Divis Laboratories Ltd Management Discussions

1. Economy and Industry Outlook

Macroeconomic and Trade Environment

The global economy in 2025-26 expanded at a moderate yet resilient pace, with GDP growth stabilising at ~3%, broadly in line with the previous year[1]. A defining feature of this period has been the relative outperformance of global trade volumes relative to overall economic growth, particularly in non-discretionary and compliance-intensive sectors such as pharmaceuticals and chemicals [1]. At the same time, global trade architecture is undergoing a fundamental shift from integrated globalisation toward more fragmented but resilient networks driven by geopolitical uncertainty, supply chain disruptions, and regulatory divergence. This has led to increased reliance on bilateral and regional trade partnerships, alongside supplier diversification to mitigate concentration risks. Consequently, procurement strategies are evolving beyond cost optimisation toward risk-adjusted frameworks that prioritise supply assurance and compliance consistency. Companies are adopting proactive sourcing practices, including selective inventory buffering and forward contracting of critical inputs. In parallel, governments are increasingly through targeted influencing incentives, localisation policies, and regulatory oversight aimed at strengthening domestic capabilities in critical industries. These dynamics are further supporting the gradual redistribution of manufacturing activity toward cost-competitive and infrastructure-ready regions, particularly across Asia.

India continues to stand out as one of the fastest-growing major economies, with GDP growth estimated at 7.6% in FY 2025–26[2]. Growth remains investment-led, driven by sustained public capital expenditure in infrastructure, manufacturing, and digital ecosystems. Ongoing investments in logistics, multimodal transport, and port infrastructure have supported supply chain mitigated operational bottlenecks, thereby enhancing Indias competitiveness in high-value manufacturing and global trade integration. As the country progresses toward its long-term aspiration of becoming a USD 30 35 trillion economy by 2047, the pharmaceutical industry is poised to play a key role in driving economic growth and strengthening national health security [3].

Global Pharmaceutical Industry

The global pharmaceutical industry continued its expansion in 2025, with aggregate medicine spending reaching ~USD 1.74 trillion[4]. While overall growth remained robust, value accretion increasingly shifted toward innovation led and specialty therapies rather than broad based volume expansion. Demand fundamentals remain strong, supported by favourable demographics, rising prevalence of chronic diseases, and improving healthcare access in emerging markets. In contrast, population-adjusted usage growth remained relatively modest at ~1.9% CAGR, reflecting demand maturity in developed markets[4]. Consequently, therapy mix, treatment duration, and patient adherence are assuming greater importance in shaping consumption patterns. This transition is evident in pharmaceutical pipelines, which are progressively oriented toward targeted and precision-driven therapies.

The ability to translate laboratory-scale innovation into reliable, compliant, and scalable supply has thus emerged as a critical success factor, particularly across multi-year commercial horizons [5].

Regional Market Structure [6]

North America remains the largest market, accounting for over 40% of global pharmaceutical value in 2025, supported by high R&D intensity, rapid adoption of innovative therapies, advanced healthcare and reimbursement infrastructure, and high per capita drug spending.

Europe represents a stable, regulation-driven market, contributing ~22 25% of global pharma value, with strengths in biosimilars, specialty generics, and chronic therapies under controlled pricing environments [4].

_Asia-Pacific is the fastest-growing region, expanding at ~7% CAGR through 2030, driven by demographic scale, income growth, and improving healthcare access. Asia serves as the global manufacturing base, with increasing participation in innovation.

Emerging markets across Latin America and the Middle East & Africa (MEA) continue to expand, supported by rising generics penetration and healthcare infrastructure investments.

Demand and Operating Model

Shift toward high-value therapeutics [4]

Specialty medicines are projected to account for ~46% of global pharma spending by 2030, driven by complex treatment pathways, longer therapy durations, and lifecycle-driven value extension beyond traditional peak-and-decline revenue curves. Global oncology spending alone is expected to grow from ~USD 291 billion in 2025 to ~USD 467 billion by 2030.

GLP-1 therapies

The rapid rise of GLP-1 therapies represents one recent of the most significant years. This growth is driven by long-duration, multi-indication usage across obesity, diabetes, and cardiovascular risk management. Global anti obesity drug spending rose from barely USD 3 billion in 2020 to ~USD 66 billion in 2025 and is expected to reach USD 125 billion by 2030[4].

Peptide therapeutics momentum [6]

The global peptide therapeutics market was estimated at ~USD 140 billion in 2025 and is projected to reach ~USD 295 billion by 2033. The innovative segment accounted for ~80% of total revenue, while metabolic disorders represented 64% of overall demand value.

Continued centrality of small molecules

Small molecules continue to account for over half of global pharma revenues, due to clinical versatility, cost efficient manufacturability, high scalability, and a sustained flow of regulatory approvals, including a significant share of the 90+ novel drugs approved during 2024-25[6].

Branded and generics balance [6]

Branded drugs accounted for ~66.5% of global pharma revenues in 2025, while generics continued to expand, particularly in cost-sensitive markets.

Generics also represented ~90% of prescription volumes in the US, underscoring a dynamic wherein innovation drives value and generics enable access.

Outlook [4]

The global pharmaceutical industry is expected to sustain steady growth through 2030, with total spending projected to reach ~USD 2.6 trillion at a CAGR of 5 8%. At the same time, overall usage is expected to approach nearly four trillion daily doses. Growth is becoming highly selective, with value concentrating in therapies that demonstrate differentiated clinical outcomes and sustained real-world effectiveness. Pricing and reimbursement pressures across developed markets are intensifying scrutiny on value delivery and utilisation. While innovation activity remains robust, commercial success is shifting from initial launch alone to effective lifecycle management spanning indication expansion, combination therapies, and sustained market access. As R&D costs rise and development timelines lengthen, operational reliability across the supply chain is becoming critical to preserving commercial value.

Overall, the industry is expected to favour players and portfolios that combine scientific differentiation with disciplined execution and predictable delivery across global markets.

Global Active Pharmaceutical Ingredients (API) Industry supplier The global API industry, valued at ~USD 270 billion in 2025, constitutes the manufacturing backbone of the pharmaceutical value chain[6]. Historically characterised by volume-led and cost-centric models, the industry is now transitioning toward process-intensive, high-barrier APIs, where competitiveness increasingly depends on combining manufacturing scale with regulatory compliance, chemistry expertise, and end-to-end reliability. Synthetic APIs continued to dominate, accounting for ~71% of global API revenues in 2025, reflecting their central role across generics and chronic therapies [6]. While captive manufacturing still accounts for more than half of global supply, the merchant API participation is expanding faster, particularly in complex and capital-intensive segments.

Geographic Dynamics and Supply Rebalancing[4],[6]

Global API manufacturing is evolving toward a diversified, multi-node, risk-adjusted supply architecture:

Asia- remains the worlds primary API manufacturing hub and the fastest-growing production region, supported by enormous chemistry talent, extensive industrial infrastructure, and cost advantages. The region continues to anchor global API supply while steadily expanding capabilities across complex chemistries.

United States accounted for ~38% of the global API market by value in 2025. While manufacturing cost defined structures are significantly higher, the current policy emphasis on domestic production is prompting infrastructure investments by companies.

Emerging regions such as Latin America and MEA remain early stage, with manufacturing focussed on essential medicines and generic APIs.

Structural Drivers of Value Creation

Process chemistry as a competitive moat

Capabilities such as multi step synthesis, impurity management, backward integration, manufacturing automation, yield optimisation, and solvent recovery are critical to ensuring reproducibility at scale and cost efficiency.

Regulatory compliance economics

Escalating expectations for GMP, batch to batch consistency, data integrity, and environmental and safety norms are raising both capital and operating intensity, making compliance credibility a key and differentiator influencing contract longevity.

• High-Potency APIs (HPAPIs)

HPAPIs represent one of the most technically demanding API segments. The HPAPI market is projected to grow from ~USD 30 billion in 2025 to ~USD 48.3 billion by 2033[6].

• Nutraceutical ingredients

Preventive healthcare and nutrition-led wellness are emergingasstronggrowthdriversbeyondtraditional pharmaceuticals. The global nutraceuticals market is projected to expand from ~USD 684 billion in 2026 to ~USD 1.15 trillion by 2033[6]. Demand for ingredients such as carotenoids and vitamins continues to grow, supported by increasing adoption across applications including dietary supplements, functional foods, beverages, and animal nutrition. This is driving greater preference for scientifically validated, quality-assured ingredients, thereby favouring manufacturers with integrated production capabilities, consistent quality systems, and formulation expertise.

Outlook

The global API industry is projected to grow at a CAGR of 5 6%, reaching ~USD 419 billion by 2033[6]. Value realisation will depend more heavily on molecular complexity, regulatory intensity, and specialised chemistries, where manufacturing capability and technical differentiation command greater strategic importance. As supply chains continue to prioritise resilience, customer relationships are expected to favour established manufacturers, reflecting the importance of regulatory familiarity, proven process robustness, and assured continuity. Rising compliance thresholds across major markets are likely to further consolidate participation toward chemistry strong, regulatory reliable suppliers.

Global Contract Development and Manufacturing Organisation (CDMO) Industry

The global CDMO industry has evolved from a supplemental outsourcing option to a core execution component of the pharmaceutical value chain. CDMOs are now embedded across the full spectrum of chemistry, manufacturing, and controls (CMC), supporting development, scale-up, validation, and commercial supply, particularly for programmes with high regulatory exposure and extended market lifecycles. The global CDMO market, valued at ~USD 150 billion in 2024, is projected to reach ~USD 290 300 billion by the early 2030s[6], reflecting a sustained shift toward outsourced execution across both Big Pharma companies and biotechnology innovators. Thus, a capacity led, transactional arrangement has now become lifecycle anchored, risk shared, and execution critical.

Operating Model and Demand Dynamics

Lifecycle-integrated outsourcing

CDMO engagement now spans the full molecule lifecycle, including clinical supply, validation, and commercial manufacturing, unlike earlier CRO-led outsourcing models. Companies increasingly prefer a smaller set of proven manufacturing partners capable of multi-year collaborations over fragmented, stage-wise service providers.

Capital-light operation

With development costs exceeding USD 2 billion per molecule, innovators are increasingly deferring in-house manufacturing investments in favour of flexible CDMOs providing specialised technology and dedicated infrastructure aligned with programme visibility and market timelines [7].

Innovation-linked demand

Small molecules accounted for ~66% of CDMO revenues in 2024[6], with demand increasingly skewed toward new, chemistry-intensive molecules that require specialised capabilities, high process precision, and expertise in advanced manufacturing.

Capacity constraints

High-barrier segments such as peptides, HPAPIs, and containment-intensive chemistries face sustained capacity bottlenecks due to capital intensity, long qualification cycles, and stringent occupational safety requirements, thus creating advantages for differentiated suppliers.

Technology-enabled process reliability

Process Analytical Technology (PAT), real-time monitoring systems, digital quality management platforms, and predictive analytics are now considered baseline requirements to ensure consistency, inspection readiness, and process control across CDMO operations.

Regional Landscape [6]

Asia- is the largest manufacturing base for small molecule CDMO activity, contributing ~38 40% of global revenues in 2024.

• North America represents the epicentre of innovator-led demand, contributing ~37% of global API CDMO revenues, supported by a dense ecosystem of multinational pharmaceutical and biotechnology companies.

• Europe remains focussed on specialty and compliance-intensive manufacturing, where regulatory rigour and long-standing industry relationships support quality-driven partnerships.

Outlook

The global CDMO market is expected to grow at a CAGR of ~7.4% through 2033 [6], outpacing underlying pharmaceutical R&D expenditure. Within this, API CDMO represents the largest segment and is projected to expand from ~USD 107 billion in 2024 to USD 210 billion by 2033[6]. Growth is expected to be concentrated in high-barrier segments such as HPAPIs and peptide-linked chemistries, where substitutability remains limited. Outsourcing is transitioning from tactical capacity augmentation toward long-term strategic partnerships, focussed on managing execution risk, accelerating development timelines, and ensuring right-first-time technology transfers. Decision-making frameworks are evolving from unit cost considerations toward total lifecycle economics. Client relationships are becoming highly selective in late-stage and commercial programmes, where execution lapses can directly impact regulatory approvals, market access, and revenue realisation.

Indian Pharmaceutical Industry

India holds a distinctive position in the global pharmaceutical network as both a large domestic market and a globally integrated manufacturing hub. The industry has advanced well beyond its traditional generics base, expanding into complexquality-assured medicines formulations, biosimilars, specialty therapies, and contract manufacturing services. Over the past nine years, it has grown at a CAGR of ~9%[10] and contributes ~1.7% to national GDP [2], firmly establishing itself as one of Indias most globally competitive manufacturing sectors. With the domestic market growing above 8% to reach ~USD 25.8 billion ( 2.46 lakh crore)[11] and exports maintaining strong momentum, the pharmaceutical industry surpassed USD 55 billion in FY26, underscoring its strength across domestic and international markets [8].

Drivers Shaping the Industry

Export-led global leadership

India is among the largest suppliers of generic medicines globally by volume. Pharmaceutical exports crossed USD 31 billion in FY 2025-26 [8], accounting for over half of industry revenues.

• Domestic healthcare demand

Growing domestic medicine consumption is driven by population growth, healthcare awareness, and better insurance coverage. Urbanisation, lifestyle changes, and diagnostic improvements further increase therapy initiation and adherence.

• Expanding access and distribution proportion

Government-supported healthcare programmes, improved procurement channels, digital pharmacies, and organised retail chains are widening access to essential medicines, even across semi-urban and rural locations.

• Moving up the value chain

Competitive intensity and pricing pressures in commoditised generics are accelerating Indias shift toward higher-value domains, including complex generics, injectables, specialty medicines, biosimilars, and differentiated drug-device combinations.

• Policies reinforcing quality and capability[8]

Government initiatives such as Production-Linked Incentive (PLI) schemes, Research Linked Incentives (RLI), and the Promotion of Research and Innovation in Pharma MedTech (PRIP) programme are enhancing R&D intensity, advanced manufacturing, and regulated market-readiness.

Outlook

Indias pharmaceutical industry is projected to reach USD 120 130 billion by 2030 [8]. Exports are expected to remain the primary value driver, driven by global demand for cost-effective, and growing preference for reliable manufacturing partners. Domestic demand is becoming structurally stronger, with a gradual shift from acute therapies toward chronic and specialty segments that offer higher value and recurring demand visibility. Indias innovation ecosystem is also expanding, with the pipeline increasing from ~270 assets in 2015 to ~450 in 2024[5]. Policy support and a growing pool of returning skilled talent are strengthening Indias scientific and research capabilities. Overall, India is well positioned to strengthen its role as a globally integrated pharmaceutical manufacturing hub, combining scale, cost competitiveness, and advancing technological sophistication across APIs, formulations, and complex chemistries. CDMO/CRDMO

Indian Active Pharmaceutical Ingredients (API) Industry

India has become a critical pillar of global API supply, supported by a massive base of USFDA and EU approved facilities and more than 500 manufacturers[8]. India ranks among the top global API suppliers by volume, with exports reaching ~ 41,500 crore in FY25 [12].

Key Drivers and Trends

Regulated market orientation

API output is A significant exported to regulated markets where requirements around data integrity, batch reproducibility, impurity characterisation, and documentation discipline are materially higher, thus elevating the importance of regulatory track record and quality systems.

• Process innovation as competitiveness

Competitive advantage is defined by process innovation alongside scale. Indian manufacturers are investing in advanced technologies such as continuous genotoxic risk management, and flow resource-efficient, green chemistries to expand the addressable opportunity set.

• Policy-led focus on resilience

Policy measures such as budgetary support, PLI schemes for bulk drugs, and development of dedicated API parks have played a catalytic role in strengthening domestic manufacturing capabilities and improving self-reliance in import dependent molecules.

Outlook

Indias API industry is well positioned to grow in line with global demand, supported by Indias established customer relationships and proven execution capabilities. Ongoing investments in backward integration, domestic capacity creation, technology adoption, and sustainable manufacturing are expected to gradually reduce dependence on imported key starting materials and improve supply resilience.

However, rising regulatory expectations and compliance requirements are increasing industry cost structures globally, reinforcing entry barriers and favouring scaled, quality-focussed players with strong governance frameworks and manufacturing systems.

Indian Contract Development and Manufacturing Organisation (CDMO) Industry

India has emerged as a significant destination, transitioning from early stage chemistry support toward late stage development and commercial manufacturing. This evolution reflects improved regulatory alignment with global agencies, expansion of manufacturing infrastructure, and deepening execution capabilities across chemistries. The Indian CRDMO market is projected to grow from ~USD 3 billion in 2024 to reach ~USD 22 25 billion by 2035[13]. Within this, the CDMO segment is poised to scale nearly fivefold to ~USD 10 12 billion over the same period[13]. In parallel, CDMO exports are expected to account for 13 15% of global outsourcing expenditure by 2030[9]. This implies a structurally expanding role for India in global pharmaceutical supply chains.

Key Factors

_ Global_supply_diversification

“China+1” and friend-shoring strategies are redirecting outsourcing flows toward alternatives. India is a key beneficiary, with estimates suggesting it could capture 20 30% of the outsourcing share potentially migrating away from China by 2030 [9].

• Outsourcing driven by pricing pressure

Reimbursement tightening and drug pricing reforms in developed markets are reinforcing outsourcing as a critical lever for margin optimisation. Indias ability to deliver cost efficiency while ensuring compliance and quality remain key advantages difficult to replicate across geographies.

• Late-stage and commercial supply

Clinical stage and pre commercial programmes account for a substantial share of outsourcing demand; however, revenue visibility and customer tenure are materially longer when products progress toward commercialisation, spaces that

Indian CDMOs are gradually claiming.

Outlook

For India, CDMO growth is expected to outpace global trends, with export revenues projected to reach ~USD 130 billion by 2047[9]. In parallel, the rapid expansion of Indias domestic in-licensed branded dosage manufacturers and dosage CDMOs supplying regional markets is strengthening local-for-local API demand. Sustained value creation will increasingly depend on disciplined operation, as higher-value opportunities are accompanied by materially higher inflammatory, anti-cancer, execution thresholds. As project complexity and regulatory expectations continue to rise, competitive differentiation is shifting toward capability compliance excellence, and trusted consistency.

2. Company overview

Divis Laboratories Limited is a leading manufacturer and supplier of high-quality Active Pharmaceutical Ingredients (APIs) and intermediates, serving global innovator pharmaceutical companies. The company has established itself as a trusted partner to many of the worlds leading pharma organisations, including 12 of the top 20 global pharmaceutical companies.

With a presence in over 100 countries, Divis Generic APIs division has played a key role in its growth, positioning the company as the worlds largest API manufacturer in 10 of the 30 generic APIs it produces. Its diverse product portfolio supports therapeutic segments such and as cardiovascular, anti-central nervous system treatments. depth, Divis Laboratories has consistently been recognised for excellence in quality, research and development, and occupational health and safety. The company remains committed to sustainable growth by expanding capacity while adhering to stringent environmental, safety, and social responsibility standards.

Headquartered in Hyderabad, India, Divis operates three state-of-the-art manufacturing facilities with advanced utilities, environmental management systems, and robust safety standards.

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: o the first manufacturing facility operating from the year 1995; and o the DC-SEZ Unit operating from the year 2020.

Unit-2, located at village Chippada, Bheemunipatnam Mandal, Visakhapatnam District, Andhra Pradesh

State comprises: o An Export-Oriented Unit operating from the year 2003. o An SEZ Unit operating from the year 2006. o DSN SEZ Unit operating from the year 2011. o 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, operating from January 2025.

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

The facilities at Hyderabad and Visakhapatnam have undergone multiple inspections by leading global regulatory authorities, including USFDA, EU GMP (UK, Germany, Ireland, Slovenia), Health Canada, TGA, ANVISA, COFEPRIS, PMDA, and MFDS.

The nutraceutical facility in Visakhapatnam is a globally recognised, technology-driven unit specialising in high-quality carotenoids, Astaxanthin, Lycopene, Canthaxanthin, Apocarotenal, and vitamin ingredients.

These products cater to food, beverage, dietary supplement, pet food, and feed industries, with formulations designed for both supplementation and food fortification.

The commissioning of phase I of Unit 3 at Kakinada in January 2025 strengthened the Companys backward integration by enabling in-house production of starting materials and intermediates, improving supply assurance, cost efficiency, and impurity control.

2.2 Research and development centres

The Companys R&D infrastructure comprises the Divis Research Center (DRC) at Sanath Nagar, Hyderabad, and Process Development &audit observations and Support Centres (PDSCs) located at its manufacturing facilities near Hyderabad and Visakhapatnam. These centres focus on the development of new processes and continuous improvement of existing ones for both pipeline and commercial products.

The PDSCs play a critical role across the product lifecycle, including process development, scale-up from gram to commercial scale, optimisation, impurity profiling, pilot studies, pre-validation and validation batches, and seamless technology transfer to manufacturing units, while also providing ongoing process supportduring and improvements to ensure operational product quality.

2.3 Subsidiaries

The Company has two wholly-owned subsidiaries, Divis Laboratories (USA) Inc., New Jersey, and Divis Laboratories Europe AG, Basel, which support the marketing of its nutraceutical products and enhance customer reach across key international markets. These subsidiaries strengthen the Companys global presence and enable closer engagement with customers in their respective regions.

3. Internal control systems

The Company has established a comprehensive and robust system of internal controls commensurate with the size, nature, and complexity of its operations, encompassing manufacturing, finance, and marketing functions, including internal financial controls over financial reporting. These controls are supported by well-defined policies, standard operating procedures, and documented processes designed to ensure orderly and efficient conduct of business, adherence to Company policies, safeguarding of assets, prevention and detection of frauds and errors, and accuracy and completeness of accounting records, along with timely preparation of reliable financial information in compliance with applicable laws and regulations.

The internal control framework is reinforced by a structured and continuous internal audit function, staffed with qualified professionals, which operates based on an annual audit plan approved by the Audit Committee of the Board. The scope of internal audit includes evaluation of the adequacy and effectiveness of internal controls, review of operational efficiencies, assessment of compliance with statutory requirements, and recommendations for strengthening internal processes, policies, and accounting systems.

The internal audit function reports directly to the Audit Committee, thereby ensuring independence the and objectivity. Significant status of corrective actions are periodically reviewed by the Audit Committee, and appropriate directions are provided to management. Process owners are responsible for implementing corrective and preventive actions in a time-bound manner.

Further, the Audit Committee, in conjunction with the statutory auditors, reviews the adequacy and operating effectiveness of internal financial controls over financial reporting. Based on such reviews and audit reports, the internal financial controls of the Company are the considered adequate and operating effectively year. The Company also fosters a culture of continuous and improvement, with management actively considering and implementing recommendations from internal auditors, statutory auditors, and the Audit Committee to strengthen governance, risk management, and control processes.

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 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 exposure to capabilities. As the Company has significant 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-?-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 to the The Company devotes significant regulatory compliances as it accesses advanced markets like Europe and USA for a major part ofitsbusiness.Risks exports, besides 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 andvolatility ensure of foreign currency 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 they are fully aware of the latest regulations, quality testing, standard operating procedures, and norms. Divis has invested in extensive training to incorporate businesses the cGMPand functions, updates intotaking 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 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 rates. has been significant Such events are outside the control or horizon of the company and it is becoming very difficult to accurately predict currency movements. With the experience over the years, it has been ascertained that 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, war, terrorism, 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), ISO-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 41 Drug Master Files (DMFs) with US-FDA, 30 CoSs (Certificates of Suitability) with EDQM, 25 DMFs with Health Canada and 9 MFs with PMDA, Japan and several filings at various other agencies. Divis has filed for a total of generic products.

6. Business distribution

Our product portfolio comprises of 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 2025-26	FY 2024-25
Exports	89%	88%
Imports, including supplies from SEZ units	44%	49%
Top 5 products	48%	43%
Top 5 customers	51%	49%
Exports in USD terms	86%	86%
Exports in Pounds	8%	9%
Exports in Euro	6%	5%
7. Performance and operations review

Analysis of profitability of Indian Operations for the current and the previous financial year is given hereunder:

		(_ in crores)
Particulars	FY 2025-26	FY 2024-25
Revenue from operations	10,388	9,198
Other income	506	352
Total income	10,894	9,550
Expenditure before depreciation & finance cost	6,974	6,219
PBDIT	3,920	3,331
Finance cost	23	1
Depreciation	461	401
Profit before tax (PBT)	3,436	2,929
Tax expense:
Current tax	869	793
Deferred tax	(40)	(73)
Profit after tax (PAT)	2,607	2,209
Other comprehensive income (net of tax)	6	(2)
Total comprehensive income	2,613	2,207
Earnings per share (EPS)
Basic & Diluted (_)	98.19	83.20

This financial year, the Company has earned revenue from operations of _10,388 crores, witnessed a growth of 12.94% over previous financial year. The total income for the year is _10,894 crores against _9,550 crores for previous year.

Our net material consumption for the year is about 38.66% of the revenue from operations for the year, against 39.98% of revenue during the previous year. Our profit before tax for the year is higher at_3,436 crores as against _2,929 crores during the previous financial year primarily due to more contribution from revenue from operations, stable overheads.

Tax expense for the year amounted to _829 crores as against a tax expense of _720 crores during the previous financial year. The effective tax rate for the year is 24.1% of PBT as against 24.6% for previous year, as the Company have opted for new tax regime under the provisions of the Income Tax Act, 1961, from previous financial year.

at Profit after tax for the year amounted to _2,607 crores as against _2,209 crores during the previous year.

7.1 Exports

Exports constituted 89% of sales revenue during the year. Exports to advanced markets comprising Europe and America accounted for 74% of sales revenue.

7.2 Region-wise sales revenue

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

				(_ in crores)
Region	FY 2025-26			FY 2024-25
	Amount	%	Amount	%
Europe	6,311	60.82	5,192	56.46
North America	1,360	13.10	1,488	16.18
Asia	1,079	10.40	1,044	11.35
India	1,147	11.06	1,105	12.02
Rest of the World	479	4.62	367	3.99
Total	10,376	100.00	9,196	100.00

7.3 Other income

Other income mainly comprises of 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 _506 crores as against _352 crores of previous year. This year, we have a gain on forex transactions and translations amounting to _210 crores against a gain of _48 crores in previous year.

7.4 Distribution of total income

7.5 Material costs

		(_ in crores)
Particulars	FY 2025-26	FY 2024-25
Material consumption	4,260	3,760
Changes in inventories of finished goods and work-in-progress	(244)	(83)
Net material consumption	4,016	3,677
Revenue from operations	10,388	9,198
% of consumption to revenue	38.66%	39.98%

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 changes in stocks is about 38.66% of revenue from operations during the year as compared to 39.98% of previous year.

7.6_Employee_benefits_expense

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

Employee benefit expense for the year is_1,474 crores against _1,210 crores for the previous year. Of this, remuneration to Whole-time Directors accounted to _224 crores during the year as against _198 crores of the previous year.

Employee cost for the year works out to about 13.53% as against 12.67% of total income earned for the respective years.

On introduction and notification of labour codes in place of 29 existing labour laws by the Government of India, past service cost of _74 crores in respect of terminal benefits Gratuity has been recognised and shown under exceptional items for the current financial year. volume of work

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, Insurance, sales commission, environment management expenses and CSR expenses.

Other expenses for the year accounted for _1,484 crores as against _1,332 crores for the previous year. Other expenses account for 13.62% of total income for the year against 13.95% for the previous year.

7.8 Capital expenditure

During the year, property, plant and equipment (PPE) and intangible assets valuing _1,544 crores have been capitalised. Total capital WIP at all locations as at the year end is _2,113 crores against _1,022 crores as at the previous year end.

7.9 Non-current investments

Non-current investments as at the end of the current year amounted to _76 crores as against _72 crores for previous year.

7.10 Current Income-tax assets

Income tax assets as at the end of the year is _14 crores, against the previous year of _12 crores, and there is a current tax liability of _11 crores for the current financial year.

7.11 Other Non-current Assets

Other non-current assets at the year end of _143 crores includes advances for capex programs of _134 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, 2026	As on March 31, 2025
Raw materials	1,423	1,022
Work-in-progress	1,969	1,698
Finished goods	121	148
Packing materials	13	9
Stores and spares	185	156
Total	3,711	3,033

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 multi-purpose plants for producing other products; -in- and hence carries significant 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 non-moving items have been fully provided for.

7.13 Trade receivables

(_ in crores)

Particulars	As on March 31, 2026	As on March 31, 2025
Outstanding receivables	3,230	2,856
Less: Allowances for doubtful debts	2	1
Net receivables	3,228	2,855
Receivables (days)	113	113

Trade receivables at the year end came to _3,228 crores as against _2,855 crores previous year. Trade receivables include an amount of _438 crores as against _300 crores of previous year due from subsidiaries.

7.14 Other current assets

(_ in crores)

Particulars	As on March 31, 2026	As on March 31, 2025
Indirect taxes - Input tax credits	325	245
Prepaid expenses	24	34
Advances to suppliers	115	87
Contract assets	125	-
Others	113	1
Total	702	367

These assets are monitored and reviewed periodically.

7.15_Other_financial_assets

Other financial assets at the year end are _75 crores against _78 crores of previous 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, 2026 amounted to _469 crores as against _509 crores as of March 31, 2025.

7.17 Trade payables

Trade payables for raw materials/services amounted to _1,190 crores as at the end of the year as against _880 crores as at the end of previous year. Of the trade payables, an amount of _62 crores (previous year: _37 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_liabilities

Otherfinancial liabilities as at the year end is _916 crores which includes refundable advance from customers of _456 crores, employee benefits payable of_312 crores, capital creditors of _145 crores and other financial liabilities of _3 crores.

7.19 Other liabilities

Other liabilities as at the year end is _516 crores includes deferred revenues of _402 crores, which will be recognised as revenue from operations over the estimated period of contract, customer advance of _83 crores, Statutory dues payable _17 crores, other liabilities of _2 crores and Liability for CSR activities of

_12 crores which will be discharged within the statutory timelines specified in the Companies Act, 2013.

7.20_Key_financial_ratios

Particulars	March 31, 2026	March 31, 2025
Return on net worth / equity (%)	16.50%	15.57%
Return on capital employed (%)	21.23%	19.88%
Basic EPS (_)	98.19	83.20
Trade receivables turnover	3.28	3.59
Inventory turnover	3.04	3.05
Current ratio	5.47	7.03
Debt equity ratio	#	#
Operating profit margin (%)	37.74%	36.21%
Net profit margin (%)	23.93%	23.13%
# There is no net debt outstanding as on March 31, 2026 and as on 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 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 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 and contract assets.

(v) Inventory turnover

Inventory 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. its capital is being It is calculated by dividing the profit by total income for the year.

7.21 Cautionary Statement capital employed i.e., Tangible

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 forward-looking statements may include but are not limited to statements about our business and expected operational and financial performance, business outlook, demand in the global markets, our strategy, etc. These forward-looking statements involve several risks and uncertainties, many of which are beyond our control. Factors that could cause our actual results to differ materially from those described in our forward-looking statements include, but are not limited to, changes in local and global economic conditions, geo-political issues, changes in government regulations, manufacturing or quality control outcomes, regulatory compliances, change in market dynamics, after tax for the year currency fluctuations, legal and cyber security issues, exposure to various market risks, human resource risks, etc. There may be other factors not presently known to us or which we currently consider to be immaterial that could cause our actual results to differ materially from those projected in any forward-looking statement we make. We do not undertake any obligation to update or revise our forward-looking statements except as required by applicable law or regulation.