Kwality Pharmaceuticals Ltd Management Discussions

INDUSTRY STRUCTURE & DEVELOPMENT

Global Economy Overview

The global economy demonstrated notable resilience during Calendar Year (CY) 2025, despite heightened geopolitical tensions, evolving trade policies, persistent inflationary pressures and continued supply chain realignments. Economic activity was supported by resilient labour markets, easing monetary conditions in several major economies, sustained consumer spending and accelerating investments in digital technologies and artificial intelligence (AI). Although growth moderated from post-pandemic highs, the global economy continued to expand at a steady pace, reflecting the adaptability of businesses and policymakers in an increasingly complex operating environment.

The global economic landscape during FY 2025-26 was significantly influenced by the continuing Russia-Ukraine conflict and the escalation of tensions in the Middle East. These developments resulted in volatility in crude oil prices, increased freight and logistics costs, disruptions in key maritime trade routes and heightened uncertainty in global financial markets. The pharmaceutical and healthcare sectors, however, continued to demonstrate resilience owing to sustained demand for medicines, vaccines and healthcare services.

According to the International Monetary Fund (IMF), global growth is projected to moderate to 3.1% in 2026, with a marginal improvement to 3.2% in 2027, supported by stable demand, technology investments and a gradual recovery in trade. Advanced economies are expected to witness relatively subdued growth, while emerging markets and developing economies are expected to remain more resilient, supported by domestic demand and infrastructure spending. However, these projections remain subject to significant downside risks arising from geopolitical conflicts, trade policy uncertainty, financial market volatility and supply chain disruptions.

Indian Economy Overview

India continued to demonstrate strong economic resilience during FY 2025-26 and remained one of the fastest- growing major economies globally. Growth was supported by robust domestic consumption, rising government capital expenditure, sustained infrastructure development, a resilient services sector and continued structural reforms. Despite global geopolitical uncertainties, including the Russia-Ukraine conflict and tensions in the Middle East, Indias macroeconomic fundamentals remained stable, supported by prudent fiscal management and a resilient financial system.

India recorded real GDP growth of approximately 6.3% during FY 2025-26, according to the International Monetary Fund (IMF), reinforcing its position as one of the fastest-growing major economies globally. Inflation remained broadly within the Reserve Bank of Indias (RBI) target band of 4% ? 2%, while foreign exchange reserves remained robust at over US$700 billion, providing a strong buffer against external shocks and supporting macroeconomic stability.

Government initiatives such as Make in India, Production Linked Incentive (PLI) Scheme, Digital India, PM Gati Shakti, the National Infrastructure Pipeline (NIP) and continued public capital expenditure strengthened manufacturing competitiveness, enhanced logistics efficiency and supported long-term economic growth. These initiatives also encouraged private investment, improved the ease of doing business and accelerated digital transformation across sectors.

Global Pharmaceutical Industry Overview

The global pharmaceutical industry continued to demonstrate resilience and sustainable growth during FY 2025-26, despite geopolitical tensions, supply chain disruptions, inflationary pressures and economic uncertainties. The industry remained supported by rising healthcare expenditure, ageing populations, increasing prevalence of chronic diseases, expanding healthcare access and continued investments in research and development (R&D).

The global pharmaceutical market was estimated at approximately US$1.74 trillion in 2025 and is projected to reach around US$1.84 trillion in 2026, reflecting continued demand across both developed and emerging markets. Longterm industry forecasts indicate that the global pharmaceutical market could exceed US$2.6 trillion by 2030, driven by innovation, increasing healthcare needs and wider access to medicines.

The global pharmaceutical industry continued to demonstrate strong resilience during FY 2025-26, supported by rising healthcare expenditure, ageing populations, increasing prevalence of chronic diseases and growing demand for innovative therapies. The global pharmaceutical market is estimated at approximately US$ 1.74 trillion in 2025 and is projected to reach US$ 1.84 trillion in 2026, with long-term projections indicating growth beyond US$ 2.6 trillion by 2030. Growth is being driven by biologics, biosimilars, specialty medicines, oncology therapies, obesity treatments, vaccines and digital health solutions.

Emerging markets, particularly India, China and other Asia-Pacific countries, continued to strengthen their position in global pharmaceutical manufacturing and exports due to their cost competitiveness, skilled workforce, regulatory compliance and expanding production capabilities. The increasing focus on supply chain diversification has further enhanced the strategic importance of these markets in the global pharmaceutical ecosystem.

Looking ahead, the industrys long-term outlook remains positive, supported by innovation, favourable demographics, rising healthcare expenditure, expanding insurance coverage and increasing global demand for

affordable, high-quality healthcare solutions. However, challenges such as pricing pressures, evolving regulatory requirements, geopolitical risks and supply chain disruptions continue to require strategic focus.

Indian Pharmaceutical Industry Overview

India has firmly established itself as the "Pharmacy of the World", driven by its ability to provide high-quality and affordable medicines to global markets. The countrys cost-efficient manufacturing ecosystem, skilled scientific workforce and strong regulatory framework have enabled it to become one of the worlds leading pharmaceutical manufacturing hubs. Today, the Indian pharmaceutical industry ranks 3rd globally by volume and 11th by value, with over 3,000 pharmaceutical companies and approximately 10,500 manufacturing units.

The industry continues to benefit from supportive government initiatives such as the Production Linked Incentive (PLI) Scheme, Promotion of Bulk Drug Parks, Strengthening of Pharmaceutical Industry (SPI) Scheme, and the Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP). These initiatives are strengthening domestic manufacturing, promoting investment in Active Pharmaceutical Ingredients (APIs), reducing import dependence and enhancing Indias competitiveness across the global pharmaceutical value chain.

Indias pharmaceutical sector has further strengthened its global presence through rising exports, increasing regulatory approvals and sustained foreign investment. Indian pharmaceutical companies continue to diversify their export markets across North America, Europe, Africa, Latin America, the Middle East and Asia, enhancing export resilience and reducing dependence on individual geographies. Supported by strong manufacturing capabilities, a robust regulatory ecosystem, continuous innovation and favourable government policies, the Indian pharmaceutical industry remains well-positioned for sustainable long-term growth.

COMPANY OVERVIEW

Kwality Pharmaceuticals Limited is an integrated pharmaceutical company engaged in the development, manufacturing and marketing of a diversified range of pharmaceutical formulations catering to regulated, semiregulated and emerging markets. With over four decades of industry experience, the Company has established itself as a reliable manufacturing partner, offering high-quality pharmaceutical products supported by strong research and development capabilities and globally compliant manufacturing infrastructure.

The Company continues to strengthen its position in complex and specialty formulations through sustained investments in research, process innovation and capacity expansion. Its R&D efforts are focused on high-value therapeutic areas including biologics, oncology, liposomal formulations, lyophilised injectables and other complex dosage forms, supporting long-term growth opportunities in global pharmaceutical markets.

During FY 2025-26, the Company delivered strong financial and operational performance, reporting Revenue from Operations of ^503 Crore, EBITDA of ^118 Crore and Profit After Tax of ^67 Crore. The Company continues to strengthen its global footprint through product registrations, regulatory approvals and expansion into new international markets.

Products supplied to 70+ countries across regulated and emerging markets including LATAM, MENA, Africa, Asia, and CIS regions

Diversified portfolio of 1,000+ products across 25+ therapeutic segments, including General, Beta Lactam, Cephalosporins, Oncology, Biologics and Hormones and specialty injectables

5 operational manufacturing facilities with advanced i nfrastructure; Unit 6 (Hormones) under construction

4 manufacturing units EU-GMP approved, along with global accreditations including PICS, ANVISA, INVIMA, and WHO-GMP compliance

With ongoing investments in biologics, oncology and hormone manufacturing facilities, Kwality Pharmaceuticals remains focused on sustainable growth, operational excellence and long-term value creation for all stakeholders.

Pipeline Strength

Strong track record of successful regulatory audits including 20+ regulatory/customer/vendor audits in last two years

DSIR-recognized in-house R&D centre with 80+ scientists, focused on complex formulations, biologics, and advanced drug delivery systems

Tech Focus on liposomal pegylated injectables, Emulsion Technology, Lyophilized Injectables, Long - acting Injectables, Niche Biological Injectables

Asset-light out-licensing and supply model (90%) with strong international filings and partnerships across regulated markets

Improvement in working capital cycle (cash conversion days reduced significantly) and increasing capital productivity

Strong biologics pipeline including EPO biosimilar (target FY27 launch) and multiple monoclonal antibodies under development

OUTLOOK

The Company remains optimistic about its long-term growth prospects, supported by increasing demand for high-quality pharmaceutical formulations, expanding opportunities in regulated markets and a growing focus on complex and specialty products. With continued investments in manufacturing infrastructure, research and development, regulatory approvals and product development, the Company is well-positioned to strengthen its global market presence and improve its competitive advantage.

Going forward, the Company will continue to focus on expanding its presence in regulated markets through additional product registrations and regulatory approvals. The recent EU-GMP approvals for its General and Beta Lactam manufacturing facilities are expected to enhance access to regulated markets and support future export growth

The Company is pursuing capacity expansion across its Oncology and Biologics facilities while progressing with the construction of a dedicated Hormone manufacturing unit. These investments are expected to enhance manufacturing capabilities, diversify the product portfolio and support future revenue growth from high-value therapeutic segments.

Research and development will remain a key growth driver. The Company is advancing its pipeline of complex formulations, biosimilars and niche injectable products, including the clinical development of Erythropoietin (EPO) and other biologic molecules. These initiatives are expected to strengthen its presence in specialty pharmaceuticals and create long-term value.

The Company also intends to leverage its asset-light out-licensing and supply model, supported by a growing portfolio of regulatory filings and strategic partnerships across international markets. This approach is expected to facilitate scalable growth while maintaining prudent capital allocation and operational efficiency.

Management expects these strategic initiatives, together with continued emphasis on quality, regulatory compliance, operational excellence and innovation, to support sustainable growth and strengthen the Companys position in the global pharmaceutical industry over the medium to long term.

Opportunities

The Global Pharmaceutical Industry continues to benefit from increasing healthcare expenditure, an ageing population, rising prevalence of chronic diseases and growing demand for affordable generic medicines. The ongoing shift towards complex injectables, specialty pharmaceuticals and biosimilars presents significant growth opportunities for manufacturers with strong research, development and regulatory capabilities. Additionally, the increasing preference of global pharmaceutical companies for outsourcing manufacturing and the diversification of supply chains beyond traditional sourcing markets create new opportunities for Indian Pharmaceutical Companies.

Kwality Pharmaceuticals is well-positioned to capitalize on these trends through its diversified product portfolio, expanding manufacturing capabilities, EU-GMP approved facilities, and growing presence in regulated and semiregulated markets. The Companys continued investments in Oncology, Biologics and Hormone manufacturing facilities, coupled with its focus on complex formulations, research & development, regulatory filings and an

asset-light out-licensing model, are expected to support sustainable growth and strengthen its competitive position in international markets.

Key Opportunities

• Growing global demand for affordable generic pharmaceuticals and specialty formulations.

• Increasing outsourcing opportunities for Indian pharmaceutical manufacturers.

• Expansion in regulated markets supported by international regulatory approvals.

• Rising demand for oncology products, biologics and biosimilars.

• Capacity expansion and commercialization of high-value products.

• Growth through strategic out-licensing and global supply partnerships.

Threats

The pharmaceutical industry remains highly competitive and subject to stringent regulatory oversight across domestic and international markets. Frequent changes in regulatory requirements, pricing pressures in generic medicines, delays in product approvals and increasing compliance costs may impact business operations and profitability. The industry is also exposed to risks arising from supply chain disruptions, fluctuations in raw material prices, geopolitical uncertainties and foreign exchange volatility, which can affect manufacturing costs and export revenues.

For Kwality Pharmaceuticals, maintaining regulatory compliance across multiple markets, managing input cost inflation, timely commercialization of new products and sustaining competitiveness in export markets remain key priorities. The Company continues to mitigate these risks by strengthening its quality systems, diversifying its product portfolio and export markets, investing in manufacturing excellence and focusing on operational efficiency.

Key Threats

• Stringent and evolving global regulatory requirements.

• Pricing pressure in domestic and international generic pharmaceutical markets.

• Delays in regulatory approvals and commercialization of new products.

• Volatility in raw material, energy and logistics costs.

• Foreign exchange fluctuations affecting export earnings.

• Supply chain disruptions and geopolitical uncertainties.

• Intense competition from domestic and multinational pharmaceutical companies.

Risks and concerns

The pharmaceutical industry operates in a dynamic and highly regulated environment, exposing the Company to various business, operational and financial risks. Kwality Pharmaceuticals continues to strengthen its risk management framework by focusing on regulatory compliance, quality assurance, operational excellence and business diversification to mitigate these risks and support sustainable growth.

Key Risks and Mitigation Measures

Risk	Potential Impact	Mitigation Measures
Regulatory Risk	Changes in regulatory requirements, inspections and delays in product approvals may affect product launches and exports.	Continuous compliance with EU-GMP and other international quality standards, regular audits and strengthening of quality systems.
Market Competition	Intense competition from domestic and global pharmaceutical companies may result in pricing pressure and margin compression.	Focus on complex formulations, specialty products, biologics, product differentiation and operational efficiency.
Raw Material & Supply Chain Risk	Fluctuations in raw material prices and disruptions in global supply chains may increase manufacturing costs and affect production schedules.	Diversified supplier base, strategic procurement and inventory management practices.
Foreign Exchange Risk	Volatility in foreign exchange rates may impact export revenues and profitability.	Natural hedging through diversified export markets and prudent treasury management.
Operational Risk	Manufacturing interruptions equipment failures or quality issues may affect business continuity.	Preventive maintenance, process automation, robust quality control systems and business continuity planning.
Research & Product Development Risk	Delays in product development, bioequivalence studies or regulatory approvals may postpone commercialization.	Continuous investment in R&D, project monitoring and regulatory planning.
Cybersecurity & Information Risk	Increasing digitalization exposes the Company to cyber threats and data security risks.	Implementation of IT security controls, data protection measures and periodic cybersecurity assessments.

Risk Management Approach

The Company has established appropriate internal control systems and risk management practices to identify, monitor and mitigate key business risks. Continuous emphasis on regulatory compliance, quality management, operational efficiency, supply chain resilience and prudent financial management enables the Company to respond effectively to changing business conditions while pursuing sustainable long-term growth.

SEGMENT WISE PERFORMANCE

The Company operates in a single business segment, namely pharmaceutical formulations, and offers a diversified portfolio of over 1,000 formulations across more than 25 therapeutic categories. During the year, the Company continued to strengthen its product mix by focusing on complex formulations, injectables, oncology products, biologics and other specialty therapies while expanding its global presence across regulated and semi-regulated markets. The Companys

revenue continued to be driven by its out-licensing and supply business model, supported by its manufacturing capabilities and regulatory approvals.

86% of the Companys revenue was contributed by Injectables (48%) and Tablets (38%), demonstrating the Companys strong manufacturing capabilities and market presence in these key dosage forms. The remaining 14% was derived from Capsules, Liquid Orals & Externals, Creams & Ointments, Dry Syrups, Ophthalmics, Sachets and Suppositories, reflecting a well-diversified product portfolio across multiple pharmaceutical dosage forms.

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. The Company continuously upgrades its internal control systems by taking measures such as strengthening of IT infrastructure and use of external management assurance services. The Company has in place a well-defined internal audit system whereby the internal audit is performed across locations of the Company and the results of the audit findings are reviewed by the audit committee.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

(In Rupees Lacs)

Particulars	Current Year	Previous Year
Total Income	50591.75	37211.71
Profit before Tax (PBT)	8949.27	5422.70
Profit After Tax (PAT)	6734.66	3988.97

During the year under review, the Company delivered a strong financial performance, with total income increasing to ^50,591.75 lakhs from ^37,211.71 lakhs in the previous year, reflecting healthy growth in business operations. Profit Before Tax (PBT) increased to ^8,949.27 lakhs from ^5,422.70 lakhs, while Profit After Tax (PAT) rose to ^6,734.66 lakhs from ^3,988.97 lakhs. The improvement in financial performance was driven by higher operational revenues, an improved product mix, enhanced manufacturing efficiencies and continued focus on cost optimisation. Going forward, despite prevailing macroeconomic and geopolitical uncertainties, the Company remains confident of sustaining its growth momentum through capacity expansion, increasing presence in regulated markets, product portfolio diversification and continued emphasis on operational excellence.

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

Ratios	Financial year 2025-26	Financial year 2024-25
Debtors Turnover	2.30	2.72
Inventory Turnover	2.98	2.04
Current Ratio	1.80	1.68
Interest Coverage Ratio*	9.15	6.48
Debt Equity Ratio	0.39	0.42
Operating Profit Margin	19.97%	14.65%
Net Profit Margin	13.39%	10.78%
Return on Net Worth	20.20%	15.00%

*The Interest Coverage Ratio has improved by more than 41% during the financial year ended 31st March, 2026, due to rise in EBITA.

The Net Worth Ratio has increased during the year ended 31st March, 2026 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 2025-26, the total number of the employees of Company are 1137 (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.

	For and on Behalf of the Board
	Sd/-	Sd/-
	(RAMESH KUMAR)	(AJAY KUMAR ARORA)
Place: Amritsar	Managing Director	Whole Time Director
Date: 08th August 2026	DIN: 00462656	DIN: 00462664