Ipca Laboratories Ltd Management Discussions.

a. Industry Structure and Development

The global pharmaceutical market is estimated to be about US$ 1.3 trillion and was hitherto comfortably growing at a CAGR of about 4%. However, it is to be seen how the Covid -19 pandemic, which has caused unprecedented economic disruption and has put tremendous pressure on healthcare system globally, will impact this industry going forward.

Though, the pharmaceutical industry is developing at a rapid pace, this growth wont come easily for the industry that is heavily influenced by healthcare reforms, cost pressure, economic and political fluidity, public demand for lower cost treatment, economic consolidation, increased competition and changing regulatory landscape with increased scrutiny.

The market growth for pharmaceuticals globally was led by 1% plus annual global increase in the population and ageing at the same time. The increasing urbanization and growing middle income population making drugs available and affordable for more people has also lead to this market growth. As population ages due to increasing life expectancy, people require pharmaceuticals to treat their chronic illness, spurring demand for industry products in future.

Thanks to advances in science and technology, the research based pharmaceutical industry is entering an exciting new era in medicine development. The research methods are evolving and the innovative pharmaceutical industry aims to turn fundamental research into innovative treatments that are widely available and accessible to patients.

b. Outlook, Risks and Concerns

The Indian pharmaceuticals industry is globally respected and is one of the most successful industries in the country. It has contributed significantly to the global healthcare by ensuring quality, accessible and affordable generic medicines around the globe. It has also immensely contributed to Indias economic growth.

Although economic woes of certain geographies are impending the pharmaceutical market growth, the long term outlook for the industry remains positive. The industry growth is driven by ageing population and ever growing middle income group in emerging economies boosting demand for the pharmaceuticals. Additionally, the emergence of new viruses, the latest being SARS-CoV-2 and drug resistant infections, biological agents, immune therapies, etc. will spur research and development activities providing the industry with more products in their drug pipeline with revenue and growth streams.

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. India is also the largest provider of vaccines and generic drugs in the global market.

I ndian 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 under developed countries including India, currency fluctuations, regulatory issues, government mandated price controls, inflation and resultant all round increase in input costs are few causes of concern.

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

c. Financial Performance and Operations Review

During the financial year under report, the Company registered on a standalone basis a total income of 4432.12 crores as against 3687.74 crores in the previous year, a growth of 20%. On a consolidated basis, the total income of the Company has increased by 23% to 4715.71 crores as against 3830.86 crores in the previous financial year.

During the financial year under report, the Earnings before interest, depreciation and taxation on a standalone basis amounted to 979.45 crores as against 747.76 crores in the previous financial year. The operations have resulted in a net profit of 652.46 crores during the financial year under report as against 454.91 crores in the previous financial year, a growth of 43%.

On a consolidated basis, the Earnings before interest, depreciation and taxation amounted to 965.89 crores as against 747.75 crores in the previous financial year. The consolidated operations have resulted in a net profit of 603.56 crores during the financial year under report as against 442.22 crores in the previous financial year, a growth of 36%.

The Companys formulations manufacturing sites at Silvassa and SEZ Indore and APIs manufacturing site at Ratlam continue to be under US FDA import alert. However, the US FDA has recently given exemption from import alert to APIs Chloroquine Phosphate and Hydroxycholoroquine Sulphate manufactured at the Companys Ratlam APIs manufacturing site and formulations of Hydroxychloroquine Sulphate manufactured at Companys SEZ Indore and Piparia (Silvassa) manufacturing sites.

The US FDA recently inspected the Companys formulations manufacturing unit situated at Piparia (Silvassa). This inspection resulted into issue of 3 observations in Form 483 by US FDA. Your Company has submitted comprehensive response to these observations to the US FDA. The Company is awaiting re-inspection by US FDA of its other two manufacturing facilities which are under import alert.

The Company has implemented comprehensive remedial measures at all its manufacturing sites to ensure quality and regulatory compliances. These remedial measures included review of all processes and procedures, revamping of training system, recruitment of senior quality personnel as well as automation of quality control laboratories. The Company is committed to its philosophy of highest quality in manufacturing, operations, systems, integrity and cGMP culture.

Except US FDA import alert on three of its manufacturing sites, none of the Companys manufacturing sites have any outstanding regulatory or compliance issues with any other regulatory agency.

Break-up of Sales (standalone)

( Crores)



Domestic Exports Total Growth Domestic Exports Total Growth
Formulations 1912.61 1221.55 3134.16 16% 1646.83 1048.26 2695.09 11%
APIs & Intermediates 250.93 922.20 1173.13 33% 201.98 682.58 884.56 18%
Total Sales 2163.54 2143.75 4307.29 20% 1848.81 1730.84 3579.65 13%
Growth 17% 24% 20% 15% 11% 13%

d. Key Financial Ratios (standalone)

31st March, 2020 31st March, 2019
1. Debtors Turnover Ratio 5.86 5.84
2. Inventory Turnover Ratio 3.11 3.21
3. Interest Coverage Ratio 62.91 41.39
4. Current Ratio 2.18 2.25
5. Debt Equity Ratio 0.11 0.11
6. Operating Profit Margin (%) 17.19% 14.86%
7. Net Profit Margin (%) 14.72% 12.34%
8. Return on Net Worth (%) 17.74% 14.50%

Due to increase in the sales and improvement in operational performance and efficiency, which has resulted into increased profitability, most of the above key financial ratios have improved substantially.

e. International Business

The products of the Company are now exported to over 100 countries across the globe. During the financial year under report, the international business amounted to 2143.75 crores as against 1730.84 crores in the previous year, a growth of 24%. Formulation exports of the Company increased by 17% to 1221.55 crores and exports of APIs and Drug Intermediates increased by 35% to 922.20 crores.

Continent-wise Exports




Formulations APIs and Intermediates Total % to exports Formulations APIs and Intermediates Total % to exports
Europe 390.95 244.53 635.48 30% 311.89 220.93 532.82 31%
Africa 308.93 34.00 342.93 16% 265.03 39.47 304.50 18%
Americas> 119.56 312.20 431.76 20% 90.13 206.77 296.90 17%
Asia 76.87 309.64 386.51 18% 87.04 200.32 287.36 17%
CIS 167.33 17.16 184.49 9% 156.43 9.24 165.67 9%
Australasia 157.91 4.67 162.58 7% 137.74 5.85 143.59 8%
Total 1221.55 922.20 2143.75 100% 1048.26 682.58 1730.84 100%

Formulation Exports - Therapeutic Contribution

Therapeutic Group 2019-20 2018-19
Cardiovasculars & Anti-diabetics 31% 29%
Pain Management 20% 21%
Anti-malarials 19% 18%
Anti-bacterials 6% 9%
Anthelmintics 8% 8%
Central Nervous System (CNS) products 6% 6%
Gastro Intestinal (G.I) products 4% 3%
Cough Preparations 2% 2%
Others 4% 4%
TOTAL 100% 100%


The Company achieved European export sales of 635.48 crores during the financial year under report as against sales of 532.82 crores in the previous year, a growth of 19%.

The Company has developed and submitted 62 generic formulation dossiers for registration in Europe out of which 61 dossiers are registered. The Company has also obtained certificate of suitability (COS) of 46 APIs from European Directorate for Quality Medicines.


The Company achieved export sales of 342.93 crores to Africa during the financial year under report as against 304.50 crores in the previous year, a growth of 13%.

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. The Company is also continuously filing new formulation dossiers for registration in the African countries.

As informed in the previous year,The Global Fund has once again selected your Company as their panel supplier of anti-malarial medicines for the Global Fund Pooled Procurement mechanism and private sector copayment mechanism and their orders for anti-malarial medicines have now started coming. Your Company has now started manufacturing and supplying of recently pre-qualified formulations of Artemether + Lumefantrine dispersible tablets and Artesunate Injectible to various institutions.

The Company has filed 64 dossiers of generic formulations for registration in South Africa out of which 42 dossiers are registered till date.


The Company achieved sales of 431.76 crores in this continent as against 296.90 crores in the previous year, a growth of 45%. As reported earlier, the US formulations and APIs business continues to be impacted due to ongoing US FDA import alert for three of the Companys manufacturing facilities.

46 ANDA applications of generic formulations developed by the Company are filed with US FDA out of which 18 ANDA applications are

granted till date. 46 DMFs of the Company are also currently filed with US FDA.


The Asian business (excluding India) recorded sales of 386.51 crores as against 287.36 crores in the previous year, a growth of 35%. 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 184.49 crores as against 165.67crores in the previous year, a growth of 11%. Most of the business is from branded formulation sales in Russia, Ukraine, Kazakhstan and Belarus. The Companys branded formulations are marketed in this continent by its own field force appointed through its non-trading offices.


The Company exports APIs to Australia and formulations to Australia and New Zealand in this sub-continent. The business from this continent was 162.58 crores during the financial year under report as against 143.59 crores in the previous year, a growth of 13%.

The Company has developed and submitted 75 generic formulation dossiers for registration in this market out of which 72 dossiers are registered.

f. Domestic Formulations Business

The Companys formulations business in India now comprises of 15 marketing divisions focusing on key therapeutic segments. Your Company is now the 19th largest in the domestic formulations market as per IMS Health - MAT March, 2020.

During the financial year under report, the domestic formulations business recorded a growth of 16% at 1912.61 crores as against 1646.83 crores in the previous year.

Domestic Branded Formulations - Therapeutic Contribution

Therapeutic segment 2019-20 2018-19
% to sales % to sales
Pain Management 47% 46%
Cardiovasculars & Anti-diabetics 18% 20%
Anti-malarials 6% 6%
Anti-bacterials 8% 7%
Dermatology 5% 5%
Gastro Intestinal (G I) products 3% 4%
Cough Preparations 4% 4%
Neuro Psychiatry 3% 3%
Urology 3% 3%
Neutraceuticals 1% 1%
Others 2% 1%
Total 100% 100%

g. Active Pharmaceutical Ingredients (APIs) and Intermediates Business

During the financial year under report, the APIs and Intermediates business recorded sales of 1173.13 crores as against 884.56 crores in the previous financial year, a growth of 33%. Nearly 79% 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 is in the process of commercializing several new APIs for the global market.

h. New APIs manufacturing unit at Dewas (M.P.)

The Company is in the process of setting up a new APIs manufacturing unit at Dewas (M.P.) with an initial capital outlay of about Rs. 250 crores. The land for this project has been acquired and the Company is currently in process of obtaining the environmental approvals.

i. 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.

j. 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.

k. 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 14,066 permanent employees (including 707 overseas employees) as on 31st March, 2020 out of which 6681 employees are engaged in the marketing and distribution activities.

l. 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.