Shree Pacetronix Ltd Management Discussions

ANNEXURE-IX

CAVEAT

Shareholders are cautioned that certain data and information in the report is external to the Company and is included in this section. Though these data and information are based on sources believed to be reliable, no representation is made on their accuracy or comprehensiveness. Further, though utmost care has been taken to ensure that the opinions expressed by the management here in contain their perceptions on most of the important trends having a material impact on the Companys operations, no representation is made that the following presents an exhaustive coverage on and of all issues related to the same. The opinions expressed by the management may contain certain forward-looking statements in the current scenario, which is extremely dynamic with risks and uncertainties. Actual results, performances, achievements or sequence of events may be materially different from the views expressed herein. Shareholders are hence advised to conduct their own investigation and analysis of the information contained or referred to in this section before taking any action with regard to their own specific objectives. Further, the discussion following herein reflects the perceptions on major issues as on date and the opinions expressed here are subject to change without notice. The Company undertakes no obligation to publicly update or revise any of the opinions or forwardlooking statements expressed in this section, consequent to new information, future events, or otherwise.

GLOBAL MARKET

The global medical device market continues to show promise with advancements in technology and healthcare. There is a growing demand for innovative devices driven by an aging population, increasing prevalence of chronic diseases, and advancements in personalized medicine.In recent years, the medical device industry has experienced significant growth, driven by factors such as an aging population, increased prevalence of chronic diseases, and a growing focus on personalized medicine. This has created a vast market with ample opportunities for companies to make their mark.

Additionally, Emerging markets like India are significant contributors to the growth of the medical equipment industry. These regions are experiencing higher healthcare spending and infrastructure development, leading to increased demand for modern medical devices.

India is the 4th largest Asian medical devices market after Japan, China, and South Korea, and among the top 20 medical devices markets globally.

The Global Cardiac Pacemakers Market size is estimated at USD 4.68 billion in 2024, and is expected to reach USD 5.53 billion by 2029, growing at a CAGR of 3.43% during the forecast period (2024-2029).

According to data from the World Population Prospects: Highlights 2020, approximately 1.5 billion people worldwide will be over 65 by 2050, up from 727 million by 2020. One in four people in Europe and North America will be 65 years or older by 2050. From 143 million in 2019 to 426 million by 2050, the number of people aged 80 and over is expected to triple. Pacing treatment is usually done to treat severe arrhythmia. According to a research article titled "Pacemaker Treatment for Older Patients: Survival and Specific Predicting Limits for One-Centered Experience", published in 2019, the number of older patients receiving pacemakers is growing.

The medical devices industry in India consists of large multinationals as well as small and medium enterprises (SMEs) growing at an unprecedented scale.

According to the World Health Organization, an estimated 17.9 million people die due to cardiovascular diseases worldwide, each year. This represents 31% of global deaths, which are majorly due to heart attack and stroke. Thus, the growing burden of cardiovascular diseases globally, along with the technological advancements in the development of novel pacemakers, is expected to drive the cardiac pacemakers market growth over the forecast period.

GROWTH DRIVERS / OPPORTUNITIES

The opportunity in the global market for pacemakers is tremendous and promising. With the increasing prevalence of cardiac diseases and the growing geriatric population worldwide, the demand for pacemakers is expected to rise in the coming years.

The Company is one among the Corporates which is operating in global market for Pacemaker. Pacemakers are medical devices that are used to impart electrical pulses to the heart, so as to ensure normal heart rate. Pacemakers are used to treat patients who are suffering from heart conditions, such as heart failure and arrhythmias. These devices are implanted under patients chest by cardiologist to deal with various indications and used for the treatment of heart medical complications/conditions.

One key driver of the Global Cardiac Pacemaker Market is the increasing prevalence of cardiovascular diseases. As the incidence of heart conditions such as arrhythmias and heart failure continue to rise globally, there is a growing demand for cardiac pacemakers to manage and treat these conditions

According to data from the World Population Prospects: Highlights 2020, approximately 1.5 billion people worldwide will be over 65 by 2050, up from 727 million by 2020. One in four people in Europe and North America will be 65 years or older by 2050. From 143 million in 2019 to 426 million by 2050, the number of people aged 80 and over is expected to triple. Pacing treatment is usually done to treat severe arrhythmia. According to a research article titled "Pacemaker Treatment for Older Patients: Survival and Specific Predicting Limits for One-Centered Experience", published in 2019, the number of older patients receiving pacemakers is growing. Cardiac Pacemaker Market in India is expected to grow at a healthy rate as people are becoming more aware and cardiac pacemakers are also becoming more user friendly with added features. Also, cardiac pacemakers have become more affordable helping the market to grow even further.

The overall Indian healthcare market was about $180 billion in FY 2023 and is projected to grow at approximately 12% CAGR to reach roughly $320 billion by FY 2028.

The Pacemaker market is driven by the factors, such as the increase in prevalence of cardiovascular diseases, the prevalence of heart disease, Aging Population, changing demographics i.e. as more people reach close to sixty years of age they are likely to develop some heart complications thus increasing the demand for cardiac pacemakers, technological developments in pacemakers that minimize the chances of heart failure, and improved efficiency of devices. Additionally, assistance from government bodies, favourable reimbursement Policies, increased government expenditure for research and development, is expected to enhance the market potential in several countries. Therefore, such initiatives from the government are expected to help the market and the patients in their treatment which will drive the Pacemakers market growth also.

Further, compared to other western countries penetration of cardiac pacemaker is less in India-hence, providing ample opportunities for growth for the manufacturers.

The Government of India has allocated an estimated amount of Rs. 89,155 crore in union budget for the pharmaceutical and healthcare sector under the Union Budget 2023-2024.Atma Nirbhar Bharat mission is providing an impetus to Indias vision of becoming a global manufacturing hub for medical devices. Recent initiatives for instance, The Production Linked Incentive Scheme (PLI) and Promotion of Medical Devices Parks Scheme are a testimony to this.

RESTRAINTS. THREATS. RISK AND CONCERNS:

The medical device industry market is very dynamic and the key drivers impacting this sector are healthcare expenditure, technological development, aging population, and chronic diseases. Further emerging trends that impact the medical device industry include the changing medical technology landscape, software as a differentiator in medical devices, as well as design and manufacturing of patient portable or smaller devices. Stringent government rules and regulations for the development & manufacture of medical devices could hinder the growth of the market.

One key restraint of the market is the high cost associated with pacemaker implantation procedures. Cardiac pacemakers are sophisticated medical devices that require skilled professionals, specialized equipment, and post-operative care. The overall cost of implantation, including the device, surgery, hospitalization, and follow-up care, can be substantial, making it a significant financial burden for many patients. This cost barrier restricts access to cardiac pacemakers, particularly in lower-income regions or for patients without adequate insurance coverage

The healthcare supplies industry continues to face significant challenges both in India and internationally with the volume and complexity of change having greatly intensified the implication of risk. Regulatory risks, which are an inherent threat in the industry, are compounded by evolving regulations, new legislation and increased enforcement. To provide affordable healthcare, the Company will fully cooperate and partner with the Government on efforts focused towards ensuring access and increasing affordability of medicines while maintaining strong commitment on quality.

RISK FACTORS:

Risks associated with pacemaker system implant include, but are not limited to, infection at the surgical site and/or sensitivity to the device material, failure to deliver on time due to various factors.

Though it is not possible to completely eliminate various risks associated with the business of the Company, efforts are made to minimize the impact of such risks on the operations of the Company. The Company has put in place various internal controls for different activities so as to minimize the impact of various risks.

Pacemaker industry in terms of current risks to business objectives:

1. Political and Economic Risk:

o Global Economic Uncertainty: Economic downturns or fluctuations in key markets can impact demand for pacemakers and affect the financial stability of manufacturers.

o Trade Policies and Tariffs: Changes in trade policies, tariffs, or trade disputes can disrupt supply chains and increase manufacturing costs.

o Geopolitical Instability: Political instability in regions where manufacturing facilities are located can disrupt operations and logistics.

2. Compliance Risks:

o Regulatory Changes: Ongoing changes in regulations by regulatory bodies such as the FDA (in the U.S.) or CE Marking (in Europe) impact product approvals and market access. Manufacturers must stay updated and adapt their compliance practices accordingly.

o Data Privacy Regulations: Increasing scrutiny on data privacy (e.g., GDPR in Europe) impacts how patient data collected by pacemakers is handled and stored.

3. Operational Risks:

o Supply Chain Disruptions: Dependence on global supply chains for critical components exposes manufacturers to risks such as raw material shortages, supplier failures, or transportation delays.

o Quality Assurance: Ensuring consistent quality and reliability of pacemakers amidst complex manufacturing processes and stringent regulatory requirements.

o Talent Acquisition and Retention: Competing for skilled talent in fields such as biomedical engineering and regulatory affairs is crucial for maintaining operational excellence.

4. New Product Risks:

o Rapid Technological Advances: Keeping pace with advancements in medical technology to meet patient needs and regulatory expectations.

o Market Adoption and Competition: Intense competition from both established players and new entrants requires effective market strategies and differentiation of new products.

o Clinical Trials and Regulatory Approvals: Lengthy and costly processes for conducting clinical trials and obtaining regulatory approvals for new pacemaker models.

5. Cyber security Risks:

o Increased Connectivity: Pacemakers are becoming more connected to digital health systems, making them susceptible to cyber security threats such as hacking or unauthorized access.

o Data Security: Ensuring robust cyber security measures to protect patient data stored and transmitted by pacemakers.

6. Ethical and Social Considerations:

o Patient Safety and Privacy: Ethical considerations surrounding patient safety, informed consent, and the ethical use of pacemaker technologies.

o Societal Expectations: Meeting societal expectations for transparency, sustainability, and responsible corporate behavior.

Pacemaker manufacturing is highly regulated business, the requirement to obtain regulatory approval based on a products safety, efficacy and quality before it can be marketed for an indication in a particular country, as well as to maintain and comply with licenses and other regulations relating to its manufacture and marketing, are particularly important. The submission of an application to regulatory authorities (which vary, with different requirements, in each region or country) may or may not lead to the grant of marketing approval.

SEGMENT- WISE OR PRODUCT WISE PERFORMANCE:

The Company is engaged in only one segment i.e. manufacturing of pacemakers, there are different types of pacemakers that the Company manufactures.

• Single chamber pacemaker. This type usually sends electrical signals to the lower right chamber of the heart.

• Dual chamber pacemaker. This type sends electrical signals to the upper and lower right heart chambers.

• Biventricular pacemaker. This type also is called a cardiac resynchronization pacemaker. Its for people who have heart failure and a slow heartbeat. The device stimulates both lower heart chambers. It helps make the heart muscle stronger.

• Throughout the fiscal year, the company successfully generated revenue totaling Rs. 2204.05 Lakhs. Amidst this achievement, the company remains dedicated to refining its operational capabilities and expanding its geographical reach. This strategic focus underscores the companys ongoing commitment to growth and operational excellence in the dynamic marketplace.

OUTLOOK

The global pacemakers market is experiencing growth driven by an aging population, increasing prevalence of cardiac conditions, and advancements in healthcare technology. Government initiatives, including enhanced reimbursement policies worldwide, are further shaping this sector. This evolving landscape presents significant opportunities for pacemaker manufacturers globally. By focusing on innovation, expanding into emerging markets, and forming strategic partnerships, companies can lead in cardiac treatment, driving growth and benefiting patients globally.

In India, the majority of market players are international companies, leading to intense competition. Our company aims to expand its footprint significantly in the Indian market in the coming years while also serving international markets, contributing to saving foreign exchange. Our commitment to growth includes prioritizing revenue enhancement, cost efficiency, and improving overall margins, all while fulfilling our responsibility towards societal welfare.

We have achieved a milestone of more than one lakh implants in India and beyond, thanks to our strong emphasis on research and development and our mission to serve our communities. The governments "vocal for local" initiative underscores the importance of local brands achieving global recognition. India, with its rapid growth and significant market potential, particularly in medical devices, aligns with our more than 30 years of experience and our dedication to the "Make in India" and self-reliance vision.

Supportive measures from the Indian government, such as promoting indigenous manufacturing of advanced medical devices and production-linked incentive schemes, are set to further boost the domestic medical devices markets growth trajectory.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The company has proper internal control system which provides adequate safeguards and effective monitoring of the transactions. The Company has comprehensive internal financial controls system for all major processes including financial statements to ensure reliability of reporting. The Company has appointed an internal auditor which carries out audit throughout the year. The Audit Committee of the Company regularly reviews the reports of the internal auditor and recommends actions for further improvement of the internal controls. The statutory auditors while conducting the statutory audit, review and evaluate the internal controls and their observations are discussed with the Audit committee of the Board. The system also helps management to have timely data on various operational parameters for effective review. It also ensures proper safeguarding of assets across the Company and its economical use. The internal financial controls system of the Company is commensurate with the size, scale and complexity of its operations. The system and controls are periodically reviewed and modified based on the requirement.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

In the fiscal year 2023-24, the Company generated operational revenue amounting to Rs. 2204.05 Lakhs, an increase from Rs. 2019.35 Lakhs in the previous fiscal year. The Company realized a profit of Rs. 335.83 Lakhs, compared to Rs. 324.76 Lakhs in the preceding fiscal year. Overall, the Companys performance has improved relative to the previous year. The Company is diligently pursuing its commitments and growth objectives, with management continuously striving to enhance operational efficiencies and overall performance.

HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company recognizes the critical role of its human resources in achieving organizational growth and success. Maintaining positive and harmonious relationships with employees across diverse locations has been a cornerstone of our operational strategy. As of March 31, 2024, the Company employed 122 permanent staff members. We have assembled a skilled and capable team capable of handling complex challenges and driving our objectives forward.

Our commitment to fostering good industrial relations has bolstered employee morale, fostering a collaborative environment where both employer and employees share a common goal of enhancing productivity. This shared sense of ownership in achieving production goals has contributed to a unified workforce and strengthened our standing within the community.

Throughout the year, the Company has implemented various initiatives aimed at reinforcing our human resource capabilities to align with our current and future growth plans. These efforts include continuous training and development programs designed to enhance technical proficiency, job-related skills, and overall competencies among our workforce.

The year was marked by a collective determination among employees to strive for continuous improvement in work practices and productivity. Industrial relations remained cordial across all locations, reflecting our ongoing commitment to fostering a conducive and cooperative work environment.

Our human resource strategy focuses on nurturing talent, promoting collaboration, and enhancing capabilities, ensuring that our workforce remains well-equipped to drive the Companys sustained growth and success.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Details of significant changes (i.e. change of 25% or more as compared to immediately previous financial year) in key financial ratios, along with detailed explanations are as follows:

S. NO	PARTICULARS	RATIO IN F.Y. 2023-2024	RATIO IN F.Y. 2022-2023	% OF CHANGE	EXPLANATIONS FORMATERIAL CHANGE (CHANGE OF 25% ORMORE)
1.	Debtors Turnover Ratio	3.73	3.61	Increase by 3.44%	Not Applicable
2.	Inventory Turnover Ratio	3.01	8.69	Decrease by - 65.37%	Due to Increase in average inventory
3.	Interest Cover age Ratio	13.71	16.55	Decrease by 17.16%	Not Applicable
4.	Current Ratio	1.98	1.87	Increase by 6.28%	Not Applicable
5.	Debt Equity Ratio	0.04	0.04	No Change	Not Applicable
6.	Operating Profit Margin	22.49	24.23	Decrease by 07.18%	Not Applicable
7.	Net Profit Margin	15.24%	16.08	Decrease by -5.26%	Not Applicable

CHANGES IN RETURN ON NETWORTH

Return on net worth for FY 2023-2024 is 29.26% whereas return on net worth for FY 2022-2023 was 39.74%. Return on net worth has steep down for the year ended 31^st March, 2024 Due to increase in average net worth of the Company as compared to previous year.

DISCLOSURE IN ACCOUNTING TREATMENT

In the preparation of financial statements, no different treatment from that prescribed in applicable Accounting Standard has been followed.

	For and on behalf of the Board of
	Shree Pacetronix Limited
Date: 10/08/2024
Place: Pithampur
Atul Kumar Sethi	Akash Sethi
Managing Director	Joint Managing Director
(DIN:00245685)	(DIN:08176396)