Syschem (India) Ltd Management Discussions

ANNEXURE D-3

ECONOMIC OVERVIEW

Over the past year, the pharmacy industry has witnessed greater collaboration, adapted quickly, and adopted innovative approach to deliver high quality medicines continuously during the pandemic and beyond. The industry has shown unwavering commitment to support the countrys healthcare needs as well as enhance its footprint across the world.According to a recent EY FICCI analysis, with a rising consensus on offering new breakthrough cures to patients, the Indian pharmaceutical market is expected to reach $130 billion in value by the end of 2030.

BUSINESS REVIEW AND PRODUCTS

Syschem (India) Limited is engaged in the business of manufacturing of API / Intermediates. It has its manufacturing facility at Village Bargodam, Tehsil Kalka, Distt. Panchkula (Haryana).

? AmoxycillinTrihydrate

? Ampicillin Trihydrate

? Cloxacillin Sodium

? Dicloxacillin Sodium

? Flucloxacillin Sodium (For export only)

? Cephalexin

? Cefadroxil

Distillation of Speciality Solvents - DMF, Acetonitrile, Ethyl Acetate and THF SWOT Analysis STRENGTHS

(i) Promoters have worked for a good period of time in same industry. They have sufficient product knowledge and is thus beneficial for the Industry. We have huge capacities to cater to the market.

(ii) Lean manufacturing practices being followed by the Company ensure better and stable margins and a cushion to sustain input price pressures and output price competition. Our products quality is well accepted in the market.

Existing relations with agents and potential customers due to past working experience ofpromoters.

The location of plant is suitable for such type of Industry.

The plant is located near to Baddi area where more than 600 pharma/formulations manufacturing units are l cated WEAKNESSES

Working Capital

OPPORTUNITIES

Increased usage of contract manufacturing services by large Pharmaceutical Companies /

(i) Pharmaceutical Traders.

Demand of antibiotics is high in unorganized market for branded as well us unbranded

(ii) products.

Positive outlook for Indian generic business in general due to a lot many products going off

(iii) patent in near future.

Low per capita consumption of medicines in Indian subcontinent offers opportunities for

(iv) growth.

Increasing income levels and health awareness in Asia is expected to result in increased

(v) spending power and usage of medicines.

Further Govt. of India is also promoting investment in Bulk Drug Industries so as to curtail the imports from China as more than 8 5% of the API Inputs are imported from China.

THREATS

(i) Dont see any big threat until unless we have funds to run the show and to grow.

(ii) Increasing regulation in US and other major pharmaceutical markets.

Emergence of new fully integrated generic firms which are less reliant on Indian "back-end"

(iii) businesses.

INDUSTRY STRUCTURE & DEVELOPMENT

India is the largest provider of generic drugs globally. Indian pharmaceutical sector supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in the UK. India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers with a potential to steer the industry ahead to greater heights. Presently, over 80 per cent of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.

Indian pharmaceutical sector is expected to grow to US$ 100 billion, while medical device market is expected to grow US$ 25 billion by 2025. Pharmaceuticals export from India stood at US$ 22.9 billion in FY23. Government is also taking several steps to promote the pharmaceutical sector in India.

EXPANSION PLANS

Company has long term program to increase the production of the pharma products so that meet the market demand and increase the sales of the Company for this, the Company has set up a new plant which is in process and will start generating the revenue soon.

RISK & CONCERNS

In a politically and economically turbulent environment, the risks pharma companies face, especially in clinical-trial design and execution, drug approval, product quality, and global commercial practices, are increasing in both frequency and magnitude.

SEGMENT WISE/PRODUCT WISE REPORTING

The Company is operating in the single segment and engaged in the manufacture and sales of Pharma products i.eAmoxycillin Trihydrate, Ampicillin Trihydrate, Cloxacillin Sodium etc. Therefore, segment wise information has not been disclosed.

INTERNAL CONTROL SYSCHEM

The Company has structured the internal control system. In view of the large size of the business and to enforce highest levels of transparency, the Company has appointed an internal auditor of the Company covering nearly all aspects related to the working of the Company. The Company has paid particular attention on proper maintenance of equipments to ensure that they are operated at the rated capacities. The Company has taken the effective steps for the reduction of cost and to improve the quality of the product. The Company has in place adequate internal controls commensurate with the size and nature of its operations. The integrated financial accounting system supported by inbuilt controls ensures reliable and timely financial and operational reporting.

FINANCIAL PERFORMANCE

Financial performance of the Company has been given separately in the Directors Report.

OUTLOOK

Medicine spending in India is projected to grow 9-12 Per cent over the next five, year, leading India to become one of the Top 10 Countries in terms of medicine spending. Going forward, better growth in domestic salewould 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.

ROAD AHEAD

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.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Our Company has built adequate systems of internal controls towards achieving efficiency and effectiveness in operations, optimum utilization of resources, and effective monitoring thereof as well as compliance with all applicable laws The internal control mechanism comprises a well-defined organization structure, documented policy guidelines, predetermined authority levels and processes commensurate with the level of responsibility.

RISK AND CONCERNS

The Company continues to operate in the challenging and dynamic environment. The Nature of the Pharma business exposes the Company to various competititive and regulatory risks in Long Term:

• Evolving pressures on commoditization in India led by disruptive business models and potential impact on the branded generics business.

• Consolidated customer base, high competition, regulatory requirements impacting product approvals and continued pricing pressure.

• Shifts in drug usage and healthcare delivery in developed and developing markets, on account of Covid-19

Howeverin spite of the challenges our Company is trying to recover the loss and increase sale.

RESPONSIBILITY FOR THE MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Board of Directors have reviewed the Management Discussion and Analysis prepared by the Management. Statement in this report of the Companys objective, projections, estimates, exceptions, and predictions are forward looking statements subject to the applicable laws and regulations. The statements may be subjected to certain risks and uncertainties.

The Company assumes no responsibility in respect of forward looking statements that may be amended o modified in future on the basis of subsequent developments, information or events.

KEY INDICATORS

Ratios	2022-23	2023-24	% Increase/ (Decrease)	Reason for change
Debtors Turnover (No. of days)	117	86.28	-26.25%	No of Days decrease in Trade Receivables.
Inventory Turnover (No. of days)	50	64.94	29.88%	No of Days Increased this year
Interest Coverage Ratio	12302.4	2571.69	-79.09%	Decreased due to statutory Liabilities
Current Ratio	1.36	1.31	-3.68%	Decrease during the year
Debt Equity ratio	0.07	0.01	-85.71%	Due to decrease in Unsecured Loan
Operating Profit Margin	4.72	1.76	-62.71%	Decrease price drop in the Market(National ai International )
Net Profit Margin (%)	3.46	1.18	-65.89%	Decrease price drop in the Market(National a International )
Change in Net Worth ratio (%)	221.32%	155.36	-0.42%	Improved due to Internal Arrangement of Financing Activities.

DISCLAIMER STATEMENT

Statement made in the report describing the current industry structure, development, development are based on certain assumptions and expectations. The Company cannot guarantee that these assumptions and expectations are accurate.

For and on behalf of the Board

Place: Chandigarh

Date: 02ndJuly, 2024