J B Chemicals & Pharmaceuticals Ltd Management Discussions

1. GLOBAL ECONOMY

The global economy remained resilient in CY 2025, growing at 3.4% despite geopolitical tensions, trade barriers, and supply chain adjustments. Inflation eased in major economies, and growth was supported by strong consumption, AI-related spending, and stockpiling of goods. Advanced economies grew modestly while emerging and developing economies maintained stronger momentum.

In CY 2026, global growth is expected to be lower at 3.1%, but risks persist from geopolitical conflicts, energy disruptions (including West Asia), and trade uncertainty. Stronger financial integration and policy buffers will be key for stability.1

2. INDIAN ECONOMY

India remained one of the fastest-growing major economies in FY 2025, with GDP growth of 7.6%, driven by strong consumption and investment. Inflation eased sharply, supporting real incomes and urban demand.2 Manufacturing grew 8.6% and services 9.3%, with robust domestic demand and stable macroeconomic conditions.

Key trade developments included progress on the India–EU FTA and a framework agreement with the US, supporting market access and supply chain resilience. Looking ahead, growth is expected to remain steady, supported by domestic demand, improving investment sentiment, and policy stability despite global uncertainties.

3. MIDDLE EAST CRISIS

The ongoing conflict in the Middle East has transitioned from a geopolitical risk to a significant macroeconomic issue. The International Monetary Fund, International Energy Agency, and World Bank collectively identify it as among the most substantial disruptions to energy supply in recent history.

The resulting impact is predominantly being transmitted through considerable reductions in oil and gas supplies, causing sustained increases in energy prices that are already contributing to global inflation. In addition to these immediate effects, elevated gas prices are raising fertiliser costs, exerting further upward pressure on food prices and intensifying inflationary risks, particularly within emerging markets.

Simultaneously, disturbances to key energy trade routes, alongside increased shipping and insurance expenses, are driving up commodity delivery costs and further tightening global financial conditions. The IMF has also underscored the heightened risks of currency volatility and capital outflows in energy-importing economies due to deteriorating external balances.

Importantly, the persistence of these issues suggests that market adjustment is more likely to occur through demand contraction rather than a rapid recovery in supply, indicating a likely slowdown in global growth. This scenario creates a stagflationary environment, where inflation remains high even as economic momentum weakens.

4. INDUSTRY OVERVIEW

The global pharmaceutical industry witnessed moderated growth during the year amid persistent geopolitical tensions and volatility in commodity markets. These factors continued to impact supply chains, inflation dynamics, and financial conditions, resulting in a cautious near-term outlook.

Despite macroeconomic headwinds, healthcare demand remained structurally resilient, supported by rising prevalence of chronic diseases, ageing populations, and increasing emphasis on preventive care. In India, strong economic activity and improving healthcare access supported earlier diagnosis, improved treatment adherence, and sustained therapy outcomes.

The Indian pharmaceutical market recorded growth of 10% in FY26. As per IQVIA MAT March 2026 data, the chronic segment continued to outperform with 14% growth compared to 7% growth in the acute segment.

5. BUSINESS ENVIRONMENT AND STRATEGIC CONTEXT

The industry continues to be driven by chronic and lifestyle therapies, particularly in cardiovascular and metabolic segments. Expansion of healthcare access, rising diagnosis rates, and deeper penetration across urban and semi-urban markets are reshaping demand dynamics.

At the same time, increasing regulatory expectations, evolving quality standards, and a shift toward complex formulations are redefining industry competitiveness. In this environment, execution excellence, portfolio strength, and scale remain key determinants of sustainable performance.

Accordingly, the Company has continued to strengthen its chronic franchise, expand its differentiated brand portfolio, and reinforce its leadership in medicated lozenges.

6. DOMESTIC FORMULATIONS BUSINESS

The Domestic Formulations business delivered steady growth of 9% during FY26.

As per IQVIA MAT March 2026, the Company outperformed the Indian Pharmaceutical Market with 11% growth versus industry growth of 10%, retaining its 22nd ranking.

Portfolio Strength

The Company has progressively diversified its portfolio, resulting in improved revenue resilience and reduced dependence on a limited set of brands.

Key highlights include:

6 mega brands with annual sales exceeding H 100 crores

Multiple emerging high-potential brands

6 brands ranked among the Top 300 IPM brands

Go-to-Market Strengthening

The Company continues to enhance field productivity, prescriber engagement, and brand equity creation. PCPM improved to H 8.5 lakhs in FY26 from H 8 lakhs in FY25.

The Company engages with approximately 345,000 healthcare professionals across key specialties, supporting sustained prescription momentum and broad market reach.

Chronic Therapy Leadership

Chronic therapies now account for 50% of domestic revenues in FY26. The chronic portfolio grew 19%, outperforming industry growth of 14%.

The Company has strengthened its position among leading chronic therapy players, with strong performance in cardiology. Key brands, including Cilacar and Nicardia, continue to deliver sustained growth ahead of market benchmarks.

Brand Leadership

Six flagship brands continue to feature among the Top 300 IPM brands, contributing approximately ~59% of domestic revenue.

Core brands maintain strong leadership positions across key therapy areas, supported by sustained physician trust and consistent market performance.

Acquisition-led Growth

The Company continues to pursue value-accretive acquisitions to strengthen its portfolio and enhance exposure to high-growth therapy areas. These initiatives are well integrated and continue to support overall business growth through improved scale and portfolio diversification.

7. INTERNATIONAL BUSINESS

The Company operates across diversified international markets, with direct presence in Russia and South Africa and distributor-led operations across key global regions including the United States, Asia, Africa, and Latin America.

It is among the leading global manufacturers of medicated and herbal lozenges and a key CDMO partner to global healthcare and consumer health companies.

International business grew ~2% to H 1,67,425 lakhs in

FY26. International formulations grew ~2% to H 115,343 lakhs, while CDMO and API segments contributed H 44,549 lakhs and H 7,533 lakhs respectively.

8. BUSINESS OUTLOOK

The Indian economy is expected to remain resilient despite global uncertainties. The pharmaceutical market is projected to grow in the range of 8–10%, driven primarily by chronic therapies, with a potential recovery in acute therapies providing additional support.

The Company will continue to focus on strengthening brand franchises, expanding its chronic portfolio, and improving operational productivity. Internationally, growth will be driven by branded generics expansion, CDMO scale-up, and pipeline development.

The Company remains well positioned for sustained long-term growth.

9. RISK MANAGEMENT

The Company operates in a dynamic environment characterized by regulatory, currency, cybersecurity, and operational risks inherent to the pharmaceutical industry.

A structured risk management framework is in place, which is periodically reviewed to ensure timely identification, assessment, and mitigation of risks.

10. INTERNAL CONTROLS AND GOVERNANCE FRAMEWORK

The Company maintains a robust internal control framework to ensure safeguarding of assets, accuracy of financial reporting, and compliance with applicable accounting standards and regulatory requirements.

Internal audits are conducted by independent professionals, with findings reviewed by the Audit Committee and the Board of Directors.

The internal control environment is considered adequate and commensurate with the scale and complexity of operations.

11. HUMAN RESOURCES

The relationship with employees and workers continued to be cordial at all levels. As on March 2026 , permanent employees strength; and temporary employees strength was 5,602 and 2,304; respectively. There has been no material development on industrial relations front.

12. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Consolidated financial performance of the Company for the financial year ended March 31, 2026, is summarized below:

( Rs.in Lakhs)

Parameter	2025-26	2024-25	Growth (%)
Revenue from operations	4,14,779	3,91,799	6
Total income	4,20,794	3,95,631	6
Operating EBITDA (excl ESOP expenses and exceptional items)	1,17,845	1,08,674	8
Reported EBITDA	1,08,026	1,03,184	5
Profit before tax and exceptional item	97,951	88,739	10
Profit before tax	95,233	88,739	7
Profit after tax	70,947	65,958	8

Note:

During the year under review, the Company registered revenue growth of 6%. While domestic business grew 9% international business recorded growth of 2%. The operating EBITDA (excluding ESOP expenses and exceptional items) witnessed an improvement of 8.4 % to INR 117,845 lakhs vs INR 108,674 lakhs in FY25. The Reported EBITDA increased by 4.7 % to 108,026 lakhs.

13. KEY FINANCIAL RATIONS

The key financial ratios for FY26, along with changes compared to the immediately preceding financial year, are presented below. Detailed explanations are provided where the change is 25% or more.

a) Current Ratio (Current assets / Current liabilities): 4.92 times as against 3.04 times in FY25.(@)

b) Debt-Equity ratio (Borrowings / Total Shareholders Equity): 0.001:1 times as against 0.008:1 times in FY25.(#)

c) Debt service coverage ratio (Earnings Available for Debt Services / (Finance Cost + Current borrowings including lease liabilities)): 106.06 times as against 26.29 times in FY25.($) d) Inventory Turnover ratio (Cost of Goods sold / Average inventory): 2.14 times as against 2.55 times in FY25.

e) Debtors Turnover ratio (Net Sales / Average account receivables): 5.20 times as against 5.22 times in FY25.

f) Operating Profit Margin (EBITDA excluding ESOP charge / Sales): 27.76% as against 27.74% in FY25.

g) Net Profit Margin (Net Profit / Net Sales): 17.10% as against 16.83% in FY25.

(@)Current ratio has improved primarily due to higher cash and cash equivalents.

(#)Debt equity ratio has improved on account of reduction of lease liabilities ($)Debt Service Coverage Ratio has improved on account of reduced lease liability interest and Installment payments, lowering total debt servicing obligations.

14. RETURN ON EQUITY

Return on Equity for the year was 17.06%, compared to 19.21% in the previous year.