Medico Remedies Ltd Management Discussions

<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS REPORT </dhhead>

Management is pleased to announce about commencement of production of ointments & cream (external preparation) manufacturing Facilities and about receiving World Health Organization Good Manufacturing Practices. (WHO GMP) certificate for this manufacturing Facilities. This will yield increase in revenue & earnings in the coming years.

Global spending on medicines is projected to grow at a compound annual growth rate (CAGR) of 3-6% in the next two years, reaching over US$ 1.6 Trillion in total market size by 2025. Growth in the global pharmaceutical market will continue to be led by the US and pharmerging markets. The pharmaceutical industry globally, has been impacted in an unseen way due to the outbreak of the COVID-19 pandemic leading to material impact around consumer requirements and preferences accompanied by macroeconomic, structural and microeconomic changes in the end-to-end value chain. The pharmaceutical landscape has undergone a massive transformation with the emergence of new technologies, cost-effective, and more efficient manufacturing approaches 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.

a.Industry structure and developments

India’s pharma exports grew by 103 percent to Rs 1,83,422 crore since 2013-14, Union Minister Piyush Goyal highlighted that India has been serving as the pharmacy of the world. "Indian pharma companies enabled by their price competitiveness and good quality, have made a global mark, with 60 percent of the worlds vaccines and 20 percent of generic medicines coming from India," the commerce ministry said. India ranks third worldwide for production in terms of volume and 14^th by value. The current market size of the domestic pharmaceutical industry is around $50 billion and in likely to be touched $130 billion by 2030. The share of pharmaceuticals and drugs in global exports is 5.92 percent.

While generic drugs still account for about 70% of output, the pandemic has spurred Indian drug producers to substantially increase their R&D spending. Due to a serious supply disruption in 2020, Indian drug producers intend to increase local production of Active Pharmaceutical Ingredients (APIs) in order to reduce their reliance on Chinese deliveries. Those imports have meanwhile rebounded, but are not yet back to pre-pandemic levels. The Indian government has taken a slew of initiatives to support the Indian pharmaceutical industry. Initiatives such as the production linked incentive (PLI) schemes, medical device and bulk drug parks are likely to boost domestic production of active pharmaceutical ingredients (APIs), biopharmaceuticals, complex generics, patented drugs, and various medical devices and transform India as the global manufacturing hub. This is a major step towards realizing its vision of "Aatmanirbhar Bharat".

In the 2020-30 period as it is expected that the Indian pharmaceutical industry will grow at a CAGR of 12.3 per cent to reach at USD130 billion. To achieve this ambitious target, a collaborative effort is required from all the industry stakeholders the healthcare providers, physicians, payers, policymakers, pharma companies, academic institutions and a range of service providers offering solutions pertaining to logistics and distribution, packaging, and other ancillary services.

b. Opportunities and Threats

The Board of your company comprises of highly qualified technocrats with experience of industry for more than 2 decade and hence can assure secured growth. 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 three (3) manufacturing units in the State of Maharashtra. All 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.

Government gave incentive of RODTEP to pharmaceutical industry wef last year and this incentive will increase profitability of your company in the coming years.

The major threats, risks and concerns which may have impact on Company’s business are as follows:

Unforeseen circumstances like natural calamities- floods, earthquakes, closure due to violence, war etc

Keeping Up with Technology

Easy availability of Counterfeit Drugs

Challenging US generics pricing environment, driven by customer consolidation and higher competitive intensity, on account of faster pace of generic drug approvals by the USFDA.

Significant volatility in the forex market, especially for emerging market currencies, may adversely impact reported growth of these markets, even though they may be recording growth in local currency terms.

Interest rate fluctuations and high rates on inflation

Intellectual Property (IP) infringement and leakage

Delay in the government spending on infrastructure

Talent risk due to huge demand for talent globally and attrition

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.

The Company operates in single segment of manufacturing medicines including Antihy pertensive Antidiabetics Antibictics Diuretics, Antimalarials, NSAIDS Tablets, Antireterovirals, Anti-Ulcer Drugs and Antacids Tablets, so many drugs used for treatment of so many diseases for oral use as well as external preparations like creams & ointments which includes anti infectives ,antifungals ,antibiotics ,steroidal preparations etc.

With rising export share, CARE Ratings has projected India’s pharma industry to grow at about

11% in next two years to reach a size of over $60 billon. The main factors that are expected to drive the growth of industry are (a) ability to leverage the opportunity available for Indian pharma companies due to expiry of the patent drugs across the globe, (b) ebbing of regulatory risks, (c) adoption of various strategies to de-risk from dependency on China for key raw materials, (d) increasing trend in PE investments, and (e) solid fundamentals of the industry.

Indias pharmaceuticals market (IPM) is expected to grow between 6 and 8 per cent on a year-on-year (YoY) basis in FY24. In a research note, India Ratings and Research (Ind-Ra) said it has maintained a neutral outlook for the Indian pharmaceutical sector for FY24.

Large players are adequately capitalised to make bigger investments to adjust for the ongoing fundamental shift in market opportunities. Cost-cutting measures remain a priority for Indian companies. However, interim disruptions such as high raw material costs and logistic expenses will put pressure on the level of free cash flow generated. With the significant improvement in the free cash flow generated in the near term, M&A activities will continue to provide inorganic push in FY24.

e.Internal control systems and their adequacy

To increase stringent controls on inventory & proper checks on system your company has installed ERP solutions program this year & implementation Started.

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, pre- determined 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 regulationsand providing reasonable assurance against fraud and errors will continue to remain central point of the entire control systems.

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

The company’s belief in trust, transparency and teamwork has yielded improvement in employee efficiency at all levels. The Company’s commitment to harmonious industrial relations resulted in enhancing effectiveness of operations and enabled the achievement of benchmarks in industry. The Company’s 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.

Debt Equity Ratio: The Debt Equity Ratio decreased to 0.00 in FY 2023-24 as against 0.01 in previous year due to decrease in Borrowings on account of repayment of loans.

Statements in this Management Discussion and Analysis Report describing the Company’s 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 Company’s 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.