Fredun Pharmaceuticals Limited – AR FY23 – MDA
Global Economy
In 2022, when the global economy was still recovering from the effects of the COVID-19
pandemic, the growth was significantly affected by geopolitical tensions. This impacted
the global supply chains which led to higher inflation, particularly in the developed
economies. To restore price stability, central banks hiked the interest rates. Certain
economies continue to witness inflationary pressures and it is expected that the impact on
growth, caused by the continued monetary tightening to control inflation, would peak in
2023. Moreover, the widespread banking sector stress, due to excessive increase in
interest rates, is expected to give way to restrictive credit conditions which will
further dampen activity. This is expected to cause a significant slowdown in growth in the
second part of 2023.
Therefore, the global growth is projected to slow down from 3.1% in 2022 to 2.1% in
2023, before reporting a tepid recovery in 2024, to 2.4%.
Sources: World Banks Global Economic Prospects, June 2023
Indian Economy
The real GDP of India increased by 7.0% in FY2023, against 8.7% in FY2022. At the
beginning of FY2023, several projections indicated that India was well-positioned for a
strong growth and would resume its pre-pandemic growth trajectory. However, the growth was
impacted due to increase in inflation which was a result of geopolitical conflicts and
unfavourable weather conditions. To reduce inflationary pressures, the Indian government
banned food exports while RBI increased repo rates and reduced surplus liquidity in the
economy. This resulted in inflation falling back to RBIs targeted range in November 2022
after being above the RBIs upper tolerance target of 6% for over ten months.
The Indian GDP is predicted to increase by 6.5% in FY2024, primarily driven by private
consumption which would come at the back of recovery in rural demand and growing
disposable income in the hands of increasing upper middle-class population.
Source: Economic Survey 2022-2023; RBI Bulletin April 2023, May 2023
Global Pharmaceutical Industry
According to IQVIA, the global medicine market is anticipated to grow from US$ ~1.5
trillion in 2022 to US$ 1.9 trillion in 2027, excluding the expenditures on COVID-19
vaccines and therapeutics, reporting a growth of 3-6% CAGR between 2023-27. However,
global spending, including COVID-19 vaccines and therapeutics, is expected to exceed this
outlook by US$ 497 billion in 2027.
Global medicine market size and growth (excluding COVID-19 vaccines & therapeutics)
The U.S. medication market, already the largest in the world, is anticipated to
increase from US$ 629 billion in 2022 to US$ 763 billion by 2027; growing at a CAGR of
2.5-5.5% during the forecasted period. The growth will be driven by increased usage of
existing protected branded products.
Over the next five years, it is anticipated that spending on medicines in Europes top
five markets—France, Germany, Italy, Spain, and the United Kingdom—will increase
by US$ 59 billion to reach US$ 263 billion. Similar to the
U.S., it is anticipated that protected branded medications will drive growth in these
regions, As a worldwide innovation powerhouse, the Asia-Pacific (APAC) regions medication
spending is expected to increase at CAGR of 5.5-8.5% between 2023-27 and touch US$ 108
billion by 2027. The region will be dominated by China, Japan, and Korea in terms of the
regions total innovative pipeline assets. APAC Region, in comparison to the United States
and the European Union, has distinct industry dynamics and a highly competitive
environment because of its complex and diversified regulatory environment and different
pharmaceutical industry infrastructures in every country. This ends up impacting
innovation across countries. In China, the market is anticipated to increase from US$ 166
billion in 2022 to US$ 194 billion in 2027 while the rate of spending growth is
anticipated to slow down. It is anticipated that medical spending in Japan, the
thirdlargest market in the world, will remain steady at US$ 75 billion due to rising
spends towards protected innovator drugs offset by regulations that support a shift to
generics and annual price cuts.
APAC Regions emerging nations include India, Malaysia, Singapore, Thailand, and
Vietnam. Growth in these nations will be fuelled by rising population, large R&D
expenditures, a modernized manufacturing base, and the incidence of chronic diseases.
Source: The Global Use of Medicines 2023: Outlook to 2027, IQVIA Report; Asia-Pacific
Pharmaceutical Industry Outlook, 2023, Frost & Sullivan Report
Indian Pharmaceutical Industry
As per GoIs Department of Pharmaceuticals Annual Report 2022-23, Indias
pharmaceutical market stood at US$ 42 billion in FY2022 in terms of revenue. The country
continues to hold a dominant position as a global provider of generics, contributing up to
20% of the volume of the global supply. Manufacturing, which contributes 15% to 18% of GDP
in India, has emerged as one of the high-growth industries. India is the thirdlargest
volume manufacturer in the pharmaceutical industry and has the most FDA-compliant
manufacturing facilities outside of the US, with a 33% cheaper manufacturing cost than
other nations. According to ICRA, continued investments in R&D initiatives would
guarantee steady market growth and improvements in profit margins over the coming few
years. The nation anticipates a significant increase in domestic API output, including
high-value APIs, as a result of the Production Linked Incentive (PLI) Scheme.
On the regulatory side, as part of G20 presidency, the Indian government has laid down
plans to promote innovation and solutions in the field of digital health and strengthen
co-operation in the industry by ensuring availability and affordability of drugs. Besides
this, the Pharmaceuticals and Medical Devices Bureau of India (PMBI) has opened more than
9,000 Kendras (centers) since the launch of the Pradhan Mantri Bhartiya Janaushadhi
Pariyojana (PMBJP), providing 1,759 medicines and 280 surgical devices. They ended up
clocking a sales of US$ 105 million (INR 869 crores) in 2022 and expect that to increase
to US$ 145 million (INR 1,200 crores) by the end of 2023.
Source: Asia-Pacific Pharmaceutical Industry Outlook, 2023, Frost & Sullivan Report
Pet Care Industry
India is one of the fastest-growing pet care marketplaces in the world. The industry
was valued at US$ 508 million in 2022 and is expected to grow at a CAGR of 24% between
2023 and 2028. There is a growing trend toward pet adoption as evidenced by the increase
of pet families in recent years. This has been due to rise in the number of nuclear
families that has resulted in need for strong emotional connection from kids and elderly.
Dogs are among the most preferred pets in India and as per estimates, there are going
to be 31 million pet dogs by end of 2023. Cats are the second most popular owned by 20% of
pet owners. The perspective of the industry has changed from pet ownership to responsible
pet parenting, which has an impact on the duties of caregivers and the quality of life for
pets. With millennials treating their pets like children and seeing them as an extension
of their family, they have no problem allocating a sizeable percentage of their income to
the upkeep of their animals. This covers yearly vaccines, grooming, interactive therapy, a
balanced diet, and even pet get-togethers. With a market value of US$ 310 million, the pet
food segment is the largest in the pet care sector. Followed by pharmaceuticals for pets
at US$ 90 million and pet accessories at US$ 65 million.
Source: PetKeen, Statista
Nutraceuticals Industry
The demand for nutraceutical products in India has increased in recent years and
continues to thrive, resulting in a remarkable CAGR of 20% over the past three years. The
expansion is primarily being driven by increased awareness of health and wellbeing, a
growing middle class with rising incomes, and growing recognition of the benefits of
wellness supplements. By the end of 2025, projections show that Indias nutraceutical
business is anticipated to grow from US$ 4 billion to an astonishing US$ 18 billion.
Peoples awareness towards improvement of their lifestyles has increased during the
last three years. Additionally, thanks to digital technology and the expansion of D2C
(direct-to-consumer) and e-commerce channels, nutraceutical firms are able to offer
individuals better access to high-quality, effective nutrition and supplements. Most
Indians have been reported to have low vitamin D despite receiving enough sunlight. It has
also become challenging to consume enough Omega-3 fatty acids and vitamin B12 through diet
alone. Nutraceuticals are being used more frequently to support and build immunity as well
as to address particular lifestyle needs like sleep, eye, brain, bone, and heart health
along with general physical and mental wellness. Supplements are no longer viewed as a
medicine, rather, they are consumed as a necessary component of daily nutrition. While
always on the go, millennial and Gen Z consumers have also recognized the need to look
after their health. In order to meet this need, the industry is also offering supplements
in the form of tablets, chewables, gummies, and even portable mixes.
Source: Publicly available articles and resources
Cosmeceuticals Industry
In 2022, the Indian market for cosmetics and personal care products was valued at $26
billion. As per industry estimates, the market is estimated to grow at a CAGR of 6.5%
between 2023 and 2028 to reach US$ 38 billion. The market is being driven by a number of
factors like the availability of a wide variety of products, the growing desire for
natural and organic goods, and the expanding use of e-commerce platforms. The cosmetics
sector in India has undergone substantial expansion as a result of changing lifestyles and
rising awareness. Indias consumer migration to online channels has benefited D2C
(direct-to-consumer) brands, just like it did for China. The tendencies toward the usage
of clean and environmentally friendly products were another element that supported the
growth of the beauty and personal care sector. Numerous market competitors are providing
vegan, paraben-free, fragrance-free, and organic products in response to this demand,
which are thought to be safer for the skin and general health. In addition, India has a
sizable and expanding young population, which makes up a crucial market demographic.
Source: The International Market Analysis Research and Consulting Group (IMARC)
Company Overview
Established in 1987, Fredun Pharmaceuticals ("Fredun" or "the
Company") is a leading formulations Company in India, operating as a wholly owned
subsidiary of Fredun Group. With over 35 years of experience in various pharmaceutical
formulations, the Company is trusted by customers across Africa, Southeast Asia,
Commonwealth of Independent States (CIS) countries and Latin America. Fredun has recently
diversified into manufacturing of dietary/herbal supplements, nutraceuticals, and other
healthcare products along with animal healthcare products. With such a diverse range of
products, the Companys objective is to be a holistic healthcare provider.
Over the years, it has transformed into a company that is supported by a formidable
manufacturing base and a strong reputation amongst global customers backed by strong
execution. Their product basket comprises of 1200+ global registrations spread across 46
countries and their key products include Metformin, Fexofenadine, Nifedipine. The Company
has presence across most therapies with key focus on Artemether Lumafantrine.
Anti-diabetics, Anti-retrovirals and anti-hypertensives products.
Business segments
The Company operates in four segments through different brands: Generics (Exports
& Fredun Gx), Pet Healthcare (Freossi), Nutraceuticals (Fredun Nutrition) and
Cosmeceuticals (Bird and Beauty or BnB).
Generics
In 2020, Fredun recently entered trade generic segment in India after successfully
exporting to 46 countries for 30+ years. The Company started operations in Maharashtra and
has launched products across various target medicine segments. The product segment
includes anti diabetics, antacids, antiemetics, anti-bacterials, anti-hypertensives,
anti-fungals, anti-allergics and much more.
Business Update
Exports
Secured XX registrations across countries during the year and expects 220 registrations
in FY24
Signed a one-year contract worth Rs. 65 crores with a Southeast Asian country. Revenues
from this contract have commenced and the order is expected to be fully executed by H1FY24
Signed contracts with three African countries that will be fully executed by next year
Fredun Gx Brand Launched 100+ products in India under the brand in FY23
Pet Healthcare
Fredun launched Freossi in 2021 with an aim to provide best quality, efficient and
affordable pet healthcare products in India. The product portfolio comprises of MCHC bases
supplements, animal feed additives and other animal healthcare formulations for pets,
poultry, and cattle. Fredun specializes in manufacturing various formulations made from
MCHC (‘Microcrystalline Hydroxyapatite Complex) which is a natural source of Calcium
& Phosphorus for animals. Fredun happens to be the largest manufacturer of MCHC in
India. MCHCs efficacy is time-tested and clinically proven for more than 60 years. Fredun
ensures superior quality control of raw materials and finished products and gets the
quality approval of all their products from a professional laboratory run by highly
qualified personnel.
Business Update
Freossi Brand
Launched 14 products under our Pet Pharma range
Launched 16 products under our Pet Treat and Feed Supplement range
Launched the affordable Pet Grooming range at a large scale with 43 products
Ultra-Niche Pet Care Cosmetic Products are set for launch in FY24
Nutraceuticals
In 2022, Fredun launched a range of personal health care products with natural active
ingredients devoid of any poisonous heavy metals or synthetic additives which are
objectionable under its brand Fredun Nutrition. Every product is at par with world-class
quality standards that is manufactured at their own facility. The products are backed by
years of research ensuring the best efficacy & quality. The Company has conducted
clinical trials on key brands like Mamalait and Damavand.
Business Update
Exports
Fully executed the contract signed with GCC region for Nutraceuticals and Human Feed
supplements Revenue from Nutraceuticals and Human Feed Supplements expected to cross US$ 2
million in FY24
Fredun Nutrition Brand
Launched XX products during the year in the XX categories
Plan to launch 16 additional New-Age Nutraceuticals in FY24. Initially, these molecules
will be sold only in Maharashtra before they are sold across India.
Cosmeceuticals
Fredun has turned out to be a pioneer in launching the Emu Oil infused product range in
India, under its brand Bird and Beauty or BnB. The Company offers a unique line of luxury
personal care formulae with pure, fully refined Emu Oil, providing their customers with
the Emu Oil products of highest quality. Used by Australian Aborigines for centuries, Emu
Oil is coveted for its rich moisturizing benefits for hair, skin, and nails. It contains a
balance of nourishing Omega 3, 6, and 9 essential fatty acids. The Emu Oil is humanely
acquired from free-range, hormone-free birds and is gently refined using an advanced,
proprietary, and chemical-free process that produces clear, odourless, and a highly stable
oil. The formulations have been made after years of research and clinical trials at its
own facility
Launched in 2022, the products cater to skin care, hair care and body care. The Company
is marketing the products mainly through e-commerce platforms and is targeting the skin
and hair care segments. As the research is on-going for multiple products, BnB will scale
up the launch of more products in the segments in the coming years.
Business Update
Exports
Added 19 products during the year
Bird and Beauty Brand
Launched XX products during the year in the XX categories
Commenced production in the recently set up State-of-the-art Lotion manufacturing unit
at Palghar in December with a trial order; unit to be fully commercialized by end of FY24.
Balm unit is doing well with total orders for 9 Mn units that will be executed by mid
FY24. Plan to launch 3 more products and have a full range by mid FY24
Manufacturing capabilities
All the Companys products are manufactured at Palghar, Maharashtra. Third party
manufacturing of productsare done at 16 different locations all over India. The Company
initiated the construction of its specialized F&D Lab at Palghar in FY2021. This lab
was set up to cater to various new product developments and support the launch of 1000+
registrations which are in pipeline over the next 4 years. The Company also commissioned a
state-of-the-art Warehousing Facility totalling to 60,000 Sq. ft. capacity.
During the year, Fredun set-up a dedicated area for manufacturing the Super Speciality
Bone Graft product - FREOSSI? Granules. The Company has leveraged its leadership position
in manufacturing MCHC and entered the Bone Graft space. Fredun plans to stand out in the
market by using the Xenograft technology, that would have a higher collagen content than
the global leader in this space. Products from Xenograft technology are superior to the
currently used synthetic products available in the market.
Outlook
Apart from trade generics, all the four branded segments are just starting to pick up
pace. On the back of this, Fredun aims to continue to grow at 25-30% CAGR between FY24 to
FY26, increase the revenue contribution from non-pharma segments from ~3% in FY23 to
15-20% by FY26 and alongside achieve an EBITDA margin of 12-15%.
Opportunities and Threats
Opportunities
Complex generics
Complex generics have enormous potential to spur market expansion in the future.
Compared to basic generics, they have more complex production procedures, less
competition, and higher margins. Only 20% of the US generics market as a whole are simple
generics, measured in terms of value. The USFDA has launched new measures to help the
generic pharmaceutical industry find the best approach for creating complicated
medications and to better facilitate the availability of complex generic medical products.
New Chemical Entities (NCEs) and New Biological Entities (NBEs)
Leading multinational pharma companies are increasingly focussed on these products.
Indian businesses are starting to develop novel drugs internally with the goal of
releasing new blockbusters and are now directly competing with global innovators. New drug
research is being conducted by some of the major Indian pharmaceutical companies, clinical
research organizations (CROs), and contract development and manufacturing organizations
(CDMOs).
Clinical Research Organizations
Big pharma and smaller biotechs will both be driving forces behind the demand for CRO
services. Other reasons for corporations to outsource R&D besides cheaper prices
include rising R&D costs and declining efficiency, a growing emphasis on novel
research in specialized therapy areas, an increase in trial complexity, and the
requirement for specialized expertise. India has made a name for itself as one of the top
locations for outsourcing research over the years. This has been made possible by the
nations superior process chemistry capabilities and alluring cost-value ratio. Another
benefit is the countrys huge and genetically diverse population, which makes it the
perfect place for novel medication trials and cost-effective clinical research operations.
Despite major R&D advancements, this is still a vast untapped market for India.
Threats/Challenges
Inadequate training and motivation for conducting research
The lack of talent across the whole research and development life cycle in the fields
of pharmaceuticals, biotechnology, and life sciences is one of the main obstacles impeding
the progress of R&D in India. There are a number of reasons causing this shortfall.
The fact that academic and educational institutions still prioritize rote learning over
creative, practical thinking and the general dearth of funding for biological research is
among the most significant causes.
Complex regulatory approval process and Intellectual Property Regime (IPR) A nations
innovation ecosystem needs excellent people in addition to effective policy and regulatory
frameworks. Entrepreneurs are encouraged to invest time, money, and resources in lengthy
and risky drug research projects by a strong patent protection. Companies can recoup
investments and finance upcoming research thanks to patents and exclusive rights.
Simplicity and agility in regulatory processes boost the likelihood of success while also
making doing business easier. India has made tremendous progress toward creating a solid
framework of regulations and policies, but there are still certain gaps that need to be
taken care of.
Risk Management
Fredun is dedicated to conducting business in accordance with all relevant statutory
laws, official announcements, and regulations. Given the intricate and tightly regulated
structure of the global pharmaceutical industry, in which Fredun participates, the Company
may be susceptible to risks typical of the sector, such as concerns about the quality and
safety of the company's products, disputes over intellectual property, and
regulatory delays, among other things. If not appropriately handled, these risks could
result in fines, product recalls, brand/reputation loss, and income loss. In this
situation, it is crucial to react to risk using a comprehensive framework for risk
mitigation that may support the Company in keeping a consistent level of product quality,
patient and staff safety, and long-term sustainability. The risks that are specific to the
pharmaceutical industry are addressed, as are any others that might have an influence on
our strategic objectives.
Review of Financial Performance
Particulars (In Rs Crores) |
FY23 |
FY22 |
YoY (%) |
| Revenue from Operations |
276.5 |
226.1 |
22% |
| EBITDA |
29.6 |
15.4 |
92% |
| EBITDA Margin % |
10.7% |
6.8% |
|
| PAT |
10.8 |
6.3 |
70% |
| PAT Margin % |
3.9% |
2.8% |
|
Revenue from operations was up 22% YoY driven by strong demand, realization of large
orders and new launches.
EBITDA margin improved significantly due to economies of scale.
Human Resources
The Company considers people to be its most valuable resource and has been working
strategically to recruit, develop and utilize people. The Company has been actively
pursuing policies for the strategic and well-planned recruitment, development and
utilization of human resources who can understand and practice the Companys Management
Principles and Activity Guidelines to contribute broadly to society and continue creating
new values. Effective recruitment, development and the utilization of globally competitive
human resources are the most important issues for your Company to survive the current
ever-changing business environment and achieve sustainable growth. Our concern is to
ensure that each of our employees exercise their full potential in line with the business
strategy of their respective departments. The number of employees as of March 31, 2023,
stood at 260.
Internal Control Systems and Adequacy
The Company maintains effective and adequate Internal Control Systems as per its size
and complexity. Fredun believes that these systems provide a reasonable assurance that
transactions are executed with management authorisation, among other things. It also
ensures that they are recorded in all material respect to permit preparation of financial
statements in conformity with established accounting principles along with the assets of
the Company being adequately safeguarded against significant misuse or loss. An
independent Internal Audit function is an important element of Companys Internal Control
System. This is supplemented through an extensive internal audit programme and periodic
review by the management and the Audit Committee of Board.
Cautionary Statement
Statements in this report on Management Discussion and Analysis, describing the
Companys objectives, projections, estimates, expectations, or predictions may be forward
looking, considering the applicable laws and regulations. These statements are based on
certain assumptions and expectation of future events. Actual results could, however,
differ materially from those expressed or implied. Important factors that could make a
difference to the Companys operations include finished goods prices, raw materials costs
and availability, global and domestic demand supply conditions, fluctuations in exchange
rates, changes in Government regulations and tax structure, economic developments within
India. The Company assumes no responsibility in respect of the forward-looking statements
herein, which may undergo changes in future based on subsequent developments, information,
or events.
+91-9892691696
