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 healthcare. Developed markets continue to grow with new medicines.

The covid outbreak has also made the countries and companies to review the supply chains for critical and essential drugs. This could be an opportunity for Indian Pharmaceutical Industry.

Indian Pharma Sector:

The Indian Pharmaceutical Sector is increasingly recognised as a source of quality and cost effective medicines for the world. Its domestic 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.

The Indian government has in response to the covid19 pandemic having studied the supply chains of Indian pharmaceutical manufacturers has also announced incentives to promote the manufacturing of APIs which are currently imported to make the country self reliant.

Strengths & Opportunities:

The strategy and skillsets and infrastructure in niche areas of fermentation, bio catalysis 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 allow exciting opportunity for the Company.

Risks, Concerns & Threats:

Dependence on only a few products currently under manufacturing for revenue and growth can pose unexpected risks. In order to mitigate this, a pipeline of new products is being developed.

Updation and upgradation 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 which can enable a healthy growth trajectory.

Company infrastructure:

The Company has its Registered Officeat Kothapalli (V), Anakapalli (D), Andhra Pradesh. The Company has two multi-purpose manufacturing facilities - Unit – I in Nellore and Unit –II in Anakapalli (Vizag), with all support infrastructures like Utilities, Environment Management and Safety Systems.

Performance of the company :

During the financial year which is under review, your Company recorded a loss of Rs. 2469.19 Lakhs as compared to a loss of Rs. 4,452.68 lakhs in the previous financial year.

Internal Control Systems and their adequacy:

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 over sight and directions to the Internal Audit function and periodically reviews the findings and ensures that the corrective measures are taken.

Discussion on Financial Performance with respect to Operational Performance :

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 accrual basis. The management accepts responsibility for the integrity and other objectivity of these 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.

Reserves:

The Company has negative reserve & Surplus of Rs. 12102.29 Lakhs as at 31^st March, 2023.

Secured Loans:

Secured Loans at the end of the FY 2022-23 were reported Rs. 999.04 lakhs as against Rs. 998.62 Lakhs in the previous FY 2021-22.

Investments:

No investments were made during the year under review.

Inventories:

The value of inventories stood at Rs. 1194.56 Lakhs as on 31^st March, 2023. 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.

Debtors:

The outstanding debtors were Rs. 52.52 Lakhs during the financial year ended 31^st March, 2023 as against Rs. 87.65 lakhs as on 31^st March, 2022.

Fixed Assets:

The net additions made to the fixed assets during the year under review was to Rs. 1515.79 Lakhs, which takes the total gross block to Rs. 30022.13 Lakhs as on 31^st March, 2023 as against Rs. 28513.36 Lakhs as on 31^st March, 2022.

Depreciation:

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. 637.46 lakhs for the financial year under report ( Rs. 565.80 lakhs during the previous financial year), based on the useful life of the assets as per Schedule II of the Companies Act, 2013 and applicable accounting standards.

Raw Material:

The supply position of raw material 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 company has a very low dependence on imported raw materials.

Finance Charges:

The finance charges during the year amounted to Rs. 297.32 Lakhs as against Rs. 539.10 Lakhs during the previous year including interest paid towards on Inter-corporate Deposits and other statutory payments.

Over heads:

The Other Overheads expenses were Rs. 2639.32 Lakhs for the FY2022-23 as against Rs. 3775.56 Lakhs for the F.Y 2021-22.

Dividend:

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

Material developments in Human Resources:

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.

Safety and Environment:

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 welfare 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 and are complied with.

Cautionary Statement

In addition to historical information, this annual report may contain certain "forward looking statements" within the meaning of applicable 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 may be read in proper perspective depending upon such developments and their possible effect on the Companys operations and activities.