Kwality Pharmaceuticals Ltd Management Discussions

INDUSTRY STRUCTURE & DEVELOPMENT Global Economy Overview

As per the International Monetary Fund report published in April 2025, the swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity. The global trade tariff tensions and extremely high levels of policy uncertainty are expected to have a significant impact on economic activity. Based on information as of April 4, global growth is projected to drop to 2.8% in 2025 and 3% in 2026—down from 3.3% for both years in the January 2025 update. This is also much below the historical (2000-19) average of 3.7%.

Growth in advanced economies is projected to be 1.4% in 2025. Growth in the United States is expected to slow to 1.8%. Growth in the Euro area is expected to slow by 0.2% point to 0.8%. In emerging markets and developing economies, growth is expected to slow down to 3.7% in 2025 and 3.9% in 2026, with significant downgrades for countries affected most by recent trade measures, such as China.

Intensifying downside risks dominate the outlook. Ratcheting up a trade war, along with even more elevated trade policy uncertainty, could further reduce near and long-term growth.

Indian Economy Overview

India is poised to lead the global economy once again, with the International Monetary Fund (IMF) projecting it to remain the fastest growing major economy over the next two years. As per IMF report April 2025, Indias economy is expected to grow by 6.2 per cent in 2025 and 6.3 per cent in 2026, maintaining a solid lead over global and regional peers.

Reflecting the impact of heightened global trade tensions and growing uncertainty despite this slight moderation, the overall outlook remains strong. This consistency signals not only the strength of Indias macroeconomic fundamentals but also its capacity to sustain momentum in a complex international environment. Indias economic resilience, the countrys role as a key driver of global growth continues to gain prominence.

Chinas GDP growth forecast for 2025 has been downgraded to 4.0 per cent, down from 4.6 per cent in the January 2025. Similarly, the United States is expected to see a slowdown, with its growth revised downward by 90 basis points to 1.8 per cent. Despite these revisions, Indias robust growth trajectory continues to set it apart on the global stage.

Indias economic outlook for 2025 and 2026 remains one of the brightest among major global economies, as highlighted by the IMF. Despite global uncertainties and downward revisions in growth forecasts for other large economies, India is set to maintain its leadership in global economic growth. Supported by strong fundamentals and strategic government initiatives, the country is well-positioned to navigate the challenges ahead. With reforms in infrastructure, innovation, and financial inclusion, India continues to enhance its role as a key driver of global economic activity. The IMFs projections reaffirm Indias resilience, further solidifying its importance in shaping the global economic future.

Global Pharmaceutical Industry Overview

The global pharmaceuticals market is projected to generate US$1.21 trillion in revenue by 2025, with Oncology Drugs leading at US$208.86 billion. It is expected to grow at a CAGR of 4.77%, reaching US$1.45 trillion by 2029. Pharmaceutical demand is anticipated to grow significantly as companies innovate and launch new therapies.

With rapid advancements in technology, drug discovery, and global health initiatives, the pharmaceutical market is evolving faster than ever before.

• Chronic diseases & aging populations — Rising rates of diabetes, cardiovascular diseases, and global population over 60 doubling by 2050 drive demand.

• Biologics & biotech — Biopharma now accounts for about 30% of total pharma spend ($431 billion), with biotech growing 14% annually, forecast at 7.5-10.5% CAGR through 2027.

• Biosimilars — Estimated cumulative savings of $150 billion in 2025, boosting adoption and access.

• Geographic shifts — Asia-Pacific (especially China & India) is the fastest-growing region, propelled by expanding healthcare access and manufacturing infrastructure.

• AI/ML in R&D: Rapid acceleration in drug discovery, clinical trial design, and patient matching. AI in healthcare is expected to reach $31 billion by 2025

• Precision therapeutics: Personalized medicine with oligonucleotides, CAR-T, mRNA cancer vaccines, nanomedicine, and digital pills are reshaping pipelines .

• Advanced manufacturing: Emerging use of 3D printing for tailored drug delivery and dose control

• Supply-chain digitization: Blockchain-based track-and-trace systems are being adopted globally to reduce counterfeiting.

Regional & Strategic Shifts

• North America: Continues to dominate (40-45% market share), driven by R&D infrastructure and chronic disease burden

• China: Leading in clinical trials (7,100+ vs. 6,000 in U.S. in 2024). Expected that 37% of molecules licensed in 2025 originate from China

• India: Globally third-largest by volume, a key generics and vaccine provider. 60% of global vaccine supply and 40% of U.S. generics by volume.

• Chinas biotech emergence: Chinese firms are challenging incumbents, licensing novel assets (e.g., GLP-1 orals, immuno-oncology) often at lower costs .

• Pricing pressures: U.S. policies (e.g., Inflation Reduction Act) aim to reduce drug prices by 30-80%, but could shift cost burdens to lower-income markets like India.

• Trade & tariffs: Potential U.S. tariffs on pharmaceuticals may drive reshoring by Big Pharma, but generics players face risk .

• Ethical marketing controls: India implemented the UCPMP 2024 to ensure transparency and ethical promotion

• Portfolio realignment: Companies pivot toward modalities like multispecific antibodies, oligos, and radioligand therapies.

• M&A & licensing: Big Pharma continues to buy or license promising biotech.

• Digital transformation: Vast digital integration—AI, telemedicine, digital health solutions, data analytics—is becoming integral to pipelines and go-to-market . ^•

• Manufacturing shifts: Investment in regions like India and the U.S. to diversify supply chains and boost resilience.

Indian Pharmaceutical Industry Overview

The Indian pharmaceutical industry is globally regarded as the Pharmacy of the World for its ability to meet the global demand for vaccines and essential medicines. Indias pharmaceutical sector is a global leader in the production of generic drugs and vaccines and is known for its affordable vaccines and generic medications. The Indian Pharmaceutical industry is currently ranked third in pharmaceutical production by volume after evolving over time into a thriving industry growing at a CAGR of 9.43% since the past nine years. Generic drugs, over-the-counter medications, bulk drugs, vaccines, contract research & manufacturing, biosimilars, and biologics are some of the major segments of the Indian pharma industry.

India has highest number of pharmaceutical manufacturing facilities that comply with the US Food and Drug Administration (USFDA) and has 500 API producers that make for around 8% of the worldwide API market.

Indian pharmaceutical sector supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK. The domestic pharmaceutical industry includes a network of 3,000 drug companies and 10,500 manufacturing units. India enjoys an important position in the global pharmaceuticals sector.

Indian pharmaceutical industry is known for its generic medicines and low-cost vaccines globally. Transformed over the years as a vibrant sector, presently Indian Pharma ranks third in pharmaceutical production by volume. The Pharmaceutical industry in India is the third largest in the world in terms of volume and 14th largest in terms of value. The Pharma sector currently contributes to around 1.72% of the countrys GDP.

According to a recent EY FICCI report, Indian pharmaceutical market is estimated to touch US$ 130 billion in value by the end of 2030.

The forecasted growth of the industry is expected to be driven by strong support from the Indian government, coupled with expanded collaborations with public and private research institutions. Further to this, the volume of clinical trials is projected to increase, with the clinical trials market forecast to attain a value of USD 3.37 billion, representing a compound annual growth rate (CAGR) of 8.6% from 2025 to 2030. Additionally, the sector is expected to witness a rise in investments in APIs, which is likely to further bolster exports in the coming years.

In addition, the domestic pharmaceutical industry has emerged as one of the preferred sectors for global investors. Recognising this potential, the Indian government has permitted 100% foreign direct investment (FDI) through the automatic route, further facilitating investment and fostering growth within the sector.

Kwality Pharma : A legacy of quality and growth

For over 40 years, Kwality Pharma has been a trusted name in the healthcare sector, synonymous with unparalleled growth and reliability. We are driven by a customer centric vision, committed to delivering high quality products.

Started with a modest venture into basic finished formulations. Now we specialise in a wide range of products including :

• Sterile Powder for Injection

• Small Volume Parentals ( Liquid and Lyophilised)

• Pre filled Syringes

• Liquid Orals and Powder for Oral Suspension

• Tablets and Capsules

• Creams and Ointments

• Ophthalmic Preparations

• Suppositories

Each product category is manufactured in a dedicated unit at our facilities of Generic, Beta Lactam, Cephalosporins, Oncology and Biologics located in Amritsar, Punjab and Jassur, Himachal Pradesh

The Company is highly focused on increasing and expanding its business by securing new clients and orders to increase its operational efficiency and performance.

OUTLOOK

Kwality Pharmaceuticals Limited has performed well in the past year, showing steady growth in its business. The companys revenue increased to around ^370 crore, and profit rose to nearly ^40 crore. These results are a testament to our unwavering focus on quality, operational excellence, and expanding global reach. The improvement in our margins and profitability further underscores the strength of our flexible business model and the relentless commitment of our team.

Throughout the year, we strengthened our presence across both domestic and international markets. With approvals from leading global regulatory bodies such as EU-GMP, SFDA, INVIMA, ANVISA, among others, we have deepened our footprint in over 80 countries. Our diverse portfolio—comprising more than 3,000 formulations across General, Beta-Lactam, Cephalosporins, Oncology, and Biological segments—remains a cornerstone of our competitive advantage.

As the pharmaceutical industry moves rapidly toward greater innovation, regulatory compliance, and global integration, Kwality is evolving as well. We are aligning our strategy with quality enhancement,

R&D-led product development, and expansion into highly regulated markets. Our focus remains strong on high-value therapeutic areas such as oncology, biosimilars, and complex generics, where we see substantial long-term potential and lower competition.

On the R&D and marketing front, we are moving decisively. We are in the process of obtaining DSIR approval to further enhance our research capabilities. Our pipeline includes a carefully selected mix of peptide-based oncology products and complex generics, aimed at global filing of the same. These programmes are currently at various stages of BE and PE studies.

Our biosimilar programme also continues to advance meaningfully. Notably, our biological erythropoietin has successfully completed preclinical studies and is currently undergoing clinical trials. We expect to commercialize this product within the ongoing financial year, which would mark a major milestone in our foray into biologics.

While global uncertainties and regulatory challenges persist, our diversified product base, disciplined execution, and expanding international footprint position us well to deliver sustained value. At the same time, we continue to advance our environmental, social, and governance (ESG) commitments, ensuring that our growth is responsible and inclusive.

Overall, Kwality Pharmaceuticals is in a strong position to grow further in both domestic and international markets. However, the innovation work with DSIR approval and technology transfer of finished products of secondary packing in other parts of the world is in the path way of future development of the Company. With a focus on quality, innovation, technology transfer and compliances, and new bioavailability of its items, the company is optimistic about delivering consistent performance and creating long-term value for shareholders.

These collective efforts are designed to position the Company for sustainable growth, regulatory alignment, and long-term value creation for all stakeholders.

PRIORITIES FOR FY26

Our Company prioritises strategic growth and innovation to strengthen our market position in the coming years. We aim to achieve

• EU GMP Audit of General and Beta Lactam unit

As a part of its strategic initiatives, the Company is focused to ensure seamless raw material availability, enhance operational efficiency, and support sustained growth in the competitive pharmaceutical market. Prioritizing the portfolio and developmental cost optimization are expected to accelerate innovation in important and high-value products while maintaining financial discipline.

OPPORTUNITIES, RISKS, CONCERNS & THREATS

Pharmaceutical companies in 2025 face a mix of growth potential and serious challenges.

Opportunities: include using AI for faster drug development, entering emerging markets, creating advanced treatments like gene and mRNA therapies, and adopting eco-friendly practices.

Risks come from strict regulations, losing patents on top-selling drugs, high R&D costs, cyberattacks, and fragile global supply chains.

Concerns focus on rising pressure to lower drug prices, protecting patient data, finding skilled workers, and reducing environmental impact.

Threats include global conflicts, new disease outbreaks, lawsuits, and growing competition from tech companies entering healthcare.

The Company operates in a relatively stable business environment and does not currently perceive any significant risks that could materially impact its operational or financial performance. However, the pharmaceutical industry is highly regulated, and the Company remains vigilant to potential risks arising primarily from changes in government policies, regulatory frameworks, and compliance requirements. These include, but are not limited to, changes in drug pricing policies, product approval processes, taxation, import/export regulations, and environmental norms. The Company continuously monitors policy developments and engages proactively with stakeholders to ensure timely compliance and mitigate any potential impact on business operations.

The Company is confident that it will be able to position itself strongly in the coming years by pursuing strategic expansion, increasing manufacturing capacities, and enhancing capabilities across the organization. These initiatives are aimed at strengthening operational efficiency, meeting growing market demand, and supporting long-term sustainable growth.

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 ongoing 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

During the year under review, on standalone basis, revenue of the company was Rs. 37211.71 Lakhs as compared to Rs. 30900.21 Lakhs in the corresponding previous year. The Company earned a profit after tax of Rs. 3988.97 Lakhs as compared to Rs. 2398.39 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:

*The Interest Coverage Ratio has improved by more than 25% during the financial year ended 31^st March, 2025, due to rise in EBITA and reduction in finance cost.

The Net Worth Ratio has increased during the year ended 31st March, 2025 as compared to the previous year, primarily due to increase in Net Profit.

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

The Companys human resources are a critical asset in ensuring the successful execution of the Companys operations. Kwality Pharmaceuticals Limited continued to prioritize its people as a key pillar of sustainable growth. The Company undertook several strategic HR initiatives focused on talent acquisition, retention, capability building, and employee well-being. The Company implemented structured training programs across departments to build technical and leadership capabilities. Initiatives to improve employee engagement, workplace safety, and productivity are also prioritize. In order to motivate employees and recognize their outstanding work, employees are being awarded for excellent work . As of the end of FY 2024-25, the total number of the employees of Company are 997 (on roll). The high retention rate reflects the Companys commitment to fostering a conducive work environment and its ability to attract, retain and nurture a highly skilled talent pool.

Industrial relations remained harmonious and collaborative, with regular engagement between management and employee representatives. The Company maintained 100% statutory compliance with labor and safety regulations across all facilities.

Kwality Pharmaceuticals remains committed to building a skilled, engaged, and future-ready workforce aligned with its growth ambitions and values.

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.