Kwality Pharmaceuticals Ltd Management Discussions.

India has emerged as one of the fastest growing major economies in the world as per the Central Statistics Organisation (CSO) and International Monetary Fund (IMF) and it is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships. India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicines in UK.

The Indian pharmaceuticals market has characteristics that make it unique. First, branded generics dominate, making up for 70 to 80 per cent of the retail market. Second, local players have enjoyed a dominant position driven by formulation development capabilities and early investments. Third, price levels are low, driven by intense competition. While India ranks tenth globally in terms of value, it is ranked third in volumes. These characteristics present their own opportunities and challenges.

Indias pharmaceuticals market has grown in confidence and firmly moved on to an accelerated growth path. The central question now rests around the true nature and the full extent of this markets potential. Backed by solid fundamentals, the market is giving rise to a variety of business opportunities. We feel confident that strong player intent, investments and actions will underpin future growth and enable the Indian pharmaceuticals market to break into the global top tier.

OPPORTUNITIES, RISKS, CONCERNS & THREATS

During the reporting period, the COVID-19 pandemic continued to pose challenges to business as usual, and aggravated existing risks, thereby mandating rapid risk responses from business teams. The Company effectively laid down risk mitigation measures to: Address business continuity challenges, Overcome growth hurdles, Tackle geopolitical developments, Secure enterprise-wide cybersecurity and Adhere with applicable laws & regulations.

At KPL, beyond managing the short-term impacts of Covid-19, the focus will be on ensuring the continued safety of employees, while increasing reliability and stabilization of production through safety measures. Improvement in maintenance programmes as well as capital spending and developing sales opportunities overseas will be other focused areas which we are evaluating to eliminate the risk. During the financial year 2021-22, major threats are likely to be from any economic downturn or problems associated with Covid-19.

SEGMENT WISE PERFORMANCE

Your Company operates in Single segment of manufacturing of broad range of finished pharmaceutical formulations in a dosage form viz. Tablets, Capsules, Syrup, Dry Syrup, Injections etc.

OUTLOOK

Financial Year 2020-21 has been a challenging year for the company where COVID-19 spread globally. Kwality Pharmaceuticals Limited as an exporting company has supplied Remdesivir Injection to the global market and similarly Propofol injection was short in supply in various high profile countries who normally accept US FDA companies products. But in shortage of medicine, they have procured these injections from our company and after seeing the performance and efficacy, they registered the product of the company. The sale has gone up and it will keep on growing as many traders and the government have come to know about the medicine(s) of Kwality Pharmaceuticals Limited. They also started procuring the other items of the company. The company became world recognized and now the booking has been growing which may yield more sales and more profit. The company has also improved the infrastructure and plant & machinery which can meet the global demand. The various new R&D projects are initiated.

After the expansion Project of Rs.19 Crore, the company has further decided and filed with Invest Punjab Project of Rs.31 Crore to be completed by September-2022.

INTERNAL CONTROL SYSTEM AND ADEQUACY

The Company has a robust system of internal controls comprising authority levels and powers, supervision, checks and balances, policies and procedures. The system is reviewed and updated on an on-going basis. These controls ensure safeguarding of assets, reduction and detection of fraud and error, adequacy and completeness of the accounting records and timely preparation of reliable financial information. Internal audits are conducted in the Company on regular basis. Reports of the internal auditor are reviewed by the senior management and are also placed before the Audit Committee of the Directors. The statutory auditors also review their findings with the senior management and the Audit Committee.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

(In Rupees Lacs)

Particulars Current Year Previous Year
Total Income 26309.03 14260.43
Profit before Tax (PBT) 2179.91 1114.01
Profit After Tax (PAT) 1541.50 843.15

During the year under review, on standalone basis, revenue of the company was Rs. 26309.03 Lakhs as compared to Rs.14260.43 Lakhs in the corresponding previous year. The Company earned a profit after tax of Rs. 1541.50 Lakhs as compared to Rs. 843.15 Lakhs in the previous year. For the coming year, although the overall economy and business scenario is grim across all sectors, but we foresee the outlook of your company as quite positive and stable.

The details of changes in key financial ratios are explained in the table below:

Ratios Financial year 2020-21 Financial year 2019-20
Debtors Turnover 6.92 4.57
Inventory Turnover 15.06 6.18
Current Ratio 1.35 1.31
Interest Coverage Ratio 9.34 5.45
Debt Equity Ratio 0.55 0.67
Operating Profit Margin 8.34 % 8.03 %
Net Profit Margin 5.89 % 6.07 %
Return on Net Worth 24.66 % 17.90 %

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The human resource plays a vital role in the growth and success of an organization. The Company has maintained cordial and harmonious relations with employees across various locations. During the year under review, various training and development workshops were conducted to improve the competency level of employees with an objective to improve the operational performance of individuals. The human resource policies of the Company are formulated with the objective of creating a safe, conducive and stimulating work environment for enhancing employee motivation and satisfaction. The management is committed to promote safety, occupational health and proper environment in designing, planning, training and completion of all tasks. Regular trainings are imparted to workmen in various areas. As of the end of FY 2020-21, the total number of the employees of Company is 496. The Companys HR department has enabled it to acquire, develop, motivate and maintain its skilled human resource. The Company worked on its recruitment process at bringing about improvement in: Speed at which talent is brought in, Quality of talent with respect to competence and compatibility and Cost of recruitment.

CAUTIONARY STATEMENT

Statement in this report describing the Companys objectives, expectations or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the companys operations include economic conditions affecting demand / supply and price condition in the domestic markets in which the company operates, changes in the government regulations, tax laws and other statutes and other incidental factors.

For and on Behalf of the Board
Sd/- Sd/-
(RAMESH ARORA) (AJAY KUMAR ARORA)
Place: Amritsar Managing Director Whole Time Director
Date: 06th September 2021 DIN: 00462656 DIN:00462664