Kilitch Drugs India Ltd Management Discussions

Economy and Industry Outlook

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 disruption and trade uncertainty. Stronger financial integration and policy buffers will be key for stability.

Given these circumstances, India remained one of the fastest-growing major economies, supported by strong domestic consumption, robust government capital expenditure, resilient manufacturing and services sectors, rising exports and continued policy reforms. The International Monetary Fund (IMF) projects Indias GDP to grow by 6.4% in FY 2025-26 and FY 2026-27, significantly outpacing the global growth forecast of approximately 3.0%, reinforcing Indias position as a key engine of global economic growth. This strong macroeconomic environment, coupled with increasing healthcare expenditure, favourable demographics and the Governments continued focus on domestic manufacturing and exports, provides a solid foundation for sustained growth of the Indian pharmaceutical industry.

The global pharmaceutical industry continues to be one of the worlds largest and most innovation-driven industries, supported by increasing healthcare expenditure, ageing populations, rising prevalence of chronic diseases, expanding access to healthcare and continuous scientific advancements in biotechnology, biologics and precision medicine. The global pharmaceutical industry is expected to maintain a strong growth trajectory over the medium to long term. While challenges such as pricing reforms, geopolitical uncertainties and regulatory compliance costs persist, demand fundamentals remain robust. Pharmaceutical manufacturers with diversified product portfolios, strong regulatory compliance, advanced manufacturing capabilities and a broad international presence are expected to be well positioned to benefit from expanding global healthcare demand.

The pharmaceutical companies are strategically positioned to benefit from evolving healthcare needs and structural shifts in the industry. Rising prevalence of chronic and lifestyle diseases, ageing populations, increasing demand for affordable generic medicines, expansion of universal healthcare coverage in emerging economies, and growing preference for preventive healthcare are driving sustained demand for injectable, ophthalmic, oral solid, liquid and Nutraceutical formulations. In parallel, global pharmaceutical companies are increasingly outsourcing manufacturing to cost-efficient, quality-compliant partners to optimise supply chains and accelerate market access. Manufacturers with diversified product portfolios, regulatory-compliant facilities and a strong international presence are therefore well placed to capitalise on expanding opportunities and deliver sustainable long-term growth in the global pharmaceutical market.

India continues to strengthen its position as one of the worlds leading pharmaceutical manufacturing and export hubs, supported by a robust formulations industry, cost-competitive manufacturing, a skilled scientific workforce and a strong regulatory ecosystem. The growing burden of chronic diseases, rising healthcare awareness, and increasing government expenditure on healthcare are driving sustained domestic demand, while favourable policy initiatives such as the Production Linked Incentive (PLI) Scheme, promotion of bulk drug manufacturing and continued focus on "Make in India" are enhancing the sectors global competitiveness. With increasing opportunities in exports, contract manufacturing, complex formulations, injectables, ophthalmics and nutraceuticals, the Indian pharmaceutical industry is well positioned to achieve sustainable long-term growth and further strengthen its role as a preferred global supplier of high-quality pharmaceutical formulations.

The India 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.

Kilitch Drugs (India) Limited continues to strengthen its position as one of Indias fast-growing pharmaceutical manufacturing companies, engaged in the manufacturing, marketing and distribution of a diversified portfolio of pharmaceutical products across domestic and international markets. Guided by its vision of making the world a healthier place, the Company offers a comprehensive range of formulations across multiple dosage forms, including Oral Solid Dosage (OSD), liquid formulations, sterile injectables, ophthalmic and nasal products, nutraceuticals, medical devices and cosmetic products.

The Company has established a strong international footprint with operations spanning Asia, Africa, the CIS region and Latin America. Its broad and diversified product portfolio is tailored to meet the specific regulatory requirements globally. During the year, the Company further strengthened its international presence through new product registrations and approvals in strategic export markets, including French West Africa and the Philippines. Supported by longstanding customer relationships, a diversified geographical presence and a robust product pipeline, the Company remains well positioned to expand its market share and capitalise on emerging opportunities in the global pharmaceutical industry.

Quality remains the cornerstone of the Companys business strategy. Kilitchs integrated Quality Management System ensures adherence to stringent quality standards across all manufacturing facilities. The Companys Quality Assurance and Regulatory Affairs teams continuously monitor compliance with applicable national and international regulatory requirements, while its manufacturing facilities operate in accordance with current Good Manufacturing Practices (cGMP). This unwavering commitment to quality, regulatory compliance and continuous improvement has enabled the Company to strengthen customer confidence and enhance its competitiveness in regulated and semi-regulated markets.

The Company also continues to invest in strengthening its commercial capabilities through a scientifically trained and performance-driven sales force. By expanding its field operations and enhancing market coverage, the Company aims to improve customer engagement, reinforce brand visibility and accelerate business growth across key domestic and international markets.

Given the significant contribution of exports to the Companys revenue, it remains exposed to various business risks, including foreign exchange fluctuations, geopolitical developments, changing trade regulations, contractual and legal disputes, credit risk, and liquidity risk and evolving statutory compliance requirements across multiple territories. The Company has established a robust risk management framework to identify, monitor and mitigate these risks through continuous review of internal controls, prudent financial management and regulatory compliance and diversified market strategies.

In line with its long-term growth strategy, the Company continues to invest in expanding its manufacturing infrastructure while maintaining the highest standards of quality, environmental stewardship and operational safety. The Companys Greenfield pharmaceutical manufacturing facility at Pen, Raigad, Maharashtra is now operational phase wise and this facility will significantly augment production capacity across multiple dosage forms, strengthen the Companys global supply capabilities and support its strategic objective of becoming a leading international pharmaceutical formulation company.

Revenue details:

In the financial year 2025-26, the Company achieved an income from operations of Rs.18,857.43 Lakh as compared to Rs.18,158.73 Lakh in previous year. The Companys total income stood Rs. 20,242.28 Lakh. Net Profit after tax for the year end 31st March, 2026 from continuing operations was Rs. 3,239.96 Lakh.

In the financial year 2025-26, the Companys consolidated income from operation was Rs. 23,547.49 Lakh as compared to Rs.19,831.85 Lakh. Total consolidated total income stood Rs. 24,671.35 Lakh. Consolidated Net Profit after tax as on 31st March, 2026 was Rs. 2,843.53 Lakh.

Key Financial Ratio

The pharmaceutical industry operates in a dynamic and highly regulated business environment, exposing the Company to various strategic, operational, financial and regulatory risks. Key risks include changes in domestic and international regulatory frameworks, supply chain disruptions, volatility in foreign exchange rates, fluctuations in raw material prices, pricing pressures, geopolitical developments, cyber security threats, environmental and statutory compliance requirements, and evolving market dynamics.

The Company has implemented a robust Enterprise Risk Management Framework designed to proactively identify, assess, monitor and mitigate risks across its business operations. The framework is embedded within the Companys governance structure and strategic decision-making process, ensuring timely evaluation of emerging risks and implementation of appropriate mitigation measures. Supported by strong internal controls, periodic risk reviews, business continuity planning, supplier diversification, regulatory compliance, information security practices and continuous process improvements, the Company remains committed to strengthening operational resilience, protecting stakeholder interests and creating sustainable long-term value.

The Company has established a robust and comprehensive internal financial control framework commensurate with the nature, size and complexity of its business operations. The framework is designed to provide reasonable assurance regarding the reliability of financial reporting, safeguarding of assets, compliance with applicable laws and regulations, operational efficiency, and the prevention and detection of frauds and irregularities. Well-defined policies and standard operating procedures ensure disciplined execution of business processes and timely preparation of accurate and reliable financial information.

The Companys internal control environment is supported by a structured system of policies, processes and risk-based controls that are periodically reviewed and strengthened to address evolving business and regulatory requirements. An independent Internal Audit function, qualified employees, undertakes risk-based audits across operational, financial and compliance areas to evaluate the adequacy and effectiveness of internal controls and recommend process improvements wherever necessary. The audit observations and corrective actions are closely monitored by the management to ensure timely implementation and continuous enhancement of the control environment.

The Audit Committee of the Board provides strategic oversight of the Companys internal control framework and periodically reviews the scope, findings and effectiveness of the Internal Audit function. Based on the reports of the Internal Auditors, managements assessment and the Audit Committees review, the Board is of the opinion that the Companys internal financial controls are adequate, operating effectively and are aligned with the requirements of the Companies Act, 2013 and applicable regulatory standards. The Company remains committed to continuously strengthening its governance framework and internal control systems in line with evolving business needs and industry best practices.

The Companys continued success is driven by the commitment, expertise and dedication of its employees, who remain its most valuable asset. The Company is committed to fostering a high-performance work culture by investing in employee development through structured learning initiatives, technical and functional training, leadership development programmes and continuous capability enhancement. Equal emphasis is placed on employee well-being by providing a safe, healthy and inclusive workplace that encourages innovation, collaboration and professional growth.

The Company maintains harmonious industrial relations across all its manufacturing facilities and corporate offices through transparent communication, employee engagement and adherence to ethical business practices. Its human resource strategy focuses on attracting, developing and retaining talent while promoting a culture of integrity, accountability and continuous improvement. Occupational health and safety, employee welfare, diversity and performance excellence remain integral to the Companys long-term growth and sustainability objectives. As on 31st March, 2026, there were 236 employees of the Company.

Statements in this Management Discussion and

Analysis describing the Companys objectives, projections, estimates, expectations or predictions may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied due to various factors including changes in economic conditions, government policies, taxation, regulatory developments, market conditions, availability of raw materials, foreign exchange fluctuations, competition and other factors beyond the Companys control. The Company assumes no obligation to publicly amend or revise any forwardlooking statements based on subsequent developments, information or events.