Fabino Life Sciences Ltd Management Discussions

1. GLOBAL ECONOMY REVIEW:

The world population has tripled since the 1950s and continues to increase. Populous middle-income countries account for the lions share of the growth in world population between 2010 and 2025. And if the current trend continues, the majority of the next billion will be born in low- and middle-income countries. With a population of 1.39 billion in 2021, India is the second-most populous country in the world. The population is estimated to grow at a CAGR of 0.9% from 2022 to 2026, replacing China as the most populous country. African countries are forecasted to witness a CAGR of 2-4% between 2022 and 2027, where the prevalence of infectious diseases is high. It is expected that Asia and Africa will witness the addition of 600 million people in the current decade.

Simultaneously, with a growing population and increasing life expectancy, there is also a growing burden of the aging population with higher healthcare needs. The aging of the population increases the prevalence of acute and chronic illnesses and drives pharmaceutical consumption. As per United Nations, the global number of people aged 65 years and above is expected to double in 30 years, increasing to 1.5 billion by 2050. This population group is witnessing a faster growth rate than younger age groups globally, resulting in 16% of the total population in 2050 as opposed to 8% in 2016.

Economic prosperity is also linked to urbanization to a certain extent. According to The World Bank, in 2021, nearly 57% of the worlds population lived in cities, up from 54% in 2016. This growth in urbanization is expected to continue. By 2050, with the urban population, more than doubling its current size, nearly 7 of 10 people (~70%) will live in cities. However, urbanization also brings healthcare challenges such as pollution-related respiratory problems, sedentary lifestyle-related chronic diseases, and high population density-associated infectious disease spread. It will lead to added healthcare and pharmaceutical expenditure. It is also rejected in the growth in global healthcare expenditure, which has risen from 9.3% of GDP in 2013 to 9.8% of GDP in 2019

In early 2023, the global economy showed positive signs of stabilisation, despite increased financial market volatility, which posed a risk of market repricing. Central banks responded promptly by tightening policies to curb inflation, resulting in strong liquidity and capital positions for banks. The global economy is gradually rebounding from disruptions in supply chains, energy, and food supply caused by the Russia-Ukraine conflict. The success of monetary policies implemented by central banks worldwide is a positive indicator. Nonetheless, there are some uncertainties in the economic outlook due to unexpected shocks.

According to the World Bank s projections, by the end of 2024, GDP levels in emerging and developing economies will be roughly 6% below the levels expected before the COVID-19 pandemic. Although global inflation is expected to moderate, it will remain above pre-pandemic levels. This situation presents an opportunity to promote sustainable growth and invest in people to help these economies achieve long-term growth and development.

As per the World Bank s latest India Development Report, India remains one of the fastest growing major economies in the world, despite challenging global environment. As per the National Statistical Office

(NSO), the country s real GDP growth during FY23 is estimated at 7.2%, as compared to 9.1% in FY22.

The recent economic growth in India can be attributed to the resurgence of private consumption, which has replaced export stimulus as the primary driver of growth. With near-universal vaccination coverage, consumer sentiment has improved, resulting in a surge in spending on contact-based services such as restaurants, hotels, shopping malls, and cinemas. Production activity and capacity utilisation growth have been observed across various sectors.

2. INDIA S ECONOMIC REVIEW:

As per the World Bank s latest India Development Report, India remains one of the fastest growing major economies in the world, despite challenging global environment. As per the National Statistical Office

(NSO), the country s real GDP growth during FY23 is estimated at 7.2%, as compared to 9.1% in FY22.

The recent economic growth in India can be attributed to the resurgence of private consumption, which has replaced export stimulus as the primary driver of growth. With near-universal vaccination coverage, consumer sentiment has improved, resulting in a surge in spending on contact-based services such as restaurants, hotels, shopping malls, and cinemas. Production activity and capacity utilisation growth have been observed across various sectors.

The Indian pharmaceutical industry has become a thriving sector, producing a range of medications and vaccines at affordable prices. Known for its expertise in generic drugs, biosimilars, and biologics, the industry has grown at a CAGR of 9.43% over the past nine years, making it the third-largest pharmaceutical producer by volume. The market is comprised of segments such as contract research and manufacturing, bulk drugs, and over-the-counter medications. The Pharma sector currently contributes to around 1.72% of the country s GDP. India has a significant presence in the global API market, with 500

Indian API producers accounting for around 8% of the market. India is also a major player in the global exports of generic drugs, meeting around 20% of the demand. The country has the largest number of pharmaceutical manufacturing facilities that comply with USFDA standards outside the US. The Indian pharmaceutical market is predicted to reach US$65 billion by 2024 and US$130 billion by 2030, with Indian pharma companies having a significant share in the US and EU prescription market. The government is committed to improving healthcare, with an estimated expenditure of over 2% of the country s GDP on healthcare in FY22. The government is also aiming to increase the penetration of health insurance, which is likely to boost the industry s growth further.

3. OVERVIEW OF COMPANY

Fabino is the Brand under which we market all of our pharmaceutical products including Tablets, Ointments Syrups etc for various medical treatments in our allopathic and certain herbal range.

Keepshine is the Brand under which we market our Shampooand Hair Maintenance products.

4. INDUSTRY STRUCTURE AND DEVELOPMENTS

Overview of Global Industry:

As economies and per capita spending power grows, demand for quality healthcare increases, healthcare infrastructure & insurance mechanisms expand, and COVID-19-induced health-oriented behaviours persist- the spending on pharmaceutical products can also be expected to grow. Aside from economic and behavioural changes, the growing burden of aging populations, chronic diseases, and the discovery of new drugs &disorders will also drive the demand for medicines. In addition, to innovation and growing disease burden, exclusivity losses leading to the introduction of low-cost generics in the market, are making drugs more affordable for the larger population, and improved healthcare services with better accessibility are leading to increased treatment rates, thus cumulatively propelling the pharma market growth

The overall pharmaceutical spending grew from USD 1,070 billion in 2018 to USD 1,287 billion in 2021 at a CAGR of 6.3%. During the pandemic, there were minor aberrations mainly due to supply chain disruptions and challenges in accessing healthcare facilities. However, the negative impact was offset by increased spending on COVID-19 therapeutics, keeping the market growth upward. Beyond 2021, the global pharma market is expected to grow at a CAGR of 4.7% till 2027, reaching USD 1,695 billion.

Overview & Developments of the Indian pharmaceutical Industry

The Indian Pharmaceutical industry is currently ranked third in pharmaceutical production by volume after evolving over me into a thriving industry growing at a CAGR of 9.43% since the past nine years. India has highest number of pharmaceutical manufacturing facilities that comply with the US Food and Drug Administration (USFDA) and has 500 API producers that make for around 8% of the worldwide API market.

Indian pharmaceutical sector supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK. The domestic pharmaceutical industry includes a network of 3,000 drug companies and ~10,500 manufacturing units. India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers with a potential to steer the industry ahead to greater heights.

Indian pharmaceutical industry is known for its generic medicines and low-cost vaccines globally. Transformed over the years as a vibrant sector, presently Indian Pharma ranks third in pharmaceutical production by volume. The Pharmaceutical industry in India is the third largest in the world in terms of volume and 14th largest in terms of value. The pharma sector currently contributes to around 1.72% of the countrys GDP.

Market size of India pharmaceuticals industry is expected to reach US$ 65 billion by 2024, ~US$ 130 billion by 2030 and US$ 450 billion market by 2047. According to the government data, the Indian pharmaceutical industry is worth approximately US$ 50 billion with over US$ 25 billion of the value coming from exports. About 20% of the global exports in generic drugs are met by India.

The pharmaceutical industry in India is a significant part of the nations foreign trade and offers lucrative potential for investors. Millions of people around the world receive affordable and inexpensive generic medications from India, which also runs a sizable number of plants that adhere to Good Manufacturing Process (GMP) standards set by the World Health Organization (WHO) and the United States Food and Drug Administration (USFDA). The Indian Government has taken many steps to reduce costs and bring down healthcare expenses. The National Health Protection Scheme, which aims to offer universal healthcare, the ageing population, the rise in chronic diseases, and other government programmes, including the opening of pharmacies that offer inexpensive generic medications, should all contribute to boost the Indian pharmaceutical industry. Some of the initiatives taken by the Government to promote the pharmaceutical sector in India are; 1) The government earmarked Rs. 1,000 crore (US$ 120 million) for the promotion of bulk drug parks for FY25, a significant increase from the previous year; 2) The total outlay for the development of the pharmaceutical industry for FY25 was increased to Rs. 1,300 crore (US$ 156.5 million) while the budget for the promotion of medical device parks was raised to Rs. 150 crore (US$ 18 million) for FY25.; 3) The allocation for assistance to medical device clusters for common facilities (AMD-CF) was pegged at Rs. 40 crore (US$ 4.1 million) for FY25.; 4) The outlay for the Jan Aushadhi scheme, the initiative to provide affordable generic medicines in the country, was hiked to Rs. 284.5 crore (US$ 34 million) for FY25, up from Rs. 110 crore (US$ 13 million) in the revised estimate for FY24

5. OPPORTUNITIES AND THREATS

Opportunities of Pharmaceutical Industry

1. Government support: The Indian government has also undertaken several policy initiatives to boost the sector. Some notable initiatives include: The new National List of Essential Medicines was released in September 2022 after a gap of seven years, with the intent to promote the rational use of medicines based on cost, safety and efficacy. It is also the factor for which the industry is ourishing to this day. The laws and taxes are often in their favour.

2. New Sector: To provide a larger range of services, our has started its new division with manufacturing units for herbal and Ayurvedic products, with aim towards offering top-quality products which undergo numerous tests before they reach consumers. We ve made our products such that they are easily accessible and affordable for everyone.

3. Growing space: This industry is still in its growing phase, according to the Life Cycle of an Industry. So, it can still go a long way and spread its wings further apart. So, it can still take control over the market, given the right marketing and advertising.

4. Foreign investment: Per Indias Consolidated FDI Policy, foreign direct investment in the pharmaceutical sector in greenfield (new) projects is permitted up to 100% without the approval of the Department of Pharmaceuticals (the "DoP"). Separately, FDI up to 100% is permitted for the manufacturing of medical devices for both Greenfield and Brownfield projects without the approval of the DoP

Threats of Pharmaceutical Industry

1. Demand for a skilled workforce: The pharmaceutical industry requires a workforce that has significant knowledge, experience, and skills. Training the workforce helps to acquire the necessary skills to ensure, enhance and improve their participation in their daily tasks. This will also help to ll in any skills gaps that may be observed in the workforce

2. Supply chain disruption: Supply chains have witnessed an unprecedented disruption all around the world, and this represents one of the major challenges facing the pharmaceutical industry. Pharmaceutical industry have faced supply chain disruptions, Many pharma companies are looking to supply chain innovations and circular supply chain models to tackle these challenges and build business resilience.

3. Regulatory compliance: Pharmaceutical companies must comply with various regulations, from clinical trial requirements to manufacturing and distribution standards. Keeping up with these regulations can be daunting, and failure to comply can result in costly fines and reputational damage.

4. R&D Costs: Developing new drugs and treatments is an expensive and time-consuming process. With rising R&D costs and increasing pressure to deliver results, pharmaceutical companies must be able to streamline their research processes and optimize their resources.

5. Pricing pressure: Pharmaceutical companies face increasing pressure to control the cost of their products, both from government regulators and consumers. This pressure can lead to lower profit margins and increased competition, making it harder for companies to invest in R&D and bring new products to market.

6. ECONOMIC OUTLOOK

The global economy s baseline scenario indicates a slight decrease in output growth from 3.4% in 2022 to 2.8% in 2023, followed by a rise to 3% in 2024. Although these estimates are lower than expected due to adverse shocks in early 2022, there are still signs of positive growth.

According to the IMF, advanced economies are expected to experience a decrease in growth by half, slowing down to 1.3% in 2023 before increasing to 1.4% in 2024. Almost 90% of these economies are projected to experience a decline in growth in 2023. Conversely, emerging markets and developing economies are predicted to experience more robust growth than advanced economies, with a projected growth rate of 3.9% in 2023 and 4.2% in 2024. However, these estimates may vary across regions. Low-income developing countries are expected to grow by an average of 5.1% over 2023-24, indicating an optimistic outlook.

However, the IMF cautions that the growth in per capita income of low-income developing countries may be lower than that of middle-income economies, which could impede progress towards achieving equal living standards among all countries.

India s economy has received a boost from various factors, such as the presence of a young and tech-savvy population and a strong emphasis on innovation. Despite facing headwinds from global geopolitical events, the economy is anticipated to grow 6.3% for the current fiscal year FY24, as per the World Bank. The government has taken steps to improve healthcare access, with initiatives like the Ayushman Bharat programme, which aims to provide free healthcare insurance coverage to more than 500 million people, and the National Health Stack, which aims to create a unified digital healthcare system across India. These measures are expected to fuel the economy s growth and contribute to better health outcomes for the population.

According to IQVIA, the pharmerging markets are expected to grow 5-8% in spending through 2027. On the other hand, lower-income countries are expected to experience a CAGR of 4.5-7.5% in spending growth, with projected spending of US$29-33 billion by 2027.

7. RISKS AND CONCERN

1. Regulations and directives: Pharma manufacturing is already highly regulated, with manufacturers continually refining their processes to overcome substantial compliance obligations and costs. Unfortunately, compliance will become even more challenging in the coming years. The U.S. Food and Drug Administration (FDA) recently issued pharma industry guidance documents that impact how organizations collect, manage and submit quality data.

2. Cyber security and data protection: Cyber security threats are a major concern for nearly every industry, but according to IBMs latest report, pharma ranks among the top three industry verticals for the highest average cost of a data breach. In 2023, the global average cost of a data breach in the pharma industry was an eyewatering $4.82 million.

3. Financial risks: These risks are pertaining to effective and efficient utilisation of the financial resources like currency fluctuations, credit risks, liquidity risks, etc. These can impact financial performance of the company like revenue, profitability, and liquidity etc. Ownership of these risks would be with the CFO.

4. Operational risk: These risks are pertaining to business operations like production capacity, quality assurance, customer demand, availability of materials, human safety etc. which can impact on business. Ownership of these risks would be with Operations team

8. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company has an Internal Control System commensurate with its requirement and size of business to ensure that the assets and interest of the company assets are safeguarded. The adequacy and effectiveness of the internal control across various activities, as well as compliance with laid down system and policies are comprehensively and frequently monitored by your company s management at all the levels of the organization. The company has established well defined policies and processes across the organization covering all major activities including authority for approvals. In all cases where monetary decisions are involved, various limits and authorities are in place.

The Company s internal controls are structured in a manner that ensure reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use or losses, executing transactions with proper authorization and ensuring compliance of corporate policies, laws and accounting standards.

With a strong monitoring system in place, the Company has an Audit Committee, the details of which have been provided in the Corporate Governance Report. The Audit Committee of the Board of Directors review the existing audit procedures and internal systems of control on an ongoing basis keeping in mind the organization s requirements, growth prospects and ever evolving business environment. They also review the internal audit findings and recommendations and ensure that corrective measures are implemented. Suggestions for improvement are considered and the Audit Committee follows up on the implementation of corrective actions.

9. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

KEY FINANCIAL RATIOS:

(Disclosure of the following ratio changed 25% or more as compared to the previous year)

	Ratio
Sr. No. Ratio Analysis	31-Mar-24	31-Mar-23	Difference	Reasons for Differences, if Difference is More than 25%.
1 Net Profit Ratio	0.01	0.00	145.26%	Decreased due to decrease in revenue from operation
2 Return on Capital employed	0.02	0.00	354.56%	Due to increase in capital cost
3 Return on Investment	-	-	-	-
4 Current Ratio	2.05	10.73	(80.94%)	-
5 Debt Equity Ratio	0.20	0.10	103.61%	Increase due to repayment of debts
6 Inventory Turnover	4.46	1.32	238.82%	Due to High Inventories

Reasons for Differences, if Difference is More than 25% - The company shall provide a commentary explaining any change (whether positive or negative) in the ratio by more than 25% compared to the ratio of preceding year.

Operation of the company:

Our teams are engaged in manufacturing, marketing, trading and Packing of pharmaceutical and other wellness focused consumer products, Our core business is marketing of Pharmaceutical formulation & products in Domestic market through own distribution network and Sales force under own brand name, Getting our Ayurvedic formulations manufactured through Loan Licensing facilities, Packing, Labeling etc. We export wellness and FMCG products like Coffee, Malt powder, Protein powder, Hair shampoo which are marketed by our company.

We aim at tapping strong distribution network in medical or pharmaceutical field in the future. Further, Our Promoter has obtained registrations and patents for various products. Some of these products are manufactured by us in house at our processing centre in Sonipat Haryana, some of our products are manufactured at our contract manufacturing facility in Haryana and other product range is manufactured by third party manufacturers on made to order basis as per our instructions.

Review Of Financial Performance

Standalone

The Total Income of the Company stood at Rs. 608.41 lakhs for the year ended March 31, 2024 as against Rs. 338.26 lakhs in the previous year. The Company made a net profit (after tax) of Rs 4.76 lakhs for the year ended March 31, 2024 as compared to the Rs 1.08 lakhs in the previous year.

Consolidated

The Consolidated Total Income of the Company stood at Rs. 2109.33 lakhs for the year ended March 31, 2024 as against Rs. 338.26 lakhs in the previous year. Consolidated net profit (after tax) of Rs 3.58 lakh for the year ended March 31, 2024 as compared to the Rs 1.08 lakhs in the previous year.

10. HUMAN RESOURCES

Fabino Enterprises Limited is part of a dynamic and progressive group that actively fosters a challenging work environment and encourages Entrepreneurship. With trust being the critical part of our business belief, we lay a strong emphasis on integrity, teamwork, innovation, performance and partnership. Our professional staff with diverse backgrounds brings varied talent, knowledge and experience to the Group, helping our businesses to remain competitive, achieve greater success and newer milestones.

Our management team and board of directors are resolved to do what, we believe, is best for our shareholders, clients and associates. We are the team of 11 people.

At Fabino Enterprises Limited we understand that internal selection and succession is very critical for the long- term sustenance of the business as it ensures business continuity, preserves corporate culture, enhances knowledge capital and fuels the ambitions of the Company s talent force leading to better retention. We ensure that our internal talent is groomed for the next level. In order to create value for our stakeholders we continue to invest in technology and adopt fair HR practices to empower our people creating a supportive environment. We continue to uphold high standards of governance with respect to all statutory compliance and regulatory requirements.

11. OUTLOOK OF THE COMPANY

We believe we are well-poised to capitalise on the healthy prospects of the industry and further solidify our positionin the market. Our strong brand equity, disciplined investment philosophy and robust process, customer-centric approach, expansive reach, and healthy financials should facilitate our future growth.

Our strategic priorities include:

Increase in Order-taking Appetite by augmenting our working capital base

Our business operations are working capital intensive. In order to effectively expand our products portfolio, Business arenas and also increase in the number of verticals and explore various geographical locations, along with the existing facilities we need to have access to a larger amount of liquid funds and sufficient working capital.

Geographical Diversification

We cater to both, the domestic as well as international markets. We aim to further develop our domestic sales networks in two ways: firstly nurturing existing relationships with clients and secondly by creating new distribution channels in non-penetrated geographies considering various cities. We currently supply in the Haryana, Delhi, parts of Punjab, Himachal Pradesh, Eastern Uttar Pradesh, Orissa, and Jharkhand, parts of West Bengal, Andhra Pradesh and Nepal.

Digital Marketing

We actively use social media and e-commerce for customer engagement, service provision and interaction with our vendors.

12. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The company is operating in only one segment. Therefore there is no requirement of Segment-wise Reporting.

13. SAFE HARBOUR

This report describing our activities, projections and expectations for the future, may contain certain forward looking statements within the meaning of applicable laws and regulations. The actual results of business may differ materially from those expressed or implied due to various risk factors and uncertainties. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised. The Company assumes no responsibility to publicly amend, modify or revise forward-looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Company s operations include determination of tariff and such other charges and levies by the regulatory authority, changes in government regulations, tax laws, economic developments within the country and such other factors globally.

The financial statement are prepared under historical cost convention, on accrual basis of accounting, and in accordance with the provisions of the Companies Act, 2013 (the ?Act ) and comply with the

Accounting Standards notified under Section 133 of the Act. The management of Fabino Enterprises Limited has used estimates and judgements relating to the financial statement on a prudent and reasonable basis, in order that the financial statement reflects in a true and fair manner, the profit for the year.