expected to improve with increased branded generics business.

Our aspiration is to have exceptional compliance record and focus on niche products which continues to be in shortage in US market. Caplin believes US business to be one of its primary engines that will drive growth.

With the backward and forward integration, we will save cost, capture more market and control supply chain which is expected to boost earnings.

Caplins DNA of remaining debt-free and self-sustenance is highlighted by increasing cash surplus over the years. Strong Balance sheet of Caplin acts as an anchor for our long-term vision. Caplin plans to enter more regulated markets such as Canada, Australia, China, Russia/CIS as well as enter the bigger LATAM markets of Mexico and Brazil in the near to medium term horizon.


* Revenue grew by 16.4% YoY to Rs1,523 Crores

* Profit after Tax (PAT) at Rs377 Crores up 22.2% YoY

* Cash and Cash equivalents at Rs772 Crores, an increase of Rs78 Crores YoY after Capex

* Cash flow From Operations at Rs271 Crores

* Capex at Rs194 Crores.

* Basic EPS grew by 25% to Rs49.62 in FY23 against Rs39.61 in FY22


Caplin covers a wide spectrum of pharmaceutical formulations and therapeutic segments across 23 countries with revenue of Rs1,523 Crores in FY23.


CAPEX allocation

Caplin has ventured into a Capex journey of ~500- 550 Crores for expanding existing capacities, widen its product portfolio and backward integrate majority of the products. We are happy to share that all of the planned Capex is funded through internal accruals only.

Capacity expansion at Caplin Steriles

Phase 2 of the facility is nearing completion. Post completion of this facility, we will be able to leverage large batches with faster filling speed for injectable vials. We are also adding a Pre-Filled Syringe Line which is a new delivery system not earlier available with us.

Phase 3 of the facility will have a high Lyophilization capacity.


Phase 1 of the Oncology Facility will have Oral Solid Dosages and Phase 2 would be manufacturing Injectables.


We are targeting to become a backward integrated Company with own APIs for 70% of all filings in US by 2024, a critical differentiator for Generic Injectables. For this purpose, we have acquired an API plant in Visakhapatnam, Andhra Pradesh. This facility will be refurbished into a regulated markets compliant plant, for general category APIs. This is part of the Companys backward integration initiative, both for Injectable and OSD APIs.

Oncology API site construction starting in adjacent facility to the Finished Dosages Oncology plant at Kakkalur, Chennai.


Softgel capacity expansion has been completed. It is twice the current capacity established for existing markets.

OSD Facility for Global markets: Construction work to commence shortly on a new Oral Solid Dosages plant in Thervoy SIPCOT, near Chennai. The facility will increase existing OSD capacity by three times and cater to additional demand from larger LATAM markets such as Mexico and Brazil, in addition to regulated markets such as US and EU.


Below are some of the Key Financial ratios:

Particulars Consolidated % Variance Standalone % Variance Reason (If variation is more than 25%)
FY 2022-23 FY 2021-22 FY 2022-23 FY 2021-22
Debtors Turn Over Ratio 4.13 4.26 (3.05)% 7.45 6.94 7.31%
Inventory Turnover Ratio 2.57 2.74 (6.24)% 4.2 6.05 (30.57)% Standalone: Higher closing Inventory considering safety stock in the current year
Current Ratio 5.80 6.25 (7.18)% 4.52 6.13 (26.18)% Standalone: Increase in other Current liabilities (Advance received from Customer) in the current year
Interest Coverage Ratio NA NA - NA NA -
Debt Equity Ratio NA NA - NA NA -
Operating Profit Margin % 32.64% 33.13% (1.47)% 50.82% 47.24% 7.57%
Net Profit Margin % 24.76% 23.58% 5.00% 37.33% 32.14% 16.15%
Return on Net worth %(RONW) 22.06% 22.74% (2.96)% 22.63% 22.24% 1.73% Consolidated : Marginal decrease due to increase in base Standalone: Marginal increase due to receipt of higher dividend income during the year


The Company has a well - established process of risk management which, inter-alia, includes identification of design gaps, analysis and assessment of various risks, formulation of risk mitigation strategies and implementation of the same to minimise the impact of such risks on the business and operations. The process ensures that new risks, which might arise, or the impact of existing „ risks which might have increased, ¦ are identified and a strategy is put in place for mitigating such risks.

The Company has a robust Enterprise Risk Management (ERM) framework

which enables us to manage our risks better. It also tracks significant external developments and internal challenges to recognise new threats and their potential impact on our risk profile.

The major risks identified by the management are regulatory, competition, supply chain disruption, cyber & data security along with economic and political risks. A review of the risk management policy is carried out by the Risk Management Committee and the Board of Directors.

The Board of Directors of the Company directly oversee the risk management framework. The Board has formed a Risk Management Committee which periodically examines critical events impacting the risk profile, existing and emerging risks and other uncertainties, and monitors the progress of planned actions.

The Risk Management Committee meets periodically and it includes the CFO, Independent Director and the Managing Director of the Company. In addition, the Companys senior leadership team undertakes various risk governance measures at the operational level as per the requirements. While every company, as part of its risk management strategy, tries to put in place mitigation measures to the extent possible, risks cannot be wished away. We have listed a summarised account of some of our key risks and mitigation measures drawn from management reviews and deliberations of RMC.


Geographical risk

Dependence of the Company on a specific geography can affect balanced growth.

Mitigation strategy

The Company has a strong presence in Latin America. On the one hand, the Company is enlarging its presence in Latin America and on the other hand the Company has been gradually stepping up its presence in the US and other regulatory markets, which will reduce its dependency in Latin America in future.

Currency fluctuation and receivables risk

The Company is exposed to currency fluctuations due to its international presence

Mitigation strategy

Rising costs due to currency fluctuations are absorbed through natural hedging. The Company receivables are at 97 days in 2022-23 as compared to 92 days in 2021-22. During the last few years, the increase in the cycle was on account of entering into the tender-based segment, marked by secure large sales to government agencies carrying a longer receivables cycle.

Quality risk

The Companys top line and brand could be affected by a decline in product quality

Mitigation strategy

The facilities of the Company are, inter-alia, US FDA, Brazil ANVISA and WHO-GMP approved, strengthening quality assurance. While there is a robust in-house QC and QA SOPs and teams for ensuring high level of quality adherence, the Company also undertakes periodic audits (external and internal) to benchmark practices in line with global standards.

Liquidity risk

The Companys ability to fund operations or report surpluses could be affected by a global economic slowdown.

Mitigation strategy

The Cash and Bank balance (including liquid investments) of the Company stood at Rs. 772 Cr as on 31 March 2023. The Companys Average working capital cycle was 141 days in 2022-23 compared with 137 days in 2021-22.

Competition risk

The Companys prospects can be affected by rising competition

Mitigation strategy

The Company has selected to market products marked by superior quality. It is present in countries with relatively low competition. It has networked pharmacies and medical practitioners to its portal, enhancing their convenience and effectiveness. It is addressing the injectables space within US, an area marked by relatively low competition.

Policy risk

The business of the Company might be hampered due to change in policies regarding generic medicines

Mitigation strategy

Medical needs have witnessed a rapid growth owing to growing population and changing everyday habits. Increase in prices of branded drugs has led to the promotion of generics by various governments, strengthening a case for affordable health care. The Company has reinforced its position in this growing space through the delivery of quality and validated generic products.

Internal control systems and their adequacy

The Company maintains appropriate systems of internal control, including monitoring procedures, to ensure that all assets are safeguarded against loss from unauthorized use or disposal. Company policies, guidelines and procedures provide for adequate checks and balances and are meant to ensure that all transactions are authorized, recorded and reported correctly.

The Audit Committee approves and reviews audit plans for the year based on internal risk assessment. Audits are conducted on an ongoing basis and significant deviations are brought to the notice of the Audit Committee of the Board of Directors following which corrective action is recommended for implementation. All these measures facilitate timely detection of any irregularities and early remedial steps.

The Audit Committee of the Company also reviews the reports of the internal auditors quarterly and recommends steps for further improvement of the internal controls. The Company has also implemented an Internal Financial Control (IFC) framework to ensure proper internal controls over financial reporting.


Industrial Relations scenario continued to be cordial during the year. The Company regards its employees as one of its great assets and accords high priority to training and development of employees. The employees have also shown their relentless dedication to the Company even in these tough times. Caplins employees have supported the management and enabled the Company to fulfil its purpose and achieve its goals over the last many years. This high level of commitment is rooted in their passion for our purpose and a sense of ownership towards it.

The Company is also committed to the wellbeing of its people, it offers a safe working environment that nurtures talent, maintains a culture of openness and transparency, and also fosters ownership among them. The Companys decisions were aligned with professional and personal goals of employees, enhancing pride of association.


1. Recruitment and Talent Acquisition: The Company

focussed on attracting and retaining top talent. We utilized innovative digital strategies and technologies to identify and recruit skilled professionals who align with the companys values and culture.

2. Employee Training and Development: Caplin recognizes the importance of fostering a continuous learning culture. It had initiated various measures to enhance employee training and development programs to nurture the skills and capabilities of the workforce. This includes both technical and soft skill training initiatives to enhance productivity and promote career growth.

3. Employee Engagement and Well-being: The wellbeing and satisfaction of employees are crucial for maintaining a positive work environment. The Company is working to implement initiatives to strengthen employee engagement, such as organizing team-building activities and events, recognizing employee achievements etc.

4. Diversity and Inclusion: Caplin Point values diversity and is committed to fostering an inclusive work environment. The Company is prioritizing initiatives that promote diversity, equity, and inclusion.

5. Performance Management: The Company has a performance management system that covers the entire workforce. The process of further improving the goal-setting framework and establishing regular performance feedback mechanisms are underway.

Overall, in the year 2022 - 2023, Caplin had concentrated on attracting and retaining top talent, enhancing employee development and engagement, fostering diversity and inclusion, and improving performance management practices.Total number of employees at consolidated level as on March, 31, 2023 stands at 2,098.


The Company continues to adhere to standard accounting policies under the Indian Accounting Standards (Ind AS), as applicable.


The statement made in this section describes the Companys objectives, projections, expectation and estimations which may be ‘forward looking statements within the meaning of applicable securities laws and regulations. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised by the Company. Actual result could differ materially from those expressed in the statement or implied due to the influence of external factors which are beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forwardlooking statements on the basis of any subsequent developments.