Caplin Point Laboratories Ltd Management Discussions

ECONOMIC OVERVIEW

GLOBAL ECONOMY

Following an unprecedented series of shocks in the preceding years, global growth was stable yet underwhelming through 2024 and was projected to remain so in the January 2025. However, the landscape has changed as governments around the world reorder policy priorities. A series of new tariff measures by the United States and countermeasures by its trading partners have been announced and implemented, ending up in near-universal US tariffs and bringing effective tariff rates to levels not seen in a century. This on its own is a major negative shock to growth. The unpredictability with which these measures have been unfolding also has a negative impact on economic activity and the outlook and, at the same time, makes it more difficult than usual to make assumptions that would constitute a basis for an internally consistent and timely set of projections.

The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity.

INDIAN ECONOMY

India has displayed steady and robust economic growth while facing global challenges and geopolitical concerns and it continues to maintain its position as the fastest-growing major economy. India is estimated to clock in a GDP growth of 6.2 and 6.3 per cent in FY25 and FY26, respectively, backed by strong domestic demand, substantial infrastructure development initiatives, a spike in rural demand and effective government policy measures.

The manufacturing sector continues to expand sharply despite experiencing a slowdown for over a year, driven by significant domestic and global demand. Major government initiatives such as Make in India and the Production Linked Incentive (PLI) scheme further boost domestic production and enhance Indias competitiveness. Over the past two decades, India has consistently contributed a sizable share to global activity and growth. The nation continues to cement its position as a sought-after hub for innovation and entrepreneurship with its rapidly expanding start up ecosystem and its status as the worlds third most preferred destination for technology investments. As increased volatility and constraints on global capital flows have affected foreign direct investment (FDI) flows to India in the past few years, the country is focusing on deregulation to boost growth and attract investment by fostering a more business- friendly environment.

This involves streamlining regulatory requirements and simplifying administrative processes to improve the ease of doing business. The government also announced an increase in capital expenditure in the union budget for FY26 by earmarking around INR11.2 trillion (USD134.5 billion), emphasising its commitment to infrastructure-driven growth.

Make in India and the Production Linked Incentive (PLI) scheme further boost domestic production and enhance India?s competitiveness.

INDUSTRY OVERVIEW

INDIAN PHARMACEUTICAL INDUSTRY

The Indian pharmaceutical industry in 2025 is set to play a central role in the global healthcare landscape. With strategic investments, robust policy support, and a push toward innovation and self-reliance, the industry is not only scaling up in size but also in global impact. Stakeholders must focus on strengthening R&D, enhancing quality compliance, and building a future-ready workforce to harness the full potential of this high-growth sector.

In 2025, the projected revenue in the Pharmaceuticals market in India is expected to reach US $13.48 bn. The largest market within the pharmaceutical industry is Oncology Drugs, which is projected to have a market volume of US$2.06bn in 2025. Looking ahead to 2030, the revenue is expected to exhibit an annual growth rate (CAGR 2025-2030) of 5.31%, resulting in a market volume of US$17.45bn. When compared globally, United States is anticipated to generate the highest revenue, with a projected amount of US$662.48bn in 2025. Indias pharmaceutical market is experiencing a surge in demand for generic drugs and is poised to become a major player in the global pharmaceutical industry

Key Growth Drivers

Following factors and opportunity hot spots are giving strong shape to the Indian Pharmaceutical Industrys the drivers for growth and sustainability.

The significant initiative and actions at the industry level, government policies, regulatory developments and market scenario provide for the required impetus for the industry.

1. Government Initiatives:

O PLI Scheme (Production Linked Incentive): Boosts local API and key intermediate manufacturing.

O Ayushman Bharat Digital Mission and Jan Aushadhi scheme improving drug accessibility.

2. Growing Healthcare Demand:

O Rising non-communicable diseases (NCDs) like diabetes, cancer, and heart diseases.

O Expanding middle-class population with higher spending on health and wellness.

3. Generics and Biosimilars:

O India continues to be the "Pharmacy of the World", especially for low-cost generics.

O Significant expansion in biosimilars, especially in oncology and autoimmune segments.

4. Domestic Formulations Market:

O Estimated to grow at 10-12% CAGR.

O Surge in demand for OTC drugs, wellness, nutraceuticals, and preventive health products.

Export & Global Integration

The growing prominence of India as worlds manufacturing hub across industries, is driving the Pharmaceutical industry also towards higher exports, technological breakthroughs and higher compliance levels. Key trends in global exports from India are:

O US remains the largest export market (about 30% of Indias pharma exports). With increased focus on EU, Latin America, and Africa.

O Indian firms are expanding global acquisitions, partnerships, and R&D facilities abroad.

R&D and Innovation Trends

The growing Indian prominence across IP driven businesses has not left the Indian Pharmaceutical Industry untouched. A

In 2025, the projected revenue in the Pharmaceuticals market in India is expected to reach US $13.48 bn.

growing number of globally compliant businesses are fast becoming the go-to provider of quality medicines and the latest trends include:

O Growing investments in biotech, new chemical entities (NCEs), and clinical trials.

O Digital health innovations: AI-driven drug discovery, telemedicine, and e-pharmacies gaining traction.

O Focus on complex generics, injectable, and inhalers for USFDA filings.

Opportunities Ahead

India is poised to be a global hub for end-to-end drug manufacturing. There is a rising interest in contract development and manufacturing (CDMO) services by the global pharma players. There is more interest and growth opportunities in telemedicine, e-pharmacies, and digital therapeutics. The Industry is now more focussed in ESG initiatives and sustainable and green manufacturing practices.

Segment wise Outlook

The various key segments of the Pharmaceutical industry are flaring well for the industrys all-round growth and diversifying and de-risking the product or service concentration and the dependence.

Segment	2025 Outlook
Generics	Continued strong growth
API/Bulk Drugs	Boost from Make in India push
Biosimilars	Rapid global expansion
Domestic Formulations	10-12% CAGR
OTC & Wellness	High urban and rural demand

Challenges for Indian Pharmaceutical Industry

The Indian Pharmaceutical industry, being a epicentre of global medicine manufacturing, has its own set of challenges which present for excellent opportunities for Indian businesses to innovate and create newer solutions.

O API Import Dependence: Despite government efforts, a significant portion of Active Pharmaceutical Ingredients (APIs) are still imported,

primarily from China.

O Regulatory Scrutiny: Continuous monitoring by global regulators such as the USFDA necessitates high compliance standards.

O Pricing Pressures: Domestic price control mechanisms and competitive pricing in exports continue to impact margins.

O Talent Gaps: There is a shortage of skilled professionals in advanced biotechnology and R&D.

GLOBAL PHARMACEUTICAL

INDUSTRY

Outlook

The global pharmaceutical industry is on the cusp of transformative change in 2025, shaped by technological advancements, regulatory evolution, and changing patient demands. With a projected market size exceeding USD 1.6 trillion, the industry is witnessing robust growth across therapeutic areas, innovation pipelines, and geographies. This report explores key market trends, sector dynamics, investment priorities, and strategic opportunities influencing the global pharmaceutical landscape.

Market Overview

The Global Pharmaceutical Market is progressing at a decent pace. With growing need to quality products, highly compliance manufacturers and cost competitiveness is opening way for cross-border businesses, thereby making world healthcare an increasingly inclusive mission.

O Market Size: The global pharmaceutical market is expected to reach over USD 1.6 trillion by the end of 2025.

O Growth Rate: A steady CAGR of 4-6% is projected, with stronger growth in emerging markets.

O Therapeutic Focus: Oncology, immunology, diabetes, and central nervous system (CNS) disorders are leading therapy areas.

O Regional Contribution: The US continues to dominate global revenues (~40%), followed by Europe, China, and Japan.

Key Growth Drivers

The key growth drivers for the Global

Pharmaceutical Industry include:

O Innovation in Drug Development: Surge in mRNA, cell and gene therapies, and personalized medicine.

O Digital Health Integration: AI/ML in drug discovery, clinical trial digitization, and remote patient monitoring.

O Aging Population: Rising elderly demographics in developed markets increasing chronic disease incidence.

With a projected market size exceeding USD 1.6 trillion, the industry is witnessing robust growth across therapeutic areas, innovation pipelines, and geographies.

O Access Expansion: Improved healthcare infrastructure and insurance coverage in emerging economies.

Emerging Trends

The world is changing faster than ever before, thereby evolution of newer technologies, rapid digitalization and data-driven business decisions are all presenting the industry with newer trends to follow:

O Biosimilars and Biologics: Accelerated adoption due to patent expiries and growing biologic drug pipelines.

O Rare Diseases and Orphan Drugs: Focus on niche therapies with high returns and regulatory incentives.

O Precision Medicine: Genomics and biomarkers driving targeted therapies.

O Sustainability: ESG goals pushing for greener manufacturing, ethical sourcing, and carbon neutrality.

Regional Outlook

The key regional geographies, across the globe have their own set, pace and phase of the industry structure, each presenting with a diverse set of outlook for the global pharmaceutical industry.

O North America: Continued leadership in innovation, R&D spending, and new drug approvals.

O Europe: Regulatory harmonization and emphasis on value-based healthcare.

O Asia-Pacific: Fastest-growing region, led by China and India; strong API manufacturing and generics presence.

O Latin America & Africa: Rising urbanization and healthcare investments driving pharma demand.

R&D and Regulatory Landscape

As the world is growing close and borders are blurring, there is a growing need for higher intervention of quality Research & Development (R&D) besides meeting varying global regulatory compliances for the businesses, transacting across borders.

O Increased R&D Spending: Global R&D investments expected to exceed USD 250 billion.

O Faster Approvals: Adaptive trial designs and real-world data usage accelerating regulatory approvals.

O Collaborative Innovation: Partnerships between academia, start-ups, and big pharma to reduce costs and boost speed.

Challenges

The diversity and vibrancy of global markets also present with diverse set of challenges for the industry players who, in order to succeed and sustain, need adapt fast, act faster.

O Pricing Pressures: Value-based pricing models and cost-containment policies in key markets.

O Patent Cliffs: Expiration of blockbuster drug patents impacting revenues.

O Supply Chain Vulnerabilities: Geopolitical risks and API supply disruptions post-COVID.

O Compliance and Cybersecurity: Increasing need for regulatory compliance and protection of patient data.

COMPANY OVERIEW

At Caplin Point Laboratories Limited, we are one of the fastest growing Indian Companies having a unique business model which caters the need of predominantly to emerging markets of Latin America and Africa. We are one of the very few companies to show consistent high-quality growth in Revenues, Profits and Cash flow over the last 15 years.

We have our own state of the art manufacturing facilities that cater to a complete range of finished dosage forms. The Company has also entered regulated markets such as US through its Subsidiary Caplin Steriles Limited.

We are happy to share that the Company was listed on Forbes "Asia?s 200 Best Under a Billion" list for 2024. The Company has appeared for the 7^th time on this list (2014, 2015, 2016, 2021, 2022, 2023 and 2024), 4^th year in a row. The Company was also awarded as "The Emerging Company of 2018" by Economic Times Family Business Awards.

FINANCIAL PERFORMANCE DURING THE YEAR

The Company delivered yet another stellar performance during FY 2024-25. Under the visionary Leadership of its founder Chairman and riding on the handwork and sustained efforts of a young and dynamic operational leadership team, the Company was able to achieve its highest ever consolidated revenue from operations of INR 1,937.47 crore during the year.

Financial Performance (FY25) (Consolidated)

(Rs. Cr)

Metric	FY24	FY25	Growth
Total Revenue	1,761	2,034	+ 15.5%
Revenue from Operations	1,694	1,937	+14.4%
Gross Profit	970	1,167	+20.3%
EBITDA	618	743	+20.2%
EBIT	565	677	+ 19.9%
PAT	461	541	+ 17%
Cash & Cash Equivalents	916	1,180	+28.8%
R&D Spend	77	89	4.6% of revenue

STRATEGIC RECOGNITION & DIFFERENTIATORS

At Caplin, the Company continued to achieve milestones, on its journey of excellence, as it moved forward. During FY2024-25, the following were key recognitions and differentiators in the competitive landscape:

O Debt-free with 1,180 Cr cash (58% of FY25 revenue).

O Unique business model with own distribution networks in underserved markets.

O Focused on Bottom of Pyramid (BoP) and transitioning into regulated high- value segments.

R&D & MANUFACTURING SCALE-UP (CROSS-GEOGRAPHY IMPACT)

During FY2024-25, the quest for innovating, improving, and inventing continued unabated with newer benchmarks.

O Dual-chamber Pre-Filled Syringes to be launched across markets.

O Amaris Clinical (CRO):

O Cleared ANVISA-Brazil virtual inspection.

O 15 in-house BE/BA studies completed; 30+ more planned for LatAm filings.

O API R&D: 90+ molecules developed across General & Oncology segments.

Caplin Steriles Limited (CSL):

CSL continued its journey of growing its share of contribution in the overall growth journey of the Company. The major developments in CSL, during the year were as under

O 8 new ANDA approvals in FY25 + 3 ANDAs acquired recently.

O Total ANDAs till date: 38; 13 more under FDA review.

O First launches: RTU Bag, Ophthalmic Emulsion, Injectable Emulsion.

O Preparing for 7 Pre-Filled Syringe filings in FY26.

O Revenue expected from Canada (8), Mexico (4), Australia (3) etc., in FY26-27.

Own-label front-end in the US

Our most ambitious strategic move for the regulated markets took wings and started showing initial sings of success during FY2024.25. Our front-end in the US, to seed our own label in the market, is showing encouraging initial results.

O Revenue of $3.2 million in first 8 months.

O 24 products launched, 15+ more planned in FY26.

O Tied up with top 7 wholesalers and 24 direct buyers (hospital systems).

O Current end users: 5610 (hospitals, pharmacies, clinics, etc.)

The Strategic Growth Initiatives

In its quest to consistently scale, enhance and upgrade, Caplin Point Laboratories continued its journey of Capex investments to create new capacities, add newer products and enhance existing product portfolio. Following the update on the key projects as at end of FY2024-25:

Chairmans take on performance:

Mr. C.C. Paarthipan, Chairman of Caplin Point Laboratories said:

"Were delighted to close out another year with excellent Top and Bottom Line Growth, and continue our progress on being a benchmark when it comes to Cash flows Our front end in the US is taking shape at a good pace and we expect this entity to drive strong growth

for the parent company over the next few years Were once again focusing on getting back to Asset Light outsourcing using our Second Innings at China, with import of Peptides and Key starting materials for Biosimilars, which we plan to file and launch in our Emerging Markets where we have a significant presence already With our API entities coming on stream in the very near future, we can truly envision Caplin being a fully integrated global Pharma player in the years to come."

FINANCIAL RATIOS

Below are some of the Key Financial ratios:

Particulars	Consolidated			Standalone
	2024-25	2023-24	Variance%	2024-25	2023-24	Variance %
Debtors Turnover Ratio	3.30	3.62	(8.92%)	4.95	5.76	(14.12%)
Inventory Turnover Ratio	2.21	2.22	(0.67%)	3.12	2.98	4.85%
Current Ratio	6.97	5.72	21.90%	8.27	5.89	40.31%
Interest Coverage Ratio	NA	NA	-	NA	NA	-
Debt Equity Ratio	NA	NA	-	NA	NA	-
Operating Profit Margin %	49.81%	50.05%	(0.49%)	33.31%	32.08%	3.82%
Net Profit Margin %	27.93%	27.24%	2.54%	38.27%	38.82%	(1.39%)
Return on Net worth % (RONW)	18.75%	19.66%	(4.65%)	19.66%	20.41%	(2.20%)

RISK MANAGEMENT

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 annually by the Risk Management Committee and the Board of Directors.

The Board of Directors of the Company directly oversight 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 he progress of planned actions.

The Risk Management Committee meets periodically and it includes the CFO, Independent Directors and other important executives 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 IRMC.

CAPLIN POINT LABORATORIES LIMITED- KEY RISK MITIGATION STRATEGIE

Risk Area	Mitigation Strategy
Geopolitical & Market Risk	Ventured early into challenging markets (LATAM, Africa), securing first-mover advantage. Created a deep market moat that is hard to replicate.
Regulatory Risk	Maintains "always-ready" regulatory posture across facilities (USFDA, EU-GMP, ANVISA, INVIMA approvals). Swiftly addresses observations with corrective actions.
Manufacturing & Supply Chain Risk	Balanced mix of in-house (60%) and outsourced (40%) manufacturing. Partnered with quality suppliers in India and China to avoid capacity bottlenecks.
Currency Fluctuation Risk	Lean manufacturing and outsourcing model reduces operational cost sensitivity to currency shifts.
Operational Risk	Strong backward and forward integration (API plants, R&D, own distribution) allows better control over operations and resilience against disruptions.
R&D and Product Pipeline Risk	Consistent R&D investment (~4.6% of revenue), with a robust pipeline: 51 ANDAs filed, 38 approved (including 8 received during the FY) and 13 under review.
	In RoW market, we have 5000+ product registrations for 650+ pharmaceuticals formulations across markets served. New approvals received for 215 products and 238 products in the pipeline that are yet to be approved. 5 dedicated R&D facilities reduce concentration risk.
Regulated Market Compliance Risk	Dedicated facilities and teams for regulated markets like US and EU. Adheres to stringent compliance with frequent internal audits.
Working Capital Risk	Operates on negative working capital model in LATAM; selective use of credit strategy. Own distribution ensures faster cash cycle and receivable control.
Product Concentration Risk	Wide product basket: 650+ formulations across 36 therapeutic segments, with a focus on difficult-to-manufacture and niche products (RTU bags, pre-filled syringes).
Environmental & Social Risk	Committed to ESG best practices. Low carbon footprint, women empowerment, and investments in rural healthcare as part of CSR.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established adequate internal control systems that are appropriate for its business nature, size, and operational complexity. These systems have been functioning effectively. The Directors have implemented policies and procedures to ensure the orderly and efficient conduct of business, adherence to company policies, safeguarding of assets, prevention and detection of fraud and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information.

In addition, the Company has engaged professional Internal Audit firm to test and evaluate all internal control systems and recommend corrective and remedial measures. The Audit Committee has deliberated with management members, reviewed the laid-down systems, and consulted with the internal audit team and statutory auditors to gauge their opinions on internal financial control systems.

The Committee is satisfied with the adequacy and effectiveness of these systems and keeps the Board of Directors informed. However, the Company acknowledges that any internal control framework has inherent limitations. Therefore, periodic audits and reviews are conducted to ensure that the systems are regularly updated.

INDUSTRIAL RELATION AND HUMAN RESOURCES

Industrial Relations scenario continued to be cordial during the year. Our employees are our most valuable assets. The Company remains dedicated to key drivers of employee engagement, career growth, learning opportunities, fair performance evaluations, rewards, and employee well-being by continually enhancing its HR processes to ensure scalability, agility, and a consistent employee experience. Additionally, the Company organizes workshops to enhance employees skill sets and encourage their overall engagement.

Individual goals are assigned to employees, aligned with the companys objectives, serving as a strong motivator and improving overall business efficiency. Furthermore, our open-door policy allows employees to voice concerns and share opinions or suggestions, leading to high engagement levels and a lower employee turnover rate.

Area	Details
Total Workforce	Over 3,500 employees across various manufacturing, R&D, distribution, and corporate functions.
Gender Diversity	Continued focus on women empowerment, especially in shop-floor operations. Active recruitment of women from rural and semi-urban areas.
Workplace Culture	- Strong emphasis on Safety, Productivity, Quality, and Integrity as core values. - Promotes Bottom-up Approach in manufacturing decisions.
Training & Development	- Technical and soft skills training across units. - Encouragement of internal mobility and role enhancement.
Digital Transformation Skills	- Employees involved in digital upskilling initiatives like e-logbooks, smart manufacturing, CRM systems, and advanced analytics tools.
Talent Strategy	- Focused hiring in regulatory, R&D, digital, and manufacturing domains. - Recruitment aligned with expansion in US and oncology markets.
Performance Culture	- Merit-based recognition and performance-linked incentives.- Emphasis on accountability and innovation in job roles.
ESG & CSR Alignment	- Local hiring in rural areas near manufacturing plants.- Social impact through healthcare and employment initiatives, particularly for underserved areas.
Leadership Development	- Mid-level managers mentored for leadership roles.- Founding management actively involved in talent grooming.
Workforce Localization	- Front-end LATAM and US teams are largely locally hired to ensure market alignment and agility.

ADHERENCE TO ACCOUNTING STANDARDS

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

CAUTIONARY STATEMENT

Certain statements made in this section describe 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 results could differ materially from those expressed in the statements 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 forward-looking statements on the basis of any subsequent developments.