Management Discussion and Analysis
MACRO ECONOMIC ENVIRONMENT
India is among the top five emerging pharma markets and has grown at an estimated
compound annual growth rate (CAGR) of 13 per cent during the period FY 2009–2013. The
Indian pharmaceutical market is poised to grow to US$ 55 billion by 2020 from the 2009
levels of US$ 12.6 billion, according to the report titled India Pharma 2020 by McKinsey
& Co.
A new cluster of countries is contributing to the growth of the pharma industry,
resulting in a robust jump in exports of drugs. The countrys pharma industry accounts for
about 1.4 per cent of the global pharma industry in value terms and 10 per cent in volume
terms. Both domestic and export-led demand contributed towards the robust performance of
the sector.
An increase in insurance coverage, an ageing population, rising income, greater
awareness of personal health and hygiene, easy access to high-quality healthcare
facilities and favourable government initiatives are some of the important factors
expected to drive the pharma industry in India. The Government of India has unveiled
Pharma Vision 2020 aimed at making India a global leader in end-to-end drug
manufacturing.
REVIEW OF OPERATIONS
The Business environment continued to remain challenging and the recessionary economic
conditions continuously leading to slowdown in demand and inflation pushed further scale
up of input costs, continued to leave its adverse imprint on overall performance for
2013-2014. In spite of such a scenario, the Company could only make meager profit during
the year under review. Gross revenue for the year was of Rs. 32.00 Lac during the year in
comparison to last years figure of Rs. 14.49 Lac. In term of Net Profit, the same was of
Rs. 13.77 Lac in comparison to last years Loss of Rs. 15.31 Lac. The Gross Revenue is
inclusive of Compensation amount of Rs. 10.83 Lac which was being received from Govt. of
Tamil Nadu as against cancellation of Land allotted to Company for the purpose of Factory.
BUSINESS SEGMENT
During the year, the Company is into the business of sole segment of trading of tablet,
liquid orals, capsules and ointments under the allopathic system and capsules and liquid
orals under the ayurvedic/ sidha systems. The Companys business involves significant
investments in marketing for its operations.
OPPORTUNITIES
India Ratings and Research has revised its outlook on the pharmaceuticals sector for FY
2014–15 to positive from stable on the back of increased exports. With the support of
Pharmexcil and the government in the form of Brand India Pharma project iPHEX, the sector
would continue to grow and meet the healthcare requirements of the developing world. The
country will also see the largest number of mergers and acquisitions (M&A) in the
pharmaceutical and healthcare sector, according to consulting firm Grant Thornton.
With 70 per cent of Indias population residing in rural areas, pharma companies have
immense opportunities to tap this market. Demand for generic medicines in rural markets
has seen a sharp growth.
The non-small cell lung cancer (NSCLC) therapeutics market value in the
Asia–Pacific region is expected to grow at a CAGR of 6.3 per cent to touch US$ 2.9
billion by 2019 from US$ 1.8 billion in 2012, according to GBI Research. An aging
population and increasing number of NSCLC incident cases will be the main drivers behind
this anticipated growth in India.
THREATS & CHALLENGES
According to the Federation of Indian Chambers of Commerce and Industry (FICCI),
globally, India ranks third for pharma manufacturing volume and 14th in terms of value.
In itself India represents a major market for pharma companies with a population of
over 1.2 billion yet the country posts an impressive export turnover of over US$10
billion, spread across 200 countries. Domestic and international pharma companies,
however, face a number of major issues, including drug quality, clinical trial quality and
patent protection.
Most of Big Pharma Companies are exiting from Pharma Business in recent past. The
reason why these companies are exiting is because their base was built in a protected
market where generic production was their staple source of revenue. However post-2005 they
have realized the issues they are facing now that they must directly compete with
international players, even if they have less resources to spend on research and
development.
Also not all Indian companies have a structured marketing chain like some of the
foreign brands have in the global market. The mouth watering valuations of the companies
are lucrative enough for the owners to give it a thought. The problem is that it is
difficult for these companies to grow selling only generic drugs and neither do they have
the money or the infrastructure to produce new, original drugs on a mass scale. While Sun
Pharma is looking at the energy sector as it has untapped potential and growth opportunity
, the owners of Ranbaxy – the Singh brothers already had Religare- an investment
company & Fortis – a successful chain of hospitals. Thus, the money that these
pharma companies will get from selling of their units will be invested into something that
has a better return and will probably take less time than developing R&D and passing
through the gestation period before these new drugs even if approved will take to become a
top-selling one.
One point of concern is the regulatory framework. Under Indian law, all drugs which
qualify as bulk drugs must have an end-price that is regulated by the government –
the recent DPCO 2013 (Drug Price Control Order) seems to have increased the number of bulk
drugs from 74 to 348. This may prove to be a deterrent to Indian pharma corporations
leading to a lot of exits.
RISK MANAGEMENT
We follow Enterprise Risk Management (ERM) tool designed to clarify the risk levels and
encourage behavior throughout the management. The process considers opportunities and
threats to short and medium term objectives as defined. ERM ensures the coordination and
development of risk management activities throughout all decision making levels and
communicates all significant risks to the top level of management. The tool is designed to
provide the risk score measures for each of the potential risk as well as its financial,
reputational and operational impact by way of quarterly report.
INTERNAL CONTROL SYSTEMSANDADEQUACY
The Company has implemented a comprehensive system of internal controls and risk
management systems for achieving operational efficiency, optimal utilisation of resources,
credible financial reporting and compliance with local laws. These controls are regularly
reviewed by both internal and external agencies for its efficiency and effectiveness.
Management information and reporting system for key operational activities form part of
overall control mechanism.
HUMAN RESOURCES
The Company recognizes that its success is deeply embedded in the success of its human
capital. The Company continued to strengthen its HR processes in line with its objective
of creating an inspired workforce. The employee engagement initiatives included placing
greater emphasis on learning and development, launching leadership development programme,
introducing internal communication, providing opportunities to staff to seek inspirational
roles through internal job postings, streamlining the Performance Management System,
making the compensation structure more competitive and streamlining the performance-link
rewards and incentives.
CORPORATE SUSTAINABILITYAND SOCIAL RESPONSIBILITY
The Company constantly strives to meet and exceed expectations in terms of the quality
of its business and services. The Company commits itself to ethical and sustainable
operation and development of all business activities according to responsible care and its
own code of conduct. Corporate Social Responsibility is an integral part of the Companys
philosophy and participates in activities in the area of education and health.
CAUTIONARY STATEMENT
Certain statements under "Management Discussion & Analysis" describing
the Companys objectives, projections, estimates, expectations or predictions may be
forward looking statement within the meaning of applicable securities laws and
regulations. Although the expectations are based on reasonable assumptions, the actual
results could materially differ from those expressed or implied, since the Companys
operations are influenced by many external and internal factors beyond the control of the
Company. The Company assumes no responsibility to publicly amend, modify or revise any
forward looking statements, on the basis of any subsequent developments, information or
events.
COMPLIANCE
The Compliance function of the Company is responsible for independently ensuring that
operating and business units comply with regulatory and internal guidelines. The
Compliance Department of the Company is continued to play a pivotal role in ensuring
implementation of compliance functions in accordance with the directives issued by
regulators, the Companys Board of Directors and the Companys Compliance Policy. The
Audit Committee of the Board reviews the performance of the Compliance Department and the
status of compliance with regulatory/internal guidelines on a periodic basis.
New Instructions/Guidelines issued by the regulatory authorities were disseminated
across the Company to ensure that the business and functional units operate within the
boundaries set by regulators and that compliance risks are suitably monitored and
mitigated in course of their activities and processes. New products and process launched
during the year were subjected to scrutiny from the Compliance Standpoint and proposals of
financial services were screened from risk control prospective.
The Company has complied with all requirements of regulatory authorities. No
penalties/strictures were imposed on the Company by stock exchanges or SEBI or any
statutory authority on any matter related to capital market during the last three years
except reinstatement fees paid to BSE for revocation of suspension from trading in the
Equity Shares of the Company.
| Chennai, May 27, 2014 |
By order of the Board |
|
For MAHAVIR ADVANCED REMEDIES LIMITED |
| Registered Office : |
BVS KOTESWARA RAO |
| No. 91, D-11, Govindappa Naicken Street |
(DIN : 02589812) |
| Chennai - 600 079 (Tamil Nadu) |
Managing Director |
+91-9892691696
