marksans pharma ltd share price Management discussions

Economy overview

Global economy

On the surface, the global economy appears poised for a gradual recovery from the powerful blows of the recession, inflation and of geopolitical tensions. China is rebounding strongly following the reopening of its economy. Supply chain disruptions are unwinding, while the dislocations to energy and food markets are caused by the war. However, since its economy was opened up, China has experienced a remarkable comeback. Supply-chain interruptions are ending as the consequences of the wars disruptions to the energy and food markets begin to fade.

At the same time, the widespread and coordinated tightening of monetary policy by the majority of central banks should begin to show results, with inflation returning to its desired level. Global growth will reach its lowest point this year at 2.8% and then increase to 3.0% in 2024. From 8.7% in 2022 to 7.0% this year and 4.9% in 2024, global inflation will decline. Many developing and emerging market economies are already advancing, with growth rates soaring from 2.8% in 2022 to 4.5% this year.¹ In the most developed economies, the employment markets continue to be historically tight. Stronger indicators of output and employment weakening have been anticipated up until this point. The financial industry is already beginning to experience major negative effects from the recent sharp tightening of policy.

Outlook

As per IMF, growth in Asia and the Pacific is forecasted to accelerate to 4.6 % this year from 3.8 % last year. The main development has been the reopening of China, where surging consumption is boosting growth across the region despite weaker demand from the rest of the world. Risks to the outlook include spillovers from greater-than-expected US monetary policy tightening and supply chain disruptions associated with geo-economic fragmentation. In the short term, monetary and fiscal policies will need to remain tight to bring inflation durably back to central bank targets and stabilize the public debt. An integrated policy response using all the available tools will be needed to manage global shocks. While Asias financial systems havent seen major impacts following recent banking turmoil in the United States and Europe, they need to be carefully monitored given the high leverage amongst households and corporates.

US economy

Geopolitical conflicts, inflation, and internal interest rate hikes were some of the key concerns for the US economy in fiscal 2023. As a result of these factors, US inflation peaked at 9.1% in FY2023, with a recession anticipated in FY 2024. While the US economy is now less sensitive to interest rates, the most interest-sensitive industries, namely construction, now contribute 7% of GDP, and spending on durable consumer goods has come down to 10.5% over the years. With these sectors in good shape and a robust corporate balance sheet, the impact of rising interest rates will be less than it was 40 years ago during the previous Recession. In Q2 2023, they forecasted a large decrease in the reported year-over-year PCE deflator due to base effects. Labor market tightness will moderate somewhat over the coming quarters but will remain elevated relative to previous economic downturns. Fed will bring rates back below 4 %. However, due to demographic challenges, tightness in the labor market is expected to remain an ongoing challenge for the foreseeable future. A tale of two economies is emerging. Businesses that benefited the most from the pandemic-induced boom are cutting back; the hardest hit industries are technology, finance, and manufacturing. Start-ups and businesses that joined the recovery later are still rising up. It is hoped that recent regulatory initiatives would eventually calm the financial markets, but this wont stop a more systemic tightening of lending conditions. When deciding how far to raise interest rates, the Federal Reserve will take into account these changes.

Outlook

USAs economy is expected to grow by 1% in fiscal year 2024, as per the recent estimates released by the IMF. With significant headwinds affecting manufacturing, the Federal Reserves terminal fund rates have been expected to reach 5% for fiscal 2024. The services sector, on the other hand, is expected to stay stable.

The US dollar is anticipated to garner more strength along with other currencies in advanced economies. In the coming year, the supply chain hurdles are also expected to smooth out to pre-pandemic levels.

UK economy

Longer-term concerns to the outlook are mostly structural and include skills shortages, decreased workforce participation, and population ageing. On the whole, more timely indicators have been encouraging. For the first time since July 2022, the composite PMI for February increased once more above the level of 50.0.

However just as the UK economy reached its pre-pandemic size, the new shocks hit the Global economy. As a result, the geopolitical events intensified the upward pressure on inflation caused by rising commodity prices around the world.

Outlook

Although the likelihood of a UK recession has fallen, it has not dissipated entirely. A major headwind is expected to come via household consumption. Elevated inflation continues to act as a drag on real incomes, and the evolution of energy prices – while having fallen in recent months – means that household utility bills remain historically high. To put this into perspective, despite the governments announcement to maintain the Energy Price Guarantee at the ?2,500 level for a further three months from April, the average household energy bill remains some 120% higher than in 2019-21. The latest data show some strengthening in momentum, as business investment increased by 4.8% in Q4 2022. It is expected that UK exports will benefit from relatively stronger growth among the UKs main trading partners, with growth in exports outpacing that of imports. UK inflation is set to fall sharply this year after reaching its highest levels in over 40 years in late 2022. ²

Russia economy

Russia is one of the worlds leading producers of oil and natural gas and is also a top exporter of metals such as steel and primary aluminium. The IMF expects it to grow by 0.7% this year. Employment grew for the third month, with the rate of jobs being the strongest since June 2021. Sentiment improved to an eight-month peak amid hopes for greater client demand and new customer acquisition. Real earnings increased, while unemployment dropped to its lowest level in four years, indicating a major improvement in the labour markets as well.

Outlook

In 2023, a decline in the Russian economy is projected. However, because of less aggressive monetary policy and lower-than-expected inflation, the decline is less severe than expected. Recent slowdowns in domestic consumer demand are the main causes of the inflation slowdown. Capital controls and Russias historic current account surplus, brought on by high prices for its commodities exports and a dramatic drop in imports, drive that in turn.

Australia

The economy continues to evolve in line with the near-term forecasts, with indications that consumption is plateauing ahead of a likely slowdown later in the year. The GDP will grow around 0.7% y/y over 2023 as higher rates increasingly weigh on household budgets. The risk of further rises remains, especially

Energy Price Guarantee extended at ?2,500 for a further 3 months if inflation or wages surprise to the upside. As of now, theres a current 3.6% cash rate as the likely peak. The unemployment rate remains at record lows, but strong population growth and slowing activity should see labour market pressures ease with unemployment likely to reach 4.7% by end-2024 before settling at 4.5% in 2025.³ The future for Australias economy continues to be shaped by the complicated interactions of rebalancing goods and services spending, rising population growth, tightening monetary policy, and a cloudy global outlook.

Outlook

The GDP will be supported in the short term by increasing trade and high commodity prices. The expansion of personal consumption will benefit from a robust labour market and a steady fall in household saving rates. For the foreseeable future, inflation will continue to rise as high energy prices, global supply chain disruptions, and wage growth brought on by a tight labour market exert upward pressure on prices. Similar to other markets, the housing market is constrained by conflicting pressures. While higher rates affect borrowing capacity and reduce approvals, underlying demographic dynamics continue to indicate a shortage of housing supply.

Emerging market and developing economies (EMDEs)

As a result of a slower immunisation process and a more constrained policy response, emerging markets and developing economies saw a weaker and more fragile recovery in 2023 compared to advanced economies. As risk sentiment deteriorated, financial conditions tightened. EMDE industrial production dropped, and manufacturing fresh export orders remained subdued as a result of persistent supply restrictions and diminishing external demand.

Outlook

Due to the removal of macroeconomic policy support, the prognosis for EMDEs is negatively skewed. By 2023, it is expected that all advanced economies will have fully recovered their output. Nevertheless, output in emerging and developing economies will continue to be below its pre-pandemic level. Inflationary pressures will continue to be present, and a stricter monetary policy will be in place through 2023.

Indian economy

Despite the global slowdown, Indias economic growth rate is much stronger than many peers economies and reflects robust domestic consumption and lesser dependence on global demand. It is projected that GDP for FY23 is to rise to 6.4% and 6.7% in FY24. The rise in the GDP would be driven by private consumption and private investment on the back of government policies to improve transport infrastructure, logistics, and the business ecosystem. Indias economy will moderate in FY2023 due to persistent global economic slowdown, restrictive monetary conditions, and high oil costs. The Reserve Bank of India started tightening its policy stance. The Indian pharmaceutical sector has developed over time into a robust industry, rising at a CAGR of 9.43% over the past nine years, and is currently ranked third in pharmaceutical output by volume. The market size of Indias pharmaceuticals industry is expected to reach USD 65 billion by 2024, and USD 130 billion by 2030.

Outlook

Despite the sluggish growth, India is still expected to be one of the major beacons of growth in 2023, driven by strong domestic demand and government expenditure. The efforts of the Union Budget 2023-24 to improve the disposable income of taxpayers in the country are expected to boost consumption via an increase in discretionary spending. In addition, the strong capital expenditure push provided by the Union Budget, with an increased outlay of 37.4% in comparison to the fiscal year 2022-23, is expected to drive growth, investments, and job creation. The governments efforts to decrease over 39,000 compliances and decriminalise over 3,400 law provisions would also improve the countrys economic environment.⁴

India is on track to overtake Japan and Germany to become the third-largest economy in the world. Global offshore, digitalization and the energy revolution are three megatrends that are paving the way for unexpected economic growth in the nation. The upward revision of private consumption, higher capital expenditure (Capex), and nearly universal vaccine coverage all contribute to the upbeat GDP estimates.

India already struggled with inflation, which the conflict has made worse. The RBI is expected to implement measures to tighten liquidity as long as there is persistently high inflation. India, however, has proven to be very resilient in the face of adversity and has now learned how to proceed while facing limitations. In conclusion, India is in a good position to combat the minor externalities.

Forecasts for India

	FY23	FY24	FY25
GDP	7.2	6.4	6.9
Inflation	6.5	5.3	4.4
Unemployment rate	7.5	6.0	5.4

Source: Ministry of Statistics and Programme Implementation, CMIE, KPMG forecasts

Industry overview

Global pharmaceutical industry

The pharmaceutical business encountered many bottlenecks during the year as a result of supply-chain interruptions and a lack of raw materials. Faster vaccine rollouts, however, have been crucial in recovering the business since governments and healthcare systems around the world are now more willing to invest in the pharmaceutical sector. Going forward, the global market will grow by 4-5% CAGR, reaching USD 1.5 trillion by 2023.

Businesses are now taking greater efforts to combat pandemic-induced effects, which formerly led to operational problems.

The larger section of the global demography is ageing, which makes them prone to chronic illnesses, such as rheumatoid arthritis, hypertension, diabetes, and cancer. The rise in patient pool drives the demand for medications, thus positioning the industry on path of recovery in the near short-term. Over the next five years, the industry is expecting to launch a total of 300 new medications, with a bias toward specialised, niche, and orphan drugs. This is likely to generate USD 196 billion in additional expenditure, that will counterbalance the brand spending reductions of USD 188 billion, owing to loss of exclusivity

Emerging trends in the global pharmaceutical industry

Artificial Intelligence	The procedures of drug research and development are being sped up by the use of artificial intelligence (AI). Start-ups are investigating how to employ these technologies to solve problems in the pharmaceutical sector, including the automation and optimisation of manufacturing processes as well as the development of successful marketing and post-launch strategies. The process of finding and developing new drugs requires the identification of patients, particularly when performing clinical trials
Flexible production	The pharma industry is exploring new ways of manufacturing due to the changing market dynamics, such as small batches for precision medicines. Single-use bioreactors are also becoming more and more popular since they boost output and decrease downtime. By omitting challenging tasks like cleaning and validation between various production phases, these bioreactors accomplish this.
Big data and analytics	The pharma industry requires high performance systems to analyse large volumes of data generated during the drug discovery and development process. The advancement in analytical techniques is also turning historical and real-time data available with pharmaceutical companies into valuable assets for predictive, diagnostic, prescriptive, and descriptive analytics.
Precision medicine	Precision medicine comes from the idea of treating each patient as a unique individual. Omic and data analytic developments are revealing fresh insights into how the body reacts to medications. Personalised medicine is becoming a reality because to this information and cutting-edge production techniques like additive manufacturing.

US pharmaceutical industry

The US healthcare system had recovered to its pre-pandemic levels thanks to its tremendous resilience and adaptation in the face of catastrophe. It is expected to see activity in areas of high expected future growth in 2023. Pharma and biotech M&A will continue to focus on oncology and immunology, but other areas such as central nervous system and cardiovascular diseases as well as vaccines will see interest. The market will place a significant premium on therapeutic area leadership. Unmet medical needs that are being addressed by promising science are tremendously valuable, but there is still fierce competition for distinctive and low-risk assets. As the overall economic outlook stabilizes somewhat, the need to invest to achieve transformation will remain unparalleled. Achieving scale to deliver shareholder value is imperative. It is continued to expect deals in the USD 5 billion to USD 15 billion range in the market sweet spot. Structured acquisitions, innovative and imaginative R&D funding strategies, and portfolio reassessments that result in divestitures will all be significant themes in the M&A toolkit in 2023. The recent reset in valuations may provide opportunities for companies to outperform investor expectations and create shareholder value by focusing on differentiated growth opportunities such as robotic surgery, structural heart disease and connected care. Balance sheets and cash flow across the industry remain strong, and M&A will remain a priority for capital allocation.

The following factors will be driving growth in the US market-

• Ageing population - The US population is expected to increase by between 0.5 % and 1 % yearly during the next five years. With population growth of 3% annually, there will be 64.5 million persons over the age of 65 by 2025, making up 18.5% to 19% of the entire population.

* More people are receiving coverage under the Affordable Care Act (ACA)— By 2023, more than 297 million Americans had access to at least one type of health insurance, a significant increase from the 257 million people who were protected in 2010.

* Chronic diseases such as s hypertension, diabetes, chronic respiratory disease, and cardiovascular diseases are rising across the globe on account of rapid urbanization, adoption of sedentary lifestyles and poor dietary habits

* The use of generic medications has expanded globally as a result of efforts to lower healthcare costs generally. These efforts have been exacerbated by a COVID-19-induced economic crisis, declining purchasing power, and financial difficulties. Governments all across the world are implementing pro-generic policies to boost use and reduce escalating costs.

UK and Eurozone pharmaceutical industry

With enterprises of all sizes, Europe is the second-largest market for pharmaceuticals in the world. The fact that developing biopharmaceutical companies do more than 70% of the research contributes to the industrys growth. Even while the industry experiences growth due to the rising incidence of illnesses, universal coverage, and easy access to healthcare facilities, future growth is constrained by the rising use of generic medications and government initiatives to minimise costs.

The pharmaceutical market in the UK, which is based on strong innovation, is anticipated to expand with a CAGR of 3.6%, reaching $34.0 billion in valuation by 2023. The wide availability of healthcare, rising disease burden, and ease of access are the main causes of this.

Australia and New Zealand pharmaceutical industry

Australia Pharmaceuticals Market is likely to register a CAGR of 3% over the forecast period. There are several significant participants in the fiercely competitive Australian pharmaceutical business. A select number of the big firms presently control the majority of the market in terms of market share. A few major players are actively acquiring other businesses and forming joint ventures with them in order to strengthen their market positions in the nation. AstraZeneca, Pfizer Inc., Amgen Inc., Eli Lilly and Company, and Abbvie Inc. are a few of the leading businesses now controlling the market.

The country invested over USD 363 million in the development of COVID-19 prevention and treatment strategies, which is projected to significantly support market expansion. Over the course of the forecast period, market growth is projected to be fueled by an increasing burden of chronic illnesses, an ageing population, and rising R&D spending for cutting-edge medicines.

Russia pharmaceutical industry

By 2023, it is expected that Russias pharmaceutical sector would have expanded by 2.5 billion Russian Rubles. The governments concern for national security in the supply of medicines is one of the key factors in the development of the industry in Russia, particularly in light of the fact that major foreign producers suspended at least some operations in the nation in 2022 as a result of the conflict in Ukraine. The expanding market for internet pharmaceutical sales, which was legalised during the COVID-19 epidemic, is another significant factor propelling the sector. Additionally, as the population ages, demographic factors will continue to drive the pharmaceutical markets rise.

Global Biologics industry

The pharmaceutical industrys most intriguing research area is biologics, and injectables are becoming more and more popular as preferred drug delivery systems since they are simpler to use, result in fewer overfills, and boost patient safety. The global biologics market size is expected to expand at a compound annual growth rate (CAGR) of 3.9% from 2020 to 2025. The creation of a variety of tailored treatments has become possible thanks to a better knowledge of the genetic and molecular causes of disease. Biologics are anticipated to have profitable expansion in the upcoming years as small molecule medication R&D productivity declines. In order to preserve their market position, pharmaceutical companies are concentrating on the development of a number of biologic medicines. Improving efficacy from oral products for rheumatoid arthritis and Crohns disease is anticipated to pull more moderate patients to the novel and branded treatments. In addition, novel molecules provide options for treatment-experienced patients and often show superior safety and efficacy.

Advancements pertaining to the development of manufacturing capabilities are projected to boost biopharmaceutical production capacity. These advancements also include the use of single-use systems in the manufacturing and processing of biopharmaceuticals. Between 2024 and 2029, when 100 biologic medicines lose their exclusivity, Europe provides tremendous opportunity, with revenues valued at more than USD 40 billion in the year of expiration. Additionally, researchers are looking towards species and expression systems that have the potential to be more fruitful. Revenue growth is expected to be fueled by the creation of reagents and cell lines that increase the productivity of biological products.⁵

Global generic industry

The global generic drug industry is expected to reach USD 1,323.68 million by 2030, at a CAGR of 9.9% during the forecast period 2023 to 2030. According to the World Health Organisation, there are 132,000 incidences of melanoma skin cancer and between 2 and 3 million cases of non-melanoma skin cancer per year. Additionally, psoriasis is a dangerous disorder that affects at least 100 million individuals worldwide and has a prevalence that ranges from 0.09 % to 11.43%. The market for advanced topical products is anticipated to expand in the coming years despite the fact that topical drug administration is the main therapy approach for the majority of skin disorders. Future generic product demand will be sustained and expand as a result of an ageing population and budgetary pressures in public health. Obesity, diabetes, and other chronic illnesses and ailments will continue to drive market growth.

Global OTC industry

The global over-the-counter (OTC) drugs market is projected to witness substantial growth, with revenue expected to reach US$ 238,453.92 Mn by 2031, growing at a CAGR of 7.0% during the forecast period.⁶ Factors such as increasing product approvals and launches, rising prevalence of chronic disorders, a growing geriatric population, and heightened awareness about health management contribute to this market growth. Additionally, the demand for OTC drugs is fueled by the popularity of self-medication, advancements in drug delivery systems, and the preference for convenient and cost-effective medications.

The market growth of OTC drugs is primarily driven by the increasing occurrence of chronic disorders and the growing number of elderly individuals. Additionally, the rising trend of self-medication and advancements in drug delivery systems play a significant role. Moreover, the market is positively influenced by the preference of consumers for medications that are both convenient and cost-effective. These factors collectively contribute to the expansion of the OTC drugs market.

Trends in the Global OTC Drugs Market

1. Rise of digital health: Increasing use of technology in healthcare has led to the popularity of digital health platforms and mobile health applications. This trend is expected to drive the expansion of the OTC drugs market as more customers purchase medications and access information digitally.

2. Focus on self-care: Consumers are seeking greater control over their health, leading to a rise in self-care practices. The demand for OTC drugs is projected to increase as individuals look for alternatives to prescription medications to manage their well-being.

3. Demand for natural and organic items: Growing awareness about product contents has led to an increased demand for OTC medications derived from natural ingredients and free of toxic chemicals and additives.

4. Growth in emerging markets: With the expanding global population, there is a significant market potential for OTC medicines, particularly in emerging markets such as Asia and Africa. Manufacturers have opportunities to enter and develop these markets.

5. Increased regulation: Governments worldwide are imposing stricter regulations on the use and sales of OTC medicines to ensure their efficacy and safety. This trend is expected to drive innovation and elevate the overall standard of products in the market.

Indian pharmaceutical industry

In terms of volume, the pharmaceutical sector in India is the third largest in the world. With 20% of the global supply, the country is also the largest generic drug supplier in the world. The Pharmacy of the World is India, which is also known for its highly efficient and cost-effective pharmaceutical companies. Indias domestic pharmaceutical market is estimated to reach USD 130 billion by 2030. The year 2023 holds a positive outlook for Indias pharmaceutical industry, with a deeper focus on quality manufacturing, affordability of drugs and adoption of innovation and technology. The main focus this year is to promote research and innovation in the country.

The industry this year was characterised by a higher level of government and industry collaboration, with both playing a crucial role in assisting the sector in further strengthening its position in the global market. The COVID-19 pandemic has completely changed the pharmaceutical industrys landscape, and cooperation between the government and the sector is now seen more favourably than ever. Despite geopolitical issues, India continued to provide medicines to over 200 countries. The sector also faced challenges this year, however, as the industry expands its footprint around the world, it will need to continuously invest in upgrading manufacturing standards to keep its promise of being a high-quality, reliable supplier of medicines to the world. India is making an effort to build a policy framework that incorporates intellectual property and technology commercialization, government procurement, scientific research, education, and skill development, as well as ease of doing business, regulatory legislation, and tax and financial incentives. These regulatory adjustments will open the door for further private sector investment in pharmaceutical R&D.⁷

Delivering for patients and investors will be difficult in 2023 because to high inflation, a skills scarcity, rising capital costs, difficult effects of foreign exchange, pressures on consumer spending, and ongoing transactional monitoring by the Federal Trade Commission (FTC). These challenges are added to those brought on by the expiration of blockbuster patents, growing competition in most therapeutic fields, and the effects of the Inflation Reduction Act (IRA) of 2022.⁸

MEGATRENDS IN INDIAN PHARMACEUTICAL INDUSTRY

Opportunities & threats

* Evolving regulatory environment

Success in collaborating with the government will have an impact on the sectors future as healthcare takes the lead in the agenda for policy.

Due to stricter laws and quicker regulatory approvals, businesses must be precise "first time." The authorities increased scrutiny has made a focus on quality assurance and control even more crucial.

* Digital- the basis of transformation

The industry is changing, and the ecosystem is currently heading towards operational integration supported by digitization.

With investments in data and analytics capabilities, businesses are adapting quickly to the changing relationship dynamics brought on by new digital elements.

* Shifting industry dynamics-

The industry is going through a number of changes, including a switch from "Make in India" to "Develop in India," increased globalisation, a focus on rural markets, a mindset shift from one that emphasises pricing to one that emphasises value-added, and a mindset shift from one that emphasises competition to one that emphasises collaboration with the merging of sectors, particularly medical devices, pharmaceuticals, and disposables.

* Adaptation to new emerging skills-

Especially in the areas of digital and advanced analytics, as well as market access, businesses are realigning their staffs competencies to new growth models and developing capabilities.

* Focus on R&D and patented goods-

India has a long history of being a leader in branded generics market with several well-established companies. Going forward, the model will alter even though the major focus will still be on branded generics. Innovation and patented goods will take centre stage. To compete in this market, a more thorough and integrated strategy will be needed.

* Development of New Trade Channels alongside Current Trade Channels-

With their growing ability to affect purchasing choices, trade channels—especially organised bodies—continue to wield their historical power. E-pharmacies, on the other hand, have seen significant expansion in recent years. The relative power of traditional channels is being undermined as they grow to constitute a significant portion of distribution channels. Companies must develop skills appropriate for both current active channels and developing fresh channels.

* Globalisation-

Industry changes have prioritised globalisation during the last few years. Leaders from around the world are travelling to India increasingly frequently. More than 200 nations now have Indian pharmaceutical businesses on the market, and this figure is expected to grow. As globalisation picks up speed, businesses operating on a larger scale will increase the depth and breadth of market penetration.

* Rural markets-

Although over 70% of Indians reside in rural areas, roughly 70% of healthcare services are currently offered in urban areas. Future pharmaceutical companies will need to focus on expanding their channel infrastructure to reach rural and urban markets as they become more relevant.

India is anticipated to spend between 9-12% more on healthcare over the next five years, ranking among the top 10 countries globally. The ability of companies to concentrate their product portfolios on chronic therapies for common conditions like cancer, diabetes, depression, and cardiovascular disease will also determine how much future domestic sales expand.

Company overview

Todays rapidly expanding pharmaceutical company, Marksans, has an integrated forward-thinking corporate approach. The company produces goods in a number of therapeutic areas, such as pain management, cough and cold, cardiovascular and central nervous system, anti-diabetic, gastrointestinal, and anti-allergic, among others.

With facilities in Goa (India), Southport (UK), and New York (USA), the Company has a strong and cutting-edge manufacturing setup that is poised to produce considerable growth by maximising its operational leverage.

Forward integrated business model with presence across the pharma value chain

US and North America

In FY23, the Formulation businesses in the US and North America exhibited robust growth of 22% YoY to H 774.6 crore compared to H 635 crores in FY22. It has 32 products in its pipeline, consisting of 20 oral solids and 12 ointments and creams. Specifically, within the oral solids category, there are four Softgels undergoing development.

Europe and UK

Through its two subsidiaries, Bell (OTC portfolio) and Relonchem (high-end Rx portfolio), the Company has a significant presence in the UK and is one of the top five Indian pharma businesses in the region. The majority of Marksans revenue mix is attributable to its position in a variety of therapeutic fields in the area, including pain management, diabetes, cold and flu, neurology, cardiology, and hormone treatment.

In FY23, the UK and Europe Formulation business recorded revenue of C 767.6 crores, exhibiting a notable growth rate of 26%. The Company has currently filed an application for approval of 16 products in its pipeline. Looking ahead, it has strategic plans to submit 34 new filings within the next three years.

Australia and New Zealand

The pharmaceutical industries in Australia and New Zealand currently make up the third-largest portion of Marksans total revenue mix as a result of Marksans years-long efforts to enhance its market dominance in these region. The Companys regional operations are backed by Nova, a research-focused speciality medicines company that Marksans invested in 2005. One of the biggest generics and private label suppliers in the area, Nova has over 30 MAs.

This business division of the Company reported revenue of H 209.4 crores in FY23. Looking ahead, the Company has a robust pipeline consisting of 10 products that are currently under development and expected to be launched within the next two years.

Rest of the world

The Company has established a notable presence in various regions, including the Middle East, Southeast Asia, CIS, Russia, and Africa. To further bolster its position in the MENA (Middle East and North Africa) region, the Company successfully acquired Access HealthCare for Medical Products LLC in the UAE, which enhances its market presence and capabilities in the area. This business division experienced remarkable growth, achieving an increase of 50.2% YoY to reach H 100.4 crores in FY23.

Outlook

Going forward, its immediate objective is to establish a comprehensive product offering in the largest over-the-counter (OTC) segments, including Pain Management, Cough and Cold, Gastrointestinal, and Anti-Allergic, while also entering the liquids, creams, and ointments OTC category. The Company aims to expand its presence in other regions by acquiring companies that align with its distribution strategy for OTC products through store brands.

Moreover, the recent acquisition of manufacturing capacity from Tevapharm (India) provides scalable production capabilities, with plans to double the existing capacity of 8 billion units per annum. This expansion includes the manufacturing of tablets, hard and soft gel capsules, ointments, liquids, creams, and more.

Growth strategy

HUMAN RESOURCES

Marksans believe in expanding by attracting, retaining, and cultivating new people. Given that the Companys main values include innovation, the business prioritises employee empowerment and retention. To maintain the Companys relevance in the crowded market, it has implemented a number of measures to improve teamwork and skills, such as keep improving the companys talent pipeline.

1,400+

Workforce

For more details please refer to the page 26 of this annual report.

Financial review

The Company witnessed a great year of performance as the total revenue exceeded the guidance of Rs. 1,800 crores in revenue. This performance was led by intense focus and execution, driving market share in various products and SKUs. The Company saw strong growth across all our markets.

Revenue

The Company experienced a substantial growth rate of 24.2% YoY in operating revenue, reaching H 1,852.1 crores. This was primarily driven by its successful market share expansion in existing store brands and markets, as well as the successful introduction of new products. Furthermore, its consolidated revenue from Europe and the UK markets witnessed a significant YoY growth of 26.0%, while the US and North American markets also exhibited a strong YoY growth of 22.0%.

Depreciation and amortization expenses

The Companys depreciation and amortization expenses rose from H 44.8 crore in FY22 to H 51.9 crore in FY23, marking an increase of 15.8% YoY basis. Increase was mainly on account of additions made into the Fixed Assets during the year.

Finance cost

Finance cost for the year, increased by H 0.7 crore to H 9.1 crore in FY23 from H 8.4 crore in FY22. It was mainly on account of non-fund based limits bank charges.

Reserves and surplus

Reserves and surplus grew from H 1161.3 crores in FY22 to H 1699.8 crores in FY23, indicating a substantial increase of 46.3% during the specified period. Increase was mainly on account of profits during the year.

Trade payables

The Company experienced a 15.2% growth in trade payables, with the amount increasing from H 200.1 crore in FY22 to H 230.6 crore in FY23. Increase was proportionate to increase in the purchases during the year.

Non-current lease liability

Due to new warehousing premises contract, the non-current lease liability increased to H 65.7 crore in FY23 compared to H 41.4 crore in FY22.

Other current financial liabilities

The other current financial liabilities decreased in FY23 to H 15.3 crore from H 65.6 crore in FY22. This was on account of reclassification of provisions for expenses into trade payables.

Provision- non-current liabilities

The provision for non-current liabilities of the Company rose from H 1.9 crore in FY22 to H 3.3 crore in FY23, witnessing a significant increase of 75.20%. Increase was due to increase in the gratuity and leave encashment provisioning.

Provision- current liabilities

With a substantial increase of 83.1%, the Companys provision for current liabilities reached H 1.3 crore compared to the previous fiscal years provision of H 0.7 crore. Increase was due to increase in provisions related to employees dues.

Property, plant and equipment (PPE)

During FY23, the property, plant, and equipment (PPE) grew to H 379.6 crore from H 341.6 crore in FY22. Increase was due to capacity expansion plans at companys manufacturing sites.

Intangible assets

In FY23, the Company witnessed an increase in its intangible assets, with the value rising to H 68.2 crore from H 56.7 crore in FY22.

Current investments

Current investments slightly increased from H 0.4 crore in FY22 to H 0.5 crore in FY23 mainly on account of increase in value of investment during the year.

Other non-current financial assets

Other non-current financial assets increased by approximately 33.3%, rising from H 2.6 crore in FY22 to H 3.5 crore in FY23.

Other current financial assets

Other current financial assets decreased by H 4.7 crore to H 3.7 crore in FY23 from H 8.4 crore in FY22.

Inventories

The Companys inventories increased by approximately 14.2%, rising from H 424.4 crore in FY22 to H 484.7 crore in FY23.

Trade receivables

The Company witnessed a growth of approximately H 22 crore in trade receivables, with the value increasing from H 394.8 crore in FY22 to H 416.8 crore in FY23. Increase was mainly due to increase in sales.

Other current assets

Other current assets surged from H 20.8 crore in FY22 to H 52.6 crore in FY23.

Other non-current assets

The Companys other non-current assets increased by approximately 837.3%, rising from H 1.6 crore in FY22 to H 14.6 crore in FY23.

Cash and cash equivalents

Cash and cash equivalents increased to H 382.4 crore in FY23 from H 206.4 crore in FY22.

Bank balance other than cash & cash equivalent

Bank balance other then cash & cash equivalent increased to H 332.50 crore in FY23 from H 142.9 crore in FY22 on account of raising of funds through preferential issue of equity shares.

Lease (Current)

Current lease decreased to H 15.7 crore in FY23 from H 28.1 crore in FY22.

Other current liability

Other current liability increased to H 11.2 crore in FY23 from H 3.1 crore in FY22.

Borrowings

Borrowings slightly increased to H 41.6 crore in FY23 from H 41.3 crore in FY22.

KEY FINANCIAL RATIOS

Complying with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company is required to provide details of significant changes (i.e. change of 25% or more as compared to the previous financial year) in key financial ratios, along with detailed explanations. Therefore, the key financial ratios are mentioned below:

Key financial ratios	2022-23	2021-22	YoY Growth	Details of significant changes
Debtors turnover(days)	154	115	33.91%	Due to increase in trade receivables
Inventory turnover (days)	109	95	14.74%	-
Interest coverage ratio (times)	25.44	29.96	-15.09%	-
Operating profit margin (%)	20.70	21.01	-1.46%	-
Net profit margin (%)	15.70	15.80	-0.61%	-
Return on net worth (%)	9.26	13.25	-30.15%	Due to increase in shareholders equity on account of conversion of warrants
Current ratio (times)	4.22	3.54	19.13%	-
Debt-equity ratio (times)	0.01	0.02	-62.05%	-

RISK MANAGEMENT

Marksans has employed a risk-management strategy, that encourages the Company to make clear decisions about the risks that it takes and suggests ways to effectively manage them. It is important to have a thorough grasp of each risks potential, as well as the effective risk management solutions that are integrated to meet the Companys strategic goals.

Regulatory risk	Every pharmaceutical product created or produced by the company is subjected to stringent regulatory, R&D, and quality monitoring. Systems of quality management are in place to guarantee that the products adhere to global standards. All of the Companys manufacturing facilities also adhere to the regulations set out by the top regulatory bodies in the sector.
Technology risk	The Company, which runs a research-driven industry, pushes technical advancement and invests to stay up with shifting trends. Marksans strong R&D demonstrates its dedication to being a technologically cutting-edge pharmaceutical company. In order to keep current on new developments, the Company also maintains strong contacts with well-known international businesses and organisations.
	The Companys competitive advantage is largely built on the efficiency of its workforce.
People risk	Marksans invests in its personnel on a regular basis and nurtures them to create a happy and productive work environment.
Competition risk	Marksans expenditures in its R&D have kept the Company stay ahead of the competition. Additionally, Marksans has a capable marketing and business development team on staff that continually evaluates industry trends and makes pertinent recommendations to management.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The internal control and risk management system are structured and implemented in accordance to the principles and criteria established in the corporate governance code of the Organisation. It is an integral part of the general organisational structure of the Company and involves a range of personnel who act in a coordinated manner while executing their respective responsibilities. The Board of Directors offers its guidance and strategic supervision to the Executive Directors and management, monitoring and support committees. The control and risk committee and the head of the audit department work under the supervision of the Board-appointed Statutory Auditors. The system is under constant review by the Chairman, Managing Director, COO, CFO, and a few others, which ensures timely prevention of discrepancies.

CAUTIONARY STATEMENT

This statement made in this section describes the Companys objectives, projections, expectations, and estimations which may be ‘forward-looking statements within the meaning of applicable securities laws and regulations. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised by the Company. The actual result could differ materially from those expressed in the statement or implied due to the influence of external factors which are 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.