Divis Laboratories Ltd Management Discussions

1. Economy and industry outlook

Global pharmaceutical market: Numbers and trends

Overview: In 2024, the global pharmaceutical industry demonstrated significant dynamism amid evolving regulatory mandates, rapid technological adoption, and a heightened focus on personalised therapies. Despite challenges such as pricing pressures and intermittent supply chain disruptions, the sector recorded robust growth in key segments, with pharmerging economies showing notable market expansion (IQVIA). Transitioning into FY 2025-26, opportunities in targeted therapeutics, requiring greater process innovation strength, specialised technical capabilities, and agile regulatory responsiveness, continue to emerge. Divis Laboratories Limited (Divis) remains at the forefront by supplying high-quality APIs that underpin these innovative therapeutic modalities.

Key pharma trends:

• Market size and growth: Global markets have experienced steady expansion, driven by both traditional small molecule and large molecule segments. According to Grand View Research, the global pharmaceutical market reached approximately US$1,646 billion size in 2024 and is projected to expand at a CAGR of ~6% from 2025 to 2030. Within this, conventional drugs (small molecules) held a dominant share of ~55% in 2024 and large molecules (biologics and biosimilars) are projected to grow at a significant CAGR over the forecast period (2025-30).

• Key therapeutics: Enhanced R&D investments have led to a 60% increase in Phase I drug candidates over the past decade, indicating intensified development activity across critical therapeutic segments (McKinsey Report). Chronic conditions, particularly in cardiology and oncology, remain high priorities—with a reported increase in relevant clinical trials—driving targeted R&D investments where Divis APIs serve as critical enablers. Moreover, 65 novel active substances (NAS) were launched globally in 2024 alone, a figure well above pre-pandemic averages (IQVIA).

• GLP surge: According to Grand View Research, the global GLP-1 receptor agonists market, catalysed by highly effective treatments targeting obesity and metabolic syndromes, reached ~US$53 billion in 2024 and is projected to grow at a CAGR of

~17% to ~US$157 billion by 2030. The market for anti-obesity medications (AOMs) alone reached a major milestone in 2024 with global spend exceeding US$30 billion for the first time, an increase of more than tenfold since 2020 (IQVIA). This surge in prevalence-led demand for advanced treatments has unlocked one of the most significant pharmaceutical opportunities in decades.

• Peptide therapeutics: Advances in peptide synthesis are fuelling market growth, driven by the need for safer, specific, and more effective therapies for complex disorders. Consequently, the global peptide therapeutics market of ~US$117 billion in 2024, is projected to expand at a CAGR of ~11% through 2030. Of this, the metabolic disorders segment accounted for the largest revenue share of ~62% in 2024 (Grand View Research).

• Regional insights: Healthcare awareness has surged globally, amplified by widespread digital access to medical information, leading to increased consumption and out-of-pocket spending. This trend is mirrored globally, with emerging economies investing in broader access, while developed markets lead in complex therapies and innovation. Mature regions such as North America and Europe continue to show stable demand, whereas Asia Pacific and Latin America present significant expansion opportunities due to infrastructure upgrades and evolving regulatory frameworks.

• Geopolitical & market dynamics: Strategic influences—including the "China+1" approach, initiatives in the Red Sea region, policy reforms under the Biosecure Act, and systemic changes under US tariff adjustments—are reshaping market conditions on a global scale.

Propelled by the growing global demand for pharmaceutical drugs and advances in process innovation, the global API market reached ~US$255 billion in 2024, reflecting rising production volumes coupled with operational efficiency.

Global API industry

Overview: Active Pharmaceutical Ingredients (APIs) remain foundational to the pharmaceutical value chain. Propelled by the growing global demand for pharmaceutical drugs and advances in process innovation, the global API market reached ~US$255 billion in 2024, reflecting rising production volumes coupled with operational efficiency. Innovations in synthetic methodologies have enhanced efficiency, ensuring compliance with stringent regulatory standards and reducing production costs (Grand View Research). Divis continues to leverage its state-of-the- art manufacturing capabilities to meet global demand with consistent quality and reliability.

Key points:

• Market growth and numbers: The API industry experienced robust growth in both volume and value and is expected to expand at a CAGR of ~6% from 2025 to 2030 (Grand View Research).

• Synthetic molecules: The synthetic segment led the market with the largest revenue share of over 70% in 2024, primarily driven by sustained demand for generic drugs (Grand View Research). Additionally, the application of continuous flow chemistry (a green technology), process automation, mechanisation, and back-integration for process and supply security creates a significant commercial edge. This approach enables cost optimisation and reduced timelines and are areas where Divis excels.

• Key drivers:

- Patent Expiries: The upcoming 2030 patent cliff offers strategic opportunities for generic formulations and reformulations. With nearly 200 originator molecules set to lose exclusivity, this trend has spurred an increase in investment and demand for APIs, particularly in oncology, where more than 60 high-revenue molecules are expected face generic competition (Grand View Research).

- Outsourcing Trends: There is a growing preference for outsourcing API production to Contract Development and Manufacturing Organisations (CDMOs), allowing manufacturers to focus on core competencies (IQVIA). Currently, outsourced APIs account for half of global API consumption and are projected to grow at 7% from 2023 to 2030, compared to 4% projected growth for captive production (Bain & Company).

- Peptide APIs: Advancements in GLP-1, GLP-2, and GIP drugs, coupled with their rising

US$1,646 billion

Global pharmaceutical market reached this size in 2024.

consumption, are significantly boosting the demand for peptide APIs. Limited capacity, long lead times, and high capex for peptide API manufacturing in the US and EU give India a distinct advantage. With substantially lower capex requirements and proven ability to reduce project execution timelines, India is well positioned to capitalise on this opportunity. Divis, with its specialised technical capabilities and scalability, is particularly well-suited to meet the growing demand efficiently.

• Divis overall performance: Continuous

investments in process innovation and capacity expansion have resulted in enhanced operations and efficiency throughout the Companys timeline.

Global CDMO industry

Overview: The Contract Development and

Manufacturing Organisation (CDMO) market has emerged as a vital extension of the pharmaceutical ecosystem. Demand for CDMO services has soared as innovators seek trusted partners for end-to-end manufacturing, regulatory expertise, and quality assurance. In FY 2024-25, rising R&D funding and the need for scalable, technology-enabled drug development contributed to accelerated growth in the CDMO space (IQVIA and McKinsey). Divis, in particular, has leveraged strategic partnerships to enhance service offerings, reinforcing its leadership in API synthesis and allied CDMO services.

Key points:

• Market and growth: Recent estimates indicate that the global CRDMO market stood at ~US$140 billion in 2024, growing at a CAGR of 7-8% from 2019 to 2024, and is projected to reach US$270 billion by 2030. To this, the small molecule CDMO market contributed ~US$85-90 billion in 2024. Region-wise, in 2024, the cumulative US-EU CRDMO market stood at US$90-100 billion, while China accounted for US$25-30 billion and India contributed US$3 billion to the total global market (BCG Report).

• Key drivers:

- Increased Demand for Outsourced Services: Outsourcing drug development and manufacturing enhances operational efficiency (McKinsey).

- Rising Drug Development Costs: Outsourcing helps mitigate escalating R&D and infrastructure investment costs (McKinsey).

- Technological Advancements: Digital tools and automation are driving superior product quality and more efficient production processes (McKinsey).

- Specialisation: A strategic shift toward

specialised advanced therapies, which are highly regulated and technically demanding, has made CDMOs "indispensable partners" globally (Bourne Partners and McKinsey).

Indian pharma industry: Market overview

Overview: Indias pharmaceutical industry continues to solidify its position as a global powerhouse, with strong leadership in generic medicines and API production. India uniquely offers end-to-end support with capacity, capability, and cost advantages to global clients. In FY 2024-25, India demonstrated robust growth driven by cost-effective manufacturing, expansive R&D capabilities, and favourable government initiatives. Divis, as a leading API manufacturer, has significantly contributed to enhancing Indias global export performance.

Key points:

Indias pharmaceutical ascent is shaped by a convergence of structural strengths and proactive policy support:

• Market growth and size: The domestic market has shown consistent growth, with rising exports contributing substantially to overall industry revenues.

- Overall market: According to Department of Pharmaceuticals (DoP), the Indian Pharmaceutical Market (IPM) reached ~4,17,345 crore (over US$50 billion) in FY2024, growing at more than 10% over the prior five years. The domestic market is projected to more than double, reaching US$130 billion by 2030, thereby increasing Indias global market share from the current 3% to nearly 5% by 2030. Furthermore, the market is expected to approach US$450 billion by 2047 (Bain & Company, IPA, Pharmexcil).

• Global leadership and export dynamics: India exported ~US$30 billion worth of pharmaceuticals in FY2025, marking an increase of over 9% from the previous years ~US$27 billion. Notably, these exports fulfil ~40% of the US generic demand and ~25% of all UK prescriptions, underscoring Indias status as a major global manufacturing hub (Pharmexcil, IBEF).

- Generics: Indian generics represent 20% of the global supply by volume and have become a critical pharmaceutical lifeline (IBEF).

- API sector: APIs are a major export category and serve as key enablers for vertical integration across the industry. Indias API exports are projected to expand from nearly US$5 billion in 2023 to reach US$12 billion by 2030, growing at a 14% CAGR during this period. The API exports are further poised to reach US$80-90 billion with a 1 2% CAGR from 2030 to 2047, matching Chinas expected penetration by 2047 (Bain & Company Report; Pharmexcil 2023 Data).

• Healthcare expenditure & government initiatives: Increased public and private healthcare spending, along with progressive regulatory reforms, has fuelled continued sector growth, accelerating the move toward a more self-reliant and value-added pharmaceutical economy (IBEF).

• Investments and FDIs: Ongoing domestic and foreign investments are catalysing innovation and capacity enhancement across the industry (IBEF).

• Divis commitment: Building on the successes of FY2025, the Company remains focussed on leveraging Indias dynamic market environment to consolidate its leadership in the global API industry.

Contract development manufacturing organisation: Indias next growth frontier

Overview: The contract manufacturing market is Indias next growth frontier. Indias CRDMO market stood at US$3 billion in 2024, after growing at a CAGR of 15%, double the global growth, during 2019-2024. While currently holding only 2-3% of the global market share, India has the potential to grow this to US$22-25 billion

by 2035. Within this, the CDMO market is poised to expand from ~US$2 billion in 2024 to US$10-12 billion by 2035 (BCG Report).

Several macro and micro factors are fuelling this CDMO momentum:

• Global supply chain realignment: As developed economies actively reduce overdependence on single sources like China, Indian CRDMOs are stepping up as reliable partners, offering quality at scale and global-standard services. The "China + 1" strategy further strengthens Indias case as a friendshoring destination. Consequently, this diversification is likely to realign US$10-15 billion in CRDMO demand, with ~US$5 billion projected to flow into the Indian market by 2030 (BCG Report).

• Manufacturing environment: Indian CDMOs offer cost-effective development and manufacturing under globally accredited stringent regulatory frameworks (e.g., US FDA, EMA, PM DA, TGA), making them preferred partners for innovators seeking to accelerate timelines and reduce cost- to-market barriers. A vast scientific talent pool further strengthens Indias competitive edge (Bain & Company, IPA, Pharmexcil).

Advancement: Indias pharmaceutical industry is entering a phase of therapeutic and technological sophistication, with active investments in new- generation, hard-to-develop modalities such as peptides (BCG Report). Specialty and complex drugs are emerging as key growth segments. In parallel, specialty medicines are projected to account for over 40% of total global pharmaceutical spending by 2027, presenting a significant upside for the industry (IQVIA).

Conclusion: Future market scenario

Overview: The outlook for the pharmaceutical industry in FY 2025-26 is promising, albeit with its share of challenges. Driven by technological innovation, digital transformation, and strategic realignments, the market is poised for sustained growth. Divis is well positioned to benefit from emerging trends across both API and CDMO domains through ongoing process innovation, capacity expansion, and strategic investments. While regulatory shifts and global supply chain challenges persist, lessons learned from FY 2024-25 will continue to guide the Companys efforts in delivering long-term value to stakeholders and strengthening its global leadership.

With a presence in over 100 countries, our Generic APIs division has been instrumental in our overall success and positioned us as the worlds largest API manufacturer in 10 of the 30 generic APIs we manufacture.

2. Company overview

Divis Laboratories Limited is a prominent manufacturer and supplier of high-quality Active Pharmaceutical Ingredients (APIs) and intermediates for global innovator companies. We have established ourselves as a reliable partner to several of the worlds leading pharma companies, including 12 of the top 20 Big Pharma.

With a presence in over 100 countries, our Generic APIs division has been instrumental in our overall success and positioned us as the worlds largest API manufacturer in 10 of the 30 generic APIs we manufacture. Our product portfolio includes a diverse range of APIs used in the manufacture of drugs for therapeutic areas such as cardiovascular, anti-inflammatory, anti-cancer, and central nervous system drugs.

Our nutraceutical facility located at Visakhapatnam is a global, technology-driven manufacturer of high-quality Carotenoid, Lutein and Vitamin ingredients used in the food, beverage, dietary supplement, pet food and feed industries. Our carotenoid and vitamin product forms are designed specifically for dietary supplements, while others are suitable for the fortification of a broad range of food and beverage applications.

Divis is headquartered in Hyderabad, India, and operates three manufacturing facilities equipped with state-of-the-art utilities, environment management, and safety systems.

The manufacturing facilities at Hyderabad and Visakhapatnam have been inspected multiple times by USFDA, EU GMP (UK, Slovenia, German, Irish authorities), HEALTH CANADA, TGA, ANVISA, COFEPRIS, PMDA and MFDS health authorities.

The new manufacturing facility near Kakinada has commenced commercial operations from January 01, 2025 in a phased manner.

We have been consistently recognised for our excellence in quality, research and development, and occupational health and safety.

In line with our commitment to sustainability, we continuously strive to expand our production capacity while maintaining compliance with environmental and safety regulations, as well as upholding our social responsibility initiatives.

2.1 Manufacturing facilities:

The Company operates from three manufacturing facilities:

• Unit 1, located at village Lingojigudem in Yadadri Bhuvanagiri District near Hyderabad, Telangana State comprises:

- the first manufacturing facility operating from the year 1995

- the DC-SEZ Unit operating from the year 2020

• Unit 2, located at village Chippada, Bheemunipatnam Mandal, Visakhapatnam District, Andhra Pradesh State comprises:

- An Export Oriented Unit operating from the year 2003

- An SEZ Unit operating from the year 2006

- DSN SEZ Unit operating from the year 2011

- the DCV SEZ Unit operating from the year 2020

• Unit 3, an Export Oriented Unit located at village Ontimamidi, Thondangi Mandal, Kakinada District, Andhra Pradesh

All these Units have been adding production capacities and utility infrastructure and are upgraded and modernised from time to time.

2.2 Research and development centres

The Company has Research Centre called as DRC at Sanath Nagar, Hyderabad and Process Development & Support Centres (PDSCs) at the

existing two manufacturing facilities at Hyderabad and at Visakhapatnam. These centres are involved in development of processes for both new compounds and improvement of processes for compounds on the market.

PDSCs work on process development and scale up from gram scale further through various stages of development, process optimisation, impurity profile, pilot studies, pre-validation batches, validation of process and transfer of technology to Plant. PDSCs also review improvement of processes and give process support to the Plants from time to time.

2.3 Subsidiaries

The company has two subsidiaries M/s. Divis Laboratories (USA) Inc., at New Jersey in the United States of America and M/s. Divis Laboratories Europe AG at Basel in Switzerland for marketing its nutraceutical products and to provide a greater reach to customers within these regions.

3. Internal control systems

The Company has an adequate system of internal controls commensurate with the nature, size and complexity of its manufacturing, finance and marketing operations, including controls over financial reporting.

The company has adopted well laid down processes and procedures, encapsulating all its operations, financial and compliance functions, for efficient and orderly conduct of its business, adherence to the company policies, safeguarding its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information and compliance with applicable statutes and rules and regulations thereunder.

Appropriate review and control mechanisms are in place for ensuring that the internal control systems operates effectively. The internal control system is supported by qualified personnel and a continuous program of internal audit. The prime objective of such audits is to test the adequacy and effectiveness of all internal control systems laid down by the management and to suggest improvements, robustness of internal processes, policies and accounting procedures, compliance with laws and regulations. For this purpose, a yearly audit plan is made with the approval of the Audit Committee of the Board of Directors.

The internal audit function reports directly to the Audit Committee, maintaining independence and objectivity in its function. Based on the reports of internal audit

function, respective process owners carryout corrective action in their areas. The Audit Committee reviews the significant audit observations and status of rectification measures thereon regularly.

The Audit committee also reviews internal controls over financial reporting and ascertains with the statutory auditors about its adequacy and effective operation. Based on Committees review and report of the statutory auditors, the internal financial controls during the year are adequate and operating effectively. The Company also encourages and recognises improvements in work practices. The Management duly considers and takes appropriate action on the recommendations made by the internal auditors, statutory auditors, and the Audit Committee.

4. Risk management

Divis lays emphasis on risk management and has an enterprise-wide approach to risk management, which lays emphasis on identifying and managing key operational and strategic risks with a dynamic business continuity plan. The Company strives to identify opportunities that enhance organisational values while managing or mitigating risks that can adversely impact its future performance through:

• Integrated process for identification, assessment and reporting

• Decentralised management of specific opportunities and risks and

• Aggregation at corporate level monitored by the Risk Management and Sustainability Committee with overall direction and control by the Board

The Company continues its initiatives aimed at assessment and avoidance or minimisation of various risks affecting its business and towards cost control and efficiency across its businesses and functions, taking appropriate measures and reviewing them from time to time. The companys risk management and control procedures involve prioritisation and continuous assessment of these risks and devise appropriate controls, evaluating and reviewing the control mechanism and redesigning from time to time in the light of its effectiveness.

4.1 Global markets

Divis is engaged in manufacture of generic APIs, custom synthesis of active ingredients for innovator companies, other specialty chemicals and nutraceuticals. The Company is very selective in its product portfolio with a focus on export markets within the domain of its capabilities. As the Company has significant exposure to

export markets, it will have an impact of change in global economy or changing dynamics in the supply-chain of its products in the global markets besides any protective actions by governments of recipient countries.

4.2 Competition

In order to stay competitive vis-a-vis its peers in Europe and US, the Company lays great stress on leveraging its inherent skills and strengths in chemistry by building strong customer relationships supported by cost competitive and fast delivery structure. However, competition is inherent in the business of the Company as there are constant efforts in process innovation and cost competitiveness. Divis continues to work towards optimising its processes and upgrading its plant capacities and capabilities at its multi-purpose manufacturing facilities to stay competitive and compliant to regulations; and is also creating additional capacities addressing the anticipated or increasing business opportunities. This would enable the Company minimise risks/threats and avail the opportunities that emerge for business growth.

4.3 Regulatory and quality compliances

The Company devotes significant importance to the regulatory compliances as it accesses advanced markets like Europe and USA for a major part of its business. Risks relating to regulatory compliances with such markets are inherent to the Companys business. Divis has put in place appropriate systems, processes, operations, and procedures to monitor and ensure consistent practice for the evolving compliance regime for market access to the recipient countries of its products and specifications. The chemists and staff are periodically retrained so that they are fully aware of the latest regulations, quality testing, standard operating procedures, and norms. Divis has invested in extensive training to incorporate the cGMP updates into its operating systems. The Company constantly reviews its policies and procedures to adhere conformity of the various global and domestic regulations for its manufacturing facilities or statutory compliances.

4.4 Patent compliance

From the inception of its manufacturing operations, the Company has its stated policy of conforming to intellectual property rights (IPR) and does not violate patents. The Company manufactures either patent-expired generics or undertakes custom synthesis of compounds for the innovator MNC companies. Divis continually reviews patent compliance in its process development of active ingredients and has a monitoring mechanism to validate non-infringement of the processes developed.

4.5 Human resources

Divis always consider employees as an integral part of its operations and put in place appropriate compensation plans, feedback process, continuing training and upgradation of skills in their functional areas. Employee relations are affable and harmonious with safe and healthy working environment and all-round contribution and participation in the growth.

4.6 Commercial and financial risks

With predominance of revenue from export of goods and services, the Company is exposed to a wide spectrum of risks relating to markets, legal disputes relating to contracts, various statutory compliances, credit from suppliers or to customers or from banks/lenders, interest rates, liquidity as well as foreign exchange rate volatility, continuity in supply of raw materials and prices or of any non-foreseen changes relating to trade and regulations by countries where company does business; and addresses these appropriately to mitigate or minimise these risks. The Company constantly reviews its systems and processes and takes adequate measures to address these risks or meet its obligations.

The Company has significant exports, besides imports of inputs and hence has a large exposure to exchange rate risks. Given the instability in the global, political and economic environment and bilateral trade issues, there has been significant volatility of foreign currency rates. Such events are outside the control or horizon of Indian companies and it is becoming very difficult to accurately predict currency movements. In the long run, we realise the best way to manage currency fluctuations is to have a better geographic balance in revenue mix factoring Companys competitive positioning, and to ensure a foreign currency match between receivables and payables.

The Company constantly reviews and aligns its policies and takes appropriate decisions to minimise the commercial and financial risks.

4.7 Insurance

The Companys current and fixed assets as well as its personnel and products are adequately insured against various risks like transit, fire and allied risks, public and product liability, personnel, directors & officers liability etc.

4.8 Environment, health and safety

As the Companys manufacturing operations involve complex chemical reactions, risks exist on any issues relating to safe operations, health and safety of

employees and environment management compliances. Divis policies and processes are designed and reviewed from time to time to adhere to all applicable regulations on the environment management, employee health and safety. Divis continually strives to optimise the resources and upgrade its processes in order to reduce the environmental impact of its processes, products and services, besides ensuring health and safety of employees involved in the processes.

4.9 Information technology (IT)

The Company has put in place an IT policy in order to ensure consistency, protection and security of data and IT systems to ensure smooth business processes. The systems used for information security are constantly tested, continuously updated and expanded. In addition, our employees are regularly trained on data protection and safety including secure online banking transactions. IT-related risk management exercise is conducted using appropriate protocols and tools.

The Company has implemented EDR (Extended Detection and Response), end point and server protection, automated prevention and detection solutions, including perimeter security controls with web security tools, enhanced internal vulnerability detection and multiple network segmentations based on business criticality. The internal team regularly performs VAPT scan which is also reviewed by external consultants. Implemented absolute zero trust security architecture.

4.10 Business continuity

The Company has appropriate strategies for business continuity for addressing disruptive events, of various nature, on business operations and has set up a comprehensive and proactive framework to mitigate such disruptive events by deploying available alternative solutions; and reduce their potential damages.

4.11 Sustainable operations

As part of our efforts towards sustainable business operations, we assess the opportunities and risks associated with sustainable sourcing/utilisation of resources and manufacturing activity; and continually evaluate alternatives and implement optimum processes for sustainable and safe operations in order to minimise, mitigate or de-risk our business operations.

5. Regulatory filings/approvals

Divis has triple certifications ISO 9001 (Quality Systems), IISO 14001 (Environment Management Systems) and ISO 45001 (Occupational Health and Safety Systems)

for its manufacturing facilities and adheres to cGMP and standard operating practices in its manufacturing/ operating activities and these certifications are renewed from time to time.

The manufacturing facilities at Hyderabad and Visakhapatnam are periodically inspected by US-FDA, EU and other major regulatory agencies.

The Company has also obtained Food Safety System Certification (FSSC) 22000 for vitamins and carotenoids, GMP+B2 certification for production of Feed Ingredients.

Divis has a total of 42 drug master files (DMFs) with US- FDA, 28 CoSs (Certificates of Suitability) filed with EDQM, 25 DMFs with Health Canada and 8 MFs with PMDA, Japan and several filings at various other agencies. Divis has filed for a total of 44 patents for generic products.

6. Business distribution

Our product portfolio comprises two broad categories i) Generic APIs (Active Pharma Ingredients) and Nutraceuticals and ii) Custom Synthesis of APIs and specialty ingredients for innovator pharma giants.

The Company operates predominantly in export markets and has a broad product portfolio under generics and custom synthesis. Among Divis well distributed product range, some of the components of the business, as percentage in value terms, are given below:

Particulars	FY 2024-25	FY2023-24
Exports	88%	87%
Imports, including supplies from SEZ units	49%	46%
Top 5 products	43%	41%
Top 5 customers	49%	37%
Exports in US$ terms	86%	84%
Exports in Pounds	9%	10%
Exports in Euro	5%	6%

7. Performance and operations review

Analysis of profitability (on standalone basis) for the current and the last financial year is given hereunder:

( in crores)

Particulars	FY 2024-25	FY2023-24
Revenue from operations	9,198
7,665
Other income	352	337
Total income	9,550	8,002
Expenditure before depreciation & finance cost	6,219	5,491
PBDIT	3,331	2,511
Finance cost	13
Depreciation	401	376
Profit before tax (PBT)	2,929	2,132
Tax expense:
Current tax	793
511
Deferred tax	(73)	45
Profit after tax (PAT)	2,209	1,576
Other comprehensive income (net of tax)	(2)	(1)
Total comprehensive income	2,207	1,575
Earnings per share (EPS) Basic & Diluted ()	83.20	59.37

This financial year, the Company has earned revenue from operations of 9,198 crores, witnessed a growth of 20% over previous financial year. The total income for the year is 9,550 crores against 8,002 crores for previous year.

Our net material consumption for the year remains about 40% of the revenue from operations for the year. Our profit before tax for the year is higher at 2,929 crores as against 2,132 crores during the last financial year primarily due to more contribution from revenue from operations, stable overheads.

Tax expense for the year amounted to 720 crores as against a tax expense of 556 crores during the last financial year. The effective tax rate for the year is at 24.6% of PBT as against 26.1% for previous year, as the Company decided to opt for new tax regime as per the provisions of Section 115BAA of the Income Tax Act, 1961.

Profit after tax for the year amounted to 2,209 crores as against 1,576 crores during the previous year.

7.1 Exports

Exports constituted 88% of sales revenue during the year. Exports to advanced markets comprising Europe and America accounted for 73% of sales revenue.

7.2 Region-wise sales revenue

Our revenue from products and services region-wise is given below:

7.3 Other income

Other income mainly comprises interest on deposits and investments, gain on forex transactions and gain in fair value of non-current investments. Other income for the year amounted to 352 crores as against 337 crores of last year. This year, we have a gain on forex transactions and translations amounting to 48 crores against a gain of 28 crores in last year.

7.5 Material costs

Particulars	FY 2024-25	in crores) FY 2023-24
Material consumption	3,760	3,210
Changes in inventories of finished goods and work-in-progress	(83)	(127)
Net material consumption	3,677	3,083
Revenue from operations	9,198	7,665
% of consumption to revenue	39.98%	40.22%

Material consumption varies from product to product. The Company manufactures several active pharmaceutical ingredients and intermediates within the Generic and Customs synthesis groups as well as nutraceuticals. Manufacture of any product involves stage-wise controlled processing through its chemistry to the specifications under the standard operating practices complying to cGMP conditions.

Material consumption net of increase in stocks is about 39.98% of revenue from operations during the year as compared to 40.22% of previous year.

7.6 Employee benefits expense

Employee benefits expense represent salaries and benefits to employees and also fixed and variable managerial remuneration of Whole-time Directors as approved by the Members.

Employee benefit expense for the year is 1,210 crores against 1,067 crores for the previous year. Of this, remuneration to Whole-time Directors accounted to 198 crores during the year as against 144 crores of the previous year.

Employee cost for the year works out to about 12.67% as against 13.33% of total income earned for the respective years.

7.7 Other expenses

Major items of other expenses are power and fuel, repairs, stores & spares, packing materials, R&D expenses, carriage outward, travelling & conveyance, sales commission, environment management expenses, political contributions and CSR expenses.

Other expenses for the year accounted for 1,332 crores as against 1,341 crores for the previous year. Other expenses account for 13.95% of total income for the year against 16.76% for the previous year.

7.8.1 Capital expenditure

During the year, we have capitalised property, plant and equipment (PPE) and intangible assets valuing 1,118 crores. Total capital WIP at all locations as at the year end is 1,022 crores against 778 crores as at the previous year end.

7.8.2 New project near Kakinada

Unit-3 greenfield project at Ontimamidi Village (Kona), Thondangi Mandal, Kakinada District, Andhra Pradesh has commenced commercial operations during the year. We have spent an amount of 1,497 crores including advances given for capital items and capital work in progress till March 31, 2025 on this project, of which property, plant and equipment valuing 885 crores was capitalised.

7.9 Non-current investments

Non-current investments as at the end of the current year amounted to 72 crores as against 89 crores for previous year. There is a partial redemption of optionally convertible debentures of 18 crores at a redemption value of 22 crores.

7.10 Current Income-tax assets

Income tax assets as at the end of the year is 12 crores, which includes excess payment of tax over estimated current tax for the current financial year of 11 crores.

7.11 Other non-current assets

Other non-current assets at the year end of 248 crores includes advances for capex programmes of 237 crores and other receivables.

7.12 Inventory position

Inventory position for the last two years is as under:

( in crores)

Particulars	As on March 31, 2025	As on March 31, 2024
Raw materials	1,022	1,067
Work-in-progress	1,698	1,620
Finished goods	148	143
Packing materials	9	8
Stores and spares	156	147
Total	3,033	2,985

The Company undertakes campaign production of large volume products like Naproxen, Dextromethorphan and Gabapentin by running the plant at full stream and stock these products for sale - thus freeing the multipurpose plants for producing other products; and hence carries significant volume of work-in-progress to be able to service the large volume products. As the company has a good market share for these products, we do not foresee any constraints in marketing these products and managing the inventory cycle. Slow moving and nonmoving items have been fully provided for.

7.13 Trade receivables

( in crores)

Particulars	As on March 31, 2025	As on March 31, 2024
Outstanding receivables	2,856	2,274
Less: Allowances for doubtful debts	1	1
Net receivables	2,855	2,273
Receivables (days)	113	108

Trade receivables at the year end came to 2,855 crores as against 2,273 crores last year. Trade receivables include an amount of 300 crores as against (last year: 260 crores) due from subsidiaries.

7.14 Other current assets

Particulars	As on March 31, 2025	As on March 31, 2024
Indirect taxes - Input tax credits	245	202
Prepaid expenses	34	35
Advances to suppliers	87	80
Other receivables	1	1
Total	367	318

These assets are monitored and reviewed periodically.

7.15 Other financial assets

Other financial assets at the year end are 78 crores against 63 crores of last year. These comprise security and other deposits and receivables of export incentives and are in the normal course of business.

7.16 Deferred tax liabilities

Deferred tax liabilities represent temporary differences arising between the tax base of assets using the liability method, liability on account of obligations for SEZ units under the Income-tax Act as also of employee benefit obligations. Deferred tax liability as of March 31, 2025 amounted to 509 crores as against 582 crores as of March 31, 2024. Exercising option to pay taxes under Section 115BAA of the Income Tax Act,1961 resulted in reduction of deferred tax liability by 29 crores.

7.17 Trade payables

Trade payables for raw materials/services amounted to 880 crores as at the end of the year as against 807 crores as at the end of last year. Of the trade payables, an amount of 37 crores (last year: 35 crores) relates to dues to micro and small enterprises. The Company follows consistent practices of procurement and avails efficient credit terms from vendors.

7.18 Other financial and current liabilities

Other financial liabilities at the yearend of 134 crores consist of capital creditors of 133 crores. All obligations are discharged as per the terms agreed with the vendors.

Other current liabilities for the current year amounted to 350 crores as against 303 crores as at the end of the last year. Employee benefits and all statutory dues are paid well within the due dates. Liability for CSR activities of 19 crores will be discharged within the statutory times lines specified in the Companies Act, 2013.

7.19 Key financial ratios

Particulars	March 31, 2025	March 31, 2024	Change
Return on net worth / equity (%)	15.57%	12.04%	29.32%**
Return on capital employed (%)	19.88%	15.62%	27.28%**
Basic EPS (?)	83.20	59.37	40.14% **
Trade receivables turnover	3.59	3.61	(0.55%)
Inventory turnover	3.05	2.65	15.07%
Current ratio	7.03	7.60	(7.50%)
Debt equity ratio*	0.00	0.00	-
Operating profit margin (%)	36.21%	32.76%	10.53%
Net profit margin (%)	23.13%	19.70%	17.45%

*There is no net debt outstanding as on March 31, 2025 and as on March 31, 2024.

** The variance is on account of increase in profits for the year ended March 31, 2025.

Detailed explanation of ratios:

(i) Return on net worth / equity

Return on net worth / equity is a measure of profitability generated to Equity holders. It is calculated by dividing the net profit after tax for the year with average Shareholders equity during the year.

(ii) Return on capital employed

Return on capital employed is a ratio that measures the efficiency of the Company with which its capital is being employed. In other words, the ratio indicates the ability of the Company to generate returns for both equity and debt holders. It is calculated by dividing net operating profit (EBIT) by average capital employed i.e., Tangible net worth + total debt + deferred tax liability.

(iii) Basic EPS

Earnings Per Share is the portion of a Companys profit allocated to each share. It serves as an indicator of a Companys profitability. It is calculated by dividing the profit after tax for the year by weighted average number of shares outstanding during the year.

(iv) Trade receivables turnover

This ratio is used to quantify a Companys effectiveness in collecting its receivables or money owed by customers. The ratio shows how well a Company uses and manages the credit it extends to customers and how quickly that short-term debt is collected. It is calculated by dividing the total revenue from operations by average trade receivables.

(v) Inventory turnover

I nventory turnover is the number of times a Company sells and replaces its inventory during a period. It is calculated by dividing the revenue from sale of goods by average inventory.

(vi) Current ratio

The Current ratio is a liquidity ratio that measures a Companys ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities.

(vii) Debt equity ratio

The ratio is used to evaluate a Companys financial leverage. It is a measure of the degree to which a Company is financing its operations through debt versus wholly-owned funds. It is calculated by dividing a Companys net borrowings by its Shareholders equity.

(viii) Operating profit margin

Operating profit margin is a profitability or performance ratio used to calculate the percentage of profit a Company produces from its operations. It is calculated by dividing the operating profit (PBDIT) by revenue from operations.

(ix) Net profit margin

The net profit margin is equal to how much net income or profit is generated as a percentage of total revenue. It is calculated by dividing the profit after tax for the year by total revenue for the year.

7.20 Cautionary statement

This report may contain certain statements that the Company believes are or may be considered to be forward-looking statements which are subject to certain risks and uncertainties. These estimates and judgements relating to the financial statements have been made on a prudent and reasonable basis, in order that the statements reflect, in a true and fair manner, the state of affairs and profits for the year. Actual results may differ materially from those expressed or implied. Significant factors that could influence the Companys operations include government regulations, tax regimes, market access related regulatory compliances, patent laws and domestic and international fiscal policies.