iol chemicals pharmaceuticals ltd Management discussions

Global Economic Overview

In 2022, the global economy faced a series of unforeseen challenges that impacted the global GDP growth. The year began with an optimistic outlook, but the surging inflation, supply chain disruptions, tightening monetary policies, inflationary pressures, and concerns of a potential recession. During the year under review, global inflation reached 8.7%, causing concerns about its impact on consumer purchasing power and overall economic stability.

One notable factor contributing to the economic fluctuations was the persisting impact of the COVID-19 pandemic. China, in particular, witnessed a temporary decline in growth during the fourth quarter of 2022 as it grappled with a surge in COVID-19 cases. Europe also confronted its own set of challenges. The region faced acute energy shortages, which affected industrial production and economic growth.

Considering these factors, the overall world economy recorded a GDP growth rate of 3.4% in 2022, significantly lower than the robust growth of 6.1% witnessed in the previous year, according to the International Monetary Fund (IMF). The lower growth rate reflected the difficulties and uncertainties that marked the global economic landscape throughout the year.

Despite the challenges, there are signs of recovery with inflation is projected to decline to 7.0% in 2023, offering some relief and contribute to economic stabilization. The IMF remains cautiously optimistic, forecasting a global growth rate of 2.8% in 2023. While geopolitical tensions and trade conflicts persist, collective efforts in addressing supply chain disruptions, implementing appropriate monetary policies, and promoting global cooperation can contribute to sustained growth and economic recovery in the years ahead.

Global GDP Growth


FY 2021 FY 2022 FY 2023
World GDP 3.4 2.8 3
Advanced Economies 2.7 1.3 1.4
Emerging Markets 4 3.9 4.2

Indian Economic Overview

Amid a challenging global scenario, the Indian economy showcased resilience and emerged as the worlds fastest-growing major economy in FY23. With a GDP growth rate of 7.2%, driven by private consumption growth, continued investments and net exports. India demonstrated robust growth despite global factors, input cost escalation, and disparities in disposable income distribution. In response to inflationary concerns, the Reserve Bank of India (RBI) took proactive measures by raising the repo rate.

Indias economic reforms have been instrumental in fostering growth. The countrys formalization drive has enhanced transparency, benefiting businesses. Initiatives like ‘Aatmanirbhar Bharat and ‘Make in India have propelled the manufacturing sector, positioning India as a potential manufacturing hub.

Looking ahead, Indias GDP is projected to grow at a rate of 6.5% in FY 2023-24, indicating a positive outlook. The central governments commitment to significantly increase capital expenditure, despite targeting a lower fiscal deficit of 5.9% of GDP, will act as a catalyst, stimulating demand and fueling economic growth.

Infiation is projected to moderate to 5% in FY 2022-23, assuming a decline in oil and food prices. Subsequently, it is expected to slow further to 4.5% in FY 2023-24 as inflationary pressures subside. Monetary policy is anticipated to be tighter in FY2022-23 due to persistent core inflation, gradually transitioning to a more accommodative stance in FY 2023-24.

The current account deficit is forecasted to decline to 2.2% of GDP in FY 2022-23 and further reduce to 1.9% in FY 2023-24. Meanwhile, growth in goods exports is expected to moderate in FY 2022-23 before regaining momentum in the subsequent years.

Overall, the Indian economy presents a positive outlook for FY 2022-23 and FY 2023-24, driven by improving labour market conditions, increased capital expenditure, inflation moderation, and a projected decline in the current account deficit. These factors are poised to sustain economic growth and foster stability in the years ahead.

Global Industry Overview

Chemical Industry

The global chemicals market exhibited robust growth, increasing from $4700.13 billion in 2022 to $5079.29 billion in 2023, achieving a CAGR of 8.1%. However, regional dynamics played a significant role in shaping its trajectory. The Russia-Ukraine war had far-reaching consequences, disrupting global economic recovery from the COVID-19 pandemic. This conflict led to economic sanctions, supply chain disruptions, and surging commodity prices, triggering inflationary pressures worldwide.

Europe encountered challenges in the chemicals market, grappling with higher energy prices and disruptions in supply chains. As a result, Europe transitioned from being a net exporter to a net importer of chemicals for the first time. Nonetheless, Europe remains a prominent player in the industry, actively driving innovation and sustainability initiatives.

The US chemicals sector faced its unique set of obstacles, including supply chain disruptions and production halts. Despite these challenges, the industry showcased resilience compared to other regions. The decreased supply of chemical fertilizers from Ukraine propelled increased prices and exports of US-produced fertilizers.

China maintained its position as the worlds largest producer and consumer of chemicals, accounting for approximately 45% of the global chemical market. However, Chinese chemical production experienced a decline in 2022 due to COVID-19 restrictions, with significant manufacturing hubs like Shanghai operating at minimal capacity due to lockdown measures and workforce quarantines.

Looking ahead, the chemicals market is projected to reach $6851.59 billion by 2027, with a CAGR of 7.8%. The industrys growth will be fueled by rising demand in sectors such as manufacturing, construction, automotive, and healthcare. Moreover, advancements in technology and a growing emphasis on sustainability practices will shape the future landscape of the chemicals market.

[Source: Research and Markets, American Chemistry Council, Chemical Industry Association]

Specialty Chemicals Sector

The global specialty chemicals market, valued at USD 272.6 billion in 2022, is projected to reach USD 364.8 billion by 2028, growing at a CAGR of 5.0% from 2023 to 2028. The markets growth is driven by various factors, including the increasing demand for specialty chemicals in construction, water treatment, electronics, pharmaceuticals, food and feed additives, Rs avors and fragrances, and other sectors. These industries rely on specialty chemicals to enhance product performance and meet specific requirements.

Advancements in process technology and trade liberalization have also contributed to the growth of the specialty chemicals market. These factors enable manufacturers to develop innovative solutions, expand their customer base, and enter new markets. Additionally, the growing focus on sustainability and environmental concerns presents opportunities for specialty chemicals that offer eco-friendly and sustainable solutions.

In terms of market dynamics, Asia Pacific stands out as the largest and fastest-growing market for specialty chemicals. The region benefits from rapid industrialization, a growing middle class, and the expansion of end-use industries. Asia Pacifics demand for specialty chemicals is particularly driven by the packaging and automotive applications.

However, the specialty chemicals market faces challenges due to government regulations and environmental standards that impose strict rules on companies. Compliance with these regulations requires significant investments in testing, research and development, and documentation. Additionally, the market is influenced by the volatility in raw material prices, which can impact manufacturing costs and profit margins.

[Source: Grand View Research]

Pharmaceuticals Industry

The global pharmaceutical market is undergoing transformative changes and exhibiting resilience. In 2022, global spending on medicines increased to $1.48 trillion, reflecting the industrys ability to adapt to challenges. Looking ahead, the market is projected to grow at a CAGR of 3-6% from 2023 to 2027, reaching approximately $1.9 trillion. The growth will be driven by improved healthcare access, increasing demand for chronic and sub-chronic therapies, and the introduction of innovative medicines. The rise of specialty medicines and biotech is reshaping the industry, with biosimilars generating significant savings. Oncology is expected to experience remarkable growth, while immunology may face competition from biosimilars.

Regional trends show diverging growth rates, with developed markets growing slower than emerging Pharmerging markets. The United States will see steady growth, while China may face pricing pressures. India, Latin America, and Eastern Europe are emerging as fast-growing regions in pharmaceutical spending.

[Source: IQVIA Global Medicine Use 2023]

API (Active Pharmaceuticals Ingredients) Sector

The global active pharmaceutical ingredients (APIs) market was valued at $ 222.4 billion in 2022 and is expected to grow at a CAGR of 5.90% from 2023 to 2030. The growth will expansion is fueled by various factors, including advancements in API manufacturing techniques and the rising prevalence of chronic diseases like cardiovascular diseases and cancer. Furthermore, favorable government policies supporting API production and evolving geopolitical dynamics contribute to the overall growth of the market. The API sector has also undergone significant transformations due to the disruptions caused by the COVID-19 pandemic, leading to changes in supply chains and preferences for API sourcing.

The increasing focus on research and development activities for novel drug development, coupled with favorable government regulations, has propelled the market for innovative APIs. Extensive research efforts have yielded promising outcomes, leading to the development of several innovative products expected to be launched during the forecast period. This trend not only fosters market expansion but also encourages new players to enter the segment, driving further growth and competition.

The demand for targeted therapies featuring high potency API compounds, including highly potent active pharmaceutical ingredients (HPAPIs), has witnessed a significant surge. Personalized medicines, particularly those leveraging antibody-drug conjugates (ADCs) that utilize linker technology to target cancer cells, have gained traction in the pharmaceutical industry. As pharmaceutical companies pursue the development of such advanced therapies, the market for ADCs and similar innovative treatments is expected to experience robust growth.

Furthermore, the expiration of patents for branded molecules plays a pivotal role in the Rs ourishing market of generic API drugs. This has led to an increase in the production and adoption of generic API medications, particularly in countries like Brazil and India, where there are substantial unmet clinical needs and a growing acceptance of over the counter (OTC) drugs.

The global API market has undergone significant changes due to the supply chain disruptions caused by the COVID-19 pandemic. Geopolitical considerations and the need to reduce dependency on China for API products have led to a shift in preference towards countries like India for API exports. Governments of various countries have recognized the importance of API production and have formulated plans and incentives to promote domestic API manufacturing, ensuring a more robust and resilient supply chain.

Indian Industry Overview

Chemical Industry

Indias chemical industry is a vital and diverse sector that encompasses bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilizers. With a global market presence, India ranks among the top exporters and importers of chemicals.

The industry is fueled by several key growth drivers. Firstly, Indias strong position in agrochemical production positions it as the fourth-largest producer globally. In addition, India plays a significant role in dyestuRs s and dye intermediates, capturing a substantial global market share. These factors contribute to the industrys expansion and prominence in the international market.

The Indian government recognizes the chemical industrys importance and has implemented various initiatives to support its growth. Measures such as mandating certification for imported chemicals and introducing production-linked incentive (PLI) schemes have been put in place. These initiatives aim to

Specialty Chemicals Sector

Specialty chemicals accounting for 22% of the overall chemical sector and valued at $32 billion. These chemicals play a crucial role in various industries, including food, automotive, real estate, clothing, and cosmetics, among others. Driven by rising demand for value-added products, both domestically and through exports, Indias specialty chemicals industry has experienced remarkable growth. It is projected to reach $64 billion by 2025, with a promising CAGR of 12.4%.

India offers a competitive advantage as a specialty chemical manufacturing hub, with factors such as reduced operational cost disparity with China, ample feedstock availability, skilled labor, favorable government policies, and strong intellectual property protection. The "China plus one" offshore strategy has further enhanced Indias position as a preferred destination for specialty chemical production. To bridge the export capacity disparity with China, India has the potential to

Pharmaceuticals Industry

The Indian pharmaceutical industry is a global leader, known for its significant contributions to the market. The industry encompasses diverse segments such as generic drugs, over-the-counter medications, bulk drugs, vaccines, contract research and manufacturing, biosimilars, and biologics. With a projected market size of US$ 65 billion by 2024 and US$ 130 billion by 2030, it is experiencing robust growth. Indias pharmaceutical industry currently holds a value of around US$ 50 billion, with exports accounting for over US$ 25 billion. The country is recognized as prevent the inRs ux of substandard chemicals, promote domestic manufacturing, and drive exports.

Furthermore, the governments commitment to the industry is evident through budget allocations. In the Union Budget 2023-24, Rs 173.45 crores was allocated to the Department of Chemicals and Petrochemicals, highlighting the governments focus on fostering the sectors development.

The outlook for the Indian chemical industry is optimistic, with strong growth projected in the coming years. The industry is expected to contribute significantly to Indias GDP, and an investment of Rs 8 lakh crores (US$ 107.38 billion) is estimated in the chemicals and petrochemicals sector by 2025.

With favorable government policies, investment prospects, and increasing demand for chemical products, the Indian chemical industry is poised for continued expansion and will play a pivotal role in driving the countrys manufacturing sector and overall economic growth.

scale up production and expand its export capacity in various specialty chemical segments. Improving productivity and competitiveness in areas such as electronics, food additives, rubber, Rs avors, and fragrances will unlock opportunities for increased export share.

Amid a resurgence in demand, Indian companies are reassessing their capacity expansion plans to meet the growing market demands. Capital spending in the sector is expected to increase by 50% year-on-year, surpassing pre-pandemic levels, reflecting the industrys commitment to cater to various sectors. With favorable government policies, promising investment prospects, and a rising demand for chemical products, Indias specialty chemicals industry is poised for continued growth and will play a critical role in the manufacturing sector and contributing to overall economic growth.

the largest provider of generic drugs worldwide and is acclaimed for its affordable vaccines and generic medications. Indias strength lies in its adherence to stringent international standards, with a significant number of pharmaceutical manufacturing facilities complying with regulations set by the US Food and Drug Administration (USFDA). Furthermore, the country is home to 500 active pharmaceutical ingredient (API) producers, representing around 8% of the global API market.

[Source: IBEF Pharmaceutical Industry Report, Feb 2023]

API (Active Pharmaceuticals Ingredients)

The Indian Active Pharmaceutical Ingredients (API) Market has witnessed notable developments in recent years. The COVID-19 pandemic exposed vulnerabilities in the pharmaceutical supply chain, particularly the dependency on API imports from China. This disruption resulted in increased costs and shortages of essential drugs, affecting the treatment of various chronic diseases. In response, the Indian government launched initiatives to boost domestic API production, aiming to reduce reliance on imports and ensure a steady supply of medications.

Amidst these circumstances, the API market in India is projected to grow from $12.59 billion in 2023 to $18.76 billion by 2028, reflecting a CAGR of 8.31% during the forecast period. This growth is driven by various factors including rising prevalence of infectious, genetic, cardiovascular, and chronic disorders necessitates a consistent supply of APIs for the production of effective medications. Furthermore, the governments initiatives, such as the allocation of significant funds and the introduction of production-linked incentives, have incentivized domestic API manufacturing. These measures are aimed at enhancing the production of critical key starting materials (KSM) and APIs used in essential drugs for treating various medical conditions, including diabetes, tuberculosis, steroids, and antibiotics. Such initiatives are expected to drive the growth and development of the API market in India, ensuring a robust pharmaceutical industry.

Business Overview

IOL is a renowned company in the Active Pharmaceutical Ingredient (API) and specialty chemicals sectors. With substantive manufacturing capacities, the Company benefits from economies of scale and cost supremacy. Its extensive expertise in both API and specialty chemicals strengthens its business model and opens doors to diversified growth opportunities.

Within the API segment, IOL develops and supplies a wide range of essential products utilized by pharmaceutical companies worldwide for the production of key medicines. The company is highly regarded and recognized in the Active Pharmaceutical Ingredient (API) and specialty chemicals sectors. It serves as a global supplier of various APIs, including Ibuprofen, Metformin, Clopidogrel, Lamotrigine, Pantoprazole, and FenoRs brate, alongside other APIs, and maintains a significant presence in all major therapeutic categories.

Given the increasing prevalence of lifestyle disorders and the demand for more affordable healthcare delivery methods, the need for APIs continues to rise. IOL effectively meets this demand and plays a crucial role in the pharmaceutical industry.

In the Specialty Chemicals division, IOL manufactures Ethyl Acetate, Iso Butyl Benzene (IBB), Mono Chloro Acetic Acid (MCA), and Acetyl Chloride. The Company is a leader in fostering green chemistry through its extensive production of Ethyl Acetate, a sustainable and environmentally friendly solvent. As one of the largest manufacturers globally, the Company plays a vital role in promoting the adoption of eco-friendly practices in various industries such as pharmaceuticals, printing, flexible packaging, adhesives, surface coatings, Rs avors, paints & lamination, and essences.

The Companys production facilities are in Barnala District, Punjab. Furthermore, IOLs R&D center equipped with modern analytical equipment is approved by the Department of Scientific and Industrial Research (DSIR). The Companys R&D efforts are centered around developing products that address the pharmaceutical industrys requirements for uninterrupted supply of superior quality products. This underscores the Companys commitment to pushing the boundaries of innovation and driving research and development initiatives. By focusing on promising innovations, IOL collaborates with innovators to deliver solutions that cater to the current and future drug needs of pharmaceutical companies worldwide.

SCOT Analysis



- Strong backward integration capabilities. - Long durational period for developing compounds and getting registrations for commercialization
- Maximizing export potential by filling DMFs and getting regulatory approvals
- Good long-term relationship with customers

- High-quality front-end team with strong regulatory and manufacturing capabilities

- Strained supply chain network across the world

- A strong balance sheet with no debt.
- Strong product pipeline in both the pharmaceutical and chemical sector - Volatility in the pricing of raw materials
- Ability to manage high scale complex operations



- Indian pharmaceuticals and chemical companies getting increased outsourcing opportunities, fuelled by the China+1 strategy

- Increasing energy and raw material prices because of the volatile nature of the changing global scenario, worsened by the Russia- Ukraine conflict

- Increasing domestic needs that are unmet due to the supply chain disruption owing to the disturbed geographical scenario can be met by the domestic producers

Risk Management

Please refer page 20 in the non-statutory section for details.

Financial Performance

During the year under review, the Company experienced steady growth in total income, reaching Rs 2,243 crores, a slight increase compared to Rs 2,216 crores in the previous year.

Segmental Revenue

The pharmaceutical segment accounted for approximately 57% of our total revenue, showing an improvement from around 46% in the previous year. Meanwhile, the chemicals segment contributed to approximately 43% of our total revenue, a decrease from the approximately 54% share it held last year.


Our EBITDA for the year amounted to Rs 252 crores, representing a decline from the Rs 288 crores achieved in the previous year. This decrease was primarily due to the rise in costs associated with raw materials, fuel, and energy.

Net Profit After Tax

During the year, our company generated a net profit after tax of Rs 140 crores, compared to Rs 166 crores earned in the previous year.

Balance Sheet

Share Capital: The Companys paid-up equity share capital as of 31st March, 2023, stands at Rs 58.71 crores, divided into 5,87,05,502 equity shares of Rs 10/- each. There have been no changes in the capital during the FY 2022-23.

Other Equity The reserves and surplus for the FY 2022-23 amounted to Rs 1448 crores, compared to Rs 1,332 crores in the previous year.

Net Worth: The Companys net worth has increased to Rs 1507 crores in FY 2022-23 from Rs 1,390 crores at the end of FY 2021-22.

Borrowings: The Company had no long-term secured or unsecured borrowings as of the end of FY 2022-23. There are no outstanding balances on any term loans.

Short-term secured borrowings at the end of FY 2022-23 amounted to Rs 80 crores, compared to Rs 43 crores at the end of FY 2021-22.


Non-Current Assets: The Companys total non-current assets, including capital work in process, increased to Rs 1,102 crores as of 31st March, 2023, from Rs 882 crores as of 31st March, 2022, net of depreciation and additions.

Current Assets and Current Liabilities: As of 31st March, 2023, the Company had inventories amounting to Rs 326 crores, compared to Rs 410 crores as of 31st March, 2022. Trade receivables stood at Rs 505 crores, an increase from Rs 470 crores in the previous year. Trade payables amounted to Rs 314 crores, compared to Rs 409 crores as of 31st March, 2022. These changes are in line with the overall increase in operations.

Cash Flows: For the year ended 31st March, 2023, the Company had a net cash flow from operating activities of Rs 123 crores, compared to a net cash flow used in operating activities of Rs 91 crores in the previous year.

The Companys net cash used in investing activities amounted to Rs 119 crores for the year ended 31st March, 2023, compared to Rs 121 crores in the previous year.

During the year ended 31st March, 2023, net cash used in financing activities amounted to Rs 4 crores, an increase from Rs 2 crores in the previous year.

Ratio Analysis


FY 2021-22 FY 2022-23
Operating Profit Margin (EBITDA) (in %) 13.01 11.24
Net Profit Margin (in %) 7.58 6.31
Return on Average Net Worth (in %) 12.50 9.66
Trade Receivable Turnover 5.66 4.53
Inventory Turnover Ratio 5.05 4.99
Current Ratio 2.10 2.02

People-Centric Culture

With a workforce of over 2,600 employees as of 31st March, 2023, IOL values its human capital and strives to provide a quality workplace. The Company fosters an inclusive environment, embracing diversity and ensuring equal opportunities through regardless of their gender, age and background.

IOL prioritizes employee engagement through various communication channels, town hall meetings, and committees, while comprehensive training and development programs cater to individual needs and promote career progression. Wellness programs, including yoga sessions and team-building activities, support work-life balance and enhance physical and mental well-being.

The Company continually enhances the employee experience based on insights from surveys, and it has comprehensive rewards and recognition programs that acknowledge exceptional contributions. With a strong commitment to safety and well-being, IOL adheres to ethical principles and standards, ensuring a positive work environment and sustainable growth.

Internal Control System and Their Adequacy

The Company has aligned its current systems of internal controls including financial controls with the requirement of Companies Act 2013. The Companys internal controls are commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance of corporate policies.

The Company uses best IT system to record data for accounting, consolidation and management information purposes and connects to different locations for efficient exchange of information.

The Audit Committee reviews reports submitted by internal auditors regularly and suggest the improvements from time to time which are being implemented by the Company.

Cautionary Statement

Statements in Management Discussion and Analysis describing Companys objectives, projections, estimates and expectations may be "Forward-Looking Statements" within the meaning of applicable laws & regulations. Actual results may differ materially from those expressed or implied. Important factors that could make a difference to companys operations include but are not restricted to the economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which Company operates, changes in the Government regulations, tax laws, and other statues, as also other incidental factors.