GLOBAL PHARMACEUTICAL INDUSTRY STRUCTURE AND DEVELOPMENTS:
The pandemic has brought in its wake, profound changes in the way the global pharma industry operates. The focus is on securing local pharma supplies while retaining the alignment towards accessibility and affordability. At the same time, a nationalistic fervor and a more patientcentric approach are also discernable.
Global medicine consumption is projected to surge, with an estimated 3.8 trillion daily doses by 2028, with varying growth rates across different regions. Specialty medications are poised to dominate global spending, exceeding 40% over the next four years, with developed markets leading the charge. Key therapeutic areas such as oncology, immunology, diabetes, and obesity are set to drive substantial growth, fueled by ongoing innovation and patent expirations.
Due to an unprecedented strain on healthcare infrastructures globally, the price and accessibility of generics have become critical. This has led to a renewed emphasis on efficiency, process innovation, and cost savings. There is a further shift towards biosimilars and a move up the value chain through complex generics and building specialty pipelines, all of which are expected to lead to sustainable business streams and maximization of long-term profit margins. To achieve this, digital transformation has emerged as a key strategy, with Gen AI and other AI technologies driving innovation.
INDIAN ECONOMY:
Overall, the outlook for the Indian economy appears bright. RBI has forecasted Indias real GDP to grow at 7 per cent in 202425, with risks evenly balanced. The increased government spending on capex has not significantly increased total expenditure, but rather reprioritized capital outlay to revenue expenditure ratio. The governments inclusive approach to economic growth, including initiatives for the poor, women, youth, and farmers, has not compromised its commitment to fiscal consolidation, lowering its Fiscal Deficit estimate to 5.1% of Nominal GDP. The global slowdown, particularly in Indias major trading partners, has reduced demand for its merchandise exports and lowered import value due to falling international commodity prices. This has narrowed Indias merchandise trade deficit, improving its current account deficit.
On the demand side, household consumption is expected to improve, while prospects of fixed investment remain bright owing to an upturn in the private capex cycle, improved business sentiments, healthy balance sheets of banks and corporates, and the governments continued thrust on capital expenditure. Improvement in the outlook for global trade and rising integration in the global supply chain will support net external demand.
As far as inflation trend is concerned, it is expected that food inflation will moderate further in the upcoming months. RBI has revised the inflation projection for Q4 of 2023-24 downward to 5 per cent in the Monetary Policy Statement of February 2024, from 5.2 per cent in the previous MPC meeting. RBI has also kept the policy rate unchanged at 6.5 per cent to facilitate full monetary transmission. With the stable downward movement in core inflation and moderation in food prices, the outlook for a reasonably low headline inflation rate is good.
However, headwinds from geopolitical tensions including continued attacks in the Red Sea and supply disruptions, more persistent underlying inflation in the developed world, volatility in international financial markets, and geo-economic fragmentation need watching.
INDIAN PHARMACEUTICAL INDUSTRY
The Indian pharmaceutical market (IPM) which is valued over $24 billion, grew at 7.6%. The achievement is significant considering that most large economies of the world struggled to maintain the growth momentum post the COVID19 pandemic. In fact, amongst the major economies of the world, India has been a standout performer amidst sluggish global growth trends. The market is expected to grow high singledigit over the near term contributed by factors such as increasing healthcare expenses, rising chronic diseases, expanding healthinsurance coverage, rising income levels and awareness, government initiatives to enhance healthcare infrastructure and expandaccess to essential medicines. Initiatives such as the Jan Aushadhi Scheme which aims to provide affordable generic medicines to masses, have played a crucial role in improving access to healthcare in rural and underserved areas. Stable pricing environment,patent expires in the recent past supporting new launch momentum have made up for the tepid base volume growth.
M&A TRENDS IN INDIAN PHARMACEUTICAL INDUSTRY:
There has been strong deal activity across multiple segments within the healthcare sector in India; a lot of activity has been in thepharma sector, across multiple sub-segments including domestic formulations, API/CDMO and nutraceutical ingredients. In the domestic formulations segment, there has been a healthy level of activity from strategics as well as financial sponsors. Pharma B2B has witnessed consistent M&A activity, especially in the Active Pharmaceutical Ingredient (API) segment. The industry continues to be fragmented, providing the opportunity for consolidation. Several larger domestic companies are looking to focus on core portfolios and sharpen capital/resource allocation decisions. This in turn has also resulted in companies divesting select noncorebrands, a trend that is likely to continue.
RISKS AND CONCERN
The Indian pharmaceuticals market is the third largest in terms of volume. India is the biggest provider of generic medications internationally and enjoys a significant position in the world pharmaceuticals sector. The country also has a huge talent pool and scientists having the capability to steer this industry forward to a much greater degree. The cost efficiency also continues to create opportunities for Indian pharmaceutical companies in the emerging global economies. The Indian pharmaceutical industry is expected to outperform the global pharmaceutical industry and grow in the next couple of years and thereby emerge as one of the top 10 pharmaceutical market globally by absolute size.
Indian pharmaceutical companies are focusing on global generic and API business, R&D activities, contract research and manufacturing alliances. India is also fast emerging as a preferred pharmaceuticals manufacturing location. Increasing use of pharmaceutical generics in developed markets to reduce healthcare cost will also provide attractive growth opportunities to Indian generic formulations manufacturers and thus Indian pharmaceutical industry is poised for an accelerated growth in the coming years.
However, poor public healthcare funding and infrastructure, low per capita consumption of medicines in developing and underdeveloped countries, currency fluctuations, regulatory issues, government mandated price controls, inflation, and resultant all round increase in input costs are few causes of concern for the industry.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Companys internal control system is commensurate with its size and complexity. The Internal Financial Control System of the Company is being regularly monitored by the Internal Auditors of the Company. Any deficiency in the controls is viewed seriously and corrective actions are taken to avoid repetition. The Internal Auditors monitors the efficiency of the internal controls/compliance with SOPs and provides required information to the Audit Committee on a time-to-time basis. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of the internal control system and suggests improvements for strengthening them. These controls are regularly monitored by the Internal Auditors to check the effectiveness of the controls. The Audit Committee Members/ Board of Directors are regularly updated on the same. The financial statements are prepared in conformity with the established Accounting Standards and Principles.
There are certain policies adopted by the Company for maintaining internal control within the organization, which are as follows: -
a) Risk Management Policy:
This policy sets out the Companys risk, oversees management of material business risks and internal control. The purpose of this policy is to encourage an appropriate level of risk tolerance throughout the Company; establish procedures to analyze risks within agreed parameters across the Company; establish appropriate risk delegations and corresponding risk management framework across the Company and ensure the Company has a risk management framework that can noticeably respond the risk profile of the Company.
b) Whistle Blower Policy:
This policy is formulated to provide opportunity to all employees to have access to the Management or the Chairman of the Audit Committee in case they observe any unethical and improper practice or behavior or wrongful conduct in the Company and to prohibit any person from taking adverse personal action against such employee.
c) Policy on Related Party Transactions:
This policy is framed to ensure compliance of the applicable provisions of the Companies Act, 2013 and the rules made thereunder and SEBI (LODR) Regulation,2015 as amended from time to time and intended to ensure the proper approval and reporting of transactions between the Company and related parties. Such transactions are appropriate only if they are in the best interest of the Company and the shareholders.
FINANCIAL PERFORMANCE AND ANALYSIS
During the year the company achieved a turnover of Rs 398.89 Crores against turnover of Rs 391.30 Crores in the previous financial year registering growth of 1.94%. The company achieved an export turnover of Rs. 282.66 Crores as compared to Rs. 293.19 Crores in the previous financial year. Although the exports have decreased marginally by 3.59% but domestic sales have shown growth of 18.47%. During the year the company earned EBIDTA of Rs 51.13 Crores as there were challenges during the year due to sluggish market movement and subdued demand. However, Ind Swift managed to defend its position and marginally increased its market share.
During the year the company achieved a total revenue from operations of Rs 502.24 Crores against turnover of Rs 410.95Crores in the previous financial year registering growth of 22.21%. The company achieved an export turnover of Rs. 379.61 Crores as compared to Rs. 282.66 Crores in the previous financial year thus registering an increase of 34.30%. The domestic sales of the Company have marginally decreased by 2.85% from Rs. 116.22 Crores in the previous financial year to Rs. 112.91 Crores in the financial year 2023-24.
During the year the company earned EBIDTA of Rs 63.70 Crores as compared to EBIDTA of Rs 51.13 Crores in the previous year. EBIDTA has increased in this year primarily due togrowth in export sales of the company.
Your Company earned net profit (after tax and extraordinary items) of Rs. 14.23 Crores as compared to net profit after tax of Rs. 26.03 Crores in the previous financial year.
OPERATIONS REVIEW & COMPANYS OUTLOOK
Exports through ourstate-of-the-art manufacturing facilities situated at Derabassi Punjab continued to be the focus of the Company. Besides Exports, the Company is also focusing on increasing its presence in the Domestic Markets.
Over the past few years, the pace of progress of our international business has accelerated. With stable tie-ups in the key export markets international formulations business has been on an upward growth. During the Financial Year 2023-24 the Companyearned an exports turnover of Rs.379.61 crores against the turnover of Rs. 282.66 crores during FY2022-23. Your company has delivered a remarkable performance on the export front. This impressive growth can be attributed to the strategic emphasis on value added sales and better distribution. Digital marketing initiatives have further bolstered brand visibility and product reach, underscoring the companys adaptability and agility in leveraging contemporary platforms for sustained growth.
Considering the distressed financial liquidity position of the company, the Board for a long time had been evaluating various restructuring options to meet the fund requirements and to reduce the debt position of the company. In its efforts to raise funds and to meet the deadlines of existing debt obligations, after taking necessary approvals from the members of the company, the Board on march 28, 2024 sold/inter- se transferred 9499720 equity shares held in M/s Ind Swift Laboratories Limited to M/s Essix Biosciences Limited at Rs. 101/- per share thereby recording a profit of Rs. 43.47 Crores. The proceeds from the sale of shares was utilized to repay the existing debt, make payments of statutory liabilities, capital expenditure and meet other working capital requirements. During the year, to redress its existing debt obligations towards M/s Edelweiss Asset Reconstruction Company Limited(EARC), the company sought financial assistance from its group company, M/s Ind Swift Laboratories Limited (ISLL) and availed a loan facility. ISLL acquired the entire debt of EARC of Rs. 815.77 Crores together with all the rights, title and interest in the Financing Documents and any underlying Security Interests, pledges and guarantees in respect thereo- fand structured the sustainable part into the term loan facility of Rs. 352.60 Crores payable in 9 years at 10% rate of interest (including 15 months moratorium on principal and interest payment, however, interest will accrue monthly) and the unsustainable part of Rs. 463.17 Crores as a zero-coupon debt (payable fully in case of default in repayment of the term loan facility and to be waived off on the successful repayment of the term loan facility). The said transaction was beneficial and in the interest of the company and its stakeholders as the same had enabled the company to settle its outstanding debt of EARC in full and has simultaneously provided some relief to the Company as to the time period for re-payment of interest and principal amount. The consolidated net debt liability of the company has not changed due to this development.
Established in 1986, Ind-Swift is a research driven pharmaceutical group known for world class finished dosage forms. The group sees itself as a stakeholder in the service to humanity, offering quality pharmaceuticals that mitigate illness and suffering, and contribute to a healthier and better world. Ind-Swift is a public limited company listed on the Bombay Stock Exchange and National Stock Exchange. Ind Swift Limited-Global Business Unit (ISL-GBU) was commissioned in 2006, to cater exclusively to the demand of the international markets for finished dosage forms. Products from GBU are now available in many countries of EU, Australia, Canada, Central & Latin America, Asia, Russia & CIS and Africa-in- eluding South Africa.
ISL-GBU is approved by UK-MHRA, TGA, Health Canada, WHO- GMP & other leading regulatory agencies for tablets, hard gelatin capsules, dry powder for oral suspensions (bottle packs); granules in sachets & sticks (including effervescent granules). ISL-GBU is one of the few facilities that can provide specific environmental conditions for highly sensitive products.
Our focus for the prospective years is on both the developed markets (UK, European Union, Australia, Canada, Brazil, South Africa) & semi regulated markets (Africa, South East Asia, Latin America, CIS countries & the MENA region as well.
For the developing markets, ISL-GBU has a dedicated approach of developing products and out licensing to customers through flexible and customer oriented strategic alliances either through partnership, dossier rights or other strategic alliances for exploring various avenues of collaboration. ISLGBU today has become a leading player as a contract Manufacturer due to its efficient and lean supply management delivering quality products on time as per customer demand. The current contract manufacturing operations extend to complete European Union, Australia & Canada.
Being a research driven organization, we have developed our own dossiers which have been out-licensed to our clients in Europe, Australia, Canada, South Africa & Russia.
Further we also undertake co-development of projects with our partners. In a major success, Ind-Swift through its JV partner submitted dossier of Atorvastatin & Ezetimibe Tablets combination on 1st day of patent expiry in EU. Launch orders have been successfully tested & released by the EU laboratory for market release; a few of the SKUs will be released shortly.
In semi-regulated markets, Ind-Swift has successfully launched its own branded generics in multiple countries like- Tanzania, Kenya, Ethiopia, French West Africa, Uganda, Oman, Qatar & UAE with expansion plans in other GCC countries. We have launched our products in various countries of CIS- Uzbekistan, Tajikistan, Yemen, Iraq & also in Nepal.
Today Ind-Swift has over 700+ Marketing Authorizations and more than 500+ under registration dossiers spread across Africa, South East Asia, Central & Latin America and CIS region. All activities are carried out by professionally qualified team members with expertise in respective with its strong R & D capabilities; ISL-GBU has built a strong portfo
lio of complex generic products thus giving its end customers the flexibility of cost along with assured quality standards, thus creating a strong portfolio of niche products.
Plant Capacity & Capability:
Sachets | 111 million per annum |
Hard Capsules | 90 million per annum |
Tablets | 9 billion per annum |
Stick Pack | 84 million per annum |
Dry Syrup | 33 million per annum |
Pallets | 6000 kg per annum |
Branch offices in Singapore, Dubai and China underline ISL- GBUs direct market presence in key regions. Tough and rough market and regulatory environment are not a deterrent for ISL-GBU, but a challenge to overcome and create a sustainable niche.
With our proven record of quality, cost effectiveness & on time delivery, we have recently bagged tech transfer of 2 branded products which will boost sales by a minimum of Rs 125 Cr once commercialized. Validation batches of these products are planned in the second half of 2024 & commercialization in 2024-25.
In our endeavor to serve humanity by providing quality medicines; Ind-Swift embarked on an expansion journey to create its presence globally.
MENA- Middle East and North Africa region has been an important addition in this regard.
Ind-Swift is present in GCC member states of Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Oman, Iraq ,Yemen through various business models like-its own sales force or through a distributor. In the year 2023-24, Ind-Swift Limited has been able to successfully register a number of products in this region and thus giving the company a significant opportunity to take a big leap in sales for coming years.
In UAE, Ind-Swift has a direct presence & has a field force consisting of Regional Head, NSM, SM & 9 MRs and a growing product portfolio of 35 SKUs. Further we are planning to expand the product portfolio with another set of 25 to 50 products by 2025 aiming to achieve an annual sales of USD 5Million.
In Saudi Arabia, we are strategically working on multiple business models for this largest market in the region to achieve a sales value of USD 5Million by 2025-26. In Qatar (6 SKUs registered), Oman (25 SKUs registered) & Iraq (3 SKUs regis-
tered) we are working on a distributor model. In these countries and many more products are in the pipeline for registration. In Iraq, Yemen, Jordan & other markets of MENA, our target is to achieve annual sales of USD 3Million by 2025-26.
With a robust development pipeline of 25+ products annually & 25 EU CTD products, the prospects for future growth are bright. With a vision to add more dosage forms to our offering, we are planning to induct a parenteral facility which will be functional by end of 2025. This will give us a further boost to expand our reach into newer more specialized segments.
In the domestic market, the Ethical division of the company is dedicated to Gynaecology, Paediatrics, Dermatology segments and its ambit extends to a wide range of medicines. The aim of this division is to provide patients and physicians with new and improved medicines that have better efficacy and fewer side effects.In this division the most popular and the best-selling products are: Anin, Suprox, Cozy, Distone, Oliade.
Through our Nova Division we entered the therapeutic segments inclusive of anti-infective, cardio-diabetic and orthopedic therapies. The range of medicines produced by the Nova Division is recognized for its effectiveness, long-shelf life and exact compositions catering to the ever-increasing demand. This division produces a wide range of products, amongst which the most popular and the best-selling are: Zoxiclav, Glypar, Olmiswif, Telhim, Ozodom-DSR, Cefextil-O, Swiclo-Sp, Swifix-O, Swifix 200, Stemin & Stemin Forte.
Our Generic Division has a current portfolio of more than 140 products. We have a field strength of more than 100 people all over India.We have introduced many new products to our portfolio and we are looking for more profitable products which we take benefit from. We have now also entered into the chronic segment of Cardiac, Diabetic and Neuropsychiatry through our generic portfolio.
This year we also entered the health and nutritional segment. It is estimated that the Health & Nutrition segment will grow double digit in the next 20 year because of increasing awareness & consciousness towards health. This will not only help the consumer to get affordable medicine but will add value in top & bottom line of your companys revenue. Further, we have also launched new products like Metala- zone, Lenalidomide Anhydrous and Methotrexate in the domestic market. In the coming year our focus is emphasized on external formulations.
In the coming year, the Company is expected to Amalgamate with its group company, M/s Ind Swift Laboratories Limited. The amalgamation would inter-alia enable both Companies to realize benefit of greater synergies between their busi-nesses, achieve wider product offerings and geographical footprints, consolidate operations thereby leveraging the capability of the Amalgamated company, yield beneficial results and pool financial resources as well as managerial, technical, distribution and marketing resources of each other in the interest of maximizing value to their Shareholders and the Stakeholders with centralization of inventory and greater economies of scale.
Our business continues to move forward by leveraging its strong market position and expanding its portfolio of high- quality, affordable drugs. By continuing to foster strong relationships with distribution channels and consumers, we aim to enhance our customer engagement and support. Additionally, we will continue to expand our digital marketing efforts to strengthen our brand presence and reach a broader audience. Our commitment to innovation and excellence will ensure that we remain at the forefront, driving positive health outcomes and delivering value to our stakeholders.
OTHER KEY FINANCIAL INDICATORS :
Ratios | 2023-24 | 2022-23 | % change (If there is more than 25% change the reason thereof as well) |
Debtors Turnover Ratio (No of days) | 93.29 | 86.69 | 7.61 |
Inventory Turnover Ratio (No. of days) | 99.59 | 133.02 | (25.13) |
Interest Coverage Ratio | 1.23 | 0.42 | 192.85 |
Current Ratio | 1.067 | 0.292 | 265.41 |
Debt Equity Ratio# | - | ||
Operating Profit Margin (%) | 13.77 | 5.96 | 131.04 |
Net Profit Margin (%) | 2.54 | 6.16 | (58.77) |
Return on Net Worth# | - | - | - |
# Debit Equity Ratio and return on Net Worth ratio have not been caicuiated as the Equity/Net worth of the Company is negative. Inventory Turnover Ratio (No. of days): Reduced due to increase in turnover of the Company
Interest Coverage Ratio: Improved primarily on account of increase in operating margin due to increase in export turnover and due to increase in other income.
Current Ratio: improved due to sale of non-current investments and conversion of current borrowing to non-current borrowing. Operating Profit Margin: Improved primarily on account of increase in operating margin due to increase in export turnover and due to increase in other income.
Net Profit Margin: Net Proift Margin Ratio has primarily Reduced due to lower net profit in this year Net profit in last year was more due to gain of exceptional/extraordinary item.
HUMAN RESOURCE DEVELOPMENT/
INDUSTRIAL RELATIONS
The company considers its human capital as the foremost resource that drives business performance and sustains growth in the face of a volatile external environment. The Company pays utmost attention to creating a learning and growing ecosystem. Over the years, it has made considerable investments towards the professional growth of its team. Our people-friendly policies have gone a long way in strengthening the teams loyalty to the company. The Management continues to strive to foster a best-in-class working environment for creating a future-ready workforce.
The HR department continued to build peoples competencies through its skill development and training initiatives. During the year, the focus of the leadership team and the management team was ondevelopment of employees at each of the level. Various initiatives have been taken which includes formal and informal ways of interaction with the employees of each level directly with the top management. Trainings and skill development has been an integral part of the human resource function. The HR department celebrated special events and festivals for enhancing team bonding and infusing energy into the organization. The department has also introduced an e-induction program for the new joiners to give them a complete overview of the organization.
Entering FY25, the HR department of the company will focus its energies on strengthening the teams for full operations of its facilities. To build a future-ready organization the HR department shall focus keenly on talent attraction, development and engagement and retention strategies. The HR department will be working closely with management and business leaders in making the company an employer of choice, building a strong talent pipeline, and preparing internal key talent to be future leaders of the organization.
Your Company has 1054 employees on its payroll as on March 31, 2024.
MATERIAL FINANCIAL & COMMERCIAL TRANSACTIONS INVOLVING SENIOR MANAGEMENT:
The Company has in place a Code of Corporate Governance which stipulates that senior management personnel shall make disclosures to the Board of Directors of the Company regarding any material financial and/or commercial transactions in which they are interested which may have a potential conflict with the interest of the Company.
ACCOUNTING TREATMENT
The current financial statements have been prepared incompliance with the requirements of the Companies Act, 2013 and Generally Accepted Accounting Principles (GAAP) in India. The management accepts responsibility for the integrity and objectivity of these financial statements as well as for various estimates and judgments used therein. These estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, in order that the statements are reflected in a true and fair manner.
CAUTIONARY STATEMENT:
Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations, or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the companys operations include raw material availability and prices, cyclicaldem and, movements in companys principal markets, changes in Government regulations, tax regimes, economic developments within and outside India and other incidental factors.
Sd/- | |
S.R Mehta | |
Chairman | |
Place: Chandigarh | |
Date: 13.08.2024 |
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