Take Solutions Ltd Management Discussions.

Industry Outlook

Global Economy

The COVID-19 crisis has lasted longer than a year, with a consequent shift in global prospects which remains highly dynamic. Economic recoveries have been varied across regions and countries, dependent on factors like the prevailing incidence of COVID-19 infection and vaccine roll out. Another important factor governing economic recovery is the implementation of effective strategies that have played a key role in managing the pandemic across the globe.

As hope of recovery from COVID-19 remains uncertain, current IMF projections expects the global economy to grow at 6% in 2021, while in 2022 it is expected to moderate to 4.4%. This outlook is moderately optimistic, when compared to October 2020 IMF World Economic Outlook (WEO). The upward growth trend is due largely to the added financial support that is provided by certain big economies. Though there have been multiple Government initiatives and economic stimulus provided, there exists a high level of ambiguity concerning economic growth, based heavily on the pandemics extended timeline. (Source: IMF)

Indian Economy

The United Nations has stated that the countrys outlook for 2021 looks fragile. The pandemic has resulted in the Indian economy plunging into a recession after nearly 25 years. According to the OECDs Economic Outlook 2021, there was a reduction in domestic consumption in 2020 that lead to the Indian economy contracting by 7.7%. In terms of GDP, there was a reduction to around 135 Lakh Crore during the latter part of March 2021, when compared with 145 Lakh Crore in March 2020.

Despite this downward trend, the International Monetary Funds (IMF) April forecast, projected the Real GDP to grow by around 12.5% in 2021. A reduction in domestic needs and unemployment levels at 14.73% remain a barrier to growth, though the number of daily COVID-19 cases have reduced from over 4 lakhs to 1.5 lakh (as of June 2021). Such challenges have resulted in the IMF declaring a need to revisit Indias economic outlook. OECDs interim economic outlook is suggestive of Indias recovery by the end of 2021 to pre-pandemic (Q3 FY20) GDP per capita. By contrast, many developed G20 nations may not fare this well. (Sources: IMF, OECD, forbes)

Pharmaceutical Industry

The pharmaceutical industry has been at the apex of the fight against the COVID-19 pandemic. The industry and its participants have collectively broken many barriers and taken exceptional steps to bring lifesaving vaccines and drugs to the market faster than ever before. As a result, the pharma industry came to be viewed under a fresh spotlight. Achievements that were thus far celebrated only within the industry, came out into view of the larger public. Terms, technologies, and processes, like mRNA vaccines, are now commonly discussed on public forums. Though this is a boon for the biopharma industry, in terms of visibility and reach, it has led to heightened scrutiny, from multiple fronts, including politicians, investors and the public at large.

Effect on Clinical Trials:

There has been a considerable number of new research studies that have commenced to develop potential therapies and preventive strategies to cope with the pandemic. Multiple studies involve the use of repurposed drugs in the treatment of COVID-19, as well as the discovery of novel treatment methods. Despite increased clinical trial activity centered around COVID-19, the industry as a unit has been severely affected. During the first few months of the pandemic, almost 70% of all clinical trials were suspended due to the operational challenges imposed by the global lockdowns and the supply chain disruptions that it caused. The net result was a significant deceleration of clinical research for several disease groups and therapeutic areas. In a recent study published by Natures Reviews Drug Discovery, the number of stopped trials peaked in June 2020, post which the number slowly started reducing. But due to the second wave, the number started creeping up once again around November 2020 and eventually came very close to the peak in March 2021.

The rise in the number of cases and the threat of infection looming large is still affecting the enrollment of new patients and availability of volunteers. Site availability for non-COVID studies is another huge challenge because of the constantly changing landscape and multiple countries going in and out of large-scale lockdowns. While the emergence of new COVID variants results in additional clinical research studies being commissioned, it also further delays and deprioritizes other disease groups.

While the initial shock which brought the industry to a standstill is behind us, the industry has not bounced back to pre-pandemic levels just yet. The industry is actively taking steps to work around the virus by developing new processes, technologies, and virtual trials-related tools. Once the industry has overcome the temporary disruption caused by the pandemic, the hastened digital transformation combined with the tailwinds created by new and more complex diseases is expected to propel the industrys long-term prospects to greater heights.

Role of Regulators in the Evolving Clinical trial Ecosystem: Regulators are a crucial part of the drug development process and are tasked with monitoring every element of a clinical trial. In the fight against COVID-19, many regulators, in developed countries, have taken an increasingly cooperative stance. Medicines that needed to be approved based on very early signs of effectiveness were facilitated, providing the much-needed impetus for the clinical trial industry and the push to drive better investments. The unprecedented number (~600) of Emergency Use Authorizations (EUAs) sanctioned during this pandemic is a testament to the collaboration between the regulators and pharmaceutical companies.

However, the regulators are still finding it difficult to carry out on-site inspections as the pandemic continues to unfold, and projects that have reached stages of inspections may likely be delayed. Going forward, it remains to be seen how regulators will handle drug approvals and how the drug review process will be carried out. Post the pandemic, experts believe that significant regulatory changes are unlikely, but many expect the regulators to take a more active role rather than the traditional endpoint review approach. (Sources: Evaluate Pharma, clinicaltrials.gov)

Clinical research Outlook

More than a year into the pandemic, much of the clinical research that was suspended during the first wave has now recommenced. The number of trials commissioned across the globe has recovered strongly on the back of a large number of new trials started to find potential treatments for COVID-19 and its new variants.

The estimated global clinical trials market size in 2020 was USD 44.3 billion with a 5.7% compound annual growth rate (CAGR) from 2021 to 2028. This growth was affected by the unprecedented emergence of the COVID-19 pandemic. However, factors like globalization of clinical trials, higher prevalence of chronic diseases, increased demand for CROs, the advent of technological advancements and heightened demand for clinical trials in developing countries offer promise of growth. Other market drivers include the growing relevance of personalized medicines and an increase in the number of biologics.

The extraordinary pace and scale of studies conducted to develop vital COVID-19 vaccines and therapeutics to limit the effect of the pandemic served as a good demonstration of the purpose of the biopharma industry. There were unexpected levels of collaboration, motivated by a drive for supporting patients, that helped deliver much needed results. It led to an astonishing pace of innovation in the Biopharma industry, and the lessons learnt in the process will help drive greater success in the future. (Source: clinicaltrial.gov, grandviewresearch)

Recent Development and Trends impacting the Life Sciences Domain

New types of collaborations and clinical trials reshaping research & development

The rapid development of novel vaccines for COVID-19 has demonstrated that there is still a lot of room for improvement in clinical trials process. Before the onset of COVID-19, the industry mean average, for new drug development and review, was 8.2 years. But COVID-19 vaccines were developed, reviewed, and deployed in less than a year. This was possible only because of radical changes that were brought in to fight the pandemic such as regulators becoming more flexible about trial design and execution, virtual trials and remote monitoring, decentralized trials executed at the point of care through telemedicine and adopting virtual trials. Going forward, the lessons learnt will help the industry remove long-standing inefficiencies, reassess the importance of each process and step that was previously thought to be necessary and foster new collaborations within and beyond the health care ecosystem.

Shortening development and review timelines, thinking more like a regulator

The pandemic also brought about a fundamental change in the way regulators engaged with the industry. Traditionally, they took an end-point approach of review and approval even in times of crisis. But during the COVID-19 pandemic, the regulators worked hand-in-hand with the industry resulting in shorter review timelines without compromising on quality. The result of this collaboration is evident from the fact that the regulators issued almost 10 times more Emergency Use Authorizations (EUAs) during the COVID-19 pandemic as compared to any other public health emergency. Almost all major regulators and industry participants believe that going digital and collaborating is the only way forward.

Accelerated digitization: New points of care, new roles for pharma and medtech

Recent studies show a significant uptick in virtual video visits to doctors, which is expected to rise to 5% globally in 2021, up from an estimated 1% in 2019. This transition to virtual health during the pandemic broadens pharmas role in the continuity of care. As with any new trend, there are several teething issues that need to be sorted out before virtual health can be rolled out on a large scale across the globe. According to a recent survey by Deloitte, 3 out of every 4 health leaders say they do not or are only partially tracking quality measures. Also, only 1 in every 3 leaders provide "web-side manner" trainings. Reimbursement and regulatory policies post-pandemic will be the deciding factor in the uptake of digitization. The industry will also need to find a way to address access to internet and availability of technology, especially in under-developed countries.

Redesigning work, workplace, and workforce, while meeting individual needs

The global lockdowns have brought about a structural change in the way employees work across all sectors and Life Sciences is no exception. Many organizations have adopted highly flexible working arrangements, allowing employees to choose how, when, and where they work. This ability to connect and work from anywhere will continue to create network effects like gaining access to specialized talent and partners to extend an organizations capability and accelerate adoption of new digital collaborations, which will significantly reduce the cost of communications.

The industry has rapidly transitioned to a hybrid working model because of the win-win scenario it has created for all stakeholders involved. In a recent survey conducted by Deloitte, 90% of employers say productivity has not suffered due to flexible schedules. While employees enjoyed the flexibility of working remotely, the same survey also showed that a good majority (64%) want to spend at least some hours in the workplace, as opposed to working remotely full-time.

Cross-border reliance intensifies the need for supply chain visibility and reshoring options

Another issue that COVID-19 has brought to the forefront is the chink in the armor of life sciences supply chain. Disruptions in supply chain brought the entire industry to a standstill for the first few weeks of the lockdown. The need to vaccinate 70% of the worlds population further compounded the issue, especially because of the special handling requirements for mRNA-based vaccines.

The entire industry stepped-up to meet this challenge head on by investing in supply chain infrastructure and partnering with competitors to expedite production and distribution of vaccines. Even non-traditional players like automotive manufacturers and FMCG companies pitched-in to bridge gaps and facilitate quick roll-out.

Advancing humanity: Environment, Social, and Governance (ESG) imperatives

An unforeseen outcome of the COVID-19 pandemic is a significant spike in the reputation and brand equity of life sciences players. Some of the large life sciences companies are among the top 20 fastest growing brands in 2020. ESG factors are becoming a key determinant of a companys financial strength. Major companies continue to make pledges to reduce or eliminate their carbon footprints and become ‘net zero with some already closing in on this target. More than 30% of the 280 companies supporting global climate change initiative, come from the life sciences industry.

A lot of work is going into ensuring that health, racial and gender equity issues are addressed across the life sciences landscape to improve access and health outcomes. Many organizations are creating new Key Performance Indicators (KPIs) to measure ESG progress, increase transparency and highlight areas for improvement.

Business highlights Life Sciences

TAKE assists drug companies in bringing their products to the market and sustain the drugs throughout their market life cycle. The Companys client base comprises of innovator and generic pharma companies, biotechnology companies as well as federal and other institutions. The Company is a full-service clinical research organization with capabilities to support sponsors across the entire spectrum of clinical trials, regulatory submissions, and post-marketing safety initiatives.

During this financial year, the company managed to renew 100% of annuity contracts from the companys existing big pharma portfolio. The company has also added 16 new logos to its client base. The company is very excited about the critical COVID-19 work that we delivered over the year. The company went above and beyond, delivering exemplary services ensuring all deliverables were met under challenging conditions to ensure COVID-19 treatments came faster to the market. Over the course of this financial year, the company worked on 10+ clinical trials covering novel NCEs, existing drugs, and vaccines. The company takes pride in its capabilities to innovate and build life sciences solutions. In this year, new features were developed and deployed for TAKEs IP solutions. In order to improve efficiencies in this new post-COVID business environment, the company took significant steps towards cost rationalization, reducing employee costs to $12.1 Mn in Q4 FY21, down from $25.3 Mn in Q4 FY20 as well as reducing quarterly SG&A expenses to approximately 1/5th of the pre-pandemic levels.

Clinical trials

Clinical trials are medical research studies conducted on volunteers and patients, aimed at evaluating the safety and efficacy of new candidates both for innovator(novel) and generic drugs. These trials represent the primary means through which researchers appraise if a new treatment is effective with less harmful side-effects than the standard treatment. Other clinical trials test ways to diagnose disease before symptoms start to manifest. A clinical trial also seeks ways to make life better for people suffering from life-threatening diseases. On the other hand, the primary objective of a generics trial is to ascertain that the new generic formulation is equivalent to the approved innovator drug both in terms of safety as well as efficacy. Even before the regulator approves a clinical trial to begin, scientists perform laboratory tests and studies on animals to test a potential therapys safety and efficacy. Only when these studies indicate favourable results does the regulator provide an approval for the intervention to be tested on humans.

TAKE Solutions Enterprise has supported the successful execution of more than 550 clinical trials across the globe. The company conducted clinical trials for the first stem cell product in India. By the end of the last financial year, the Company has generated more than 110,000 biostatistics & statistical analysis reports. The Company has completed around 1,100+ successful Bioavailability / Bioequivalence studies. The Company is still at a development stage in the clinical trial business where it is investing in assets upfront with the prospect of generating follow-on revenues. The company has exhaustive knowledge of country level nuances in running clinical trials across APAC and the US. The knowledge base and thought leadership has helped the company sustain long-term engagements with some of the largest federal institutions. The company is capitalizing on global cost arbitrage opportunities by getting work done out of low-cost geographies, while billing is completed in a profitable geography. This model maximizes the profits while globalized processes ensure a standard quality of deliverables, irrespective of the geography from which they are delivered.

Regulatory Submission business

The drug development cycle is heavily regulated across geographies. Data and insights gathered at each stage of the process needs to be documented and submitted to the regulatory bodies at pre-defined intervals and formats. Over the years, this aspect of conducting clinical trials has become increasingly complex and difficult to navigate. So many biopharmaceutical companies have partnered with companies like TAKE solutions with specialised knowledge and domain expertise to handle regulatory submissions. The Company has developed 5 unique IPs specifically to cater to regulatory affairs. This technology platform-enabled delivery model has helped the company delivery successful outcomes consistently. The companys cloud-based submissions management solution, pharmaREADY, has over 180 customers worldwide. All services and solutions are backed by insights derived through proprietary industry network forums and more than 19 years of benchmark data. The Company runs 10 proprietary life sciences industry networks with 120+ members having subscribed to these network forums. The company has enabled more than 180,000 regulatory submissions across the globe. With close to 4.35% of USFDA regulatory submission being our market share for 2012 - April 2021 and with over 90% customer retention rate, the company foresees a promising future in this line of business.

Safety

Safety monitoring is a key component of human clinical trials because the health and wellbeing of the volunteers and patients are at stake. The safety function, referred to as pharmacovigilance (PV), focuses on monitoring and reporting on any adverse effects (AE) that a new potential drug candidate displays during the trials. Through acquisitions, TAKE Solutions has over 30 years of experience in the field of pharmacovigilance. This expertise has enabled the company to bag more than 300 safety consulting engagements. The company has also developed 2 unique IPs, which help it stand out from the crowd.

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 Significant 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, 2021, and the Consolidated Balance Sheet as at March 31, 2021. The consolidated results are relevant for understanding the financial performance of TAKE, which has global operations and a significant presence outside India.

Results of operations

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

The companys financial performance deteriorated materially since Q4 FY20, due to global disruptions of clinical trials and temporary suspension of business due to the outbreak of COVID-19 pandemic. The revenue dropped by 65% YOY to 7,740 Mn from 22,129 Mn in 2019-20. This sharp drop turned the EBITDA negative.

During the year, the company realigned its sails to weather this storm by carving out and divesting business units that did not align with its new strategic direction.

In INR million
FY21 FY20 FY19 FY18 FY17
OPERATIONS
Income from Operations 7,740 22,129 20,390 15,872 13,446
Operating EBITDA (730) 1,689 3,835 3,065 2,622
Net Profit/ (Loss) for the period after
(4,520) (124) 1,773 1,605 1,431
Minority Interest
Basic Earnings per Share (30.91) (0.85) 12.13 12.19 11.22
Diluted Earnings per Share (30.91) (0.84) 12.09 12.15 T>11.19
FINANCIAL POSITION
Working Capital 7,164 9,188 8,832 10,310 6,319
Total Assets 18,446 24,833 23,339 18,436 13,727
Total external borrowings 5,142 5,532 4,739 3,226 2,372
Trade Receivables 4,339 7,008 5,254 4,692 4,362
Shareholders Equity 11,247 15,753 15,182 13,283 9,109
OTHER DATA
Net Fixed Assets excluding Goodwill 4,000 6,190 5,948 3,151 2,715
Goodwill on Acquisition 2,640 3,283 3,063 764 680
Goodwill on Consolidation 2,371 2,384 2,315 2,396 2,354

The company has established a scalable cost platform to fuel growth and enhance investment in core capabilities. Prudent rationalization of direct costs slowed down the decline in EBIDTA, which was partially offset by a one-time charge of 2,251 Mn, of which 1,567 Mn pertains to EU Closure and 684 Mn relates to impairment of non-current assets.

The company reported positive adjusted EBITDA since Q3 FY21 demonstrating strong resilience, commitment and focus on recovering from the effects of the pandemic.

Revenue by segment

Segment-wise revenue diversification remains low since life sciences contributed about 95.8% to the revenue in FY21; and the remaining 4.2% contributed by the supply chain management segment.

During the year, the company divested its entire equity stake held in APA Engineering Private Limited, a supply chain division of the company, to accelerate its growth trajectory in the life sciences business portfolio and enhance

Revenue by vertical ( Mn)
Segment FY21 FY20 Change (%)
Life Sciences 7,412 20,792 -64.35
Supply Chain 328 1,337 -75.43
Revenue by geography ( Mn)
Segment FY21 FY20 Change (%)
USA 5,286 18,743 -71.80
Asia-Pac 2,212 2,855 -22.50
Rest of the World 243 531 -54.30

emphasis on profitable growth.

Revenue by geography

After the closure of the EU business unit, a large majority of the companys revenue is sourced from the US and Asia-Pac regions. The US accounted for 68.3% of the Companys revenue in FY21 as compared to 84.7% in FY20. The contribution from Asia-Pac region increased to 28.6% in FY21, up from 12.9% in FY20.

Cost analysis

Total cost during the year stands at 9,997 Mn. Total cost as a proportion of revenue grew 2661 bps from 100.58% in 2019-20 to 127.19% in 2020-21.

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. As such, direct costs are closely correlated to revenue

FY21 FY20
Particulars Amount ( Rs. Mn) % Of Total Income Amount ( Rs. Mn) % Of Total Income Change (%)
Employee Costs 4,738 60.27 7,186 32.09 -34.07
Other Direct Costs 1,881 23.93 6,616 29.55 -71.57
TOTAL DIRECT COST 6,619 84.21 13,802 61.64 -52.05
SGA expenses* 1,852 23.56 6,638 29.64 -72.10
Amortization of Capitalized Software
602 7.66 609 2.72 -1.13
Costs
Depreciation 552 7.02 1,060 4.74 -47.96
Finance Expenses 373 4.75 413 1.84 -9.60
TOTAL COST 9,997 127.19 22,522 100.58 -55.61

* SGA Expenses excludes INR 2,251 Mn exceptional expense, of which INR 1,567 Mn pertains to EU Closure and INR 684 Mn relates to impairment of non-current assets. growth. The company leverages strategic cost transformation as a key lever not only to mitigate the impact of the pandemic on the short term but also, and more importantly, to recover and thrive in the longer term.

With the entire office footprint being remapped coupled with the transition to digital marketing efforts, there has been a significant reduction in SGA costs. SGA costs stood at 398 Mn in Q4 FY21 against 6638 Mn in Q4 FY20.

Employee cost

The Companys employee benefits cost reduced 34.07% from 7,186 Mn in 2019-20 to 4,738 Mn in 2020-21. As a percentage of the total cost, employee cost was 47.39% in 2020-21 against 31.91% in the previous year.

Employee costs have come down significantly as an outcome of proactively delayering the organization. Employee costs stood at 899 Mn in Q4 FY21 against 1832 Mn in Q4 FY20. Also, the company took full advantage of many offshoring opportunities as a part of its cost restructuring efforts.

Depreciation

Depreciation and amortization expense for the Company reduced 30.88% from 1,669 Mn in 2019-20 to 1,154 Mn in 2020-21, accounting for 14.68% of the revenue in 2020-21 compared to 7.45% in 2019-20. 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 impact of forex rate fluctuations pertaining to interest payments in other currencies incurred by subsidiary companies and related expenses like processing charges.

Interest costs reduced in 2020-21 by 9.60%, as it stood at 373 Mn against 413 Mn in 2019-20. The potential impact of the reduction in LIBOR rates resulted in reduced cost on USD denominated loan. The company also availed the moratorium facility provided by RBI during the pandemic to the extent of debt in INR. The decline in the interest coverage ratio (0.43) in 2020-21 against 0.69 in 2019-20 was largely due to the impact of COVID-19 on the business.

Taxation

Total tax liability for the year stood at 135.50 Mn against (19.75) Mn in 2019-20. The effective tax rate for the Company stood at -3.09% during the year under review.

Earnings per share

The COVID-19 pandemic has caused a significant drop in profitability, thereby a decline in the companys earnings per share from (0.85) per share in 2019-20 to (30.91) in 2020-21.

Foreign currency transactions

The company generated a majority of its revenues from outside India, especially from the USA. The accounting treatment for reporting financial performance and position at the end of the year was in consonance with the requirements of the IndAs. In conformance to this, the Statement of Profit and loss for the year reflected a 4.57% increase in average USD exchange rates over the previous year in Revenues and Expenses. The performance of international subsidiaries was translated at the average USD to INR rate for the current financial year at 74.19 as against 70.94 in 2019-20. However, on account of a significant natural hedge for risks associated with foreign currency fluctuations by virtue of international operations both in terms of revenues and costs, there was no significant impact on operations.

While conforming to IndAs in Balance Sheet reporting (requiring reporting at the closing rate on the last date of the year), there would be an impact of about 2.02% decrease in closing rates of the Indian Rupee as at March 31, 2021 vis-a-vis March 31, 2020 respectively. The Balance Sheet reported a closing USD to INR rate of 73.37 in FY 2021 as against 74.88 in FY 2020.

Share capital

The equity share capital of the

Company comprised 146.23 Mn equity shares of Re 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 28.87% from 15,607 Mn as on March 31, 2020, to 11,101 Mn as on March 31, 2021. The reduction was owing to reduced retained earnings derived on account of loss during the year.

Borrowings

Borrowed funds of the Company reduced by 7.06% from 5,532 Mn as on March 31, 2020, to 5,142 Mn as on March 31, 2021, largely due to the debt repayments of USD denominated loan. The company availed the moratorium facility to the extent of debt in INR based on the relaxations provided by RBI during the pandemic. During the year, the companys long-term borrowing for the Company stood at 1,985 Mn as on March 31, 2021, as against 2,126 Mn as on March 31, 2020. The Companys gearing stood at an optimal 0.46 in 2020-21 compared to 0.35 in 2019-20.

Working capital

Trade receivables as on March 31, 2021, stood at 4,339 Mn against 7,008 Mn as on March 31, 2020, showing a reduction of 38.09%. The Debtors cycle increased to 205 days in 2020-21 from 116 days in 2019-20. Debtors outstanding for more than six months comprised of 34.8% in 2020-21 compared to previous years 27.9%.

Current investments of the Company have come down to nil as on March 31, 2021, from 58 Mn as on March 31, 2020.

The total Current Liabilities have marginally come down by 20.53% from 6,597 Mn as on March 31, 2020 to 5,243 Mn as on March 31, 2021, owing to the decrease in working capital facilities and other financial liabilities. The trade payables of the company reduced form 609 Mn March 31, 2020 to 416 Mn as on March 31, 2021.

Cash and bank balance

The cash and bank balance decreased by 13.63% as it stood at 393 Mn as on March 31, 2021 compared to 455 Mn as on March 31, 2020.

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:

Revenue by geography ( Mn)

Ratio FY21 FY20 Formula
(i) Debtors Turnover 1.36 3.61 Turnover/Average Trade Receivables
(ii) Interest Coverage Ratio -4.73 0.69 EBIT/Interest Expense
(iii) Current Ratio 1.64 1.82 Current Assets/ Current Liabilities
(iv) Debt Equity Ratio 0.46 0.32 Net debt/ Shareholders equity
(v) Operating Profit Margin (%) -7.89% 8.82% Operating EBITDA/ Operating Revenue
(vi) Net Profit Margin (%) -58.58% -0.55% PAT/Operating Revenue
(vii) Return on Net Worth (%) -33.51% -0.71% 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:

Interest Coverage Ratio – The companys EBIT tumbled due to the disruption in business caused by the pandemic. The decline in the interest coverage ratio (0.43) in 2020-21 against 0.69 in 2019-20 was largely due to the impact of COVID-19 on the business.

Operating Profit Margin (%), Net Profit Margin (%) and Return on

Net worth (%) - COVID-19 had a significant impact on the companys annual performance. Consequently, the disruption in business operations have led to increased volatility on the key financial ratios.

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 organically and inorganically.

Working capital cycle

The pandemic has adversely affected working capital cycles across sectors globally and the life sciences space is no exception. The Debtors cycle increased to 205 days in FY21 from 116 days in FY20 because of the compression in revenue in the previous financial year that went by.

A large number of organizations have proactively stretched their payables cycle to preserve liquidity during the pandemic.

The unbilled revenue (revenue for which the billing milestone/time cycle has not yet been reached) has seen a steep increase as of the end of the current year, compared to the end of last year.

The working capital of the company is further elevated on account of not seeking large up-front payments for studies (a common practice among large competitors). This is a part of the value delivered to customers, where superior cost-efficiency helps present customers with a compelling value proposition. The Company has also been working on smaller projects marked by relatively low upfront payment. To grow to the level of peers, the company will have to grow to a scale (expected in the next couple of years) to provide better control over receivables.

Risk management

Risk management, also known as Enterprise Risk Management ("ERM"), is a systematic and holistic approach for firms to address all their risks, whether operational, strategic, or financial, comprehensively. ERM is a critical component of value creation. To create value successfully, ERM must play a central role in every substantive business decision. Effective ERM can enable a company to manage potential future events that create uncertainty and respond to uncertainty in a manner that reduces the likelihood of downside surprises. ERM can also help a company improve the quality of risk taking and thereby, give the company a competitive advantage.

TAKE Solutions has a comprehensive ERM Framework, guided & supervised by the Board, with a clearly defined

Risk Appetite Statement and a Risk Management Policy. Separate and detailed policies are laid out especially for Cyber Security and Data Privacy.

TAKEs framework sets out clearly its risk appetite for various identified categories of risk and the risk governance mechanism including an effective hierarchy of risk management and compliance within each business team. The Board of directors establishes risk culture and oversees the communication of the tone from the top.

Risk Categories identified and assessed include Strategic risks, Operational Risks and Compliance Related Risks:

Strategic risks are uncertainties impacting the strategic objectives of the organization and requiring the intervention of the Board and Senior Management and include Industry changes & innovations, Strategic Development, M&A, global economic fluctuations & disruptions.

Operational risks relate to efficient & effective utilization of resources in successful delivery of contractual responsibilities, and effective internal controls related thereto.

Compliance risks cover risks due to non-compliance of applicable laws, regulations or standards adopted as part of Good Practices (GxP) Standards including those promised to customers, vendors & partners.

Risks are mapped and mitigation measures documented in digitized Risk Registers. Monitoring and tracking of required actions are automated.

Process of rating risks are defined according to the Probability of Incidence and Impact on business. Under the ERM framework, every identified risk has designated risk owners responsible for risk treatment as per the Risk Management Policy to successful closure or mitigation. The Risk Management Committee as well as the Audit Committee and Board are presented with Quarterly updates of Heatmaps of identified risks and briefed on any changes or risk incidents during the period, till closure.

Human resources

As of 31st March 2021, the company had a total employee strength of over 1500. The company provides equal opportunities to its employees and has created a meritocracy, using a Balanced Scorecard to appraise employee performance. The Company reinforced capabilities through intensive in-house training and job-specific training over the course of this financial year.

As a company that has always prioritized employee health and well-being, the company actively supported its employees in managing the COVID-19 crisis on multiple fronts. The company promoted a safety-first culture across all aspects of the business to prevent the spread of the disease. For those who were affected, the company provided a holistic support across all spectrums to ensure they receive the best possible care and guide them along the quickest path to recovery. In India, 36 resources were affected by COVID-19 and all of them have recovered successfully.

CAUTIONARY STATEMENT

The information and opinion expressed in this report and as well as Directors Report describing the Companys objectives, projections, estimates and expectations may be ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downtrend in the infrastructure spend in the country, significant changes in the political and economic environment in India, volatility in the prices of major raw materials and their availability, tax laws, exchange rate fluctuations, interest and other costs.