Medico Remedies Ltd Management Discussions.

Global spending on medicines crossed US$ 1.2 Trillion in 2018; and is projected to grow at a compound annual growth rate (CAGR) of 3-6% in the next five years, reaching over US$ 1.5 Trillion by 2023. Growth in the global pharmaceutical market will continue to be led by the US and pharmerging markets.

While new product launches, especially specialty products, will be the key growth catalyst in developed markets, pharmerging market expansion will be driven by multiple factors. These factors comprise improving per capita income, increasing healthcare awareness, ageing population and rising incidence of chronic ailments. The product mix in the developed world will continue to shift towards specialty and orphan products. Emerging technologies are enabling healthcare providers to innovate and engage better with key stakeholders.

The largest generics pharmaceutical market in the world i.e. the US, witnessed increased pricing pressure over the past couple of years due to channel consolidation and faster ANDA approvals by U.S.FDA. However, we are witnessing stabilisation in the US generics landscape with portfolio restructuring leading to selective product discontinuations and increasing focus on profitability by the large generics players.

Of late, pricing of drugs by manufacturers, including annual price increases, has become a key talking point among the lawmakers as well as the public. Following the public outcry, many companies have committed to set a cap on their annual price hike at 6% for branded products.

a. Industry structure and developments.

India is the largest provider of high quality, affordable generics drugs globally and Indian pharmaceutical companies have played a pivotal role in improving the reach of affordable healthcare around the world. India is exporting medicines to 205 countries and vaccines to more than 150 countries. There are more than 600 U.S.FDA approved manufacturing facilities in India, which is higher than any other country outside the US. There are more than 1,300 WHO-GMP certified manufacturing plants in India.

b. Opportunities and Threats.

All whole-time directors of your company are highly qualified technocrats with experience of industry for more than 1 decade and hence can assure secured growth. Company has orders for export in hand worth Rs 43 crore as on today and find difficulties to execute orders with existing facilities and hence company is planning to increase capacities in existing plant as well as take over some existing units to cater the need of additional manufacturing capabilities to execute orders in time.

Strategic Location of Manufacturing Units:

Our Company has two (2) manufacturing units in the States of Maharashtra. Both our Units are strategically located with the following benefits:

• Raw materials sourced domestically are easily available from the manufacturers located in Maharashtra.

• Procurement of raw materials is less time consuming and comparatively cheaper.

• Skilled and semi skilled workers are easily available in Palghar, Maharashtra in view of the large number of industries located in these areas.

• Government has created various infrastructural facilities conducive for growth of Manufacturing Companies.

c. Segment-wise or product-wise performance.

AQABA, JORDAN 13768437 200562
APAPA,NIGERIA 55155116 798401
BELIZE CITY 3215419 45965
COLOMBO,SHRILANKA 32939021 473355
DAKAR, BAMAKO MALI 15338537 217528
DAKAR, BAMAKO MALI 6061571 80774
ERBIL,IRAQ 2100349 29750
LA HABANA 5367107 69537
JEBEL ALI, DUBAI 5236218 74679
KAMPALA,UGANDA 6273387 91330
bhutan 1166675 16081
LAPAZ, BOLIVIA 939148 13343
MOGADISHU, SOMALIA 1579047 20501
MOMBASA, KENYA 41900574 598149
MONROVIA,LIBERIA 6315762 88829
MORESBY, papua 738525 10750
POTI GERORGIA 10614341 152921
SAN PEDRO SULA, HONDURAS 110005320 1570914
YANGON, MYANMAR 52152469 746188
Total 626172855.5 8700425.5 242112.4
LAGOS, NIGERIA 53187623 778669 103.70
BELIZE CITY 2810594 38736 114.40
CAUCEDO, DOMINICAN REPUBLICANA COLOMBO, SRILANKA 227912559 15480296 3301095 225700 62.65 212.78
DAKAR,SENEGAL 20008696 291628 106.95
UMM QASR NORTH PORT 31751852 467482 6.61
HAVANA, CUBA 9675651 141520
HAVANA, CUBA 4176726 54208 38.75
KAMPALA, UGANDA 4535769 68280 138.31
BHUTAN 12080387 171889 9.66
BOLIVIA 1090559 17800 86.12
MANILA, PHILIPPINES 120983755 1771040 85.09
MOGADISHU, SOMALIA 721605 9885 218.82
KENYA MOMBASA 22957983 330313 182.51
SAN PEDRO SULA, HONDURAS 125691443 1832626 87.52
YANGON, MYANMAR 55510051 797040 93.95
PANAMA CITY 5181270 74000
TOTAL 714760221.8 10331957.1 54208

d. Outlook

US spending was at US$ 486 Billion in 2018, while pharmerging markets spending was US$ 286 Billion. These two regions will be key contributors to global pharmaceutical growth. Pharmaceutical spending in the top five western European markets (EU5) touched US$ 178 Billion in 2018; and is likely to grow at a sluggish pace int he 2018-2023 period, as compared to that of the previous five years. Government-mandated price reductions and slower uptake of new specialty products will be key reasons of this sluggish growth. Healthcare providers are exploring technology investments in cloud computing, artificial intelligence and machine learning to ramp up productivity. This trend is expected to gain further momentum in the coming years.

Uptake of specialty medicines will continue to rise in developed markets, driven by advancement of new and innovative targeted medicines, using immunology, gene therapy, monoclonal anti-bodies and other contemporary technologies. Share of specialty medicines in overall pharmaceutical spending will cross 50% by 2023 in most developed markets.

Japans medicine spending was at US$ 86 Billion in 2018; and is expected to slow through 2023, on account of continued uptake of generics and government-mandated price reductions. Chinas US$ 137 Billion pharmaceutical market is expected to grow at 3-6% by 2023, driven by improving insurance access, modernisation of hospital systems and expansion of primary care services.

e. Risks and concerns.

The major risks and concerns which may have impact on Companys business are as follows:

1. Indian Economy and International Economic trends

2. Foreign Currency rate fluctuations

3. Interest rate fluctuations and high rates on inflation

4. Unforeseen circumstances like natural calamities- floods, earthquakes-, closure due to violence

5. Delay in the government spending on infrastructure

Further, Pharmaceutical manufacturing industry is competitive industry and reflects with demand-supply chain, trusted quality, and customer confidence is directly linked with economic factors like consumer reliance, technology and its upgradation etc.

f. Internal control systems and their adequacy.

The Company has built adequate systems of internal controls towards achieving efficiency and effectiveness in operation, optimum utilization of resources, and effective monitoring thereof as well as compliance with all applicable laws. The internal control mechanism comprises of well-defined organization structure, documented policy guidelines, predetermined authority levels and processes commensurate with the level of responsibility. Needless to mention, that ensuring maintenance of proper accounting records, safeguarding assets against loss and misappropriation, compliance of applicable laws, rules and regulations and providing reasonable assurance against fraud and errors will continue to remain central point of the entire control systems.

g. Discussion on financial performance with respect to operational performance.

The highlight of financial performance is discussed in the Directors Report. The Audit Committee also reviews financial performance of the Company from time to time

h. Material developments in Human Resources / Industrial Relations front, including number of people employed.

The companys belief in trust, transparency and teamwork has yielded improvement in employee efficiency at all levels. The Companys commitment to harmonious industrial relations resulted in enhancing effectiveness of operations and enabled the achievement of benchmarks in industry. The Companys ongoing objective is to create an inspirational work climate where talented employees engage in creating sustained value for the stakeholders. The Company has developed an environment of harmonious and cordial relations with its employees. Due to the presence of such a culture, there is no communication gap between the employees and the Management. Loyalty also flows out giving the Company comfortable space to explore new opportunities in the International markets and tap the sectors untouched

i. details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including:

No significant changes (i.e. change of 25% or more as compared to the immediately previous Year)

(i) Debtors Turnover - 3.35 : 1

(ii) Inventory Turnover - 5.16 : 1

(iii) Interest Coverage Ratio - 5.65 : 1

(iv) Current Ratio - 1.40 : 1

(v) Debt Equity Ratio 0.23 : 1

(vi) Operating Profit Margin (%) - 5 %

(vii) Net Profit Margin (%) - 2%

j. details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

Return on Net Worth
Particulars 31.03.2020 31.03.2019
Net Profit after tax for the year 1,63,03,459 1,57,01,101
Share Capital + Retained Earnings 29,86,60,959 28,23,57,500
Ratio 5.46 5.56

Kindly note that there is no significant change in net worth for FY 2019-20 and FY 2018-19. k. Caution Statement

Statements in this Management Discussion and Analysis Report describing the Companys objectives, estimates etc. may be "Forward looking statements" within the applicable laws and regulations. Actual results may vary from these expressed or implied; several factors that may affect Companys operations include Dependency on telecommunication and information technology system, Government policy and several other factors. The Company takes no responsibility for any consequences of the decisions made, based on such statement and holds no obligation to update these in future.

For and On Behalf of Board of Directors
Mr. Haresh Mehta
Chairman & Whole-Time Director