Quest Laboratories Ltd Management Discussions

INTRODUCTION:

Our Company, Quest Laboratories Limited is engaged in the business of manufacturing of pharmaceutical formulations across a broad spectrum, including antibiotics, antimalarials, antispasmodics, anti-inflammatories, antiemetics, respiratory medications, diabetes treatments, antidepressants, and more. These formulations fall under the trademark Quest Laboratories Limited. The company produces a variety of products, comprising ethical drugs, generic drugs, and over the-counter drugs (OTC). These products are available in various forms such as tablets, liquid orals, oral dry powders, oral powders (ORS), ointments, and external liquids. This comprehensive approach allows our Company to address a wide range of medical needs and preferences among patients.

INDUSTRY STRUCTURE AND DEVELOPMENT

The Indian pharmaceutical industry continues to remain one of the significant and rapidly evolving sectors of the Indian economy. India has established a strong position in the global pharmaceutical industry, particularly in generic medicines, formulations and contract manufacturing. The industry is supported by a well-developed manufacturing ecosystem, skilled manpower, increasing healthcare expenditure and growing demand for affordable medicines.

During the financial year 2025-26, the pharmaceutical sector continued to witness opportunities arising from increasing healthcare awareness, expansion of healthcare infrastructure, growing demand for quality medicines and increasing acceptance of Indian pharmaceutical products in domestic as well as international markets.

The industry, however, continued to face challenges relating to regulatory compliance, pricing pressures, raw material costs, quality standards, competition, foreign exchange fluctuations and changing regulatory requirements.

The Company continues to monitor developments in the pharmaceutical sector and remains focused on maintaining quality standards, operational efficiency and sustainable business growth.

OPPORTUNITY

The pharmaceutical sector offers several opportunities for growth, including:

• increasing healthcare awareness;

• growing demand for pharmaceutical products;

• expansion of healthcare infrastructure;

• increasing demand for quality and affordable medicines;

• opportunities for product diversification;

• expansion into new geographical markets; and

• increasing focus on preventive and affordable healthcare.

The Company will continue to evaluate such opportunities based on commercial viability, available resources and regulatory requirements.

Global trade wars can pose a challenge to international trade impacting the company. Competition from new players within the country poses a threat.

SEGMENTWISE PERFORMANCE

The Company operates in a single segment of Drugs and Chemicals, which is the primary reportable segment, and the same is given in the notes to the financial statements.

FUTURE OUTLOOK

The integration of digital technologies in pharmaceutical manufacturing and supply chain operations is expected to further enhance efficiency, traceability, and product quality. Coupled with increasing healthcare awareness and rising disease burden, the industry is well-positioned to meet the growing demand for high-quality, affordable medicines. Regulatory frameworks are also expected to evolve in alignment with industry advancements, emphasizing patient safety and supporting sustainable growth.

THREAT, RISK AND CONCERNS

The pharmaceutical industry is subject to various business and operational risks. The principal risks and concerns include:

Raw Material Risk

Fluctuations in the prices and availability of active pharmaceutical ingredients, packing materials and other inputs may affect operating costs and margins.

Competition Risk

The Company operates in a competitive industry with the presence of domestic and international players. Increased competition may impact pricing and market share.

Quality Risk

Product quality and compliance with applicable pharmaceutical standards are critical to the Companys operations. Any failure to maintain required quality standards may adversely affect business operations and reputation.

Market Risk

Changes in market demand, customer preferences and economic conditions may affect sales and profitability.

Financial Risk

The Company is exposed to normal business risks relating to credit, liquidity, interest rates and working capital requirements.

The Company regularly monitors these risks and takes appropriate measures to mitigate their potential impa

The Company had adopted Risk Management Policy to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business..

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place adequate internal financial controls with reference to all its operations and such systems are continuously reviewed and upgraded. All the transactions are properly authorized and recorded. The Company is following all the applicable Accounting Standards for properly maintaining the books of accounts and reporting financial statements. The Internal Audit is conducted by outside auditing firms which evaluate the functioning and quality of internal controls and check; and provides assurance of its adequacy and effectiveness. The Internal Audit Reports are actively reviews by the Audit Committee and adequate remedial measures, if any, are taken. The Internal Audit Reports are also reviews by the Board of Directors periodically. During the year, no reportable material weaknesses in the design or operations were observed.

FINANCIAL PERFORMANCE

(Rs. in Lakhs)

Particulars		2025-26	2024-25
Income
Revenue from Operations		11,182.18	10,396.58
Other Income		239.44	424.38
Total Revenue		11,436.23	10,820.97
Less: Expenses other than Finance costand Depreciation		9,357.75	8,798.40
Profit before finance cost, depreciation & amortization, and tax		2,078.48	2,022.58
Less: Finance Costs		185.38	63.60
Less: Depreciation and amortization expenses		82.45	90.55
Profit before Tax		1,810.65	1,868.42
Less: Tax Expenses
Current Tax		349.83	457.18
Deferred Tax (Assets)/Liabilities	40.92		(54.60]
Profit for the year	1,487.14		1,371.24
Other Comprehensive Income	-		-
Total Comprehensive Income	1,487.14		1,371.24
Earning per equity share
Basic	9.07		8.37
Diluted	9.07		8.37

During FY 2025-26, Revenue from Operations increased to Rs.11,182.18 lakh from tl0,396.58 lakh, representing growth of approximately 7.56%.

Total Revenue increased from Rs.10,820.97 lakh to Rs.11,436.23 lakh.Profit before Finance Cost, Depreciation and Tax increased from Rs.2,022.58 lakh to Rs.2,078.48 lakh. Profit before Tax stood at Rs.1,810.65 lakh compared with Rs.1,868.42 lakh in the previous year. The Company reported Profit after Tax of Rs. 1,487.14 lakh, as against

Rs. 1,371.24

Basic and Diluted EPS increased from Rs. 8.37 to Rs. 9.07 during the year.

Overall, the Company maintained growth in operating revenue and reported an improvement in Profit after Tax during FY 2025-26

KEY FINANCIAL RATIOS AND PERFORMANCE

Ratio	2025-26	2024-25	% Variance	Explanation in case change is more than 25%, as compared to previous year
Inventory Turnover	3.73	5.55	-32.78%	-
Current Ratio	6.83	2.88	137.31%	-
Debt Equity Ratio	0.08	0.37	-77.94%	variation in the Debt- Equity Ratio is primarily due to the repayment of the Overdraft (OD) limit during the year.
Debtors Turnover ratio	3.38	3.82	-11.55 %	-
Net Profit Ratio	0.13	0.13	0.83%	-
Return on Capital employed	0.21	0.24	-12.73%
EPS	9.07	8.28	1.74%	-

MATERAL DEVELOPMENT IN HUMAN RESOURCE AND INDUSTRIAL RELATIONS

Human resources continue to be an important component of the Companys operations.

The Company recognises that skilled, motivated and committed employees are essential for sustainable business performance. The Company seeks to maintain a professional working environment and encourages employees to contribute towards operational efficiency and organisational growth.

The Company continues to focus on employee development, workplace discipline, safety and compliance with applicable labour laws.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, expectations, estimates and predictions may constitute forward-looking statements within the meaning of applicable securities laws and regulations.

Actual results may differ materially from those expressed or implied due to various factors, including changes in economic conditions, government policies, regulatory requirements, competition, demand, raw material prices, financial markets and other risks and uncertainties.

The Company assumes no responsibility for publicly updating or revising any forward-looking statements, whether as a result of new information, future events or otherwise