Shilpa Medicare Ltd Management Discussions

GLOBAL INDUSTRY OVERVIEW Global Pharmaceutical Industry

The global pharmaceutical industry has demonstrated a growth of 5.0% from 2018 to 2023, with projections indicating an accelerated growth rate of 6.2% from 2023 to 2028. This expansion is primarily driven by the increasing prevalence of chronic diseases, an ageing population, and elevated healthcare expenditures.

Innovations in biologics, personalised medicine, and RNA interference (RNAi) therapies are enhancing the effectiveness of treatments. Furthermore, expedited regulatory pathways and a growing demand for patient-centered solutions are factors contributing to market expansion. Technological advancements in drug delivery systems and improved healthcare access in emerging economies also play a crucial role in shaping a promising future for the industry.

Despite encountering challenges within this evolving landscape, the pharmaceutical sector has demonstrated exceptional adaptability, delivering groundbreaking innovations, particularly during the COVID-19 pandemic, which has allowed for sustained growth.

In terms of modality, the global pharma market comprises two key categories of drugs i.e. small-molecule drugs and large-molecule drugs or biologics. The small molecule drugs dominates the market with 65% revenue share. Although, the dominance of small molecules is expected to maintain, due to ongoing research and development (R&D) efforts in modulating RNA splicing, stimulating specific types of stem cells, and developing drugs with antibody or peptide conjugates etc., the large molecules or biologics segment is expected to grow faster due to efficacy and targeted action.

The small-molecule segment has grown from USD 844 Billion in 2018 to USD 970.6 Billion in 2023, achieving a CAGR of 2.8%. For the same period, the biologics segment has grown from USD 291.9 Billion to USD 480.0 Billion in 2023, achieving a CAGR of 10.5%.

In the next five years i.e. period between 2023 and 2028, the small molecule segment is expected to grow at CAGR of 4.4% to reach USD 1,203.5 Billion in 2028, while the Biologics segment is expected to grow at CAGR of 9.4% to reach USD 752.1 Billion in 2028.

Global API market

As per Mordor Intelligence report, the global API market is valued at USD 232.13 Billion in 2025, and is expected to reach USD 328.94 Billion by 2030, at a CAGR of 7.22%. The sustained growth stems from the pharmaceutical sectors pivot toward specialised, higher-value molecules, rising demand for targeted therapies, and greater reliance on outsourcing. North America retains leadership on account of stringent regulatory oversight and an established manufacturing base, while Asia is capturing incremental volumes by offering cost-competitive, technologically sophisticated capacity. Strategic reshoring in the United States and Europe, growing adoption of continuous manufacturing, and accelerated development of mRNA platforms are reshaping competitive dynamics. Capital inflows into high-potency and biologic APIs, together with heightened emphasis on supply-chain resilience, are creating further expansion opportunities for companies that combine quality systems with advanced process know-how.

Global CDMO market

The Global Contract Development and Manufacturing Organisation (CDMO) industry has rapidly emerged as a critical segment in the pharmaceutical and biotechnology sectors. Driven by rising drug development costs and the need for specialised manufacturing capabilities, CDMOs offer essential services ranging from drug formulation to large-scale production. Their flexibility allows clients to expedite time-to-market for innovative therapeutics. As the demand for personalised medicine and biologics grows, CDMOs are increasingly investing in advanced technologies and quality controls. This evolution is fostering strategic collaborations and reshaping the landscape of drug manufacturing, enabling companies to remain competitive in a complex global market.

The global CDMO industry has grown from USD 86 Billion in 2018 to USD 120 Billion, representing a CAGR of 6.9%, and expected to reach to USD 176 Billion by 2028, representing a faster CAGR of 7.9%. Within global CDMO place India, which currently contributes a meagre 2-3% of the market is expected to grow at a much faster rate and capture about 8-10% of the global market by 2035, backed by its strong scientific capabilities and low cost-high quality manufacturing advantage.

COMPANY OVERVIEW

Shilpa Medicare Limited (the Company) is a prominent player in the global pharmaceutical industry. Established in 1987 in Raichur, Karnataka, the Company has grown into a renowned brand known for its affordable active pharmaceutical ingredients (APIs) and formulations distributed across Indian and various International markets.

With operations in four key business areas – APIs, formulations, CDMO (Contract Development and Manufacturing Organization), and biologics – the Company utilises a network of subsidiaries and six advanced manufacturing plants that serve clients in 65 countries. Its two API facilities are based in Raichur, while its formulation plants are situated in Jadcherla, Hyderabad and Dabaspet, whereas the Biologics unit is situated at Dharwad.

Driven by a commitment to innovation and quality, the Company operates five R&D centers in key Indian cities, supported by a team of over 400 scientists. These facilities propel the product pipeline and patent management, leading to the filing of over 550 patent applications for APIs, formulations, and biologics, underscoring its vital role in advancing global healthcare.

Active Pharma Ingredients (APIs)

The Company conducts its API business through its wholly-owned subsidiary, Shilpa Pharma Lifesciences. It operates two manufacturing facilities for APIs located in Raichur, Karnataka, with a total installed capacity of over 1,000 KL per annum. The Company is engaged in the production of oncology and non-oncology APIs, intermediates, peptides, and bio-polymers, and it also provides Contract Development and Manufacturing Organization (CDMO) services.

Throughout the years, the Company has established a significant leadership position in the global API industry by supplying products across various international markets. It has obtained regulatory accreditations from all major international regulatory agencies, including the USFDA, EUGMP, TGA, PMFDA, KFDA, and WHO-GMP.

Performance in FY25

During the year, the Companys API segment recorded a revenue of 73,605 Lakhs in FY25 compared to 77,222 Lakhs in FY24. The API CDMO segment demonstrated healthy growth by revenues increasing to 6,193 Lakhs in FY25 from 4,200 Lakhs in FY24, a growth of 47.5%. The Oncology API revenue stood at 32,778 Lakhs in FY25 as against 35,535 Lakhs in FY24, whereas Non-Oncology API revenue came in at 31,764 Lakhs in FY25 compared to 34,786 Lakhs in FY24.

Looking ahead to FY26 and beyond, while pricing pressures persist across generic markets, we maintain a positive outlook for our API division, driven by several strategic advantages. The commercial availability of expanded capacity for key products – including UDCA, Tranexamic Acid, and Ambroxol – positions us to meet growing demand efficiently. At the same time, we expect stronger contributions from our Peptides and Polymer segments, reflecting our focus on high-value specialty APIs. Our efforts to optimise the customer mix and increase penetration in regulated markets are yielding tangible benefits, enhancing both revenue stability and margins. Furthermore, the planned launch of new products in oncology and non-oncology segments will diversify our portfolio and support sustainable, long-term growth.

Formulations

The Company product offerings includes various dosage forms like Tablets/Capsules, Injectables, Oral Dissolving Films, and Transdermal Patches.

It operates three manufacturing plants in Jadcherla, Hyderabad and Bengaluru. The Jadcherla plant produces~ 25 Million OSD tablets,~ 4 Million capsules, 3 Million injectables, and ~2 Million vials of liquid lyophilisation annually, holding accreditations from multiple regulatory bodies including EU GMP, ANVISA, COFEPRIS, TGA, WHO-GMP, SHAPRA, and Health Canada. The Bengaluru plant is fully automated having capabilities to manufacture Oral Dissolving Films (ODF) and Transdermal Patches, having capacity of ~50 Million ODF units and ~30 Million TDF units annually, with major accreditations from US FDA,TGA, WHO-GMP, UK-MHRA, and EU GMP.

Performance in FY25

In FY25, our formulations segment delivered robust performance, achieving revenue growth of ~37% to reach 47,377 Lakhs, up from 34,589 Lakhs in FY24. This growth was propelled by successful new product launches, including the first generic Nilotinib in the EU, reinforcing our position as a key player in differentiated generics.

Licensing Income forms a substantial portion of formulations business, the Licensing Income in FY25 stood at 18,986 Lakhs as against 15,271 Lakhs in FY24. Over the years, Shilpa has invested in creating its own IP, which the company leverages its expertise in high-quality generic formulations to partner with global pharmaceutical companies, licensing out advanced development/ready-to-market molecules (including oncology and CNS therapies) for commercialisation in key markets like the US and EU. Through its licensing model, Shilpa Medicare selects partners with strong regional distribution, provides regulatory support, and earns revenue via upfront fees, milestones, supply agreements, and profit share. This low-capital, high-margin strategy accelerates market access while allowing partners to expand their portfolios with niche generics.

Amongst the revenue from regulated markets in FY25, EU region formulations revenue came in at 11,067 Lakhs compared to 8,591 Lakhs in FY24, whereas US region revenue in FY25 stood at 4,755 Lakhs compared to 5,402 Lakhs in FY24. On the emerging markets front, revenue came in at 9,969 Lakhs in FY25 compared to 3,317 Lakhs in FY24, whereas India formulations revenue stood at 2,555 Lakhs in FY25 as against 2,008 Lakhs in FY24.

Looking ahead, we expect continued momentum from high-value niche launches, including NorUDCA in India and Bortezomib RTU in US, as well as market share expansion for Pemetrexed in US. Additionally, the planned introduction of a transdermal product in the EU will further strengthen our portfolio in specialised delivery formats. With a strong pipeline and execution focus, we are well-positioned to sustain this growth trajectory in the coming years.

Biologics

The Company navigates its Biologics business through two wholly-owned subsidiaries: Shilpa Biologicals and Shilpa Biocare. This dynamic segment encompasses a diverse array of focus areas, including New Biological Entities (NBE), Microbial Products, Mammalian Products, and the innovative services of Contract Development and Manufacturing Organization (CDMO). With remarkable capabilities, the Company is positioned to design and develop complex biologics with unmatched speed, exceptional quality, and pioneering innovation.

At its biologics facility situated in Dharwad, the Company offers an all-encompassing suite of services, guiding each product from initial development to commercial manufacturing of both microbial and mammalian-based drug substances and products. This facility is equipped with an installed capacity of 4,000 litres for upstream processes, 1,000 litres for the microbial suite, and a throughput of 80 units per minute for pre-filled syringes (PFS). Proudly recognised with approval from the EU GMP, the facility excels in advanced technological specialisations such as Antibody-Drug Conjugates (ADC), and conjugated proteins.

Recombinant Human Albumin

Recombinant Human Albumin is a laboratory-produced version of human albumin, a protein typically found in human blood plasma. Albumin plays a vital role in maintaining blood volume and pressure by exerting osmotic pressure, which helps retain fluid in the bloodstream and prevents it from leaking into other tissues.

This year, the company filed its first Drug Master File for a 20% Recombinant Human Albumin (Excipient grade) with the US FDA. This innovative recombinant product has been developed through a patented, environmentally friendly process, ensuring consistent high quality, scalability for large production volumes, and cost competitiveness. The 20% recombinant Human Albumin aims to meet the growing demand for human serum albumin in the market. Notably, the company became the first Indian company to complete Phase 1 clinical trials for Recombinant Human Albumin (rHA) 20%.

To bring BioCare products to life, the Company boasts a cutting-edge, fully automated integrated facility. This state-of-the-art establishment features an advanced Distributed Control System (DCS) that meticulously manages operations, complemented by a sophisticated filtration system for efficient protein separation. The facility is designed with an impressive fermentation capacity exceeding 200 kilolitres per annum, and its versatile product vessel capacities range from 5 KL to 50 KL, while buffer vessels accommodate between 5 KL and 15 KL.

Performance in FY25

In FY25, our Biologics segment demonstrated robust performance, more than doubling its revenue to ~ 7,571 Lakhs, up from 3,091 Lakhs in FY24. This growth was driven by market share gains in Adalimumab and increasing contributions from our Biologics CDMO business.

Looking ahead, we are well-positioned to sustain this momentum through strategic new product launches, including Aflibercept, and expanding Adalimumab into new markets. Additionally, we continue to strengthen our long-term pipeline with ongoing investments in biosimilars and Phase III trials for Recombinant Human Albumin (rHA) in India and the EU. With a robust commercial portfolio and a promising development pipeline, we are confident in the segments ability to drive sustained, high-value growth in the years to come.

FINANCIAL OVERVIEW _CONSOLIDATED_

In FY25, the operating revenue of the Company increased by 12% to 1,28,641 Lakhs from 1,15,160 Lakhs in FY24. The net profit increased by 158% to 7,599 Lakhs from 2,950 Lakhs during the previous year. The other income of the Company increased to 2,315 Lakhs in FY25 from 817 Lakhs in FY24.

The cost of the raw materials which included purchasing the goods and changes in the stock of finished goods and work-in-progress for the reported year was 41,037 Lakhs, representing 32% of the operating revenue whereas, in FY24, the cost was 40,804 Lakhs, representing 35% of the revenue. In addition to this, employee costs increased by 4% to 29,271 Lakhs in FY25 from 28,139 Lakhs in FY24. The finance cost incurred by the Company was 7,553 Lakhs in FY25 in comparison to 9,180 Lakhs in FY24, reflecting a change of -18%. The depreciation and the amortisation amount for the Company in FY25 was 11,299 Lakhs, reflecting a growth of 5%. Also, the other expenses of the Company in FY25 were 26,628 Lakhs, which increased by 22% from 21,769 Lakhs in FY24.

Key Financials (Consolidated)

		( in Lakhs)
Particulars	FY25	FY24
Revenue from Operations	1,28,641	1,15,160
EBITDA	34,021	25,267
Profit before tax (PBT)	12,233	5,434
Profit after tax (PAT)	7,829	3,187

Product-mix analysis of operating revenue is as follows:

			( in Lakhs)
Category	FY25	FY24	Change
A. Products
API	67,410.75	73,019.69	-7.68%
Formulations	28,480.29	18,668.48	52.56%
Other Products	1,863.86	1,212.98	53.60%
Total Products	97,754.90	92,901.15	5.2%
B. Services
CDMO / Licence fees	30,886.51	22,259.15	38.76%
Total Services	30,886.51	22,259.15	38.76%
Total Operating Revenue (A+B)	1,28,641.40	1,15,160.30	11.71%

Key Standalone Ratios

S. No. Ratio	Numerator	Denominator	UOM	FY25	FY24
1 Current Ratio	Current Assets	Current Denominator	Times	2.10	1.77
2 Debt Equity Ratio	Total Debt	Shareholder Equity	Times	0.04	0.07
3 Debt Service Coverage Ratio	Earnings available for debt service	Debt Service	Times	18.58	0.71
4 Inventory Turnover Ratio	Cost of Goods Sold	Average Inventory	Times	0.93	0.86
5 Return on Equity	Net Profit after Taxes	Average Shareholders Equity	%	2.88	1.26
6 Trade Receivable	Revenue	Average Trade	Times	2.86	2.42
Turnover Ratio		Receivables
7 Trade Payable Turnover Ratio	Purchase of Trade and Services	Average Working Capital	Times	6.76	4.25
8 Net Capital Turnover Ratio	Revenue	Average Working Capital	Times	2.30	1.12
9 Net Profit Ratio	Net Profit	Revenue	%	12.09	6.34
10 EBITDA Margin	Earning Before Interest and Tax	Revenue	%	25.98	21.79
11 Return on Capital Employed	Earning Before Interest and Tax	Capital Employed	Times	8.34	5.74

HUMAN RESOURCE

The Company views human resources as a crucial strategic factor in fostering a productive, inclusive, and engaged workforce. It emphasises talent management and development, alongside cultivating a strong organisational culture. Valuing its employees as its greatest asset and key drivers of growth and success, the Company regularly provides skill enhancement and training programmes, empowering its workforce to meet the Companys business objectives. It nurtures a meritocratic environment while motivating employees through various recreational activities and recognition initiatives.

Understanding the significance of a strong human resources function in promoting organisational success, the Company continuously seeks ways to enhance employee satisfaction. Its initiatives are focussed on aligning talent strategies with business objectives to ensure sustainable growth. A well-structured HR policy has been established to foster a collaborative, transparent, and positive work culture, promoting alignment between employee aspirations and the organisations long-term vision.

Risk & Mitigation

Risk Category	Risk Description	Mitigation
Regulatory Compliance Risk	New or updated laws and regulations can pose risks if the firm fails to adapt its processes accordingly. This includes local, national, and international guidelines.	Regularly monitor changes in regulations and industry standards. Also, engage with all concerned regulatory bodies on consistent basis to understand and ensure all compliances.
Competition Risk	Any intense competition in the industry could lead to pricing pressures and could impact profitability.	Company stays competitive by innovation, quality assurance and strong delivery capability.
Intellectual Property Risk	API manufacturers need to ensure they respect existing patents and copyrights to avoid infringement claims that can lead to costly legal battles.	A dedicated team is engaged to manage IP portfolio.
Supply Chain Disruptions	Companys production process is dependent on various raw material sourced from international markets, also the goods are sold in various international geographies. Any disruptions in any geography could impact the business.	The Company always endeavours to diversify the geographical and product risk. Also, strong pool of suppliers mitigate risks to great extent.
Product Liability & Safety Risk	The Companys products are used for making medicines for various types of diseases. Any manufacturing defect or safety mismanagement could lead to liabilities.	The Company deploys best-in-class quality control measures using technology and processes.
Economic & Political Instability	The Company imports raw materials and exports its products to various international markets. Any economic disruption or change in political scenarios could impact the business adversely.	The diversified client base reduces the risk, also the Company monitors all the socio-economic developments in the client or supplier countries.
Technological Advancements & Innovations	In the event of the Companys failure to adapt latest technology or lack of innovation, it could impact the competitiveness of the Company in the industry.	The Company invests heavily in R&D facilities to stay ahead of the curve and lead the industry innovations.

INTERNAL CONTROL SYSTEM AND ADEQUACY

The Company has established a robust internal control system that ensures reliable financial reporting, provides timely operational feedback, and facilitates compliance with relevant laws and regulations. The implementation of SAP has significantly strengthened our financial reporting, introducing effective measures that decisively prevent any financial irregularities.

We have confidently deployed advanced monitoring software and developed comprehensive control systems across our production, materials, and marketing departments. Regular internal audits affirm the effectiveness of these controls, enabling our audit team to proactively identify potential risks. We continuously refine and enhance these systems to maximise both efficiency and effectiveness, reflecting our commitment to excellence.

CAUTIONARY STATEMENT

This document presents forward-looking statements concerning the anticipated future events, financial performance, and operational outcomes of the Company. These statements are based on specific assumptions and are subject to inherent risks and uncertainties. Therefore, it is important to recognise that the accuracy of these predictions cannot be guaranteed. We advise readers to approach these forward-looking statements with caution, as various factors may lead to significant differences between the anticipated results and actual future outcomes.