Lyka Labs Ltd Management Discussions.

Economic Overview And Outlook

Over a year, the COVID-19 pandemic has hit us hard through public health crisis and economic disruption. In this scenario, high uncertainty surrounds the global economic outlook. There has been contraction of activity in 2020. As per IMF, the global economy contracted -3.3 percent in 2020. As per IMF, the global economy is projected to grow at 6 percent in 2021 and moderating to 4.4 percent in 2022. The COVID-19 recession is likely to leave smaller scars than the 2008 global financial crisis. However, emerging market economies and low-income developing countries have been hit harder and are expected to suffer more significant medium-term losses.

Pharmaceutical Sector Overview

Pharmaceutical has always been one of significant contributors to the world economy. As per Global Medicines & Usage Trends: Outlook to 2025 report by IQVIA in April 2021, the total cumulative spending on Covid-19 vaccine through 2025 is projected to be USD 157 billion, largely focused on the initial wave of vaccinations to be completed by 2022.

Despite the unprecedented dynamics at play with the COVID-19 pandemic, medicine spending growth will continue to be driven by traditional factors including patent expiries, launches of new medicines as well as changing volume demand. As per the IQVIA report, the global medicine spending the amount spent purchasing medicines from manufacturers before off-invoice discounts and rebates is expected to reach about USD 1.6 trillion in total market size in 2025, registering 3-6% CAGR.

Company Overview

Lyka Labs Limited is a pharmaceutical company engaged in the development, manufacture and marketing of quality finished dosages. The Company has a well-diversified therapies and products to fulfil unmet patient needs. This also helps us de-risk the business to a large extent from possible uncertainties in the business environment.

SEGMENT WISE OR PRODUCT WISE PERFORMANCE:

The Company is engaged in only one segment viz. pharmaceuticals. The Company is one of the oldest company in Indian pharmaceuticals industry having presence in Domestic as well as International markets.

The Company has r commercial presence in various countries either on its own or through its subsidiary company. During the year, the total revenue of the Company is Rs.64 crores.

OUTLOOK:

1. Company is constantly exploring possibilities of entry into newer international markets with reputed partners and also introduce new products in existing markets.

2. It is also modernising its existing manufacturing facilities to improve through put and reduce manufacturing costs thereby increasing profitability.

3. Company is also trying to add reputed customers to its clientele list in the domestic P2P and Job work business.

4. The Company also expects to have Plant approvals from PICS and other regulatory Authorities within the next financial year.

5. To meet the increase in demand for lyophilised products the company has embarked on an expansion project of its Lyophilization Plant at its Ankleshwar factory. This Project is likely to be completed in 6 months with a 50% enhancement in capacity for lyophilisation.

RISKS AND CONCERNS :

Your Company does not perceive any risks or concerns other than those that are common to the industry such as regulatory risks, exchange risk, cyber risks and other commercial and business related risks.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY :

The Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March 2021.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During the financial year the total Income from Operations was Rs 64.47 crores as against a total income of Rs 43.33 crores of the previous financial Year ended on 31st March, 2020. During the Financial year the company has earned operating profit of Rs 16.63 Crores before charging interest and depreciation as against loss of Rs 61.94 lakhs of the Previous Financial Year ended on 31st March 2020.

HUMAN RESOURCE :

There has been no material development on human resources and industrial relations front. The relationship with employees and workers continued to be cordial at all levels. As on 31st March 2021, permanent employees and workers strength was 99.

KEY FINANCIAL RATIOS :

The key financial ratio for 2020-21 and changes therein as compared to the immediately preceding financial year along with detailed explanation in cases where the change is 25% or more are as under:

a. Debtors Turnover ratio:Net credit sales/Average Account Receivable. The ratio for the year was 7.55 (times) as against 3.81 (times) in the previous year. This year this ratio is lower as compared to previous year due to increase in revenue and decrease in average debtor.

b. Inventory Turnover ratio:Cost of Goods Sold / Average Inventory. This ratio for the year was 4.70 (times) as against 3.48 (times) in the previous year. The ratio in the current year has increased due to increase in Cost of Goods Sold and reduction in average inventory.

c. Interest Coverage ratio:EBIT / Interest Expense. The ratio for the year was 28% as against -190% in the previous year. This ratio has become positive in the current year due to increase in total income before interest and tax.

d. Current Ratio:Current Assets/ Current Liabilities. This ratio for the year was 0.58 (times) as compared to 0.55 (times) in the previous year. This ratio in the current year has increased due to decrease in current assets and decrease in current liabilities.

e. Debt-Equity ratio:Total Debt/ Shareholders Equity. This ratio for the year was 43.17 (times) as against 9.44 (times) in the previous year. This ratio has increased due to decrease in equity and increase in debt.

f. Operating Profit Margin:EBIT/Sales operating profit margin for the year was -110% as against -83% in the previous year. The operating profit has become positive due to increase in operating profit

g. Net Profit Margin:Net Profit/Sales Net Profit Margin (including other income) for the year was -23% as against -136% in the previous year. Due to reduction in net loss as compared to previous year.

CHANGE IN RETURN ON NET WORTH

Return on Net Worth:This financial performance is calculated by dividing net income by shareholders equity. Return on networth or return on equity during the year was -328% as compared to -295% in the previous year. The negative return on net worth increased due to reduction in equity as compared to previous year.

Date: 02 June, 2021 For and Behalf of Board of Lyka Labs Limited
Place: Mumbai Kunal N. Gandhi
Managing Director
DIN: 01516156