Neuland Laboratories Ltd Management Discussions

<dhhead>Management Discussion and Analysis</dhhead>

GLOBAL ECONOMIC OVERVIEW

In 2024, the world economy grew 3.3%, maintaining the pace of growth, despite continued geopolitical tensions. Shifting geopolitical developments, trade fluctuations and inflationary trends shaped the global economy. Growth was not uniform across countries with robust momentum in the US in contrast to slower growth witnessed in the

Euro region. Proactive policy measures and sustained investments provided resilience, enabling economies to navigate an evolving global environment.

Global inflation decreased from 6.8% in 2023 to 5.7% in 2024. Inflation is further expected to decline to 4.3% in 2025 and 3.6% in 2026. Advanced economies are likely to meet their inflation targets before emerging and developing markets.

Advanced economies are expected to witness moderate growth at 1.4% in 2025 and 1.5% in 2026 similar to 1.7% and 1.8% growth witnessed in 2023 and 2024 respectively. The US economy is expected to grow at 1.8% in 2025 and 1.7% in 2026, lower than 2.8% in 2024 and 2.9% in 2023.

The Euro Area is showing gradual improvement in economic growth from 0.4% in 2023 to 0.9% in 2024, 0.8% in 2025 to 1.2% in 2026. Emerging Markets and Developing Economies (EMDEs), led by China and India, grew at 4.3% in 2024 and are projected to witness steady growth at 3.7% and 3.9%, respectively in 2025 and 2026.

Outlook

In 2025 and 2026, growth is projected at 2.8% and 3% respectively with expectations of pick-up in growth in the US which will offset the continued slowdown in the Euro area. US’s new policy implementations need to be closely monitored post the 90-day hiatus, as they will have a significant impact on global trade. US tax cuts could boost the US economic growth. The response of trade partners in retaliation to US’ cross-border tariffs of 10% will alter the landscape of global trade. Continued geopolitical tensions could play out in patterns which are distinct from the past and have to be closely monitored.

INDIAN ECONOMIC OVERVIEW

Despite ongoing geopolitical turmoil across the globe, India has shown resilience and sustained growth momentum. As per the Second Advance Estimates of GDP, India’s GDP growth was expected at 6.5% in FY 2024-25, much lower than 9.2% GDP growth in FY 2023-24. Slower GDP growth in the first half of the year is attributable to lower industrial activity. Election uncertainties in the first quarter followed by a modest activity in construction and manufacturing in the subsequent quarter due to weather-related disruptions led to weaker-than-expected gross fixed capital formation. Though both private consumption and government spending witnessed significant uptick, RBI’s monetary policy stance was weak given slow economic activity. Inflation in November 2024 at 5.8% was well above RBI’s target of 4%. It is expected that rural consumption, government expenditure, investment, and strong services exports would lead to a pickup in GDP in the second half of the financial year. The IMF projects Indias economy to grow at 6.2% in 2025 and 6.3% in 2026, aligning with global trends of steady growth and declining inflation, though growth in 2024 slowed due to deceleration in industrial activity.

GLOBAL PHARMACEUTICAL INDUSTRY

Post Covid-19, the pharmaceuticals market has been witnessing a major transformation driven by increasing significance of digitalisation and integration of AI tools and solutions in R&D activities. There is an increased focus from players around the world on novel drug therapies. In 2023, the global pharmaceutical market was estimated at US$ 1,661.3 billion and it increased to US$ 1,763.9 billion in 2024. Increased R&D spending, rising prevalence of various chronic conditions, growing geriatric population prone to various age-related disorders, along with increasing healthcare expenditure in emerging countries are some other major factors aiding global pharmaceutical market growth. The market is expected to grow at 7.5% CAGR to US$ 3,148.3 billion by 2032. The rising global prevalence of chronic conditions, especially cancer, diabetes, and others, is adding to the patient population. With the growing awareness and diagnosis of infectious diseases, the need for vaccines, personalised drugs, and therapies is also on the rise. There is a rapid growth in per capita healthcare expenditure in developed and emerging countries which is expected to continue.

Source: www.fortunebusinessinsights.com; Pharmaceuticals Market Size, Share : Forecast Report [2032])

GLOBAL SPECIALITY PHARMACEUTICAL INDUSTRY

Specialty pharmaceuticals primarily entail specialty drugs or medications distinct from traditional or general pharmaceuticals typically used to treat complex, chronic or rare medical conditions such as cancer, autoimmune disorders. They include biologic drugs, gene therapies, cell therapies or other advanced treatment modalities.

A rapid expansion of the specialty pharmaceutical industry has been observed, leading to the predictions of a significant increase from US$ 68.3 billion in 2023 to US$ 1,532.8 billion by 2033. This represents a strong CAGR of 36.5%. North America is emerging as the largest market. This sector is experiencing growth and expansion due to the rise in chronic and rare diseases along with various advances in biotechnology and personalised treatment.

Source: Specialty Pharmaceuticals Market - Global Industry Size, Share, Trends, Opportunity, and Forecast, 2020-2030F

INDIAN PHARMACEUTICAL INDUSTRY

India’s pharmaceutical industry is globally known as the ‘Pharmacy of the World’ offering multiple solutions across a vast range of segments, including generic drugs, over-the-counter (OTC) medicines, bulk drugs, vaccines, contract research, biosimilars, and biologics. India is the world’s leading vaccine exporter. India supplies 65-70% of the World Health Organisation’s (WHO) vaccine requirements, particularly for DPT, BCG and measles. The Indian pharmaceutical market (IPM) ranks third globally in production by volume and 14th by value. IPM plays a significant role in affordable HIV treatment. With such major contributions and growing China plus one strategy among large pharmaceutical markets, India is cementing its position as a key global pharmaceutical supplier.

The Indian pharmaceutical industry, currently valued at US$ 58 billion. India’s pharmaceutical exports grew from US$ 15 billion in FY 2013-14 to US$ 27.85 billion in FY 2023-24. The industry is estimated to reach US$ 120-130 billion by 2030 led by rising lifestyle diseases, an aging population, increased focus on holistic health, strong government push and the growing consumerisation of healthcare. With rise in streamlining of regulatory reforms in India, there is expected to be substantial growth in R&D and innovation. The IPM is amidst a significant transformation with growing focus from generic medications to innovation-driven solutions. Contract Development and Manufacturing Organisations (CDMOs) is a crucial part of this journey.

Source: Investing in Indias Pharmaceutical Industry: Key Growth Prospects

THE INDIAN PHARMACEUTICAL INDUSTRY, CURRENTLY VALUED AT US$ 58 BILLION. INDIA’S PHARMACEUTICAL EXPORTS GREW

FROM US$ 15 BILLION IN FY 2013-14 TO US$ 27.85 BILLION IN FY 2023-24.

GOVERNMENT SUPPORT FOR PHARMACEUTICAL R&D AND EXPORTS

With the intention to cement its stronghold in the global pharmaceutical space, the government has taken various measures like the PLI scheme and Strengthening of Pharmaceuticals Industry (SPI) among others. Strict adherence to Good Manufacturing Practices (GMP) through tightened regulations and inspections is improving manufacturing processes and quality control measures to a large extent. The adoption of advanced technologies like automation, data analytics, and Artificial Intelligence is enhancing quality control processes and enhancing process efficiency. The Union Budget 2025 focussed on improvement of medical infrastructure, expansion of medical education, promotion of medical tourism and ‘Heal in India’ campaign. The budget also intended to boost private sector-driven R&D and innovation. Several announcements were made for cancer and other critical treatments.

Global API market

Active Pharmaceutical Ingredients (API) are the primary component in medications which cause the therapeutic effect. The global pharmaceutical API market is valued at US$ 245.6 billion in 2024 riding on healthy growth in past decade. The growth in the global API market is the result of the rising demand for specialty drugs and the widespread use of generic medicines. Technological advances in API production, scaling production capacities, the rising incidence of chronic diseases, expanding global healthcare infrastructures and increased investments in drug development are also driving this growth.

By 2033, the global API market is expected to grow at 4.4% CAGR to reach US$ 369.0 billion. The growth is mainly driven by growing prevalence of chronic diseases like diabetes, cancer, and neurological and cardiovascular disorders, increasing demand for biosimilars and generic drugs, and substantial rise in investments in pharmaceutical R&D

activities. The growing need for generic medication which act as affordable alternatives to brand-name medications coupled with emerging trend of commercialisation of biologics and biosimilars is aiding growth of the API market globally.

Source: Active Pharmaceutical Ingredients [API] Market Size : 2033

Global CDMO market

Outsourcing strategies are becoming increasingly commonplace in the global pharmaceutical and biotechnology sectors as it increases operational efficiency. This shift is particularly evident in the contract development and manufacturing organisation (CDMO) market, where companies are leveraging external expertise to streamline drug development and production. Several CDMOs offer an array of services covering the entire process from drug discovery to commercialisation. These include drug discovery, preclinical and clinical trials, API and finished product manufacturing, dosage form development, among others. CDMOs are adept at navigating regulatory environments, encouraging pharmaceutical and biotechnology companies to collaborate with them to ensure compliance.

The global CDMO market is projected in the range of US$ 200 billion to US$ 242.62 billion in 2024. Growing at 8.5% CAGR till 2032, the market is expected to increase to US$ 400 billion to US$ 465.14 billion.

Based on the internal estimate, small molecule CDMO market projected in the range of US$ 95 billion to US$ 105 billion in 2024. Limited in-house manufacturing capabilities and manufacturing processes in small pharmaceutical companies, coupled with ever-increasing complexities in therapies are driving the market growth.

Digital advancement is the latest trend in the CDMO market. The use of AI has a potential to transform the pharmaceutical CDMO market by automating manufacturing processes. AI helps in analysis of huge datasets to identify potential drug candidates, improving drug discovery and development processes. By accelerating the R&D process use of technology enables CDMOs to enhance the time to market. AI also enhances quality control, ensuring final products meet regulatory standards. AI finds applications in personalised therapeutic approaches, the development of more targeted therapies and in supply chain management.

Source: https://www.fortunebusinessinsights.com/contract-development-and-manufacturing-organisation-cdmo-outsourcing-market-102502

COMPANY OVERVIEW

Neuland Laboratories Limited (Neuland or the Company), a front-runner in the global API contract development and manufacturing organisation space, has a legacy of over 4 decades as a global CDMO with an impeccable record of quality standards. Headquartered in Hyderabad, India, a publicly traded Company, is a no-compromise pure-play API manufacturing service provider with a wide-range of chemistry solutions custom made to suit the needs of the global pharmaceutical industry.

Neuland has established itself as a dedicated API solution provider, possessing in-depth expertise in extensive complex chemistry capabilities. The Company offers various solutions like custom synthesis, the supply of advanced intermediates and APIs throughout various clinical development stages, CMC (Chemistry, Manufacturing and Controls) support for NDA filing, manufacturing through the commercial product lifecycle from launch to life cycle management through to genericisation.

Neuland has proficient technical and scientific teams which have earned strong brand equity in cGMP API manufacturing and expediting drug development. Its USP is its consistency in delivering superior quality APIs manufactured in 3 cGMP US FDA-approved plants, leveraging robust process chemistry within a regulatory compliant framework. It has a dedicated workforce of 1794 employees with 360 scientists in R&D working tirelessly manufacturing 100+ APIs across 10 different therapeutic areas.

Neuland serves more than 80 countries, earning 82% of total revenue from exports primarily from the US and Europe which account for over 89% of its total exports. The Company has 988 filings worldwide with 499 European DMFs, 72 active US DMFs. Its facilities have been successfully inspected by USFDA, EMA, PMDA, Rx-360, TGA, KFDA, ANVISA, and WHO with a total manufacturing capacity of 1,174 KL. The Company continues to strive to add capacities for backward integration and new business development. The Company exhibits unwavering focus on advancing deuterated molecules, peptides, enzymatic reactions, and cryogenic processes. It has a strong commitment to reducing absolute Scope 1&2 GHG emissions to 58.80% by FY 2033-34, reach net-zero greenhouse gas emissions across the value chain by FY 2049-50, water neutrality by FY 2049-50, and zero waste-to-landfill.

COMPANY SEGMENTS

Generic Drug Substances (GDS)

Neuland is an eminent premier provider of Generic Drug Substances (GDS)/ Generic APIs offering best-in-class quality reliable products, with expertise in complex chemical processes to over 500 customers globally. Neuland has superior operational capabilities and deep-rooted expertise in synthetic chemistry and process innovation with ability to deal with niche chemistry. The Company’s Process Investigation Department (PID) majorly helps the customers to meet their price pressures by way of cutting their total cost of ownership in developing an API, thereby achieving excellence in Process development.

The Company is a well-known, trusted and preferred API supplier boasting of a vast portfolio of APIs across varied therapeutic categories. It has carved a niche for itself with 988 filings worldwide. Neuland has emerged as an ideal API partner for generics, specialising in steering through the evolving pharmaceutical landscape led by its efficient supply chain and strong quality focus. The Company’s long track record combined with pure play API model makes it one of the first ports of call for customers.

Neuland’s GDS business consists of non-exclusive APIs, both Prime APIs and Specialty APIs. The Specialty API segment includes high-value, lower-volume complex niche molecules that require advanced chemistry and process expertise. The Prime API segment includes large volume, mature, high-quality, complex APIs used in generic formulations.

Prime APIs

The Prime API segment consists of a portfolio of 10 APIs, responsible for driving of business volume growth. Key molecules include Mirtazapine (an anti-depressant) and Levetiracetam (effective in treating epilepsy) along with other important compounds like as Ezetimibe, Escitalopram, Levofloxacin, Ciprofloxacin, Enalapril, Sotalol, and Labetalol.

Specialty APIs

The Specialty APIs segment is a high margin profit-driving segment, comprising a robust portfolio of 50+ value-added APIs with a focussed approach towards select customers. The Company deals in complex compounds that are frequently covered by patents and are used in validation batches and regulatory filings. This segments key molecules are Paliperidone, Dorzolamide, Brinzolamide, Deferasirox, Donepezil, Entacapone, and Salmeterol.

Key highlights of FY 2024-25

• Specialty business driven by Paliperidone and Dorzolamide

• In Prime segment Ezetimibe, Mirtazapine and Escitalopram were the key molecules

• Steady shift from low margin Prime to high margin Specialty and CMS segments

• Five new Drug Master File (DMFs) were filed

• The first Peptide DMF filed for Difelikefalin

Opportunities

• Has numerous strategic opportunities for collaborations with leading global generic players as well as players focussed on certain highly regulated markets

• Focussing on differentiating the portfolio with more focus on molecules where Neuland’s presence has a higher impact for customers

• Increasing business with existing clients by strengthening relationships and customise product offerings to their evolving needs

• Continues to prioritise regulated markets and quality-conscious customers, ensuring compliance with strict regulations to enhance credibility and market competitiveness

• Striving to identify primary sourcing opportunities to secure business ahead of competitors

• Expanding portfolio with line extensions and explore new market segments for growth

• Commercialising pipeline compounds and pursuing first-to-market and NCE-1 opportunities to propel future growth

• Collaborating with dossier development firms to broaden capabilities and extend market reach, while investing in new areas to promote diversification and adaptability to market trends

• Submitting Drug Master Files (DMFs) for peptides

Custom Manufacturing Solutions (CMS)

Neuland offers customised small molecule API development and manufacturing support under its high-margin Custom Manufacturing Solutions (CMS) segment. The Company is proficient in aiding innovator pharmaceutical and biotech companies bring their innovations first to the market. The segment may exhibit short-term variances in performance.

The Company’s fast-growing CMS vertical is duly supported by its state-of-the-art infrastructure complying with regulatory, environmental and safety requirements. The Company also boasts of strong domain expertise in complex chemical processes and manufacturing carving a niche for itself.

Services cover a vast range from pre-IND (Investigational New Drug) through to the manufacturing of small-scale clinical trial batches and commercial supplies with optimal technology transfer timelines. Led by a strong track record of providing reliable solutions for API development and manufacturing, the Company is emerging as an important player in the small molecule CDMO industry. The Company acts as a complete partner with services ranging from designing and developing manufacturing processes; process optimisation for competitiveness; cGMP manufacturing of APIs and intermediates; filing of CMC (Chemistry, Manufacturing and Controls) documentation/DMF for the API; to solid-state and pre-formulation technologies.

Neuland has earned a strong repute for skilfully handling complex reactions to transfer the processes from small-scale through validation to commercial manufacturing led by its rich experience. It has long-lasting and stable customer relationships led by its consultative approach. Neuland is known for expediting the development-to-market timelines with the support of its dedicated local teams across the globe together with skilled technical and commercial teams.

R&D and Manufacturing of Products in the Pipeline

The Company undertakes process chemistry, analytical R&D and lab-scale work and manufacturing operations for molecules in the clinical pipeline stage under this segment. Usually characterised by high margins these projects have a lower probability of repeat business. However, the Company has emerged as a reliable partner on the innovation journey due to its collaborative manner of working with customers and the strong trust build during the development stage strengthens. This makes Neuland a preferred commercial partner when the drug receives regulatory approval. Characterised by high attrition of molecules in clinical trials as well as variability in timelines based on the indications and data from the trials, the segment contributes to the uneven nature of the business. The development revenues indicate the number of projects or molecules close to commercialisation.

Commercial Manufacturing

The Company produces intermediates and APIs for commercial novel molecules, covered under patent protection, under this segment. The Company is among the few approved suppliers for products that have attained commercialisation status, aiding generation of recurring revenue. The success of the commercialised drugs determines the scale in such projects. In the near future, there is a healthy pipeline of late-stage development projects likely to transition to commercial manufacturing contracts.

Enhancement of Peptide production - capability and capacity

Neuland Laboratories invested US$ 30 million in a modern multi-product, multi-modular peptide facility automated through DCS. The facility will incorporate advanced process optimisation technologies and increase peptide synthesiser capacity from 0.5 Kl to 6.37 Kl to support both clinical and commercial-scale peptide projects.

This investment will boost Neulands capacity to meet rising global demand for complex peptides, solidifying its role as a reliable partner for pharmaceutical and biotech firms. The expansion includes advanced manufacturing infrastructure, reflecting Neulands dedication to innovation, quality, and dependability in the peptide CDMO sector.

Key highlights

• Revenues driven by commercial molecules

• Increasing interest from Biotechs leading to increase in early-stage projects

• Establishing increased credibility with multiple projects from customers

• Interest from a varied range of customers including Big Pharma

• Number of peptide opportunities emerging including some exciting early stage molecules

Prospects

Advanced technologies, robust research and development capabilities and sustained customer relationships are expected to drive the segment revenues. To ensure consistent and de-risked revenue generation, the Company strives to maintain a healthy mix of Phase III and early development projects.

FINANCIAL PERFORMANCE Statement of Profit and Loss

Revenue for the Company stood at 1,497.3 crore in FY 2024-25 as compared to 1,571.1 crore in FY 2023-24, witnessing marginal y-o-y decline of 4.7%. The EBIDTA of the Company declined 27.8% y-o-y to reach 342.8 crore in FY 2024-25 compared to 474.5 crore in FY 2023-24. The decline was due to the change in business mix while operational expenses grew in line with the business needs.

Profit after tax for Neuland declined 13.4% y-o-y, to reach 259.4 crore in FY 2024-25 compared to 299.6 crore in FY 2023-24.

Financial Highlights FY 2016-2025

Rs.crore

Particulars	FY16	FY17	FY18	FY19	FY20	FY21	FY22	FY23	FY24	FY25
Total Income	511.6	588.9	533.7	670.3	766.6	953.0	953.2	1,200.9	1,571.1	1,497.3
EBITDA	81.5	106.9	54.6	61.4	105.3	162.5	144.3	281.1	474.5	342.8
EBITDA Margin	15.9%	18.1%	10.2%	9.2%	13.7%	17.1%	15.1%	23.4%	30.2%	22.9%
PAT	26.4	46.4	11.8	16.1	15.9	80.3	63.5	163.1	299.6	259.4
PAT Margin	5.2%	7.9%	2.2%	2.4%	2.1%	8.4%	6.7%	13.6%	19.1%	17.3%
EPS	29.7	41.6	10.6	12.8	12.4	62.6	49.5	127.1	233.5	202.2
Current Ratio (x)	1.2	1.3	1.2	1.4	1.4	1.5	1.6	1.7	2.1	2.4
ROCE (%)	18.4%	15.9%	5.0%	4.7%	8.9%	13.5%	9.7%	21.3%	32.8%	17.9%
Fixed Asset Turnover (x)	3.7	3.8	3.2	2.9	2.3	2.4	2.1	2.7	3.1	2.3
Debt to Equity (x)	0.9	0.7	0.5	0.3	0.3	0.1	0.2	0.1	0.1	0.1

Interest Coverage Ratio

During the fiscal year, the interest coverage ratio remained steady at 76.8x in FY 2024-25, unchanged from 76.8x in FY 2023-24 on account reduced finance cost in line with reduced EBIDTA.

EBITDA Margin (%)

The EBITDA margin for the Company contracted by 730 bps to reach 22.9% in FY 2024-25 from 30.2% in FY 2023-24. The decline was due to the change in business mix while operational expenses grew in line with the business needs.

Net Profit Margin (%)

Net profit margin contracted 166 bps to 17.6% in FY 2024-25 from 19.2% in FY 2023-24 due to lower finance cost as compared to reduction in EBITDA.

Net Debt to Tangible Net Worth Ratio

Net debt to tangible net worth ratio declined to -0.18 in FY 2024-25 from -0.03 in FY 2023-24 on account of increased negative net debt from previous year.

Current Ratio

Current ratio increased to 2.4 in FY 2024-25 from 2.1 FY 2023-24.

Cash Conversion Cycle

The cash conversion cycle (number of days of revenue) stood at 107 days in FY 2024-25 compared to 122 days in

FY 2023-24. The decrease in days is due to faster collection of receivables.

Return on Capital Employed and Return on Invested Capital

Return on capital employed decreased to 17.9% in FY 2024-25 compared to 32.8% in FY 2023-24. Further, the return on invested capital was pegged at 14.6% in FY 2024-25 compared to 24.7% in FY 2023-24.

Fixed Assets Turnover

The fixed assets turnover ratio stood at 2.3 in FY 2024-25 compared to 3.1 in FY 2023-24. During the fiscal, the Company made capex investments of 206.4 crore.

R&D Investment

In FY 2024-25, the total R&D spend stood at 61.2 crore compared to 43.5 crore in FY 2023-24. The Company has further strengthened R&D capabilities by adding equipment.

Particulars	FY 2024-25	FY 2023-24
Debtors Turnover Ratio	4.20	4.15
Inventory Turnover Ratio	WIDTH=27% VALIGN=TOP> 2.93	3.31
Debit Equity Ratio	0.09	0.06
Operating Profit Margin	18.52%	26.40%

HUMAN RESOURCES

HR is a crucial part of business continuity and serves as the foundation for its achievements. The Company has created a work culture wherein all employees prioritise customer satisfaction, and strive to fulfil customer needs with dedication, passion and a sense of purpose. A strict all-inclusive policy, irrespective of gender, ethnicity, religion, or nationality, guarantees the objective.

Ample opportunities are provided to showcase talent with good performance being duly recognised and awarded. With its rich legacy of over four decades, the Company attracts and nurtures top-tier talent providing a challenging yet supportive, safe and conducive work culture.

Talent Management

The Company is striving to up its ante on the quality of people be hired, goal setting and appraisal mechanism. Online HRMS system enables appraisers to review SMART goals created by the employees. It is a constant effort to align employee goals with the organisational objectives by open communication between the appraisers and the employees. Mid-year appraisals further enhance the appraisal process by acknowledging the progress on goals, modifying goals as deemed fit and providing developmental feedback to better reach the goals.

The Company mandates the appraiser to spend adequate time with the appraisee to give feedback on his or her performance during the year and share views on their performance. Feedback is provided in writing as well as during the appraisal discussion comprising inputs from all other stakeholders that the appraisee has worked with during the year. Confirmation from the appraisee is required on the HRMS system for successful completion of one-on-one feedback session with the appraiser.

Training and Development

Various training and development opportunities are offered to aid employees to expand their skill set, widen knowledge base and facilitate career advancement, through workshops, seminars, online courses and mentoring programmes, among others.

Rewards and Recognition

ACE awards (Acknowledging Commitment and Excellence), the rewards and recognition programme at Neuland, comprises quarterly and annual recognition programmes for both individual and team excellence.

On a quarterly basis, online ACE awards are presented to high-performing employees as well as high-performing teams. The annual recognition includes the ‘Employee of the Year Award’ being presented in an exclusive in-person event attended by the senior leadership of the organisation.

Employee Wellness

Various wellness initiatives are conducted to promote employee’s physical, mental and emotional well-being, including regular health checkups, medical insurance, vaccinations and health awareness seminars.

Health check-ups have played a vital role in early ailment detection and facilitation of preventive actions. A third party, ‘YourDOST’, has been hired to manage emotional well-being of all employees wherein employees, and even their family members, can book online appointments and interact with the psychologists and counsellors of YourDOST in complete confidentiality. There are 1,799 employees globally.

RESEARCH AND DEVELOPMENT

The Company has a state-of-the-art research and development (R&D) facility in Bonthapally, Hyderabad, focussed on the efficient development of complex molecules. The facility is well-equipped with modern facilities and a team of proficient scientists. Creation of non-infringing processes, designing cost-effective routes and minimising impurities, are its key focus areas.

For safety and operational efficiency, the Company has built fifteen state-of-the-art development labs, including 70 fume hoods. The analytical labs facilitate precise analyses, and a full-fledged kilo lab carries out seamless scale-up processes. Neuland also has specialised labs for peptides and a separate facility for D2 analogues, reflecting unwavering commitment to diverse research pursuits. The facilities include a dedicated hazardous waste lab for safe chemical management, a wet lab for various experiments and a Focussed Beam Reflectance Microscope (FBRM) for particle size analysis and crystallisation monitoring. The Company also has pilot plants with polyblock reactors for solubility and crystallisation studies, laboratory reactors for varied temperature reactions and heating and cooling systems for Design of Experiments (DoE) studies. Neuland has assembled a robust research and development team of around 360 individuals, post approvals from the Department of Scientific and Industrial Research, to drive innovation and promote scientific advancement.

The Company also has Pilot Plants and Kilo Labs, reflecting Neuland’s strength across a wide variety of reaction capabilities that facilitate the exploration and refinement of new methods. Neuland engages in close collaboration with clients under confidentiality agreements to accelerate product development under custom synthesis. This enables Neuland to offer customisable solutions tailored to specific client needs, supported by thorough analytical backing throughout the development process. Neuland remains committed to innovation and excellence in pharmaceuticals by leveraging its R&D initiatives. Neuland leads the way in API and its intermediates’ development aided by its team of skilled scientists and advanced infrastructure.

Priorities

• Repeated enhancement of technical skills and quality advancements in research and development activities

• Dealing with complex chemicals leads to need for automation, sophisticated chemistry and the adoption of complementary new technologies

• Ongoing investment in process engineering and Quality by Design (QBD) laboratories, demonstrating a commitment to robust quality control measures and the optimisation of manufacturing processes

• A focus on deepening technical prowess and enhancing quality to ensure the delivery of superior quality products

These principles align with Neulands overarching aim to foster innovation and maintain a competitive edge in the marketplace.

Supply chain management

An array of measures, ensure a robust supply chain management (SCM) system at Neuland. The Company has deployed different strategies to ensure effectiveness and consistency of the supply chain to comply with manufacturing demand and ensure on-time delivery to the customers.

The robust SCM system enables Neuland to efficiently counter any supply chain risks and ensure business continuity. The Company promotes collaboration with suppliers and logistics partners through various strategies to optimise inventory management, reduce lead time and minimise costs throughout the supply chain.

Key highlights of FY 2024-25

• Captured Scope 1 & 2 emissions from suppliers covering 70% by value and 90% by volume using a third-party GHG data platform

• Held ESG awareness sessions to improve supplier carbon data and build alignment for Scope 3 strategies

• In partnership with CII-IGBC, Neuland developed a carbon accounting tool and disclosed emissions data for SBTi, EcoVadis, CDP, and other ESG frameworks

• Achieved full digitisation of the procurement process and initiated digital invoice processing for greater efficiency and transparency

Priorities

Neuland integrates ethical practices and digital intelligence into its supply chain operations to promote environmental stewardship. This offers equal opportunities for all stakeholders. The Company ensures adequate access to procurement opportunities by leveraging its innovative capex procurement engine, with 30% sourced from Micro, Small and Medium Enterprises (MSMEs).

To keep the supply chain updated with evolving market trends and ensure uninterrupted operations, the supply chain is anchored by five core principles. The Company continuously optimises supply chains aided by streamlined processes and strategic partnerships. This also enables it to reduce lead times and improve efficiency to meet the evolving needs of customers and communities.

To evaluate supply chain performance and identify areas for improvements, the Company has established key performance metrics. This ensures the Company maintains a culture of continuous improvement to optimise the supply chain processes and performance.

Various advanced technology like SCM software, predictive analytics and IoT devices have been utilised to improve transportation routes, modes and schedules to reduce lead times and costs. This streamlines processes and also enhances overall visibility across the supply chain.

QUALITY CONTROL AND QUALITY ASSURANCE

The Company has in place an extensive quality management framework which complies with the various international regulations. Neuland constantly strives to be prepared for and promptly implement any new policies and regulations ahead of time. Such measures reflect the Company’s unwavering focus on quality control and assurance enabling it to provide customers with superior quality goods and services.

Strong quality control and quality assurance are followed throughout manufacturing process with a view to strict compliance with regulatory standards. Quality assurance ensures highest quality standards are strictly implemented from the procurement of raw materials to the distribution of finished products. It incorporates the implementation of comprehensive quality management systems, risk assessment practices and adherence to Good Manufacturing Practices (GMP). Quality control enables the testing and evaluation of intermediates, final products and raw materials, to ensure established standards and legal requirements are complied with. Quality control validates the consistency and integrity of products through analytical testing, method validation and batch release testing.

QC (Quality control) lab is facilitated with Wet Chemistry, Instrumentation, and Microbiology sections. The QC labs are equipped with sophisticated instruments like HPLC, GC, UV, FTIR, Particle size analyser, LC-MS, ICP-MS XRD etc. QC labs work round the clock with adequate analysts to support the manufacturing operations real time. Stability studies are conducted inline with ICH guidelines.

Certifications received during FY 2024-25

• GMP certification by DCA

• WHO GMP certification by CDSCO

• EU written confirmation by CDSCO

• ISO 9001:2015 surveillance audit certification

• ISO 14001:2015 certification

• ISO 45001:2018 certification

Quality Control	EHS
Quality Control can be facilitated with Wet Chemistry,	Hazard and EHS Impact studies are regularly conducted.
Instrumentation and Microbiology Laboratories.
The Company is equipped with sophisticated instruments	24X7 occupational health centre with ambulance facility has been provided.
like HPLCs, GCs, FTIR, UV and Particle Size Analyzer.
About 50+ chemists perform activities round the clock in 3 shift operations.	The effluent treatment plant equipped with an RO system and Zero Liquid Discharge systems for wastewater has been successfully implemented and is operating continuously and effectively across all three manufacturing sites.
	The treated wastewater is fully recycled for utilities makeup.
Stability studies have been conducted as per ICH guidelines.	VOC (Volatile organic compound) monitoring has been in place through an Online Environmental Monitoring System, which is connected to the servers of both state and central pollution control boards across all manufacturing sites.
	This system ensures effective control of environmental parameters.

Key highlights of FY 2024-25

• Implemented three-layered quality reviews, monthly at site level, monthly at corporate quality level & quarterly at management level

• Implemented the review of quality metrics (USFDA) as part of quality review meetings

• Rolled out new modules on LIMS (Finished product testing, stability studies, in-process & cleaning samples testing, reference & working standards management, label management, analyst qualification, lab chemicals management)

• Initiated the roll-out of SAP S/4 HANA to enhance the operational efficiency at business level, strengthen data integrity and real-time monitoring, leading to better process control and compliance adherence

• Monthly review of product quality & right first time, compliance rates, audit performance, QMS performance & documentation quality were conducted

• Implemented QbD tool for achieving enhanced product quality by applying risk management (FMEA & DoE)

• Established a robust investigation process and ensured its robustness on a continued basis. A

check-list based review & scoring of investigation reports was conducted to achieve a score of >80%

• Pro-active assessment of guidelines, pharmacopeia & USFDA 483 observations for compliance and implementation of actions through procedural changes and training

• Ensure cross deployment of CAPA for improving process efficiency, ensuring regulatory compliance, and enhancing product quality

• Initiated regular interactions with shopfloor teams, leadership engagement, and cross-functional discussions to ensure that quality remains a shared responsibility and instrumental in fostering a mindset of ownership, accountability, and continuous improvement at all manufacturing locations

• Initiated the review of SOPs for improvement across all departments and sites

• Conducted exhaustive and repeated training sessions to shopfloor personnel on cGMP & ALCOA principles

• Monthly meetings with R&D and SCM have been initiated to have a structured approach for ensuring collaboration, alignment in quality objectives and a unified strategy for risk mitigation

Priorities

The Company attaches utmost importance to monitoring and adhering to applicable regulations and standards in the pharmaceutical sector. With a view to ensure alignment with evolving requirements, internal processes and procedures are consistently updated. To ensure strict compliance the internal audits and inspections are regularly conducted and prompt corrective measures are undertaken for any observed deviations.

With a strong commitment to excellence, Neuland strives to empower employees the knowledge and skills necessary to uphold regulatory standards and conducts various training programmes for employees in this regard. Neuland remains committed to offering superior quality products led by a strong culture of compliance and continuous improvement.

Every customer complaint is meticulously investigated through a structured complaint handling process. To effectively address any underlying issues and prevent recurrence, prompt corrective actions are implemented.

INFORMATION TECHNOLOGY

Neuland has a robust IT system which enables to ensure system resilience, uninterrupted workflow, enhanced connectivity, strong data security measures and smooth cross-functional coordination.

IT Infrastructure and Enterprise Application

Various enterprise applications enable Neuland to update operations and improve efficiency. To ensure seamless cross-functional information transfer, the Company has implemented SAP ERP which incorporates the key business functions of the organisation. All HRMS processes are effectively managed by SAP Success Factors. For efficient and secure access control, Neuland has installed face recognition technology. For online compliance in commercial despatches, Quick Response (QR) codes have been implemented.

Different sales and operational planning tools, enable to optimise inventory management and forecasting. CRM

tools aid in lead management and marketing campaigns. For quality and manufacturing compliance, LIMS and QAMS systems are in place. Neuland has an in-house web-based intranet application, Base camp, enabling employee self-service with role-based access control. The Company also provides mobile device and application management with single sign-in through Office’s 365 suite along with Enterprise Mobility Suite (EMS) on the cloud.

Hybrid working with all security measures is possible through Virtual Desktop Infrastructure (VDI) across 90% of the organisation. To ensure data centre security, the Company has in place Virtualised server stacks with high availability. SDWAN connectivity ensures secure network access between locations, supported by a comprehensive Data Leak Prevention (DLP) solution at all layers. Neuland also has strong Business Continuity Plan (BCP) and Disaster Recovery (DR) solution.

Data security

Data security and confidentiality are of prime importance at Neuland given its nature of operations, especially in relationships with creative partners. Ransomware, unauthorised access, and human error are effectively managed by an array of precautions undertaken. These include regular Vulnerability Assessments and Penetration Testing (VAPT) to strengthen IT infrastructure, and Security

Information and Event Management (SIEM) for early attack detection.

To assure compliance with international security guidelines, Neuland has recertified its ISMS to ISO 27001:2013 standards. Security awareness is enhanced through ISMS standard orientation and refresher training programmes for employees. All stakeholders, including customers, workers, suppliers, and consultants have to sign Confidentiality Disclosure agreements. This enables Neuland to ensure data confidentiality across the organisation.

ENVIRONMENT, HEALTH AND SAFETY (EHS)

Corporate responsibility is at the heart of the Company’s work ethics with special focus on Environment, Health and Safety (EHS). The Company’s senior management is committed to pursuing excellence in EHS practices, working towards preservation of environmental, prevention of occupational illnesses and minimising work-related injuries. Neuland has a robust EHS management system that focusses on resource conservation, pollution prevention, and safeguarding worker health. To emphasise the importance of individual wellbeing and environmental conservation across business operations, Neuland has adopted a ‘Safety First’ approach. These EHS efforts have been recognised with a global ESG (Environmental, Social, and Governance) score of 70 out of 100 from S&P Global rating, highlighting its commitment to these critical areas.

Energy management and GHG emissions

The Company aims to achieve a 58% reduction in greenhouse gas emissions by FY 2033-34 compared to the baseline year, FY 2023-24. For this, it is implementing energy efficiency measures, transitioning to renewable energy sources, and optimising manufacturing processes.

• The Company is investing in energy-efficient equipment and technologies to reduce energy consumption. It is also streamlining manufacturing processes to enhance efficiency and reduce emissions

• Neuland is investing in renewable energy projects such as solar and wind farms to offset their carbon emissions by generating clean energy. Installing solar panels and wind turbines to generate clean energy and reduce reliance on fossil fuels

• The Company is also focussing on improving energy efficiency across their operations to reduce overall carbon footprint

WATER MANAGEMENT

The Company has a target to reduce water consumption by 10% through recycling and efficient water management practices. Thus, it is investing in advanced water recycling technologies and promoting water conservation initiatives across all facilities.

• Neuland has upgraded their water recycling systems to include advanced filtration and purification technologies, allowing for higher rates of water reuse within their manufacturing processes

• By adopting green chemistry principles, Neuland has optimised their processes to reduce water usage and minimise waste generation

• Continuous process improvements and the use of efficient equipment have further enhanced water conservation efforts

• During the year, a waterbody rejuvenation project was initiated by the Company that aims at balancing ~50% of FY 2024-25’s water consumption, in pursuit of our near-term and long-term water neutrality goals

WASTE MANAGEMENT

The Company has set forth a target to achieve a 75% reduction in hazardous waste generation and a 50% reduction in non-hazardous waste. For this, it is adopting green chemistry principles, enhancing waste segregation and recycling programmes, and implementing waste-to-energy projects.

• Enhancing manufacturing processes to minimise waste generation. Lean Manufacturing: Implementing lean manufacturing principles to reduce waste at every stage of production

• Installing advanced scrubbers and filters to capture and reduce harmful emissions from manufacturing processes

• Ensuring regular maintenance of emission control systems to maintain their efficiency and effectiveness

• Using safer, non-toxic chemicals in manufacturing processes to reduce the release of hazardous substances

• Implementing green chemistry principles to minimise waste generation and improve overall environmental performance

• Effluent management

• Neuland has adopted Zero Liquid Discharge (ZLD) technology across all their manufacturing units. This system ensures that no liquid waste is discharged into the environment. Approximately, 90% of water is recovered from wastewater for industrial reuse, significantly reducing freshwater consumption

• Neuland has implemented advanced effluent treatment processes to recycle and reuse water within their operations. This technology is used to treat the remaining 10% wastewater, converting it into solid waste which is then safely disposed of through methods like Multiple-Effect Evaporation

• Neuland Laboratories is integrating various carbon offset projects to support its Net Zero journey

• Neuland is investing in afforestation and reforestation projects to sequester carbon dioxide by planting trees on non-forested land and restoring degraded forests

• Neuland is exploring and potentially investing in carbon capture and storage (CCS) technologies to capture carbon dioxide emissions from their operations and store them underground

• Neuland is actively involved in R&D to develop and implement innovative carbon capture solutions that can be integrated into their manufacturing processes

By setting clear interim targets and implementing robust tracking and reporting mechanisms, Neuland aims to make significant strides towards their sustainability goals by 2035.

RISK MANAGEMENT

At Neuland, risk management is considered an essential pillar of business growth. The risk management framework enables the Company to protect public health, ensure adherence to laws and statutes, and safeguard the Companys reputation and financial health. The Company is exposed to various risks given the complex and uncertain nature of business operations involving drug development, production and distribution process. The extensive risk management strategies and frameworks enable to identify, evaluate and address these risks and minimise the impact on business. The risk management strategies enable Neuland to offer superior quality products. In addition, these help to maintain stakeholder’s faith in business operations. A more comprehensive coverage of Risk Management is covered on pages 45-48 of this report.

Risk	Definition	Mitigation Strategies
	Various factors like transportation issues, geopolitical events or supplier problems can cause disruptions in the timely delivery of raw materials,	The Company constantly strives to reduce dependency on any single source and expand its supply chains. Neuland thoroughly researches domestic and global market trends to foresee market
Supply chain risk	components or finished products. Such events which may cause production delays and/or shortages of essential drugs may impact business profitability.	volatility in input prices.
	Being in the pharmaceutical sector, the Company has to adhere to various laws, regulations and guidelines set by pharmaceutical regulatory authorities such as the FDA in the United States	The companys Regulatory & Quality teams regularly monitor the changing regulatory and legal landscape to ensure that the company is in compliance. The operational teams undergo regular training
Non-compliance risk	or the EMA in Europe. Non-compliance may attract legal penalties, product recalls and harm brand equity.	sessions with assessments which are mandatory. Further, the company has internal audit mechanism in place and conducts periodic mock audits by external parties to ensure compliance with applicable laws and regulations.
Market risk	Various market factors may impact business operations including demand fluctuations, pricing pressures, forex volatility, and heightened competitive pressure.	The Company strives to closely monitor varying market dynamics and devices strategies to modify operations to suit the market changes to minimise impact on business operations, brand equity and profitability.
IP risk	The Company’s intellectual property rights, such as patents, trademarks and trade secrets, face risk of patent infringement lawsuits, heightened competition, or counterfeit products. These may lead to loss of market exclusivity resulting in impact on revenue, margins and brand equity.	The Company monitors closely intellectual property rights for any risks arising due potential infringements and challenges to patents. To sustain its competitive advantage, Neuland focusses on research and development to create innovative and improved products and processes.

INTERNAL CONTROL AND AUDIT

The Company’s robust internal control systems are in keeping with the size and nature of operations and industry. All applicable rules and regulations are strictly complied to, which helps in safeguarding assets from unauthorised use, averting frauds and errors, securing sensitive data, aiding the audit process, maintaining proper accounting controls, monitoring operations, executing authorised transactions, and ensuring compliance with corporate policies. This aids in improving overall efficiency of productivity at all levels. There are limits defined for various processes, according to which the empowered authority approves contracts and expenditure.

The systems define processes for annual and long-term business plans along with periodic review. The management assessed the effectiveness of the internal control over financial reporting (as defined in Regulation 17 of SEBI Listing Regulations, 2015) as of March 31, 2025. Post evaluation of internal financial controls (as defined in Section 177 of Companies Act, 2013 and Regulation 18 of SEBI Listing Regulations, 2015) as on March 31, 2025, the Audit Committee approved the systems were adequate and operating effectively.

M S K A & Associates, the statutory auditors of the Company, have audited the financial statements included in this annual report. They have issued an attestation report on the internal control over financial reporting (as defined in Section 143 of Companies Act 2013).

Ernst & Young LLP, the internal auditors, monitor and conduct the internal audit of the Company’s activities. Annually, the Audit committee in consultation with the Auditors define and approve the Audit plan along with the audit process. The internal audit reviews the internal controls framework and risks for the Company’s operations such as manufacturing, R&D, supply chain management, accounting and finance, IT processes, EHS following international standards.

Specialised third-party consultants and professionals audit and review business-specific compliances such as quality management, production management, and information security, at periodic intervals. The audit reports submitted by internal auditors and statutory auditors, and the reports from the management are thoroughly reviewed by the Audit Committee.

The Audit Committee is also responsible to recommend improvements and corrective actions as deemed necessary. The adequacy of internal control systems is discussed and reviewed by the Audit Committee and the statutory auditors. The Board of Directors is apprised with the important findings from this meeting, periodically. As on March 31, 2025, the Audit Committee approved the adequacy and effectiveness of the Company’s internal financial controls, based on its evaluation (as defined in Section 177 of Companies Act, 2013 and Regulation18 of SEBI Listing Regulations, 2015).

ADDITIONAL INFORMATION

This MDA (Management Discussion & Analysis) should be read in conjunction with the materials captured earlier in the report which cover the topics in comprehensive detail.

CAUTIONARY STATEMENT

This document contains forward-looking statements regarding expected future events, and financial and operating results of Neuland Laboratories Limited. As these statements rely on assumptions, they are inherently subject to risks and uncertainties. There is a significant risk that these assumptions and predictions may not prove to be accurate. Readers are cautioned against placing undue reliance on forward-looking statements, as various factors could cause actual future results and events to differ materially from those expressed in these statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications, and risk factors outlined in the Management’s Discussion and Analysis of Neuland Laboratories’ Limited Annual Report for FY 2024-25.