Sequent Scientific Ltd Management Discussions.

Macro-Economic Scenario

The global economy experienced a major slowdown in CY2019 with growth at 2.4% as compared to 3.5% in CY2018. World Bank projected a marginal increase in global economic growth to 2.5% for CY2020. However, a new downside risk emerged in the form of the COVID -19 crisis starting from China and spreading across the world. Restriction on movement of people, goods and services, and containment measures such as factory closures resulted in a simultaneous demand-cum-supply shock to all the countries gripped by the virus. Due to rising concerns over global growth, central banks across the globe cut interest rates to shore up their economies. This resulted in World Bank cutting its CY2020 global growth forecast to a decrease by 5.2%. However, World Bank expects that during CY2021 the global economy will grow by 4.2% assuming pandemic fades in the second half of 2020 and economic activity normalises with the help of policy support.

The US economy is expected to move at a slow pace this year since it has seen the highest number of COVID-19 cases. U.S. GDP growth will contract by 6.1% in CY2020, a decrease from 2.3% in CY2019. World Bank expects it to recover to 4.0% in CY2021. The U.S. Government has also provided fiscal support approaching US$ 3 trillion, including over $1 trillion in loans to firms and to state and local governments.

In CY2020, Europe Union is expected to decline by 9.1%. It is estimated that Europe may bounce back in CY2021 with a growth rate of 4.5%.

Chinas annual economic growth rate for 2020 is expected to be 1%. However, as it was the first to recover from the pandemic, it is expected to clock 6.9% growth thereby becoming among the fastest growing economies in CY2021.

Animal Healthcare

Over the last few years, animal healthcare has emerged as a market of prime importance across the world. The primary livestock species are cattle (both beef and dairy), swine, poultry, fish and sheep.

The primary reason behind the rise in demand of animal healthcare products and services has been the outbreak of new animal diseases over the recent times.

The animal healthcare market has also seen an upward growth thanks to the changes in farming practices for bulk production that require good quality animal feed additives, hygiene management products, vaccines, etc.. With the growing animal population and increasing in infections , there has been a demand for preventive medicines to curb viruses in animals.

The global animal healthcare market was estimated at US$ 33 Billion in 2019 and is expected to grow at a CAGR of 4.90% to reach US$ 46.1 billion by 2026. The market is primarily divided into two categories that includes traditional medicines such as medicines, vaccines, parasiticides and medicated feed additives, and smaller but fast- growing areas such as diagnostics, BioDevices, genetics and precision livestock farming. The global animal healthcare market is driven by veterinary technological advancement, which are expected to propel future growth for the sector.

North America has the largest market in the geographical segment given its large animal population including milch and meat cattle, rising demand for protein rich diet and rising incidences of animal disease. Asia-Pacific is expected to be the fastest growing market chiefly due to factors such as rising prevalence of zoonotic diseases, presence of major market players involved in the manufacture of animal healthcare products mandatory immunisation of animals by the regulatory agencies and higher disposable income to keep companion animals.

Animal health industry is characterised by the following industry dynamics:

a) Favourable pricing environment

Unlike the pricing landscape of human prescription medicines, where pricing pressure and price control have been the regulator‘s and government‘s major weapon to control burgeoning healthcare costs, the animal health market has seen little direct government involvement.

Unlike human pharmaceuticals industry where eventual buyers are insurance companies or government; in animal health industry, buyers are pet owners and animal farm owners. This gives the government very little incentive to get involved in fixing prices.

b) Higher R&D productivity

Unlike human health, the animal health industry is characterised by higher R&D productivity and shorter development time, as well as lower costs and risks. Animal health products generally show faster R&D timelines in all stages ranging from research to the regulatory review process.

Hence, in aggregate total development timelines are typically 3 to 5 years faster than in human drug development.

c) Limited competitive intensity

Competition is lower in animal health industry. There is extremely limited overlap in product portfolio of Top-10 companies. Market is dominated by Big US and a few European players.

d) The global population is growing at 0.75% p.a., which is expected to increase from 7.7 billion today to over 9.7 billion by 2050. This increased population cannot be fed by agriculture alone. Livestock farming automatically becomes a secondary yet important source of living. Second, population growth leads to increased demand for land, hence animal farms necessarily have to have enhanced productivity.


Growth drivers for Animal Healthcare Industry a) Growing animal husbandry around the world

Animal husbandry significantly contributes to the GDP of emerging nations around the world. Animals have been domesticated since 13,000 years. Even today, cattle such as cows, buffaloes, goats, sheep that provide milk and meat are the primary source of income in rural areas. Animal husbandry has become technology driven with rising demand on quality of animal products. Like all major industries, it has seen corporatisation resulting in attachment of control on animal infection outbreaks. This in turn has resulted in the growth of the animal healthcare market.

b) Increase in pet adoption and growing technology

In the past few decades, there has been a significant expansion in pet adoption, especially amongst the elderly population. The increase in disposable income and increasing acceptability of animals as social companions has led to increase in pet ownership. Amongst some lonely elderly people, certain animal categories like dogs and parrots are seen as an alternative to human children, given their ability to respond to human emotions and signals. The growing number of pets will also boost the overall demand from the animal healthcare industry.

c) Protein consumption

It is estimated that by 2030, to feed the global population, animal protein production will have to increase by 30 percent from its current volume. Without effective disease prevention and health management strategies, this could impact the meat and dairy industries in a big way.

Post consideration of the increased interest in plant-based or lab-based meats and other protein alternatives, animal-based proteins will remain critical in meeting the demand of the worlds growing population.

d) Human population growth

The global population is growing at 0.75% p.a., which is expected to increase from 7.7 billion today to over 9.7 billion by 2050. This increased population cannot be fed by agriculture alone hence livestock farming is also simultaneously required. Second, population growth leads to increased natural resource constraints driving a need for enhanced productivity.

e) Improved living standards

There is increased focus on food quality and safety as standards of living improve, leading to higher demand for quality non-vegetarian food.

Farm Animal healthcare

The farm animal healthcare accounts for ~62% share in the entire veterinary healthcare market. Continued efforts are being made by the government with initiatives that help modernise agriculture through technology and continued scale consolidation. With that, stricter food safety/ quality improvements and environmental regulations have formed which are useful as well as easily adopted in many developing countries. Governments globally have taken several steps for the development of farm healthcare animals. These include zero environmental impact of agricultural residues, over the course of the last five years by the Chinese government. Other Governments have enacted notably stringent environmental protection laws. Additionally, there are several efforts to educate farmers and collaborate with domestic firms to develop better channels of distribution of healthcare products for farm animals, and connect with ecological and social values, thus driving the demand of farm animal healthcare market. Cattle, swine, poultry and fish are the major farm animals.

The global farm animal healthcare market size was US$ 20.5 billion in CY2019. It is expected to grow at a CAGR of 8.2% between 2019-2025 with North America being the largest market and Asia Pacific being the fastest growing market.

Companion Animal Healthcare

The global companion animal market size in 2019 was worth US$ 12.54 billion and expected to reach US$ 19.18 billion by 2024 with a growth rate at a CAGR of 6.26%.

The increase in the number of pets and importance of emphasis on animal healthcare and vaccination has led to an increase in the demand of animal healthcare product. Since pet owners realise that their animal companions are part of their own family, the level of care provided to these animals has significantly improved, thereby driving the growth of this market. Rise in the income levels of individuals leveraging to the recent trends is leading to the increase in the number of pet (companion animal) adoption which ultimately leads to increase in the demand of companion animal healthcare. Additionally, advances in animal health medicines and vaccines, increased types of medical treatment are fostering the market growth of companion animal healthcare market.

The companion animal healthcare market is extremely competitive with major players accounting for about 3/4th of the market. Given its highly competitive nature, several companies are focusing more on research and development to produce better pharmaceuticals and vaccine products for the existing and newly diagnosed diseases.

Impact of COVID-19 on the Animal Health Industry

The COVID-19 pandemic is expected to enhance focus on the health care market including animal health. The European Union has already committed US$3.3 billion for directly supporting the healthcare systems of the EU countries, matched with US$3.3 billion from the Member States. It is expected that a significant chunk of this will be channelled into animal healthcare.

(Source: European Commission)

All countries have classified veterinary medicines and other animal healthcare products as ‘essential goods. This has ensured that their supply can continue to cross borders even under current restrictions or closures . This strengthens the global food system as livestock animals are crucial for feeding the human population during long periods of self-isolation. The European Medicines Agency and the US FDA did not report any shortages in veterinary medicines during the pandemic. As per The Animal Health Institute - the industry body in the USA, the Member companies were in constant contact with the US FDAs Center for Veterinary Medicine to keep the agency informed of any shortages or delays in production. Till April end 2020, no Member companies had reported significant disruptions or shortages related to COVID-19.

Many developed countries pharmaceutical companies rely on China for active pharmaceutical ingredients (APIs). In the given circumstances, this is expected to shift from China to other manufacturing bases including India and local manufacturing in Europe and USA.

The pandemic forced China to a mass culling of pork, poultry and beef stock, leading to demand-supply gap, thereby increase in prices. In recent months, China saw significant rise in imports from the US and Brazil. Given that China will have to feed their population with these imports while balancing its internal sources of livestock, the overall livestock species of the country will return growth by 2021. It is expected that leading livestock nations including Brazil, the US and the EU, will export pork, poultry and beef to China in 2021.

Animal wise impact


Poultry had a short term hit due to the move from the large trend of 50:50 dine in, dine out to 90:10 dine in scenario. This has resulted in near-term supply chain realignment from box packaging to add-supermarket consumption.

In a recession, consumers generally trade down a little bit on protein, resulting in slightly lesser meat consumption. However, the same still is expected to grow 1-2% as per past historical trends. It is expected that the same will be normalised in the coming months.


China has a huge demand for pork, which is imported from USA, Brazil and other geographies. China will need to significantly ramp up protein imports during the next several years from the rest of world given the ASF disease that decimated Chinese hog production in 2019 and materially reduced protein availability within the country. Pork demand has remained stable thus far.



It is expected that the cattle population will be maintained for the dairy industry. Beef demand has shifted from restaurants to home dine in due to the formers closure. As a result, a marginal decline has been noted so far and it is expected that the same trend will gradually become normal in the second half of 2020 with the recent reopening of restaurants in developed countries. Further, cattle breeding and rearing is expected to remain constant since livestock owners know that it takes around 2 years to fully breed a cattle. The Standard & Poor (S&P) GSCI Livestock commodity gained 5.4% in May 2020 with the S&P GSCI Live Cattle index surging 10.1% in May 2020 as compared to the previous month reflecting renewed interest in livestock and cattle.*


Our focus markets and opportunity

At SeQuent, we are focused on addressing the global animal health challenges to ensure food security for an ever-increasing world population. We are striving to emerge as one of the global leaders in the animal health industry. Towards this objective, we have carefully chosen markets wherein we foresee opportunities for progress and growing awareness about safe and healthy animal environment.

Strategic initiatives and performance in FY 2019-20

We continued to deliver on our FY2019 performance, with an all- round revenue and EBITDA growth by 13.5% and 32.5%. PAT too reported a growth of 43.7% due to our continued focus on profitable operations. In line with our targets, the EBITDA margins increased by 210bps on account of stellar growth in both API and formulations business.

More than a third of our products cater to the global top 10 players in the animal health industry. Growth in the API segment continues to be driven by the top 5 customers who constitute 42% of our API sales while the top 10 customers contribute 55%.

This growth was achieved despite the headwind of COVID-19 in the last quarter of FY2020. Our teams global response to the COVID-19 pandemic has been remarkable by adapting to the new-normal while remaining committed to our employees and customers. We have seamlessly transitioned to a remote workplace while ensuring critical products reach to our customers.

We established a new formulations R&D facility in Mumbai for our injectables business. This has world class facilities and a multi-dosage capability for regulated-markets. This is an integrated facility from lab to pilot helmed by a team of 20 scientists with 100+ years of cumulative experience. We are proud to inform you that this new facility has already started delivering with the worlds largest injectable already filed for EU in FY2020.

Animal health industry is characterised by strong cash flows and our recent performance is reflective of the same and we have delivered stronger operating cash flows over the past three years.

Given the COVID-19 first originated in animals, we expect greater attention to animal healthcare in the coming years which, in turn, would enable greater growth in the coming years.

We have shown a consistent EBITDA growth of 44.6% CAGR over the past 3 years.

Given the COVID-19 outbreak first happened in animals, we expect greater attention to animal healthcare in the coming years which in turn would enable greater revenue in the coming years.

Business performance review


Key highlights: a. Enhanced production:

We enhanced production capacity of Albendazole at our Mahad facilitywhich enabled us to meet the increased demand of Albendazole. We now have 27 commercialised APIs.

b. Filings:

We achieved 19 US fillings and 11 CEP filling with another 14 products in the pipeline. We filed Mavacoxib and Robenacoxib API making Alivira the sole VMF filer in the Cox-2 inhibitors range. In the last three years, Alivira has filed eighteen VMFs, with sole filing for six molecules other than the innovator. For further six filings, there are less than three competitors thereby establishing our dominant position in API filings and making our products a moat as compared to our competitors. We are also proud to state that we are the #1 generic animal health USVMF filer and #3 global animal health USVMF filer.

c. WHO approval:

In March 2020, we received WHO Geneva approval in anthelmentics (for Praziquantel) under the prequalification program for our API facility at Vizag. Aliviras Vizag site is Indias only US FDA-authorised and EU GMP-compliant facility focused on production of active pharmaceutical ingredients (APIs) for the animal health sector.

The Vizag site is a multipurpose manufacturing facility equipped with reactor capacity of 225KL and six clean rooms.

The site began commercial production in 2015 and has been successfully inspected by USFDA during 2016 and 2018.

This approval further emphasises our focus on compliance standards and opens up additional business opportunities in the coming years.

API future growth drivers:

Expansion of Vizag capacity: We currently have a capacity of 225 KL at Vizag and are in the process of expanding the same to 350 KL. This will enable us to ramp up production volumes significantly in 2021.

We continue to expand margins through focus on regulated markets and/or customers along with high value products.

We follow a two-pronged strategy for the API market. Fundamentally, our API model is independent of our own formulation strategy. So API development is driven by where we believe there is a market opportunity. Having said that, on such unique products which are (A) under patent; and (B) do not have easy API availability, we do look for developing our own formulation as well.


We have grown faster than the industry growth rate of 4%. a) Global Filings:

US: We are on a strong footing with 10+ new filings in the US in next three years with a market size of over US$500 mn+.

EU: We filed for the first and worlds largest livestock injectable developed at this location for the EU market with an addressable global market of US$350 million. We plan to file a further three filings from this new Mumbai R&D facility in both the injectable and tablet segment in FY 2021.

UK: We filed for the said livestock injectable . separately for the UK market post Brexit.

b) Local manufacturing:

All governments are increasingly supporting local manufacturing. Local manufacturing enables us faster access to local and adjacent markets, fine-tuning products and volumes as per country-specific need and put in place a supply chain for faster and cheaper procurement.

c) Inauguration of new research and development

. facility:

The year was marked with an important milestone, that of the inauguration of a new state-of-the-art multifaceted and dedicated Animal Health R&D centre at Ambernath in Mumbai. Spanning 3,200 square feet, this unique centre with strong injectable focus has capabilities to develop products of eight different dosage forms including injectable solutions & suspensions, tablets, oral solutions & suspensions, granules, powders and premixes. Equipped with the best lab to pilot infrastructure, a team of 20+ research professionals with over 100+ years of experience, the centre is working on several differentiated products to cater to Aliviras Global market needs. In addition to product development, the team has developed capabilities to handle complex radio-labelled ecotoxicity studies and in-vitro palatability, tissue residue, bio-equivalence studies across a spectrum of livestock and companion animals. This has enabled 30% cost reductions on the product side.

d) Expansion of research and development team:

We have expanded our R&D team to address the huge opportunity in front of us as we prepare ourselves for our first US filing soon and commercialisation in FY2022.

e) Appointment of US Business sales team:

We appointed our USA Business Head in FY2020 to enable us to better serve our USA business in future.

f) Global reach:

We have a marketing presence in 80+ countries through a combination of own sales force and distributors. Further, 50% of our sales are to regulated markets enabling us to command pricing power.

Formulation future growth drivers: a) German facility filing:

We currently have the capacity to do one validation of an injectable every quarter from our German facility. In view of the Covid situation, we are deferring the capacity expansion plan of later half of FY21.

b) Filings:

We expect to derive a competitive advantage through early filings of both our current as well future filings as the animal healthcare are limited as compared to human healthcare filings. Further, based on our market perception, the price erosion in animal healthcare is limited as compared to human healthcare.

Analytical services

Our wholly owned subsidiary SeQuent Research Limited (SRL) has two USFDA approved state-of-the-art GLP compliant Analytical laboratories based in Mangalore and Bangalore. Both the centres are equipped with comprehensive capability in instrumental analysis, wet laboratory testing & trace element analysis and have LIMS conforming to 21 CFR with a strength of nearly 100 scientists. With both the facilities now being USFDA compliant, we are on track to deliver customised therapies to USA, the worlds largest healthcare and FMCG market.

Our response to COVID-19

In the COVID-19 pandemic, health item and animal health items have been listed as critical items. Within the animal health industry, we cater to the animal production segment, which is not a discretionary spend and hence lock-downs or economic slowdowns have little influence on this business. This has ensured smooth flow of our products.

Business Continuity Plan (BCP)

We have has implemented a Business Continuity Plan (BCP) to deal with the crisis as a response owing to the Covid-19 pandemic. As part of the program, manufacturing operations in locations across the world operated with decreased staff as all non-operational workers started to operate remotely. The sales and operations teams have continued to collaborate with customers on mutual business continuity strategies to respond further to the continually changing situation.

We streamlined our workload and coordinated alternate logistics across all factories to ensure sustained emphasis and dedication to our customers and target geographies. the leadership team helped manage the situation along with day-to-day activates to keep operations running smoothly.

Business Operations

The rapid implementation of BCP program has ensured that our operations have undergone minimal disruptions. Around the start of the lockdown, our API factories in India saw minor disruption in the availability of manpower, but the situation improved afterwards. We intend to continue this situation in the medium term and there are appropriate measures in place to maintain the BCP for the remainder of the COVID-19 crisis.

Factories run at usual scales in Spain, Turkey, Germany and Brazil while all non-manufacturing-related employees are working from home.

Our on-going expansion at Vizag was also adequately moderated to minimise human presence at the site, without affecting prospects for development.

In the supply chain side, we are completely secure both for our API and formulating systems for all main products and the only issue we face is logistics disruption.

We are constantly and proactively engaged with the appropriate authorities who support us in keeping the operations running to the best of their capacity.

Business Outlook

The Company has ended FY 2020 on a strong note, largely achieving both the strategic and operational objectives for the year and continues to move ahead with its organic and inorganic business strategy for its identified core markets of US, EU and Australia. The certainty around Brexit now allows to have a strategic perspective around UK which we are aggressively pursuing. This includes establishing front-end organisation either organically or through acquisition as also undertaking aggressive new product filings. We continue to be on track for new product pipeline of 35+ products, which are at various stages of development. The company has recently made significant progress in establishing distribution partnership with a leading global animal health company for India and has initiated CDMO business model for APIs with another animal health major. These recent initiatives shall further add growth engines for the company.

The company is also pursuing consolidation of minority interest across its subsidiaries. The management continues to actively identify and pursue new opportunities with new and existing clients to significantly boost volumes and profitability.

Business resources


We have eight world-class manufacturing facilities in operation, both in India and internationally. Further, we have instituted supply chain arrangements for critical products to ensure seamless supplies at stated delivery milestones. Our facilities are detailed below:

Business vertical Facility name, location Key features
Animal Health APIs Vizag, India Approvals: USFDA , WHO-Geneva and EU GMP
Capabilities: API facility with reactor capacity of 225 KL with six clean rooms
Mahad, India Approvals: EU GMP, COFEPRIS Mexico and WHO
Capabilities: 23 reactors having cumulative capacity of 76KL
API Intermediates Tarapur, India Approvals: cGMP
Capabilities: API intermediates facility with reactor capacity of 64 KL with two clean rooms
Animal Health Ambernath, India Approvals: India, Uganda, Ethiopia and Kenya
Formulations Capabilities: Granules for injections and oral liquids
Polatli, Turkey Approvals: EU GMP and Turkish GMP
Capabilities: 12 dosage forms including Beta-lactam and non-beta lactam injectable solutions/ suspensions, intra-mammaries, oral solutions/suspensions, aerosol and pour- on, spot-on
Barcelona, 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
Campinas, Brazil Approvals: MAPA (Ministry of Agriculture, Livestock and Supply)
Capabilities: Oral solutions, oral powders and drug premixes
Warburg, Germany Approvals: EU GMP
Capabilities: Sterile injectable including beta-lactam and hormones, oral liquids and oral powders acquired in April 2018

Research and development (R&D)

We believe that our research and development equips us to provide our customers cutting-edge products to drive further growth. New product innovation is a core of our business strategy. Our R&D investment is focused on projects that target novel product introductions, as well as new indications, presentations, combinations and species expansion. To this end, we inaugurated our new Ambernath, Mumbai research and development facility in FY2020 in addition to our Mahad facility to drive research in new products.


We have implemented stringent quality standards and benchmarks both internally as well across our supply chain to ensure effective manufacturing and consistent delivery of products.

Intellectual property rights

We have a qualified team of professionals who file patents across all geographies. In FY2020 we completed a total of 19 US filings / approvals and competed a total of 11 CEP filings, of which 10 are approved. Pursuant to this, we launched 21 formulations in regulated markets.


We believe employees are the corner stone of our strategy and continuously foster better HR practices to help them achieve their goals. We have 1,700+ employees.

Environment, health and safety

We have accorded the highest level of priority to safety; hence we have various systems to enable the same. Further, we have instituted safety awards to channelise the same in our employees.

Global presence and marketing

Our sales organisation includes sales representatives and technical and veterinary operations specialists. We have a local sales force in several key markets including Europe. We have recently appointed our US business head and the requisite sales team. In order to expand our reach, we generally contract with distributors that provide logistics and sales and marketing support for our products.

Financial review

(In Rs. Million)

Particulars FY 2019-20 FY 2018-19 Movement
1. Non-current asset
a) Property, plant and equipment 3,449.07 2,270.30 1,178.77
b) Capital work-in-progress 110.65 172.00 (61.35)
c) Goodwill 2,379.74 2,209.72 170.02
d) Other intangible assets 493.45 501.39 (7.94)
e) Intangible assets under development 23.59 54.15 (30.56)
f) Financial assets
i. Investments 1,312.88 1,796.50 (483.62)
ii. Other financial assets 68.03 49.77 18.26
a) Deferred tax assets (net) 232.40 142.56 89.84
b) Income tax assets (net) 56.81 45.81 11.00
c) Other non-current assets 15.03 636.70 (621.67)
Total non-current assets 8,141.65 7,878.90 262.75
2. Current assets
a) Inventories 2,194.17 2,001.03 193.14
b) Financial assets
i. Investment 401.79 4.70 397.09
ii. Trade Receivable 3,187.64 2,782.54 405.10
iii. Cash and cash equivalents 680.96 677.89 3.07
iv. Bank balances other than (iii) above 77.29 42.50 34.79
v. Loans 3.48 6.07 (2.59)
vi. Other financial assets 101.53 25.04 76.49
a) Other current assets 394.51 460.10 (65.59)
Total current assets 7,041.37 5,999.87 1,041.50
Total assets 15,183.02 13,878.77 1,304.25
I Equity
a) Equity share capital 496.74 493.74 3.00
b) Other Equity 6,930.86 6,573.18 357.68
Equity attributable to owners of the Company 7,427.60 7,066.92 360.68
c) Non-controlling interest 447.37 402.51 44.86
Total equity 7,874.97 7,469.43 405.54
I Liabilities
1. Non-current liabilities
a) Financial liabilities
i. Borrowings 1,500.59 1,478.46 22.13
ii. Other financial liabilities 919.43 380.33 539.10
a) Provisions 95.69 81.53 14.16
b) Deferred tax liabilities (net) 83.22 103.26 (20.04)
c) Other non-current liabilities 13.13 22.96 (9.83)
Total non-current liabilities 2,612.06 2,066.54 545.52
2. Current liabilities
a) Financial Liabilities
i. Borrowings 1,343.57 1,273.62 69.95
ii. Trade payables 2,203.80 2,093.50 110.30
iii. Other financial liabilities 758.04 706.06 51.98
a) Provisions 25.49 20.46 5.03
b) Current tax liabilities (net) 196.65 77.21 119.44
c) Other current liabilities 168.44 171.95 (3.51)
Total current liabilities 4,695.99 4,342.80 353.19
Total liabilities 7,308.05 6,409.34 898.71
Total equity and liabilities 15,183.02 13,878.77 1,304.25

Non-current assets

Property, plants and equipment (PPE)

PPE increased from Rs. 2,270.30 million in FY 2018-19 to Rs.3,449.07 million in FY 2019-20 mainly due to capex in Spain and Vizag along with capitalisation of leased asset as per IND AS 116 - Leases.

Capital Work in progress (CWIP)

The CWIP decreased from Rs.172 million in FY 2018-19 to Rs.110.65 million in FY 2019-20 due to capitalisation of PPE.


Goodwill increased from Rs.2,209.72 million in FY 2018-19 to Rs.2,379.74 million in FY 2019-20 9 is resultant of restatement of goodwill due to foreign exchange rate fluctuation.

Other intangible assets

Other intangible assets decreased from Rs.501.39 million in FY 2018-19 to Rs.493.45 million in FY 2019-20 as amortisation and foreign exchange rate fluctuation is netted off against purchase of product licence by one of the subsidiary company.

Intangible asset under development

The decrease in intangible asset under development from Rs.54.15 million FY 2018-19 in to Rs. 23.59 million FY 2019-20 is resultant of capitalisation of development expenditure in few subsidiaries.

Non-current investment

The decrease in non-current investments from Rs.1,796.50 million in FY 2018-19 to Rs.1,312.88 million in FY 2019-20 is resultant of mark to market loss on investment in Strides Pharma Sciences Limited.

Other non-current financial assets

The increase in non-current financial assets from Rs.49.77 million in FY 2018-19 to Rs.68.03 million in FY 2019-20 is resultant of increase in margin money deposit.

Deferred tax assets (net)

The increase in deferred tax assets (net) from Rs. 142.56 million in FY 2018-19 to Rs. 232.40 million in FY 2019-20 is resultant of recognition of deferred tax assets on brought forward losses and lease assets.

Other non-current assets

The decrease in other non-current assets from Rs.636.70 million in FY 2018-19 to Rs.15.03 million in FY 2019-20 is resultant of recognition of leased assets in PPE as per IND AS 116.

Current assets

Current investment

The increase in current investments from Rs.4.70 million in FY 2018-19 to Rs.401.79 in FY 2019-20 is resultant of investment in mutual fund units by parent and subsidiary companies.

Trade Receivables

The increase in current loans from Rs. 2,782.54 million in FY 2018-19 to Rs.3,187.64 million in FY 2019-20 is in line with business growth.

Other current financial assets

The increase in other current financial assets from Rs.25.04 in FY 2018-19 to Rs.101.53 million in FY 2019-20 is resultant of recognition of claim receivable on certainty of receipt.

Other current assets

The other current assets have decreased from Rs.460.10 million in FY 2018-19 to Rs.394.51 million in FY 2019-20 as a result of expensing of past indirect input credits due to uncertainty on realisation of the same.


Equity share capital

The Companys share capital increased from Rs.493.74 million in FY 2018-19 to Rs.496.74 million in FY 2019-20 due to issue of shares to ESOP Trust.

Other Equity

The other equity has increased from Rs.6,573.18 million in FY 2018-19 to Rs.6,930.86 million in FY 2019-20 mainly due to better performance of the Group.

Non-controlling interest

The non-controlling interest has increased from Rs.402.51 million in FY 2018-19 to Rs.447.37 million in FY 2019-20. The increase in minority is a result of increased performance of subsidiaries having minority interest.

Non-current liabilities

Long-term borrowings

The marginal increase in long-term borrowings from Rs.1,478.46 million in FY 2018-19 to Rs.1,500.59 million in FY 2019-20 is net result of repayment of borrowings in India and some additional borrowings for expansion in other geographies.

Other financial liabilities

The increase in other financial liabilities from Rs.380.33 million in FY 2018-19 to Rs.919.43 FY 2019-20 million is resultant of recognition of lease liabilities as per IND AS 116 - Leases.

Deferred tax liabilities (net)

The decrease in provision from Rs.103.26 million in FY 2018-19 to Rs.83.22 million in FY 2019-20 is resultant of recognition of deferred tax assets on lease assets.

Current liabilities

Current borrowings

The marginal increase in current borrowings from Rs.1,273.62 million in FY 2018-19 to Rs.1,343.57 million in FY 2019-20 is in line with expanded business scale.

Trade payables

The increase in trade payables from Rs.2,093.50 million in FY 2018-19 to Rs.2,203.80 million in FY 2019-20 is in line with expanded business scale.

Other financial liabilities

The increase in other current liabilities from Rs.706.06 million in FY 2018-19 to Rs. 758.04 million in FY 2019-20 is resultant of recognition of lease liabilities as per IND AS 116 - Leases.

Consolidated statement of profit and loss for the year ended March 31, 2020

(In Rs. Million)

Particulars FY 2019-20 FY 2018-19 % change
Revenue from operations 11,792.44 10,393.07 13%
Other Income 100.89 86.72 16%
Total Income 11,893.33 10,479.79 13%
Cost of materials consumed 5,086.92 4,538.71 12%
Purchases of stock-in-trade 888.90 1,166.44 -24%
Changes in inventories of finished goods, stock-in-trade and work-in-progress 74.69 (275.03) -127%
Employee benefit expenses 1,650.59 1,459.49 13%
Finance costs 357.14 328.02 9%
Depreciation and amortisation expenses 506.22 419.20 21%
Other expenses 2,388.12 2,254.12 6%
Total expenses 10,952.58 9,890.95 11%
Profit before tax 940.75 588.84 60%
Tax expenses 120.29 20.07 499%
Profit after tax 820.46 568.77 44%
Profit After Tax for the year attributable to:
- Owners of the Company 699.05 486.60
- Non-controlling interest 121.41 82.17

Revenue from Operations

The revenue from operations increased from Rs.10,393.07 million in FY 2018-19 to Rs.11,792.44 million in FY 2019-20. This increase is commensurate with further expansion in Animal Health operations.

Cost of materials consumed

The cost of material consumed, as a percentage to net sales remain in line with previous year.

Employee benefit expenses

The employee benefit expenses have increased by 13% on account of the following:

• Average annual salary increase of 8%

• Proportionate increase in staff welfare expenses

• Increase in overall number of employees in the Group

Finance costs

The increase in finance cost from Rs.328.02 million in FY 2018-19 to Rs.357.14 million in FY 2019-20 in line with business growth.

Depreciation and amortisation expenses

There is an increase in depreciation and amortisation expenses from Rs.419.20 million in FY 2018-19 to Rs.506.22 million in FY 2019-20 is resultant of depreciation on leases capitalised as per IND AS 116.

Tax expenses

There is increase in tax expenses from Rs.20.07 million in FY 2018-19 to Rs.120.29 million in FY 2019-20 due to business growth.

Risk Management and Internal Control

The Company is responsible for establishing and maintaining adequate and effective internal financial controls and the preparation and presentation of the financial statements. The assertions on the internal financial controls is in accordance with broader criteria established by the Company.

Due of the inherent limitations of internal financial controls, including the possibility of collusion or improper management and override of controls, material misstatements in financial reporting due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls are subject to the risk that the internal financial control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A robust, comprehensive internal control system is a prerequisite for an organisation to function ethically and in commensuration with its abilities and objectives. We have established a strong internal control system for the Company and its subsidiaries. This control system is aimed at providing assurance on the effectiveness and efficiency of operations, compliance with laws and regulations, safeguarding of assets and reliability of financial and management reporting. The Company is staffed with experienced and qualified people who play an important role in designing, implementing, maintaining and monitoring the internal control environment.

Additionally, an independent body of Chartered Accountants 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

Particulars Consolidated
FY 2019-20 FY 2018-19
Debtors turnover ratio 3.70 3.74
Inventory turnover ratio 5.37 5.20
Interest coverage ratio (*) 3.63 2.80
Current ratio 1.50 1.38
Debt equity ratio 0.29 0.36
Operating margin ratio 14.91% 12.77%
Net profit margin (*) 6.90% 5.43%
Return on net worth (RONW) (*) 10.57% 9.08%

(*) significant change in interest coverage ratio, net profit margin and RONW is due to improvement in operational efficiency