Earum Pharmaceuticals Ltd Management Discussions.


Although the global economy is emerging from the collapse triggered by the pandemic, the recovery is projected to be subdued.Global economic output is expected to expand 4% in 2020-21 but still remain over 5% below its pre-pandemic trend. Moreover, thereis a material risk of setbacks in containing the pandemic or other adverse events derailing the recovery. Growth in emerging marketand developing economies (EMDEs) is envisioned to firm upto 5% in 2020-21, but EMDE output is also expected to remain well belowits pre-pandemic projection. The pandemic is likely to steepen the long-expected slowdown in potential growth over the next decade,undermining prospects. The heightened level of uncertainty around the global outlook highlights policy makers role in raising thelikelihood of better growth outcomes while warding off worse ones.

Global growth is projected to moderate to 3.8% in 2021-22, weighed down by the pandemics lasting damage to potential growth. Inparticular, the impact of the pandemic on investment and human capital is expected to erode growth prospects in EMDEs and setback key development goals. The global recovery, which has been dampened in the near term by a resurgence of COVID-19 cases,is expected to strengthen over the forecast horizon as confidence; consumption and trade gradually improve, supported by ongoingvaccination.

Downside risks to this baseline predominate, including the possibility of a further increase in the spread of the virus, delays in vaccineprocurement and distribution, more severe and longer-lasting effects on potential output from the pandemic, and financial stresstriggered by high debt levels and weak growth. Global co-operation will be key in addressing many of these challenges.


COVID-19 virus posed the most formidable economic challenge to India and to the world in a century. The imperative of flatteningthe disease curve was entwined with the livelihood cost of an imminent recession, which emanated from the restrictions in economicactivities from the lockdown required to contain the pandemic. This inherent trade-off led to the policy dilemma of lives versuslivelihoods.

Governments and central banks across the world deployed a range of policy tools to support their economies, such as loweringkey policy rates, quantitative easing measures, loan guarantees, cash transfers and fiscal stimulus measures. India recognized thedisruptive impact of the pandemic and charted its own unique path, amid dismal projections by several international institutions, withreference to the outbreak in the country given its huge population, high population density and an overburdened health infrastructure.

A favorable monetary policy ensured abundant liquidity and immediate relief to debtors via temporary moratoria, while uncloggingmonetary policy transmission. As anticipated, while the lockdown resulted in a 23.9% contraction in GDP in Q1 2020-21, the recoveryhas been a V-shaped one as seen in the 7.5% decline in Q2 and the recovery across all key economic indicators. Starting July, aresilient V-shaped recovery is underway, as demonstrated by the recovery in GDP growth in Q2 after the sharp decline in Q1, asustained resurgence in high frequency indicators, such as power demand, E-way bills, GST

collection, and steel consumption, amongothers. The reignited inter- and intra-state movement and record-high monthly GST collections have marked the unlocking of industrialand commercial activity.


The global pharmaceutical market is expected to have slowed down marginally during the year 2020 and valued at around US$ 1.21 trillion. The year was impacted due to the lockdown and social distancing norms imposed by various countries and economic slowdown across countries owing to the COVID-19 outbreak and the measures to contain it. The market is expected to grow at a CAGR of 8.5% from 2021 through 2023 and reach a size of US$ 1.74 trillion. Technological advances, changes in lifestyles, new methods for drug discovery, large pool of undiagnosed population, and an increase in pharmaceutical drug usage due to the COVID-19 pandemic is expected to drive the growth of the market (Source: Industry Estimates).

US remained the largest pharmaceutical market during the year accounting for over 40% share of the global pharmaceutical sales. The US is expected to retain its leading position in the global pharmaceuticals market with a market share in excess of 40% in 2023. Growth of the US pharmaceutical market will be fuelled by the growing and ageing population in U.S. Apart from ageing and rising population, the improvements in purchasing power will drive the growth of the US pharma market. Another aspect which is leading this growth is raising focus of pharmaceuticals companies to tap the rare and speciality diseases (Source: Industry Estimates).


Like other sectors, Indian Pharmaceuticals Market (IPM) was also impacted during the year on account of the pandemic and the measures taken by the Government to contain the spread as the market slowed down during the year, registering a growth of 2.1% viz-a-viz 9.7% registered during the previous financial year.

Overall, the market added Rs. 2,966 crores during the year against the addition of Rs. 12,719 crores last year.

The market declined by 5.9% during the first quarter of the fiscal. However, the market started to recover from the second quarter of the fiscal with various unlocking measures implemented by the government which in turn led to the increase in patient footfall and the doctors re-starting their practice resulting in increase in number of prescriptions.

The market in-fact grew by 5.9% during the second half of the FY21 after de-growing by 2.3% during the first half.


The year gone by was an unprecedented one for the entire humanity across the globe as the world continued to battle against an unprecedented healthcare crisis in the form of novel coronavirus disease which emerged from the beginning of the calendar year 2020, spread rapidly across the globe and wreaked havoc forcing many countries to go into the lockdown. The Company began the year on a quiet note as the country was under lockdown at the start of the year which in turn impacted the business in India and the emerging markets during the initial days of the lockdown.

To counter the challenges posed by the pandemic, the Company implemented a business continuity plan in the light of events unfolding in the external environment to ensure that the operations continue right through the pandemic situation with minimal interruption. The manufacturing facilities of the Company were running at reasonable capacities even during the lock-down since pharmaceutical products are classified as essential commodities. The Company implemented several preventive and corrective measures across all workplaces in the form of enhanced safety requirements, physical distancing at work places, mandated use of protective gears and remote working across the locations to ensure the safety of the employees. The Company could fulfill the demand of customers across the globe with the collaborative efforts of various functions despite the logistical challenges.

Particulars Year Ended 31.03.2021 Year Ended 31.03.2020
Revenue 4108.37 5510.88
Other Income 893.20 227.30
Total Income 5001.57 5738.18
Total Expenditure 4977.51 5483.7
Profit before Depreciation & Tax 24.06 254.48
Less: Depreciation 12.30 (9.97)
Profit/ (Loss) before Tax 11.76 244.51
Less: Current Tax (2.94) (62.98)
Less: Deferred Tax - -
Profit/ (Loss) after Tax 8.82 181.53
EPS (Basic) 0.14 2.94
EPS (Diluted) 0.14 2.94


Sr. No. Particulars

Ratio for Financial Year

2020-21 2019-20
1. Debtors Turnover Ratio
Formula: Debtors Turnover Ration= Net Credit Sales/Average Account Receivable 2.97 Times 3.96 times
Definition: The Debtors Turnover Ratio also called as Receivables Turnover Ratio shows how quickly the credit sales are converted into the cash. This ratio measures the efficiency of a firm in managing and collecting the credit issued to the customers.
2. Inventory Turnover Ratio
3.85 times 3.25 times
Formula: Inventory Turnover= Sales/Inventory = 94 Days =112 Days
Definition: Inventory turnover is a ratio showing how many times a company has sold and replaced inventory during a given period. A company can then divide the days in the period by the inventory turnover formula to calculate the days it takes to sell the inventory on hand.
3. Interest Coverage Ratio
Formula: Interest Coverage Ratio= EBIT /Interest Expense
Definition: The interest coverage ratio measures how many times a company can cover its current interest payment with its available earnings. The ratio is calculated by dividing a companys earnings before interest and taxes (EBIT) by the companys interest expenses for the same period. 1.13 times 3.53 times
4. Current Ratio
Formula: Current Ratio=Current Assets/ Current Liability
Definition: The current ratio is a liquidity ratio that measures whether a firm has enough resources to meet its short-term obligations. It compares a firms current assets to its current liabilities, and is expressed as follows: The current ratio is an indication of a firms liquidity. 2.46 times 1.34 times
5. Debt Equity Ratio
Formula: Debt Equity Ratio = Debt/Total Equity
Definition: The debt-to-equity ratio is a financial ratio indicating the relative proportion of shareholders equity and debt used to finance a companys assets. Closely related to leveraging, the ratio is also known as risk, gearing or leverage. 1.61times 2.64times
6. Operating Profit Margin Ratio
Operating profit margin = *Operating income/ Total revenue
*Operating Income excluding Exceptional Item Operating profit margin = **Operating income/ Total revenue
**Operating Income including Exceptional Item 0.0023 times 0.43 times
Definition: In business, operating margin—also known as operating income margin, operating profit margin, EBIT margin and return on sales —is the ratio of operating income to net sales, usually presented in percent. Net profit measures the profitability of ventures after accounting for all costs.
7. Net Profit Margin Ratio
Formula: Net Profit Margin= Net Profit/ Sales
Definition: The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining profit after all costs of production, administration, and financing have been deducted from sales, and income taxes recognized. 0.002 times 0.03 times
8. Return on Net Worth Ratio
Formula: Net Income/Shareholders Equity 0.011 times 0.23 times
Definition: The return on Net Worth is a measure of the profitability of a business in relation to the equity.


1. Strengths

S Strong R&D skillsets to develop technologically complex products in the generic and specialty space

S Ability to drive growth and profitabilitythrough a pragmatic mix of organic andinorganic initiatives

S Ability to supply high-quality productsat affordable prices

2. Threats and Weaknesses

S The outbreak of the COVID-19 pandemic across the world and subsequent disruption in economic activities is likely to impact GDP across countries and may indirectly also impact pharmaceutical consumption

S Governments across the world try to control their healthcare budgets, which may lead to government-mandated price controls on pharmaceutical products

S The specialty initiative entails high upfront investments for long-term benefits, thus impacting short-term profitability

3. Opportunities

S Favorable macroeconomic parametersfor India and emerging markets are likelyto ensure reasonable volume growth forpharmaceutical products in these markets S Contribution of specialty products is expected to increase in developed markets over medium to long-term

S Growing penetration of generics in Japan and opening of the China market, present a good long-term opportunity for Indian companies


The Companys policies and procedures take into accountthe design, implementation and maintenance of adequateinternal financial controls, keeping in view the size and natureof the business. The system ensures adherence to accountingstandards, compliance to various statutes, company policies andprocedures and effective usage of resources and safeguarding ofassets. An audit team comprising of both internal and externalauditors, closely monitors the control systems and processes inthe organization and any deviation from expected performanceis reported. Prompt action is initiated to restore normalcy. It isalso ensured that expenses are kept within budgeted levels atall times. Strict adherence to all the environment protectionnorms is ensured. Reporting of the Audit team is periodicallyreviewed by the Audit Committee.

Some Key Features of the Companys internal controls system are:

• The Company uses ERP system to record data for accounting, consolidation and management Information purposes and connects to different locations for efficient exchange of Information.

• Preparation & monitoring of Annual Budgets through monthly review for all operating & service functions.

• Adequate documentation of Policies & Guidelines.

• The Company has a well-defined delegation of power with authority limits for approving revenue & capex expenditure which is reviewed and suitably amended on an annual basis.

• The Company has a compliance management system.

• Internal Audit is carried out in accordance with auditing standards to review design effectiveness of internal control system & procedures to manage risks, operation of monitoring control, compliance with relevant policies & procedure and recommend improvement In processes and procedure.


The Company believes that the key to excellent businessresults is an excellent talent pool. It values its human capitaland provides them ample opportunities to grow. It ensuresa safe, conducive and productive work environment. TheCompany provides regular skill and personnel developmenttraining to enhance employee productivity. HR policies nurturea work culture that leads to employee satisfaction, unflaggingmotivation, and high retention rate. Across construction sites,essential safety measures are in place to ensure complete safetyand health of the employees. The Company boasts of havingone of the lowest incidents of work-related accidents (majoror minor) across all its project sites. The Company periodicallyundertakes a host of skill development and safety drill programs.Proficient and competent work culture is the essence of theorganization, inspired by strong corporate ethos. The Companyhas formulated human rights policies for construction workersto ensure fair wage distribution as per industry standards. In2020-21, the Company ensured a healthy relationship with itsworkforce.


This report contains statements that may be "forward looking"including, but without limitation, statements relating to the implementation of strategic initiatives, and other statementsrelating to Companys future business developmentsand economic performance. While these forward looking statements indicate our assessment and future expectationsconcerning the development of our business, a number ofrisks, uncertainties and other unknown factors could causeactual developments and results to differ materially from ourexpectations. These factors include, but are not limited to,general market, macroeconomic, governmental and regulatorytrends, movements in currency exchange and interest rates,competitive pressures, technological developments, changesin the financial conditions of third parties dealing with us,legislative developments, and other key factors that could affectour business and financial performance. Company undertakesno obligation to publicly revise any forward looking statementsto reflect future/likely events or circumstances.