Economy Outlook
The global economy is indeed facing a challenging and uncertain outlook
due to several factors. The lingering effects of the COVID-19 pandemic and Russias
invasion of Ukraine have had significant repercussions on economic stability worldwide. As
per IMF, the baseline forecast is for growth to fall from 3.4 percent in 2022 to 2.8
percent in 2023, before settling at 3.0 percent in 2024. Advanced economies are expected
to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent
in 2023. In a plausible alternative scenario with further financial sector stress, global
growth declines to about 2.5 percent in 2023 with advanced economy growth falling below 1
percent.
According to the International Monetary Fund (IMF), India is projected
to be the fastest-growing economy in the world. The IMFs World Economic Outlook report
predicts Indias economy to grow by 5.9% in the current fiscal year, making it a beacon of
resilience in the global economy. The report also highlights Indias efforts in leveraging
digitalization to overcome the pandemics challenges and create new opportunities for
growth and employment. The IMF Managing Director has praised Indias balance between
development needs and fiscal responsibility in its recent budget, emphasizing the
countrys unwavering strength and commitment to progress.
Indias growth projection remains strong, with the country expected to
contribute significantly to global growth in 2023. The IMF report also suggests that
Indias inflation is expected to ease to 4.9% in the current year, further demonstrating
Indias economic resilience and ability to overcome obstacles.
Industry Demand Scenario
Now, turning to the industry demand scenario, the global prevalence of
over population, HIV and its devastating consequences underscore the importance of condom
usage. Condoms not only reduce the risk of sexually transmitted infections (STIs) such as
chlamydia, gonorrhea, trichomoniasis, HIV/AIDS, and hepatitis B but also provide some
protection against syphilis, human papillomavirus (HPV), and genital herpes. Rising
awareness through government initiatives, along with comprehensive sex education programs,
aims to mitigate the spread of HIV and other STIs, which in turn is expected to bolster
the demand for condoms.
Numerous governments worldwide have launched extensive campaigns and
implemented sex education programs to enhance awareness among young individuals and
promote the usage of contraceptives to combat sexually transmitted diseases (STDs) and
prevent unwanted pregnancies. Prominent international and government healthcare bodies
such as the World Health Organization (WHO) and the Centers for Disease Control and
Prevention (CDC) play a significant role in raising awareness about safe sex practices
involving condoms. According to a report by Grand View Research, the global condom market
was valued at USD 9.9 billion in 2021 and is projected to expand at a compound annual
growth rate (CAGR) of 8.52% from 2022 to 2030. Factors driving this growth include the
free distribution of condoms by government organizations to prevent the spread of HIV and
unintended pregnancies, as well as increased international donor funding.
The condom market is segmented into male and female condoms. The male
condom segment currently dominates the market, accounting for 98.75% of revenue in 2022.
This segments growth can be attributed to various factors, including manufacturers focus
on male condom production, greater societal acceptance compared to female condoms, and a
diverse product portfolio. However, the female condom segment is expected to witness the
fastest growth, with a compound annual growth rate (CAGR) of 12.69% during the forecast
period. Female condoms are increasingly recognized for their effectiveness in reducing the
risk of STIs and unplanned pregnancies. The World Health Organization (WHO) has
established stringent prequalification procedures for female condoms, and only a few
companies have met these requirements, leaving significant market opportunities for new
entrants. Additionally, the shift in consumer preference toward e-commerce channels
following the pandemic has resulted in increased demand for female condoms.
Key drivers contributing to the growth of the condom industry include
rising awareness regarding condom usage, the availability of diverse condom types to cater
to consumer preferences, measures aimed at reducing the spread of HIV and other STIs and
the free distribution of condoms by government organizations.
Company Review
CUPID Limited, established in 1993, holds the distinction of being
Indias leading manufacturer of male and female condoms, water-based lubricant jelly, and
IVD (In-vitro diagnostics) kits. With a strong international and domestic presence, CUPID
became the first company globally to obtain WHO/UNFPA pre-qualification for both male and
female condoms. The company employs over 100 staff members and boasts more than two
decades of industry experience. It currently supplies its products to over 104 countries
and derives over 90% of its revenues from international markets. CUPID has a long-term
agreement with WHO/UNFPA and maintains a steadfast commitment to research and development,
continuously innovating and expanding its product portfolio to stay ahead of competition
and meet evolving customer demands.
CUPID operates in both the business-to-business (B2B) and
business-to-consumer (B2C) segments. In the B2B segment, the company primarily caters to
governments and institutional buyers worldwide, focusing on the prevention of AIDS, STIs,
STDs, and unintended pregnancies. Additionally, CUPID engages in contract manufacturing,
producing products under other customers brands.
Furthermore, CUPID is actively preparing its In-vitro diagnostics (IVD)
division and pursuing various regulatory approvals. The company aims to target both
central and state government tenders and establish contract manufacturing facilities for
domestic and international players. Regarding the USFDA status for Female Condoms, CUPID
is preparing for the re-submission of 510K application to the USFDA. The company
anticipates receiving the necessary permissions and commencing commercial activities in
the US in Fiscal 2025.
Financial Review
In the fiscal year 2022-23, CUPID achieved its second-highest revenue
since its inception, reporting a total revenue of 164.10 crore and the second-best profit
after tax of 31.58 crore. These figures reflect a total revenue growth of approximately
19.75% and a robust 82.75% increase in profit after tax. The companys operating
performance improved, with an EBITDA margin of 25.93% and an EBITDA of 41.31 crore,
representing a significant surge of 79.68%. Enhanced profit margins were driven by stable
input costs and improved productivity. CUPIDs consistent ability to generate revenue,
improve operational efficiency, and improved profitability has solidified its position as
a global industry leader.
Export sales accounted for 94% of CUPIDs revenue in the fiscal year,
up from 85% in the previous year. The product mix indicates that male condoms contributed
75% of revenue in comparison to 63% in the previous year, while female condoms accounted
for 16% (compared to 14%) and lubricant jelly contributed 9% (compared to 20%). The
companys order book stands at 177 crore as of April 1st, 2023.
Our sales breakdown shows that 94% of our revenue comes from exports,
while the remaining 6% is generated from the domestic market. This emphasizes our strong
presence and success in international markets, positioning us as a trusted supplier
globally in the condom industry.
Our product-wise sales breakdown reflects a strong demand for male
condoms, representing 75% of our revenue. Female condoms contribute 16%, while lubricant
jelly accounts for 9%. With this diversified product portfolio, we cater to a wide range
of customer preferences, establishing ourselves as a comprehensive provider of sexual
health products.
Outlook
The outlook for the demand of both male and female condoms remains
positive. This is primarily attributed to the increasing awareness among individuals
regarding the effectiveness of condoms in preventing sexually transmitted infections
(STIs), including HIV, as well as unintended pregnancies. Additionally, the affordability
and absence of significant side effects further contribute to the demand for condoms.
The company, foresees several repeat orders in the upcoming year from
notable customers such as UNFPA, Tanzania, South Africa, and private sector customers from
various countries worldwide. This indicates a favourable market reception for CUPIDs
products. The company expects improved top and bottom-line performance during FY24, driven
by stable input costs and a robust order book.
The process of registration of our IVD products with the authorities of
various countries is in progress. Further, required applications have been filed for
obtaining WHO certifications and CE Mark.
Risks and Concerns
There are many risks and concerns in the condom manufacturing industry.
These include heightened competition, fluctuating raw material prices, regulatory
compliance, and geopolitical uncertainties. To address these risks, we prioritize
innovation, effective supply chain management, regulatory compliance, and vigilant
monitoring of global developments.
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