Solara Active Pharma Sciences Ltd Management Discussions

ECONOMIC OVERVIEW

In 2024, the global economy grew at a moderate rate of 3.3%, reflecting a phase of relative stability, albeit growth was restrained. As we progress through 2025, the global environment is seeing a substantial transformation, prompted by nations realigning their policy priorities in reaction to escalating geopolitical tensions and increasing economic difficulties.

The United States has implemented a series of additional tariff measures, eliciting immediate and vigorous responses from significant trading partners. This resulted in the establishment of nearly universal tariffs on April 2. Consequently, effective tariff rates have escalated to unprecedented heights, inflicting a severe and detrimental impact on global GDP.

The issue has been exacerbated by the rapid and erratic nature of these policy shifts, which have markedly intensified economic uncertainty and rendered the shortterm outlook highly unstable. This escalating instability has compromised the trustworthiness of conventional forecasting methods, rendering it challenging to build estimates on previously trustworthy assumptions.

Considering this uncertainty, worldwide headline inflation is projected to decrease at a slower rate than previously planned. The projection indicates a decline to 4.3% in 2025 and thereafter to 3.6% in 2026. The revision indicates increased inflation projections for advanced economies, somewhat counterbalanced by slight downward revisions in emerging markets and developing nations.

GDP GROWTH TREND

(Source: World Economic Outlook, April 2025)

OUTLOOK

Despite the ongoing challenges facing the global economy, this moment offers a unique opportunity to build resilience and steer toward a more sustainable future. Several economies under strain have shown remarkable adaptability, underscoring that recovery is attainable through proactive reforms and coordinated policy efforts.

A fairer and more balanced global recovery can be achieved if nations work together to foster transparent trade practices, enable timely debt resolution, and address underlying structural imbalances. Safeguarding long-term growth and restoring financial stability will depend on maintaining clear monetary policy

guidance, applying macroprudential tools judiciously, and executing credible fiscal strategies.

Looking ahead, international collaboration will be essential. Through aligned strategies, strong leadership, and a shared commitment to progress, the global economy can regain momentum, rebuild buffers, and unlock new opportunities for inclusive and sustained growth.

INDIAN ECONOMY

India has firmly established itself as a beacon of resilience and stability, navigating persistent global headwinds with consistent GDP growth, easing inflation, and robust domestic demand. The economy grew by 6.5% in FY 2024-25, driven by strong performance in construction, trade, and financial services, supported by sustained consumption and strategic government expenditure.

Consumer price inflation (CPI) eased to a seven-month low of 3.6% in February 2025, primarily due to falling food prices. However, core inflation edged up to 4.1%, signalling persistent underlying pressures. This mixed inflationary trend calls for a calibrated monetary policy response by the Reserve Bank of India to balance growth and inflation expectations.

On the fiscal side, the government has continued its consolidation efforts, targeting a fiscal deficit of 4.9% of GDP for FY 2024-25, down from 5.6% in the previous year. The Union Budget for FY 2025-26 earmarked 11.21 lakh crore around 3.1% of GDP for capital expenditure, reinforcing the governments commitment to infrastructure-led growth, job creation, and sectoral development.

The external sector is also witnessing a gradual rebound. Merchandise exports are expected to rise, buoyed by strong global demand in engineering goods, pharmaceuticals, and electronics. Meanwhile, lower crude oil prices and expanding domestic manufacturing, particularly under the Production-Linked Incentive (PLI) schemes, are likely to moderate imports, helping narrow the trade deficit. Strategic policy initiatives, including new trade agreements and targeted export promotion, are further strengthening Indias global position.

Looking ahead, Indias economic outlook for FY 202425 remains robust, underpinned by resilient domestic consumption, higher public investment, and reform- driven governance. Dynamic sectoral contributions from services, manufacturing, and construction continue to reinforce the economic foundation. While global uncertainties, trade disruptions, and geopolitical risks remain key challenges, Indias structural transformation fuelled by digital adoption, a thriving startup ecosystem, and manufacturing push through PLI schemes provides a strong buffer. Disciplined fiscal and monetary strategies, rising productivity, and innovation-led

growth are enhancing Indias competitiveness. While risks such as capital flow volatility and persistent core inflation warrant ongoing vigilance, India remains well- positioned to sustain its momentum and retain its status as the worlds fastest-growing major economy.

GLOBAL PHARMACEUTICAL INDUSTRY

The global pharmaceutical sector continues to chart a steady growth trajectory, fueled by relentless innovation, expanded healthcare access, and rising demand for specialty therapies. In developed markets, growth is being driven by the adoption of advanced, high-value treatments, while emerging economies are witnessing increasing momentum through higher volumes and greater expenditure on complex therapies, aided by broader healthcare coverage.

According to IQVIA, the global pharmaceutical market is projected to grow at a compound annual growth

rate of 6% to 9%, reaching a value between US$2.23 trillion and US$2.25 trillion by 2028. This expansion is underpinned by a rising burden of chronic and lifestyle- related diseases, growing awareness around preventive and long-term care, and the healthcare needs of an ageing population.

Across the value chain, the industry is undergoing profound transformation. Companies are investing in breakthrough innovations, expanding healthcare access, leveraging emerging technologies, and optimising operational efficiencies. Collaboration across the healthcare ecosystem is also intensifying, supported by proactive government policies aimed at fostering resilience and innovation. The industrys ability to navigate uncertainty was powerfully demonstrated during the pandemic, highlighting its agility, creativity, and global coordination in the face of unprecedented challenges.

GLOBAL PHARMACEUTICAL MARKET GROWTH

API INDUSTRY

The Active Pharmaceutical Ingredient (API) market forms the foundation of the pharmaceutical industry, providing the critical components that deliver therapeutic effects in medicines. Sourced either from natural materials or through chemical synthesis, APIs are essential to drug development and manufacturing worldwide. As the pharmaceutical sector advances with new therapies and innovative delivery technologies, the demand for complex and high-quality APIs is set to rise significantly.

The global API market is projected to reach $359.12 billion by 2032, growing at a strong compound annual growth rate (CAGR) of 6.9%. This sustained momentum highlights the pivotal role of APIs in advancing pharmaceutical innovation and addressing the rising global demand for complex therapies. IQVIA, through its MIDAS database, provides comprehensive tracking and analysis of the global molecule market, forming the foundation for API market insights.

Over the past two decades, the pharmaceutical supply chain has evolved significantly, with companies increasingly outsourcing manufacturing activities to leverage cost efficiencies and operational flexibility. Major pharmaceutical players, emerging biopharma firms, and virtual pharma companies are relying heavily on contract manufacturers, particularly in India and China, where API production costs are 30-40% lower than in the United States. Favorable factors such as cost-effective labor, robust testing infrastructure, ample research capabilities, and supportive regulatory frameworks have further strengthened the appeal of these markets, enabling companies to scale up production, enhance productivity, and improve efficiency.

At the same time, the industry continues to grapple with supply disruptions and drug shortages, often triggered when demand exceeds supply for specific products. Factors such as limited financial incentives to produce less profitable drugs can exacerbate these imbalances, leading to extended shortages if disruptions persist. While many shortages eventually resolve through production adjustments or shifts in demand, they highlight the fragility of pharmaceutical supply chains and the critical need for proactive management to ensure consistent availability of essential drugs.

Drivers of API market expansion

The global Active Pharmaceutical Ingredient (API) market is being propelled by a diverse set of structural and cyclical factors. Key drivers include expanding manufacturing capacities, increasing demand for generics and complex therapies, technological advancements in production processes, and demographic shifts such as a rapidly aging global population. The rising burden of chronic diseases further accelerates the momentum of API market growth.

Scaling production capacities

Continuous investments in expanding pharmaceutical and biopharmaceutical manufacturing capabilities are enabling companies to meet rising global demand, introduce new therapeutic products, and adopt advanced production technologies. This expansion strengthens the long-term sustainability and innovation potential of the API market.

Technological ADVANCEMENTS

Rapid progress in drug discovery, development, and clinical research is reshaping the pharmaceutical landscape. Innovations in API manufacturing technologies have enhanced production efficiency, improved quality standards, and enabled the development of next-generation therapies, positioning APIs as vital components of novel treatments.

Rising demand for generics and specialty therapies

The growing global burden of chronic diseases such as cardiovascular conditions, diabetes, and cancer has amplified the demand for affordable treatment options. Generic medicines, offering therapeutic equivalence at lower costs, are witnessing rising adoption, directly driving higher API requirements across therapeutic categories.

Impact of an aging global population

The steadily expanding geriatric population is a significant contributor to the increased consumption of pharmaceuticals. With age-related illnesses on the rise, the demand for chronic care medications continues to surge, fueling long-term growth in the API market.

Lessons from global health crises

The COVID-19 pandemic underscored the strategic importance of a resilient pharmaceutical supply chain. The intensified focus on vaccine development, rapid drug discovery, and biopharmaceutical innovation during the crisis significantly boosted API demand, a momentum that continues to influence market dynamics positively.

Outlook

The global Active Pharmaceutical Ingredients (API) market is poised for steady growth, fueled by rising demand for generic and innovative therapies, alongside advancements in biotechnology and personalized medicine. Increasing focus on affordable healthcare, expansion of biopharmaceutical research, and the evolving treatment landscape are expected to sustain strong momentum in the API sector over the coming years. With supportive regulatory frameworks and greater outsourcing of manufacturing activities, the market outlook remains positive, offering significant opportunities for growth and innovation.

Source: IQVIA: API Market Overview,

INDIAN PHARMA INDUSTRY

Indias pharmaceutical industry is entering a significant growth phase, with the domestic market currently valued at approximately USD 55 billion in 2024. Over the next six years, the market is projected to expand 2.2 to 2.4 times, reaching between USD 120 billion to USD 130 billion by 2030. Looking further ahead, the industry aspires to approach a market size of nearly USD 450 billion by 2047, positioning itself as a global powerhouse not only in manufacturing volumes but also in innovation and value creation.

This expansion will be driven by rising domestic healthcare needs, increased access to medicines, broader health insurance penetration, and Indias growing role as a trusted supplier of affordable, high-quality generics and vaccines worldwide. The country already holds a leadership position, supplying nearly 20% of the worlds generic medicines, supported by a manufacturing base of over 10,000 facilities, including the largest number of USFDA-compliant plants outside the United States. With strong production capabilities and deep expertise, India is well-positioned to significantly increase its share of the global pharmaceutical market in the coming years.

However, while India leads in terms of volume, there remains a gap in export value compared to more developed markets. To address this, the sector is pivoting towards value-added growth, emphasizing higher investments in R&D, expansion into complex generics, biosimilars, innovative therapies, and greater adoption of advanced manufacturing technologies.

Government initiatives such as the Production Linked Incentive (PLI) schemes, efforts toward API self-reliance, and policies promoting innovation clusters are set to further accelerate this shift. By building on its strategic advantages in cost-efficient healthcare, strengthening its innovation ecosystem, and capturing opportunities in emerging therapies, India is well on its way to reshaping its global pharmaceutical leadership over the next two decades.

Outlook

Indias pharmaceutical industry is set for sustained growth, underpinned by rising healthcare needs, a strong manufacturing base, and supportive government policies. Increased prevalence of lifestyle diseases, an aging population, and the demand for affordable healthcare are driving domestic and global opportunities. Indias leadership in generics, backed by USFDA-compliant facilities and initiatives like the Production Linked Incentive (PLI) scheme, is further strengthening its position. As companies invest in R&D and adopt advanced technologies, India is moving up the value chain, enhancing its global competitiveness and shaping the future of healthcare delivery.

INDIAN API INDUSTRY

Indias Active Pharmaceutical Ingredients (API) market is poised for significant growth, with projections estimating it to reach USD 14.77 billion by 2025 and expand at a CAGR of 8.31% to USD 22.02 billion by 2030. This growth is driven by several factors, including the rising prevalence of chronic diseases such as cardiovascular ailments, cancer, and diabetes, which necessitate a steady supply of effective medications. Additionally, government initiatives like the Production Linked Incentive (PLI) scheme are boosting domestic API manufacturing, reducing dependency on imports, and enhancing the sectors self-reliance.

Indias strong manufacturing infrastructure, comprising over 10,000 facilities and numerous USFDA-compliant plants, underpins its leadership in global generic medicine production. The market features a mix of captive and merchant manufacturers, with a significant presence across both synthetic and biotech APIs. Furthermore, increased investments in research and development, coupled with the adoption of advanced technologies, are enabling Indian pharmaceutical companies to move up the value chain and strengthen their global competitiveness. In summary, Indias API market is set for sustained expansion, supported by government policies, manufacturing strength, and growing global demand for high-quality APIs. The strategic focus on self-reliance, innovation, and technology adoption is expected to further consolidate Indias position as a global hub for API production.

Source: Mordor Intelligence

Rising global demand for generic drugs: India is a leading exporter of affordable generic medicines. The expiration of patents for several blockbuster drugs in regulated markets like the U.S. and Europe has further accelerated the demand for APIs produced in India.

Government initiatives and policy support: The

Indian government has implemented several initiatives to bolster domestic API production. Notably, the Production Linked Incentive (PLI) scheme aims to reduce dependency on imports and enhance self-reliance in API manufacturing. Additionally, the establishment of pharmaceutical parks and financial incentives are encouraging investments in the sector.

Increasing prevalence of chronic diseases: The

growing incidence of chronic diseases such as cardiovascular ailments, cancer, and diabetes has led to a sustained demand for effective medications. This trend necessitates a steady supply of APIs, thereby driving market growth.

Technological advancements and R&D focus: Indian pharmaceutical companies are increasingly investing in research and development, focusing on complex generics and innovative therapies. The integration of advanced technologies in manufacturing processes is enhancing efficiency and product quality.

Shift in global supply chains: The global pharmaceutical industry is witnessing a strategic shift to diversify supply chains, reducing over-reliance on a single country. India is emerging as a preferred alternative for API sourcing, owing to its cost-effective production capabilities and regulatory compliance.

Outlook

The Indian API market is set for steady expansion and transformation over the forecast period. While growth is being propelled by strong government support and industry partnerships, challenges such as stringent regulatory frameworks and intense global competition remain. Nevertheless, with a strategic emphasis on innovation, sustainability, and strengthening global competitiveness, Indias API industry is well-positioned to play a pivotal role in the global pharmaceutical supply chain and contribute meaningfully to advancements in healthcare worldwide.

BUSINESS REVIEW

With over three decades of expertise in pure-play API manufacturing, Solara Active Pharma is committed to improving patients lives through technology, science, and innovation. Guided by a dynamic and entrepreneurial spirit, we develop value-driven products that are tailored to the evolving needs of our customers.

Powered by a state-of-the-art R&D center and a dedicated team of scientists, we uphold transparency, integrity, and excellence in all our collaborations. Our global footprint spans key markets across North America, Europe, Japan, South Korea, the Middle East, and North Africa. Backed by six world-class API manufacturing facilities, Solara Active Pharma consistently delivers high-quality solutions to meet the diverse and growing needs of healthcare markets worldwide.

During FY25, we announced that our Board Committee has approved the incorporation of a wholly owned subsidiary. This strategic move is part of the companys plan to demerge its Contract Research and Manufacturing Services (CRAMS) and Polymers businesses into an independent listed entity, aiming to streamline operations and enhance focus on its core competencies. The proposed subsidiary will operate within the pharmaceuticals sector, specifically focusing on Active Pharmaceutical Ingredients (APIs). Solara will hold 100% ownership of this new entity. The incorporation is subject to approvals from the Ministry of Corporate Affairs and other relevant statutory authorities. This development aligns with Solaras commitment to innovation and growth in the pharmaceutical industry, reinforcing its position as a key player in the global API market.

FINANCIAL PERFORMANCE

FINANCIAL RATIOS

PEOPLE & CULTURE

Our workforce stands as the foundation of Solaras success, bringing together individuals from diverse backgrounds, each contributing unique expertise and perspectives. We believe the strength of our people drives our ability to innovate, grow, and deliver sustained value. Their collective skills, passion, and commitment enable us to translate opportunities into tangible outcomes for our stakeholders.

At the forefront of this journey is the Solara Leadership Council (SLC), alongside our highly accomplished senior management team. Together, they provide strategic direction, operational leadership, and a forward-looking vision that anchors our growth agenda. Their deep industry knowledge, entrepreneurial mindset, and unwavering commitment to excellence continue to be instrumental in shaping Solaras future.

We are equally committed to nurturing a culture of continuous learning and development. By investing in our peoples growth and equipping them to stay ahead of industry trends and market shifts, we empower them to realize their full potential. Through this approach, we aim to sustain our legacy of delivering innovative solutions and creating enduring value for our customers, partners, and communities.

ENTERPRISE RISK MANAGEMENT

Effective risk mitigation is critical to sustaining our business success and long-term viability. We have established a comprehensive framework to identify, assess, and create awareness of risks across all levels of the organization. Our risk management structure is anchored by a dedicated committee that monitors strategic, operational, and financial risks. In this report, we have outlined the key risks we face along with the strategies in place to address them. Our goal is to foster a risk-aware culture where proactive risk considerations are embedded into business decision-making, ultimately supporting value creation for the company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Solara places a strong emphasis on internal controls to ensure the integrity and reliability of its financial statements. Our Internal Auditors and Senior Management teams continually evaluate the effectiveness of internal controls, supported by investments in advanced infrastructure that strengthen oversight across business processes and practices. We maintain a robust in-house audit program that regularly reviews operations across the organization. In addition, the Audit Committee periodically reviews internal audit observations to ensure that our internal control systems provide reasonable assurance over the accuracy, transparency, and compliance of our operations.

CAUTIONARY STATEMENT

This report contains forward-looking statements, which are made in accordance with applicable legal requirements. These statements are based on certain assumptions and expectations of future events. However, actual results, performance, or achievements may differ materially from those expressed or implied, due to a range of risks, uncertainties, and other factors that could influence future outcomes.