Par Drugs & Chemicals Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENTS Industry Structure:

The Pharmaceutical Industry needs to be approached at both macro and micro levels, whether for domestic or global markets. Pharmaceutical Industry forms part of Pharmaceutical Sector at a macro level. Hence, broad picture of Pharmaceutical Sector should be at preface while analyzing the Pharmaceutical Industry. Pharmaceutical Sector comprises various industries, which in turn, have numerous sub-classes or products. One such major industry in the overall Pharmaceutical Sector is "Pharmaceutical Products Manufacturing Industry", which in turn encompasses Active Pharmaceutical Ingredient segment. Thus, the micro analysis of segments such as Active Pharmaceutical Ingredients should be analyzed in the light of "Pharmaceutical Products Manufacturing Industry" at large. An appropriate view on Active Pharmaceutical Ingredients calls for the overall economic outlook, performance and expectations of Pharmaceutical Sector, position of Pharmaceutical Products Manufacturing Industry and micro analysis thereof.

Active Pharmaceutical Ingredient (API) is the part of any drug product. Pharmaceutical drugs might be available in type of capsules or tablets yet their genuine components are a long way from homogenous. Active Pharmaceutical Ingredient (API) is known as that part of the chemical included in the drugs which treats the cause and that actually works on the condition. Contents in drugs is not static it may contain one or more API and according to the dosage or prescription it will differ from person to person. Pharmaceutical technologists are prevalently possessed with the creation of different dose structures, for example, tablets, pastilles or dragees. The enhancing access to healthcare with the fast penetration of technology and different advancements in the healthcare segment. The Indian bulk drug industry has progressed from being perceived as an industry manufacturing simple API molecules to becoming the preferred destination for high value and complex APIs. The industry currently ranks third globally, next only to China and Italy and is focussed on low cost operations whilst leveraging the availability of skilled manpower in the country. Significant investments in process research and innovation have generated value for the industry. The bulk drug industry is also dominated by MSMEs, which are the primary employment generators in the Indian pharmaceutical sector.

Developments:

While we have always known that each business stands uniquely apart in its thinking, objectives and resources, we believe the timing is opportune to run them independently. The year gone by is proof of our long-term approach to doing business whether from the point of view of strategy, operations or sustainability. After considerable thought, we believe that reorganizing our businesses as explained earlier is the most efficient and sustainable way to move to the next level and stay true to Par Drugs mission to enhance the value of our customers products by delivering best quality of raw materials and consistently improve quality and production standards for the betterment of our customers. and build a strong

relationship with all our customers, vendors and employees on the values of ethical and transparent working system.

It would be worthwhile to mention here that till two decades ago, the country has been producing most of the APIs required in the country and even exporting a major part of the same to Europe and the US. But, the high cost of production because of comparatively low scale of operations and higher input costs rendered the domestic API production economically unviable. Besides the price-related issues, the Indian governments recent policy intervention is praiseworthy given the ever deteriorating Sino-Indian border relations. If the ongoing border skirmishes between India and China in the Ladakh region reach a flashpoint and as a retaliatory measure China decides to stop export of APIs and other raw materials to India, the result would be disastrous for the country as the industry does not have any alternate sources to procure these basic raw materials. Stringent environmental regulations added fuel to the fire, forcing the pharma companies to turn to China which emerged as a producer of cheap APIs with huge capacities and lower cost of production. However, over-dependence on China for APIs has always been a thorn in the flesh of Indian drug manufacturers as the prices of APIs tend to go through the roof whenever there is any disruption in China which was evident in the first months of this year due to the Covid-19 outbreak there. The Covid-19 outbreak and the subsequent disruption in supply of active pharmaceutical ingredients from China to India has finally made the alarm bell ringing and has woken up the Indian government from its self imposed slumber on framing a conducive policy on APIs to end the countrys over-dependence on China for APIs. To make India self-reliant in APIs production, the Central government has recently approved.

The good news is that the entire product range in our product portfolio, were the products which required the raw materials which are 100% indigenous and we are not relying on any Import Raw Materials.

OPPORTUNITIES:

The major requirements of APIs in India are met by imports from other countries such as China, Italy, Germany, France, Malaysia, etc. This situation can be converted into an area of opportunity if the government provides adequate infrastructure facilities, subsidies and loans at low interest rates because then the captive market of APIs can be better developed to meet the requirements of the domestic manufacturers. Expanding of geographical markets and high growth of end user industries in respect of current situation of Covid-19 and regulatory easement of India can be helpful to reach next step towards the growth of the Company.

THREATS;

Company has business dealings in many countries. Each of these markets presents a different economic and political risk along with the ever present threat of natural disasters like current situation of Covid-19 pandemic. whereas A widespread global presence, with no overdependence on any one region or country, considerably insulates the Company from any uneventful developments in any particular market. Further, strong emphasis is given to regular tracking of the local developments to address these risks though, entry of global Players and technology disruptions still affected.

PRODUCT PERFORMANCE REVIEW

Company continues to operate only in one segment i.e. Active Pharma Ingredients ("APIs") and Fine Chemicals and there is no change in the nature of business of the company. The product Performance during the Financial Year 2019-20 as under.

OUTLOOK:

The Company continues to maintain its relatively stable and progressive growth outlook. The initiative taken by your Company for reducing overheads and finance costs, build a strong relationship with all our customers, vendors and employees on the values of ethical and transparent working system, improving the new standards of production process into our existing product lines which will optimize the production time without compromising on the quality, improving operating parameters and optimiz ing operating costs will enable the company to face challenges in coming times.

RISKS AND CONCERNS:

The risks are measured, estimated and controlled with the objective to mitigate adverse impact. Your companys fundamental approach to risk management includes to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. The Company has adopted a risk management policy which inter alia, sets out our approach towards risk assessment, risk management and risk monitoring, which is periodically reviewed by the Board. Pharmaceutical is among one of the highly regulated industries across the world. And rightly so as it deals with evolving human life. These regulation impact development, manufacturing, approval, marketing and distribution of products, while throwing new compliance challenges. A strong quality assurance mechanism and compliance monitoring network at your Company ensures strict compliance at every level. The Company earns its revenue in foreign exchange, thus exposing it to the volatility in the exchange rates. This can have an adverse effect on its earnings. The Company follows a conservative view which ensures protecting the desired exchange rate for sustaining the profitability.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control. All the transactions are properly authorized, recorded and reported to the Management. The Company is following all the applicable Accounting Standards for properly maintaining the books of accounts and reporting financial statements. The Management of the Company and internal auditor checks and verifies the internal control and monitors them in accordance with. Audit Committee of the Board reviews reports submitted by the independent internal auditors and monitors follow-up and corrective actions.

DISCUSSION OF FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial highlights with respect to operational performance:

Particulars 2019-2020 2018-2019 %

Change

Revenue from Operations
Sale of Products
Finished Goods Sold during the year:
1) Domestic 4,656 4,069 14%
2) Export 853 486 76%
3) Other Operating Revenue 76 77 -1%
4) Add: taxes 769 664
Less: Taxes (769) (664) 16%
Net Sale of Product (A) 5,585 4,632 21%
Other Income(B) 10 9 11%
Total Revenue from Operations (C)=(A)+(B) 5,595 4,641 21%

MATERIAL DEVELOPMENTS IN HUMAN RESOURCE AND INDUSTRIAL RELATIONS

To achieve company targets, plans and business goals by linking individual and team performance objectives to department business plans and evaluating an employees job - related attributes, behaviours and results, to develop core competencies reflecting the values and skills necessary for individual and organization success, to continually monitor employees progress and communicate any ongoing issues to assist the employee in reaching goals and aligning expected performance levels with Company goals and objectives, to develop people through regular constructive coaching and dialogue, to promote job satisfaction in a motivating environment. As on March 31, 2020, the Company had total 96 employees. We are used to take review the employees day to day performance and behaviour to develop their skill and give chance to do work in the sometime out of box area to develop themselves. Further, The industrial relations have remained harmonious & in developing stage throughout the year RATIO ANALYSIS:

Ratio Analysis 2019-20 2018-19 Variance

(%)

Reasons if variance is more than 25%
Debtors Turnover 4.52 5.44 -16.94% -
Inventory Turnover 19.15 10.79 77.51% Timely utilization of working capital money raised through public issue tends to increase the turnover
Interest Coverage Ratio 12.61 4.49 180.58% Accurate use of working capital money raised through public issue tends to increase Interest coverage
Current Ratio 2.23 1.14 96.12% Respectively Current ratio affected as effective utilization of IPO money.
Debt Equity Ratio (%) 14.80% 39.89% -62.90% On the same path debt to equity decreased
Operating Profit Margin (%) 25.58% 26.45% -3.27% -
Net Profit Margin (%) 10.73% 7.11% 50.97% Amount received through public issue used for payment of debt hence, interest cost of the company drastically reduce, as major reason to increase in profit margin.
Return on Net worth (%) 11.73% 8.65% 35.63% Return of net worth increased due to increasing of Net profit Margin and effective utilization of working capital money raised during the year.

Precautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objective, projections, estimates, expectations, etc. may be forward-looking statements. Actual results may differ materially from those expressed or implied due to various risks and uncertainties. Important factors that could make a difference to the Companys operations include economic and political condition in India and in the countries in which the Company operates, volatility in currency rates, changes in government regulations and policies, tax laws, statutes and other incidental factors. The Company does not undertake to update these statements.