Sakar Healthcare Ltd Management Discussions.

a. Industry Structure and Developments:

The Indian Pharmaceutical Industry is 3rd Largest in volume and 13th Largest in terms of value in the world and is expected to grow at a CAGR of 15.92%, according to a recent report by the Indian Brand Equity Foundation (IBEF) by 2020. Branded Generics are expected to continue their dominance in the Indian Market, considering the various therapeutic categories they cover and the increase in population.

b. Opportunities and Threats (SWOT Analysis):

STRENGTHS:

Experienced Management Team (Collective Domain Experience):

Our Company has experienced diverse management team comprising excellent technical as well as business management skills. Over years we have delivered tremendous customer satisfaction through customization under the leadership of our senior management. Management team is well versed in functions like regulatory affairs, quality assurance, manufacturing, quality control, supply chain management, business development, sales and marketing, Human Resources and finance.

State of Art Manufacturing Facilities (WHO & Overseas Approvals):

Our Company has manufacturing facilities at Changodar, Ahmedabad, Gujarat which is built in accordance with the WHOs CGMP guidelines. Our company presently manufactures multiple formulations under various therapeutic segments and it is also multi adaptable. Our Company believes that its manufacturing facilities which have been equipped with latest technology and machineries enable it to lower overall production costs, improve process efficiencies and produce high quality products exported as per the required standards of various countries.

Modernized Technology (Lyophiliser):

Currently company has got techno-rich through inclusion of TOFFLON, make Lyophiliser with auto loading & unloading with ORABS. This updated freeze drier helps improving stability and hence efficacy of the products. The process of registering lyophilized products in overseas markets has been initiated, with commercialization from F.Y. 2017-18.

Wide Therapautic Segment (22 Categories):

We manufacture a wide range of products in the formulation segment encompassing Oral Solids, Oral Liquids, liquid / lyophilized / dry powder injections. Currently Company manufactures products covering 22 therapeutic categories which include: Antacid, Antimalerial, Anticoagulant, Laxative, Anthelmintic, Bronchodilator, Anaesthetic, Antidepressant, Sedative, Adrenergic, Anti-infective, Diuretics, Oxytocic, Analgesic, Antiemetic, Antipsychotic, Antifungal, PPI, Anticonvulsant, Anti-inflammatory, Antihistamine, Multi vitamins.

Strong Client Relationship (Over Decades):

Over a period of time, our Company has developed relationships including customers from leading Indian as well as multinational pharmaceutical companies. Our top five customers who have remained with us for over 4 years have accounted for 40.07% of our Companys net sales for the year ended March 31, 2019. These relationships have been further strengthened on account of recurring business from such existing customers. We believe our operating experience and relationship with our customers has helped us in getting further orders and move higher in the value chain with improvement in our results of operations.

Accreditation & World Wide Recognition:

Our Company has 243 product registrations in various countries. Registered Products are dispatched currently to these countries and distributed through channel partners. The manufacturing unit has been accreditated by regulatory authorities of 14 countries which includes Uganda, Kenya, Yemen, Ethiopia, Congo, Zimbabwe, Nigeria, Malawi, Philippines, Peru, Vietnam, Cote DIvoire.

WEAKNESS:

Few Local players at times disturb regular business flow through offering of notional benefits to the customers.

OPPORTUNITIES:

Migration to the Main Board:

Emerging Bigger through migration from SME Platform to Main Board at National Stock Exchange of India Limited from 11th April 2019. This Opportunity has enhanced companys credibility and provided encouragement for growth.

DSIR Approval:

Sakar in-house Research & Development unit has been recognised by Department of Scientific & Industrial Research operating as a part of Ministry of Science & Technology, India. This recognition is definitely an encouraging and motivational outcome of technical capabilities of Sakar in field of research works.

Expansion to Oncology:

Sakar Healthcare Limited has initiated the process of business expansion with anti-cancer (oncology) drugs. The project has been perceived and articulated to get operational by 2021. This Opportunity has helped Sakar to proceed with business expansion to remain competitive and ahead in the market.

THREATS:

The organisation constantly evaluates the probable threats due to changes in the regulatory norms, both in domestic and international arena, as well as the effects of restructuring of pricing regimen at any point of time. Both these factors can adversely affect the business revenue.

In addition declining phase of any product in its life-cycle may stagnate growth for the product business and hence the product basket has been made flexible across countries with multiple brands to nullify such effects, at any point of time.

c. Segment wise Performance:

The Company is operating in single segment. Hence, there is no need of reporting segment wise performance.

d. Recent Trend and Future Outlook:

India is now among the top 5 pharmaceutical emerging markets. This has given the necessary structure to the credibility of India make products; particularly when quality matters the most. Keeping the manufacturing unit and operations compliant to regulatory market requirements, company has ensured the standards for quality and presentation of the products which can draw attention internationally. Recent inclusion of lyophiliser has made it feasible to manufacture class products with advanced technology and enhanced stability. The strategic decision for future would be to extend the range of products with wider use across multiple countries, revisiting products with higher returns and marketing of lyophilized products for differentiation and growth.

e. Risks and Concerns:

There are a set of risk factors which have been evaluated. This includes competition, pricing and margins, investment rationale on products, country of export as all of these contribute to key decision making. A balance in contribution from countries, products and key accounts has thereby been assessed, with proper adherence to ever changing regulatory and environment, health and safety norms.

f. Internal Control Systems and their Adequacy:

The Company has adequate systems of Internal Controls commensurate with its size and operations to ensure orderly and efficient conduct of business. These controls ensure safeguarding of assets, reduction and detection of fraud and error, adequacy and completeness of the accounting records and timely preparation of reliable financial information.

g. Financial Performance with respect to Operational Performance:

The financial performance of the Company for the year 2018-19 will be described in the Directors Report.

h. Material Developments in Human Resources and Industrial Relations Front:

Your Company has undertaken certain employees development initiatives, which have very positive impact on the morale and team spirit of the employees. The Company has continued to give special attention to Human Resources/Industrial Relations development. Industrial relations remained cordial throughout the year. We are also concentrating on building up of our Human Resource Capital especially in our Sales Team by undertaking various R& D activities. We are also creating adequate support systems at our HO which will provide requisite knowledge and data to our sales team. These activities will lead to a more informed and motivated sales team.

i. Key Financial Ratios:

Key Ratios FY 2018-19 FY 2017-18 Change % Explanation, if required
Debtors Turnover (days) 54 Days 56 Days 3% The average receivable recovery days have been reduced by 2 days.
Inventory Turnover (days) 55 Days 71 Days 22% The average inventory holding period has come down by 16 days.
Interest Coverage Ratio 6.26 3.36 86% The profit available to serve the interest payment has improved by 86% due to decrease in external borrowings from financial institutions and increase in profitability.
Current Ratio 1.86 2.14 13% The current ratio has reduced compared to previous year due to increase in advances paid in respect of expansion of commercial operations.
Debt Equity Ratio (long term) 0.08 0.19 57% The debt-equity ratio has improved due to decrease in external borrowings from financial institutions.
Operating Profit Margin (%) 16.94% 16.38% 3% The operating profit has improved compared to previous year by 3.42%.
Net Profit Margin (%) 10.27% 7.18% 43% The net-profit has improved compared to previous year by 43.03%
Return on Networth 9.78% 7.41% 32% The return on net-worth has improved compared to previous year by 31.98%

j. Cautionary Statement:

Statement in this Management Discussion and Analysis Report, describing the Companys objectives, estimates and expectations may constitute ‘Forward Looking Statements within the meaning of applicable laws or regulations. Actual results might differ materially from those either expressed or implied.