Ipca Laboratories Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

a. Industry Structure and Development

The global economy is currently navigating multiple challenges ranging from geo-political conflicts, raising crude prices, geo-political tariff threats, inflation concerns and supply chain challenges. Inspite of these global multiple challenges, it is heartening to note that the Indian economy is showing resilience. The inflation and foreign exchange pressures are largely balanced by the steady GDP growth and expectation that the Indian economy will remain amongst the fastest growing large economy in FY27 despite these headwinds.

b. Industry Structure and Development

The global pharmaceutical market currently stands at about US$ 1.75 trillion and is projected to cross US $ 2 trillion by 2030. The global generic pharmaceutical market currently stands at about US $ 500 billion and is projected to grow at a compounded annual growth rate of about 6% to 8% over the next decade.

On the other hand, the Indian pharmaceutical market is valued at about US$ 60 billion and is expected to reach about US$ 120 billion by 2030. Indian pharma sector is the 3^rd largest by volume and 14^th largest by value, globally. Key growth drivers include surge in chronic therapy demand, expansion into bio-similars and rapid growth of CDMO segment.

Pharmaceutical industry has emerged as one of the fastest growing industry in the world. The global pharmaceutical industry has shown rapid growth over the years driven by factors such as an aging population, increasing prevalence of chronic diseases, advancement in technology, raising healthcare awareness and expenditure fueled by expanding middle-class population seeking better access to healthcare. As people live longer, there is higher demand for medications to manage and treat conditions such as cardiovascular diseases, diabetes and autoimmune diseases.

Indian pharmaceutical exports play a significant role in the growth of the Indian economy and account for 6% of Indias total merchandise exports by value. The Indian pharma industry also supports about 2.7 million livelihoods, directly or indirectly. Because of the low price and high quality, Indian medicines are preferred worldwide, thereby rightly making the country the pharmacy of the world. Nearly half of the Indias pharmaceutical exports are directed to highly regulated markets such as Europe and United States. India is one of the biggest supplier of low cost vaccines in the world.

India has a large and strong pharma industry with more than 10,000 manufacturing units with about 650 of them USFDA compliant, largest number outside the United States. The Indian pharma industry currently ranks 3^rd in the world by volume and supports close to 40% of the generic formulations demand in the US and 25% of all medicines in the United Kingdom.

Indian pharma industry is highly diverse industry manufacturing bulk drugs, generic formulations, over the counter medications, vaccines, bio-similars and biologics. India has also emerged as the medical tourism hub of the world providing cost effective treatments with latest technology.

The Government of India has set an ambition to become a US$ 30 trillion economy by 2047, coinciding with 100^th year of Indian independence. With its robust global footprint, pharmaceutical industry is a critical component of this growth strategy and is expected to contribute significantly towards this objective.

India is the largest global supplier of generic medicines fulfilling about 20% of global demand. However, Indian global generic formulations business still lags from value perspective and need to transition from volume to value driven model by exporting high value formulations such as bio-similars. Transition from volume to value will be critical for Indian pharmaceutical sector to secure its place amongst worlds top pharmaceutical exporter in value term. Indian pharma manufacturers are expected to strengthen their global presence through continued innovation, technological advancements and production capacity expansions.

c. Outlook, Risks and Concerns

In the global pharmaceutical sector, India is a significant and rising player. Indian pharma industry is now mature with decades of experience in bulk drugs and generics manufacturing catering to the global needs. The Indian pharma industry has the experience and know-how to produce quality drugs in an efficient, high quality and cost effective manner. Indias rich human capital is the strongest assets of the Indian pharmaceutical industry.

Despite the challenges, Indian pharma industry aims to become the worlds largest by volume and rank amongst the top five pharma market by value. This ambitious goal if realized will not only boost Indias economy but also contribute significantly to global health security by providing affordable medicines to both developed and developing nations.

The Indian pharma industry has marked a decisive shift by positioning itself to capitalize on global patent cliff and is looking beyond the traditional generic play. Indian pharma industry has also signaled a strong intent in the blooming GLP-1 space besides joining the global bio-similar band wagon with the strategic initiative to expand and consolidate its presence in the coming years. Thus, Indian pharmaceutical export market is all set to transform on a massive scale driven by strong cost effective production capabilities, focus on research & innovation and government policy that supports the industry.

However, poor public healthcare funding and infrastructure, low per capita consumption of medicines in emerging economies including India, currency fluctuations, geo-political conflicts and resultant increase in the energy and logistics costs, regulatory issues, government mandated price control, trade and tariff barriers, inflation and resultant all round increase in input costs are a few causes of concern.

During the year under report, there was no change in the nature of Companys business.

d. Financial Performance and Operations Review

During the financial year under report, the Company registered on a standalone basis a total income of Rs.7431.39 Crores as against Rs.6749.21 Crores in the previous year, a growth of 10.11%. On a consolidated basis, the total income of the Company has increased by 8.73% to Rs.9820.78 Crores as against Rs.9032.39 Crores in the previous financial year.

During the financial year under report, the Earnings before interest, depreciation, exceptional items and tax expense on a standalone basis amounted to Rs.1874.93 Crores as against Rs.1596.32 Crores in the previous financial year. The operations have resulted in a net profit of Rs.1132.52 Crores (after exceptional items) during the financial year under report as against Rs.650.76 Crores in the previous financial year, an increase of 74.03%.

On a consolidated basis, the Earnings before interest, depreciation, exceptional items and taxation amounted to Rs.2153.01 Crores as against Rs.1818.94 Crores in the previous financial year. The consolidated operations have resulted in a net profit of Rs.1191.37 Crores (after exceptional items) during the financial year under report as against Rs.787.53 Crores in the previous financial year, an increase of 51.28%.

Break-up of Sales (standalone)

					(Rs. Crores)
	2025-26				2024-25
	Domestic	Exports	Total	Growth	Domestic	Exports	Total	Growth
Formulations	3817.24	2082.58	5899.82	10%	3455.10	1918.58	5373.68	10%
APIs & Intermediates	348.89	1046.85	1395.74	10%	375.46	890.38	1265.84	1%
Total Sales	4166.13	3129.43	7295.56	10%	3830.56	2808.96	6639.52	8%
Growth	9%	11%	10%		12%	4%	8%

Key Financial Ratios (standalone)

	31st March, 2026	31st March, 2025
1. Debtors Turnover Ratio	5.98	6.05
2. Inventory Turnover Ratio	1.14	1.18
3. Interest Coverage Ratio	43.93	20.67
4. Current Ratio	2.82	2.66
5. Debt Equity Ratio	0.03	0.13
6. Operating Profit Margin (%)	21.51%	18.89%
7. Net Profit Margin (%)	15.24%	9.64%
8. Return on Net Worth (%)	14.19%	9.44%

Due to business growth, mainly in the formulations business, where the value addition is better, there is an improvement in most of the key financial ratios as compared to the previous financial year. Due to repayment of the borrowings, interest coverage ratio and debt equity ratio have also improved.

e. Domestic Formulations Business

The Companys branded formulations business in India now comprises of 22 marketing divisions focusing on key therapeutic segments with a portfolio of about 172 brands. Your Company is now the 16^th largest in the domestic formulations market as per IQVIA - MAT March, 2026. 6 formulation brands of the Company are featuring in the list of 300 top selling formulation brands in the country.

In order to increase the coverage and facilitate launch of new therapy divisions and new products, the Company has been adding medical representatives in the domestic market.

During the financial year under report, the domestic formulations business recorded a growth of 10% at Rs.3817.24 Crores as against Rs.3455.10 Crores in the previous year.

Domestic Branded Formulations - Therapeutic Contribution

	2025-26	2024-25
Therapeutic segment	% to sales	% to sales
Pain Management	53%	53%
Cardiovasculars & Anti-diabetics	17%	17%
Anti-malarials	2%	3%
Anti-bacterials	5%	5%
Dermatology	6%	6%
Gastro Intestinal (G I) products	2%	2%
Cough Preparations	4%	4%
Neuro Psychiatry	4%	3%
Urology	5%	5%
Nutraceuticals	1%	1%
Others	1%	1%
Total	100%	100%

f. International Business

The products of the Company continue to be exported to over 100 countries across the globe. During the financial year under report, the international business amounted to Rs.3129.43 Crores as against Rs.2808.96 Crores in the previous year, a growth of 11%. Formulation exports of the Company have increased by 9% to Rs.2082.58 Crores and exports of APIs and Drug Intermediates have increased by 18% to Rs.1046.85 Crores.

Continent-wise Exports

					(Rs. Crores)
	2025-26				2024-25
Continent	Formulations	APIs and Intermediates	Total	% to exports	Formulations	APIs and Intermediates	Total	% to exports
Europe	522.75	361.84	884.59	28%	525.00	281.11	806.11	29%
Africa	538.56	55.92	594.48	19%	502.30	43.40	545.70	19%
Americas	344.03	321.30	665.33	21%	267.43	268.57	536.00	19%
Asia	134.66	263.51	398.17	13%	137.22	254.64	391.86	14%
CIS	228.21	40.97	269.18	9%	210.42	35.84	246.26	9%
Australasia	314.37	3.31	317.68	10%	276.21	6.82	283.03	10%
Total	2082.58	1046.85	3129.43	100%	1918.58	890.38	2808.96	100%

Europe

The Company achieved European export sales of Rs.884.59 Crores during the financial year under report as against sales of Rs.806.11 Crores in the previous year, a growth of 10%.

The Company has developed and submitted 65 generic formulation dossiers for registration in Europe out of which 60 dossiers are registered. The Company has also obtained Certificate of Suitability (COS) of 62 APIs from European Directorate for Quality Medicines (EDQM).

The Company has started marketing generic formulations in the United Kingdom in its own label and this business is progressing on expected lines with several more generic formulations lined up for registration/commercialization.

Africa

The Company achieved export sales of Rs.594.48 Crores to Africa during the financial year under report as against Rs.545.70 Crores in the previous year, a growth of 9%.

The Company exports branded and generic formulations as well as APIs to many African countries. The Company markets branded formulations in Africa through dedicated field force. The Company also supplies generics formulations to South Africa.

The Company is expanding its branded formulations business in this continent through expansion of geographical coverage and increase in the number of branded formulations marketed. Your Company is also is in the process of expanding its field force in this continent. The Company is also continuously filing new formulation dossiers for registration in the African countries.

Americas

The Company achieved sales of Rs.665.33 Crores in this continent as against Rs.536.00 Crores in the previous year, a growth of 24%. The Company has commercialized its APIs and formulations in the US market post lifting of import alert on the Companys manufacturing facilities at Ratlam, Piparia (Silvassa) and SEZ Indore. Few of the formulations manufactured by the Company are currently marketed in the US market and few more formulations are currently in the process of commercialization. Unichem Pharmaceuticals (USA) Inc., Companys step-down subsidiary is marketing/distributing the formulations manufactured by the Company in the US market.

46 ANDA applications of generic formulations developed by the Company are filed with US FDA out of which 32 ANDA applications are granted till date. 50 DMFs of the Company are also currently filed with US FDA.

Asia

The Asian business (excluding India) recorded sales of Rs.398.17 Crores as against Rs.391.86 Crores in the previous year, a growth of 2%. The Company exports formulations as well as APIs to several Asian countries. In countries like Nepal, Sri Lanka, Myanmar, Philippines and Vietnam, the Company markets its branded formulations through dedicated field force.

Confederation of Independent States (CIS)

The Companys CIS business recorded sales of Rs.269.18 Crores as against Rs.246.26 Crores in the previous year, a growth of 9%. Most of the business is from branded formulation sales in Russia, Kazakhstan and Belarus. The Companys branded formulations are marketed in this continent by its own field force appointed through its non-trading offices.

But for the continuing geo-political conflict, the Companys export business in this sub-continent could have been even better.

Australasia

The Company exports APIs to Australia and formulations to Australia and New Zealand in this sub-continent. The business from this continent was Rs.317.68 Crores during the financial year under report as against Rs.283.03 Crores in the previous year, a growth of 12%.

The Company has developed and submitted 78 generic formulation dossiers for registration in this market out of which 76 dossiers are registered.

g. Active Pharmaceutical Ingredients (APIs) and Intermediates Business

During the financial year under report, the APIs and Intermediates business recorded sales of Rs.1395.74 Crores as against Rs.1265.84 Crores in the previous financial year. Nearly 75% of the APIs and Intermediates business is from exports.

The Company exports its APIs across the globe. Most of the international customers of the Company are end user formulations manufacturers including several multinational companies.

Your Company continue to commercialize new APIs for the global market.

h. Intellectual Property Protection

The Company has created intellectual property management group within the Research and Development centers to deal with management and protection of intellectual property. The Company has filed many patent applications till date in India, USA and other countries. These applications relate to novel and innovative manufacturing processes for the manufacture of APIs and pharmaceutical formulations.

i. Internal Control Systems and its adequacy

The Company has adequate internal control systems including suitable monitoring procedures commensurate with its size and the nature of the business. The internal control systems provide for all documented policies, guidelines, authorization and approval procedures. The Company has an internal audit department which carries out audits throughout the year. The statutory auditors while conducting the statutory audit, review and evaluate the internal controls and their observations are discussed with the Audit committee of the Board.

j. Human Resources

The human resource plays a vital role in the growth and success of an organization. The Company has maintained cordial and harmonious relations with employees across various locations.

During the year under review, various training and development workshops were conducted to improve the competency level of employees with an objective to improve the operational performance of individuals. The Company has built a competent team to handle challenging assignments. The Company strives to enhance the technical, work related and general skills of employees through dedicated training programs on a continuous basis.

The Company has 18,667 permanent employees (including 1,035 overseas employees) as on 31^st March, 2026. Out of this, 10,308 employees are engaged in the marketing and distribution activities.

k. Cautionary Statement

Certain statement in the management discussion and analysis may be forward looking within the meaning of applicable securities law and regulations and actual results may differ materially from those expressed or implied. Factors that would make differences to Companys operations include competition, price realization, currency fluctuations, regulatory issues, changes in government policies and regulations, tax regimes, economic development within India and the countries in which the Company conducts business and other incidental factors.