Panchsheel Organics Ltd Management Discussions

INTRODUCTION AND OVERVIEW OF PHARMACEUTICAL INDUSTRY

India being the largest provider of generic medicines globally, occupying a 20% share in global supply by volume, supplying 62% of Global Vaccine demand is a prominent and rapidly growing presence in the global pharmaceuticals industry. India ranks 3rd worldwide for production by volume and 14th by value.India is home to more than 3,000 pharma companies with a strong network of over 10,500 manufacturing facilities offering over 60,000 generic brands across 60 therapeutic categories.India has the highest number of US-FDA compliant Pharma plants outside of USA and its API industry is third largest in the world, with 57% of APIs on the WHO.

- The Indian pharmaceutical industry is the 3rd-largest globally by volume and the 11thlargest by value.

- The domestic market size is USD 60 billion, projected to reach USD 130 billion by 2030.

- The annual turnover of the Pharma sector reached Rs. 4.72 lakh crore in FY25.

- India currently ranks 11th globally by value in pharmaceutical exports, with exports to 191 countries in 2024-25. - Pharma exports stood at USD 30.5 billion, a nearly 16-fold increase from USD 1.9 billion in 2000-01. - FDI inflows Rs. 13,193 Crore for the current financial year 2025-26 (up to September).

- In the Union Budget 2026-27, Biopharma SHAKTI has been proposed to position India as a global biopharmaceutical manufacturing hub with a total outlay of Rs. 10,000 Crore over the next five years.

Indias pharmaceutical industry in 2026 is valued at approximately $60 billion, maintaining its position as the third-largest globally by volume and the primary provider of global generic medicines and vaccines.

Market Size and Projections

- Current Valuation: Valued around $60 billion in 2026, with domestic market turnover reaching high growth trajectories.

- Future Outlook: As of 2026, the sector is projected to reach approximately $130 billion by 2030, with a robust CAGR of 8 11% over the next 2-3 years.

- Global Standing: Occupies a 20% share in global generic medicine supply by volume and supplies over 60% of global vaccine demand.

Introduction - Linking Public Health with Economic Progress

Health functions both as a driver and an outcome of economic development, and the pharmaceutical industry occupies a unique position at this intersection. By ensuring the availability of essential medicines and vaccines, the industry plays a critical role in advancing public health outcomes and societal welfare, while concurrently generating employment, reinforcing supply-chain resilience, and contributing to broader socioeconomic development. Over time, the Indian pharmaceutical industry has emerged as one of the world‘s most distinctive and socially significant sectors, positioning India among the largest and most technologically advanced pharmaceutical producers globally.

India in the Global Pharmaceuticals Market

India‘s standing as the Pharmacy of the World is rooted in the unique combination of affordable pricing and assured quality, which has made Indian medicines widely preferred across global markets. Cost-efficient manufacturing, supported by a strong scientific workforce and scale, has enabled the consistent supply of essential drugs without compromising standards. The Indian pharmaceutical industry ranks 3rd globally by volume and 11th by value, with more than 3,000 companies and 10,500 manufacturing units. The domestic pharmaceutical market, valued at USD 60 billion, is projected to reach USD 130 billion by 2030. As per Economic Survey 2025-26, in FY25, the sector‘s annual turnover reached Rs. 4.72 lakh crore, with exports growing at a CAGR of 7 per cent over the last decade (FY15 to FY25). India is the largest global supplier of generic medicines, accounting for around 20 per cent of global supply, manufacturing about 60,000 generic brands across 60 therapeutic categories. By expanding access to affordable HIV treatment and emerging as a leading global supplier of cost-effective vaccines, the pharmaceutical industry continues to advance public health outcomes domestically and internationally while generating economic opportunities. India hosts the highest number of manufacturing plants approved by the United States Food and Drug Administration (USFDA) outside the United States of America, reinforcing international confidence in the safety and quality of Indian pharmaceuticals. There are about 500 active pharmaceutical ingredient (API) manufacturers, accounting for nearly 8 per cent of the global API industry.

Pharmaceutical Exports - Global Reach and Investment Growth

India is the global leader in the supply of Diphtheria, Tetanus, and Pertussis (DPT), Bacillus CalmetteGuerin (BCG), and measles vaccines. Indian manufacturers provide about 60 percent of vaccine supplies to the United Nations International Childrens Emergency Fund (UNICEF), meet 40-70 per cent of global demand for DPT and BCG vaccines, and account for 90 per cent of the World Health Organization‘s (WHO) measles vaccine demand. This highlights the robustness of Indian pharmaceutical exports and their substantial integration within global healthcare supply networks.

Export Performance

As per the Economic Survey 2025-26, India currently ranks 11th globally in pharmaceutical exports by value, with exports to 191 countries in 2024-25, of which 50 percent are directed to highly regulated markets such as the United States and Europe, reflecting wide international acceptance of Indian medicines. In 2024-25, pharmaceutical exports stood at USD 30.5 billion, a nearly 16-fold increase from USD 1.9 billion in 2000-01. Export momentum has also remained strong every month, with Drugs and Pharmaceuticals exports rising by approximately 2.70 per cent from USD 2.59 billion in January 2025 to USD 2.66 billion in January 2026. Further, medical device exports have grown significantly from USD 2.5 billion in 2020-21 to USD 4.1 billion in 2024-25, with exports to 187 countries in FY25.

India‘s pharmaceutical sector has expanded its global presence through rising exports and steady foreign investment, signalling strong international confidence in its manufacturing and regulatory standards. Collectively, these strengths position India as a dependable supplier of quality, affordable medicines and underpin its continued export-driven growth. Indian pharmaceutical exporters have strategically diversified their export portfolio by expanding shipments to emerging and non-traditional destinations, including Nigeria,

Mexico, the United Republic of Tanzania, the Netherlands, France, Brazil, Sri Lanka, Saudi Arabia, and Spain, across bulk drugs, surgical products, and formulations. This targeted market diversification has enhanced export resilience by mitigating exposure to tariff-related risks concentrated in individual markets.

SEGMENT-WISE PERFORMANCE

The operation of the Company consists of a single segment. Our Company deals in bulk drugs. Hence, Accounting Standard (AS-17) on Segment Reporting issued by the Institute of Chartered Accountants of India does not apply.

OUTLOOK

The likely duration, intensity and spread of the corona virus has brought in a lot of uncertainty into the global and domestic economic outlook. The concerns have transformed from the initial impact of imports from China on the domestic supply chains to the domestic and external demand shock.

The duration of the same remains uncertain with social distancing and lockdowns raising the prospects of production shutdowns and job losses in some sectors. A revival in domestic investment is likely to be hindered, given the increased risk aversion on a global scale, and renewed concerns about resilience of the financial sector.

In the near term, the negative impact of the Covid-19 outbreak on economic growth and sentiment may be modestly mitigated by higher government spending, a brighter outlook for crop yields and emergency stockpiling of essential items. Furthermore, the fall in commodity prices would provide mild cushioning to earnings in the near term, which provides some comfort.

FACTORS THAT MAY AFFECT OUR RESULT OF OPERATIONS

Our financial conditions and results of operations are affected by numerous factors inter alia

Growth of unorganized sector and threat from local regional players;

Change in freight and forwarding charges;

General economic and business conditions;

Our Company s ability to successfully implement our growth strategy;

Fluctuation in Exchange rates;

Prices of raw materials we consume and the products we manufacture;

Changes in laws and regulations relating to the industry in which we operate;

Changes in political and social conditions in India.

PANCHSHEEL ORGANICS SWOT ANALYSIS

- STRENGTHS

- Extensive experience in specialty chemicals and pharmaceutical intermediates;

- Stronger sustainability and compliance framework with thrusts to continuously improving and adding on to it;

- Export sales in more than 15 countries;

- Sound manufacturing capability of APIs;

- Strategic location of manufacturing units with easy access to raw materials and utilities.

- WEAKNESS

- Products are highly dependent on the availability of raw materials;

- Macro factors may expose various risks impacting the growth;

- Global nature of operations like unfavorable currency movements, etc, expose the business to losses.

- OPPORTUNITIES

- Domestic Markets

The Company has a wide range of pharmaceutical products in its portfolio. The Company tries and taps every lawful opportunity coming it‘s way and follows a focused approach and increases marketing efforts. All these have resulted in increased growth of the Company in the recent years. In the coming years, it shall strive hard to build a strong reputation for themselves and carve a niche for our products.

- International Markets?

The Company is continuously trying to build a large overseas business and revenue from export business accounts for a sizeable component of Company‘s total turnover. The Company is continuously tapping potentially new markets and exporting a wide range of products to these countries.

- THREATS

- Due to emergence of corona virus, API production has been hampered in China, which has impacted the Company‘s supply chain;

- Other low-cost countries such as China and Israel are affecting outsourcing demand for Indian pharmaceutical products;

- Entry of foreign players (well-equipped technology-based products) into the Indian market;

Drug Pricing: The domestic pharmaceutical industry is very much dependent on the government‘s Drug Pricing Policy. It is important for the Government to introduce free and fair competition rather than arbitrary drug control measures to decide prices of essential drugs.

This will ensure that Companies like us can manufacture and market all the vital life-saving drugs at economical prices; - Rising Costs and Availability of Materials;

The prices of many API‘s and intermediates have risen significantly due to restriction in production by various Chinese manufacturers. Other factors contributing to such price hike are rise in price of petroleum-based products, frequent shortages and general inflationary conditions.

All these adversely affect the production schedules and overall margins of our Company‘s products.

REPORT ON NEW FERMENTATION PLAT ESTABLISHED BY THE COMPANY

FERMENTATION PLANT PROGRESS & DEVELOPMENT REPORT

Fermentation-Based Antibiotics, Probiotics & Enzymes Manufacturing Division

Financial Year: 2025 26

1. Overview

Panchsheel Organics Ltd. has established a dedicated Fermentation-Based Manufacturing Division focused on the development, scale-up and commercial manufacturing of high-value fermentation-derived pharmaceutical APIs/intermediates, probiotics, enzymes and other specialty microbial products. The manufacturing platform encompasses the complete microbial production cycle, including:

Microbial strain development and preservation

Seed-train development

Upstream fermentation

Biomass and product recovery

Downstream processing

Purification and concentration

Drying and formulation

Quality control and product release

GMP documentation and complete batch traceability.

The Company is developing a flexible manufacturing platform capable of supporting multiple microbial products through campaign-based manufacturing.

2. R&D and Technology Development

The Companys R&D facility at Indore has successfully completed the development and pilot-scale scale-up of several important fermentation-based products. The major products developed include:

Antibiotics / APIs

Mupirocin

Bacitracin

Polymyxin

Fusidic Acid

Clavulanic Acid

Other selected fermentation-based pharmaceutical products

Probiotics

Bacillus-based probiotic products

Lactobacillus-based products

Other microbial probiotic products

Enzymes

Serratio Peptidase

Other specialty enzymes under development

The successful completion of R&D development and pilot-plant scale-up demonstrates the robustness, reproducibility and scalability of the developed manufacturing processes.

3. Product Portfolio

Segment	Representative Products	Applications
Antibiotics / APIs	Clavulanic Acid, Bacitracin, Nystatin, Fusidic Acid, Mupirocin, Polymyxin, Minocycline, etc.	Pharmaceutical
Probiotics	Bacillus spp., Lactobacillus spp., Saccharomyces spp.	Human, Animal Health & Aquaculture
Enzymes	Serratio Peptidase, Protease, Amylase, Lipase, Cellulase and Specialty Enzymes	Pharmaceutical, Food, Feed & Industrial
Specialty Fermentation Products	Organic Acids, Biopolymers and Microbial Metabolites	Food & Pharmaceutical

4. Scale-Up and Commercial Manufacturing

Following successful laboratory and pilot-scale development, the Company is progressing towards commercial-scale manufacturing at its Pithampur manufacturing facility.

Almost 60 percent of the work is completed till date, balance machinery procurement and plant development activities are currently in progress.

The facility is planned to be commissioned progressively, enabling the Company to commence large-scale commercial production of the developed products in next 4-5 months.

5. Strategic Growth Opportunities

The Fermentation Division is expected to provide a strong platform for future business growth through:

Commercialization of successfully developed R&D products

Expansion of fermentation manufacturing capacity

Addition of new antibiotics, probiotics and enzymes

Development of high-value specialty microbial products

Improvement in fermentation yields and process efficiency

Expansion into pharmaceutical, animal health, aquaculture, food and industrial markets

Development of domestic and export markets

Greater utilization of manufacturing infrastructure through multi-product campaign production.

6. Future Outlook

Panchsheel Organics Ltd. intends to continue investing in R&D, process optimization, fermentation technology, manufacturing infrastructure and product commercialization.

With the combination of R&D capability, pilot-scale experience, fermentation technology and planned commercial manufacturing infrastructure, the Fermentation Division is expected to become an important contributor to the Companys long-term growth and expansion.

a. RESULTS OF OPERATIONS:

The break-up of Revenue and Costs of the Company is as given below:

PARTICULARS	Financial year ended March 31, 2026	Financial year ended March 31, 2025
INCOME(A)
Sales & income from
Operations:
Domestic	1,05,63,75,701.18	1,05,79,68,286.75
Export	1,04,79,419.00	1,29,49,881.40
Total Sales	1,06,68,55,120.18	1,07,09,18,168.15
Less : Excise Duty	-	-
Other operating Income	9,70,729.96	8,66,200.96
Add: Other Income:	3,51,98,774.06	3,07,28,855.07
TOTAL INCOME	1,10,30,24,624.20	1,10,25,13,224.18
EXPENDITURE(B)
Operating Expenditure	79,15,65,079.21	83,32,15,460.30
Administrative and other expenditure	12,13,82,545.24	12,48,02, 769.75
Finance Charges	24,35,322.81	37,42,395.30
(Increase)/ Decrease in stocks	1,96,32,939.31	-6,21,79,684.00
Depreciation for the Year	2,33,40,011.62	2,19,62,435.34
TOTAL	95,83,55,898.19	92,15,43,376.69
Profit Before Tax	14,46,68,726.01	18,09,69,847.49
Less: Current tax	3,65,69,025.00	4,65,61,162.17
Excess or short income tax provision	-	-
Deferred Tax	-2,04,054.10	-35,36,357.29
Profit after Tax	10,83,03,755.11	13,79,45,042.61

(1) Total Income:

Our revenue has Increased from Rs 1,10,25,13,224.18 to Rs.1,10,30,24,624.20 as compared to previous year 2024-25. Sales in the domestic market have increased, however it has increased in the export market. The overall sales have however decreased.

(2) Operating Expenditure:

The operating expenditure has decreased from Rs. 83,32,15,460.30 to Rs. 79,15,65,079.21 as compared to previous financial year 2024-25.

(3)Administrative and other Expenditures:

The administrative expenses have decreased from Rs. 12,48,02,769.75 to Rs. 12,13,82,545.24 as compared to previous financial year 2024-25.

(3) Depreciation:

The Depreciation cost has increased from Rs. 2,19,62,435.34 in Financial Year 2024-25 to Rs. 2,33,40,011.62 current year.

(4) Net Profit:

Net profit for the financial year 2025-26 is Rs. 10,83,03,755.11

b. OTHER FACTORS:

(1) Known trends or uncertainties

The world economy has witnessed an unprecedented economic crisis causing severe recessionary trends in various countries, but Indian pharmaceutical industry remained less affected compared to other sectors.

(2) Future relationship between costs and revenues

The Company doesn‘t see substantial increase in labor cost or other costs related to the product, except that raw material prices may go up in the near future due to rise in commodity prices. However, any increase in raw material prices would be duly covered in the sales price of the product.

(3) Dependence on Single or few suppliers / Customers

The Customer base of the Company is very strong it does not deal with a single customer or supplier. The Company has a very cordial relationship with all the customers and suppliers with whom they have been dealing since a very long time.

(4) Significant developments subsequent to the last financial year

In the opinion of the Directors, there are no significant changes since the date of the last financial statements, which could materially affect the operations, and profitability of the Company.

TRANSACTION(S) IN WHICH THE MANAGEMENT IS INTERESTED IN THEIR PERSONAL CAPACITY

During the year, there are no materially significant related party transactions entered into with the management that may have potential conflict with the interest of the Company. For more details, refer Notes to the Financial Statements.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis Report describing the Company s objectives, projections, estimates and expectations, may be forward looking statements and are within the meaning of the applicable laws and regulations. Actual results might differ substantially or materially from those expressed and implied. Important developments that could affect the Company‘s operations include a downtrend in the international market, fall in onsite, offshore rate and significant changes in political and economic environment, environment standards, tax laws, litigations and labor relations.