MANAGEMENTS DISCUSSION AND ANALYSIS
INDUSTRY STRUCTURE & DEVELOPMENT
Global Economy Overview
In 2022, the global economy witnessed a slowdown, marked by a
significant surge in inflation. This slowdown stemmed from a combination of factors,
including geopolitical uncertainties, supply chain disruptions, and the enduring effects
of the COVID-19 pandemic. According to the International Monetary Fund (IMF) global
economic outlook report, the global GDP growth declined from 6.0% in 2021 to an estimated
3.2% in 2022. The baseline forecast is for growth to fall from 3.4% in 2022 to 2.8% in
2023, before settling at 3.0% in 2024.
Indian Economy Overview
Indian economy demonstrated remarkable resilience amidst global
headwinds and became the worlds fifth-largest economy with a nominal GDP of US$ 3.5
Trillion with a GDP growth of 7.2% in FY 2022-23. Looking ahead, Indias economic
outlook remains promising. According to the Economic Survey, the country is projected to
achieve a real GDP growth rate of 6.5% in FY 2023-24.
Global Pharmaceutical Industry Overview
For the last few years, the global pharmaceutical sector has been
stable despite the uncertainties caused by COVID-19. With huge advances in information and
research, the outlook for the sector is getting clearer with more predictable challenges
ahead.
As per IQVIA, global medicine market is expected to grow at a CAGR of
4.5% through 2027, reaching about $1.9 Trillion in total market size despite recent
slowdown in key markets across the globe. The reasons are simple: aging and growing
population, rising income levels, and emerging medical conditions and emergence of new
diseases.
Oncology along with critical care is forecasted to grow the fastest in
terms of global spending at a CAGR of 13–16% through 2027.Demand for innovative drugs
will drive oncology spending to approximately $370 billion by 2027, almost double the
current level.
Another key growth area for medicines is biotech, which is estimated to
represent 35% of global spending in the next five years.
Indian Pharmaceutical Industry Overview
The Indian pharmaceutical sector is the third largest supplier by
volume in the world. With 20% of the global supply share, India is also known as the
Pharmacy of the World. To get a sense of its manufacturing abilities, India has the
highest number of US-FDA compliant Pharma plants outside of USA and is home to more than
3,000 pharma companies with a strong network of over 10,500 manufacturing as well as a
highly skilled resource pool.
Currently, the Indian pharma industry is valued at $50 billion out of
which 51% consist of exports. In FY23, India exported nearly $25 billion worth of
pharmaceuticals. Indian Pharma industry has been growing at a healthy pace and is known
for its highly efficient and cost-effective pharmaceutical companies. According to the EY
FICCI report, the Indian pharmaceutical market is expected to reach $130 billion in value
by the end of 2030, as there has been a growing consensus on providing new innovative
therapies to patients.
The pharmaceutical industry was primarily focused on covid drugs in
2020 and 2021 but by 2022, the focus had shifted to other severe diseases such as anaemia
and cancer. In 2022-23, despite geopolitical concerns, India continued to supply medicines
to over 200 countries, living up to its reputation as the worlds pharmacy.
COMPANY OVERVIEW
Introduction:
Kwality Pharmaceuticals Ltd was established in 1983, by Mr. Ramesh
Arora and later joined by his younger brother Mr. Ajay Kumar Arora. Today, the operations
of the company are spearheaded by Mr. Aditya Arora from the second generation under the
guidance of the founders.The management is now focused to shape the organization for the
next phase of growth, as they navigate Kwality to be future ready.
Business Model
Kwality Pharmas business model caters to a wide range of
Pharmaceutical Products predominantly for the global market. The company has its
production facilities based in Punjab & Himachal Pradesh having a total of 5 units
that are fully operational.
Kwalitys market reach extends to more than 60 countries, with a
strong presence in the Middle East, French West Africa, and Latin American regions. We are
actively expanding our market access, particularly in multiple LATAM & ASEAN
countries. We have recently ventured into the Brazilian and EU markets, marking new
milestones in our growth journey.
Our extensive product range includes over 3000 formulations spanning
across more than 25 therapeutic segments. The company covers a wide array of product
categories, encompassing generics, cephalosporin, beta-lactam, oncology, and biologics.
More than 95% of revenues for the company comes from the exports markets and Injectables
have contributed to over 50% of the companys sales in recent years.
Adhering to high quality standards, all our manufacturing plants are
compliant with Good Manufacturing Practices (GMP). Our commitment to quality is
underscored by the approval of three out of our five units by BRAZILs National Health
Surveillance Agency (ANVISA). Additionally, two out of the five units have secured
approval by the European Unions Good Manufacturing Practice (EU GMP) standards.
Kwalitys differentiated manufacturing capabilities are
demonstrated by some of our unique product categories that can be manufactured as below:
Liposomal Pegylated Injectables
Peptide (Long Acting) based Injectables
Lyophilized injectables
Nano particle-based Tech
Emulsion & Implant Tech
Niche Biological Injectables
Manufacturing Setup
The company operates two manufacturing facilities -One at Amritsar,
Punjab and other at Jassur, Himachal Pradesh
1. Unit 1, Amritsar: This unit has two blocks -Block A and Block W1 and
is used to manufacture all type of generic medicines and medicines for critical care
injectables. Approval Status: GMP, Brazilian ANVISA in Dec 2022,
2. Unit 2, Amritsar: This facility is for Beta-lactam and
anti-infectives segment. The operations have been commenced from June 2022 onwards for
non-regulated markets but is currently operating at a very low utilization. Approval
Status: Our plan is to get the USFDA approval down the line.
3. Unit 6, Amritsar: This facility is for biologics. The operations
have been commenced the operations from August 2023 Approval Status: Our plan is to get
ANVISA &EU GMP down the line
4. Unit 3, Jassur: This facility is for Oncology products
Approval Status:PIC/S, ANVISA (Brazil) and EU GMP
5. Unit 4, Jassur: is for Cephalosporins and Anti-infectives. This
block was started in August 2021.
Approval Status: PIC/S, ANVISA (Brazil) EU GMP
Whatever cash we generated in an exceptional FY22 from the covid
related molecules sales, we have infused it all in building up new facilities and in
upgradation of existing ones.
Regulatory Approvals:
While exporting any pharmaceutical product, there are two types of
approvals that may be required across most semi-regulated and regulated markets: 1)
Facility / Plant Approval 2) Product Approval. The competent authority audits the
manufacturing facility along with the processes, product capability and many other areas
before giving final approvals.
Though the concept of approval process on a high level is same for
different inspecting authorities, there are many nuances that differ from one country to
another in terms of compliance procedures, documentations, process timelines and the
regulatory costs.
Kwality has been successfully pivoting itself from being a ROW player
to semi-regulated and regulated markets. This is demonstrated by building up new plants
and getting multiples plants approved from various regulatory authorities across the world
including the stringent regulatory authorities of the world. Further, the company also
plans to get additional plant approval from stringent regulatory authorities so as to
cater to a larger product basket in the global markets.
OUTLOOK
The company efforts are placed to achieve the following strategic,
operational and financial goals:
1. On the strategic front, we plan to leverage the excellence in
manufacturing to enter more regulated markets while making long term commercial
partnerships both locally and globally. We plan on Increasing our R&D efforts for
off-patent drugs that are complimentary to existing portfolio to be an early entrant in
the global markets.
2. On the operating front, we are trying to get all our remaining units
EUGMP approved while increasing our footprint in existing markets of LATAM, French West
Africa and across other Ems. We plan to apply for USFDA approval for Unit 2 starting FY25
in phases. We are also working towards to build a biologics product portfolio starting
with 3 molecules in initial phase and get PIC/s and EU approval for the most anticipated
and fastest growing segment of Oncology.
3. On the financial front, we want to sustain our EBITDA margin in the
range of 22-25% while improving our working capital efficiency. Our target is to double
our revenues before FY26.
OPPORTUNITIES, RISKS, CONCERNS & THREATS
In the financial year 2022-23, global economy witnessed slowdown in
growth impacted by the Ukraine – Russia conflict, persistently high inflation levels
across all major economies in the world and slowdown in the Chinese economy that was
affected by numerous lockdowns imposed to control the COVID-19 pandemic. Despite
uncertainties particularly ones engendering from economic and geopolitical circumstances,
the industry is expected to regain its pre-pandemic growth rates by 2024. The global
pharmaceutical market is projected to grow at a CAGR of 3-6% between 2023 and 2027 and
Indias pharmaceutical exports grew in FY 2023 to US$25.3 billion from US$24.6
billion in the previous year.
The Company does not perceive any risks or concerns other than those
that are common to the industry such as regulatory risks, exchangerisk, cyber risks and
other commercial and business-related risks.
The Kwality Pharmaceuticals Limited will be able to place itself in a
strong position by expanding strategically, increasing its manufacturing capacities and
enhancing capacities across the organization.
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.
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 |
25393.60 |
45964.35 |
Profit before Tax (PBT) |
2576.13 |
16167.48 |
Profit After Tax (PAT) |
1946.88 |
12004.65 |
During the year under review, on standalone basis, revenue of the
company was Rs. 25393.60 Lakhs as compared to Rs. 45964.35 Lakhs in the corresponding
previous year. The Company earned a profit after tax of Rs. 1946.88 Lakhs as compared to
Rs. 12004.65Lakhs 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 2022-23 |
Financial year 2021-22 |
Debtors Turnover |
3.49 |
8.41 |
Inventory Turnover |
3.59 |
12.90 |
Current Ratio |
1.65 |
1.64 |
Interest Coverage Ratio |
8.02 |
56.42 |
Debt Equity Ratio |
0.45 |
0.30 |
Operating Profit Margin |
16.85% |
35.44 % |
Net Profit Margin |
7.76% |
26.32 % |
Return on Net Worth |
9.64% |
65.76 % |
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. Our goals are best achieved when motivated and well-trained employees
provide quality service that always fulfils our customers expectations. Our
Certified programs are tailored for seamless & easy implementation. Common values of
Passion, Can Do, Right First Time & as One and a clear focus on quality are the
foundational tools necessary for all company employees to deliver customer centricity par
excellence. In order to motivate employees and recognize their outstanding work, employees
are being awarded by individual managers for excellent work and several employees are
being acknowledged for achievements beyond the call of duty.As of the end of FY 2022-23,
the total number of the employees of Company are 579. 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 September2023 |
DIN: 00462656 |
DIN: 00462664 |
+91-9892691696
