Indiaco Ventures Ltd Management Discussions.

Management Discussion And Analysis

a) Industry Structure and Development

The global pharmaceutical market crossed the US$ 1 trillion mark in 2013, with a contribution of over 70% from the developed countries. Emerging markets continued to register a double digit growth while the developed markets registered a marginal growth of around 1%. Due to mounting pressure on healthcare costs and changing demographics, markets across the world are moving towards generics. The Indian pharmaceutical industry commenced the year with a promising growth in the first half followed by a sluggish trend in the second half, resulting in an annual growth rate of 11.9% for the year as against 15.8% in the previous year. Within therapies, the chronic segment grew by 14% and the acute segment grew by 11%. Higher base effect, poor season and low stocking due to the pricing policy resulted in less than the expected growth for the industry.

b) Opportunities and Threats

The global market presents a huge opportunity for the pharma industry both in developed and emerging markets. Indian pharma companies have established world class manufacturing facilities and R&D capabilities to grab a larger share of the growing generic industry. In addition to products going off-patent, higher genericisation across the globe has given a boost to the generic industry. Currency fluctuations, delayed regulatory approvals, non-tariff barriers to trade and economic slowdown may, however, impact the international business.

On the Indian business front, the growth pace is expected to pick up momentum in view of the favourable macro economic facto Rs. However, poor public healthcare funding, postponement of treatments, inflation and delays in government approvals are some of the causes of concern. The new pricing policy announced by the Government of India expands the number of products coming under price control and is perceived as a risk in the short term for the Industry.

c) Financial Performance

The overall financial performance of the Company was reasonably good for the year ended 31st March 2013 with the domestic formulations business growing at 15.4% and the international business growing at 8.4%. The domestic business contributed to 65% and international business contributed to 35% of the total business. The formulations business contribution stood at 94.5% as against that of the API business, which stood at 5.5% of the total business.

The international business comprises of formulations and Active Pharmaceutical Ingredients (APIs) exports, the details of which are as follows:

( Rs. In lakhs)

Particulars FY 12-13 FY 11-12
Regulated Markets 18,138 14,948
Emerging Markets 1,951 3,599
Formulation Total 20,089 18,547
API 1,782 1,625
Total 21,871 20,172

Other operating income in the current year reduced by Rs. 4.67 crore as compared to the previous year. The decrease is mainly on account of lesser export benefits and reduced exchange gain.

The material consumption to net sales is 41.8% at Rs. 261.96 crore as compared to 43.7% at Rs. 244.98 crore last year. This decrease in the material cost is due to the product mix as also efficiency in manufacturing processes as well as effective procurement policies. The staff cost to net sales is 16.0 % at Rs. 100.31 crore as compared to 14.6% at Rs. 81.88 crore last year. The increase is mainly on account of normal annual increase in salary and new recruitments. The recurring R&D expenses to net sales are 2.1% at Rs. 12.90 crore as compared to 1.9% at Rs. 10.80 crore last year. Other expenses to net sales are at 25.9 % at Rs. 162.15 crore as compared to 26.2% at Rs. 146.53 last year. The finance cost to net sales is at 3.5% at Rs. 21.88 crore as compared to 2.9% at Rs. 16.33 crore. The impact is higher due to exchange loss of Rs. 12.7 crores on currency fluctuations. The operating profit increased by 1.0% to Rs. 60.38 crore from Rs. 59.80 crore last year. The increase in profit is mainly on account of increase in revenues. Depreciation is higher at Rs. 23.72 crore as against Rs. 19.25 crore in the previous year.

Profit before tax is at Rs. 48.37 crore as compared to Rs. 51.27 crore in the last year showing a decrease of 5.7%. Profit after tax was Rs. 42.66 crore as against Rs. 46.34 crore in the last year, thereby showing a decrease of 7.9%.

Basic & Diluted earnings per share (EPS) for the year is Rs. 4.63 as against Rs. 5.03 in the previous year (both after and before the extra-ordinary items). The outstanding debt as on 31st March, 2013 was Rs. 118.80 crore as compared to Rs. 114.70 crore last year. The cash outflow on account of capital expenditure (CAPEX) during the year was Rs. 43.36 crore as compared to Rs. 65.97 crore in the last year. During the year an amount of Rs. 8.33 crore was contributed to the national exchequer by way of payment of income tax and Rs. 2.14 crore by way of sales tax. The net worth of the company as at 31st March, 2013 is Rs. 414.05 crore against Rs. 379.96 crore previous year which is on account of retained profits. The debt-equity ratio during the year was 0.07 times as compared to 0.12 times in the previous year. The return on net worth was 10.3% as at 31st March, 2013 against 12.2% as at 31st March, 2012.

d) Business Overview Domestic Business

The Companys domestic business continued to record a healthy growth which is well above the industry average. A number of strategic initiatives were taken by the Company, viz., focus on brand building, select therapies majorly in the chronic segment and training & development of the field force. These initiatives continue to yield positive results and would ensure sustainable growth.

The Company markets and distributes finished dosages in 18 therapeutic segments through 8 marketing divisions. The distribution network comprises of 29 sales depots and offices spread across the country. Details of major therapies of the domestic branded formulations are:

( Rs. in lakhs)

Therapy Cont. % 2012-13 2011-12 Gwth %
Respiratory 18.2 7,314 6,780 7.9
Stomatologicals 17.4 6,986 5,961 17.2
Anti-Infectives 15.5 6,237 5,587 11.6
Gastro Intestinal 13.7 5,501 4,535 21.3
Pain / Analgesics 7.5 3,025 2,193 37.9
Ophthalmic / Otologicals 5.6 2,251 1,851 21.6
Gynaec. 5.5 2,187 1,892 15.6
Vitamins / Minerals / Nutrients 5.2 2,086 1,680 24.2

Brands which have contributed to the volume of the domestic formulations business are FEBREX PLUS, CYCLOPAM, SENSODENT, SENSODENT-K, ATM, SENSOFORM, CLOBEN G, OXIPOD, CITAL and VEPAN. The contribution of these brands accounts for over 50 % of the domestic formulations revenues.

Indoco is ranked 29th as per AWACs as on 31st March2013 and at 26th as per the CMARC Prescription Ranking (Rxs). During the year, two of our brands moved up the ranks, making the total number of brands to five in the top 500 brand category. The Company enjoys a good position in the domestic market with 26 brands ranking amongst the top 5 positions in their respective segments, details of which are given below:

CYCLOPAM 1 Antispasmodic/Analgesic 11.6
SENSODENT-K 1 Desensitizing Toothpaste 95.6
CITAL 1 Urinary Alkalizer 38.5
SENSOFORM 1 Desensitizing Toothpaste 65.8
CARMICIDE 1 Anti-flatulant 68.5
HOMIDE 1 Opthalmic 94.3
RENOLEN 1 Opthalmic 69.6
FEBREX PLUS 2 Anti-cold 22.9
SENSODENT-KF 2 Desensitizing Toothpaste 26.8
TUSPEL PLUS 2 Cough Syrup 18.8
MCBM 69 2 Gynaec 8.5
HEMSYL 2 Gynaec 13.7
TUSPEL PX 2 Cough Syrup 18.6
LORCHEK MR 2 Pain/Analgesic 18.6
DEXOREN - S 2 Opthalmic 14.3
TOBAREN D 2 Opthalmic 21.1
CLOBEN G 3 Anti-fungal Skin Cream 15.7
SCABEX 3 Scabies Skin Cream 17.7
OTOREX 3 Opthalmic 11.8
ZINCOREN 3 Opthalmic 10.6
OTICHEK 3 Opthalmic 9.6
VEPAN 4 Anti-infective 15.8
TRIZ 4 Anti-allergic 6.2
NOSIC 4 Anti-emetic 5.6
ATM 5 Anti-infectives 5.0
TOBAREN 5 Opthalmic 8.1

Source: AWACs data

Domestic Marketing Divisions


Indoco division has a strong presence in major therapies including Gastrointestinal, Anti-Infectives, Respiratory, Anti-Diabetics and Vitamins. CYCLOPAM, KARVOL PLUS, CLOBEN-G, TUSPEL PLUS, OXIPOD, GLYCHEK, HEMSYL, MCBM 69 are the top brands promoted by the division with a strong prescription equity amongst the covered specialties like General Practitioners, Consulting Physicians, Gynecologists, Pediatricians, ENTs.


Spade division covers General Practitioners, Consulting Physicians, ENTs, Pediatricians, Dermatologists and Chest Physicians. The division promotes brands like Febrex Plus, ATM, and Methycal besides othe Rs. Along with Febrex Plus, ATM has entered the league of Top 500 Brands of Indian Pharma Market during the year.


Warrens product basket comprises of toothpastes for hypersensitivity, mouthwashes and a range of antibiotics, analgesics/anti inflammatory, local anesthetics and other oral care products. The division currently enjoys the coveted No.1position in the stomatological segment and has launched Senolin SF (Dental Balm) and Snowdent (Tooth whitening paste) for the first time in India.


Spera division covers General Practitioners, Gynecologists and Pediatricians as its target specialties with a focus on new products viz., DBZ, Flamar Plus Gel coupled with legacy brands like Cital etc.


Excel division covers Ophthalmologists, ENTs and General Practitioners promoting products in the ophthalmic, anti-oxidant and anti-infective segments. The major brands marketed by this division are Homide, Renolen, Dexoren-S, Mofloren-BF, Alerchek, Lotechek-LS, Macuchek and Lotechek.


Eterna divisions focus is on chronic, nutritional and pain management therapies and covers Orthopedic and Consultant Physicians with brands like Osteochek, Lorchek and Xanfeb-DSR. The division has launched Lorchek-PTC, Lorchek-MR gel and Xanfeb-DSR combinations for the first time in India.

Indoco CND

Indoco CND caters to super-specialists like Cardiologists, Diabetologists, Endocrinologists, Nephrologists and Consulting Physicians with an objective to strengthen the Companys presence in chronic segment. The division is progressing well with its top brands like Prichek, Amchek, Cal-aid, Telmichek, G-Neuro and Febubest. A combination of Rosuvastatin and Vitamin D has been launched for the first time in India under the brand name Rosuchek-D and has received a good response at the consultant level.

New Product launches

During the year, the Company launched 37 products, out of which 8 products cater to chronic ailments. The details on new launches are given below:

Cyclopam DF Drops Indoco Gastro - Intestinal
Cyclopam MF tab. Indoco Gastro - Intestinal
Hemsyl-CVP Indoco Gyneac
Oxipod-O tablet Indoco Anti-Infectives
Inflachek tab Indoco Pain / Analgesics
Inflachek-D tab Indoco Pain / Analgesics
Febrex CCF Drops Spade Respiratory
Febrex CCF Syrup Spade Respiratory
ATM-OF tablet Spade Anti-Infectives
Concize Caps Spade Vitamins / Minerals / Nutrients
Febrex LP tablet Spade Respiratory
Ristor 30 tab Spade Gyneac
Ristor 60 tab Spade Gyneac
Fevorit-O D.S. Spade Anti-Infectives
ATM-A Gel Spade Anti-Infectives
Mofloren-LP Excel Opthal / Otological
Mofloren-BF Eye Drops Excel Opthal / Otological
Irimist-V Solution Excel Opthal / Otological
Mofloren UNIMs Excel Opthal / Otological
Cital-H tablet Spera Gyneac
Vcef Plus tab. Spera Anti-Infectives
Osteoflam Aq. Inj. Spade Pain / Analgesics
Rosuchek 10mg Indoco CND Cardiac
Rosuchek 5mg Indoco CND Cardiac
Rosuchek-5D Indoco CND Cardiac
Rosuchek D Indoco CND Cardiac
Telmichek-M 25 Indoco CND Cardiac
Telmichek-M 50 Indoco CND Cardiac
Telmichek 80H tab Indoco CND Cardiac
Telmichek 80 tab Indoco CND Cardiac
Xanfeb DSR Eterna Pain / Analgesics
Nutrichek Eterna Vitamins / Minerals / Nutrients
Lorchek-PTC tab Eterna Pain / Analgesics
ATM-LX tablet Eterna Anti-Infectives
Osteochek D3 Eterna Vitamins / Minerals / Nutrients
Osteochek-K tab Eterna Vitamins / Minerals / Nutrients
Lorchek-MR Gel Eterna Pain / Analgesics

Impact of Drugs (Price Control) Order, 2013

The new Drug (Price control) Order announced by the Government of India affects 8 Indoco products, the overall impact of which will be marginal on our domestic formulations sales. The long term impact of the new pricing policy on the company as well as the industry overall remains positive.

International Business

Indoco offers a complete solution to generic companies world-wide, including development, manufacturing and supply of Finished Dosages, APIs and Intermediates.

For regulated markets, the Company has a large basket of products backed by eCTD dossiers, ANDAs, DMFs, CoS and a strong product pipeline covering NDDS, Para IV filings and 505(b)2 applications. Having established itself as a reliable player in (CRAMS) Contract Research & Manufacturing Services, Indoco is now moving higher in the value chain through filing dossiers and ANDAs in its own name.

The Company offers branded generics with promotional support for countries in the emerging markets and has established itself through brand loyalty in some of these markets.

Country wise / Region wise Sales Contribution for the year 2012-13 is shown in the graph below:

North America

Pharmaceutical sales in the United States of America (USA), the largest pharmaceutical market in the world, are expected to be in the range of US$ 350-380 billion (Source IMS data) by 2016, with around 30% comprising of generic products. The generics market growth in the country has been ahead of the pharma market and this trend is expected to continue.

Four of Indocos products are already available in the US market through our partne Rs. The product basket with Watson /Actavis, USA has been increased to 21. Additionally, Indoco has 37 ANDAs at various stages of development, out of which 13 will be filed in Indocos name and the rest through partners in the US market.

The company has also started receiving approvals from Health-Canada for Opthalmic ANDS and supplies have commenced.


Top 5 European markets are expected to grow at a CAGR of ~ -1% to ~ 2% by 2016 to achieve sales in the range of US$ 135-165 billion (Source IMS data). Major EU markets contribute 25% by value to the worldwide generics industry and have grown at a faster rate when compared to the low single digit growth for the pharma industry as a whole.

Indocos business from the European market is evenly focused on Contract Research & Manufacturing Services (CRAMS). UK and Germany are the major contributors in addition to Denmark, Slovenia and Croatia. The Company started with contract manufacturing and progressed to out-licensing of dossie Rs. The next step to move up the value chain has been already initiated through registration of eCTD dossiers and by obtaining marketing authorizations (MAs) in Indocos name. Business in Europe will comprise of a combination of contract manufacturing, out-licensing of Dossiers and MAs.

South Africa / New Zealand/ Australia

Indoco is emerging as a key partner to Aspen as the deal with Aspen now covers over 50 products, 30 geographies and 4 different business models. Indocos manufacturing and R&D skills and Aspens regulatory and marketing expertise makes the partnership synergistic. The business with Aspen is growing well and is supplemented by business from other customers in the region.

Emerging Markets

From a global perspective, emerging markets present a better opportunity as these markets are registering a double digit growth and facilitate speedy regulatory approvals. The industry strategy is to build brands through active promotion for sustainable business with high growth and better margins.

Indocos presence in South-East Asia and Africa is sizeable with Kenya, Tanzania, Myanmar and Sri Lanka being the top four contributing countries. For long term and sustainable growth, the Company has changed the business model from the present Distributor model to Promotional model in select countries. The Companys strength in ophthalmic and dental products range is also being exploited by registering these products in 25 countries in the emerging markets.

API Business

The API division provides a strong support to the Companys efforts of backward integration by using own APIs in the ANDAs and Dossiers developed for regulated markets. At the same time, the available capacities are being used for manufacturing APIs for domestic as well as international markets. Efforts are made to secure long term contracts for API supplies to generic companies from regulated markets, in addition to the spot business in domestic and emerging markets.

Indoco has 3 API manufacturing facilities near Mumbai, with reaction capabilities like asymmetric synthesis, green chemisty, organo-metallic reactions, click chemistry, chiral separation, stereo-selective reactions, cryogenic reactions and hydrogenation. The multi-ton plant at Patalganga and the kilo facility at Rabale have been approved by USFDA, TGA and WHO. For several APIs, Indoco has USDMFs, Certificates of Suitability (CEPs) and EUDMFs and many new products are under various stages of development and regulatory submissions. Indoco is exporting APIs and intermediates to more than 30 countries including USA, United Kingdom, Italy, Egypt, Argentina, U.A.E, Guatemala, Taiwan and Pakistan.

Indocos new initiative - AnaCipher will provide analytical services and meet customers analytical research needs, utilizing its state-of-art infrastructure and highly experienced human resource. The analytical facility of AnaCipher has been approved by USFDA.

Research & Development

Our Research and Development (R&D) is an expression of our commitment towards excellence through innovation.

Spread over an area of 100,000 square feet, Indocos ultra modern and multi disciplinary R&D centre houses state-of-the-art equipments, analytical instruments and latest databases. A team of 200 experienced scientists - doctorates, post graduates and graduates in pharmacy & chemistry are working in three areas:

• API development

• Formulation development

• Analytical services

During the year, an amount of Rs. 17.25 crores was incurred on R&D activities totally as against Rs. 17.32 crores last year. The recurring R&D expenditure amounted to Rs. 12.90 crores as compared to Rs. 10.80 crores last year. The capital expenditure was Rs. 4.35 as against Rs. 6.52 crores in the last year. The R&D expenditure as a percentage to net sales is 2.74 % out of which, 2.05% pertains to revenue and 0.69% pertains to capital expenditure.

Intellectual Property Rights (IPR):

The Company understands the need to create and protect its Intellectual Property and has a separate IPR cell to support its R&D activities. An in-depth study of the existing patents and patent applications is carried out to make sure that the products offered are non-infringing. Innovative processes developed during product development are protected by filing patent applications, the details of which are as under:

Patent Applications FDFs APIs
India 18 24
PCT applications - 13
Total 18 37

e) Human Resources

The Companys growth plans demand the best talent and clusters of high performing teams. With shared values and vision, HR has instituted a development model and has taken the following initiatives:


GEMS - A mentoring programme to develop leaders of the future. This programme has been initiated under the guidance of our visionary leader, Mr. Suresh G. Kare, who is the Chief Mentor.

HIGH FLYERS - A 3 day event organized in Mumbai annually for select MRs / FSOs from all over the country, along with spouses and children, in recognition of their consistent performance.


The culture of continuous development is inculcated through an in-house training module, viz., "IMPACT" - Indoco Management Programme for Achieving Competitive Talents and "CLIMB" - Cluster of Learning at Indoco for Mutual Benefit. These programmes cater to the development of the middle management for personal and professional growth.


The Company conducts employee oriented activities like Foundation Day, Womens Day, Family Day, Safety-Week celebrations and various other competitions and environment awareness programmes. Every year on 9th January, a cultural event under the banner of Inspira is organized to give a platform to employees to display their talents.


The Leadership Excellence programmes are conducted from time to time, including :

Strategic Analysis Meet : Senior management meets quarterly to develop business plans for achieving organizational goals.

Retreat : An outdoor event wherein the top management exchanges ideas for development of new business strategies.

Impetus : A group of senior managers meets quarterly to discuss business processes for cost control and efficiency improvement.

f) Future Outlook

With a strong infrastructure, skilled manpower and strategic alliances, the Company is poised to take a higher leap forward. The Company clocked growth rates better than the industry average in the domestic business and is expected to continue the momentum. The focus on legacy brands will continue and new products will be launched across covered therapeutic areas. The strategy to increase the share of chronic segment is being pursued through consistent focus on Indoco-CND and Eterna divisions.

On the international front, the US business will speedily ramp up upon ANDA approvals. The planned launch in US, South Africa and other emerging markets through partners is expected to improve the sales as well as margins. New products are continuously being added to the basket of products with our partners in these markets. In Europe, the Company is gradually reducing its dependence on contract manufacturing and moving on to supplies against own dossiers/marketing authorizations.

The API business is expected to grow at a much faster pace and will contribute to the Companys formulation business in regulated markets through backward integration in select APIs. Part of the API production will be marketed in domestic and international markets with higher penetration in the emerging markets. The new initiative, AnaCipher is contributing a steady stream of income by offering analytical services and is expected to grow in the segment of highly specialized analytical research needs of generic companies.

Considering the above triggers and initiatives, the Company is confident to achieve the intended growth in all the business segments it operates in.