Kabra Drugs Ltd Management Discussions.

The Management Discussion and Analysis Report are prepared in adherence to the spirit enunciated in the Code of Corporate Governance, approved by the Securities Exchange Board of India and in compliance with the provisions of the Listing Regulations, 2015.

Industry Structure and Development

During the year, India s market growth rate has decreased and failed to give credible returns in the market. The Indian Pharma Industry is going to grow with a expected rate of 15percent annum between the years 2015 and 2020. Going forward, better growth in domestic sales would also depend on the regulatory and pricing issue in the company The growth in Indian domestic market will be boosted by increasing consumer spending, rapid urbanization, increasing healthcare insurance, drugs and so on. By 2020, India is likely to be among the top three pharmaceutical markets by incremental growth and sixth largest market globally in absolute size. Indian pharma companies spend 8-11 per cent of their total turnover on R&D due to that expenditure on R&D is likely to increase due to the introduction of product patents; companies need to develop new drugs to boost sales. Growth in the number of lifestyle diseases in India could boost the sale of drugs in this segment. Pharma companies have increased spending to tap rural markets and develop better medical infrastructure. The Indian pharmaceuticals companies have started their product development according to the new environment. Yet, constant inflation in the country is taking its toll and rising global commodity prices is only compounding the problem. The growth in Indian domestic market will be on back of increasing consumer spending, rapid urbanization, and raising healthcare insurance and so on. The pharmaceutical industry in India retains its position of strength as the pharmacy capital of the world. It supplies an estimated one-third of all global pharmaceutical produce in terms of volume. A growing trend was that more Indian pharmaceutical companies focused on semi-urban and rural markets for incremental growth opportunities.

Opportunities and threats

Opportunities and threats go in line with the industry development. As India is a developing country, increasing population and income levels are the reasons because of which demands have increased for drugs which is opening new opportunities for the pharmaceuticals industries. Your Company is required to accept the changes fast. Rising living standards is leading to growing demand for healthcare. Changing lifestyles leading to changing disease burden are opening markets for pharma industries. Your Company is the best manufacturer of Ether derivatives in M.P. Slow market growth is a big in hurdle in the growing process. Many policy reforms are going to take place as healthcare is being the top priority. Patient centric healthcare is the new technology trendwhich is resulting in more informed patients who take more active role in any treatment planned by doctor which is giving a challenge to the pharmaceuticals industry. Strict government regulations are making it difficult to survive in the market. Threat of new entrance with wide resources is also a threat to survive in the market as low barriers are for entry.The pharmaceutical industry in India retains its position of strength as the pharmacy capital of the world. It supplies an estimated one-third of all global pharmaceutical produce in terms of volume

Outlook

The pharmaceutical industry is expected to have muted export growth and stable domestic revenue in the year. The overall pharma exports are expected to grow by about 5 per cent while the domestic pharma market is expected to grow by 8-10 per cent in the next fiscal. The key factors driving growth for the domestic market have been increasing healthcare spending by the government, demographic trends, increasing disposable income and higher incidence of lifestyle diseases . The market will, however, remain exposed to any expansion of the price control regime. Though expansion of the drug price control regime could have an impact on the topline growth of companies temporarily, a likely improvement in volume sales over the medium term could offset the impact, the report stated. The growth momentum is likely to face further pressure. Increased regulatory scrutiny, consolidation of supply chain in the US market resulting in pricing pressures and higher research and development expenses will have an impact on profitability of the companies.

India s pharmaceutical market is dominated by generic drugs, which account for around 75 percent of the market by volume which is supplied mainly by domestic companies. Generics have helped to keep pharmaceutical prices low and the market is expected to continue expanding rapidly. Still, India s growing middle class is increasing demand for more advanced and costly medicines. Demographic trends will be a significant driver of global demand for pharmaceuticals in the next five years. Increase in diagnosis and treatment of chronic conditions and an aging population will drive pharmaceutical demand in developed markets. In emerging markets, population growth, coupled with improved access to healthcare and rising per capita income will drive demand. Taking into the account all the above it is expected that while the growth in profitability would be a challenge, the concrete plans and strategies set up by the management will help the company to overcome the challenges.

Risk and Concern

The commercial environment is getting harsher, as healthcare payers impose new cost constraints on healthcare providers and scrutinise the value medicines offer much more carefully. They want new therapies that are clinically and economically better than the existing alternatives, together with hard, real-world outcomes data to back any claims about a medicine s superiority.

Pharma s output has remained at a stable level for the past decade. Using the same discovering and developing processes, there s little reason to think its productivity will suddenly soar.

Concern over health risks has brought into focus a need for strict regulations by government. Fraudelent marketing is also a concern for the company. Emerging markets will be the growth engines for pharmacy but as opportunities will be high risk and threats will move side by side. Company needs to identify risks and make working and policy accordingly so as to save company from criminal and other fines and penalties etc. The challenge for growth goes beyond cost and it includes flexibility, innovation and distribution. All the pharmacos use the same strategy to capture the emerging markets but difference lies in the quality of execution.

The company to stay in market has to lower the cost of production and have to adapt the strategies as per the changing environment and policies to get strategic advantage.

Financial & Operational Performance

(Rs. In Lacs)

Particulars

Year ending 31.03.2018

Year ending 31.03.2017

Gross Income

201.92

772.05

Net Profit After Interest, Depreciation & Tax

-235.66

3.82

Internal Control Systems and Adequacy

As always, the Company s internal control procedures are tuned to keep up with the organization s pace of growth and increasing complexity of operations. These ensure compliance with various regulations. The internal audit team carries out extensive audits throughout the year, across all functional areas and submits its reports to the Audit Committee of the Board of Directors.

Human Resources

Your Company believes in philosophy of communicating with the entire team in a two way process. Company also believes in the principal of proper delegation of authority which results in uplift of Commitment level, responsibility and accountability of entire team right from Managing Director to Lowest level of administration. Every effort is made to implement the suggestions received and to encourage staff for more suggestion. During the year 2017-18, the company has maintained cordial and harmonious relation with the employees.

Cautionary Statement

Actual performance may differ from projections made as the Company s operations are subject to various economic conditions, government regulations and other incidental factors.

By order of Board

FOR KABRA DRUGS LIMITED

SHRI SHYAM KABRA

CHAIRMAN CUM MANAGING DIRECTOR

DIN: 00760020

Place: Indore Date: July 10, 2018