Natural Capsules Ltd Management Discussions.


During the year under review, Indian Pharma Industry has faced challenges in both domestic and international fronts. However despite these challenges, industry has grown by around 3 %. On domestic front, industry faced challenges due to Introduction of GST during first quarter of Financial Year-2018; price control on many finished formulations had impacted the industry. Bigger Pharma companies had faced challenges of pricing in regulated markets, however stiff competition in these markets has given increased market share to Indian companies who have been more adept in handling the pricing pressure. At the same time exports to other countries were affected due to challenges of currency depreciation, hard currency availability etc. Your company during the Financial Year 2017-18 had a gross turnover of Rs. 5232.32Lakhs as against Rs. 5136.66Lakhs in the previous year, a marginal growth of 1.82%. Profit before depreciation and taxation was Rs. 168.22 Lakhs as against Rs.90.00 lakhs in the previous year. The net profit of the Company for the year under review was placed at Rs. 111.111Lakhs as against Rs. 62.78Lakhs previous year. Due to continuing challenges on export front and pricing pressure in domestic front and increase in other input costs, margins remained in lower percentages. Despite these challenges Profit after tax has increased by 43.49 % during the year under review.

Opportunities and threats:

a). Opportunities

1. Opening of export opportunities for HPMC capsules in various countries.

2. Increase in demand for HPMC capsules within the country due to trend of conversion of many products from gelatin to HPMC capsules.

3. New dosage formulations using hard capsules.

4. Company‘ new API project will market products which are currently being imported and hence will have good demand and margins.

b). Threats:

1. Aggressive expansion & price competition from Chinese suppliers.

2. Increase in prices of raw material due to short supply in domestic market and higher import costs due to devaluation of Indian currency.

3. Slowdown in exports due to challenges in international economy.

Segment –wise or product wise performance is not relevant in view of the company having single product.

c). Outlook:

Based on the companys performance up to the date of this report, orders on hand and realizing the incremental capacity post up gradation of machines, your company is hopeful of achieving a turnover of around Rs. 58 to 60 crores in the current year. However due to increase in input costs, company may still earn lower margins as compared to earlier years. New API project once commissioned will give a big boost to company‘s revenue and profits. d.) Risks & Concerns

Risk of competition and exchange fluctuations may have an adverse impact on the projections. Risk of delay in receiving payments for both local & international customers can lead to higher finance cost. Risk of short supplies of raw material can cause loss of business to some extent.

Internal Control Systems and Their Adequacy:

The Company has an adequate Internal Control System commensurate with its size and operations. Management has overall responsibility for the Companys Internal Control System to safeguard the assets and to ensurereliability of financial records. Audit Committee reviews all financial statements and ensures adequacy of internal control systems.The Company has engaged the services of an Independent Chartered Accountant to carry out the internal audit and ensure that recording and reporting are adequate and proper, the internal controls exist in the system and that sufficient measures are taken to update the internal control system. The system also ensures that all transaction are appropriately authorized, recorded and reported. Exercises for safeguarding assets and protection against unauthorized use are undertaken from time to time. The company has also installed an extensive CCTV Surveillance system to cover the entire factory premises. All these measures are continuously reviewed by the management and as and when necessary improvements are affected.

Discussions on financial performance with respect to operational performance:

The Net Sales during the year was Rs.5475.52lakhs and your Company could make Net Profit of Rs.111.11 Lakhs after tax.

No. of Employees:

31-03-2017 31-03-2018
HO 24 0 24 HO 22 0 22
UNIT-1 31 0 31 UNIT-1 29 0 29
UNIT-2 74 12 86 UNIT-2 73 10 83


The Board acknowledges the continued assistance from the Bankers, State Governments, Local Bodies, Customers, Suppliers, Executives, Staffs, workers at all levels and the Shareholdersfor their continuous cooperation and assistance.

For and on Behalf of the Board
Sd/- Sd/-
Place: Bengaluru Sunil L Mundra S Gopalan
Date : May 18th 2018 Managing Director Chairman