Shelter Pharma Ltd Management Discussions

Overview

Shelter Pharma Limited is engaged in the manufacturing and marketing of pharmaceutical products catering to both the human and veterinary healthcare segments. During the financial year 2025-26, the Company delivered a strong operational and financial performance, supported by robust revenue growth, increasing market presence, enhancing manufacturing capabilities, and continued focus on operational excellence.

The Company remained committed to strengthening its product portfolio, maintaining high standards of quality and regulatory compliance, improving operational efficiency, and enhancing reliability and scalability across its business operations. During the year, the Company undertook strategic initiatives towards business expansion and strengthened its financial position through fund raising, with the objective of deploying the proceeds towards its core business activities, including capacity enhancement, infrastructure development, product portfolio expansion, and other growth-oriented initiatives.

Supported by prudent financial management, focused capital allocation, and investments aligned with its core objectives, the Company continues to build a strong foundation for sustainable growth and long-term value creation for its stakeholders. Further, Shelter Pharma works to meet patient expectations, strengthen core operations and identify emerging opportunities to deliver superior value to the shareholders.

Industry Structure and Developments

Indias pharmaceuticals industry the pharmaceutical sector in India continues to remain one of the key contributors to the healthcare ecosystem, supported by increasing demand for affordable and accessible medicines, expansion of healthcare infrastructure, and growing acceptance of Indian pharmaceutical products across domestic and international markets. The industry is witnessing a shift towards greater emphasis on quality standards, technology adoption, product innovation, and efficient supply chain management.

The sector is undergoing continuous transformation due to evolving regulatory frameworks, increasing focus on compliance, changing customer preferences, and the need for cost-effective healthcare solutions. Companies are increasingly investing in manufacturing capabilities, research and development, product diversification, and operational efficiencies to maintain competitiveness in a rapidly evolving market environment.

The industry also faces challenges arising from competitive intensity, pricing pressures, fluctuations in raw material costs, and global supply chain uncertainties. However, companies with strong manufacturing capabilities, robust quality systems, diversified product offerings, and disciplined business strategies are better positioned to leverage the long-term growth potential of the sector.

In this evolving landscape, Shelter Pharma Limited continues to strengthen its operational capabilities, expand its product portfolio, enhance market reach, and align its growth strategy with emerging opportunities in the pharmaceutical industry. The Companys focus remains on sustainable expansion, efficient resource utilization, and delivering value through its core business operations. to demonstrate resilient growth driven by domestic branded generics, increasing healthcare awareness, government initiatives to enhance access, and steady export demand in select therapeutics. The operating environment remains competitive with persistent pricing discipline from institutional buyers, input cost volatility linked to key starting materials (KSMs)/active pharmaceutical ingredients (APIs), and ongoing regulatory and quality-compliance expectations. Within this backdrop, Shelter Pharma Limited remains focused on disciplined execution in manufacturing and marketing of pharmaceutical products, reinforced by process reliability, cost control, and judicious capital allocation.

Financial Highlight

Revenue Analysis

Particulars	FY 2025-26 ( Lakhs)	FY 2024-25 ( Lakhs)	Growth (%)
Revenue from Operations	7,313.36	5,066.02	44.36%
Other Income	1.59	0.55	189.09%
Total Income	7,314.95	5,066.56	44.37%

The company achieved a robust increase in revenue, led by increased sales and expanded

market reach in both human and veterinary product lines.

Profitability

Particulars	FY 2025-26 ( Lakhs)	FY 2024-25 ( Lakhs)	Growth (%)
Operating Profit (Before Tax)	1,222.47	967.70	26.33%
Net Profit After Tax (PAT)	902.72	723.74	24.73%
EBITDA Margin (%)	17.4	19.6	-2.2ppt
EPS (Basic)	6.57	6.26	04.95%
EPS (Diluted)	5.16	6.26	-17.57%

Profit expansion is attributed to higher sales but also accompanied by a moderate increase in costs, particularly materials and employee benefits.

Details of Significant Changes in Key Financial Ratios

Based on the audited standalone financials, notable movements reflect:

Sr. No. Description	2025-26	2024-25	Remarks
1. Current Ratio	7.86	7.19
2. Debt - Equity Ratio	0.01	0.03
3. Debt - Service Coverage Ratio	88.70	7.21
4. Return on Equity Ratio (%)	15.13	16.94
5. Inventory Turnover Ratio	2.98	3.26
6. Trade Receivables Turnover Ratio	6.87	5.53
7. Trade Payable Turnover Ratio	53.60	40.71
8. Working Capital Turnover Ratio	1.52	1.77
9. Net Profit Ratio (%)	12.34	14.29
10. Return on Capital Employed (%)	15.93	22.46

A Window To Modern Ayurveda

Note: The Company prepares its standalone financials under Accounting Standards (AS), being exempt from mandatory Ind AS adoption as a company listed on the SME exchange in terms of the applicable MCA notification and SEBI ICDR framework. EPS is computed in accordance with the applicable AS on Earnings Per Share.

Balance Sheet Position

Particulars	31-Mar-26 ( Lakhs)	31-Mar-25 ( Lakhs)
Share Capital	1,661.18	1,155.98
Reserves & Surplus	5,605.29	3,116.09
Money Received against share warrants	396.73	-
Total Equity	7663.20	4,272.06
Non-Current Liabilities	60.12	98.64
Current Liabilities	699.97	462.86
Total Liabilities	760.09	561.5
Non-Current Assets	2918.42	1505.69
Current Assets	5504.87	3327.87

Overall, the balance sheet evidences strengthened net worth and calibrated investments in fixed assets and working capital to support growth.

Key Business Drivers and Operational Review

O Volume and Market Execution: Revenue growth in FY26 underscores improved market

presence, product availability, and sales execution across addressable channels.

O Input Costs and Sourcing: Cost of materials tracked higher with volume; the Company remains focused on proactive sourcing, vendor consolidation where appropriate, and value engineering to mitigate volatility.

O Operating Discipline: Employee, manufacturing overheads, and distribution costs were managed in line with growth; other expenses were maintained at prudent levels to support scalability.

O Capacity Build-out: Incremental PPE investments during FY26 enhance production reliability, quality systems, and throughput for medium-term growth.

O Working Capital: Higher inventories and receivables supported growth and service commitments; management continues to emphasize cash conversion through disciplined receivables follow-up and inventory turns

Segment-wise Performance

In accordance with AS 17 on Segment Reporting, the Company is engaged in a single primary business segment: manufacturing of pharmaceuticals. Performance is therefore evaluated at an enterprise level.

Risks and Concerns

O Regulatory and Compliance Risk: The pharmaceutical sector is governed by stringent regulatory standards. Any non-compliance may impact operations and reputation. The Company remains focused on maintaining strong compliance practices.

O Input Cost and Supply Chain Risk: Volatility in KSM/API prices and supply disruptions may impact margins and production. The Company manages these risks through diversified sourcing and inventory planning.

O Competitive and Pricing Pressure: The branded generics market remains competitive with pricing pressures. The Company focuses on quality, product differentiation, and market expansion to sustain growth.

O Working Capital Intensity: Growth requires effective management of receivables, inventory,

and cash flows. The Company follows disciplined working capital practices to maintain liquidity.

O Operational Continuity: Any disruption in manufacturing or logistics could impact performance; the Company emphasizes preventive maintenance, quality assurance, and business continuity planning.

O Regulatory Approval and Product Launch Risk: Delays in regulatory approvals or challenges in new product commercialization may affect growth plans. The Company focuses on effective regulatory management and timely product development.

O Environmental, Health and Safety (EHS) Risk: Pharmaceutical operations involve environmental and safety responsibilities. The Company remains focused on compliance with EHS standards and sustainable operating practices.

Internal Control Systems and Adequacy

The Company has implemented a comprehensive internal control framework commensurate with the scale, complexity, and nature of its operations. The framework encompasses key business processes, including procurement, manufacturing, quality, sales, finance, and compliance, with the objective of ensuring accuracy and reliability of financial reporting, safeguarding of assets, operational efficiency, and prevention and detection of errors and irregularities.

The internal control systems are supported by well-defined policies, standard operating procedures, appropriate authorization mechanisms, and segregation of duties. The effectiveness and adequacy of these controls are periodically assessed and reviewed by the management, Audit Committee, and statutory auditors. The Company remains committed to continuously enhancing its control environment to ensure transparency, accountability, and sustainable business operations.

Human Resources

The Company recognizes its employees as a key enabler of sustainable growth and continues to focus on developing a skilled, engaged, and agile workforce. The organization emphasizes talent acquisition, capability building, employee development, and retention initiatives to support evolving business requirements.

The Company maintains a positive work environment supported by effective employee engagement practices, continuous learning programs, and adherence to workplace safety and compliance standards. Healthy industrial relations and a strong focus on productivity and operational excellence continue to contribute to the Company overall performance.

Outlook

The Company aims to sustain growth by:

O Strengthening distribution capabilities, increasing brand visibility, and enhancing market penetration across focus geographies and therapeutic segments.

O Expanding the product portfolio through new product introductions, lifecycle management, and opportunities aligned with evolving market requirements.

O Enhancing manufacturing efficiency, capacity utilization, productivity, and yield improvement through continuous process optimization.

O Building a resilient supply chain through diversified sourcing, improved vendor management, and effective cost optimization initiatives.

O Continuing to uphold stringent quality systems and regulatory compliance practices as fundamental pillars of business operations.

O Focusing on product development initiatives to support innovation, market competitiveness, and sustainable growth.

O Prioritizing investments across manufacturing capacity, product development, infrastructure, and working capital to maximize returns.

Management believes that the investments made in FY26 in capacity and capabilities position the Company to capitalize on medium-term demand while maintaining financial prudence.

Cautionary Statement

This Management Discussion and Analysis contains forward-looking statements relating to the Company objectives, strategies, plans, expectations, and future performance. Such statements are based on current assumptions, estimates, and expectations and are subject to various risks and uncertainties. Actual results may differ materially from those expressed or implied in such statements.

Factors that may influence actual outcomes include, but are not limited to, changes in regulatory and government policies, economic conditions, market dynamics, demand and supply factors, input cost fluctuations, foreign exchange movements, industry developments, and other unforeseen circumstances.

The Company does not undertake any obligation to publicly update, modify, or revise any forward-looking statements to reflect subsequent events, developments, or changes in assumptions, except as required under applicable laws and regulations.

Opportunities and Threats Opportunities

1. Market Expansion and Distribution Growth:

The Company has opportunities to strengthen its presence by expanding distribution networks, increasing market penetration, and enhancing reach across focus geographies and therapeutic segments.

2. Product Portfolio Enhancement:

Growing healthcare needs and evolving market dynamics provide opportunities for portfolio expansion through new product introductions, lifecycle management, and differentiated offerings.

3. Manufacturing Efficiency and Capacity Optimization:

Continuous improvement initiatives, process optimization, and better capacity utilization provide opportunities to enhance productivity, improve margins, and support scalable growth.

4. Strengthening Supply Chain Capabilities:

Developing a resilient supply chain through diversified sourcing, strategic vendor partnerships, and cost optimization initiatives can improve operational stability.

5. Increasing Healthcare Demand:

Rising healthcare awareness, increasing access to medicines, and growing demand for quality pharmaceutical products present long-term growth opportunities.

Threats

1. Regulatory and Compliance Challenges:

Increasing regulatory requirements and evolving compliance standards may result in higher operational costs and potential business disruptions.

2. Competitive and Pricing Pressure:

Intense competition in the pharmaceutical sector, along with pricing pressures, may impact margins and market share.

3. Raw Material and Supply Chain Volatility:

Fluctuations in API/KSM prices, supply constraints, and external disruptions may affect production costs and operational efficiency.

4. Market and Economic Uncertainties:

Changes in economic conditions, government policies, healthcare regulations, and demand-supply dynamics may influence business performance.

5. Quality and Operational Risks:

Any quality-related concerns, manufacturing disruptions, or delays in product availability may impact customer confidence and business reputation.

6. Foreign Exchange and Global Market Risks:

Currency fluctuations and changes in international market conditions may affect profitability, particularly for businesses with export exposure.