Mankind Pharma Ltd Management Discussions

Economic Overview Global economy

In recent years, the global economy has encountered several headwinds, including the COVID-19 pandemic and geopolitical conflicts in Europe and the Middle East. These challenges, coupled with tensions in the Red Sea and the subsequent tightening of global monetary policies have led to weak global trade growth. However, despite these obstacles, the global economy rebounded, achieving a growth of 3.2% in CY 20231.

While global headline and core inflation have declined from their peak in 2022, they remain above the target for most economies. The recent conflict in the Middle East has further exacerbated existing risks, resulting in supply chain constraints and volatile commodity prices.

Outlook

Going forward, global inflation is likely to stay at 5.9% while global growth is expected to maintain its growth rate at 3.2% in CY 2024. However, changes in government policies and regulations resulting from the upcoming elections in major countries such as the UK and US could affect the growth of economies in the near term.

Also, climate change has the potential to significantly impact the global economy. Adverse environmental impacts can disrupt supply chains and business operations. For instance, climate risks can lead to supply chain constraints and cost escalations, affecting the timely delivery of goods and services as well as compromising product quality, thereby impacting lives globally.

Source: https://www.imf.org/extemal/datamapper/PCPIPCH@WEO/WEOWORLD

Indian economy

The Indian economy has shown steady growth amid global economic challenges, maintaining its position as one of the fastest-growing major economies. Higher GST revenue collections, deleveraged balance sheets for banks and major corporations, fiscal consolidation, manageable external balance and substantial foreign exchange reserves have positively contributed to the domestic economys growth. Additionally, with the China Plus One strategy coming into play, most countries are now considering India as an alternative manufacturing hub.

Political stability in the past decade and various favourable policies introduced by the Government have kept the domestic economy buoyed from external headwinds. In addition to this the Government of India has introduced several structural reforms in areas such as banking and taxation, creating a business-friendly environment. Indias ascent in the World Banks ease of doing business ranking saw the country climb from 67th place in 2017 to 63rd place in 2020, showcasing significant progress and a more conducive business environment.

The Governments ‘Make in India initiative supported by Production Linked Incentives (PLI) scheme, aims to support manufacturing in India and promote the consumption of indigenous products. This has resulted in reduced dependence on imports, further contributing to economic expansion. In FY 2023-24, import declined from USD 898.01 billion in FY 2023 to USD 854.80 billion but there was a slight rise in the export in India.

In 2023, the RBI undertook timely and decisive monetary policy actions, including policy rate hikes and liquidity measures, keeping inflation anchored at 5.4% in CY2023.

Outlook

Looking ahead, the Indian economy is poised to reach a valuation of USD 5 trillion in FY2028.4 The remarkable economic growth achieved in FY2024 has not only enhanced the prospects for the domestic economy but also demonstrated Indias growth potential against the backdrop of a sluggish global economy. The International Monetary Fund (IMF) estimates that India is expected to contribute 18% to the worlds incremental GDP growth by 2028 — showcasing its increasing influence on the global stage.

Furthermore, government initiatives, such as the Pradhan Mantri Bhartiya Jan Aushadhi Pariyojana (Ayushman Bharat) and Pradhan Mantri Suraksha Bima Yojna, are likely to make quality medicines affordable in the country, making a positive impact on the Indian healthcare and pharmaceutical sectors. This will in turn enhance the healthcare and pharmaceutical sectors contribution to the domestic GDP.

Industry overview

Global pharmaceutical industry

The global pharmaceutical sector is dominated by major markets such as North America and Europe, primarily due to their contribution to developing novel medicines and higher healthcare expenditures. Emerging economies, Latin America and the Asia-Pacific regions such as Brazil, China and India, are also witnessing rapid growth due to the increasing volumes and greater adoption of novel medicines over the past few decades.

In recent years, the integration of cutting-edge technologies, including Artificial Intelligence (AI), machine learning and data analytics, has significantly benefitted the pharmaceutical industry. The deployment of these technologies has facilitated advancements in drug discovery and clinical research. It has also led to the development of several novel therapies for migraine, Alzheimers disease and Parkinsons disease.

Pharmaceutical players around the globe are now focusing on enhancing affordability and making generic medicines accessible to a larger population, driving the global usage of medicine. The defined daily doses is expected to grow at a CAGR of 2.3% by 2028 to reach nearly 3,800 billion defined daily doses, compared to 3,400 billion in 2023.

Further, by CY2028, the global pharmaceutical sector is expected to grow at a CAGR of 5-8% including spending on COVID-19 vaccines and therapeutics, reaching an estimated value of USD 2,300 billion.5

Medicine spending and growth by regions6

Spending USD Bn	2023	2028	CAGR (2024-2028)
Developed*	1,275	1,775-1,805	5-8%
Pharmerging#	304	400-430	10-13%
Lower-income countries	28	33-37	3-6%
Global	1,607	2,225-2,255	6-9%

Source: The Global Use of Medicines 2024: Outlook to 2028, IQVIA

‘Developed countries refer to the top 10 developed markets (U.S., Japan, Germany, France, Italy, Spain, UK, Canada, South Korea, Australia and Other developed countries) from the World Banks income segmentation of high and upper-middle income countries, with the exception of pharmerging markets. •Pharmerging markets are those with per capita GDP by purchasing power parity (PPP) <USD 30,000/year and forecasted 5-year aggregate pharma sales growth >USD 1bn (absolute or rounded) in at least two forecasts.

Regions around the world are growing following diverging trends, with emerging countries being more volume driven led by generic drugs while developed countries being more value driven due to greater contribution from adoption of novel therapies.

US markets

Net spending in the U.S. is projected to reach USD 537 billion by the year 2028, growing at a rate of 2%-5%. Moreover, markets pertaining to oncology, immunology, diabetes and obesity, have gained momentum over the years. During the past couple of years, generic medicine prices have been decreasing, driven by an increase in the number of generic approvals and significant brands facing loss of exclusivity. However, during the last fiscal year, there has been some trend reversal in terms of pricing in the US generics market.

Pharmerging markets

In pharmerging and lower income countries, spending on originator products is less, as a greater focus is observed on generic drugs. These products are usually marked at a lower price. Volume growth in generic medicines has enabled the growth of the Pharmerging markets.

Strategic growth enablers

According to WHO, the number of people aged 60 and above is expected to reach 1.4 billion by CY2023 and further rise to 2.1 billion by CY 2050. This demographic shift will present both challenges and opportunities for pharmaceutical companies to develop effective treatments and medications for age-related conditions.

The investments in the pharmaceutical industry will facilitate the expansion of both product and service offerings. These investments will drive the R&D for new products, leveraging advanced technologies. Additionally, they will enable the industry to serve a larger and more diverse customer base.

According to the 2023 edition of OECD Health at a Glance, on an average across 24 OCED countries in 2021, more than one-third of people aged around 16 and above have reported living with a chronic illness. The increasing prevalence of chronic ailments such as diabetes, hypertension, cardiovascular and obstructive pulmonary disease has resulted in a burgeoning demand for pharmaceutical products. Global pharmaceutical companies are now aiming to cater to this demand, which, in turn, may lead to healthy growth in the sector, going forward.

The Hatch-Watchman Act and Generic Drug User Fee Amendments (GDUFA) in the US have enforced a favourable regulatory environment for generic medicines. This, combined with an increased preference for affordable healthcare and austerity measures adopted by governments in Europe and similar measures adopted by other countries across the globe have propelled the growth of the generic drugs market.

Per capita medicine usage is rising in emerging pharmaceutical markets, such as India, Brazil and Indonesia, among others. A rise in per capita income, improvement in healthcare infrastructure and an increase in insurance coverage have facilitated the expansion of the pharmaceutical industry in the emerging markets.

According to IQVIA Global Trends in R&D 2024, R&D funding level has rebounded in 2023 after a steep decline in 2020 and 2021. An increase in the number of high profile and high value deals indicates a growing interest from investors and innovators in the next generation of therapies. R&D expenditure by large pharma corporations totalled a record USD 161 Bn in 2023, an increase of almost 50% since 2018 and historically high at 23.4% of companies ‘net sales8.

Outlook

The global pharmaceutical sector is poised for significant growth with rapid advancements in medical science. Changing lifestyles and increasing incidences of chronic diseases will continue to fuel the demand for pharma products. At present, oncology and immunology are the leading therapeutic areas; they are expected to witness even greater demand by CY2027. Mergers and acquisitions are also likely to play a key role in driving progress and creating opportunities for companies to expand their product offerings and cater to diverse patient needs.

Indias pharmaceutical industry

Indian pharmaceutical industry is the third largest pharmaceutical industry in the world by volume. It has a market size of around USD 50 billion. It is anticipated that the industry could potentially grow to USD 120-130 billion over the next decade 9.

The Indian pharmaceutical industry can be broadly classified into domestic formulations and pharmaceutical exports, with each constituting 50% of the industry.

Indian Pharmaceutical Industry (inr billion)

Particulars	FY19	FY23	FY24	YoY (%)	CAGR (FY19-24)
Domestic Pharmaceutical Market (I)	1,356	2,005	2,161	8%	10%
Pharmaceutical Exports (II)	1,339	2,041	2,306	13%	11%
Ayush and Herbal Products	31	51	54	7%	12%
Bulk Drugs, Drug Intermediates	273	379	396	5%	8%
Drug Formulations, Biological	1,007	1,564	1,798	15%	12%
Surgical	28	48	58	21%	16%
Indian Pharmaceutical Industry (I + II)	2,695	4,046	4,467	10%	11%

Source: IQVIA, Ministry of Commerce and Industry

Considered the ‘pharmacy of the world, India is a major exporter of pharmaceutical products. With increasing demand for cardiac, anti-infection and neurological medicines, the industry has also significantly contributed to the countrys economic growth.

At present, India holds 4% share in the global pharmaceutical economy and 8% in the Global API manufacturing industry. With low-value generic drugs constituting a large part of Indian pharmaceutical exports, India currently commands 20% share in the global supply of generic medicines.10

Domestic pharmaceutical industry

The domestic pharmaceutical industry has grown at a CAGR of 10.4% over the last 10 years despite multiple disruptions such as the National List of Essential Medicines (NLEM), the Fixed Dose Combination (FDC) ban, Goods and Service Tax (GST), demonetisation and the COVID-19 pandemic. The growth has been led by a mix of volume, price hikes and new launches. Initially, during FY 2012 to FY 2018, the growth in the domestic pharmaceutical industry was driven by volume. However, during FY2019 to FY 2024 the volume-driven growth has been modest, while price-driven growth has been more pronounced.

The emergence of newer trade channels, such as Modern Trade and E-Commerce, has an increased role to play in growth of the domestic pharmceutical industry amid increasing consumer awareness and rising cases of lifestyle diseases.

Indias population is expected to grow by 25% in 25 years and urbanisation is expected to increase by 37% leading to a greater demand for healthcare services. Other factors, such as lifestyle changes, a higher life expectancy, stress and poor dietary habits, are likely to raise various health concerns. With increasing health awareness among consumers post-pandemic, they are now opting for insurance to cover exorbitant healthcare costs. This trend is giving a substantial boost to the insurance sector in India and also bodes well for the growth of the domestic pharmaceutical industry.

The Government of India has launched the National Policy on Research and Development and Innovation in the Pharma- MedTech sector. This initiative aims to facilitate research and development in pharmaceuticals, including traditional medicines, phytopharmaceuticals and medical devices and build an ecosystem that will encourage cross-sectoral research and innovation for the sustainable growth of the pharmaceutical sector. The success of this initiative will result in rising exports, forex inflows and an increased share of the global pharmaceutical market.

IPM Therapy-wise growth trend

Therapy-wise growth (%)	IPM Sales Mix FY24	FY19	FY20	FY21	FY22	FY23	FY24	FY21-24	FY19-24
Cardiac	12	12	12	13	11	9	11	10	11
Anti-Infectives	11	8	13	-12	35	6	5	14	8
Gastro-Intestinal	11	9	9	6	17	12	7	12	10
Anti-Diabetes	9	14	12	9	8	7	5	7	8
Vitamins/ Minerals/ Nutrients	8	13	10	11	16	3	8	9	9
Respiratory	8	11	15	-8	44	7	2	16	11
Pain / Analgesics	8	10	12	-1	22	12	8	14	11
Derma	7	14	9	6	10	6	7	8	7
Neuro / CNS	6	12	10	10	11	12	8	10	10
Gynecological	5	17	9	3	16	16	6	12	10
YoY Growth %		11	11	5	18	8	8	11	10
Total IPM (INR tn)	2.2

Source: IQVIA

Risks for the Domestic Pharmaceutical Industry

The industrys reliance on China for bulk drugs poses a substantial risk, as any disruption in the supply chain could have far-reaching consequences. Diversifying sources of bulk drugs is crucial to mitigate potential disruptions and ensure the stability of the industry

The presence of counterfeit medicines in the entire value chain undermines the efficiency and effectiveness of original drugs and thus, posing significant risks to patients health

India lacks a skilled workforce for several sectors, including the healthcare sector, which can hinder the growth in penetration of healthcare services in India.

Outlook

Indias pharmaceutical industry is poised to achieve robust revenue growth rate of 10%. This expansion will be primarily driven by increased spending on healthcare, ageing population, population expansion, surge in lifestyle diseases, higher awareness about quality healthcare.11

Consumer Healthcare Industry in India

The consumer healthcare market in India encompass a wide array of products covering:

(a) Vitamins and dietary supplements / lifestyle wellness

(b) OTC products across varied therapy areas (anti-tussive, antacids / gastroenterology, dermatology and more)

(c) Sexual wellness such as condoms and other contraceptive products

(d) Herbal/ traditional products

(e) Pain management

(f) Oral Health and Hygiene

While the OTC market in India grew by 13.1% in FY24, the domestic consumer healthcare market is poised to continue its growth trajectory owing to changing lifestyle patterns amid rapid urbanisation.

Strategic growth enablers

Demand-side factors

1. Higher consumer awareness towards preventive healthcare- With consumers becoming increasingly aware about the importance of health and wellness, preventive healthcare is gaining momentum. This is increasing the demand for quality healthcare products. This paradigm shift in demand for consumer products is expected to drive the growth of the consumer healthcare industry.

2. Population growth- Indias burgeoning population contributes to a heightened demand for consumer healthcare products. As the number of potential consumers rises, companies have the opportunity to expand their businesses and cater to a larger customer base.

3. Rising incomes- The upward trajectory of consumer incomes drives greater demand in the domestic consumer healthcare industry. With rising disposable incomes, individuals are becoming more willing to invest in healthcare products.

4. Changing lifestyles- Evolving lifestyle patterns lead individuals to seek convenient solutions. Self-medication and easily accessible products have become more appealing. This shift in consumer behaviour fuels the demand for consumer healthcare products.

5. Increased penetration through new-age channels-

It is expected that the consumer healthcare industry will benefit from the rising popularity of e-commerce platforms. Enhanced consumers convenience, increased cost savings and greater availability of products are expected to bode well for the industrys growth in the coming years.

Supply-side factors

1. Leveraging targeted marketing strategies- Effective marketing of products in vernacular languages can enable pharmaceutical companies to target specific markets and demonstrate their offerings to consumers. This can help pharmaceutical companies gain a better understanding of market demand as well as contribute to market expansion.

2. Enabling digitalisation- With the advent of digitalisation, the e-pharmacies industry is expected to register a compounded growth rate of 44%, reaching a valuation of USD 4.5 billion by FY2025.13

3. Focus on innovation- With consumers making informed decisions when it comes to purchasing healthcare products, it is essential to develop novel medications to meet the evolving market demands. Relentless investments in R&D and innovation have bolstered the growth of the healthcare industry with a surge in the development of effective products tailored to diverse health concerns of patients.

4. Shift from Penetration to Premiumisation- Companies are seizing opportunities to expand their portfolios and strengthen brand recognition by capitalising on growing consumer awareness and the trend towards premium products. This shift towards premiumisation is expected to contribute significantly to market expansion.

I Mankind is the youngest Company among the top five companies of Indian Pharmaceutical Market (IPM).

With commencement of operations in 1995, Mankind Pharma Limited (Mankind) is engaged in developing, manufacturing and marketing a diverse range of pharmaceutical products and consumer healthcare items. With the initial focus to provide quality medicines in rural areas, Mankind gradually expanded into peri-urban areas followed by metropolitan and Tier I cities. With a focus on serving the citizens of India, Mankind takes pride in establishing one of the largest distribution network of stockists in India. The Companys pan-India presence is supported by a strong coverage of more than five lakh doctors, catering to patients present even in the hinterlands. The Company values customer satisfaction and therefore ensures a plethora of quality parameters at affordable pricing. To ensure quality, the Company has undertaken initiatives to provide DMF / International grade quality products and innovative packaging to enhance customer experiences and reduce chances of counterfeit.

In FY 2023-24, the Company partnered with AstraZeneca Pharma to distribute Symbicort in India, one of the most advanced inhalers for asthma. Further, in FY2022-23, we have entered into an in-licensed deal for Glargine with Biocon and are getting a very positive response from the market for Nobeglar, a type of insulin used in the anti-diabetics space.

The Company undertook multiple initiatives to facilitate digital transformation across all verticals to enhance operational efficiency, cost optimisation and automation. The Project PACE integrates advanced technologies to optimise the procurement process. Additionally, the Company has also adopted other initiatives such as Adapt and Wave, which focus on streamlining supply chain operations and optimising warehouse management, respectively. The Company has also introduced new AI-based modules in Superman SFA that ease day-to day activities of medical representatives through user-friendly apps.

The Companys manufacturing automation initiatives encompass several key components, including AI-based chiller plant automation, an energy management system and AHU optimisation. Chiller plant automation involves maintaining optimal temperature levels to uphold product quality, with real-time monitoring and adjustment of temperature and humidity based on environmental conditions. Furthermore, the Companys energy management system aims to reduce costs, enhance efficiency and minimise energy consumption. This system integrates energy consumption data with prescriptive analytics using IoT technology.

In addition, AHU optimisation automates the adjustment of AHU blower or fan speeds to meet conditioning requirements in different areas. Leveraging IoT, it monitors and adjusts HVAC systems accordingly.

The integration of Artificial Intelligence (AI), Machine Learning (MI) and the Internet of Things (IoT) has significantly improved operational efficiency for the Company, marking a transformative shift in its approach.

In India, Mankind operates at the intersection of the Indian pharmaceutical formulations and consumer healthcare market, aiming to provide international quality products at affordable prices.

The Company has established an impressive record of building and scaling brands in-house faster than the market (in less than three decades). Further, the Company has added three new brand families in INR 100 crore club increasing the total count to 23.

Domestic Business

In the domestic business, Mankind deals in acute and chronic therapeutic areas. In FY 2024, the revenue from domestic business grew by 13% from INR 8,453 crore in FY23.

In 2004, Mankind marked its presence in the chronic division. With the inclusion of several effective initiatives, the Companys market share increased from just 1% in FY 2004 to 28% in FY 2018 and 36% in FY2415. The Company analysed the rise in lifestyle diseases in India; thereafter, launching super specialty divisions across several chronic therapeutic areas, including anti-diabetic, cardiovascular, neuro and CNS and respiratory, leading to an increase of 800 bps in the chronic division.

With the launch of these divisions, the growth of the chronic division was amplified, aiding the Company to consistently outperform the IPM. The chronic therapeutic areas grew at a CAGR of 15% between FY2020 to FY2024, outpacing the IPM by 1.5 times15.

Mankind continued to deliver strong performance in the acute segment as well, consistently outpacing IPMs growth rate for acute therapeutic areas, by approximately 1.2 times (FY2020 to FY2024)15. In FY 2024, however, the withdrawal of certain products and intense competition in dydrogesterone resulted in muted growth. Nevertheless, with strategic new launches, Mankinds CVM presence in the IPM has significantly increased.

Moreover, these new launches present a lucrative opportunity for the Company to grow, in terms of increasing its market share and scaling its business further. The Company has identified few whitespaces in key therapies that has also enabled it to expand its market reach.

Therapeutic presence	Market share in FY2021	Market share in FY2024	CAGR FY21-24	CVM rank FY24
Gynaecology	5.8	6.7	18	2
Anti-infectives	5.5	6.0	18	4
Cardiovascular	4.2	4.9	16	4
VMN	5.4	4.8	5	2
Respiratory	4.3	4.6	19	6
Gastrointestinal	4.7	4.4	10	6
Anti Diabetic	3.7	4.3	12	5
Dermatology	4.9	3.7	(1)	3
Pain/Analgesics	3.2	2.6	7	9
Neuro/CNS	2.2	1.9	5	5

As a diversified Company, the top five therapies contribute 57% to its revenue, highlighting ample opportunities to grow in both existing and new therapies. With expansion even in the remotest area of the country, the Company has built successful brands faster than its peers.

Consumer Healthcare

Driven by the goal to establish Mankind as a household name, Mankind ventured into the consumer healthcare industry in 2007. With the introduction of various brands in diverse categories, consumer healthcare increased its brand equity and enhanced brand recall value, aiding the Company to realising its objective.

The total covered market for consumer healthcare business amounted to INR 18,500 crore+ in FY24. The revenue from consumer healthcare witnessed a tepid growth of 2% from INR 692 crores in FY23 to INR 706 crores in FY24. The Company adopted multiple digital initiatives and channel inventory consolidations to sustain its growth in the industry. However, despite muted growth in primary sales, the secondary sales witnessed a robust growth across all key brands, improving market share in their respective categories and enabling the Company to maintain its leadership position.

With the focus on taking the Company to new heights, Consumer Healthcare business became a wholly-owned subsidiary. This ensured the Company adapted to the dynamic trends, increasing its consumer reach and creating a stronger brand recall.

Export business

Mankinds export business employs a calibrated and differentiated approach to enter and expand the Companys presence in International Markets. Mankinds products are currently sold over 20 countries, including regulated and semi-regulated emerging markets such as the United States, Latin America, Southeast Asia, Africa and the Middle East among others. During FY2024, the exports revenue increased due to a resurgence in the US market, the launch of an ophthalmic product that received no competition, increased sales and the introduction of new products.

Growth Strategies

Increasing share in the chronic segment

The Companys cronic share has increased by 800 bps in FY24 to 36% from 28% in FY18

Increasing CVM Share through New Launches and Market Diversification

CVM increased to 69% in FY24 from 62% in FY21

Growing consumer healthcare portfolio

Expanding OTC business from Pregnancy Care and Sexual Wellness to Consumer Wellness. Four of Mankinds brands ranked number one in their respective categories

Adopting a volume-driven approach

Increased growth in modern trade sales accounted for ~6% of total domestic revenue. Added ~70 Lakhs prescriptions in FY24, 153 crores medicine strips sold in FY24

Scaling up of Brands

In FY24, total brand families worth over INR 100 Crore increased to 23 from 20 in FY23

Improving Productivity and Efficiency

Adopting latest technologies to optimise cost and enhance productivity. Key projects include Adapt, Pace, Wave, Superman SFA

Inorganic growth opportunities

Mankind has entered into in-licensing agreements with other pharmaceutical companies to launch differentiated molecules, increasing growth in the domestic market

Opportunities and Threats

Opportunities
Innovation and Diversified Portfolio	The pharmaceutical industry is constantly evolving, with R&D at the core of creating innovative medicines and consumer health products to meet consumer needs. By harnessing its technological and innovative prowess, the Company develops effective treatments for chronic diseases, exploring the chronic market further. This ensures Mankind Pharma, with its dedicated R&D teams, gains a competitive advantage in the market
Expanding in Tier I and Tier II cities	In Tier I and Tier II cities, where individuals typically have higher incomes and consumption rates, Mankind Pharma can enhance its market presence and achieve sustained growth. By forming partnerships with corporate hospitals, the Company can expand its footprint in major cities such as Bangalore, Delhi, Hyderabad, Kolkata and Mumbai.
Increasing consumer demand for healthcare products	The healthcare market is expected to grow due to factors such as rising income levels, growing health awareness, increased lifestyle diseases and a lack of time to invest in long-term treatments. These factors can enable the growth of the Company in the coming years
Increasing presence in Modern Trade	E-pharmacy offers Mankind Pharma the chance to enhance consumer service through convenience, accessibility, 24/7 availability, easy ordering and doorstep delivery. The Company can expand its reach and attract a diverse consumer base. With the growing preference for digital over physical stores, building a strong online presence can significantly benefit the Company.
Increasing share in chronic medicine market 16	The Chronic segment of the pharmaceutical industry has proved to be a lucrative sector providing exceptional growth. Mankind must take significant steps to build its presence in the segment. The revenue generated by the Company in this part of the sector grew by 14% (FY21-FY23), reflecting the growth potential in this sector.
Threats
Competitive generic market	Increased competition in generic products can lead market players to reduce their product prices, thereby affecting their profit margin as the demand for cheap generic products increases. The Company should undertake strong, strategic and innovative marketing and branding strategies to stay ahead of the competition in the generic market, maintaining a robust brand recall among its customers.
Frequent changes in government regulations and policy	Government policies, along with dynamic political and economic environments, shape the regulatory landscape for pharmaceutical companies. However, these elements are subject to constant change, making frequent adjustments in rules and policies. These changes can pose a threat to the operations of the Company.
Storage and supply chain management	The availability of storage and efficient supply chain management is imperative in the pharma industry. There are some products which are sensitive to temperature variation and they require effective storage facilities. The fragmented supply chain can undermine the ability of the Company to achieve optimum storage and supply chain conditions. Furthermore, the stock level should be maintained at an equilibrium level. Mankind Pharma must take more efficient initiatives so that it can benefit from improved storage and supply chain management.

Manufacturing facilities

The Company has 30 manufacturing facilities across India, with formulation manufacturing facilities having a total installed capacity of 43.5 billion units per annum. These facilities provide a diverse range of dosage forms, including tablets, capsules, syrups, vials, ampoules, blow fill seal, soft and hard gels, eye drops, creams, contraceptives and other over-the-counter products.

In FY 2024, the Company commissioned Indias first fully integrated manufacturing facility for Dydrogesterone and other hormone-related products in Udaipur, Rajasthan.

At other facilities, with the aid of backward integration, the Company has started manufacturing APIs and key starting materials for brands such as Telmikind and Dydroboon. This ensures competitive advantage over operating costs and quality.

Procurement practices

Within the Companys operational framework, the optimisation of its supply chain is driven by a deliberate strategy of engaging local suppliers for critical raw materials. This approach not only streamlines procurement processes but also strengthens the Companys ties with the local communities. By prioritising local sourcing, the Company reduces exposure to global market fluctuations while simultaneously supporting regional businesses. Moreover, the Companys emphasis on ethical sourcing extends to its selection of suppliers, as it seeks partners who align with its values of integrity and sustainability. Through these partnerships, the Company not only secures a stable supply of materials but also fosters a more responsible and resilient supply chain network.

Supply chain

Mankind has a strong distribution system across the country, helping it to cater to evolving market demands. The Company understands the market needs and accordingly, manages its inventory efficiently. The integrated supply chain aims to improve the Companys performance, minimising disruptions and reducing losses.

Information technology

Mankind Pharma has implemented a robust IT governance framework to manage its information systems effectively. The framework includes Information Technology General Controls (ITGC) and Information Security Management Systems (ISMS). The Company also has a dedicated Information Security Delivery Team with over 50 resources. To streamline operations and foster collaboration between internal and external teams, the Company deploys tools like SAP S4HANA, Success Factors, ADP, Concur and Tableau. Cutting-edge technologies and robust security methods further bolster the Companys risk mitigation framework.

Data privacy and cybersecurity measures

To secure the network infrastructure of Mankind Pharma, the Company has used hardware security tools such as firewall protection, Multiprotocol Label Switching (MPLS) and software-defined wide area networks (SDWAN). Other security tools employed by the Company to mitigate cyber threats include endpoint protection, email security, single sign-on, identity management and antivirus software.

Research and development

Mankinds R&D operations comprise several divisions including drug discovery, generic APIs, formulations, biotechnology and innovative packaging. The divisions are supported by global regulatory compliance, clinical research and biopharmaceutical teams. The Company is focused on the development of niche APIs and complex generic formulations, while enhancing process efficiency to achieve better quality and efficacy.

The Company relies on research and development to innovate products, streamlining operations while developing cost-effective manufacturing processes and addressing any opportunities to bolster business growth. In FY24, the Company spent INR 223 Crores on research and development, representing 2.2% of the total revenue from operations.

Human resources

The Company provides equal opportunity to its employees and fosters a culture of diversity and inclusion. Mankind offers a leadership development programme that enables a conducive work environment. Further, the Companys talent acquisition strategy encompasses campus and lateral hiring, leveraging its brand recognition to attract skilled individuals. Additionally, the Company also provides opportunities to enhance the skills and efficiency of its employees by providing them with a dynamic learning culture, training programmes and external coaching.

Sustainability

The Company adheres to environmental laws and regulations and is committed to conducting its business responsibly. The Company promotes the adoption of sustainable practices in its day-to-day operations. To minimise the generation of hazardous waste from its manufacturing units, the Company has also launched well-calibrated initiatives that focus on efficient energy, water and waste management. Furthermore, Mankind Pharma undertakes systematic analysis and robust risk control measures to ensure a safe workplace for all its team members.

Corporate social responsibility

The Company is committed to its CSR vision, ‘We Are There to Care and aims to uplift the underserved sections of society. With various well-thought-out initiatives, the Company encourages R&D in medical science, widens access to quality education and healthcare and promotes inclusive development and self-reliance. To achieve its CSR objectives, the Company has identified key focus areas, which include livelihood enhancement, healthcare and education.

Risk management approach

Recognising risks as an inevitable part of a business, Mankind Pharma has in place an efficient Risk Management Committee that maps both internal and external risks which may affect the Companys operations and performance. Such risks are specific to the business and encompass financial, operational, sectoral, cybersecurity, sustainability-related risks (especially those involving ESG) and more. The Committee is also tasked with supervising and guiding the risk management policys execution.

Risks		Mitigation strategies
Regulatory challenges	The dynamic nature of the regulatory environment has led to increased scrutiny and higher expectations from stakeholders regarding compliance. Failing to comply with regulations can adversely affect the Companys operations and reputation.	The Company has a robust compliance management system in place to ensure awareness and compliance. The Company has invested in benchmark processes and procedures that are accessible to all employees with the intent of fostering compliance throughout the workplace. The roles and responsibilities have been clearly defined to guarantee precise scrutiny and compliance.
Supply chain challenges and rising input costs	Business operations are susceptible to disruptions in the supply chain, which can impact the Companys operations. If the cost of manufacturing rises, margins can be adversely affected due to increasing input costs.	The Company is exploring alternative sources of raw materials to ensure a reliable and cost-effective supply chain, mitigating the uncertainties associated with global supply chains.
Fluctuations in foreign exchange and interest rates	Most pharma companies purchase certain raw materials from sources outside India. This reliance on foreign suppliers can expose them to currency exchange risks, further increasing the cost of production. Interest rate fluctuations can further raise the cost of borrowing, thereby adversely impacting the Companys overall financials.	Mankind does not have any major forex exposure in terms of exports and imports. The exports amount to 8% of the total turnover of Mankind. The imports are less than 10% of the total Cost of Goods Sold (COGS) of the Company. As such, the fluctuation in foreign exchange/currency rates does not have a major impact on the Companys profitability. Currently, Mankind does not have any loan in foreign currency, hence the risk of fluctuation in foreign currency interest rates does not exist. Going forward, if the foreign currency exposure increases, the Company will review and implement an appropriate hedging mechanism.
Environmental, health and safety	Given the Companys focus on healthcare, maintaining a zero-risk approach to health and safety is of utmost importance. Failure to comply with domestic and international regulations in these areas can disrupt business operations.	The Company has implemented measures to address environmental, health and safety risks. This involves the installation and commissioning of full-fledged wastewater treatment units followed by wastewater recycle units and the development of green belts. All factories are equipped with fire protection and prevention systems. Mock drills are regularly conducted. Firefighters and first aid members are present on the Company premises. Training is also provided to both employees and contractual workers to ensure compliance with the best EHS practices.
Quality, product development and launch	The Company recognises the risks involved in new product development, such as substantial upfront investment, clinical trials, competition from other companies and potential patent disputes.	The Company has implemented a dedicated quality assurance team consisting of 1000+ individuals, who are responsible for overseeing quality operations at manufacturing facilities. They enforce rigorous controls on equipment, finished products and vendor samples, ensuring compliance with approved standard operating procedures. Further, along with cost reduction and control efforts, the Company has enhanced operational efficiency and undertaken initiatives to elevate quality control standards.
People risk	For sustained efficiency and profitability, the acquisition and retention of a competent workforce are necessary.	The Company has implemented a comprehensive recruitment procedure to hire employees across all levels of the organisation. The procedure includes thorough assessment methods that prioritise employee engagement and ensure job satisfaction. Individual performance is evaluated through the Performance Management System (PMS) and accordingly rewarded on an annual basis. These practices are diligently followed to maintain fairness and transparency in the compensation process.
Patent risk	Business operations could be impacted by the inability to defend patent challenges or third-party agreements.	The Company conducts comprehensive due diligence before entering into any agreements and includes detailed terms and conditions in its development or commercial agreements with third parties.
Intense competition	The Company faces stiff competition from e-pharmacies and other businesses, which can directly impact its revenues. The Companys activities may be affected in light of a dynamic market and intensifying competition with local and international businesses.	To stay ahead of the curve and maintain its profitability, the Company consistently upgrades its manufacturing facilities with advanced equipment and technology. It strives to optimise production costs, ensuring a competitive advantage and healthy profit margins. Additionally, the Company pursues new product registrations and regulatory approvals to expand its product range.
Price control risk	Adoption of the tender system and other price control strategies ultimately result in decreased revenue and profit. Moreover, specific products may be subjected to price control restrictions imposed by the Government.	Mankind adheres to regulatory and ethical guidelines when determining pricing strategies. To mitigate the risk associated with pricing, the Company focuses on expanding its production volume. The Companys products are priced considering all essential aspects, including affordability. These help generate a higher number of prescriptions, which ultimately contributes to the Companys success.
Cybersecurity / data privacy risk	Data privacy and cybersecurity regulations require safeguarding customer data while also enforcing obligations to ensure the quality, integrity and governance availability (CIA) of data, which involves limitations on data acquisition and usage, as well as appropriate data retention/restoration and disposal practices.	Through software and hardware training, the Company aims to continuously enhance its technologies, facilities and machines to align with global standards. The Company prioritises data security by implementing access restrictions and employing multi-factor authentication measures. These measures are designed to prevent cyber adversaries from gaining unauthorised access to the Companys devices, networks and sensitive information.

Financial Review Consolidated

• Revenue

Revenue from operations has increased to INR 10,335 crore from INR 8,749 crore in FY23. The growth in revenue of 18% was primarily due to strong growth in modern trade and chronic business, driving domestic revenue coupled with healthy growth in exports, particularly in US market.

• EBITDA

EBITDA increased to INR 2,550 crore up by 33% in FY24. The EBIDTA margins increased by 280 bps to 24.7% in FY24 from 21.9% in FY23. The growth is primarily on account of higher gross margins led by increase in selling price, strong growth in chronic, stabilisation of API prices and favourable sales mix. This has been further aided by operating leverage and certain cost savings in current fiscal year.

• Employee Cost

The Employee cost increased by 19% to INR 2,275 crore in FY24 as compared to INR 1,918 crore in FY23. The increase is mainly due to annual increments, Increase in employee headcount, ESOP expenses and higher variable incentives in line with sales growth.

• Other Expenses

In FY24, other expenses has increased to INR 2,315 crore as compared to INR 2,017 crore in FY23 up by 15%. The uptick was primarily due to increase variable cost in line with sales such as freight & distribution expenses. This year witnessed increased Advertisement expenditure on account of corporate campaigns & higher training activities.

• Depreciation and Amortisation

The Depreciation and Amortisation expenses of the Company increased to INR 398 crore for FY24 from INR 326 crore for FY23. The increase is primarily due to higher capitalisation of completed projects, which included Udaipur plant getting operational during Q2, FY24 and accelerated depreciation related to upgradation & expansion of existing R&D site at Manesar to support further growth.

• Finance Cost

The Finance cost has decreased from INR 44 Crore in FY23 to INR 34 crore in FY24 due to reduced borrowings.

• PBT and PAT

The PBT has increased to INR 2,399 crore in FY24 from INR 1,671 crore in FY23 up by 44% and PAT has increased to INR 1,942 crore in FY24 from INR 1,310 crore in FY23 up by 48%. The growth is driven by increase in EBITDA and Other Income, this has been partly offset by higher Depreciation.

• Earnings Per Share

The basic and diluted EPS for FY24 has been INR 47.7 & 47.7 respectively as compared to INR 32.0 & 32.0 respectively in FY23.

• Other Intangible Assets

Other intangible assets decreased to INR 1,588 crore in FY24 from INR 1,701 crore in FY23. This is majorly on account of amortisation of brands acquired from Panacea.

• Trade Receivables

Trade receivables have increased to INR 848 crore in FY24 from INR 576 crore in FY23. The increase is primarily attributed to exceptionally higher growth in exports business at year end & new adjacent ventures have higher credit periods.

• Cash and Cash Equivalents & Bank Balances

The cash and cash equivalent has been INR 382 crore in FY24 from INR 305 crore in FY23 and bank balances has increased to INR 816 crore in FY24 from INR 148 crore in FY23 The growth is largely in line with growth in PAT.

• Total Non-current Liabilities

The total non-current liabilities have increased to INR 268 crore in FY24 from INR 229 crore in FY23. The increase is majorly on account of increase in non-current provisions for gratuity and deferred tax liabilities.

Financial Performance

Particulars (in E Crore)	Standalone		Consolidated
	FY2024	FY2023	FY2024	FY2023
Revenue from operations	9,265	8,127	10,335	8,749
Earnings before Depreciation, Interest, Tax and Exceptional Items	2,325	1,697	2,550	1,913
Profit before Tax	2,260	1,563	2,399	1,671
Profit after Tax	1,823	1,248	1,942	1,310
Basic EPS (in C)	45.5	31.2	47.7	32.0
Diluted EPS (in C)	45.5	31.2	47.7	32.0
Cash EPS (in C)*	54.5	38.3	57.6	40.4

* Cash EPS is calculated as (Profit for the year attributable to equity holders + Depreciation, Amortisation and Impairment) / Weighted average number of Equity Shares)

Key Financial Ratios

Ratios (Consolidated)	FY2024	FY2023	Explanation
Debtors Turnover (no. of days)	25	20	Note - 1
Inventory Turnover (no. of days)	174	204	-
Interest Coverage Ratio (times)	64.2	35.7	Note - 2
Current Ratio (times)	3.10	2.32	Note - 3
Debt Equity Ratio (times)	0.02	0.02	-
Operating Profit Margin (%)	24.7	21.9	-
Net Profit Margin (%)	19	15	-
Return on Net Worth (%)	20.4	17.2	-

Note - 1 Debtor turnover ratio is higher due to higher revenue from exports having extended credit period Note - 2 Interest coverage ratio is higher due to increase in EBIT on account of higher sales during the year

Note - 3 Increase in Current ratio during FY24 primarily on account of increase in current assets owing to a increase in Current investment & bank balances.

Outlook

Backed by a track record of substantial progress in terms of growth rate, revenue generation, lucrative brands, R&D, operation & manufacturing and CSR initiatives, the Companys outlook remains optimistic. Its risk mitigation framework has proved efficient and will continue to shield the Company against headwinds. With enhanced operational efficiencies, the Company is well-positioned to cater to an even larger customer base.

Internal control and its adequacy

Mankind has an adequate system of internal controls commensurate with the nature of its business. The Company has adopted policies and procedures covering all financial, operating and compliance functions. These controls have been designed to provide reasonable assurance over

• Effectiveness and efficiency of operations

• Prevention and detection of fraud and errors

• Accuracy and completeness of the accounting records

• Timely preparation of reliable financial information

• Safeguarding assets from unauthorised uses or losses

• Compliance with applicable laws and regulations.

This framework is sound in design and is continuously evaluated for effectiveness and adequacy. The management is committed to ensuring an effective internal controls environment commensurate with the size and complexity of the business, which assures compliance with internal policies, applicable laws and regulations, ensures the accuracy of records, promotes operational efficiency, protects resources and assets and overall minimises the risks.

Disclaimer

The statements may contain forward-looking statements like the words ‘believe, ‘expect, ‘anticipate, ‘intend, ‘plan, ‘estimate, ‘project, ‘will, ‘may, ‘targeting and similar expressions regarding the financial position, business strategy, plans, targets and objectives of the Company. Such forward-looking statements involve known and unknown risks that may cause actual results, performance, or achievements to be materially different from results or achievements expressed or implied. The risks and uncertainties inter-alia, relating to these statements include (i) cash flow projections, (ii) industry and market conditions; (iii) ability to manage growth; (iv) competition; (v) Government policies and regulations; (vi) obtaining regulatory approvals; (vii) domestic and international economic conditions such as interest rate and currency exchange fluctuations; (viii) political, economic, legal and social conditions in India/ elsewhere; (ix) technological advances; (x) claims and concerns about product safety and efficacy; (xi) domestic and foreign healthcare reforms; (xii) inability to build production capacity; (xiii) unavailability of raw materials and failure to gain market acceptance.

The Company shall not have any responsibility or liability whatsoever for any loss howsoever arising from this report, or its contents or otherwise arising in connection therewith.