Parmax Pharma Ltd Management Discussions.

To

The Shareholders

Global Pharmaceuticals Market

Global Economy:

Global economy has recorded its weakest pace in 2019, since the global financial crisis a decade ago. Rising trade barriers and associated uncertainty weighed on business sentiment globally. In advanced economies and China, these developments magnified cyclical and structural slowdowns already under way. Further pressures came from country specific weakness in large emerging market economies such as India, Brazil, Mexico and Russia. Worsening macroeconomic stress related to tighter financial conditions (Argentina), geopolitical tensions (Iran), and social unrest (Venezuela, Libya and Yemen) rounded out the difficult picture. The global economic growth is estimated to be 2.9% in 2019 down from 3.6% in 2018. Growth in advanced economies decreased from 2.2% in 2018 to 1.7% in 2019 and emerging economies decreased from 4.5% in 2018 to 3.7% in 2019. In the beginning of 2020, the COVID-19 pandemic has inflicted severe impact on economic activity with the result that the global economy is projected to contract sharply by 3% in 2020. Due to exponential growth of this pandemic, more than 150 countries had put in place regional or complete lockdown to contain the virus. Workplace closures has resulted to supply chains disruptions, lower productivity, decreasing demand, income declines and heightened uncertainty leading to further business closures and job losses. It has curtailed mobility affecting sectors that rely on social interactions such as travel, hospitality, entertainment and tourism. There is a multi-layered crisis with de facto shutdown of significant portion of the economy. By the end of March, commodity prices fell sharply and equity markets have sold off dramatically. Large fraction of countries is expected to experience negative per capita income growth in 2020. Growth in the advanced economies is projected at -6.1% in 2020 while in emerging economies, the growth is projected at -1% in 2020. Because of the economic fallout, various governments are taking substantial targeted fiscal, monetary and financial market measures to normalize economic activity. Central banks of various countries have already taken significant actions to have rate cuts, provide monetary stimulus and liquidity support to reduce systemic stress. These actions have contributed to ensure that the economy is better placed to recover. There remains considerable uncertainty around the forecast, the pandemic itself, its macroeconomic fallout and the associated stresses in financial and commodity markets. However, assuming that pandemic to fade in the second half of 2020, global growth is expected to rebound to 5.8% in 2021 reflecting the normalization of economic activity from very low levels.

Industry Review:

Our analysis shows that the Indian pharmaceuticals market will grow to USD 55 billion by 2020 driven by a steady increase in affordability and a step jump in market access. At the projected scale, this market will be comparable to all developed markets other than the US, Japan and China. Even more impressive will be its level of penetration. In terms of volumes, India will be at the top, a close second only to the US market. This combination of value and volume provides interesting opportunities for upgrading therapy and treatment levels. Pricing controls and an economic slowdown can wean away investments and significantly depress the market, allowing it to reach only USD 35 billion by 2020.

On the other hand, the market has the potential to reach USD 70 billion provided industry puts in super normal efforts behind the five emerging opportunities, and enhances access and acceptability in general. The mix of therapies will continue to gradually move in favour of specialty and super-specialty therapies. Notwithstanding this shift, mass therapies1 will constitute half the market in 2020. Metro and Tier-I markets2 will make significant contributions to growth, driven by rapid urbanization and greater economic development. Rural markets will grow the fastest driven by step-up from current poor levels of penetration. On balance, Tier-II markets will get marginally squeezed out. The hospital segment will increase its share and influence, growing to 25 per cent of the market in 2020, from the current 13 per cent. Finally, the five emerging opportunities will grow much faster than the market, and will have the potential to become a USD 25 billion market by 2020.

Over the past 5 years, the distinction between local players and multinational companies has increasingly blurred. We believe that if market leadership is the aspiration, the implications and imperatives will be common for both groups of players. They will need to strengthen three sets of commercial capabilities: marketing excellence, sales force excellence, and commercial operations. In addition, players will need to put in place two enablers: strengthen the organization to be able to sustain performance and manage rising complexity; and collaborate with stakeholders within and outside the industry to drive access and shape the market. The government will need to make investments to expand access to healthcare, while ensuring that industry remains viable and competitive. (Source: McKinsey & Company Analysis)

Internal Control System:

The Company has proper and adequate system of internal control, commensurate with the size and nature of its business. Regular Internal Audits and Checks carried out and also management reviews the internal control system and procedures to ensure orderly and efficient conduct of business and to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that transactions are authorized, recorded and reported correctly. The Company has well defined internal control system. The Company takes abundant care to design, review and monitor the working of internal control system. Internal audit in the organization is an independent appraisal activity and it measures the efficiency, adequacy and effectiveness of other controls in the organization. The Audit Committee, comprising Independent Directors, regularly reviews audit plans, significant audit findings, adequacy of internal controls, and compliance with Accounting Standards, among others.

Human Resources:

The Company believes that its people are its most important asset and thus continuously strives to scale up its employee engagement through well structured systems and a visionary HR philosophy. The Company continues to lays emphasis on building and sustaining the excellent organization climate based on human performance. Performance management is the key word for the Company. Pursuit of proactive policies for industrial relations has resulted in a peaceful and harmonious situation in the Company. We are highly focused on developing our employees to perform with the same excellence for the challenges and huge business opportunities that are envisaged in future. The Company firmly believes that intellectual capital and human resources is the backbone of the Company s success.

CAVEAT

Shareholders are cautioned that certain data and information external to the Company is included in this section. Though these data and information are based on sources believed to be reliable, no representation is made on their accuracy or comprehensiveness. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this section, consequent to new information, future events, or otherwise.

RISK MANAGEMENT:

A. Risk Management Committee

The Company has not constituted any risk management committee. However the Board as and when required reviews the Risk Management Policy.

B. Major risks affecting the existence of the company

Business Risk

• Operating Environment

• Ownership Structure

• Competitive position

• Management, Systems and Strategy, governance structure

Financial Risk

• Asset Quality

• Liquidity

• Profitability

• Capital Adequacy

C. Steps taken to mitigate the risks:

Company has framed formal risk management policy. However Board of directors are constantly trying to avoid the risks by way of planning, developing strategies to remain in the market, reviewing government policies and procedures, and doing marketing activities to remain in the market.

Corporate Social Responsibility:

This clause is not applicable.

Directors Responsibility Statement:

Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, state the following:

That in the preparation of the annual financial statements for the year ended March 31, 2020, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; That such accounting policies as mentioned in Notes to the Financial Statements have been selected and applied consistently and judgement and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2020 and of the profit of the Company for the year ended on that date; That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; That the annual financial statements have been prepared on a going concern basis. That proper internal financial controls were in place and that the financial controls were adequate and were operating effectively. That systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

Key Managerial Personnel:

Mr. Alkesh M. Gopani, Managing Director (Executive), Mr. Alkesh R. Gosalia, Managing Director (Finance and Operations), Mr. Umang Gosalia, Whole-time Director, Mr. Keyur D Vora, Chief Financial Officer and CS Yash Vora, Company Secretary are the Key Managerial Personnel of the Company.

Vigil Mechanism/Whistle Blower Policy:

Your Company is committed to highest standards of ethical, moral and legal business conduct. Accordingly, the Board of Directors have formulated a Whistle Blower Policy which is in compliance with the provisions of Section 177(10) of the Companies Act, 2013 and Regulation 22 of the SEBI (LODR), Regulations, 2015. It is framed for employees and Directors of the company to report to the management instances of unethical behavior, actual or suspected fraud or violation of the company s code of conduct. This policy enables the employees or directors of Company to approach the Chairman of Audit Committee.

Further, the whistle blower policy is available at the website of our company at http://www.parmaxpharma.com/policies.php.

Change in Nature of Business:

There is no material change in the business of the Company during the year under review.

Acknowledgment:

The Directors wish to place on record their appreciation to the devoted services of the workers, staff and the officers who largely contributed to the efficient management of the Company in the difficult times. The Directors place on record their appreciation for the continued support of the shareholders of the Company. The Directors also take this opportunity to express their grateful appreciation for assistance and cooperation received from the bankers, vendors and stakeholders including financial institutions, Central and State Government authorities, other business associates, who have extended their valuable sustained support and encouragement during the year under review.