Shelter Pharma Ltd Management Discussions

OVERVIEW

Shelter Pharma Limited operates in the pharmaceutical sector, specializing in human and veterinary healthcare products. The financial year 2024-25 has reflected strong revenue growth, continued focus on R&D, prudent cost management, and successful capital restructuring. Below is a detailed management analysis based on the financial statements as at 31^st March, 2025.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Indias pharmaceuticals industry continues 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 HIGHLIGHTS Revenue Analysis

Particulars	FY 2024-25 (? Lakhs)	FY 2023-24 (? Lakhs)	Growth (%)
Revenue from Operations	5,066.02	4,002.28	26.56%
Other Income	0.55	0.39	41.03%
Total Income	5,066.56	4,002.67	26.61%

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 2024-25 (? Lakhs)	FY 2023-24 (? Lakhs)	Growth (%)
Operating Profit (Before Tax)	967.70	828.26	16.85%
Net Profit After Tax (PAT)	723.74	620.02	16.72%
EBITDA Margin (%)	19.6	20.7	-1.1ppt
EPS (Basic/Diluted)	6.26	5.36	16.82%

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:

• Revenue Growth: FY25 revenue up ~26.6% year-on-year, driven by volume and execution.

• Profitability: PAT increased to Rs.723.74 lakh from Rs.620.02 lakh, with EPS improving to Rs.6.26 from Rs.5.36.

• Working Capital: Increases in inventories and receivables consistent with revenue scale-up; management focus remains on cycle optimization.

• Leverage and Liquidity: Conservative borrowing profile with adequate liquidity supported by operating cash flows and cash balances.

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-25 (? Lakhs)	31-Mar-24 (? Lakhs)
Share Capital	1,155.98	1,155.98
Reserves & Surplus	3,116.09	2,425.60
Total Equity	4,272.07	3,581.58
Non-Current Liabilities	98.64	62.42
Current Liabilities	462.86	147.49
Total Liabilities	561.5	209.91
Non-Current Assets	1505.69	819.60
Current Assets	3327.86	2971.87

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

• Volume and Market Execution: Revenue growth in FY25 underscores improved market presence, product availability, and sales execution across addressable channels.

• 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.

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

• Capacity Build-out: Incremental PPE investments during FY25 enhance production reliability, quality systems, and throughput for medium-term growth.

• 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

• Regulatory and Compliance Risk: The pharmaceutical sector is subject to stringent quality, safety, and compliance standards across jurisdictions. Non-compliance could impact operations and reputation. The Company prioritizes adherence to applicable regulations and standards.

• Input Cost and Supply Chain Risk: Volatility in KSM/API prices and supply constraints can affect margins and service levels. Diversified sourcing and inventory planning are key mitigants.

• Competitive and Pricing Pressure: Branded generics remain competitive; sustained focus on quality, differentiated offerings, and field execution is essential.

• Working Capital Intensity: Growth requires disciplined management of receivables and inventories to safeguard liquidity.

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

Shelter

Internal Control Systems and Adequacy

The Company maintains internal financial controls commensurate with its size and nature of operations, covering key processes such as procurement, production, quality, sales, finance, and compliance. Controls are designed to ensure the reliability of financial reporting, safeguarding of assets, and prevention and detection of fraud and errors. These controls are subject to periodic review by management, the Audit Committee, and external auditors, and are reinforced through standard operating procedures and segregation of duties.

Human Resources

The Company continues to invest in building a capable and performance-oriented organization. The increase in employee benefit expense is consistent with growth, talent acquisition, and retention. Industrial relations remained cordial during the year. Training, safety, and compliance practices are emphasized to sustain quality and productivity.

Outlook

The Company aims to sustain growth by:

• Deepening distribution and improving market reach in focus geographies and therapeutic areas.

• Enhancing manufacturing efficiency, capacity utilization, and yield through continuous improvement.

• Strengthening sourcing resilience and cost management to protect margins.

• Maintaining quality and compliance rigor as a non-negotiable foundation.

• Exercising disciplined capital allocation across capacity, product development, and working capital.

Management believes that the investments made in FY25 in capacity and capabilities position the Company to capitalize on medium-term demand while maintaining financial prudence.

Cautionary Statement

Statements in this MD&A describing the Companys objectives, projections, estimates, expectations, or predictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference include changes in government policies, regulatory environments, tax laws, economic conditions, demand-supply dynamics, input cost trends, foreign exchange fluctuations, and other incidental factors. The Company assumes no responsibility to publicly amend, modify, or revise any forward-looking statements on the basis of subsequent developments, information, or events.

Key Financial Ratios:

Sr. No	Particulars	Fy 2024-25	Fy 2023-24	% Changes
1	Current Ratio	7.19	20.15	-64.32
2	Debt Equity Ratio	0.02	0.02	36.26
3	Debt Service Coverage Ratio	38.13	124.55	-69.39
4	Return on Equity Ratio	16.94	17.31	-2.14
5	Inventory Turnover Ratio	3.24	3.26	-0.61
6	Trade Receivable Turnover Ratio	5.53	4.70	17.75
7	Trade Payable Turnover Ratio	40.72	52.28	-22.12
8	Working Capital Turnover Ratio	1.77	1.42	24.80
9	Net Profit Ratio	14.28	15.49	-7.81
10	Return on Capital Employed	22.46	22.89	-1.88

Notes:

1. Current Ratio decreased by 64.32% due to change in Current Assets & Liabilites

2. Debt Equity Ratio Increased by 36.26% due to increase in Equity

3. Debt Service Coverage Ratio decrease by 69.39% due to change in debt service