Zenlabs Ethica Ltd Management Discussions

(As per Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015)

Introduction

Your company is one of the leading marketing companies, which is trading in wide range of branded drugs including GIT disorders, Anti-Diabetics, Anti-Hypertensive Drugs, Anti-Infective, Soaps & Anti-Bacterial Drugs, Nutraceuticals and more. Zenlabs Ethica Ltd corporate sustainability is demonstrated through (a) fair, transparent and ethical governance, (b) engagement with marginalized and vulnerable communities, (c) adherence to and respect for all human rights, (d) reduction of impact of its operations on the environment and (e) promotion of employee well-being and safety.

In last three years, your company has optimized its business models, reshaped its portfolio, and expanded its footprint to strengthen its competitive position in key geographies. Throughout the pandemic, we have up scaled our capabilities to ensure widespread availability of quality medicines. Your Company is committed to investing in talent to nurture an agile, innovation, and excellence-focused culture.

Management discussion and analysis report reflecting the performance and outlook including the future prospects for the Company is presented herewith.

(a) Industry Structure and development:

The pharmaceutical manufacturing industry in India is witnessing steady and transformative growth, driven by rising healthcare needs, increased life expectancy, and greater demand for affordable, high-quality medicines both domestically and globally. India ranks among the top pharmaceutical producers in the world, known for its cost-effective manufacturing capabilities and strong presence in the global supply of generic medicines. There is an increasing focus on quality assurance, sustainable manufacturing practices, and innovation in formulation and drug delivery systems.

The Company as a committed pharmaceutical manufacturing company, is well-positioned within this dynamic landscape. The company has invested in robust manufacturing infrastructure, quality systems, and R&D capabilities to meet the growing demand across various segments.

Our Company manages continues to align its operations with these industry developments, focusing on quality, innovation, regulatory compliance, and market expansion to drive sustainable growth in the coming years.

(b) Opportunities and Threats:

The priorities of the industry are changing, concentrating more on re-organization of operations, development of new markets and marketing techniques, giving the organizations vision a global outlook and retaining and building upon customer relationships. Fragmented markets provide many opportunities for company to expand and increase market share. New markets allow company to expand their business and diversify their portfolio of products and services.

Changes to government rules and regulations can negatively affect the company. Politics can increase companys risk factors, because governments can quickly change business rules that negatively affect companys business. Political Risk has a significant impact; Volatile costs mean company has to plan for scenarios where costs skyrocket. Cautious planning leads to development delays that can negatively affect the company.

Pricing of several antibiotics, vaccines, anti-cancer drugs and many other important drugs has reduced effective from 11th November, 2022. The NLEM focuses on aspects such as safety, efficacy, availability, and affordability. It comprises of 384 drugs across 27 categories. While the 2022 list has 34 new drugs, 26 drugs from the 2015 list have been removed.

(c) Segment wise or product-wise performance:

The currently company is engaged in trading in a wide range of branded drugs including GIT disorders, Anti-Diabetics, Anti-Hypertensive Drugs, Anti-Infective, Soaps & Anti- Bacterial Drugs, Nutraceuticals and more.

(d) Outlook:

The focus for the forthcoming financial year for the Company will be continued delivery in progressing mode and grabbing the opportunities and trying to overcome challenges.

(e) Risks and concerns:

The Board of the Company has formed a risk management policy to frame, implement and monitor the risk management plan for the Company. The Board of Directors are responsible for reviewing the risk management plan and ensuring its effectiveness. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The Board of Directors has established a Risk Management Policy to design, implement, and monitor a comprehensive risk management framework for the Company. The Board is responsible for regularly reviewing this framework to ensure its effectiveness. Key risks identified across various business functions are proactively managed through structured mitigation strategies and continuous monitoring.

In the opinion of Board, the rising costs and changing government policies and regulations are the key risk factors that may threaten the existence of the company.

(f) Internal control systems and their adequacy:

Internal Control and Audit is an important procedure and the Audit Committee of your Company reviews all the control measures on a periodic basis and recommends improvements, wherever appropriate. The internal control is designed to ensure that the financial and other records are reliable for preparing financial statements and other data and for maintaining accountability of assets.

Your Company has put in place an adequate internal Control System to safeguard all assets and ensure operational excellence. The system also meticulously records all transaction details and ensures regulatory compliance. The reports are reviewed by the Audit Committee of the Board. Wherever deemed necessary, internal control system are strengthened and corrective actions initiated.

(g) Discussion on financial performance with respect to operational performance:

During the year under review your Company has recorded a turnover of Rs. 5,142.25 Lakhs/ -. However, the company reported profit of Rs. 26.92 Lakhs/- net profit after tax as against previous year profit of Rs. 42.12 Lakhs/-

(h) Material developments in Human Resources / Industrial Relations front, including number of people employed:

The relationship with the employees continues to be cordial. The Company recognizes the importance and contribution of its employees for its growth and development and constantly endeavors to train nurture and groom its people. The Company puts emphasis on attracting and retaining the right talent. The company prioritizes the training and development of employees across all levels and has implemented various methods and practices for Human Resource Development. Currently, the company employees 65 individuals.

(i) Key Financial Ratios

Ratio/Measure	Methodology	As on 31st March, 2025	As on 31st March, 2024	% Variance
Current Ratio (times)	Current assets/ Current liabilities	1.33 1.22	1.32 1.47	0.95% -16.99%
Debt Equity Ratio (%)Note1	(Non-current borrowings + Current borrowings + Non- current Lease liabilities + Current lease)/
Debt Service Coverage Ratio (Times) Note2	EBITDA/ (Interest expense +Borrowings)	1.07	1.22	-12.19%
Return on Equity (ROE) (%) Note 3 Inventory turnover ratio (Times) Note 4	Net Profit after tax/ Average Shareholders Equity Revenue from operation/ Average Inventory	2.62 4.10	4.25 5.01	-38.33% -18.25%
Trade receivables turnover Ratio Note 5	Revenue from operation/ Average Trade Receivable	2.55	2.76	-7.48%
Trade payables turnover ratio	Purchases of services and other expenses/ Average Trade Payables	3.25	2.69	21.02%
Net capital turnover ratio (Times)	Revenue from operation/ Average Working Capital	5.79	7.07	-18.02%
Net profit ratio (%) Note 3	Net Profit/ Revenue from operation	0.52%	0.72%	-27.21%
Return on Capital employed Note 2	Earning before interest and taxes/ Capital Employed	5.85%	5.66%	3.31%
Return on investment (%)		-	7.15%	-

Explanation for change in the ratio by more than 25%: The ratio has changed by more than 25% primarily due to a decline in net profit after tax.

	On behalf of the Board For
	Zenlabs Ethica Limited
Date: 4th September,2025
Place: Chandigarh	Sd/-
	Sanjeev Singal
	Managing Director
	DIN: 01154896