Smruthi Organics Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

During the year under review, the Company reported Net Sales and Other Income of Rs.12,609.67 lakhs as compared to Rs.12,771.86 lakhs in the previous year, registering a marginal decline of 1.3%. The net profit stood at Rs.356.29 lakhs, closely aligned with the previous years figure of Rs.359.03 lakhs. Despite persistent pricing pressures in domestic markets, the Company successfully sustained profitability through robust export performance and cost optimization measures.

Company Performance and Operational Highlights

The Companys strategic thrust on expanding exports has yielded strong results, with export sales growing by 38% year-on-year. Notably, China emerged as a key market contributing significantly to this growth. However, stagnant and, in some cases, declining product prices continued to exert pressure on overall margins—a trend consistent with the previous financial year. This was largely mitigated by targeted cost reduction initiatives and process improvements across product lines.

Building on previous years focus on operational efficiency, FY 2024-25 saw the successful execution of backward integration and raw material cost optimization initiatives. These process improvements, spearheaded by our R&D centres in Hyderabad and Solapur, have not only lowered input costs but also contributed to quality enhancements and improved yields across several key APIs. These developments mark a continued transition from dependency on external intermediates to in-house manufacturing, further securing our supply chain and cost structure.

In FY 2024-25, the R&D team also developed two new APIs and worked on multiple improvement programs that enhanced product quality, yield, and environmental compliance. These efforts, while not detailed in this report, align with our long-term goal of strengthening inhouse capabilities and broadening our therapeutic footprint.

The Company undertook a capital expenditure of Rs.1151.50 lakhs during the year, funded partially through a term loan. This investment was directed towards modernization of plant infrastructure, automation, and utility upgrades.

In line with our global regulatory roadmap, the Company submitted 12 new Drug Master Files (DMFs) across international authorities in Russia, China, Africa and Korea during FY 2024-25. These submissions build upon the 22 DMFs filed in the prior year and underscore our commitment to expanding in regulated, high-value markets.

We are preparing for regulatory inspections by ANVISA (Brazil) and EDQM (Europe) in FY 2025-26. These inspections are critical milestones toward entering regulated markets, expected to catalyze product approvals and revenue growth from these regions.

The FDF division recorded secondary sales of Rs.37.27 lakhs, down from Rs.58.57 lakhs in the previous year—a decline of 36.4%. This was primarily due to reduction in geographic coverage and field-force attrition.

Outlook

Looking ahead, the Company remains cautiously optimistic. While pricing pressures persist domestically, the continued export momentum, enhanced operational efficiencies, and deepening of regulatory compliance should improve growth. We anticipate stronger revenue contributions from China and Russia, supported by our increasing regulatory presence:

We will continue our focus on:

• Expanding our product pipeline through in-house R&D,

• Driving backward integration and cost rationalization,

• Strengthening regulatory readiness to tap into EU, Brazil, and South Korea,

• Sustained DMF filings in key global markets.

The management is confident that the foundations laid over the past three years—ranging from infrastructure modernization and cost optimization to global compliance—will translate into enhanced shareholder value in the medium to long term.