Krebs Biochemicals & Industries Ltd Management Discussions

Industry Structure and Developments:

Global:

Pharmaceutical Industry worldwide is expected to grow steadily with developing countries and therapies directed to age related diseases being major drivers. Emerging markets are driving the growth with increasing purchasing power and access to health care. Developed markets continue to grow with new medicines.

The Indian Pharmaceutical sector is increasingly recognised as a source of quality and cost effective medicines for the world. Indias domestic pharma market is growing at one of the highest rate in the emerging markets and is driven by increasing purchasing power of the population and wider availability of health care.

Indian Pharmaceutical Industry benefits from cost competitiveness driven by backward integration, lower labour cost, economies of scale and efficient manufacturing process. The scale and diversity of the Indian pharmaceutical industry enable it to cater to diverse needs and maneuver through market turbulences effectively.

The strategy and skill sets and infrastructure in niche are as of fermentation, biocatalyst is and chemistry allows the Company to pursue products, groups and partners in these niche segment.

With the access to marketing reach of an associate company and also ability to leverage the forward integration possible with their finished dosage capabilities can give opportunity for the Company to ulitise its manufacturing capacity optimally.

Dependence on only a few products currently under manufacturing for revenue and growth can pose unexpected risks. In order to mitigate this, the Company is evaluating pipeline of new products for development as well as exploring the possibility of contract manufacturing for third parties.

Updation and up gradation of facility and manpower to be in line with the latest quality and regulatory requirements is of paramount importance. This is a continuous and ongoing process in the Company.

The Company has its Registered Office at Kothapalli (V), Anakapalli (D), Andhra Pradesh. The Company has two multipurpose manufacturing facilities - Unit - I in Nellore and Unit - II in Anakapalli (Vi zag), with all support infra structures like Utilities, environment management and safety systems.

During the financial year which is under review, your Company recorded a net loss of Rs. 2,693.93 Lakhs as compared to a net loss of Rs. 1,972.84 lakhs in the previous financial year.

Inspite of its best efforts, the Company is unable to get adequate volume of production on loan license/ contract manufacturing arrangements and therefore, unable to fully utilised its manufacturing capabilities optimally.

The Company has received closure order dated 7th February 2025 issued by A. P. Pollution Control Board for its Manufacturing Facility situated at Vizag on 9th February 2025. Accordingly, the manufacturing operations of this manufacturing facility is closed since 9th February 2025. The Management of the Company is taking necessary steps to get closure order revocated from the Pollution Control Board at the earliest.

The Company has in place adequate internal control systems, which is commensurate with its size, nature of business and complexity of its operations and are designed to provide a reasonable degree of assurance regarding the effectiveness and efficiency of operations, the adequacy to safeguard its assets, internal control over financial reporting and compliance with applicable laws and regulations. Internal Audit function evaluates the adequacy of and compliance with policies, plans, regulatory and statutory requirements.

The Internal Auditors directly reports to the Boards Audit Committee, thus ensuring the independence of the process. It also evaluates and suggests improvement in effectiveness of risk management, controls and governance process. The Audit Committee and Board provides necessary oversight and directions to the Internal Audit function and periodically reviews the findings and ensures that the corrective measures are taken.

The Financial statements are prepared under the historical cost convention in accordance with Indian Accounting Standards and the provisions of the Companies Act, 2013 and other Standards issued by the Institute of Chartered Accountants of India. All income and expenditure having a material bearing on the financial statements are recognized on an accrual basis. The management accepts responsibility for the integrity and other objectivity of the financial statements as well as various estimates and judgments used there in Capital:

The Authorized Share Capital of the company is Rs.153,00,00,000 (Rupees One hundred and Fifty Three Crores Only), comprising of:

i. Rs.23,00,00,000 (Rupees Twenty Three Crores) Equity Share Capital divided into 2,30,00,000 Equity Shares of Rs.10 each; and

ii. Rs. 130,00,00,000 (Rupees One Hundred Thirty Crores) Preference Share Capital divided into 1,30,00,000 Preference Shares of Rs.100 each.

The Paid up Share Capital of the company is Rs. 151,56,05,860 (Rupees One hundred and Fifty One Crores Fifty Six Lakhs Five Thousand Eight Hundred and Sixty Only), comprising of:

iii. Rs.21,56,05,860 ( Rupees Twenty One Crore Fifty Six Lakhs Five Thousand Eight Hundred and Sixty) Equity Share Capital divided into 2,15,60,586 Equity Shares of Rs.10 each; and

iv. Rs. 130,00,00,000 (Rupees One Hundred Thirty Crores) Preference Share Capital divided into 1,30,00,000 Preference Shares of Rs.100 each.

The Company has negative Reserve & Surplus of Rs.16,779.94 Lakhs as at 31st March, 2025.

No investments were made during the year under review.

Inventories:

The value of inventories stood at Rs. 603.15 Lakhs as on 31st March, 2025. The raw materials, stores and spares are valued at “AT COST” plus related inward transport and handling charges. Work in progress is valued at cost incurred up to the stage of manufacturing. Cost of finished goods includes all direct costs and an appropriate portion of overheads as per accepted principles of accounting.

The net additions made to the fixed assets during the year under review was to Rs. 247.84 Lakhs, which takes the total gross block to Rs.31,128.66 Lakhs as on 31st March, 2025 as against Rs.30,963.62 Lakhs as on 31st March, 2024.

The Company has been calculating depreciation on straight line method at the rates specified in Schedule II of the Companies Act, 2013 which amounted to Rs. 668.92 Lakhs for the financial year under report (Rs. 676.63 Lakhs during the previous financial year), based on the useful life of the as sets as per Schedule II of the Companies Act, 2013 and applicable accounting standards.

The supply position of raw materials through out the year was smooth and comfortable. There was no interruption or stoppage of production due to shortage or non-availability of raw materials. The Company always maintains a minimum stock as required for production through efficient budgetary planning of production.

The products manufactured by the Company has a very low dependence on imported raw materials.

The finance charges during the year amounted to Rs. 591.42 Lakhs as against Rs. 468.94 Lakhs during the previous year including interest paid towards Inter-corporate Deposits and other statutory payments.

In view of the losses incurred, no provision is made for dividend.

The Company very well recognizes the importance of the employee work force and provides excellent growth opportunities, training and development and competitive compensation packages to attract and retain with the Company the best talents available in the industry.

The operations of the companys plants are in conformity with good industrial safety practices. Regular Hazards and Risks Analysis were conducted at both the plants as part of the ongoing Safety Policy. The management takes into consideration the we lf are of the employees and also effect on the surrounding community at large. Norms and Standards for effluents treatment and disposal are prescribed by the Pollution Control Board are complied with.

In addition to historical information, this annual report may contain certain "forward looking statements "with in the meaning of a pplicable securities laws or regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global economy, global and Indian demand supply conditions, increased installed capacity by competitors, finished goods prices, raw materials availability and prices, cyclical demand and pricing for the Companys products, changes in government regulations and tax regimes.

The estimates and expectations are based on the historical facts and perception of future possibility as envisaged by the management. The business environment is never static. Unexpected changes and unforeseen developments are not rare. The global trend is now prevalent and any incidents in the world market will have an effect on the operations of your Company. While taking all precautions to be realistic and practical in making presumptions for the future, the management would like to advise that the statements maybe read in proper per spective depending upon such developments and their possible effect on the Companys operations and activities.

On behalf of the Board of Directors

Chairman

(DIN- 00272977) Place: Mumbai

Date: 7th August, 2025