sequent scien Management discussions

Macro-Economic Overview

The global economy grew by 3.4% as estimated by the United Nations World Economic Situation and Prospects 2022, following a tumultuous 2020 where the world witnessed wide-scale economic contraction. The global economy started showing signs of recovery and returning to an estimated 5.5% growth in 2021. Global GDP in the first quarter was stronger, reflecting continued adaptation of economic activity to the pandemic. Momentum weakened in the second quarter, weighed down by widespread outbreaks across several emerging markets and developing economies (IMF World Economic Outlook 2021).

Advanced and emerging economies attained substantial vaccination coverage for their populations, enabling the economies to come out of their lockdowns. Sizable fiscal support helped cushion some of the adverse economic impacts of the pandemic. However, several challenges in the macro-economic environment, such as commodity price inflation, subdued employment growth and rising debt levels confronted the global economy as well. Global energy prices surged in the second half of 2021, particularly for natural gas and coal, owing to recovering demand but constrained supplies. Global inflation increased to 5.2% in 2021, majorly due to persistent supply chain bottlenecks and rising freight costs across the globe, impacting global production and trade, pushing up prices of commodities and goods further. Food prices shot up significantly in 2021, reaching their highest levels in a decade, with sharp increases in prices of inputs such as vegetable oils, cereals, and dairy prices. The subsequent Covid-19 waves during the year continued to impact consumer demand, albeit to a limited degree when compared to the initial period of the pandemic. Rising geo-political tensions amid the Russia-Ukraine conflict meant global economic recovery was to remain uncertain in the near term, with supply side strains, increasing inflation, financial stress, as well as climate-related changes.

Animal Healthcare

Fundamentally, the animal healthcare sector is categorised across three segments - pharmaceuticals, veterinary services, and medical devices. The industry caters to the needs of production animals, including cattle, pigs, poultry, sheep, and companion animals such as dogs, cats, horses, among others. North America continues to be the largest segment for animal healthcare, with major corporations collaborating to improve their research and development skills and assure high-quality standards.

According to a Mordor Intelligence report, the European veterinary healthcare market was valued at $8.3 Billion in 2021 and is expected to grow at a CAGR of 6.61% between 2022 and 2027. Majorly, the growth in the European veterinary market can be attributed to rising animal adoption in European countries, coupled with increasing initiatives by various governments and improved animal healthcare. According to a Markets and Markets report, the APAC animal health market is projected to reach a $22.1 Billion by 2025 from $15.6 Billion in 2020, growing at a CAGR of 7.2% during the forecast period. Rapid rise in livestock population, increasing awareness on animal health, and rising frequency of animal disease outbreaks are expected to drive the growth of the APAC animal health market. Restrictions on the use of parasiticides in food-producing animals, shift toward vegetarian diets, and the rising cost of storage of animal vaccines may pose challenges to the prospects.

Opportunities

The global animal healthcare market was estimated at $ 53 Billion (Source: https://www.globenewswire.com/news-release/2022/04/13/2422121/0/en/Animal-Healthcare-Market-Size-to-Hit-US-76-82-Billion-by-2030.html) in 2021 and is forecasted to grow at a CAGR of ~5% between 2022 and 2027. Substantial rise in demand for animal protein and increase in prevalence of food-borne and zoonotic diseases globally are driving the growth of this industry, promoting companies in undertaking consistent efforts to control pathogen contamination risks by producing quality pharmaceutical products.

Production Animals

Production animal as a segment was valued at $33 Billion in 2021, and is estimated to reach $39 Billion by 2027, driven by increasing consumption of milk, meat, and other animal by-products. The segment has always been a shining performer in the animal health market, with a revenue share of ~62% in 2021, led by increasing food safety concerns among consumers and government healthcare organisations. Policymakers worldwide are striving to attain food security by boosting large-scale food production and hence, greater rearing of livestock.

Companion Animals

Growing household income and discretionary spending contributed to the soaring pet culture. Factors like increased urbanisation, nuclear families, families with fewer or no children are creating a need for social support. With rising companion animal ownership, pet parents are also becoming aware consumers of pet nutrition and health who routinely seek veterinary services, driving the growth of this segment further.

Trends in Animal Healthcare

The future of the animal healthcare industry is likely to be shaped by the following:

1. Emphasis on animal nutrition: Animal healthcare companies will focus increasingly on catering to companion animals and their day-to-day needs as well as animal feed products for farm animals. The animal husbandry segment is witnessing the highest ever demand for its products, which is driving the growth of the production animal healthcare segment.

2. Growing Digitisation: Rising internet penetration, customer convenience focus, and inclination towards discounted medicine prices will be among the growth drivers for the digital segment, that may lead to an increase in the demand for animal healthcare products, thereby increasing the demand from e-commerce segment at a CAGR of 4.8% till 2027.

3. Increasing pet adoption: While pet adoption rates were already high in developed countries, recent trends indicate increased adoption of pets by families in developing countries. This growth is driven by several factors, such as rising disposable income among middle-income households, coupled with social companionship needs influenced by lockdowns and physical distancing, and changing attitudes towards pets. Consumers are influenced by varying trends around them in areas of health and wellness and are keen to ensure that their pets receive products with filled with wholesome nutrition and medical care.

About SeQuent Scientific Limited

Over the last few years, Sequent Scientific Limited has emerged as Indias largest animal health company, with presence in 100+ countries. Our nine manufacturing facilities across India, Spain, Germany, Brazil, and Turkey have approvals from top global regulatory bodies, including USFDA, EUGMP, WHO, TGA, among others. We offer a comprehensive portfolio across animal health Finished Dose Formulations, Active Pharmaceutical Ingredients (APIs), as well as analytical services to the pharmaceutical and life sciences industries.

Business Performance Review

Key business areas of the Company:

1. Active Pharmaceutical Ingredients (APIs)

Key Highlights

Particulars	FY22 Updates/ Developments	Total Products
US VMF Filing	1	24
EU CEP Approvals	-	11

Growth Drivers

a. Deepening relationship with the Big 4 Animal Health players - recently signed first long-term master supply arrangement with a global player, expected to drive growth in coming years

b. Strengthening partnerships and setting up of an advisory committee to garner higher wallet share from the top 10 animal heath companies

c. Portfolio diversification with successful broad basing of revenues

d. Expanding capacity by ~20% through the commissioning of a 7^th clean room at Vizag

e. Signing of a CDMO Agreement with a large animal health company to drive revenues and enhance collaboration

Formulations

Key Highlights

a. Tulathromycin: In FY21, the Company launched Tulathromycin in Europe, first injectable developed in-house. The year gone by was the first full year of commercialisation and the product performed well ahead of our expectations

b. Acquisitions: Acquired 100% stake in Nourrie Saude e Nutrigao Animal Ltda (Nourrie) in Brazil, marking Aliviras entry into the fast-growing pet segment in Brazil, the 4^th largest companion animal market in the world

c. Consolidation: The Company acquired residual stake of minority shareholders in Brazil to consolidate the operations, thereby reflecting growing confidence on our existing business and excitement for the future. This follows on from the entity consolidations in Turkey, Netherlands and Belgium in FY20-21, building on the Companys strong track record of successfully acquiring, integrating and consolidating global businesses

Growth Drivers

a. Entry into U.S. market: The Company initiated work on the capability and capacity expansion of injectable facility in Bremer, Germany for USFDA Approval and US commercialisation, which has been delayed due to Covid related travel challenges to Europe besides deferral of facility upgradation work

b. Deepening presence and expanding portfolio: The conclusion of Nourries acquisition marks an important milestone in Sequent 2.0 strategy of establishing presence in Brazils pet market, the fastest growing segment. Brazil is the 4^th largest pet market in the world, with an estimated market size of BRL 1.8 Billion, growing annually at ~16%. The addition of Nourrie nearly doubled the product portfolio available to Alivira for commercialisation in Brazil, with additions in nutraceutical and therapeutic product categories. Nourrie also brings a strong pipeline of 20 products under development, 12 of which are planned for launch in the next fiscal.

Analytical Services

SeQuent Research Limited (SRL), the Companys wholly owned subsidiary is a Contract Research Organisation focusing on analytical and development services. The USFDA approved analytical service centre is in Mangaluru. With ~70 scientists, SRL has developed robust capabilities in instrumental analysis, wet laboratory research, trace element analysis, and a Laboratory Information Management System (LIMS) complying with the latest regulatory standards and guidelines.

Focus Markets and Opportunities

The Company is ensuring global food security for the worlds ever-increasing population with a focus on becoming a value leader in the sector. It has established presence in countries with significant animal health population & believes in the immense potential these markets have to offer.

Market Statistics

• The Indian animal health market is estimated at $1.1 Billion and expected to grow at a CAGR of ~9%

• Livestock contributes ~4% to Indias GDP, making it a crucial farm activity for large rural population

Presence and Performance

Over the years, SeQuent expanded presence in the ruminants & poultry segment. The business performed exceptionally well in FY22, growing by 30.5% on a YoY basis from 782 Million to achieve landmark revenues of 1,021 Million in FY22. This growth allowed Alivira to further strengthen itself in the Indian market and service much larger number of customers.

India has emerged as a key strategic market for the Company, with significant potential to support our growth plans. We remain focused on addressing customer needs by providing research-based products and services.

Growth Drivers

• The Company established sales presence in 8 new headquarters with the aim of expanding presence

• Launched new products to drive the growth momentum

• Strengthened the techno-commercial and marketing teams with onboarding of skilled resources, thereby building internal capabilities to sustain growth over the long term

EUROPE -

Market Statistics

• Second largest animal health market and is expected to grow at a CAGR of ~5%

• Growth is expected to be driven by increasing pet ownership, high disposable income, and the growing need for efficient animal husbandry practices to meet the demand for meat protein

Presence and Performance

• The business grew marginally by ~1% on a YoY basis owing to supply chain pressures, slowdown in demand and overall challenges in the macro-environment.

Growth Drivers

• The Company initiated upgradation of German facility with the aim of servicing future demand in the growing European market along with US commercialisation plans. For success of this critical project, which has the potential to drive Aliviras growth as a powerhouse of sterile injectables manufacturing for regulated markets, the Company is taking significant steps to ensure on-time completion

• Recorded healthy growth in Benelux region, validating the Companys focus in this part of Europe

• Extending the available portfolio for commercialisation in Italy with the aim of entering new segments. This is an outcome of the resilient performance of the business through supply chain disruptions and inflationary pressures

• Implemented SAP in Benelux to streamline the operations

TURKEY

Market Statistics

• Turkey is estimated to have approximately 17 Million cattle, 42 Million sheep, and 11 Million goats as per population data of 2020

Presence and Performance

• SeQuent is the third largest animal health company, and the largest player with domestic manufacturing of products, which offers a distinct advantage to the Company

• The Company has two manufacturing plants in Tuzla, Istanbul & Polatli, Ankara, which comprise of multiple manufacturing lines for various dosage forms, including injectables, oral solutions, aerosols and tablets catering to the ruminant segment

Growth Drivers

• During the year, the manufacturing plant received EUGMP certification for the newly constituted Tablets line. This is in-line with the strategy of leveraging Turkey as an export base for EU markets and consequently take advantage of currency depreciation as a high-quality local manufacturer, coupled with de-risking part of operations dependent on imports from further currency fluctuations

LATIN AMERICA

Market Statistics

• As of 2021, Latin America accounted for ~12% share of the global animal healthcare market and is expected to grow at a CAGR of 5.5% till 2025

Presence and Performance

• The Company has strengthened direct presence in key animal health markets

• The Brazilian facility primarily manufactures oral dosages

• The business performed exceptionally well during the year supported by new launches and in-licensing of products across multiple product categories

Growth Drivers

• During the year, the shareholding of existing minority partners in the local subsidiary was consolidated by the Company. This reflects a growing confidence in the business potential & faith in the existing team who have been instrumental in driving a stellar business performance

• Entered the fast growing pet segment, the 4^th largest companion animal market globally by acquiring a 100% stake in Nourrie Saude e Nutripao Animal Ltda (Nourrie) in Brazil, which specialises in the development and commercialisation of nutraceuticals and therapeutic products, with a portfolio of 23 commercialised products for pet and swine, and a near-term pipeline of 17 products. The business is well established with integrated R&D and manufacturing setup, complementary to Aliviras existing local capabilities. The Company also manufactures Transuin, a Ractopamine based product for swine, a key product in Alivira Brazils portfolio.

EMERGING MARKETS —

Presence and Performance

We market our products across several Emerging Markets. In FY21, we adopted a conservative approach in these markets due to stagnant collections, uncertain impact of lockdowns, and local currency fluctuations against the U.S. dollar. However, in FY22, the business is back to the pre - pandemic growth led by South Africa, the Middle East & Southeast Asian regions.

Global presence and marketing

In all our strategic markets, we have a local sales force which consists of technical veterinary experts as well as sales executives. Over the years, we have expanded the reach of our portfolio to more than 80 countries through a judicious mix of direct sales presence and distributor model. The said distribution channels further enable us to effectively serve a much larger customer base in the markets where we dont have direct on-ground presence through own field-force.

In several main markets, like Europe and Turkey, we have a local sales force which consists of technical and veterinary operations experts supplemented by sales executives. Over the years, we have expanded the reach of our portfolio to more than 80 countries through a judicious mix of direct sales presence and distributor model. The said distribution channels enable us to effectively serve our customers where we dont have direct on-ground presence through own field-force.

Global Manufacturing Footprint

Globally, the Company operates world-class manufacturing facilities as mentioned below:

Business vertical	Location	Highlights
Animal Health APIs	Vizag, India	Approvals: USFDA, WHO-Geneva and EU GMP Capabilities: API facility with reactor capacity of 270 kL with seven clean rooms
	Mahad, India	Approvals: EU GMP, COFEPRIS Mexico and WHO Capabilities: 23 reactors having a cumulative capacity of 80 kL
API Intermediates	Tarapur, India	Approvals: cGMP Capabilities: Facility with reactor capacity of 64 kL with two clean rooms
	Spain	Approvals: EU GMP Capabilities: Liquids - oral solutions/suspension and solids (powders) - beta lactam and non-beta lactam antibiotics Specialises in nutrition products - veterinary premixes
	Germany	Approvals: EU GMP Capabilities: Sterile injectable including beta-lactam and hormones, oral liquids, and oral powders
Formulations	Turkey	Approvals: EU GMP and Turkish GMP Capabilities: Multiple dosage forms including Beta-lactam & non-beta lactam injectable solutions/ suspensions, intra-mammary, oral solutions/ suspensions, aerosol and pour- on
	Brazil	Approvals: MAPA (Ministry of Agriculture, Livestock and Supply) Capabilities: Oral solutions, oral powders and drug premixes
		Approvals: MAPA (Ministry of Agriculture, Livestock and Supply) Capabilities: Nutritional additives, premix, tablets, paste and suspensions
	Ambernath, India	Approvals: India, Uganda, Ethiopia, and Kenya Capabilities: Granules for injections and oral liquids

Employees

The Companys 1900+ employees are the foundation of our business, and we focus on providing them with equal opportunity and supporting them to achieve greater success in their career. All throughout managing our business functions, our primary emphasis in COVID times was on the "safety and well-being" of our team, which is the foundation of our employee first approach and will continues to be our priority going forward.

Employee Stock Option Plan (ESOP)

The accounting for the said scheme is to be done as per the fair value method determined by the Black Scholes model for option valuation. The accounting impact of the said ESOP issuance would range between 1.6 Billion to 1.85 Billion depending upon the then prevailing stock price, the time value and the vesting period.

Governance

Ethics & Governance Committee

The Company has formed an Ethics & Governance Committee for overseeing policies on Anti-Money Laundering, Anti- Bribery and Corruption (ABAC), Counter Terrorist Financing, Whistle Blower Policy, Prevention of Sexual Harassment (POSH) and Insider Trading. The Company conducts regular awareness programs to make its employees familiar with the above mentioned policies. During the year, the Company has conducted the following trainings:

1) SeQuent Values & Whistle Blower Policy for employees

2) Code of Conduct & Code of Ethics for employees

3) Prevention of Sexual Harassment at Workplace

4) Learning Management System based Training Program on

a) Anti-Corruption Compliance Policy

b) Economic Sanctions Compliance Policy

c) Anti-Money Laundering & Counter Terrorist Financing Compliance Policy Policy on Prevention of Harassment and Discrimination

The Company is committed to promoting a working environment free from discrimination, harassment and intimidation. Therefore, the Company has established a Sexual Harassment Prevention Committee (SHPC) for every location, that will hold a meeting within five days of the receipt of any complaint in a confidential manner. The Company has conducted trainings on Prevention of Sexual Harassment at different locations during the year.

There were no cases reported to the Sexual Harassment Prevention Committee during the year under review.

SeQuent Whistle Blower Policy

The Company has formulated a Whistle Blower Policy for the purpose of reporting any improper or unethical behaviour/ practices or alleged wrongful conduct or violation of Code of Conduct of the Company or applicable laws, frauds, bribery, corruption, employee misconduct, illegality, health, safety & environmental issues or misappropriation of Company funds or assets within the Company or by the Company. In the event of a leak of unpublished price sensitive information or a suspicion of a leak of unpublished price sensitive information, policies and procedures for investigation have been established. The companys hiring and other personnel policies include the clause for shielding "whistle blowers" from wrongful termination and other discriminatory employment practices.

The Company affirms that in FY22, it has not denied any personnel access to the Whistle Blower Mechanism.

Anti-Corruption Compliance Policy

The Company has formulated and adopted the Anti-Corruption Compliance Policy as applicable in the jurisdiction of the country where it operates, which applies to all directors, officers, as well as full-time, part-time and temporary employees of the Company. This Policy, along with the internal controls herein have been designed to prevent bribery or any sort of wrongdoings from occurring, and enable the Company to respond promptly and effectively to any inquiries about its conduct and the conduct of those acting on the Companys behalf.

Anti-Money Laundering & Counter Terrorist Financing Compliance Policy

This Anti-Money Laundering & Counter Terrorist Financing Compliance Policy as applicable in the jurisdiction of the country where it operates, defines responsibilities and policies for Sequent Scientific Limited and all of its subsidiaries and affiliates with regard to avoiding money laundering and terrorist financing activities. The Company is committed to compliance with all applicable laws and regulations related to combating money laundering and terrorist financing.

Economic Sanctions Compliance Policy

The Companys Economic Sanctions Compliance Policy as applicable in the jurisdiction of the country where it operates, provides the framework for this commitment and is designed to communicate the Companys culture of compliance to all directors, officers, employees, agents, representatives, and other associated persons of the Company and third parties, which include entities or persons with authority, or who can reasonably be perceived as having the authority, to interact with others on behalf of the Company.

Environment, Health and Safety (EHS)

We consider EHS as the responsibility of management and the employees. We conduct our operations keeping in mind the impact it would have on Environment, Health, and Safety of Employees, Customers and the Community.

Also we have incorporated an EHS policy under which we are committed to comply with all the statutory requirements covered in EHS. We aim to foster a sense of responsibility for EHS among our employees along with imparting appropriate training and sharing information to develop their EHS skills so that every employee can comply with the EHS laws applicable to his/her area of operations.

We strive for continual improvement in our EHS performance and measure progress and verify compliance through management reviews and audits.

Threats, Risks and Concerns

The company faces a variety of risks in the conduct of its business, which are discussed below, along with their mitigants.

Regulatory risks	An adverse facility inspection by any regulatory body may cause restriction in sales to certain customers or associated geographies.
Measures undertaken	We have established systems to monitor compliance at all times. Our employees receive training on compliance updates for confirming to them at all times.
Environment, Health and Safety (EHS)	Because the Companys manufacturing activities involve sophisticated chemical reactions, there are risks associated with operational safety and environmental compliance.
Measures undertaken	The companys policies and practises are established and reviewed on a regular basis to ensure that they comply with all applicable environmental, health, and safety standards. The company focuses on optimally using its resources and continually update its processes to reduce the environmental effect of its operations, products, and services.

Currency volatility risks	Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates.
Measures undertaken	The Group manages its foreign currency risk by hedging transactions in geographies where its operations are in currencies other the local currency.
Interest rate risk	The Groups borrowings are on a floating rate basis, hence any changes in interest rates can have an influence on the companys performance.
	All the local entities of the Group borrow in local currencies tied to the respective base rates in line with their domestic businesses.
Credit Risk	The Companys financial assets are subject to credit risk. The customers credit terms vary depending on market factors in different parts of the world. Financial assets are also subject to counterparty credit risk.
Measures undertaken	The organisation examines receivables ageing in each geography on a regular basis. Credit restrictions based on a standard model have been established, along with a suitable Delegation of Authority (DOA) matrix for releasing credit blocks.
Liquidity risks	Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.
Measures undertaken	The Company targets low leverage ratios to ensure that low liquidity risk.
Information Technology & Cyber Security Risks	For its global operations, the Group is heavily reliant on IT systems.
Measures undertaken	IT infrastructure monitoring and review, database management, IT policy, cyber security, and compliance are all localised, so any threat to infrastructure or data is addressed locally.
Market risks	Market risks are the possibilities of losses as a result of price fluctuations. Market risks are the possibilities of losses as a result of price fluctuations. Geopolitical events, foreign exchange fluctuations, worldwide pandemics, and other events can all have an impact on market movements.
Measures undertaken	The Board evaluates the Companys investments from a long-term strategic viewpoint, while the Company monitors geopolitical risk on a continuous basis.

Risk Management and Internal Control

In line with the requirements under the SEBI LODR, the Company has constituted a Risk Management Committee of the Directors. The Members of the Committee are Mr. Neeraj Bharadwaj (Chairman), Mr. Milind Sarwate (Member), Mr. Rajaram Narayanan (Member) and Mr. P. V. Raghavendra Rao (Member). A meeting of the Risk Management Committee was held on September 23, 2021 and March 21, 2022 in which the current Risk Management process was evaluated and ways and means of strengthening the same were discussed.

Financial Review

Consolidated Balance Sheet for the year ended March 31, 2022

(In Rs Million)

Particulars	F.Y. 2021-22	F.Y. 2020-21	Movement
ASSETS
1. Non-current assets
a) Property, plant and equipment	2,200.53	2,173.19	27.34
b) Right-of-Assets (ROU)	964.77	1,017.54	(52.77)
c) Capital work-in-progress	88.13	287.83	(199.70)
d) Goodwill	1,853.08	1,742.01	111.07
e) Other intangible assets	531.27	423.85	107.42
f) Intangible assets under development	28.19	20.06	8.13
g) Financial assets
i. Investments	367.91	769.39	(401.48)
ii. Other financial assets	108.29	48.94	59.35
h) Deferred tax assets (net)	291.98	205.07	86.91
i) Income tax assets (net)	104.82	91.76	13.06
j) Other non-current assets	8.97	10.10	(1.13)
Total non-current assets	6,547.94	6,789.74	(241.80)
2. Current assets
a) Inventories	3,479.74	2,643.57	836.17
b) Financial assets
i. Investments	14.37	56.55	(42.18)
ii. Trade receivables	3,292.41	3,461.37	(168.96)
iii. Cash and cash equivalents	574.96	537.44	37.52
iv. Bank balances other than (iii) above	17.57	24.52	(6.95)
v. Loans	2.52	1.90	0.62
vi. Other financial assets	11.71	107.63	(95.92)
c) Income tax assets (net)	7.69	4.53	3.16
d) Other current assets	466.04	298.34	167.70
Total current assets	7,867.01	7,135.85	731.16
Total assets	14,414.95	13,925.59	489.36
EQUITY AND LIABILITIES
I. Equity
a) Equity share capital	496.74	496.74	-
b) Other Equity	6,427.33	6,779.77	(352.44)
Equity attributable to owners of the Company	6,924.07	7,276.51	(352.44)
c) Non-controlling interest	480.06	486.65	(6.59)
Total equity	7,404.13	7,763.16	(359.03)
II. Liabilities
1. Non-current liabilities
a) Financial liabilities
i. Borrowings	1,224.55	937.06	287.49
ii. Lease Liabilities	418.52	453.97	(35.45)
iii. Other financial liabilities	16.10	-	16.10
b) Provisions	163.82	93.24	70.58
c) Deferred tax liabilities (net)	59.85	69.30	(9.45)
d) Other non-current liabilities	6.77	8.69	(1.92)
Total non-current liabilities	1,889.61	1,562.26	327.35
2. Current liabilities
a) Financial liabilities
i. Borrowings	1,924.36	1,309.91	614.45
ii. Trade payables	2,580.45	2,269.10	311.35
iii. Lease Liabilities	81.57	68.90	12.67
iv. Other financial liabilities	208.15	473.60	(265.45)
b) Provisions	73.05	69.12	3.93
c) Current tax liabilities (net)	82.34	226.55	(144.21)
d) Other current liabilities	171.29	182.99	(11.70)
Total current liabilities	5,121.21	4,600.17	521.04
Total liabilities	7,010.82	6,162.43	848.39
Total equity and liabilities	14,414.95	13,925.59	489.36

Non-current assets

Goodwill

During the year, goodwill has been increased by 235.29 Million on account of new business acquisition in Brazil which is offset by 124.22 Million due to foreign currency translation impact.

Other intangible assets

Other intangible assets increased from 423.85 Million in F.Y. 2020-21 to 531.27 Million in F.Y. 2021-22 on account of aforesaid new business acquisition in Brazil.

Non-current investments

The decrease in non-current investments from 769.39 Million in F.Y. 2020-21 to 367.91 Million in F.Y. 2021-22 is the impact of mark to market (MTM) adjustment of equity investments in Solara Active Pharma Science Limited.

Current assets

Inventories

Increase in inventories from 2,643.57 Million in F.Y. 2020-21 to 3,479.74 Million in F.Y. 2021-22 is on account of built-up Inventory basis sales plan for the current year.

Other current financial assets

The decrease in other current financial assets from 107.63 Million in F.Y. 2020-21 to 11.71 Million in F.Y. 2021-22 is on account of realisation of export incentives accrued up to December 2020.

Other current assets

The other current assets have increased from 298.34 Million in F.Y. 2020-21 to 466.04 Million in F.Y. 2021-22 is on account of increase in input GST credits.

Equity

Other Equity

The decrease in other equity from 6,779.77 Million in F.Y. 2020-21 to 6,427.33 Million in F.Y. 2021-22 is primarily due to impact of foreign currency translation adjustment of 728.17 Million and impact of MTM adjustment on equity investments by 353.91 Million which is party off-set by 412.51 Million on account of profits for the year.

Non-current liabilities

Long-term borrowings

The increase in long-term borrowings from 937.06 Million in F.Y. 2020-21 to 1,224.55 Million in F.Y. 2021-22 is due to additional borrowings to acquire non-controlling stake consequent to exercise of Put Option by such stake holders and additional borrowings for new business acquisition in Brazil.

Current liabilities

Current borrowings

The increase in current borrowings from 1,309.91 Million in F.Y. 2020-21 to 1,924.36 Million in F.Y. 2021-22 is due to additional funds drawn for working capital requirements.

Trade payables

The increase in trade payables from 2,269.1 Million in F.Y. 2020-21 to 2,580.45 Million in F.Y. 2021-22 is in line with business growth.

Other financial liabilities

Decrease in other current liabilities from 473.6 Million in F.Y. 2020-21 to 208.15 Million in F.Y. 2021-22 is on account of discharge of put option liability.

Consolidated statement of Profit and Loss for the year ended March 31, 2022

(In Rs Million)

Particulars	F.Y. 2021-22	F.Y. 2020-21	% change
Revenue from operations	14,128.16	13,616.15	4%
Other Income	108.45	83.63	30%
Total Income	14,236.61	13,699.78	4%
Expenses
Cost of materials consumed	6,705.22	5,886.65	14%
Purchases of stock-in-trade	1,718.89	1,450.19	19%
Changes in inventories of finished goods, stock-in-trade and work-in-progress	(494.15)	(390.27)	27%
Employee benefit expenses	2,313.68	1,872.23	24%
Finance costs	157.74	243.83	-35%
Depreciation and amortisation expenses	510.85	505.98	1%
Other expenses	2,790.52	2,676.65	4%
Total expenses	13,702.75	12,245.26	12%
Profit before exceptional items and tax	533.86	1,454.52	-63%
Exceptional item	-	88.23
Profit before tax	533.86	1,366.29	-61%
Tax expenses	83.26	321.77	-74%
Profit after tax	450.60	1,044.52	-57%
Profit after tax for the year attributable to:
- Owners of the Company	412.51	954.42	-57%
- Non-controlling interest	38.09	90.10	-58%

Revenue from operations

Revenue from operations have increased from 13,616.15 Million in F.Y. 2020-21 to 14,128.16 Million in F.Y. 2021-22 on account of normal business growth which is off-set due to impact on foreign currency translation in Turkey business operations.

Cost of materials consumed

The cost of materials consumed as a percentage of net sales has increased by 511 bps largely on account of increase in raw material costs for API business and Spain business operations.

Employee benefit expense

The employee benefit expense has increased from 1,872.23 Million in F.Y. 2020-21 to 2,313.68 Million on account of new ESOP scheme and for normal increments during the year.

Finance costs

Decrease in finance cost from 243.83 Million in F.Y. 2020-21 to 157.74 Million in F.Y. 2021-22 is on account of decrease in net borrowings during the first three quarters of the year.

Tax expenses

Decrease in tax expenses from 321.77 Million in F.Y 2020-21 to 83.26 Million in F.Y. 2021-22 is due to reversal of tax provision of earlier years 120.30 Million.

Risk Management and Internal Control

In line with the requirements under the SEBI (Listing and Disclosure Requirements) Regulations, 2015 the Company has a Risk Management Committee of the Directors.

The Company has adequate internal controls and systems in place which provide reasonable assurance about the integrity and reliability of financial statements.

Additionally, PwC, a leading global audit firm performs periodic internal audits to provide reasonable assurance over internal control effectiveness and advises on industry-wide best practices. The Audit Committee consisting of Independent Directors review important issues raised by the Internal and Statutory Auditors, thereby ensuring that the risk is mitigated appropriately with necessary rectification measures on a periodic basis.

Key Ratios

Ratio	FY22	FY21
Debtors Turnover Ratio (Days)	85	93
Inventory Turnover Ratio (Days)	90	71
Interest Coverage Ratio*	4.38	6.97
Current Ratio	1.54	1.83
Debt Equity Ratio**	0.37	0.22
Operating Margin Ratio*	7.74%	15.88%
Net Profit Margin*	3.17%	7.62%
Return on net worth (RONW)*	5.96%	14.51%

#Increase in inventory turnover ratio due to build-up of inventory for future sales plan.

*The Margin Ratios and RONW were impacted in FY22 due to increase in input material costs and ESOP costs **Increase in debt equity ratio mainly due to debt taken for acquisition in Brazil.

Glossary of few terms used across this report

• API: Active Pharmaceutical Ingredient means the active ingredient contained in medicine

• Formulations: Formulation is defined as a mixture that is prepared according to a specific procedure (called a formula). Formulations are made for particular applications and are normally more effective than their individual components when used singly.

• cGMP: Current good manufacturing practices are defined by the FDA as systems to assure proper design, monitoring, and control over manufacturing processes and facilities in pharma and other FDA- regulated industries

• EUGMP: The highest recognition available by companies in the pharmaceutical space in the European Union

• Betalactam: Any of the large class of natural and semisynthetic antibiotics (as the penicillins and cephalosporins) with a lactam ring

• Swine: Pig

• Livestock: Animals kept on a farm

• Companion animal: Pet or other domestic animal

• Production animal: An animal which provides output of sale value other than its progeny

• Animal husbandry: A branch of agriculture concerned with animals that are raised for meat, fiber, milk, eggs, or other products

• Poultry: Live or slaughtered domesticated bird

• Poultry products: Poultry which has been slaughtered for human food

• Animal protein: Nitrogenous material found in animals

• Feed supplements: Animal feeding product that contains added protein or urea or both; designed to be used in conjunction with other animal feeding items

• Feed additives: Products used in animal nutrition for purposes of improving the quality of feed and the quality of food from animal origin, or to improve the animals performance and health

• Antibiotics: Medicine that inhibits the growth of or destroys microorganism

• Disinfectants: Chemical agents designed to deactivate or destroy microorganisms on inert surfaces

• Antibacterial: Anything that destroys bacteria or suppresses their growth or their ability to reproduce

• Anthelmintic: Medicines used to destroy parasitic worms

• Ruminant: Mammals that are able to acquire nutrients from plant-based food by fermenting it in a specialised stomach prior to digestion, principally through microbial actions

• Bioequivalence: Property wherein two drugs with identical active ingredients or two different dosage forms of the same drug possess similar bioavailability and similar effect at the site of physiological activity

• Nutritional feed-add: Extra nutrients or drugs for acceleration of the growth of livestock

• Parasitic: An animal or plant that lives on or in as well as feeds on another animal or plant of a different type

• Mastitis: Inflammation of breast tissue that sometimes involves an infection

• Infertility: Disease of the reproductive system due to which person or animal is not able to have babies or produce offsprings

• Probiotics: A microorganism introduced into the body for its beneficial qualities

• Enzymes: Substance produced by a living organism which acts as a catalyst to bring about a specific biochemical reaction

• Toxin binders: A substance that is added to animal feed in small quantities in order to trap mycotoxins, preventing them from entering the blood stream where they can cause serious harm to your animals

• Acidifier: Inorganic chemicals put into a body, which either produce or become acid. These chemicals increase the level of gastric acid in the stomach when ingested

• CEP filing: Certificate of Suitability (CEP) is to certify the compliance of a material with the requirements laid down in the relevant monograph of the European Pharmacopoeia

• Albendazole: Medication used for the treatment of a variety of parasitic worm infestations

• Ricobendazole: Antiparasitic active ingredient used in veterinary medicine mainly in livestock against internal parasites

• Praziquantel: Synthetic anthelmintic drug used in the treatment of schistosomiasis and other infestations of humans and animals with parasitic trematodes or cestodes

• USVMF: The USA Veterinary Master File

• MAPA: Ministry of Agriculture, Livestock and Supply, Brazil