Valiant Laboratories Ltd Management Discussions

Management Discussion and Analysis Report

Economy Overview

Global Economy¹

The global economy proved more resilient than expected during CY 2025, growing by 3.5%, the same rate as in 2024. Growth was supported by resilient private consumption, sustained technology investment and accommodative financial conditions, even as trade barriers rose and policy uncertainty remained elevated. World trade volumes grew 5.0% during the year.

Global headline inflation moderated to 4.1% in CY 2025 from 5.8% in 2024, as supply chains improved and the cumulative effect of monetary tightening worked through prices. That disinflation has since stalled.

Outlook

The outlook for CY 2026 is dominated by two opposing forces. The first is the negative supply shock from the outbreak of war in the Middle East and the disruption to shipping through the Strait of Hormuz. The second is the positive shock from the acceleration of the global technology cycle, driven by advances in and deployment of artificial intelligence. Global growth is projected to slow to 3.0% in 2026 before recovering to 3.4% in 2027.

Commodity prices are the principal channel through which the conflict is transmitting to the real economy, and this is directly relevant to manufacturers of chemicals and pharmaceutical intermediates. Crude oil prices are projected to rise 31.8% in 2026, with the average petroleum spot price assumed at approximately US$ 89 per barrel against US$ 82 assumed in April 2026. Fertiliser prices are projected to rise 26% and food prices 8%. Energy prices remain roughly 25% above pre-war levels, and pass-through to industrial input, utility and freight costs is expected to persist through the year.²

Global headline inflation is now expected to rise from 4.1% in 2025 to 4.7% in 2026, before easing to 3.9% in 2027. The disinflation trend in place since the beginning of 2024 has therefore stalled, and monetary policy is expected to be less supportive than previously assumed. Risks to the outlook are more balanced than earlier in the year but remain tilted to the downside, with renewed conflict, trade fragmentation and a correction in technology-driven expectations the principal concerns.

Indian Economy

India maintained its position among the worlds fastest-growing major economies during FY 2025-26. Growth remained resilient despite geopolitical tensions, trade disruptions and commodity price volatility. Strong domestic fundamentals, resilient consumption, public capital expenditure and improving private investment supported economic expansion during the year.

Real GDP grew by 7.7% in FY 2025-26, compared with 7.1% in FY 2024-25, reaching Rs.323.12 lakh crore at constant prices. Nominal GDP grew 8.9%. Real Gross Value Added increased 7.9%. These are the Provisional Estimates released by MoSPI on 5 June 2026 and are compiled on the new national accounts series with base year 2022-23, which was introduced in February 2026; growth rates are therefore not directly comparable with those published under the earlier 2011-12 series.³

Growth was led by the secondary and tertiary sectors, which expanded 8.8% and 9.3% respectively at constant prices, while the primary sector grew 3.2%. Manufacturing was the standout performer at 10.7%, up from 9.3% in the previous year. Trade, hotels, transport and communication grew 11.0% and financial, real estate and professional services 10.4%.

On the demand side, Private Final Consumption Expenditure and Gross Fixed Capital Formation grew 7.7% and 8.2% respectively at constant prices, against 5.8% and 6.4% in the previous year. Gross fixed capital formation was 32.3% of GDP. The combined strength of domestic consumption, capital formation and sectoral expansion reinforced macroeconomic stability.

The pharmaceutical sector remains an important contributor to Indias manufacturing and export landscape. The Economic Survey 2025-26 highlighted the industrys shift towards a value- driven growth model, led by complex generics, biosimilars and innovation-led products. India continues to hold a strong position in the global pharmaceutical value chain, supported by its manufacturing scale, skilled workforce and established global presence. Continued investments in research and development, technology and manufacturing capabilities are expected to enhance competitiveness and support long-term growth.⁴

Outlook⁵

The Indian economy is expected to moderate from the exceptional pace of FY 2025-26 while remaining among the fastest-growing major economies. At its meeting of 3 to 5 June 2026, the Monetary Policy Committee of the Reserve Bank of India kept the policy repo rate unchanged at 5.25% with a neutral stance, and revised real GDP growth for FY 2026-27 down to 6.6% from 6.9%.

The International Monetary Fund projects 6.4% for the same year, and the Economic Survey 2025-26 placed the range at 6.8% to 7.2%.⁶

Growth is expected to be supported by resilient private consumption, sustained public capital expenditure, healthy capacity utilisation and steady credit growth. The Reserve Bank has specifically flagged elevated energy prices arising from the conflict in West Asia, supply-chain disruptions, rupee pressure and the prospect of a below-normal monsoon as the principal downside risks.

The Reserve Bank raised its CPI inflation projection for FY 2026-27 by 50 basis points to 5.1%, with a quarterly profile of 4.2% in Q1, 5.1% in Q2, 5.9% in Q3 and 5.4% in Q4, and core inflation at 4.7%.

The upward revision reflects higher crude oil prices, elevated input costs and supply-side pressures. For a manufacturer dependent on power, steam, solvents and freight, this points to a higher input-cost environment in FY 2026-27 than in the year under review.⁷

Industry Overview Pharmaceutical Industry Global⁸

The global pharmaceutical industry continued to play a pivotal role in addressing evolving healthcare needs during 2025. Rising healthcare expenditure, increasing prevalence of chronic diseases, expanding healthcare access and growing demand for advanced therapies supported industry growth across developed and emerging markets.

The global pharmaceutical market was valued at approximately US$ 1,772.65 billion in 2025. North America remained the largest market, supported by advanced healthcare infrastructure and strong research capabilities. Asia-Pacific emerged as one of the fastest-growing regions, driven by improving healthcare access, rising incomes and increasing health awareness. Conventional drugs continued to account for a significant share of the market by molecule type. Branded pharmaceuticals also maintained a substantial contribution to industry revenues.

Estimates of the size of the global pharmaceutical market differ materially according to whether they are measured at list, invoice or net prices and whether over-the-counter products are included. For reference, the IQVIA Institute-the benchmark most widely used within the industry-places global medicine spending at approximately US$ 1.6 trillion in 2025 at invoice price levels, rising to approximately US$ 2.4 trillion by 2029. The figures presented in this section should therefore be read as indicative of direction and scale rather than as a definitive measure.

The industry is expected to sustain its growth momentum in the coming years. The global pharmaceutical market is projected to increase from approximately US$ 1,881.67 billion in 2026 to US$ 3,219.76 billion by 2035, registering a CAGR of 6.15% during the forecast period.

Indian⁹

The pharmaceutical industry has emerged as one of Indias most strategically important sectors, contributing significantly to healthcare accessibility, manufacturing output and export earnings. A strong manufacturing base, extensive formulation capabilities and increasing investments in research and innovation continue to support the industrys growth.

India is the third largest producer of drugs by volume and supplies approximately 20% of the worlds generic medicines by volume. The domestic industry is currently estimated at approximately US$ 60 billion. Continued focus on product diversification, manufacturing excellence and innovation has strengthened Indias position in the global pharmaceutical value chain.¹⁰

The Pharmaceuticals Export Promotion Council of India projects that the industry will reach approximately US$ 130 billion by 2030, implying a compound annual growth rate in excess of 10%. The Department of Commerce has set a longer-term trade target of one trillion dollars for the sector.

Exports remain a key driver. Indias exports of drugs and pharmaceuticals stood at US$ 30.47 billion in FY 2024-25, a growth of 9.4%, and crossed US$ 31 billion in FY 2025-26, although growth moderated to approximately 5% to 6% as demand from the United States softened. Formulations and biologicals account for approximately 79% of exports by value. Bulk drugs and drug intermediates-the segment in which the Company operates-are the second largest category at approximately 16% of exports.

Indias pharmaceutical exports

Active Pharmaceutical Ingredients (API) Industry

Global¹¹

Active Pharmaceutical Ingredients (APIs) form the foundation of pharmaceutical manufacturing and serve as the essential therapeutic components in medicines. The industry continued to expand in 2025, supported by increasing pharmaceutical production, rising demand for generic medicines and biologics, and the growing role of outsourced manufacturing. The global API market was valued at approximately US$ 256.4 billion in 2025. The industrys strategic importance has increased with advances in pharmaceutical research, the development of complex therapies and greater emphasis on quality-focused manufacturing. These factors continue to strengthen the role of APIs within the global healthcare value chain.

The global API market is projected to grow from approximately US$ 256.4 billion in 2025 to US$ 376.2 billion by 2034, registering a CAGR of 4.22% during 2026-2034.

The compound growth rate cited above is stated by the source for the period 2026 to 2034 and does not reconcile exactly with the 2025 base figure, which is drawn from the same report on a slightly different basis. The two should not be compounded together.

Indian¹²

The Indian Active Pharmaceutical Ingredients (API) industry remains a critical part of the countrys pharmaceutical ecosystem, with an estimated market size of US$ 15 to 16 billion. India produces more than 500 APIs and accounts for the largest single share of the World Health Organization prequalified list. Rising healthcare demand, increasing insurance penetration and expanding access to healthcare services continued to support industry growth during FY 2025-26.

The adoption of advanced technologies, including data analytics, process automation and continuous flow manufacturing, is helping improve operational efficiency and manufacturing capability. However, India continues to depend on imports for approximately 35% of its API requirements by value, with close to 70% of those imports sourced from China. Dependence exceeds 90% for a number of critical APIs and key starting materials. This concentration remains the principal structural vulnerability of the Indian API industry and the strongest argument for domestic capacity addition.¹³

CareEdge Ratings projects that the Indian API industry will grow at a compound annual growth rate of 5% to 7% in FY 202627 and FY 2027-28, driven by favourable government policy, a structural shift towards high-potency and complex APIs, rising domestic demand and deeper penetration of regulated and emerging markets.

Government initiatives are central to this outlook. The Production Linked Incentive Scheme for bulk drugs carries an outlay of Rs.6,940 crore and the Bulk Drug Parks scheme an outlay of Rs.3,000 crore. More than 30 projects under these schemes have been completed and commissioned, and nearly 80% of ongoing API investment projects in India are linked to the bulk drug parks initiative, with large facilities under development in Andhra Pradesh, Himachal Pradesh and Gujarat. Para-amino phenol, the key starting material for Paracetamol, is on the list of key starting materials eligible for support under the scheme.¹⁴

Separately, the reconfiguration of global pharmaceutical supply chains-driven by China-plus-one sourcing strategies and by legislative measures in the United States restricting reliance on certain Chinese suppliers-has increased enquiry volumes at Indian contract manufacturers and API producers. This represents a material medium-term opportunity for Indian manufacturers with established quality systems and regulatory track records.

A significant trade development occurred during the year. On 2 April 2026 the President of the United States issued a proclamation under Section 232 of the Trade Expansion Act of 1962 imposing an additional ad valorem duty of up to 100% on patented pharmaceutical products and their associated active pharmaceutical ingredients and key starting materials, taking effect from 31 July 2026 for larger companies and 29 September 2026 for smaller manufacturers. Rates are tiered by country of origin and by whether the importer holds a Commerce-approved onshoring plan or a most-favoured-nation pricing agreement.¹⁵

Generic pharmaceuticals, biosimilars and their associated ingredients are expressly excluded from the measure. Paracetamol, being an off-patent molecule supplied into generic formulations, therefore falls outside its scope at present and the Company has no immediate exposure. However, the proclamation requires the Secretary of Commerce to advise, within one year, whether the tariffs should be extended to generic pharmaceuticals and their ingredients. That review, expected by approximately April 2027, is a genuine forward risk for the Indian API industry and is being monitored.

Paracetamol Industry in India¹⁶

Paracetamol remains one of the most widely used analgesic and antipyretic drugs in India, making it an important component of the domestic pharmaceutical market. Its extensive use across prescription and over-the-counter (OTC) applications continues to support demand. Paracetamol is among the highest-volume bulk drugs manufactured in India, and the country is one of the largest global producers of Paracetamol API. Its affordability, broad therapeutic applicability and widespread availability have contributed to sustained demand across households, healthcare institutions and retail pharmacies.

The industry continues to benefit from Indias expanding pharmaceutical manufacturing capabilities and improving healthcare infrastructure. Tablet formulations account for a significant share of consumption, while capsules and oral solutions address diverse patient requirements. Pain and fever management remain the dominant segment, followed by cold and cough treatment, muscle cramps and other therapeutic uses. The growing reach of retail pharmacy networks and digital healthcare channels has further improved product accessibility across the country.

Paracetamol is manufactured from para-amino phenol, which is the principal key starting material and accounts for the substantial majority of input cost. A significant proportion of Indias para-amino phenol requirement has historically been imported from China, and the availability and price of this input is the single most important determinant of margins for Indian Paracetamol manufacturers.

Imports of Paracetamol from China were subject to antidumping duty for a substantial period from 2001, most recently at US$ 787 per tonne, before the definitive duty was terminated in 2019. Domestic manufacturers therefore compete directly with imported material on price, and domestic realisations track international Paracetamol prices closely. This is reflected in the Companys own experience over FY 2022-23 to FY 2024-25, discussed under Financial Performance below.

Demand for Paracetamol in India is expected to grow broadly in line with the wider analgesic and antipyretic segment over the medium term, supported by sustained healthcare demand, expanding pharmaceutical access and increasing penetration of organised retail and digital pharmacy networks. Growth in the segment is volume-led rather than price-led.

Continued investments in manufacturing capacity, strengthening domestic supply chains, and ongoing improvements in healthcare infrastructure are expected to support the industrys long-term growth trajectory. In addition, initiatives aimed at enhancing domestic pharmaceutical production are expected to reinforce Indias position as a key manufacturing hub for essential medicines.

Source: Grand View Research; IBEF, Indian Chemicals Industry Analysis.

Chemical Sector

The Companys existing operations are in pharmaceutical API industry rather than in chemicals generally. The following commentary is included because the diversification being pursued through Valiant Advanced Sciences Private Limited takes the Group into adjacent chemistries, and the commercial environment for those products is relevant to that strategy.

Indian¹⁷

Indias chemical industry is a key contributor to the countrys manufacturing ecosystem, supplying critical inputs to sectors such as pharmaceuticals, agriculture, construction, automotive and consumer goods. Supported by a diversified product portfolio and strong domestic demand, the industry is estimated at approximately US$ 155-165 billion.

The industry is projected to reach approximately US$ 230-255 billion by 2030, registering a CAGR of 8-9% over the next five to six years. Growth is expected to be driven by rising demand from both traditional end-use sectors and emerging industries such as semiconductors, electric vehicles, batteries, renewable energy, aerospace and defence.

Indias chemicals trade deficit, estimated at approximately US$ 31 billion in 2025 and concentrated in inorganic chemicals (approximately US$ 12 billion) and polymers (approximately US$ 13 billion), represents a substantial import substitution opportunity and supports the case for domestic capacity expansion and deeper integration into global chemical value chains.

Source: McKinsey & Company, "From Challenges to Possibilities: Leading Indias Chemicals Industry Through Global Headwinds", March 2026.

Specialty Chemical Industry

Indian¹⁸

India has emerged as a prominent market for specialty chemicals, supported by the growing sophistication of its manufacturing sector and accelerating demand for high-performance chemical solutions. The industry serves a diverse range of end-use sectors, including pharmaceuticals, agrochemicals, personal care, construction and automotive. Independent estimates of its size vary according to market definition and are set out below.

Estimates of the size and growth of the Indian specialty chemicals market vary considerably between sources according to how the market perimeter is defined. Independent estimates place the market at approximately US$ 63 billion to US$ 67 billion in 2024-25, growing at between 6% and 9% a year to approximately US$ 89 billion to US$ 95 billion by 2030. IBEF, citing McKinsey, projects the Indian chemicals industry as a whole to reach US$ 255 billion by 2030.

Company Overview

Valiant Laboratories Limited is an Indian Active Pharmaceutical Ingredient (API) manufacturer with a specialised focus on Paracetamol API. Part of the Aarti Group, the Company traces its origins to 1980, when it commenced operations as Bharat Chemicals, establishing a strong foundation in chemical manufacturing.

Over the years, Valiant Laboratories has expanded its capabilities through focused research and development and transitioned into the pharmaceutical sector. It has built a reputation as a reliable supplier of high-quality Paracetamol API, serving domestic and international customers with a strong emphasis on quality, consistency, and operational excellence.

The Company operates a state-of-the-art manufacturing facility at Tarapur Industrial Estate, Maharashtra, dedicated to the production of Paracetamol API across multiple grades and specifications to meet diverse customer requirements. Its strategic location near key logistics infrastructure supports efficient distribution and supply chain management.

Valiant Laboratories is supported by modern manufacturing equipment, stringent quality standards and a dedicated research and development team focused on process improvement and identification of future growth opportunities. With strong manufacturing expertise, customer-centric approach and focus on sustainable long-term growth, the Company continues to strengthen its position within the pharmaceutical API industry.

Segment-wise and Product-wise Performance

The Company is engaged in the manufacture and sale of Active Pharmaceutical Ingredients, principally Paracetamol API. In accordance with Ind AS 108 - Operating Segments, the Chief Operating Decision Maker reviews the business as a single operating segment. Accordingly, no separate segment disclosure is required or presented. Product-wise revenue is set out below.

Strengths and Opportunities

	• Experienced leadership and industry expertise:
	Valiant Laboratories is guided by an experienced leadership team with deep domain knowledge across the chemical and pharmaceutical sectors. The promoters extensive industry experience enables the Company to navigate evolving market dynamics, maintain high standards of quality and operational excellence, and pursue sustainable long-term growth through informed strategic decision-making.
	• Strong domestic sourcing and supply chain resilience:
	The Companys emphasis on domestic sourcing reduces its exposure to global supply chain uncertainties and raw material volatility. Strong engagement with local suppliers enhances operational reliability, supports consistent product quality and strengthens business continuity, while contributing to the domestic manufacturing ecosystem.
	• Commitment to research and innovation:
STRENGTHS	A strong emphasis on research and development underpins efforts to enhance product capabilities, advance new chemistries and unlock future growth opportunities. The development of new molecules and technologies through Valiant Advanced Sciences Pvt. Ltd. supports portfolio diversification and strengthens long-term value creation. By fostering innovation and continuous improvement, the Company remains well positioned to address evolving industry requirements and emerging technological trends.
	• Strong governance and ethical business practices:
	Ethical conduct, transparency and accountability remain integral to the Companys business philosophy. A well-established governance framework supports prudent decision-making, operational discipline and long-term stakeholder value creation. These principles have contributed to building confidence among customers, business partners and investors, reinforcing the Companys position as a trusted and dependable participant in the pharmaceutical industry.
	• Growing demand for Paracetamol and pharmaceutical APIs:
	Increasing healthcare expenditure, rising prevalence of chronic illnesses and expanding access to healthcare services are expected to support sustained demand for pharmaceutical products and Active Pharmaceutical Ingredients (APIs). As a specialised Paracetamol API manufacturer, the Company is well positioned to capitalise on growing domestic and international demand, strengthening its market presence and supporting future business growth.
	• Supportive policy environment and domestic manufacturing initiatives:
	Government initiatives aimed at promoting self-reliance in pharmaceutical and chemical manufacturing, including support for domestic API production and import substitution, present significant opportunities for industry participants. Such initiatives can facilitate capacity expansion, strengthen local supply chains and enhance the competitiveness of domestic manufacturers in both local and export markets.
zCY=	• Integrated manufacturing ecosystem and supply chain reliability:
OPPORTUNITIES	Complete backward integration through key raw material manufacturing within Group companies provides a strategic advantage by reducing dependence on external suppliers and mitigating supply chain risks. This integrated structure enhances operational stability, improves supply reliability and strengthens customer confidence through consistent product availability and quality assurance.
	• Innovation and technology-driven growth opportunities:
	Advancements in process automation, advanced analytics, digital manufacturing and research-driven product development are creating opportunities to improve operational efficiency and strengthen competitiveness. Continued focus on innovation and new chemistry development can support diversification initiatives and enable the Company to address evolving market requirements more effectively.
	• Increasing export opportunities and global supply chain diversification:
	As global pharmaceutical and chemical supply chains continue to diversify, Indian manufacturers are gaining greater opportunities to expand their international footprint. Supported by manufacturing expertise, quality standards and cost competitiveness, the Company is well positioned to leverage emerging export opportunities and strengthen its presence in global markets.
	The Companys strategic priorities for the medium term are:
	• Ramp-up of the newly commissioned capacity:
	The principal near-term driver of consolidated profitability is raising throughput at the capacity commissioned during FY 2025-26. Managements focus is on stabilising the process, completing customer validations and progressively increasing plant utilisation.
nnf)	• Diversification beyond Paracetamol:
GROWTH	Through Valiant Advanced Sciences Private Limited, the Company is developing specialty chemicals where Our products will find end-use applications in the agrochemical, pharmaceutical, dye, pigment, fragrance, food, and polymer industries.
STRATEGIES	• Cost and process efficiency:
	Continued investment in process improvement, solvent recovery, energy efficiency and yield enhancement is intended to protect margins in a market where selling prices are largely externally determined.

Product-wise revenue from operations

				(Rs. In Lakhs)
	Consolidated		Standalone
	FY26	FY25	FY26	FY25
Sale of manufactured products	22,929.44	12,971.92	19,760.66	12,969.90
Sale of traded products	517.31	66.28	1,643.59	66.28
Other operating revenue	300.00	300.00	300.00	300.00
Revenue from operations	23,746.75	13,338.20	21,704.25	13,336.18

Sale of manufactured products, which represents the Companys core Paracetamol API business, grew 76.76% on a consolidated basis and 52.36% on a standalone basis. The difference between the two reflects the contribution of the capacity commissioned at the subsidiary during the year. Traded goods remain an ancillary activity undertaken to service customer requirements and are not a strategic focus.

Financial Performance

The financial performance discussed below is presented on a consolidated basis, with standalone results shown separately.

The Companys wholly-owned subsidiary, Valiant Advanced Sciences Private Limited, houses the manufacturing capacity commissioned during the year and is material to an understanding of the Groups results.

Consolidated results

			(Rs. In Lakhs)
Particulars	FY26	FY25	Change
Revenue from operations	23,746.75	13,338.20	78.04%
Other income	232.04	543.48	(57.31) %
Total income	23,978.79	13,881.68	72.74%
EBITDA	871.05	75.54	1,053.8%
EBITDA margin (%)	3.67%	0.57%	310 bps
Finance costs	190.25	17.53	985.3%
Depreciation and amortisation	603.98	209.26	188.6%
Profit/(loss) before tax	76.82	(151.26)	-
Tax expense	403.61	68.86	486.0%
Profit/(loss) after tax	(326.79)	(220.12)	-
Net worth	31,088.51	23,431.01	32.68%
Gross block (property, plant and equipment)	25,260.78	6,900.57	266.07%
Total borrowings	4,494.87	12,120.46	(62.92) %

Consolidated revenue from operations grew 78.04% to Rs.23,746.75 lakhs. Profit before tax turned positive at Rs.76.82 lakhs, against a loss of Rs.(151.26) lakhs in FY 2024-25. The Group nevertheless recorded a loss after tax of Rs.(326.79) lakhs, principally on account of a total tax charge of Rs.403.61 lakhs which includes a deferred tax charge of Rs.239.65 lakhs arising on the difference between book and tax written-down values of the newly capitalised assets. Finance costs and depreciation together increased by Rs.567.45 lakhs as the new facility moved from capital work-in-progress into operation; these are fixed costs that will be absorbed only as utilisation rises.

Standalone results

On a standalone basis the Company returned to profitability. Revenue from operations grew 62.75% to Rs.21,704.25 lakhs and profit after tax was Rs.554.82 lakhs, against a loss of H(215.02) lakhs in the previous year. The four-year standalone summary is set out below.

(Rs. In Lakhs unless stated otherwise)

Particulars	FY26	FY25	FY24	FY23
Revenue from Operations	21,704.25	13,336.18	18,205.24	33,390.95
Revenue Growth (%)	62.75%	(26.75)%	(45.48)%	14.54%
EBITDA	1,007.09	75.21	127.33	3,995.32
EBITDA Margin (%)	4.64%	0.56%	0.70%	11.97%
Profit Before Tax (PBT)	754.79	(144.78)	(75.25)	3,813.64
PBT Margin (%)	3.48%	-1.09%	-0.41%	11.42%
Profit After Tax (PAT)	554.82	(215.02)	34.03	2,899.83
PAT Margin (%)	2.56%	-1.61%	0.19%	8.68%
Capital Employed	32,321.42	29,633.37	29,836.45	16,223.95

 

	(Rs. In Lakhs unless stated otherwise)
Particulars	FY26	FY25	FY24	FY23
Operational Parameters
Top 3 Customers (H lakhs)	3,637.93	2,292.90	2,151.70	6,983.70
Top 5 Customers (H lakhs)	5,085.23	3,363.50	3,288.70	9,895.50
Return on Equity (%) - standalone	2.00%	(0.91) %	0.20%	33.73%
Debt to Equity ratio - standalone	0.00	0.14	0.36	0.59

Financial performance in relation to operational performance

Between FY 2022-23 and FY 2024-25 standalone revenue from operations declined from Rs.33,390.95 lakhs to Rs.13,336.18 lakhs, a fall of 60.06%. The contraction was a price and spread phenomenon rather than a demand phenomenon, driven by lower global Paracetamol prices and aggressive import pricing, which compressed the spread between selling prices and key input costs.

In FY 2025-26 the position reversed, and the recovery was entirely volume-led. Sales volumes rose, while average realisation on manufactured products declined. The two effects together account for the growth in sale of manufactured products.

Customer concentration reduced during the year. The three largest customers accounted for 16.76% of standalone revenue from operations against 17.19% in FY 2024-25, and the five largest for 23.43% against 25.22%.

Operating leverage. The commissioning of the new facility increased consolidated depreciation from Rs.209.26 lakhs to Rs.603.98 lakhs and finance costs from Rs.17.53 lakhs to Rs.190.25 lakhs. Consolidated profitability is therefore highly geared to utilisation of the new capacity: each incremental tonne carries a low marginal cost against a largely fixed depreciation and interest base.

Capital deployment. Consolidated capital work-in-progress of Rs.15,578.06 lakhs as at 31 March 2025 was substantially capitalised during the year, with Rs.16,856.58 lakhs transferred from capital work-in-progress into property, plant and equipment. Consolidated gross block rose from Rs.6,900.57 lakhs to Rs.25,260.78 lakhs. Asset turnover, measured as revenue from operations to average capital employed, remains low at approximately 0.69 times and is the principal metric management will seek to improve in FY 2026-27.

Working capital. Consolidated inventories increased from Rs.398.87 lakhs to Rs.4,542.62 lakhs, principally raw material secured to support the ramp-up of the expanded capacity, and trade payables increased from Rs.4,071.60 lakhs to Rs.9,402.48 lakhs. Trade receivables grew 29.73% against revenue growth of 78.04%, representing an improvement in collection efficiency, although receivable days remain elevated at approximately 127 days of consolidated revenue from operations. Reducing this cycle is a stated management priority.

Funding and balance sheet. The Rights Issue of 1,08,62,500 equity shares at Rs.75 per share (face value Rs.10 and securities premium Rs.65), allotted on 11 August 2025, raised Rs.8,146.88 lakhs. Rs.7,625.59 lakhs of long-term borrowings were repaid during the year, reducing consolidated total borrowings from Rs.12,120.46 lakhs to Rs.4,494.86 lakhs. Consolidated net worth increased from Rs.23,431.01 lakhs to Rs.31,088.51 lakhs.

Key Ratios

Particulars	FY26	FY25	% Change	Reason for change
Current ratio	3.02	5.69	(46.93%)	Increase in inventory & Advance to Supllier has led to variance in ratio
Debt Equity ratio	0.00	0.14	(100%)	Repayment of borrowings during the year
Debt Service Coverage ratio	(0.17)	(2,405.29)	(99.99%)	Repayment of borrowings during the year
Return on Equity ratio	2.00%	(0.91%)	(319.44%)	Increase in Profit has led to variance in ratio
Inventory Turnover ratio	13.91	16.69	(16.63%)	Not a significant change.
Trade Receivable Turnover ratio	2.79	2.26	23.43%	Not a significant change.
Trade Payable Turnover ratio	5.13	5.86	(12.40%)	Not a significant change.
Net Capital Turnover ratio	193.00%	94.86%	103.46%	Increase in revenue during the year
Net Profit ratio	2.56%	(1.61%)	(258.55%)	Increase in Profit has led to variance in ratio
Return on Capital Employed	2.43%	(0.54%)	(549.99%)	Increase in Profit has led to variance in ratio
Return on Investment (%)	8.58%	12.32%	(43.58%)	Redemption of Investment has led to decrease in returns.
Interest Coverage Ratio	29.91	(7.26)	511.98%	Increase in profit reflects the margin of safety a company has for paying interest on its debt
Operating Profit Margin (%)	3.60%	(0.95)%	478.95%	Due to increase in revenue and profit

Return on Net Worth

On a consolidated basis, return on net worth moved from (0.94) % in FY 2024-25 to (1.05) % in FY 2025-26. The consolidated loss after tax increased from Rs.(220.12) lakhs to Rs.(326.79) lakhs, on account of commissioning costs, a full charge of depreciation and finance cost on capacity commissioned during the year, and a deferred tax charge of Rs.239.65 lakhs. Consolidated net worth increased from Rs.23,431.01 lakhs to Rs.31,088.51 lakhs following the Rights Issue of Rs.8,146.88 lakhs allotted on 11 August 2025.

On a standalone basis, return on net worth improved from (0.92)% in FY 2024-25 to 1.74% in FY 2025-26, with profit after tax of Rs.554.82 lakhs against a loss of (215.02) lakhs in the previous year, and net worth of Rs.31,975.87 lakhs.

Risk Management

Risk	Impact	Mitigation Strategy
Competitive intensity and pricing pressure	Increased competition and pricing pressures may adversely affect profitability and reduce the commercial viability of certain products.	Continuous portfolio enhancement, introduction of value-added products, cost optimisation initiatives and market-focused strategies help maintain competitiveness.
Economic and geopolitical uncertainties	Political instability, economic disruptions and macroeconomic volatility may create operational and financial uncertainties in certain markets.	Regular monitoring of economic and geopolitical developments, coupled with prudent financial management and customer risk assessment, helps mitigate potential impacts.
Regulatory and quality compliance risks	Non-compliance with applicable quality standards and regulatory requirements may result in penalties, regulatory actions and reputational damage.	Strong quality management systems, periodic compliance reviews and continuous process improvements support adherence to regulatory requirements.
Intellectual property and taxation disputes	Intellectual property claims, tax-related disputes or legal proceedings may affect business operations and delay product launches.	Comprehensive legal reviews, proactive risk assessments and strict adherence to applicable laws and regulations help minimise potential exposures.
Raw material price volatility	Significant fluctuations in raw material prices may increase production costs and adversely impact profitability and business planning.	Continuous monitoring of raw material markets and strategic sourcing initiatives help manage price-related risks effectively.
Regulatory approval delays	Delays in obtaining product approvals may affect market entry timelines, sales growth and expansion plans.	Close monitoring of approval processes and timely engagement with regulatory authorities support efficient resolution of regulatory requirements.
Foreign exchange and international business risks	Currency fluctuations may impact profitability, cash flows and the competitiveness of international operations.	Appropriate hedging strategies and prudent treasury management practices help mitigate foreign exchange-related risks.
Cybersecurity and information security threats	Cyber incidents may result in financial losses, operational disruptions and reputational damage.	Continuous strengthening of cybersecurity infrastructure, regular system monitoring and timely risk mitigation measures help safeguard critical business information.
Supply chain disruptions	Interruptions in the supply chain may affect production schedules, increase costs and impact the ability to meet customer requirements.	Active supplier engagement, supply chain monitoring and development of alternate sourcing arrangements help improve supply resilience.
Execution risks in major projects	Delays or underperformance in key projects may impact financial returns and hinder strategic growth initiatives.	Robust project evaluation, continuous progress monitoring and disciplined execution controls support effective project management.

Quality Control

Quality remains a key focus area across the Companys operations. Robust quality management systems are implemented across manufacturing and corporate functions to ensure compliance with industry standards.

The Companys quality systems are certified under ISO 9001:2015 standards, reflecting its commitment to internationally recognised quality management practices. The Company also holds Good Manufacturing Practices (GMP) certification for the production and export of bulk drugs and APIs, demonstrating adherence to stringent quality and regulatory requirements.

Comprehensive quality assurance processes are integrated across the entire manufacturing value chain, from raw material procurement to production, storage and dispatch of finished products. Each product undergoes rigorous testing through well- equipped laboratories and advanced analytical systems before commercial release.

This structured approach enables the Company to consistently deliver safe, reliable and high-quality products while meeting customer expectations and regulatory requirements.

Human Resource

The Company employed 84 permanent employees as at 31 March 2026, against 79 as at 31 March 2025. Consolidated employee benefits expense for the year was Rs.699.82 lakhs, against Rs.438.81 lakhs in the previous year, the increase reflecting the recruitment and deployment of operating, quality and engineering personnel for the newly commissioned facility.

The Company regards its people as central to the consistency and quality of its output. During the year, employees were engaged extensively in the construction, commissioning, validation and stabilisation of the new capacity, alongside continuing operations at the existing plant. Training was focused on process safety, good manufacturing practice, effluent and hazardous waste handling, and the operation of the new equipment.

Industrial relations remained cordial throughout the year. There were no strikes, lock-outs or material employee disputes, and no loss of man-days on account of industrial action. The Company maintains a Prevention of Sexual Harassment policy and an Internal Complaints Committee constituted under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Internal Control Systems and Adequacy

The Company has in place strong internal control procedures commensurate with its size and operations. The Company believes that safeguarding of assets and business efficiency can be prolonged by exercising adequate internal controls and standardising operational processes. The internal control and risk management system is structured and applied in accordance with the principles and criteria established in the corporate governance code of the organisation. It is an integral part of the general organisational structure of the Company and Group and involves a range of personnel who act in a coordinated manner while executing their respective responsibilities. The Board of Directors offers its guidance and strategic supervision to the Executive Directors and management, monitoring and support committees.

The Company has established an internal financial controls framework, including controls over financial reporting, commensurate with the nature, size and complexity of its operations. These controls are designed to provide reasonable assurance regarding the reliability of financial reporting, the effectiveness and efficiency of operations, the safeguarding of assets and compliance with applicable laws and regulations. The adequacy and operating effectiveness of these controls have been reviewed and reported upon by the Statutory Auditors in accordance with Section 143(3)(i) of the Companies Act, 2013.

An independent Internal Auditor is appointed under Section 138 of the Companies Act, 2013 and carries out audits in accordance with a risk-based annual internal audit plan approved by the Audit Committee. Internal audit reports, together with managements responses and the status of remedial actions, are placed before the Audit Committee at its meetings. The Audit Committee reviews the adequacy of the internal control systems, the internal audit function and the findings of internal investigations, and reports to the Board.

Cautionary Statement

The statements made in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand-supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the government regulations, tax laws and other statutes and other incidental factors.