Kilitch Drugs (India) Ltd Management Discussions

Economy and Industry Outlook

The global pharmaceutical industry witnessed significant growth across regions, setting the stage for robust expansi?n in the coming years. In the dynamic pharmaceutical landscape, marked by sign ificant transformations and emerging challenges, the industry is witnessing a surge in growth, innovation and market expansi?n. Despite downward revisions in vaccination and COVID-related therapeutic spending due to lower usage, the industry demonstrated strong resilience and agility by increasing overall medicine usage. As the pandemic transitioned to an endemic, the outlook for medicine spending through 2028 was revised upwards, reflecting accelerated growth rates and a projected CAGR of 5-8%, reaching a total expenditure of USD 2.3 trillion.

Global medicine market is expected to continu? on its growth path over the next five years driven by higher spending in regions such as the US, Europe and key Emerging Markets. Newly introduced branded produc?s, increased uptake of original medicines and adoption of novel therapies will drive growth in these regions. China, India, and other Asian markets are poised to lead this growth, with Lat?n America also experiencing rapid expansi?n. North America, Western Europe and Japan are expected to exhibit slower growth duetotheiralready higher pe rea pita use levels.

The volume of medicines used globally plateaued in 2023 but is anticipated to grow in coming years. The ?njectable drug market was evaluated at USD 738.4 billion in 2023 and is estimated to grow at 9.4% CAGR from 2024 to 2032. The rising preference for self- administration of drugs, an increasing number of regulatory approvals and usability advantages are anticipatedtofuelthe growth.

Pharma Industry in India

The Indian pharmaceutical industry is one of the largest and most important sectors within the countrys economy. It plays a vital role in providing affordable healthcare Solutions not only to the Indian population but also to the global market. India is often referred to as the "Pharmacy of the World" due to its large-scale production of high-quality, cost-effective and innovative generic medicines. The Indian Pharmaceutical industry contin?es to dem?nstrate a positive outlook characterized by a deeper emphasis on quality manufacturing, drug affordability and the adoption of innovation andtechnology.

India has emerged as the medial tourism hub of the world providing cost-effective treatments with the latest technology enabled by several path breaking reforms and provisions. Access to affordable HIV treatment from India is one of the greatest success stories in medicine. India is one of the biggestsuppliers of low-cost vaccines in the world. Because of the low pnce and high quality, Indian medicines are preferred worldwide, thereby rightly making the country the Pharmacy of the World

Indian pharma companies have a substantial share in the prescription market in the US and EU. As of the latest reporting period, the industry holds a third position globally in the pharmaceutical production by volume, reflecting a consistent growth trajectory with a CAGR of 9.43% over the past few years. The total market size of the Indian Pharma Industry is expected to reach US$ 130 billion by 2030 and US$ 450 billion market by 2047, reflecting significant growth prospeets and evolving market dynamics. As per PharmExcil, the industry growth was further driven by Indias ph armaceutical exports, which rose by 9.34% in the initial 11 months of FY24. India has the largest number of USFDA-compliant pharmaceutical plants outsidethe US and over 2,000 WHO-GMP approved facilities, serving demand from 150 plus countries worldwide, with 10,500 plus manufacturingfacilities.O

The Ministrys scheme "Strengthening of Pharmaceutical Industry (SPIJ" with a total financial outlay of Rs. 500 erare :US$ 60.9 million) extends support required to existing ph arma clusters and MSMEsacrossthe countryto improvetheir productivity, quality and sustainability. Various policies such as National Devices Policy, 2023 are approved by Government to facil?tate the growth of the medical device sector to meet the public health objectives of access, affordability, quality, and innovation. Overall, the Indian pharmaceutical industry remains posed for sustained growth, driven by a combination of industry innovation, government support and evolving market dynamics.

Business overview

Kilitch Drugs is one of the Indias fastest growing pharmaceutical manufacturing company broad range of pharmaceutical formulations in various dosage forms like Solid, Liquid and Parental marketed across the Globe with an ult?mate purpose of making the world a healthier place. The Company has formidable presence in many countries in Asia, Africa, CIS and Lat?n America with a broad product portfolio to suit the needs of each country. With a favourable outlook forthe pharmaceutical ?ndustry and robust produc?s portfolio, the Company is well-positioned to benefit from upcoming trends. Our product range encompasses OSD, Parenteral, Nasal Products, Opthalmic Products, Nutritional Products, Medical Devices and Cosmetics Products. Our international business strategy has yielded new product approvals and registrations across new markets that ineludes French West Africa, Philippines etc. With our strong product portfolio, we are well positioned to leverage our existing customers & markets and targeting newmarketopportunities.

Kilitchs robust quality management system ensures the highest quality standards are maintained across its manufacturing divisions. Our Quality Management Team oversees regulatory compliance for all produc?s and manufacturing plants and we hold current Good Manufacturing Practice (cGMP) certifications from regulatory bodies. Kilitch has built a sales forc? comprising well-trained and scientifically oriented representativas with a strong performance track record. The Company maintained the highest field forc? productivity among key players. Additionally, the Company focuses on increasing its field forc? to expand geographical reach, amplifying brand presence across key markets.

With predominance of its exports, the company is exposed to a wide spectrum of risks relating to markets, legal disputes relating to contracts, various statutory compliances, credit from suppliers or to customers, interest rates, liquidity as well as foreign exchange rates volatility, sudden changes in the regulations related to trade by countries where the company operates The company constantly reviews its Systems and processes and takes adequate measures to addressthese risks ormeet its obligations.

In line with our commitment to sustainability, we continuously strive to expand our production capacity while maintaining compliance with environmental and safety regulations. Our manufacturing plant in Mumbai has facility to dry powder section, ophthalmic produc?s as well as the capacity to produce small volume liquid ampoules and vials. With the increase in demand, we have doubled our manufacturing capacity of ophthalmic produetsat Mumbai Plant. With ongoing infrastructural developments, the construction of our new Greenfield pharmaceutical project at Khopoli Maharashtra India is under progress. The facility to produce various pharmaceutical produc?s will enable the Company to make a greater impact in both the domestic and international markets.

Revenuedetails:

Particulars	2023-24 (Rs. In Lakh)	2022-23 (Rs. In Lakh)	Growth 1%)
OSD	3,614.47	2,080	73.77
General Injectable	5,503.42	4,096.81	34.33
Ophthalmic	887.96	847.60	4.51
Cephalosporin	2,880.29	2,029.75	41.00
Others	273.76	2,722.19	(89.00)

Financial OverView

In the financialyear 2023-24, the Company achieved an income from operations of Rs. 13,157.90 Lakh as compared to Rs. 11,778.35 Lakh in previous year. The Companys total income stood Rs. 13,778.75 Lakh. Net Profit after tax for the year end 31^v March, 2024 from continuing operations was Rs. 1,757.38 Lakh.

In the financial year 2023-24, the Companys Consolidated income from operation was Rs. 15,437.25 Lakh as compared to Rs.13,959.90 Lakh. Total Consolidated income stood Rs.15,885.14 Lakh. Consolidated Net Profit after tax as on 31^sl March, 2024 was Rs. 1,357.52 Lakh.

Key Financial Ratio

Particulars	31.03.2024	31.03.2023	Change (%l
Return on Net Worth (%)	7.88	8.02	(1.75)
Debtor Turnover	1.49	2.49	(40.24)
Inventory Turnover	13.24	12.82	3.26
Interest Coverage	22.80	22.10	3.19
Current Ratio	2.20	2.03	8.15
Deb? Equity Ratio	0.14	0,11	25.46
Operating Profit Margin (%)	51.04	50.03	2.02
Net Profit Margin (%)	12.75	12.84	(0.70)

RiskandConcerns

The Company strives to identify opportunities that enhance organisational val?es while managing or mitigating risks that can adversely ?mpact ?ts future performance through integrated process for ?dentification, assessmentand reporting, decentralised management of specific opportunities and risks and aggregation at corporate level monitored by the Risk Management Committee with the overall direction and control bythe Board.

The Company contin?es its initiatives aimed at assessment and avoidance of various risks affecting its business and towards cost control and efficiency across its businesses and functions, taking appropriate measures and reviewing them from time to time. The Companys risk management and control procedures involve prioritisation and continuous assessment of these risks and devise appropriate Controls, evaluating and reviewing the control mechanism and redesigning from ti meto time in the light of itseffectiveness.

Category of risks experienced and mitigated by the Company are related to Global Market, Competition, Regulatory and Quality Compliance, Intellectual Properties, Commercial and Financial Risk, Environment, Health and Safety, Human Resource, Regulatory and Sustaina ble Operations.

Infernal Control Systems

The Company has in place adequate infernal financial Controls over financial reporting. It has adopted necessary policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to Companys policies safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of relia ble financial information.

The Company maintains a system of policies and procedures for internal control of operations and activities and these are continually reviewed for effectiveness. The infernal control system is supported by qualified personnel and a continuous programme of internal audit. The prime objective of such audits is to test the adequacy and effectiveness of all internal control Systems laid down by the management and to suggest improvements.

Kilitchs overall system of internal control is adequate given thesize and natureof operations and haseffective implementation of internal control self assessment procedures to ensure compliance to policies, plans and statutory requirements.

The Audit Committee of the Company periodically review the functions of Infernal Audit. The Management of the Company assessed the effectiveness of the Companys internal control over financial reporting. Based on its evaluation, the Audit Committee has concluded that the internal financial Controls of the Companyareadequateand operating effectively.

Human Resource

Kilitch and ?ts subsidiaries are striving to build and maintain a positive employee experience with high satisfaction and quality of Ufe, so that employees can contribute their best efforts to their work. We consider employees as an integral part of our operations and we put in place appropriate compensaron plans, feedback processes, continuingtrainingand upgradation of skills in their functional areas while maintaining safe and healthy working environment to ensure all round contribution and participaron intheself-growthaswell as growth of the Company.

Our motive has been to create a committed work forc? through people-enabling processes and knowledge sharing practicesbased uponourvaluesystem.Thekey elementof our Human Resource strategy is to provide a healthy working environment that empowers people, encourages innovation, enhances work satisfaction and builds a merit - driven organizaron. As on 31 st March, 202A, there were 168 employees of the Company.

Forward - Looking Statement

Certain statements made in the Management Discussion and Analysis Report relating to the Companys objectives, projections, outlook, expectations, estimates, and others may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, whether expressed or implied. Several factors could make a significant differenceto our operations. These includeclimatic and economic conditions affecting demand and supply, government regulations and taxation, any epidemic or pandemic and natural calamities over which we do not have any direct/indirect control. Readers are cautioned not to place undue reliance on any forward - looking statements. The report should be read in conjunction with the Companys financial statements included herein and the notes thereto.