Caprihans India Ltd Management Discussions

Pharmaceutical Packaging Industry Outlook

The Indian pharmaceutical market is a significant global player, particularly in the generic drug sector which was valued at USD 50 billion, with domestic consumption at USD 23.5 billion and exports at USD 26.5 billion. India is the worlds third-largest producer of pharmaceuticals by volume and ranks 14th in terms of value. India is the largest provider of generic medicines globally, holding a 20% share of the global generic medicine market. India is also the worlds largest vaccine supplier by volume, accounting for over 60% of global vaccine production. The industry produces a wide range of products including generic drugs, bulk drugs, over-the-counter (OTC) medications, vaccines, biosimilar and biologics. The industry is expected to reach USD 130 billion by 2030 according to a report by Bain & Company.

The Active Pharmaceutical Ingredients Market size is estimated at USD 245.67 billion in 2026, and is expected to reach USD 348.61 billion by 2031, at a CAGR of 7.25% during the forecast period (2026-2031).

Aging populations, the persistent rise of chronic illnesses, and surging biologics approvals keep demand strong, yet producer margins hinge on merchant manufacturing uptake, continuous-flow plant deployment, and on-shoring incentives in major economies. Governments in India, the United States, and the European Union disbursed more than USD 4 billion in combined Production Linked Incentive and tax-credit packages between 2024 and 2026, shifting new capacity toward domestic clusters. Contract development and manufacturing organizations (CDMOs) scaled faster than captives because continuous-flow and mini-plant technologies shorten cycle times and cut capital intensity for mid-volume APIs.

The pharmaceutical packaging industry in India continues to grow steadily, driven by rising medicine production, stricter regulatory requirements, and the increasing need for secure and sustainable packaging. The prolonged Ukrain-Russia War coupled with unstable Gulf war situation in FY 2025-26 has fueled demand of Pharmaceutical products and at the same time has created havoc on supply chain with high input and logistics cost, leading to lower margin. While the broader Indian pharma market is expanding rapidly, the packaging segment is benefiting from specific trends: higher exports to regulated markets, the growing role of contract manufacturing for multinational companies, and the transition to eco-friendly materials.

Pharma packaging is no longer viewed solely as a protective layer; it plays an important role in patient safety, supply-chain integrity, product protection and regulatory compliance.

Features such as tamper evidence, track-and-trace, anticounterfeit solutions and digital identification are gaining importance. Packaging solutions are increasingly designed to protect sensitive formulations, extend shelf life and support product integrity throughout the distribution chain.

Caprihans, with its long-standing expertise in PVC, PVDC and other multi-layer films, continues to serve domestic and global pharmaceutical customers. The Companys manufacturing capabilities, product-development focus and quality systems provide a platform to respond to evolving customer requirements and applicable quality and regulatory expectations.

Market Size and Drivers

Indias pharmaceutical packaging market is estimated at USD 2.2 billion in 2024 and is projected to grow at over 8% CAGR through 2030, outpacing global packaging market growth.

This is supported by:-

• Regulatory Push: Increasing regulatory and customer requirements are driving demand for traceability, product identification, safety features and enhanced information on pharmaceutical packaging. The Company continues to monitor applicable requirements in its domestic and export markets.

• Export Expansion: High-value shipments to regulated markets like the US and EU demand advanced tamper- evident and child-resistant closures.

• Anti-Counterfeit Surge: Security-focused packaging technology in India scales rapidly, estimated to reach multi- billion-dollar adoption as track-and-trace laws tighten.

PVC and PVDC blister films remain dominant for solid oral dosage [OSD] packaging segment due to their proven barrier protection and cost-effectiveness. However, newer laminates combining PET, PE, and proprietary coatings are gaining traction for sustainability and performance advantages.

Caprihans Competitive Position

Caprihans operates with several competitive strengths:

• Large-scale Manufacturing: High-capacity film extrusion calendaring, lamination and coating facilities capable of serving large pharma customers from two (2) State-of-the- art integrated manufacturing facilities.

• R&D and Product Development: Active development of halogen-free blister films and recyclable environment friendly laminates.

• Regulatory Compliance: Systems aligned with EU, U.S. FDA, China FDA and WHO GMP requirements.

• Supply Chain Reach: Strong domestic distribution network and export capabilities to multiple continents.

• Customer Partnerships: Long-term relationships with top pharma companies and packaging converters.

The company is increasingly focusing on sustainable packaging innovations—developing recyclable mono-material solutions, introducing solvent-free coating processes, and optimizing barrier properties.

Opportunities, Threats and Outlook

Opportunities:

• Expanding sustainable product lines to cater to the shift in buyer specifications.

• Offering advanced anti-counterfeit and traceability features integrated into films.

• Partnering with pharmaceutical companies for codevelopment of custom barrier solutions.

• Export growth by meeting high-barrier packaging needs in Europe, North America, and emerging markets.

• Geopolitical developments may influence pharmaceutical demand, supply-chain patterns, logistics costs and availability of critical inputs, thereby creating both opportunities and risks for packaging suppliers.

Threats:

• Volatility in petrochemical-based raw materials, driven by crude oil prices, resin market dynamics, geopolitical developments and foreign exchange movements.

• Competitive pressure from global film manufacturers entering the Indian market.

• Potential phase-outs or restrictions on certain halogen- based materials in export markets.

• Customer consolidation and pricing pressure, which may affect margins and commercial terms.

Outlook: Demand for pharmaceutical packaging is expected to remain resilient, particularly for barrier films, sustainable solutions and high-performance materials. The Company intends to focus on product development, operational efficiency, customer service and export opportunities, while remaining responsive to changes in regulatory requirements and market conditions.

Packaging Technology and Trends

The pharmaceutical packaging industry continues to be shaped by the following key trends:

1. Sustainability:

• Development of halogen-free environmental friendly films and recyclable multi-layer laminates.

• Increased demand for materials that meet extended producer responsibility (EPR) norms.

2. Digital Integration:

• Films designed for seamless integration with serialized packaging lines.

• Printing surfaces optimized for QR codes, authentication labels, and digital tracking.

3. Barrier Performance:

• Higher moisture and oxygen barrier requirements due to global distribution timelines.

• Focus on packaging that supports complex formulations such as moisture-sensitive APIs and biologics.

The Company continues to evaluate coating and product- development technologies that can reduce material consumption while maintaining required barrier performance, with the objective of improving cost efficiency and reducing environmental impact.

Internal Controls and Adequacy

The Company has internal financial controls and operational control systems commensurate with the nature, size and complexity of its operations. These controls are supported by defined processes, approval mechanisms, segregation of duties and periodic review/internal audit. Significant observations, where applicable, are placed before the Audit Committee for review and appropriate corrective action. The management continues to review the adequacy and effectiveness of such controls and strengthen them where considered necessary.

Human Resources and Industrial Relations

Human resources remain an important enabler of the Companys operational and quality objectives. The Company continues to focus on employee capability, productivity, workplace safety, training and retention of critical skills. The number of employees as at March 31,2026 was [•] and should be confirmed before finalisation of the Annual Report. There were no material developments in industrial relations during the year, subject to confirmation by management.

Sustainability and Regulatory Environment

The Company recognises the increasing importance of resource efficiency, responsible use of materials, waste management and compliance with applicable environmental and product- related requirements. The Company continues to evaluate opportunities to reduce material consumption and improve the sustainability profile of its products and processes, while maintaining the performance requirements of pharmaceutical packaging.

SEGMENT-WISE PERFORMANCE

The Company operates in a single reportable business segment, namely pharmaceutical packaging solutions, covering the manufacture and sale of such products.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Companys operating revenue and other income stood at Rs. crores as compared to Rs. 752 crores in the previous year. The Sales drop is primarily from domestic segment from 515 Cr to 454 Cr, while the Company expanded its export market from 222 Cr to 243 Cr. with improved margins.

The financial performance and key operational indicators are reflected in the financial statements and the ratio analysis set out below. Other ratios and related disclosures, where applicable, are provided in Note 42 to the financial statements.

Ratio	Current year	Previous year	% Variance	Remarks for variance more than 25%
Return on capital employed (in%)	7.43%	1.08%	586.09%	Positive variance due to decrease in loss before tax and decrease in deferred tax liability.
Return on investment (in%)	0.08	0.04	86.94%	The increase in Return on Investment is primarily attributable to higher dividend income earned from treasury investments during the year.
Operating Profit Margin (%)	9.62%	7.09%	35.65%	The improvement in Operating Profit Margin was primarily driven by a favourable product mix, enhanced cost efficiencies, and higher Other Income during the year.
Current ratio (in times)	1.03	0.79	30.55%	The increase in Current Ratio is primarily attributable to an increase in current assets, mainly due to fixed deposits placed with banks having a maturity of less than 12 months.

Risks and Concerns

The principal risks and uncertainties identified by management include:

• Material Price Volatility: Mitigated through long-term supplier contracts, wherever possible and strategic inventory management.

• Regulatory Changes: Continuous monitoring of international packaging regulations to ensure compliance readiness.

• Environmental Compliance Costs: Increasing investment in sustainable technology to stay ahead of legislation.

• Currency Fluctuations: Impacting export profitability; managed via hedging strategies.

Cautionary Statement

This Management Discussion and Analysis contains forwardlooking statements based on the Companys current assumptions, estimates, expectations and information available as on the date of this Report. Such statements are subject to risks and uncertainties and actual results may differ materially due to changes in market conditions, raw material prices, customer demand, regulatory requirements, foreign exchange movements, geopolitical developments and other factors beyond the Companys control. The Company undertakes no obligation to publicly update or revise any forward-looking statement, except as may be required under applicable law.