Take Solutions Ltd Management Discussions

Industry Outlook

GLOBAL ECONOMY

The global economy is projected to grow at a steady pace in 2024 and 2025, maintaining the growth rate of 3.2% seen in 2023. This stability reflects a balance between slight growth acceleration in advanced economies and a modest slowdown in emerging markets and developing economies. Advanced economies are expected to see growth rise from 1.6% in 2023 to 1.7% in 2024 and 1.8% in 2025. Conversely, growth in emerging markets and developing economies is projected to slow slightly from 4.3% in 2023 to 4.2% in 2024 and 2025.

Several factors contribute to this growth outlook. These include the persistence of high interest rates aimed at controlling inflation, the gradual withdrawal of fiscal support, and low underlying productivity growth. The global inflation rate is expected to decline from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, with advanced economies likely to achieve their inflation targets sooner than emerging markets.

Despite these challenges, the global economy has shown remarkable resilience, supported by favorable supply developments and significant central bank rate hikes. The main risks to the global economic outlook remain geopolitical tensions, persistent core inflation, and potential new price spikes. Conversely, faster-than-expected inflation declines, timely structural reforms, and advancements in artificial intelligence could boost productivity and economic growth.

Source: International Monetary Fund (IMF)

INDIAN ECONOMY

Indias economy is projected to grow at 6.3% in fiscal year 2024, driven by robust private consumption, public investment, and government initiatives in infrastructure development and digitalization. Key sectors such as manufacturing, technology, and services are expected to see significant contributions to growth. However, the global economic slowdown, higher interest rates, and inflation pose risks to this optimistic outlook.

To ensure sustained economic progress, structural reforms including labor and land reforms are essential. Inflation is expected to moderate, which will aid consumer spending and investment. Favorable demographics, along with ongoing reforms, bolster Indias long-term growth prospects. Additionally, initiatives to improve ease of doing business and enhance export competitiveness are critical. Despite challenges, the Indian economy remains resilient and is well-positioned for future growth.

GLOBAL CLINICAL RESEARCH INDUSTRY

The global clinical trials market is expected to experience significant growth in the coming years. In 2023, the market was valued at approximately USD 55.2 billion and is projected to reach around USD 83.16 billion by 2030, growing at a compound annual growth rate (CAGR) of 6.03% from 2024 to 2030 . This growth is driven by several factors, including technological advancements, streamlined regulations, and an increasing focus on patient-centric approaches. The adoption of AI, machine learning, and blockchain technologies is expected to make clinical trials more efficient and cost-effective, while also increasing inclusivity and diversity.

The demand for clinical trials is also fueled by the growing prevalence of diseases such as diabetes and cancer, which necessitate the development of new and effective treatments. For instance, the International Diabetes Federation (IDF) estimates

that the number of people living with diabetes globally is expected to rise from 536.6 million in 2023 to 783.7 million by 2045. Additionally, the trend of outsourcing clinical research activities by pharmaceutical and biotech companies to contract research organizations (CROs) is contributing to market growth.

The North American region, particularly the United States, is anticipated to play a significant role in this growth due to high R&D expenditures and a robust regulatory framework (Research & Markets).

Sources: Mordor Intelligence,

Research & Markets

GENERICS INDUSTRY

The global market for generic drugs was valued at USD 424 billion in 2023 and is estimated to reach approximately USD 681 billion by 2033, growing at a compound annual growth rate (CAGR) of 5% between 2023 and 2033. The forecast period indicates a significant increase in the global generic drugs market.

The main factor driving the growth of this industry in the near future is the lower cost of generics as an alternative to branded drugs. Moreover, the adoption of Robotic Process Automation (RPA) to ensure compliance with regulations and standards presents lucrative growth opportunities for key players in the market. RPA utilizes artificial intelligence (AI) technology to automate routine tasks, allowing industry players to focus on more advanced value-added activities. This trend of using RPA to ensure compliance is expected to gain traction in the generic drugs market. Pharmaceutical companies commonly employ RPA systems for high-volume research and development (R&D) and production activities. The RPA technology involves software that performs various tasks such as data entry, measurements, and completion of necessary activities, with the aim of achieving faster procedures and cost reduction while ensuring regulatory conformity.

A patent cliff is looming once again for the biopharma industry, $236 billion worth of patents expiring between 2022 and 2030. In the next eight years, more than 190 drugs will go off-patent. Of those, 69 are blockbuster drugs (annual sales of at least $1 billion). Many of the drugs are biologics across multiple therapeutic areas with respiratory diseases, type II diabetes and oncology being the top areas.

Stringent regulations pose a major obstacle to the growth of generic drugs as the FDA scrutinizes the accuracy, side effects, and ingredients used in these drugs. Non-compliance with regulatory guidelines often leads to drug recalls. This in turn fuels the demand for partnering with experienced CROs that are capable of navigating these complexities and delivering the desired outcomes. CROs are equipped with a dedicated team of professionals who possess extensive knowledge and expertise in complex segments of the generics market. They can help streamline the R&D process, ensuring efficient study design, patient recruitment, and data collection. Resulting in accelerated timelines for developing and submitting an ANDA (An abbreviated new drug application (ANDA) contains data which is submitted to FDA for the review and potential approval of a generic drug product.)

As a testimony to the rebound of the generics drug development industry, a total of 782 ANDA approvals were granted during the financial year 2023, registering a growth of 8.3 per cent over last year. Indian players contributed a large proportion (~48%) of the incremental number of approvals in the past two years.

Companies have not only maintained the momentum but also accelerated filings, even during the ongoing waves of the COVID-19 pandemic, resulting in a higher number of ANDA approvals since 2022 across all dosage forms, competition levels, and product complexity including drug-device combination products. We may see a higher number of approvals through the Competitive Generic Therapy (CGT) route in the future as the list of open opportunities gets expanded and companies gain experience. Overall, the global generics studies market valued at USD 736 million in 2023 is expected to grow at a CAGR of 8.3% over the next 5 years.

Source: Precedence Research, Global View Research, FDA, expresspharma

BUSINESS HIGHLIGHTS

In the realm of Bioavailability & Bioequivalence, our team stands out for its ability to deliver top- notch results promptly and with exceptional quality, all while ensuring compliance with stringent regulatory standards. We specialize in expedited studies that enable our clients to establish a first-to-market approach. We are renowned for our prowess in handling scientifically demanding research projects, including multi- drug combination Inhalation studies, euglycemic clamp studies, as well as PK/PD endpoint studies and Pharmacokinetic (PK) studies involving special populations and patients. Our clinical laboratories, equipped for pathology testing, boast accreditations from esteemed bodies such as NABL and CAP, reflecting our unwavering commitment to precision and excellence.

Our success story is deeply rooted in the dedication and expertise of our remarkable team comprising over 180 industry specialists, with more than 60% holding advanced degrees like Ph.D. or Masters. These professionals bring a wealth of experience to the table, ensuring that we deliver services at the highest standard. Our investment in cutting-edge infrastructure, including clinical and analytical labs, has been endorsed through successful audits by global regulatory authorities, underlining our commitment to quality and compliance. With this robust infrastructure, we have conducted a substantial number of Bioequivalent studies and developed a vast array of Bioanalytical methods, solidifying our standing as a frontrunner in the field.

Our track record and credentials speak volumes about our commitment to excellence and the strong partnerships we have cultivated in the generics industry. Over the years, we have amassed a wealth of experience, having completed 1600+ Bioavailability & Bioequivalence studies and developed 500+ validated bio-analytical methods. Our team of over 180 generics experts, a majority of whom hold advanced degrees, have helped successfully navigate 40+ regulatory audits across our facilities, demonstrating our expertise and compliance. With capabilities for conducting complex studies like Euglycemic Clamp and Inhalation studies, we cater to a diverse clientele of 50+ generics companies worldwide, supported by a wide network of clinical facilities and healthy volunteers.

Our unwavering commitment to quality and service excellence has positioned us as a trusted partner in the generics industry. With a customer base spanning across the United States, European Union, and India, we have honed our expertise in catering to the unique needs of the generics segment. Dominating the regulatory landscape, over 70% of our filings are directed to the UFDA, with additional submissions to key regulatory authorities like EMA and Health Canada. Operating from four cutting-edge facilities in Bangalore, Mangalore, Manipal, and Chennai, we continue to expand our operational footprint while upholding the highest standards of regulatory compliance and operational excellence.

In terms of scale and reach, our impact is felt across the globe, with 50+ generics companies availing our services and benefiting from our expertise. Across our three clinical facilities, we manage 300+ beds and have engaged over 25,000 healthy volunteers in various studies. Our commitment to quality is further underscored by the presence of 2 GLP and 21 CFR part 11 compliant bio-analytical laboratories equipped with state-of-the- art technology platforms like LC-MS/MS, ICPMS, and LBA. Moreover, our customer base of 50 clients spread throughout key regions underscores our strong foothold in the generics market, reflecting our reputation for excellence and reliability.

Risk Management

At TAKE Solutions, we recognize the critical importance of risk management as a core component of robust corporate governance. We are steadfast in our commitment to embedding risk management into our daily operations and corporate culture, as outlined in our Quality Management practices.

Aligning Our Risk Management Policies with Goals

Our company continually evaluates and oversees our risk management and internal control framework, reflecting our identity as a responsible entity focused on enhancing patient outcomes.

Enabling Effective Enterprise Risk Management

Our methodology involves developing comprehensive enterprise risk plans that detail each risk, its context, assessment, appetite, treatment strategies, and necessary actions to mitigate the risk in line with our internal control framework. Scenario and risk-thinking exercises are integral to our strategic planning, including analyses of market dynamics and the impacts of socioeconomic, environmental, geopolitical, and political developments that present risks or opportunities for our business.

The Enterprise Risk Management (ERM) process includes the following steps:

• Risk and Opportunity Identification: Identify potential risks and opportunities for key processes within the organization.

• Risk Impact Evaluation: Assess the potential impact of identified risks across various business operations.

• Mitigation Plan Development: Develop a comprehensive plan to mitigate identified risks, ensuring alignment with the organizations risk appetite.

• Ongoing Risk Monitoring: Regularly monitor the identified risks.

• Effective Risk Reporting: Provide updates to the Risk Management Committee to ensure effective oversight.

• Digital Disruption: Monitor and mitigate risks related to new digital technologies and data regulation and privacy.

• Environmental Impact: We assess, monitor, and mitigate environmental risks throughout our value chain.

• Ethics and Compliance: We uphold high ethical standards and compliance through our code of conduct to maintain integrity.

Proactive Risk Management

Our company emphasizes proactive risk management and compliance at all levels. To achieve this, our Risk Management Committee continuously identifies emerging risks as part of an ongoing process. We categorize risks into five main types:

i. Strategic risks

ii. Operational risks

iii. Data Privacy and Cyber Security risks

iv. Financial risks

v. Compliance Risks

Each risk is assessed based on its probability and potential impact on the company.

Board Oversight - Risk Management Committee

The Board of Directors has established an internal Risk Management Committee tasked with identifying, evaluating, mitigating, and monitoring the companys risk management.

The primary objectives of the Committee are to:

• Oversee all categories of risk and promote a risk- aware culture within the organization.

• Adopt leading industry risk management practices and manage risk proactively at the organizational level.

• Foster a risk-aware culture across all levels of the organization.

• Provide input on risk appetite and tolerance, and monitor organizational risks on an ongoing basis.

• Approve and review the risk management plan, including the companys risk management structure, framework, methodologies, guidelines, and assurance processes.

• Monitor risks and risk management capabilities and mitigation plans.

Key Focus Areas During the Year

During the year, the Risk Management Committee reviewed the following notable highlights:

• Strategic risks to the business model and stability, focusing on maintaining operating business continuity, stakeholder engagement, and long-term shareholder value.

• Operational and compliance risks associated with the companys operating facilities in Karnataka & Tamil Nadu, India and maintaining Regulatory & Quality standard certifications.

• Enhanced measures to ensure high levels of information security and other cyber security protections.

We maintain stable risk exposure through consistent and thorough risk scanning and assessments. These practices provide valuable insights that inform the evolution of our control framework, allowing us to adapt and align with changes effectively.

By rigorously and systematically managing risks, we create and protect value, ensuring our business remains sustainable and resilient in the face of evolving challenges and opportunities.

Internal control systems and their adequacy

The Company has established adequate internal control systems that are appropriate for its business nature, size, and operational complexity. These systems have been functioning effectively. The Directors have implemented policies and procedures to ensure the orderly and efficient conduct of business, adherence to company policies, safeguarding of assets, prevention and detection of fraud and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information.

In addition, the Company has engaged a professional Internal Audit firm to test and evaluate all internal control systems and recommend corrective and remedial measures.

The Audit Committee has deliberated with management members, reviewed the laid-down systems, and consulted with the internal audit team and statutory auditors to gauge their opinions on internal financial control systems. The Committee is satisfied with the adequacy and effectiveness of these systems and keeps the Board of Directors informed. However, the Company acknowledges that any internal control framework has inherent limitations. Therefore, periodic audits and reviews are conducted to ensure that the systems are regularly updated.

Human Resources

Our employees are our most valuable assets. As of March 31, 2024, 203 individuals were employed by the Company. We believe our professionals quality and commitment are on par with industry standards. TAKE remains dedicated to key drivers of employee engagement, career growth, learning opportunities, fair performance evaluations, rewards, and employee well-being by continually enhancing its HR processes to ensure scalability, agility, and a consistent employee experience.

Additionally, the Company organizes workshops to enhance employees skill sets and encourage their overall engagement. Individual goals are assigned to employees, aligned with the companys objectives, serving as a strong motivator and improving overall business efficiency. Furthermore, our open-door policy allows employees to voice concerns and share opinions or suggestions, leading to high engagement levels and a lower employee turnover rate.

Financial review

The financial statements of TAKE Solutions Ltd and its subsidiaries (collectively referred to as TAKE or the Company are prepared in compliance with the Companies Act, 2013 and Indian Accounting Standards (IND-AS)). Details of Material Accounting Policies used for the preparation of the financial statements are presented in the notes to the consolidated financial statements appended later in this Annual Report. The discussions below relate to the Consolidated Statement of Profit & Loss for the year ended March 31, 2024, and the Consolidated Balance Sheet as at March 31, 2024. The consolidated results are relevant for understanding the financial performance of TAKE.

Results of operations

The five-year financial summary of the company is provided below:

The revenue dropped by 65% YOY to T 656 Mn from T 1,891 Mn in 2022- 23 due to closure of operations at the holding company level in the year 2023-24.

Particulars	In INR Mn
	FY24	FY23	FY22	FY21	FY20
OPERATIONS
Income from operations	656	1,891	6,526	7,740	22,129
Operating EBIDTA	(135)	(190)	101	(730)	1,689
Net Profit / (loss) for the year after Minority Interest	(1,196)	(1,004)	(7,823)	(4,520)	(124)
Basic Earnings per Share	(8.18)	(6.86)	(53.50)	(30.91)	(0.85)
Diluted Earnings per Share	(8.18)	(6.86)	(53.50)	(30.91)	(0.84)
FINANCIAL POSITION
Working Capital	(539)	(107)	795	7,164	9,188
Total Assets	881	2,244	12,231	18,446	24,833
Total External borrowings	280	333	585	5,142	5,532
Trade Receivables	70	300	815	4,339	7,008
Shareholders Equity	(89)	1,086	1,806	11,247	15,753
OTHER DATA
Net Fixed Assets excluding Goodwill	302	316	507	4,000	6,190
Goodwill on Acquisition	-	-	-	2,640	3,283
Goodwill on Consolidation	-	523	539	2,371	2,384

Total cost during the year stands at T 924 Mn. Total cost as a proportion of revenue increased 17.95% from 122.90% in 2022- 23 to 140.85% in 2023-24. Direct Costs are those that are required to be incurred for purposes of completing the contractual obligations entered with customers - Employee and Contracted Resources compensation costs as well as technology licenses, subscriptions, and such related costs necessary for the delivery of contracted services.

	FY24		FY23
Particulars	Amount (Mn)	% of Total Income	Amount ( Mn)	% of Total Income	Change %
Employee Costs	150	22.87	479	25.33	(68.68)
Other Direct Costs	244	37.20	830	43.89	(70.60)
TOTAL DIRECT COST	394	60.06	1,309	69.22	(69.90)
SGA Expenses	397	60.52	772	40.82	(48.58)
Amortization of Capitalized Software Costs	40	6.10	61	3.23	(34.43)
Depreciation	39	5.95	107	5.66	(63.55)
Finance Expenses	54	8.23	75	3.97	(28.00)
TOTAL COST	924	140.85	2,324	122.90	(60.24)

Employee cost

The Companys employee benefits cost reduced 68.68 % from T 479 Mn 2022-23 to T 150 Mn in 2023- 24. As a percentage of the total cost, employee cost was 16.23% in 2023- 24 against 20.61 % in the previous year. Employee costs have come down significantly as an outcome of proactively delayering the organization.

Depreciation

Depreciation and amortization expense for the Company reduced 52.98 % from T 168 Mn in 2022-23 to T 79 Mn in 2023-24, accounting for 12.04 % of the revenue in 2023- 24 compared to 8.88% in 2022- 23. While write-off of purchased intangibles and tangibles are treated as depreciation, IP developed by the company is amortized.

Finance cost

Finance cost comprised of interest charges on credit facilities availed by the company as well as the related expenses like processing charges.

Interest costs reduced in 2023-24 by 28.00 %, as it stood at T 54 Mn against T 75 Mn in 2022-23.

Taxation

Total tax liability for the year stood at T 12.30 Mn against T 16.80 Mn in 2022-23. The tax rate for the Company stood at -0.14 % during the year under review.

Earnings per share

There is a decrease in the companys earnings per share from T (6.86) per share in 2022-23 to T (8.18) in 2023-24.

Share capital

The equity share capital of the Company comprised 146.22 Mn equity shares of T 1 each. The equity share capital of the Company during the year under review remained stable.

Reserves and surplus

Reserves and surplus of the Company reduced 125 % from T 940 Mn as on March 31, 2023, to Negative T 235 Mn as on March 31, 2024. The reduction was owing to reduced retained earnings derived on account of loss during the year.

Borrowings

Borrowed funds of the Company reduced by 15.92 % from T 333 Mn as on March 31, 2023, to T 280 Mn as on March 31, 2024, largely due to the debt repayments. During the year, the companys long-term borrowing for the Company stood at T 60 Mn as on March 31, 2024, as against T 122 Mn as on March 31, 2023.

Working capital

Trade receivables as on March 31, 2024, stood at T 70 Mn against T 300 Mn as on March 31, 2023, showing a reduction of 76.67%. Current investments of the Company is nil as on March 31, 2024 and March 31, 2023. The total Current Liabilities have decreased from T 1,009 Mn as on March 31, 2023 to T 892 Mn as on March 31, 2024. The trade payables of the company reduced from T 236 Mn March 31,2023 to T 174 Mn as on March 31, 2024.

Cash and bank balance

The cash and bank balance decreased by 91.96 % as it stood at T 9 Mn as on March 31, 2024 compared to T 112 Mn as on March 31, 2023.

Ratio Analysis

In accordance with the SEBI (Listing Obligations and Disclosure Requirements 2018) (Amendment) Regulations, 2018, The company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector- specific financial ratios. The company has identified the following ratios as key financial ratios:

Ratio	FY24	FY23	Formula
(i) Debtors Turnover	3.55	3.39	Turnover / Average Trade Receivable
(ii) Interest Coverage Ratio	(3.67)	(3.70)	EBIT/Interest Expense
(iii) Current Ratio	0.40	0.89	Current Assets / Current Liabilities
(iv) Debt Equity Ratio	(3.15)	0.31	Net Debt / Shareholders Equity
(v) Operating Profit Margin (%)	-20.58%	-10.05%	Operating EBIDTA / Operating Revenue
(vi) Net Profit Margin (%)	-182.32%	-24.85%	PAT / Operating Revenue
(vii) Return on Networth (%)	-239.68%	-32.50%	PAT / Average Net worth

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

Debt Equity Ratio - It has become negative in the current year.

Operating Profit Margin (%), Net Profit Margin (%) and Return on Net worth (%) - There is a significant decline on the companys annual performance.

Cash flow statement

The cash flow statement comprises cash flow from operations and cash flow from investing / financing activities. The cash flow from operations indicates the health of the core business of the company. Cash flow from operations has always been positive in the last 10 years and despite exceptional circumstances it remains positive for the year under review.

As with any CRO, the company needs to invest upfront to generate prospective revenues. The cash flow from investment and financing activities indicates long-term planning. Our divestitures have enabled us to manage liquidity, extending runway to tide over this storm. The Company invests its cash, which otherwise would have been available as free cash, in growing the business.