NGL Fine Chem Ltd Management Discussions

Global Economy

The global economy entered 2026 on a cautious footing. In its April 2026 World Economic Outlook, the International Monetary Fund projected global growth to slow to 3.1% in 2026 and 3.2% in 2027, against a backdrop it described as the global economy operating in the shadow of war following the outbreak of conflict in the Middle East. Global headline inflation is expected to rise modestly in 2026 before resuming its decline in 2027, and the balance of risks remains firmly on the downside, including a prolonged conflict, deeper geopolitical fragmentation and renewed trade tensions.

Advanced economies continued to grow more slowly than emerging markets and developing economies, as the lagged effects of earlier monetary tightening, soft investment and weaker trade weighed on activity. Emerging markets, led by Asia, remained the principal engine of global growth, even as higher tariffs and protectionist measures in some markets added uncertainty to trade flows. Energy and commodity prices stayed volatile through the year, sensitive to geopolitical developments.

For globally integrated manufacturers, the operating environment was shaped by elevated freight costs and supply-chain disruption, particularly the rerouting of shipments away from the Red Sea, together with currency volatility in several export markets. These conditions raised input and logistics costs across the pharmaceutical supply chain and placed a premium on supply reliability and cost discipline. Companies with diversified geographic exposure and integrated manufacturing were better placed to absorb these pressures.

Source: IMF World Economic Outlook, April 2026.

Indian Economy

India remained the fastest-growing major economy during the year. Real GDP is estimated to have grown about 7.6% in FY26 under the revised 2022-23 base series released by the National Statistics Office, supported by resilient domestic demand, sustained public capital expenditure and a gradual recovery in private investment. Growth was broad-based across services, manufacturing and construction, while agriculture benefited from favourable conditions. Consumer price inflation stayed benign through the year, averaging in the lower half of the Reserve Bank of Indias 2% to 6% tolerance band. This allowed the RBI to hold the policy repo rate at 5.25% with a neutral stance through the first quarter of FY27, supporting investment and consumption. The Government continued on a path of gradual fiscal consolidation while protecting capital expenditure, and growth for FY27 is projected at around 6.7% to 6.9% by the RBI and other agencies.

A stable macroeconomic environment, continued policy support for manufacturing and the China-plus-one sourcing shift together reinforce Indias position as a global pharmaceutical and API manufacturing hub. For an export-oriented producer such as the Company, this combination of domestic stability and a structural shift in global sourcing provides a supportive backdrop for growth, even as currency movements remain a factor to manage.

Source: MoSPI First Advance Estimates 2025-26; RBI Monetary Policy Statements, 2026; IMF World Economic Outlook, April 2026.

Global Animal Healthcare Market

The global animal healthcare market is in a sustained period of expansion. According to Grand View Research, the market was valued at US$68.7 billion in 2025 and is projected to reach US$156.0 billion by 2033, growing at a CAGR of 11.0% over 2026 to 2033. Growth is supported by rising animal-health expenditure, increasing pet ownership and humanisation, an intensifying focus on food security, and heightened concern over zoonotic disease under the One Health agenda.

Market and Trends

Pharmaceuticals lead

The pharmaceutical segment, including anti-infectives and parasiticides, held the largest share at 43.1% in 2025, sustained by continuous innovation and rising demand for therapeutic interventions in livestock (Grand View Research, 2025).

One Health

Rising outbreaks of zoonotic infection have elevated animal health as a frontline of public health, supporting steady, noncyclical demand for high-quality APIs.

Food security

Intensifying livestock production to meet global protein demand continues to underpin demand for parasiticides, anti-infectives and nutritional additives.

Regional Outlook

North America

Remained the largest market, with a share of over 35% in 2025, supported by high pet humanisation and advanced veterinary infrastructure (Grand View Research, 2025).

Asia-Pacific

Is the fastest-growing region, supported by livestock modernisation and rising incomes.

Europe

Remains a critical market for regulated growth under stringent European Medicines Agency standards.

Industry Challenges

The growing emphasis on antimicrobial stewardship is reshaping the use of certain therapeutic classes and directing demand towards alternative and high-compliance products. Pricing pressure persists in several categories, driven by competition and capacity additions, while divergent regulatory regimes across regions increase the cost and complexity of operating globally. Continuous innovation and a strong compliance record are increasingly the conditions for participation rather than sources of differentiation alone.

The medium-term outlook is favourable, with structural demand drivers and a steady shift towards higher-quality, regulated products that benefit established, compliant manufacturers.

Source: Grand View Research, Animal Health Market, 2025.

Global Veterinary API Manufacturing Market

The global veterinary API manufacturing market is shifting towards higher quality standards and more localised supply chains. Grand View Research valued the market at approximately US$9.92 billion in 2025 and projects it to reach US$17.36 billion by 2033, at a CAGR of 7.34% over 2026 to 2033.

Drivers and trends

Synthesis dominance

Chemical synthesis remains the largest mode of API production, reflecting the extensive use of small-molecule parasiticides and antibiotics where cost-effectiveness and scale are decisive.

The outsourcing pivot

A marked shift towards contract development and manufacturing is under way, as global innovators increasingly outsource to specialised manufacturers in India and China to access expertise and reduce capital expenditure.

Regulatory intensification

Scrutiny continues to rise, with frameworks such as ICH Q7 and electronic submissions raising the bar for filings in the US and EU, and rewarding manufacturers that invest in compliance and data integrity.

Supply-chain resilience

Reshoring and backward integration are increasingly used to reduce dependence on single geographies for key starting materials.

Regional outlook

North America

Remains the largest manufacturing hub, supported by the worlds highest R&D expenditure.

Asia-Pacific

Is the fastest-growing region; India in particular is strengthening its position as a global hub for veterinary API exports, supported by a large base of regulator-approved facilities and expertise in complex chemical synthesis.

As global customers consolidate their supplier base around reliable, compliant partners, integrated Indian manufacturers that can manage these challenges are well placed to gain share over the forecast period.

Source: Grand View Research, Veterinary API Manufacturing Market, 2025.

Industry challenges

Supply-chain vulnerabilities

A high dependence on specific geographies for key starting materials has prompted reshoring and backward integration among leading manufacturers, in order to reduce exposure to geopolitical and logistics risk.

Operational complexity

Physical parameters such as particle-size distribution and polymorphism have become central to quality assurance, and a failure in stability testing or labelling can lead to significant delays and cost in regulated markets.

Environmental compliance

Tightening environmental regulation in India and the European Union is influencing solvent choices and emission controls, raising operating costs for non-integrated players.

Indian Animal Healthcare Market

Indias animal healthcare market is transforming from a traditional livestock-support sector into a high-technology pharmaceutical hub. Grand View Research valued the market at US$1.97 billion in 2024, rising to an estimated US$2.19 billion in 2025, and projects it to reach US$4.21 billion by 2030, at a CAGR of 13.9% over 2025 to 2030. Pharmaceuticals accounted for the largest share at 42.55% in 2024, while production animals represented 79.57% of the market in the same year.

Key drivers

Livestock as an economic engine

Indias large livestock and dairy base sustains strong demand for quality veterinary APIs for productivity and disease management.

China-plus-one

India is emerging as a preferred alternative to China for API sourcing; the Governments Animal Husbandry Infrastructure Development Fund, with an outlay of Rs.29,610.25 crore, is incentivising private investment in manufacturing scale and regulatory compliance (Department of Animal Husbandry & Dairying).

Companion-animal growth

Rising pet ownership and humanisation are expanding demand for premium parasiticides and chronic-care medications.

Regulatory advancement

As Indian companies target regulated markets, continued investment in US FDA and EMA-compliant documentation is becoming a necessary, if demanding, barrier to entry.

Industry Structure and Operating Context

Indias animal-healthcare and veterinary API industry is export-led and competitive, comprising a mix of dedicated animal-health companies and diversified bulk-drug manufacturers, many with facilities certified for international markets. Operationally, veterinary API production shares characteristics with human API manufacturing, including a dependence on imported raw materials, a significant share of which is sourced from China. This structure rewards manufacturers with backward integration, scale and a strong compliance record.

The industry continues to contend with input-cost volatility, particularly in the pricing of key starting materials, and with logistics and geopolitical friction, including elevated freight costs and longer shipping lead times to Europe and the United States. Regulatory harmonisation, as Indian companies pursue regulated markets, requires continued investment in compliant documentation and remains a necessary barrier to entry. The market is expected to sustain double-digit growth, supported by structural demand, policy support and the broadening shift of global sourcing towards India.

Source: Grand View Research, India Animal Health Market, 2024; Department of Animal Husbandry & Dairying (AHIDF).

Indian Veterinary API Manufacturing Market

India is positioning itself as a high-value, research-driven hub within the global veterinary API industry. Grand View Research valued the Indian market at US$547.7 million in 2024, accounting for 5.9% of the global veterinary API manufacturing market, and projects it to reach US$1,133.3 million by 2033, at a CAGR of 8.4% over 2025 to 2033. India is the fastest-growing regional market in Asia-Pacific.

Market dynamics

The regulated-market pivot

Indian manufacturers are migrating towards regulated markets in the US and EU, leveraging human-grade manufacturing expertise to file Veterinary Master Files and Certificates of Suitability, improving realisations and de-risking portfolios.

Maturity of China-plus-one

Multinational animal-health companies are increasingly forming long-term partnerships with Indian API firms to secure supply-chain stability, favouring Indias record on data integrity and intellectual-property protection.

Process innovation

Contract outsourcing is the fastest-growing service segment, with investment in automated process controls and green chemistry to meet revised Schedule M norms and international sustainability standards.

Policy support

Government initiatives, including infrastructure funding and interest subvention, are encouraging private players to establish modern API units and enhance compliance.

With higher realisations in regulated markets and a maturing China-plus-one shift, the Indian veterinary API sector is positioned for steady, quality-led growth, benefiting integrated manufacturers with established regulatory credentials.

Source: Grand View Research, India Veterinary API Manufacturing Market, 2024.

Company Overview

NGL Fine-Chem Limited is a globally recognised pharmaceutical company with over four decades of experience in animal and human healthcare. The Company develops and manufactures veterinary APIs, human APIs, intermediates and finished dosage forms, supported by strong process-chemistry expertise, backward integration and integrated manufacturing operations.

The Company manufactures 45 APIs, of which 43 are veterinary and two are human, together with 11 finished dosage forms, and supplies five of the worlds ten largest animal health companies. Its products reach over 55 countries and it serves approximately 430 customers worldwide. The Company operates five manufacturing facilities at Tarapur and Navi Mumbai, supported by its subsidiary Macrotech Polychem, with a greenfield expansion under way at Tarapur. It continues to strengthen its regulated-market presence through CEP approvals, ASMF filings, VMF submissions and validation activities across Europe and the United States.

Performance Review

FY26 was a year of strong operational and financial recovery, led by volume growth across products and geographies. Revenue from operations increased 36% to Rs.500.95 crore, against Rs.368.26 crore in FY25. EBITDA more than doubled to Rs.72.69 crore, with the EBITDA margin improving to 14.51% from 9.2% in the previous year. Profit after tax grew 128% to Rs.48.13 crore. The improvement in profitability reflected higher capacity utilisation on the back of increased volumes, improved manufacturing efficiencies and stronger cost absorption. Total income, including other income of Rs.14.73 crore, rose to Rs.515.68 crore. Finance costs increased to Rs.4.47 crore and depreciation to Rs.19.58 crore, reflecting the larger asset base following the Tarapur investment. Profit before tax rose to Rs.63.37 crore, an increase of about 129% over the previous year.

The recovery strengthened as the year progressed, with performance more pronounced in the second half on the back of sustained, volume-led growth. The benefit of higher volumes was partly offset during the year by elevated freight costs, the limited ability to pass on costs under certain fixed-price contracts, and mark-to-market provisions arising from currency movements. The Company secured a partial price pass-through to customers towards the close of the year, which, together with improving operating leverage, is expected to support margins going forward.

The balance sheet strengthened over the year. Shareholders funds increased to Rs.329.23 crore, while total borrowings rose to Rs.108.42 crore, comprising long-term borrowings of Rs.56.40 crore and short-term borrowings of Rs.52.02 crore, reflecting funding of the expansion programme. Net block increased to Rs.164.09 crore as capital work progressed. Inventories stood at Rs.70.28 crore and trade receivables at Rs.130.88 crore, both higher in line with increased activity, taking total assets to Rs.545.50 crore. The current ratio was 1.84 and the debt-equity ratio 0.33. Cash flow from operating activities was Rs.43.32 crore. Cash used in investing activities was Rs.70.59 crore, reflecting continued capital expenditure on the Tarapur project, while cash flow from financing activities was Rs.29.55 crore. The Company closed the year with cash and bank balances of Rs.2.81 crore. Working capital rose during the year in line with higher activity, with the increase in trade receivables and inventories reflecting the scale-up in volumes. The Company continued to fund its expansion through a prudent combination of internal accruals and calibrated borrowing, maintaining balance-sheet stability while investing for long-term growth.

Geographic Review

The Companys revenue is well diversified geographically across Asia, the rest of the world, India and Europe, with the United States representing a future opportunity as the Companys regulated-market entry progresses. Demand strengthened across Asia, Europe and Latin America during the year, with Latin America a particular area of strength supported by product registrations and growing customer acceptance. Europe remains a key market for regulated growth, where the Companys CEP and ASMF pipeline is advancing, while the United States will open up as the first US FDA registration progresses through the audit process. (Asia 24%, rest of the world 37%, India 24%, Europe 14%, United States 01%.)

Customer and Product Concentration

The Companys diversification extends to its product and customer base. The top ten products accounted for 65% of FY26 sales, while the Company served over 430 customers across more than 55 countries, which reduces concentration risk and improves stability across market cycles. Revenue concentration in select products and regions can nonetheless increase exposure to volatility in those areas.

Outlook

The demand recovery seen during FY26 has continued into the early part of FY27. With a broader portfolio, an advancing regulatory pipeline, additional capacity from the Tarapur expansion and improving operating leverage, the Company is positioned to build on its recovery and pursue opportunities across both emerging and regulated markets, while remaining mindful of pricing pressure, input-cost volatility and currency movements.

Key Financial Ratios

The Companys key financial ratios improved markedly during the year, reflecting the recovery in profitability and the strengthening of returns, partly offset by higher borrowing to fund the expansion programme.

Ratio	FY26	FY25	Remarks
Operating profit margin (EBITDA)	14.96%	9.61%	Increase due to improved cost control & operational efficiency
Net profit margin	8.27%	4.91%	Increase due to higher revenues & cost control
Return on net worth	12.94%	6.4%	Increase due to Higher Profitability & Financial Leverage
Return on capital employed	18.45%	9.37%	Increase due to increase in Operating Profit
Current ratio	1.84	1.98	Reduced due to increase in Short & Long term Borrowings
Debt-equity ratio	0.37	0.27	Increase on account of increase in Term Borrowings
Interest coverage (.x)	15.2	12.9	Increased due to increase in Earnings before interest
Inventory turnover (x)	7.70	7.53	Increase due to strong consumer demand & better sales forecasting
Debtors turnover (x)	4.70	4.35	Increase due to better collection of outstanding sales receivables
Debt service coverage (x)	6.11	6.38	Decrease due to increase in debt service payments

Principal Risks, Potential Impacts and Mitigation Measures

The Company operates a structured risk-management framework, overseen by the Risk Management Committee of the Board, which identifies, assesses, mitigates and monitors risks across regulatory, operational, financial and market dimensions. The principal risks and the Companys mitigation measures are summarised below.

Risk	Description and Potential Impact	Mitigation Measures
Regulatory and Compliance	Frequent changes in domestic and international regulation; non-compliance could lead to penalties, recalls or loss of market access.	Continuous monitoring of regulatory change, robust compliance protocols, staff training and dedicated compliance teams.
Quality Assurance	Any deviation from quality standards may result in recalls, regulatory action or reputational damage.	Rigorous quality control, regular audits, adherence to cGMP and investment in testing infrastructure.
Supply Chain Disruption	Disruption in procurement of raw materials or logistics may delay production and raise costs.	Supplier diversification, strategic inventory management, long-term contracts and backward integration.
Market Competition and Pricing	Intensifying competition from domestic and Chinese manufacturers pressures prices and margins.	Continuous investment in R&D, cost leadership through integration and portfolio diversification.
Currency and Input- Cost Volatility	Currency devaluation and input-cost inflation in export markets affect realisations and working capital.	Selective price pass-through, geographic diversification and prudent treasury management.

Internal Control Systems

The Company maintains internal control systems that underpin the orderly and efficient conduct of its operations. These controls are designed to safeguard assets, prevent and detect fraud and error, ensure the accuracy and completeness of accounting records, and facilitate the timely preparation of reliable financial information. The framework is aligned with regulatory requirements and good practice, and comprehensive policies and procedures govern day-to-day activities to ensure compliance with applicable 68 laws and ethical standards.

Regulatory Compliance

The Company places strong emphasis on regulatory compliance, adhering to all relevant statutes, regulations and policy directives, with regular monitoring and review mechanisms in place.

Internal Auditing

Internal audit is a cornerstone of the control environment. The function independently reviews and evaluates the effectiveness of the Companys internal checks and control systems, providing assurance of compliance and offering recommendations for continuous improvement.

Human Resources

The Company recognises that its people are central to its sustained success, and fosters a culture of performance, role clarity, collaboration and mutual respect. Investment in human capital and process excellence ensures that employees are valued, empowered and aligned with the Companys strategic objectives. As at 31 March 2026, the Companys workforce comprised 537 employees.

Training and Development

The Company provides regular training and development programmes tailored to the evolving needs of the business, equipping employees with the skills and knowledge required to keep pace with industry and technological developments, and thereby enhancing organisational capability and agility.

Recognition Programmes

The Company recognises and rewards strong employee performance through various recognition programmes that acknowledge meaningful contributions and foster a culture of motivation, which in turn supports the overall success of the business and the satisfaction of its customers.

Health and Safety

The health, safety and well-being of employees are a priority. The Company maintains stringent health and safety protocols, complies with applicable occupational health and safety regulations, and reviews its policies and procedures regularly to support continuous improvement.

Cautionary Statement

The statements and expectations presented in this Management Discussion and Analysis may include forward-looking statements as defined under applicable securities laws and regulations. Actual results may differ materially from those expressed or implied, due to various factors including, but not limited to, changes in economic conditions, government policies, tax laws and other incidental factors.