GLOBAL PHARMACEUTICAL SCENARIO
Owing to the supply-chain disruptions and raw material shortage, the pharmaceutical
industry experienced several bottle-necks during the year. However, faster vaccines
rollouts has played a cardinal role in reviving the sector, since healthcare systems and
policy makers across economies are now more confident about spending on the pharmaceutical
industry. The global pharmaceutical industry is likely to grow at a CAGR of 9.1% in
CY2022, thus reaching a market valuation of $1587.05 billion. Companies are now adopting
better measures to tackle the pandemic induced impacts, which earlier resulted in
operational issues. At a CAGR of 19.2%, the pharmaceuticals industry is estimated to reach
$3201.02 billion in CY2026.
The larger section of the global demography is ageing, which makes them prone to
chronic illnesses, such as rheumatoid arthritis, hypertension, diabetes, and cancer. The
rise in patient pool drives the demand for medications, thus positioning the industry on
path of recovery in the near short-term. Over the next five years, the industry is
expecting to launch a total of 300 new medications, with a bias toward specialised, niche,
and orphan drugs. This is likely to generate $196 billion in additional expenditure, that
will counterbalance the brand spending reductions of $188 billion, owing to loss of
exclusivity.
DOMESTIC PHARMACEUTICAL MARKET
The Indian pharmaceutical industry is the 3rd largest pharmaceutical manufacturing
country, in terms of volume. The nation is also the largest supplier of generic
pharmaceuticals in the world, accounting for 20% of worldwide supply. Furthermore, Indian
pharmaceutical firms are extremely cost-effective and offers excellent efficacy, all of
which has helped the country to become the ‘Pharmacy of the World. The Indian
pharmaceutical market is now valued at $41.7 billion and by 2024, it is likely to be worth
$65 billion. Constant government impetus, in terms of PLI scheme for bulk pharmaceuticals
and manufacturing of local medical device is facilitating growth of the sector. Between
April and September, FY2022, the sector witnessed a growth of 53% in terms of FDI, thus
accounting for Rs. 4,413 crore. This can be attributed to the need to meet the
COVID-19-related medical and immunisation needs. Despite being a prominent player in
formulations, the country is heavily reliant on imports for bulk pharmaceuticals used in
medication formulations. To reduce this reliance, the GoI introduced the PLI scheme, and
allotted Rs 6,940 crore to promote domestic production of 53 important Active
Pharmaceutical Ingredients (APIs) over the next 8 years.
Investments and Recent Developments
The Union Cabinet has given its nod for the amendment of the existing Foreign Direct
Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 per
cent under the automatic route for manufacturing of medical devices subject to certain
conditions. The drugs and pharmaceuticals sector attracted cumulative FDI inflows worth
US$ 15.93 billion between April 2000 and December 2019, according to data released by the
Department for Promotion of Industry and Internal Trade (DPIIT).
Some of the recent developments/investments in the Indian pharmaceutical sector are as
follows:
• In February 2020, the Indian pharmaceutical market grew by 10 per cent
year-on-year.
• Between Jul-Sep 2019, Indian pharma sector witnessed 39 PE investment deals
worth US$ 217 million.
• Investment (as % of sales) in research & development by Indian pharma
companies* increased from 5.3 per cent in FY12 to 8.5 per cent in FY18.
• In 2017, Indian pharmaceutical sector witnessed 46 merger & acquisition
(M&A) deals worth US$ 1.47 billion
• The exports of Indian pharmaceutical industry to the US will get a boost, as
branded drugs worth US$ 55 billion will become off-patent during 2017-2020.
Government Initiatives
Some of the initiatives taken by the government to promote the pharmaceutical sector in
India are as follows:
• The allocation to the Ministry of Health and Family Welfare has increased by
13.1 per cent to Rs 61,398 crore (US$ 8.98 billion) in Union Budget 2020-21.
• In October 2019, the Uttar Pradesh Government announced that it will set up six
pharma parks in the state and has received investment commitments of more than Rs
5,000-6,000 crore (US$ 712-855 million) for the same.
• The National Health Protection Scheme is largest government funded healthcare
programme in the world, which is expected to benefit 100 million poor families in the
country by providing a cover of up to Rs 5 lakh (US$ 7,723.2) per family per year for
secondary and tertiary care hospitalisation. The programme was announced in Union Budget
2019-20.
• In March 2019, the Drug Controller General of India (DCGI) announced its plans
to start a single-window facility to provide consents, approvals and other information.
The move is aimed at giving a push to the Make in India initiative.
• The Government of India is planning to set up an electronic platform to regulate
online pharmacies under a new policy, in order to stop any misuse due to easy
availability.
• The Government of India unveiled Pharma Vision 2020 aimed at making India a
global leader in end-to-end drug manufacture. Approval time for new facilities has been
reduced to boost investments.
• The government introduced mechanisms such as the Drug Price Control Order and
the National Pharmaceutical Pricing Authority to deal with the issue of affordability and
availability of medicines.
ICRA ICRA has given a stable outlook on the Indian pharmaceutical industry. The
headwinds from pricing pressure in large regulated markets, especially USA, increased cost
related to regulatory compliances but are largely offset by growing scale of business,
increased focus on specialty/ niche segments and comfortable balance sheet structure. The
domestic pharmaceutical industry has gained adequate scale and generic drug development
capabilities over a decade of growth, which will keep them in good stead to capture bigger
opportunities in the regulated market. The FY2019-2021 CAGR is expected to be around 8-10%
for domestic Pharmaceutical companies. The credit metrics of leading pharma companies are
likely to remain stable in view of steady growth prospects in regulated markets and
limited dependence of Indian pharmaceutical companies on bank borrowings. The
OPBITDA/Interest and TD/OPBITDA for ICRA set of 21 entities in Indian pharmaceutical
industry has been healthy at 10.2x and 2.3x for FY2019. They are expected to remain in
similar range in medium term despite some pressure on profitability and marginal rise in
debt levels, given inorganic investments. The key sensitivity to our outlook remains
productivity of R&D expenditure, increasing competition in the U.S. generics space and
operational risk related to increased level of due diligence by regulatory agencies.
The growth from US has come down sharply from 14.4% in FY2016, 4.0% in FY2017 to -13.1%
in FY2019. Going forward the growth momentum would face continued headwinds given the
relatively moderate proportion of large size drugs going off patent, increased
competition, generic adoption reaching saturation levels in the US market along base
effect catching up for Indian exporters. Further increased regulatory scrutiny as
reflected in increased issuance of warning letters/import alerts and consolidation of
supply chain in US market resulting in pricing pressures has impacted competitiveness of
Indian pharmaceutical companies. The profitability for the industry, though expected to
remain healthy, faces pressure from rising pricing pressures in US, increased regulatory
compliance costs, rising R&D costs and other overheads and currency volatility related
challenges in EMs. Overall, company specific factors would continue to play a pivotal role
with quality of product pipeline (i.e. higher share of limited competition launches in the
U.S.) being the single most differentiating factor. Companies with growing portfolio
comprising of niche/complex products in regulated markets, diversified geographic-mix and
established brands in EMs would be better placed to manage some of the headwinds.
Over the past few years, pharma companies have increased their R&D budgets
significantly in view of their growing focus on regulated markets and complex
molecules/therapy segments. With R&D optimization efforts underway, we expect
aggregate R&D spend to maintain at current levels despite requirements arising from
expanding presence in complex therapy segment such as injectables, inhalers, dermatology,
controlled-release substances and even biosimilars.
INDUSTRY FUTURE
Medicine spending in India is projected to grow 9-12 per cent over the next five years,
leading India to become one of the top 10 countries in terms of medicine spending. Going
forward, better growth in domestic sales would also depend on the ability of companies to
align their product portfolio towards chronic therapies for diseases such as such as
cardiovascular, anti-diabetes, anti-depressants and anti-cancers that are on the rise. The
Indian government has taken many steps to reduce costs and bring down healthcare expenses.
Speedy introduction of generic drugs into the market has remained in focus and is expected
to benefit the Indian pharmaceutical companies. In addition, the thrust on rural health
programmes, lifesaving drugs and preventive vaccines also augurs well for the
pharmaceutical companies.
COMPANY PERSPECTIVE:
TYCHE INDUSTRIES LTD (TIL) has developed good reputation as a quality and reliable
manufacturer and exporter of APIs, Intermediates and Nutraceuticals, the company expects
to develop adequate revenues from these segments in future. TIL is one of the largest
manufacturers in India of Glucosamine Hydrochloride and corresponding sodium and potassium
salts which are mainly exported to USA and Europe.
The overseas Regulatory approvals facilitated entry of the Company into the overseas
advanced regulatory markets. The company has obtained US FDA recognition for its
facilities in Kakinada, and the company has already obtained EU- GMP certification. The
company is in the process of filings for more ANDAs in the coming future.
SEGMENTWISE OR PRODUCTIONWISE PERFORMANCE
Companys operations are predominantly related to the manufacture of bulk drugs
intermediates, as such there is only one primary reportable segment.
COMPANYS FINANCIAL PERFORMANCE AND ANALYSIS
The Companys financial performance and analysis is already discussed in the Directors
Report, which forms a part of the Annual Report.
FUTURE OUTLOOK
The company has been manufacturing its core products for several years and has built up
a steady clientele. The company has plans to introduce newer products after careful market
study. The management always strives to introduce new products which it hopes will
contribute to the top line and bottom line in the ensuing years by expanding its marketing
network to new areas countries in Africa, Europe, Israel, and Middle East.
RISKS AND CONCERNS
Any business activity is confronted with various risks and an efficient business
concern would take cognizance of the various risks and arrange for taking corrective
actions to mitigate the risks.
Some of the risks are listed below along with the suggested actions for mitigation.
1. COMPETITION:
The competition is mainly from some of the suppliers in India and more so from Global
market including Chinese suppliers. To preserve its market share, the company has embarked
on aggressive programme to improve the cost efficiency of processes and production of key
products vis- a- vis increase in input cost of raw materials, power, labour etc.
2. MARKETING:
Constant efforts are being made to expand the product portfolio and diversify the
market into new countries in Africa and Europe, increasing the number of customers and
introducing newer products by continuous research and development. The company is also
focussing on obtaining regulatory approvals and entering into new markets.
3. EXCHANGE RATE:
High volatility in the foreign currency is a big concern for the company as most of the
raw materials are imported / imported products are used by the company. Further as most of
the major customers are from outside India the company also faces exchange rate variation
on its receivables, Finance Department is constantly monitoring the situation and taking
action against major fluctuations as per the exchange rate movements.
4. RESEARCHES AND DEVELOPMENT:
The company faces challenges on rolling out new and improved products, Research and
development is a key to success of the unit and hence management takes steps to improve
the strength of the R&D team continuously in order to face competition.
5. ENVIRONMENTAL MANAGEMENT:
The company is very much aware of its responsibilities towards environment and
commissioned the Multiple Effect Evaporation System to concentrate and collect the solid
effluent and send it for incineration to government approved agency.
INTERNAL CONTROLS:
Tyche Industries Limited has proper and adequate internal control system commensurate
with the size and complexity of the organization and a well-defined internal control
system which is adequately monitored. Checks and balances and control systems have been
established to ensure that assets are safe guarded, utilized with proper authorization and
recorded in the books of account. There is a proper definition of roles and
responsibilities across the organization to ensure information flow and monitoring. An
Internal Audit was conducted in various areas of operations of the Company. The Management
duly considered and takes appropriate action on recommendations made by the Statutory
Auditors, Cost Auditors, Internal Auditors and The Independent Audit Committee of the
Board of Directors. The Company has an Audit Committee consisting of three directors out
of which two are the Independent Directors. This Committee reviews the statutory audit
reports, the quarterly and annual financial statements and discusses all significant audit
observations and follow up actions arising from them.
HUMAN RESOURCES / INDUSTRIAL RELATIONS:
The Company recognizes the immense value addition made by its employees to the growth
and development. In turn, the Company is committed to train and develop its people and
motivates them to enhance their potential and industrial relations have been cordial and
mutually beneficial. As on March 31, 2023 the Company had about 184 employees.
KEY FINANCIAL RATIOS
Key financial parameters as on 31st March 2023 on the basis of Standalone Financials
for the year ending 31st March 2023 & 31st March 2022 respectively are as follows;
| Particulars |
FY 2022-23 |
FY 2021-22 |
| Debtors Turnover |
4.20 |
3.99 |
| Inventory Turnover |
2.30 |
2.50 |
| Interest Coverage Ratio* |
NA |
NA |
| Current Ratio |
5.81 |
7.87 |
| Debt Equity Ratio |
NIL |
Nil |
| Operating Profit Margin |
27.67 |
21.40 |
| Net Profit Margin |
17.54% |
14.15% |
*Company doesnt have any interest liability.
During the year, the return on Net Worth of the Company is 16.35% as compared to the
previous financial year 12.12%.
CAUTIONARY STATEMENT:
The financial statements have been prepared in compliance with the requirements of the
Companies Act, 2013, guidelines issued by Securities and Exchange Board of India (SEBI),
Generally Accepted Accounting Principles in India and Accounting Standards / Ind AS issued
by The Institute of Chartered Accountants of India (ICAI).
Our management accepts responsibility for the integrity and objectivity of the
financial statements as well as for various estimates and judgments used therein. The
judgments relating to the financial statements have been made on a prudent and reasonable
basis so that the financial statements reflect in a true and fair view of the state of
affairs of the Company.
Readers are advised to kindly note that the above discussion contains statements about
risks, concerns, opportunities, etc., which are valid only at the time of making the
statements. A variety of factors known/unknown expected or otherwise may influence the
financial results. These statements are not expected to be updated or revised to take care
of any changes in the underlying presumptions. Readers may therefore appreciate the
context in which these statements are made before making use of the same.
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