Jenburkt Pharmaceuticals Ltd Management Discussions.

a. Overview of Indian pharmaceutical industry structure, development and important changes:

The Indian pharmaceutical industry has achieved significant growth in both domestic and global markets during the past five decades. From contributing just 5% of the medicine consumption in 1969 (95% share with the global pharma), the share of "Made in India" medicines in Indian pharmaceutical market is now a robust 80% in 2020. More importantly, during the same period, the country has also established a leading position in the global pharmaceutical market. The pharmaceutical sector has been contributing significantly to Indias economic growth as one of the top 10 sectors in reducing trade deficit and attracting the Foreign Direct Investment (FDI). The drugs and pharmaceuticals sector attracted cumulative FDI inflow worth US$16.54 billion between April 2000 and June 2020. The pharmaceutical industry in India contributes more than 20% by volume of the global generics market and 62% of the global demand forvaccines.

As per the trends so far, the Covid-19 pandemic is expected to have far-reaching effects globally. While it is difficult to predict with certainty the scale and spread of the Coronavirus disease. The impact on international economics, politics and society is significant .Policy makers are facing unprecedented challenges in financing health welfare programs. Many health systems are already stretched and underfunded. They have been further constrained by the increasing number of Covid-19 patients. It is difficult to predict how international economies will be affected over the coming months.

Ma ny cou ntries a re experiencing the second or third wave of the virus, resulting in new lockdowns and restrictions. Macroeconomic and geo-political changes due to the pandemic is adversely affecting economies across the world. Global GDP has shrunk.

As the entire world faces this unprecedented crisis this is an opportunity for the Indian pharma industry to consolidate on its competitive advantages and reignite innovation-led industrial growth.

Covid-19 has clearly highlighted the importance of a strong health care system, the lack of which can put an entire nations economy and society at risk. As India continues to fight Covid-19 and stabilize its economic growth trajectory, it is the right time for the country to apply learnings from the challenges that emerged during the pandemic. There is a need to swiftly develop the required healthcare infrastructure and make it available to the entire population. The Indian pharma industry has been a key contributor in improving the countrys healthcare and economic outcomes. The pandemic has accelerated several opportunities and challenges for the industry. While the growing trust deficit with China presents an opportunity for India, there is increasing competition from other countries, such as Vietnam. India is also dependent on China for ~two third of its imports of bulk drugs or drug intermediaries. To emerge as a winner in the post-pandemic world, the industry needs to continue building on its strength and at the same time make a giant leap towards innovation. New capabilities need to be introduced across the business functions to bring efficiencies and to help industry move up the value chain. Government also needs to provide the right enablers and business environment conducive for growth.

Government Initiatives

Some of the initiatives taken by the Government to promote the pharmaceutical sector in India are as follows:

• In November 2020, Prime Minister, Narendra Modi dedicated two future-ready national premier Ayurveda institutions to the country to mark celebrations of the 5th Ayurveda Day. Also, World Health Organization (WHO) announced the setting up of the Global Centre of Traditional Medicine in India.

• On October 15, 2020, India and the Netherlands unveiled plans to collaborate with an aim to provide digital health facilities and security to all citizens. Part of Indias National Digital Health Mission (NDHM), through this cooperative initiative, the two countries will work closely to create capacities and put in place the requisite technology to enable this initiative.

• In September2020, the government announced production linked incentive (PLI) scheme for the pharmaceutical industry worth Rs.15,000 crore (US$ 2.04 billion).

• India plans to set up a nearly Rs.1 lakh crore (US$ 1.3 billion) fund to provide boost to companies to manufacture pharmaceutical ingredients domestically by2023.

• Under Budget 2020-21, Rs.65,012 crore (US$ 9.30 billion) has been allocated to the Ministry of Health and Family Welfare is. The Government has allocated Rs.34,115 crore (US$ 4.88 billion) towards the National Health Mission under which rural and urban people will get benefited.

• Rs.6,400 crore (US$ 915.72 million) has been allocated to health insurance scheme Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (AB- PMJAY).

• The National Health Protection Scheme is the largest Government funded healthcare programme in the world, which is expected to benefit 100 million poor families in the country by providing a cover of up to Rs.5 lakh per family per year for secondary and tertiary care hospitalisation. The programme was announced in Union Budget 2018-19.

• The Government of India is planning to set up an electronic platform to regulate online pharmacies under a new policy to stop any misuse due to easy availability.

• Government of India unveiled Pharma Vision 2020 to make India a global leader in end-to-end drug manufacture. Approval time for new facilities has been reduced to boost investment.

b. Business performance, opportunities and outlook:

The Indian pharmaceutical industry has proved to be a dependable supplier of quality drugs in a time of global need on account of the Covid-19 pandemic, and is expected to reach a size of $130 billion by 2030. Following the onset of the pandemic, the Indian pharmaceutical industry has shown its role as a reliable supplier of drugs and medical devices in a time of need. India has been serving more than 200 countries with its pharmaceutical products and will continue to do so. India will continue to strive to achieve and maintain a leadership position in the manufacturing and supply of high-quality generic medicines and medical devices.

FAVIVENT ~ Covid-19, had a significant impact globally and with immense pride we make a note that your Company played an important role in the fight against Covid-19. While the nation was suffering from severe lack of treatment options your Company with an intention to serve the nation was 02nd in the country to launch Favipiravir tablets a product for mild to moderate Covid-19, under the brand name FAVIVENT.

During these uncertain and scary times of the Covid-19 pandemic, your Company was committed to releasing a solution as a service to the Nation and its people and had to ensure Favivent was launched at almost half the market price at the time. Favivent was priced at Rs.39 / tablet while the only other product available then was at Rs.75 / tablet. Your Company always felt that this was a once in a lifetime opportunity to serve people and the nation even though Jenburkt was only the second to introduce this product in the country. Your Company followed its ethos given as a legacy by the founders - which is also strikingly reflected in the Companys mission and vision statement.

Your Company stood firm, with full support from the board of directors, entire leadership team and ensured that the product is freely available in spite of initial disturbances in availability.

Your Companys decision to price Favipiravir tablets so low , to serve the nation , not only prompted many to reduce the prices of their Favipiravir tablet, but also set the tone for pricing of future launch of 400 mg and 800 mg Favipiravir tablets, based on the low pricing of FAVIVENT 200 mg tablets.

Your Company also encouraged other pharmaceutical companies to price their Favipiravir tablets low - as it was the time for the Indian pharmaceutical industry to serve the nation and its people.

Your Companys move to serve the nation had a major impact on the Favipiravir tablet market, making the product available to so many at a very affordable price during these tough times. Many were benefited with the launch of FAVIVENT.

Your Company also encouraged an educative initiative through knowledge series webinars - named "Meet the COVID Warriors" - where leading intensivists and pulmonologists of national prominence, who have dealt with many COVID patients - held panel discussions and interactive regional sessions (in local languages) with doctors - essentially general physicians across the country. The idea behind this initiative was to make treating Covid-19 even at the smallest town possible - by educating and sharing the experiences of senior doctors - which would give local doctors the confidence and medical knowledge to treat a COVID patient. As the disease had spread to smaller towns of the country which have very limited infrastructure, patients are not getting admissions into hospitals and unable to access quality treatment. Hence it would be best to equip the local doctors with knowledge of the disease and new medicines available. The idea is to prevent mild COVID from progressing to moderate and moderate to severe. The webinars were free of charge for any participant.

This initiative was recognized by the industry and your Company won COVID FIGHTERS - PHARMA EXCELLENCE AWARD 2020 - Category - COVID MEDICAL EDUCATION INITIATIVES.

Your Company also donated FAVIVENT tablets to government hospitals, especially in Mumbai, so that the poor and needy could benefit from free availability of FAVIVENT.

The Municipal Corporation of Greater Mumbai acknowledged your Companys contribution in this fight against Covid-19 and recognized your Company as a COVID WARRIOR ~ a truly gratifying moment.

Covid-19, has brought various challenges in terms of very restricted and unpredictable mobility issues for our field force. Due to a sudden surge of cases, either a state or a district would be under lockdown preventing our medical representatives and managers to travel and meet doctors and stockists. So your Company has not been able to undertake a structured working in the field. This is over an above the challenges faced where doctors are either not practising or not willing to meet company representatives due to fear of getting infected.

Your Company did not launch any new product, except Favivent, as the doctors were not willing to meet and also due to restricted mobility.

All the recently launched new brands which were shaping up were affected as brand promotion activities could not be continued as required.

Many product segments were affected in terms of prescriptions as the occurrences of certain indications did not arose. Due to the lockdown people were at home and also travelled infrequently with restrictions, hence, instances of other infections did not occur. This was especially seen among children. There was a dramatic drop in cases of fungal infections, cases of cough ~ in both of which your Company was at an initial brand building stage and had been investing for last 2 years. A lot of elective surgeries and procedure were either cancelled or postponed. Pain killers, antacids prescriptions also saw a downfall due to this.

It has been only since November 2020 that private practitioners have started meeting patients in limited numbers. However since March 2020, due to the second wave of Covid-19, the work momentum which was building up again got adversely affected.

Due to the pandemic and due to the uncertainty brought about by it, your Company rationalised its number of headquarters in the field. Wherever it was felt it would take a long time for a particular geography to perform, your Company have either merged or discontinued. Once things normalise your Company would reassess the situation. This is a temporary setback on the revenue front due to the pandemic from the new geographies.

It was very heartening to see that despite of many challenges the plant was functioning and the supply chain and logistics team with full support from finance, HR and IT team ensured that our finish product supplies do not get affected.

Our investment in technology in ourvision to work remotely, even before the pandemic, paid off during the crisis.

Your Company made a beginning by making its presence felt on social media platforms like Instagram, Facebook, LinkedIn and YouTube. Some educative awareness campaigns were run on these platforms. In time to come your Company will have more such engaging thought leadership content on such platforms and create communities.

C. Risks, concerns and threats

There has been a global disruption in the supply chain due to the varying period and duration of lockdown announced in many countries due to Covid-19. There has been a severe shortage of shipping containers due to the imbalance caused. As a result many of shipments were delayed. The costs of shipment have increased due to the shortage of containers and sea liners.

Similarly during the last few months, most countries have experienced disruption in pharmaceutical supply chain and also because of their dependency on China for APIs and excipients.

The above unseen factors made the production, quality assurance, supply chain and logistics team to face newer challenges. To ensure our patients in other countries do not suffer due to the non-availability of your Companys brands in whom they and their doctors have faith the respective teams had put in a lot of effort.

NPPA had served a show cause notice to your Company in 2013, alleging that a Companys product was violating a NPPAs standing order. However, after a personal hearing and detailed submission, NPPA passed a written order stating that your Companys product did not violate the standing order. Subsequently, NPPA reviewed its own order, without having any power to review, issued show cause notices and demand notice to your Company. Your Company subsequently filed a writ petition against the demand of NPPA, at the Honble High Court of Bombay. The matter was settled in favor of your Company, in 2013. Later NPPA, after over a year, filed a Special Leave Petition (SLP) (demanding Rs.16.45 crore) at the Honble Supreme Court. DPCO, 1995, explicitly debars NPPA to review its own order, the very reason cited by Honble High Court of Bombay, while quashing the show cause notices and demand notice in their judgment dated 08th August, 2013 and 26th September, 2013. Your Company has been legally advised, that based on the facts and merits of the case, the demand raised by NPPA is not likely to crystallize. The matter is pending at Supreme Court after being admitted for further hearing.

Apart from above, in case of any change in policies, affecting the Company/industry, by the Government of India and any delays in product approvals can have undesirable effect on the industry. Further, the Covid-19 like situation can impair the growth of the Company for uncertain time.

Any further increase in the number of FDCs ban or in the number of National List of Essential Medicines (NLEM), may hamper the sales and profitability of the Company.

The rising input cost, especially of raw material and transportation cost is a matter of concern. As the Indian Rupee got weaker against the US Dollar and the Euro, the cost of imported raw material has increased. The rate of fluctuation of the foreign currency, make it more difficult to take procurement decisions.

Due to the weak Indian Rupee and increase in fuel price most input cost have increased.

Even when there is an increase in input cost, we can increase our Maximum Retail Price only up to 10 %, in a 12 months period.

As we are in knowledge based industry, attracting and retaining talent is of a paramount importance. The cost incurred in doing so, is mounting as there is a scarcity of good talent. There seems to be no immediate respite to curtail employee cost.

As an organization, we have developed competencies and capabilities to emerge resilient in a tough industrial environment.

D. Internal control system and their adequacy :

Your Company maintains appropriate systems of internal control, including monitoring procedures, to ensure that all assets are safeguarded against loss from unauthorized use or disposition.

Your Companys policies, guidelines and procedures endeavors to provide for adequate checks and balances and are meant to ensure that all transactions are authorized, recorded and reported correctly.

The CFO, internal auditor together with external auditor verify that all assets are protected against loss and that the financial and operational information is accurate and complete in all respects.

Audits are conducted on an ongoing basis and significant deviations, if any, are brought to the notice of the audit committee following which corrective action is taken for implementation.

Your Company continue to invest in automation and latest technology in its business operations, in order to improve efficiencies and drive down costs. Your Company has in place SAP based ERP system. The system has the latest offering of the world-renowned organization - SAP - S/4 software with its very high end, developed HANA database.

Your Companys manufacturing and supply chain and key supporting functions like finance and accounts, marketing, sales, HR, etc. are integrated in the system. The system has also been installed with your Companys Super Stockists to get data of their sales, stock, collection, breakage/expiry etc. The Companys investment in such technology ensured that your Company could work remotely almost instantaneously.

Recently, SAP featured your Company on its web site and social media platforms under the title "How Does Unified, Intelligent ERP Help Ensure Quality, Streamline Distribution, and Track Sales? Meeting demand for 11 million prescriptions peryear".

https://www.sap.com/france/documents/2020/09/e8c1c

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All statutory and other dues and payments are made within the stipulated time limit.

All compliances are taken care by dedicated software to enhance the timely compliance process, it generates alerts for timely compliance with an escalation process. A robust internal audit system at the registered office and plant is in place. The internal auditors independently evaluate transactions and the activities carried out by the Company during the year, on quarterly basis and submit their reports periodically. Based on the internal auditors reports the CFO along with accounts head and head of other departments ensures rectification and initiates corrective steps. As needed the Company follows maker and checker concept as supported by the software and it has standard operating procedure for various activities. Accounting of various financial activities is done by dedicated employees and monitored by accounts head.

Under its vigil mechanism, your Company has in place a well- defined whistle blower policy.

The audit committee of the Company carries out inter-alia, the functions specified under the Act and SEBI-LODR.

The CFO, internal auditor together with external auditor verify that all assets are protected against loss and that the financial and operational information is accurate and complete in all respects.

Based on internal financial control policy frame work established and followed by the Company, the audit work performed by the Companys internal auditors, statutory auditors, cost auditors and secretarial auditors and based on reviews of the management and the audit committee, the board is of the opinion that the Companys internal financial controls are adequate and effective.

E. Research and Development (R&D)

Some of the products developed by the R&D of the Company during the year are as under:

1) Cartisafe max tablet; 2) Bifoconazole Dusting powder; 3) Zix DT (mouth dissolving) tablet.

Following products were earlier developed by R&D have been approved by Central Drugs Standard Control Organisation (CDSCO) for export market:

1) Zix strong Spray; 2) Powergesic Spray; 3) Powergesic Max Gel; 4) Powergesic Max Spray; 5) Powergesic Max Plus Gel.

Your Companys R&D has been reapproved as Recognized Research Centre by Department of Scientific and Industrial Research (DSIR) , Government of India, for next 3 years.

The work of setting up a new ultra-modern Analytical Process Development laboratory as a part of your Companys R&D set up was affected by Covid-19. The work shall be completed during financial year2021-22.

F. Material development in human resources

We at Jenburkt, believe that skilled and talented manpower plays a vital role in the growth of the organization. Keeping in mind of the same, we impart periodical development programmes across the organisation, to improve their skills and carrier growth.

During the year under review, Covid-19 had affected the whole world. Your Company prepared the mind set of Jenburktians to face new challenges erupted out of the pandemic. Various virtual programmes were conducted for the benefit of Jenburktians, especially in Stress Management where they were required to work under severely restricted conditions, including work from home due to lock down and other measures enforced by the Government. This has benefited them to a large extent to discharge hassle free services without disruption. Other regular reorientation and skill developing programmes were also conducted using virtual platforms. Employees were guided time to time for maintaining strict Covid precautionary disciplines and maintain mental calm (strengthen their mind and eliminate psychological fear).

Your Company covered every employee under a Covid mediclaim policy .

Seniors members of your Company took a voluntary salary cut ranging from as high as 25 % to 10 % , for the first 5 months of the financial year and barring a few exceptional cases at a very junior level there were no salary increments this financial year. You would feel proud that your Company employees cooperated fully to ensure good financial health of the Company as there was uncertainty of Company revenue due to the pandemic.

The Company is in compliance with the Sexual Harassment with Women at Work Place (Prevention, Prohibition and Redressal Act, 2013) and there is no complaint reported during the year.

Overall industrial harmony is maintained at all levels.

Your Companys HR team distributed face masks and sanitizers free of charge to many poor and needy in the initial phase of Covid-19, when such items were not freely available. The help of Indian Red Cross Society was taken for the distribution.

G. International Business

Your Companys global distribution network and supply chain in India has gone through turbulence due to Covid-19. The restrictions on export of selected products imposed by Directorate General of Foreign Trade (DGFT) in March 2020 affected the supply of products for the initial part of the year.

However, we witnessed growth across all the countries, where we export, even during this adverse pandemic time. This was due to the faith in your Companys product quality and the science based brand building activities undertaken since launch of every brand.

Our diversified products portfolio has helped us maintain the growth momentum in our core countries like Sri Lanka, Benin & Mauritius.

We received export orders amid these difficult times. Due to great efforts, during this challenging times, from the production, regulatory & distributions teams of the Company, we could cater to these export orders successfully.

We remained focused on strengthening our existing businesses, developing a different and specialty product basket and regulatory compliances.

Your Company successfully widened its distribution network in couple of Francophones (French speaking countries) markets in West Africa and is expanding.

We are focused on our priorities areas. Our near-term priority is to complete the registration process at the earliest for our product FAVIVENT (for treatment for mild to moderate Covid-19) in those countries where we have a very strong presence as well as in other new countries like Philippine and Panama.

Meeting doctors and functioning was affected in most countries in varying degrees due the lockdown imposed in all countries in which we operate. The registration of new products would get delayed due to Covid-19, affecting future business.

With an understanding of foreign markets we are committed to grow with our long-term focus on value creation, strong fundamentals, scale of operations, regulatory compliances, and people. Going ahead, we reinforce our commitment to achieve our long-term goals by focusing on strategy, focused on unique product development and strong R&D capabilities. This shall enable us to maintain a consistent momentum of product registration filings across Emerging Markets.

H. Segment wise performance

Your Company operates exclusively in one segment i.e. pharmaceutical formulations.

I. Details of significant changes in key financial ratios

a) Inventory Turnover ratio reduced from 4.22 during 2019- 20 to 2.93 during 2020-21.

b) Interest coverage ratio reduced from 70.02 (2019-20) to 41.22 (2020-21) due to reduction in Profit before tax, as stated above and increase in Finance Cost due to interest on lease liability towards rented premises made under IND-AS.

c) Change in Return on Net worth: Rs.9,846.63 Lacs in 2020- 21 as compared to Rs.8,000.43 Lacs recorded in previous financial year 2019-20 a rise by 23.08%.

d) Total Debt Equity Ratio improved from 0.30 as on 31.3.2020 to 0.22 as on 31.3.2021 due to increase in Net Worth in turn due to plough back of profits vis-a-vis reduction in total liability.