Cupid Ltd Management Discussions.

Economy Outlook

The global economy fell to 2.9% in 2019 amidst heightened trade disputes which led to decline in business confidence and investment forcing central banks to cut interest rates to support growth and reduce downside risks. Trade policy uncertainty, geopolitical tensions and slowing job growth continued to hamper domestic demand during the year leading to the slowest rate of expansion since the 2008 financial crisis. Higher import tariffs negatively impacted manufacturing activity and international trade. The global growth which appeared to have bottomed out towards the end of the year received a major jolt due to Covid-19 pandemic which has further aggravated the slowdown. Though central banks and government across the world have knocked down interest rates and deployed trillions of dollars to spur economic growth, the slowdown caused by the coronavirus shock is likely to lead to contraction in global growth by 4.9% in 2020.

Indian economy grew at a slow pace with growth rate plunging to 4.2% in FY20 on the back of weak manufacturing activity, sluggish consumer demand, falling exports and credit squeeze following the collapse of several key Non-Bank Financial Companies (NBFCs). Slowdown in credit growth owing to NBFC crisis and asset quality issues among public sector banks exacerbated prolonged weakness in private investment and a material decline in consumption. To jump-start the economy, the government announced a slew of reforms for the industry reeling under severe stress. Corporate tax rates were rationalized while relief measures were announced to ease liquidity crunch of NBFCs and revive realty sector with an aim to stimulate the economy and promote investment. However, the emergence of Coronavirus (Covid-19) pandemic has dashed hopes of anticipated recovery in the economy and is likely to lead to GDP contraction by 4.5% in FY21, according to IMF estimates. Responding to the crisis which has disrupted supply chain and almost brought the economy to a halt, the policy makers announced a slew of measures to help mitigate the negative impact on the economy. Economic growth is expected to remain muted in the near term and revive gradually over the long term.

Industry Demand Scenario

Growing prevalence of HIV and sexually transmitted diseases (STDs) is expected to boost the demand for condoms worldwide. According to WHO, every day more than 1 million STDs are acquired globally. Condom is one of the low-cost and convenient option that efficiently protects from sexually transmitted diseases and prevention of unintended pregnancy. The increased adoption of birth control measures, growing emphasis on the concept of safe sex, and the increased per capita disposable income are driving increased use of condoms worldwide. The promotion of the concept of safe sex using condoms through social media is contributing to the increased sale of condoms via online channels. Further, the emergence of innovative designs and growing popularity of female condom is driving the global condom market growth. Increasing government support to raise awareness regarding STDs and promoting the use of contraceptives to prevent HIV infections and unwanted pregnancies is expected to propel the market growth.

The increased demand from institutions such as public health organizations, NGOs, and global organizations to promote the concept of safe sex and increase the awareness of HIV and sexually transmitted diseases (STD) is significantly contributing to the growth of the condom market worldwide. Institutional buyers such as UNFPA, USAID, WHO, and other UN agencies are the most significant promoters of male and female condoms. Governments across the globe are making substantial expenditure on condoms and freely distributing in vulnerable areas to prevent incidence of sexually transmitted diseases and curb the global population. Thus, projects and campaigns undertaken by several authorities in spreading awareness about condoms as an effective tool to prevent the spread of STDs and prevention of unintended pregnancy will prove beneficial for institutional segment growth. According to report by Grand View Research, Inc., the global condom market size is expected to reach USD 15.1 billion by 2026, exhibiting a CAGR of 8.5% over 2019.

Female condom segment is projected to grow at over 20% CAGR during the period 2018 2024, according to research report by Growing participation of women and rising awareness about womens sexual rights is propelling the demand of the female condoms. Female condom is an effective tool to prevent the spread of STIs and unwanted pregnancy. It gives women greater control over safe-sex negotiation, increases sexual pleasure, and is a good option for men who do not like to use male condoms. Although female condoms have been introduced in many countries, their penetration remains woefully low owing to lack of awareness, limited advertisement & promotion and due to financial and regulatory barriers. Government is supporting the adoption of these products to prevent STDs and HIV diseases amongst sex workers. Female condom needs to be integrated in reproductive health programs and included in STI/HIV and pregnancy prevention efforts worldwide. Usage of female condoms should be promoted through social media campaigns in an effective way to increase awareness about female condoms among end-users. Moreover, the need of the hour is to develop greater political and social support for the female condom at local, national, and international levels and promote correct and consistent use of female condoms for HIV prevention.

Factors that are going to drive the growth of condoms going forward are:

1. Growing awareness of sex education programs

2. Innovations in condom designs

3. increased popularity of female condoms

4. Influence of the internet in shaping the purchasing behaviour among end-users

Organizations such as UNAIDS are targeting to eradicate AIDS completely by 2030. Condoms stand to be the biggest beneficiary as they are the most effective tool to prevent the spread of STDs and STIs and prevention of unintended pregnancies. Increase in demand for Condoms is expected due to increase in international donor funding, higher consumption in lower- and middle-income countries and more funding from National Governments for the prevention of spread of HIV and unintended pregnancies like Brazil, South Africa and India.

Company Review

We started our journey in 1993 and currently we are a leading condom manufacturing company in India engaged in designing, manufacturing and marketing of Male Condoms, Female Condoms and Lubricant Jelly. In 2012, Cupid was the first company in India and only second in the world to have pre-qualified for Female Condoms accredited by WHO (World Health Organization)/UNFPA (United Nations Population Fund) for worldwide public distribution. From a manufacturing standpoint, our facility at Nashik is mapped to global standards with best quality practices and accredited with various quality standards. As a testimony to our systems, we are WHO-GMP approved along with certifications from ISO standards such as 9001:2008, 13485:2003, 14001:2004, CE-0434, pre-qualification from UNFPA, SABS Mark, USFDA_510k for Male Condoms, Indian FDA amongst others. We have a strong focus on research and development initiatives which have enabled us to develop and improve our product portfolio. We have an active research and development centre in addition to our production facility at Nashik enabling us to innovate and enhance our product portfolio and remain ahead of the curve in meeting the emerging requirements of our customers.

The Company operates predominantly in the B2B space but continues to focus equally in the B2C category. In the B2B segment, we primarily cater to governments and institutional buyers worldwide for prevention of AIDS, STIs, STDs and prevention of unintended pregnancies. We are also engaged in contract manufacturing business, whereby we undertake contracts and manufacture products under other customers brands. During the fiscal year, Cupid benefitted in terms of increased sales and profitability owing to addition of capacity in the previous year which has enabled the Company to expand its reach into newer geographies.

The Company witnessed strong performance in Fiscal Year 2020 with highest turnover and highest net profit in its

27 years history on the back of strong demand for Male and Female Condoms especially in the export market. The revenue of the Company increased significantly by 88.7% from Rs 854.7 mn in FY19 to Rs 1,612.5 mn in FY20.

Out of the total operating revenues, the Female Condoms contributed about 59% in value terms as against 39% for the Male Condoms, and Water Based Lubricant Jelly added around 2%. From a margin standpoint, our EBITDA margins improved to 34.6% in FY20 against 27.0% in FY19. At the net profit level, Cupid closed this financial year with a net profit of Rs 398.4 mn (FY20) as against Rs 152.1 mn in the previous year.

Cupid achieved the highest ever export sales at 91% of total revenue in FY20. Capacity utilization during the year were 86% and 92% for the Male and Female Condom production respectively. During the year, the Company commenced export of Female Condoms to Brazil and also exported to Tanzania and South Africa. With sales to 8 new countries during the year through UNFPA, the company has sold its products to over 80 countries worldwide.

Also, the Company received "SPECIAL EXPORT AWARD" by the Chemical and Allied Export Promotion Council of India (CAPEXIL) for the years 2015-16 & 2016-17 at an award function at Vigyan Bhawan in New Delhi.


Demand for Condoms is increasing due to its efficacy in the prevention of unintended pregnancies and spread of sexually transmitted infections (STIs) including HIV. Cupid remains well placed to cater to the increasing demand in the light of recently added capacity. The Company is constantly trying to improve its order book further and trying to expand business into new geographies throughout the world. Some of the key initiatives planned for coming year are: A. Expansion into new category of products related to female health and wellness.

B. Strengthen digital marketing medium to increase the share of sales through online channel.

C. Strengthen our distribution network and foray into newer geographies both for the institutional as well the retail business.

D. To explore the possibility of setting up a joint venture facility in South Africa to manufacture Female Condoms.