Decipher Labs Ltd Management Discussions

OVERVIEW:

The financial year under review was one of the most challenging periods faced by the Company in recent years. The operating environment was impacted by a combination of global economic uncertainty, geopolitical disruptions, regulatory developments, tightening liquidity conditions, and a generally cautious business sentiment across several industries and geographies. These factors adversely affected revenue generation, profitability, customer spending patterns, and the pace of execution of various business initiatives.

During the year, the Company experienced a significant decline in revenues and reported losses both on a standalone and consolidated basis. The deterioration in financial performance reflects not only challenging market conditions but also the impact of legacy issues, reduced business opportunities in certain segments, and the need to align operations with the realities of the current business environment.

Management has therefore adopted a measured and pragmatic approach focused on business preservation, cost optimization, risk management, and enhancement of operational discipline. The Company has undertaken a comprehensive review of its business model, organizational structure, cost base, and strategic priorities to ensure that available resources are deployed efficiently and towards activities capable of generating sustainable value.

The primary objective in the near term is to stabilize operations, improve cash flows, strengthen compliance and governance standards, and create a platform from which the Company can pursue selective opportunities when market conditions become more favourable. Management remains mindful that the path to recovery may be gradual and that the current environment requires prudent decision-making rather than aggressive expansion.

The Company continues to draw strength from its long operating history and experience in navigating periods of uncertainty. While the near-term outlook remains challenging, management remains committed to preserving the Companys long-term viability and positioning it to benefit from future improvements in industry and economic conditions.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

The global business landscape continues to undergo significant transformation. Economic growth across major economies has moderated amid persistent inflationary concerns, geopolitical conflicts, trade restrictions, fluctuating currency markets, and evolving regulatory frameworks. Businesses worldwide have become increasingly cautious in making investment decisions, resulting in slower project execution cycles and reduced spending across several sectors.

The pharmaceutical industry continues to face considerable challenges despite its long-term importance to healthcare systems globally. Increasing regulatory requirements, intense competition from generic manufacturers, pricing controls imposed by governments, supply chain disruptions, rising compliance costs, and pressure on margins continue to affect industry participants. Market consolidation is expected to continue as companies seek scale, efficiencies, and stronger market positions to withstand these pressures.

Similarly, the information technology and consulting sectors have experienced softer demand conditions, particularly in discretionary spending categories. Many customers have postponed expansion plans, reduced budgets, or delayed implementation of new projects pending greater visibility regarding economic conditions.

Against this backdrop, the Company has focused on preserving key customer relationships, maintaining operational continuity, and identifying opportunities for collaboration with strategic partners. The Board and management recognize that the prevailing environment may favour companies capable of operating with leaner structures, lower fixed costs, and stronger strategic alliances.

The Company has therefore continued evaluating alternative business arrangements, including marketing alliances, technology partnerships, outsourcing arrangements, joint ventures, and other collaborative structures that may improve operational efficiency and market access without requiring substantial capital commitments.

Management believes that industry consolidation and strategic cooperation will increasingly become important factors for survival and long-term competitiveness. Accordingly, efforts are being directed toward identifying suitable partners whose capabilities, customer base, and resources may complement the Companys existing strengths.

While certain sectors may eventually benefit from a normalization of global economic activity, management remains cautious regarding the pace and timing of any recovery and continues to plan its operations on conservative assumptions.

OPPORTUNITIES AND THREATS:

The Companys principal opportunity lies in its ability to adapt its business model to changing market conditions and participate in industry consolidation through strategic partnerships and collaborative arrangements. Management continues to explore opportunities that may provide access to customers, technologies, markets, operational expertise, or complementary resources that can strengthen the Companys competitive position.

Discussions with potential partners and counterparties remain ongoing. However, given current market conditions and regulatory considerations, management recognizes that the process of completing meaningful transactions may require considerable time and effort. As such, there can be no assurance regarding the timing or outcome of any proposed collaboration.

The Company also continues to evaluate opportunities within selected service-oriented and asset-light business segments where capital requirements are relatively lower and scalability can be achieved through partnerships and technology-driven solutions.

At the same time, the Company faces several significant threats and challenges, including a prolonged slowdown in domestic and international economic activity, evolving regulatory developments that may affect business operations and strategic flexibility, and intense competition from larger and better-capitalized market participants. The Company also continues to experience margin pressures due to competitive pricing and increasing compliance costs, customer concentration risks, delays in project execution, limited availability of growth capital coupled with higher financing costs, and supply chain disruptions and operational uncertainties arising from geopolitical developments. In addition, continued pressure on profitability and working capital, along with the challenge of attracting and retaining specialized talent in a highly competitive environment, remain key risks that could impact the Companys future performance.

Management believes that the ability to manage these risks effectively will be critical to ensuring the Companys long-term sustainability. Consequently, greater emphasis is being placed on disciplined capital allocation, operational efficiency, risk mitigation, and strategic collaboration.

SEGMENT-WISE OR PRODUCT WISE PERFORMANCE:

Revenues-Standalone

During the year under review, the Company on a standalone basis has recorded an revenue of Rs. 113.54 Lakhs and incurred a loss of Rs. 24.68 Lakhs as against the income of Rs. 85.32 Lakhs and loss of Rs. 44.02 Lakhs respectively in the previous financial year ending 31.03.2025.

Revenues-Consolidated

During the year under review, the Company on a consolidated basis has recorded an revenue of Rs. 1,405.40 Lakhs and incurred a loss of Rs. 308.43 Lakhs as against the income of Rs. 2,261.25 Lakhs and loss of Rs. 508.02 Lakhs respectively in the previous financial year ending 31.03.2025.

	Standalone		Consolidated
Segment	Revenue generated in FY 2025\u201326 (Amount in Lakhs)	Revenue generated in FY 2024-25 (Amount in Lakhs)	Revenue generated in FY 2025-26 (Amount in Lakhs)	Revenue generated in FY 2024-25 (Amount in Lakhs)
Manufacturing and Trading of Pharmaceutical drugs	67.50	68.60	67.50	68.60
Consultancy Services	46.04	16.72	1337.90	2192.65

The details of the financial performance of the Company are comprised in the Balance Sheet, Profit and Loss Account and other financial statements which are annexed hereto along with the Directors and the Auditors Report.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has an adequate internal control system which commensurate with the size and nature of its business. The internal control system is being supported by internal audits, regular reviews by management to ensure reliability of financial and all other records to prepare financial statements and other data. Further the Audit Committee of the Board review the findings and recommendations of the internal audit and suitable implementations are affected.

RISK MANAGEMENT SYSTEM:

The company manages our business risk through strict compliance and internal control system.

RISK MANAGEMENT:

The Company continues to strengthen its risk management framework in response to the evolving business environment. Risk management is integrated into the decision-making process and encompasses strategic, operational, financial, legal, regulatory, and reputational risks. Management regularly reviews key business risks and evaluates mitigation measures to reduce their potential impact on operations and financial performance. Particular attention is currently being directed towards liquidity management, compliance obligations, customer retention, cost control, and regulatory developments that may influence the Companys future course of action.

The Board and senior management remain actively involved in monitoring risk exposures and ensuring that appropriate internal controls and governance mechanisms are maintained.

RISK AND CONCERNS:

The Companys current operating environment presents a number of material risks and concerns that may affect future performance. Revenue visibility remains limited in certain business segments, while industry-wide competitive pressures continue to impact pricing and profitability.

Given the financial performance reported during the year, management has undertaken a comprehensive review of all areas of expenditure and resource deployment. The Company is actively identifying opportunities to reduce fixed costs, improve productivity, rationalize non-essential expenditure, and optimize operational processes.

Management recognizes that certain difficult but necessary decisions may need to be implemented to safeguard the long-term sustainability of the enterprise. These decisions may include restructuring of business operations, consolidation of activities, reassessment of investment priorities, renegotiation of commercial arrangements, and rationalization of costs where required.

The objective of such measures is not merely to reduce expenditure but to ensure that the Company remains economically viable, operationally resilient, and capable of generating value over the long term. The Board believes that preserving financial stability during periods of uncertainty is essential to maintaining the Companys ability to capitalize on future opportunities.

The Company will continue to explore strategic tie-ups, commercial alliances, and mutually beneficial partnerships that may help strengthen revenues while limiting capital expenditure requirements and operational risks.

OUTLOOK:

The outlook for the forthcoming financial year remains subdued and uncertain. While there are indications that certain sectors of the economy may gradually stabilize, the broader business environment continues to be characterized by cautious spending patterns, regulatory uncertainty, competitive intensity, and geopolitical risks.

Management does not presently foresee a significant improvement in business conditions in the immediate future and therefore expects operating conditions to remain challenging. Revenue growth is likely to remain constrained until broader economic conditions improve and strategic initiatives begin yielding measurable results.

The Company has also been affected by regulatory developments that have influenced certain aspects of its strategic planning and expansion activities. As a result, management has adopted a more conservative approach toward capital deployment and business expansion. Several previously contemplated initiatives have been deferred or placed under review pending greater clarity regarding the regulatory and operating environment.

Accordingly, the Companys priorities for the coming year will be centered on preserving cash flows and financial resources while undertaking measures to reduce and rationalize operating costs. Management will continue to focus on strengthening governance standards, regulatory compliance, and internal control frameworks to ensure operational stability and resilience. Efforts will also be directed toward stabilizing existing business operations, improving operational efficiency, and optimizing the utilization of available resources. In view of the prevailing market conditions, the Company will actively evaluate strategic partnerships, alliances, and collaborative arrangements that can support business sustainability and future growth with limited capital commitments. Additionally, the Company will seek to identify asset-light business opportunities capable of generating sustainable returns while remaining committed to protecting and enhancing stakeholder value over the long term.

Management believes that strategic partnerships and business tie-ups will play a critical role in the Companys future direction. Rather than pursuing aggressive expansion independently, the Company intends to focus on opportunities where risks, investments, and operational responsibilities can be shared with capable partners.

Although near-term growth prospects remain limited and the possibility of continued business challenges cannot be ruled out, management remains committed to taking all necessary steps to preserve the Companys long-term economic significance. Through disciplined execution, prudent financial management, and strategic restructuring initiatives, the Company seeks to create a more sustainable operating platform capable of supporting future recovery and growth when market conditions become more favourable.

The Board and management remain focused on navigating the present challenges responsibly while maintaining the flexibility required to respond to emerging opportunities as they arise.

DISCLOSURE OF ACCOUNTING TREATMENT:

The Company has not carried out any treatment different from that prescribed in Accounting Standards.

DETAILS OF SIGNIFICANT CHANGES:

Particulars	F.Y 2025-26	F.Y 2024-25	% of changes	Remarks
Debtors Turnover	8.71	3.76	132	Outstanding dues received and sales reduced
Inventory Turnover	-	-	-	-
Interest Coverage Ratio	-	-	-	-
Current Ratio	0.22	0.47	(53)	Due to decrease in sales
Debt Equity Ratio	-	-	-	-
Operating Profit Margin (%)	(0.21)	(0.52)	59.6	Due to decrease in Sales
Net Profit Margin (%)	(0.21)	(0.52)	59.6	Due to decrease in sales
Return on Net-worth	(0.03)	(0.05)	(40)	Due to decrease in current assets

There is change in net worth as compared to the immediately previous financial year.

HUMAN RESOURCES:

The company is in the process of expansion of its operations and with time will need to expand the man power which had previously come down during consolidation. There is a conscious effort by the Company to build diversity in the workforce. The company through its subsidiary has sufficient manpower.

CAUTIONARY STATEMENT:

Some of the statements in this Management Discussion & Analysis, describing the Companys objectives, projections, estimates and expectations may be forward looking statement within the meaning of applicable laws and regulations. Actual results might differ substantially from those expressed or implied. Important developments that could affect the Companys operation including changes in the industry structure, significant changes in political and economic environment in India, tax laws, import duties, litigation and labour relations. The Company does not undertake endeavors to update these statements.

For Decipher Labs Limited

Place: Hyderabad Date: 05.09.2026

Sd/- Sushant Mohan Lal Non-Executive Director (DIN: 01227151)

Sd/- Dalavath Amarsingh Executive Director DIN: 02206249