Par Drugs & Chemicals Ltd Management Discussions

Industry Structure and Operating Environment

The Company operates within a dynamic environment shaped by competitive intensity, pricing movements, input-cost variations, regulatory requirements and changing customer expectations. These factors can influence operating margins and the return profile associated with incremental capital deployment.

During FY2025-26, the Company continued to evaluate these dynamics closely. While the business remained profitable, management recognises the importance of assessing performance not only through revenue and absolute profitability but also through the sustainability of margins, capital requirements, associated risks and potential returns.

Financial Performance

The audited standalone financial results for the year ended March 31, 2026 were reviewed by the Audit Committee and approved by the Board of Directors at its meeting held on May 14, 2026. The statutory auditors have expressed an unmodified opinion on the financial results. A summary is set out below:

Revenue from operations grew modestly during the year, while profitability reflected a moderation in margins attributable to input-cost and pricing dynamics. Other income for the year stood at Rs4.00 crore as against Rs2.15 crore in the previous year.

The Companys financial position as at March 31, 2026 remained strong. equity share capital stood at Rs12.30 crore and other equity at Rs99.68 crore, resulting in total shareholders equity of approximately Rs111.98 crore. The Company remained debt-free, with no current or non-current borrowings as at the year-end. The Company had liquidity of approximately Rs68.98 crore, comprising cash and cash equivalents of Rs41.84 crore and non-current investments of Rs27.14 crore. The Company generated net cash of approximately Rs16.43 crore from operating activities during the year.

The financial position provides the Company with a significant degree of financial flexibility. The management recognises the importance of disciplined capital allocation and will continue to evaluate the possibilities available to the Company having regard to risk, return, liquidity, regulatory requirements and stakeholder interests. Any material capital allocation decision will be considered through the appropriate governance processes and in accordance with applicable regulatory requirements.

Product wise performance:

Review of Sales and Product Portfolio during FY 25-26 are as under:

Significant changes in key financial ratios

Discussion on financial performance with respect to operational performance.

The Companys financial performance during FY 2025-26 remained resilient despite a competitive operating environment and continued pressure on margins.

Operationally, the Company continued to focus on maintaining product quality, customer relationships, production efficiency and prudent working-capital management. The improvement in debtor and inventory turnover ratios indicates better management of receivables and inventory during the year.

Overall, the Companys finance performance reflects modest growth in revenue, sustained profitability and a strong liquidity position notwithstanding the moderation in operating margins. Going forward, management will continue to focus on strengthening sales and marketing, improving operational efficiency, managing costs, maintaining customer relationships and deploying capital prudently, while taking into consideration prevailing market conditions, associated risks and potential returns.

Segment Information

The Companys operations constitute a single business segment in terms of Ind AS 108 on Operating Segments. Accordingly, there are no separate reportable segments. The product-wise performance of the Companys API and Fine Chemicals businesses has been stated above.

Opportunities and Threats

Opportunities

The Company operates in sectors supported by established customer relationships, manufacturing capabilities and accumulated industry experience. The management believes that the Companys financial strength, debt-free position and healthy liquidity provide a degree of flexibility to evaluate opportunities for sustainable growth and efficient deployment of capital.

Key opportunities include:

- Operational Optimisation · Improving manufacturing efficiency, productivity and cost management to support sustainable margins.

- Customer and Market Development · Strengthening existing customer relationships and exploring opportunities to expand the Companys presence across existing and potential markets.

- Product and Business Diversification · Evaluating opportunities to broaden the Companys product portfolio and business activities, subject to commercial viability and applicable regulatory requirements.

- Prudent Capital Deployment · The Companys debt-free balance sheet and healthy liquidity provide flexibility to evaluate investments and other opportunities based on risk, capital requirements and potential returns.

- Long-Term Value Creation · Continued focus on operational efficiency, financial discipline, governance and responsible capital allocation can support sustainable value creation for stakeholders.

Threats

The Companys performance may be influenced by factors beyond its direct control. Key risks and challenges include:

Competitive Pressure — Increasing competition and pricing pressure may affect revenue growth and operating margins.

Input Cost Volatility — Changes in the prices and availability of key raw materials, utilities and other inputs may impact profitability.

Market and Demand Conditions — Changes in customer requirements, industry demand and supply-demand dynamics may affect volumes and margins.

Regulatory Environment — Changes in applicable laws, regulations, regulatory requirements or directions of competent authorities may affect the Companys operations and strategic alternatives.

Execution and Capital Allocation Risks — New business initiatives, diversification or deployment of capital may involve execution risks and may not generate the anticipated returns.

Macroeconomic and Geopolitical Factors — Broader economic conditions, trade policies, foreign exchange movements and geopolitical developments may influence market conditions and business performance.

Management Approach

The Company continues to adopt a measured and disciplined approach towards its operations, opportunities and risks. Management recognises that the operating environment remains dynamic and may be influenced by competitive conditions, pricing, input costs, customer requirements, regulatory developments and broader market factors.

Management will continue to evaluate the possibilities available to the Company with due regard to their commercial rationale, associated risks, capital requirements, resource utilisation and potential returns. Such evaluation is an ongoing management process and does not represent a commitment to, or indication of, any particular future course of action.

The Company remains focused on maintaining operational and financial discipline, efficient utilisation of resources, prudent capital allocation and appropriate risk management. At the same time, the Company will continue to uphold its governance and compliance responsibilities and conduct its affairs in accordance with applicable laws, regulations and directions of the competent authorities.

With respect to the regulatory developments concerning the proposed transaction, the Company respects the ongoing regulatory process and remains committed to extending the necessary cooperation to the competent authorities and complying with the directions issued from time to time. In view of the ongoing nature of the regulatory process, management does not consider it appropriate to anticipate or indicate any particular outcome.

Any matter requiring consideration will be evaluated objectively, at the appropriate time, through the applicable governance processes and within the prevailing legal and regulatory framework, having regard to the interests of the Company and its stakeholders.

The Company remains committed to evaluating these opportunities and risks on an ongoing basis. Management will continue to adopt a measured approach, balancing growth opportunities with financial discipline, risk assessment, regulatory compliance and the efficient utilisation of capital.

Regulatory Proceedings

The Company is mindful of the regulatory developments concerning a proposed transaction of the Company, broadly described in the section titled ‘Regulatory Developments During the Year. The Company respects the regulatory process and remains committed to extending the necessary cooperation to the regulatory authorities and complying with applicable laws, regulations and directions. Given the ongoing nature of the regulatory process, the Company considers it appropriate not to anticipate its outcome. Any matter requiring consideration will be approached through the appropriate governance and regulatory processes.

Risks and Concerns

- Market and Margin Risk · competitive intensity, pricing movements and input-cost variations can influence operating margins and returns.

- Customer and Demand Risk · changing customer requirements and supply-demand conditions can affect volumes and realisations.

- Regulatory and Compliance Risk · the Company operates within regulatory frameworks applicable to its operations and to it as a listed entity; the regulatory proceedings described elsewhere in this report remain a relevant consideration, and their eventual outcome cannot be anticipated.

- Concentration Risk · the Company operates in a single reportable business segment.

Management monitors these risks on an ongoing basis and addresses them through operational discipline, financial prudence and adherence to governance and compliance processes.

Internal Control Systems and Their Adequacy

The Company has internal control systems commensurate with its size and the nature of its operations, directed at safeguarding assets, ensuring the reliability of financial reporting and ensuring compliance with applicable laws and regulations. The Audit Committee periodically reviews the adequacy and effectiveness of internal controls.

Human Resources

The Company continued to maintain cordial industrial relations during the year. Attention was given to training, safety and employee well-being across the organisation.

Outlook

The operating environment continues to evolve, requiring businesses to remain attentive to market conditions, competitive dynamics, input costs, margins and capital efficiency.

Against this backdrop, management will continue to evaluate the environment and the possibilities available to the Company, taking into consideration the associated opportunities, risks, capital requirements and potential returns.

The Company remains mindful of the regulatory developments concerning it and will continue to comply with applicable laws, regulations and directions of the competent authorities and extend the necessary cooperation in connection with the regulatory process.

Given the circumstances, management does not consider it appropriate to anticipate any particular strategic outcome. Any proposal or course of action that may require consideration will be evaluated at the appropriate time, through the applicable governance processes and subject to the prevailing regulatory framework.

Cautionary Statement

Statements in this Annual Report describing the Companys position, performance and perceptions are based on information available as on the date of this report and on the current operating environment. This report does not contain, and should not be read as containing, any commitment, assurance, projection or indication regarding any future course of action of the Company, including in relation to its existing operations, the proposed transaction or any other business opportunity. References to the evaluation of possibilities are descriptions of an ongoing management process and do not indicate any particular outcome. Matters concerning the regulatory proceedings described in this report remain subject to the ongoing regulatory process, and nothing contained herein should be construed as anticipating or commenting upon the outcome of such proceedings.

Actual developments may differ materially from those expressed or implied, on account of factors beyond the Companys control, including economic conditions, market dynamics, input costs, and regulatory and legal developments.