Valiant Laboratories Ltd Management Discussions

Global economy

Overview1

Despite a tumultuous CY 2023 marked with volatile commodity prices, prolonged geopolitical conflicts and surge in inflation, the global economy exhibited remarkable resilience, achieving a growth rate of 3.2%. Although central banks worldwide resorted to calibrated interest rate hikes to anchor in inflation, it exacerbated fiscal and debt vulnerabilities in the developing countries. Nevertheless, the global economy steadily navigated the macroeconomic challenges.

Many emerging markets and developing economies (EMDEs) such as Mexico, Vietnam and India witnessed stronger-than- anticipated growth and attracted substantial foreign capex inflows. On the other hand, advanced economies such as the US also surpassed its pre-pandemic growth. With the decline of inflation from its peak, the economic activities steadily gained momentum. Few low-income and frontier economies regained market access as well.

Outlook

The global growth is anticipated to sustain its growth rate at 3.2% for both CY 2024 and CY 20252. Amidst debottlenecking of supply chains and tightened monetary policies, global headline inflation is expected to decline faster-than-expected across most regions, declining to 5.8% in CY 2024.

Furthermore, growth in advanced economies is projected to decline from 1.6% in CY 2023 to 1.5 % in CY 2024 before rising to 1.8% in CY 2025. However, global trade is estimated to report a growth of 3.3% in CY 2024 and 3.6% in CY 20253.

Despite prolonged geopolitical disequilibrium, high-frequency economic indicators suggest a positive momentum for most major economies. Looking forward, declining inflation and increasing government spending in advanced and emerging economies are anticipated to further mitigate fiscal pressures and attract investments for future growth.

Indian economy

Overview

In FY 2024, the Indian economy maintained its promising trajectory amidst the global headwinds. In FY 2024, Indias GDP touched 8.2% with its Current Account Deficit (CAD) standing at 1.9% of GDP.4, driven by strong domestic demand, consistent government spending, surging exports, rise in private consumption, increasing focus on infrastructure development and a positive investment environment.

India is one of the fastest growing major economies in the world. It has simultaneously established itself as one of the most favourable destinations for foreign investments. With the growing prominence of the China plus one strategy, India has emerged as an alternative manufacturing hub for most foreign businesses. Moreover, with the Government implementing favourable fiscal policies, including flagship programmes such as Make in India, Digital India and Aatmanirbhar Bharat, it has attracted foreign capital inflow and has lent stability to the Indian economy by spurring growth across different sectors.

On the backdrop of a robust Indian economy, the Indian pharmaceutical sector has emerged as a global leader in research and innovation. The Indian pharma industry ranks third globally in pharmaceutical production by volume. The pharma industry is currently valued at USD 50 billion but is anticipated to reach USD 130 billion for the annual report by 2030, owing to effective governmental policies, rising medical tourism and robust drug manufacturing.5 On the other hand, the chemical industry in India also witnessed significant growth in the year under review. Furthermore, the industry employs more than 2Mn people, contributing significantly to growth of the Indian economy.

Outlook

According to Reserve Bank of India, the prospect for the Indian economy remains bright, underpinned by strong macroeconomic fundamentals, robust financial and corporate sectors and a resilient external sector. Furthermore, debottlenecking of supply chains, decline in core inflation and early indications of an above normal southwest monsoon augur well for the inflation outlook for FY 2024-25. With the headline inflation easing towards the target, it is anticipated to spur consumption, especially in the rural regions.

India is anticipated to maintain its positive growth momentum in the upcoming financial years. Projections indicate that India will become the world-third largest economy by 2027, surpassing Japan and Germany.

Industry Overview Global Pharmaceutical Industry

The global active pharmaceutical ingredient market is expected to attain a value of USD 352.98 Billion by 2030. It is projected to expand at a Compound Annual Growth Rate (CAGR) of 5.75% from 2024 to 2030.6 Factors fuelling this growth include advancements in active pharmaceutical Ingredients (API) manufacturing, the expanding biopharmaceutical sector and a rise in the geriatric population.

The global API industry operates through interconnected supply chains across various regions around the world. Price fluctuations and regulatory compliance play pivotal roles in shaping the market. Regional hubs specialise in manufacturing various types of ingredients tailored to specific segments of the industry. China is renowned for its high volume and low-cost API manufacturing, positioning it as a vital source in the global pharmaceutical industry.

Numerous countries and regulatory bodies have enforced rigorous standards for producing high-quality APIs as the industry transforms through the years. These measures aim to strengthen the clinical efficacy of the products while upholding the environmental safety protocols. Many companies are thus opting to outsource API manufacturing, leading to growth in the Asia-Pacific region. China and India attract partnerships from global pharmaceutical industries who are seeking to collaborate with manufacturers in these nations.

Indian Pharmaceutical Industry

API is a crucial segment of the pharma industry, contributing to around 35% of the market. India is the 3rd largest producer of API accounting for an 8% share of the global API Industry7. More than 500 APIs are manufactured in India which contribute to 57% of the prequalified list of the World Health Organisation (WHO).

Indias API market is expected to grow at a CAGR of 13.7% during the first four years which is about 8% higher than the generic API industry. This has become a lucrative space for several investors and venture capitalists. Indias domestic market, advanced chemical industry, skilled workforce, stringent quality and manufacturing standards and low costs for setting up and operating a modern plant gives an added advantage.

The growing antagonism between the West and China has also pushed the global pharma majors to source more from countries other than China. Indias emergence as the alternate source of bulk drugs has been quite remarkable.

Growth Drivers

Government Initiatives

Initiatives such as "Make in India" and Production Linked Incentives (PLI) provide financial and infrastructural backing to companies engaged in domestic manufacturing of APIs. This emphasis on self-sufficiency aims to diminish the dependence on imports from China, while fortifying the industrys global standing. The governments allocation of funds towards research and development (R&D) within the pharmaceutical sector enhances the innovation of API production, positioning India as a centre for cutting-edge API development.

Shifting global landscape

India emerges as a global player in this industry due to its strong regulatory framework and production costs, often 40% lower than the Western markets. The China Plus One approach, aimed at decreasing dependency on China, positions India as an alternative.. This strategic redirection has attracted investments and forged partnerships with the Indian API manufacturers.

Rising domestic demand

The increasing need of a robust API sector in India arises from the increasing population and healthcare awareness of the citizens. A thriving domestic API sector ensures a reliable supply chain and mitigates price fluctuations linked to imports. The rise of disposable income has also fuelled the growth in demand of specialised drugs targetting chronic conditions such as diabetes and cancer. This presents a lucrative market that Indian API manufacturers can address.

Chronic disease burden

The API industry has growing opportunities in the Indian market with the emergence of diseases such as diabetes, cancer and heart diseases, which need specialised APIs which are different from generic drugs. The manufacturers can meet this escalating demand by prioritising R&D in these specialised domains. A solid domestic API industry can enhance the accessibility to life-saving treatments for the population by curbing the production costs.

Focus on innovation

The Indian API manufacturers can leverage their expertise to produce biosimilar APIs, replicating the functionalities of intricate biologic drugs at a reduced cost. The Governments focus on innovation is evident through its allocation of funds for R&D and provision of patent protection. This creates a dynamic environment for Indian API companies to innovate and manufacture specialised medications outside the generic realm of drugs.

Paracetamol API Industry in India

The paracetamol API industry in India surged to H39 billion in 2023, encompassing both domestic consumption and exports. This growth was primarily propelled by an uptick in pain and analgesics therapy, targetting common ailments such as fever, cough and cold and the realisation of industry players. The demand for paracetamol API experienced an increase due to the pent-up demand following the COVID-19 pandemic.

The demand for export attributed to supply constraints in China. This provided Indian manufacturers with opportunities to penetrate the global market. Historically, the growth of the paracetamol API sector has been underpinned by a moderate rise in volume consumption coupled with price increases.

The paracetamol API industry in India is anticipated to experience a CAGR of 5% to 7% from FY 23 to FY 27. This growth will stem from increased demand from both domestic formulation manufacturers and export markets. Within the domestic market, the rise in demand can be attributed to the expanding Over-The- Counter (OTC) segment and the trend of self-care for common ailments such as fever and cold. The escalation in raw material costs for manufacturing paracetamol API has contributed to the increased prices. This upward price trend in the paracetamol API sector often reflects in the pricing of formulations which are frequently adjusted in accordance with the Wholesale Price Index (WPI).

Global Chemical Industry8

The global chemical industry anticipated a modest rebound in production for 2023. By mid-2023, several chemical companies revised down their expectations significantly due to a sluggish global demand. Factors contributing to this are the European recession, the US inflation and a smaller-than-expected rebound in the Chinese demand.

High inventory levels has resulted in months of destocking and less than 1% Year-on-Year (YoY) growth in chemical output within the first eight months of 2023. Many companies focused on cost reduction and improving the efficiency in response to it.

Although fears of an economic downturn in the US has diminished, analysts forecast a modest rebound in chemical production, with destocking transitioning to restocking. Underlying demand weakness and over-capacity for certain products may persist. The American Chemistry Council expects the capital spending for the US chemical industry to remain mostly unchanged in 2024 before growing by 3% to 4% annually in 2025-2026.

Global chemical industry size in USD trillion

Stakeholder pressure and government policies have incentivised investment in the energy transition, leading to convergence among related sectors. Some oil and gas companies are expanding into critical minerals mining, agriculture and chemicals, while certain chemical firms are entering lithium processing, battery manufacturing and clean ammonia production. Chemical companies face both new opportunities and increased competition from industries with stronger cash flows, such as large oil and gas corporations as a consequence.

Indias Chemical Industry

Currently valued at USD 300 billion and boasting a CAGR of 9.3%, Indias chemical industry holds significant importance in fuelling the economic expansion.9 India must establish a robust industry landscape to foster competitiveness within this sector. The Indian chemical industry stands poised for remarkable growth. This growth is propelled by increasing domestic chemical consumption which reflects a favourable demand scenario.

The industrys pivotal role in supporting numerous other sectors by contributing to the production of nearly 1,00,000 products underscores its potential and the growth opportunities awaiting in India. The chemical sector aligns with the governments vision of fostering self-reliance (Aatmanirbhar Bharat") and achieving the ambitious goal of transforming India into a $30 trillion economy by 2047.

Growth Drivers

• The per capita consumption of chemicals in India remains notably lower in contrast to Western nations, indicating ample room for fresh investments.

• Indias large population, heavy reliance of the domestic market on agriculture and robust export demand serve as primary catalysts for industry growth.

• Changes in the geopolitical landscape and global supply chain preferences away from China present India with an opportunity to transform challenges into favourable circumstances.

• The domestic market exhibits growth potential, buoyed by increasing Gross Domestic Product (GDP) and the purchasing power among consumers.

• India possesses world-class engineering expertise and a robust R&D capabilities, further enhancing its position in the chemical industry.

Global Specialty Chemical Industry

The Indian specialty chemicals sector is poised for revenue growth of 6% to 7% in FY 2024, primarily driven by increased domestic demand. Despite macroeconomic challenges affecting exports to the US and the Europe, higher domestic demand is expected to strengthen the volume growth. Revenue growth may be tampered by stagnant realisations in the current year. Agrochemicals and performance chemicals hold significant shares in the global specialty chemical revenue, each contributing 8% to 10% in 2021. The surge in agrochemical usage stems from the growing demand for agricultural products which is attributed to the population growth and increased purchasing power of consumers.

Over the past two decades, there has been a shift in the specialty chemical industry, with developed countries like the US and emerging economies in the Asia-Pacific region. This transformation is largely driven by stricter environmental regulations in the Western nations and the cost advantages enjoyed by companies in emerging markets. Companies are increasingly relocating closer to the demand hubs and optimising their supply chains to adapt to such changes.

Indias Specialty Chemical Industry10

Indias specialty chemicals sector constitutes approximately 26% of the overall chemicals industry and is experiencing a robust demand from both global clients seeking alternatives of China and increasing domestic consumption. Stock prices have reached an all-time high, surpassing the global valuations. Sustained demand from domestic and international markets is expected to drive revenue growth in the specialty chemical companies, leading to robust earnings in the medium term and maintaining high valuations. Companies with strong technical expertise, sound financial health and differentiated products are anticipated to outperform cyclical or bulk commodity players.

The rapid growth of the Indian specialty chemicals industry is inevitable, but companies must exhibit an agility to adapt to evolving industry landscapes for sustainable growth. This entails focusing on customer value creation through product differentiation, collaborative customer engagement and building resilient supply chains with increased investments in R&D and digital technologies. Efforts are being made by such companies to reduce carbon footprint through green practices. Continued government support is needed to foster a conducive business environment and develop world-class infrastructure. This includes additional Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs) and enhanced availability of feedstock.

Growth Drivers

Rising Demand Across End-Use Industries

Specialty chemicals play a crucial role across various sectors such as pharmaceuticals, automobiles, personal care and agriculture.

It serves as essential components for enhancing product performance and functionality. There is a corresponding increase in demand for specialty chemicals to meet the evolving needs of these industries as they expand gradually.

Focus on Innovation

Indian specialty chemical firms are ramping up investments in R&D to develop innovative and high-performance products. This emphasis on innovation enables them to meet the changing demands of various industries and maintain a competitive edge.

Export Opportunities

The increasing global demand for specialty chemicals presents a significant opportunity for Indias specialty chemical sector to expand. This makes India an appealing supplier for international markets. The schemes launched by the government to promote exports in the sector is also driving its growth.

Focus on Sustainability

The specialty chemicals sector in India is also focusing on sustainability goals. Indian enterprises are actively developing eco-friendly alternatives and adopting sustainable methods of production. These initiatives align with the preferences of environmentally conscious consumers and it also facilitate access to emerging markets.

Shifting Supply Chain Dynamics

Indias specialty chemical firms have opportunities due to geopolitical tensions and disruptions in supply chains. Indias established regulatory framework and commitment to quality position makes a dependable alternative for conventional suppliers.

Company Overview

Valiant Laboratories Limited is an active pharmaceutical ingredient manufacturing company in India. The Company has established a reputation of being a highly reliable supplier for over 40 years, who has the capability to anticipate and meet market needs. It is a part of the Aarti Group of Industries.

1980

Year of establishment

The Company started its journey in the pharmaceutical industry after a few years of R&D. The first ever product of the Company was paracetamol which is an API. After a few years, the partnership firm was converted into a public limited company under the name of Valiant Laboratories Limited.

The Company is a leading API manufacturing company with its focus on manufacturing Paracetamol API/bulk drug. It operates at a single location, a manufacturing facility at Tarapur industrial estate, India.

The Companys facility is well equipped with the latest instruments and equipment to meet the requirements of its customers. It also offers different grades of the API as per the requirement of the customer. This facility is strategically located at a distance of 150 kilometres from Nhava Sheva Port (JNPT) and approximately 110 kilometres from the registered office in Mumbai.

The Company also has a dedicated team for carrying out various R&D projects to identify newer molecules that can commercialised and further add to its growth.

Key Strengths

Experienced promoters and strong management team: The Companys extensive industry expertise and established track record enables them to make strategic decisions and adeptly navigate regulatory challenges. This proficiency facilitates the establishment of valuable partnerships, optimisation of production processes and maintenance of stringent quality control standards. Its experienced team leads the Company towards a sustainable growth and ensures profitability.

Strong financial performance: A strong financial performance results in an efficient cash flow, which can be allocated towards strategic investments such as R&D or expanding the production capacity. A track record of profitability can enhance investor confidence, potentially facilitating smoother access to capital for future growth.

Reducing dependence on import of raw materials: Reducing dependency on the import of raw materials shields the Company from fluctuations in global prices and potential disruptions in the supply chain. The Company can enhance profit margins and re-invest in domestic production. Emphasising on domestic sourcing can also fortify relationships with local suppliers, potentially resulting in improved quality and a more dependable supply chain.

Growth Strategies

Diversification into new chemistries and industry: The Company, along with its wholly owned subsidiary Valiant Advanced Sciences Private Limited plans to establish a greenfield project in Saykha Industrial Area, Bharuch, Gujarat. This facility, spanning over 57,766 square metres, will specialise in producing ketene and diketene derivative products within the specialty chemicals sector. These chemicals find use across various industries including agrochemicals, pharmaceuticals, dyes, pigments, food and fragrance sectors. These initiatives aligns with the Companys strategic objectives by diversifying its customer portfolio and mitigating reliance on a single product.

Increase in market share: The rising popularity of OTC medications and self-care practices is driving demand for paracetamol API in the domestic market. Price increases in the API sector is linked to the rising raw material costs and the WIP surge of approximately 10% in 2022. To capitalise on these trends, the Company aims to enhance its market share in the paracetamol API industry by attracting new customers and retaining the existing ones.

Improve operational efficiencies through backward integration of proposed facility: The Company aims to improve operational efficiency by implementing backward integration, producing ketene and diketene derivative products. Utilising acetic anhydride internally for paracetamol production, it plans to supply the remaining products to external customers. This strategy aims to reduce the product costs, ensure raw material supply control, mitigate supply chain risks and decrease the reliance on third-party sources. Backward integration will enhance control over manufacturing processes, maintain quality standards and achieve cost effectivity. These measures are expected to facilitate timely customer demand fulfilment, increase sales and enhance working capital management and supply chain operations.

Increasing the penetration in international markets including regulated markets: The Company aims to expand internationally, focusing on regulated regions, to become a preferred paracetamol API supplier to pharmaceutical firms. Its efforts target securing necessary approvals and tailoring growth strategies with respect to each countrys regulatory framework. Strengthening existing customer partnerships for enhanced collaboration is prioritised. Operating from its ISO 9001:2015 compliant manufacturing facility in Tarapur Industrial Area, Maharashtra, continuous assessment of markets and partnerships will strengthen the Companys presence in domestic and export markets.

Opportunities

Growth in Paracetamol Demand: The Company has the opportunity to leverage the growing need for paracetamol API by maximising production capacity and extending its reach to cater to the increasing demand for OTC pain relievers. This emphasis on a sought-after product has the potential to enhance its market presence and ensure profitability.

Government Initiatives: Schemes like "Production Linked Incentive (PLI)" launched by the government aim to boost domestic API production. Valiant Laboratories can explore participation in such programmes to gain financial and infrastructural support.

Focus on Domestic Sourcing: Firstly, this initiative can lessen reliance on overseas suppliers, thereby mitigating risks such as import delays and currency fluctuations. Secondly, it can leverage government initiatives supporting domestic manufacturing, potentially resulting in tax breaks or subsidies. Lastly, it has the potential to enhance brand image by aligning with "Make in India" sentiments.

Strategic Partnerships: Strategic partnerships present an opportunity for the Company to leverage its resources and expertise. Collaborating with research institutions can accelerate its innovation, while partnerships with distributors can facilitate the market expansion. Acquisitions or mergers offer avenues to access new technologies or customer base, driving the Companys growth trajectory.

Financial Performance

The total revenue of the Company decreased from H3,339.10 million in FY23 to H1,820.52 million in FY24. The PBT decreased from H381.36 million in FY23 to H(7.53) million in FY24, resulting in a margin of -0.41%. The PAT decreased from H289.98 million in FY23 to H3.40 million in FY24, with a margin of 0.19%.

Particulars	FY24	FY23	FY22
Total Revenue	1,820.52	3,339.10	2,915.23
Revenue growth (in %)	-45.00%	14.54	59.85
EBITDA	12.73	350.91	423.18
EBITDA Margin (%)	0.70%	10.51	14.52
Profit Before Tax (PBT)	(7.53)	381.36	417.04
PBT Margin (%)	-0.41%	11.42	14.31
Profit After Tax (PAT)	3.40	289.98	274.96
PAT Margin (%)	0.19%	8.56	9.37
Capital Employed	2983.65	1,622.39	1,323.85
ROCE (%)	-0.23%	22.76	35.75
ROE (%)	0.14%	33.73	34.36
Debt to equity ratio	0.36	0.59	0.85
Operational Parameters
Top 3 customers (in Hmillion)	215.17	698.37	476.84
Top 5 customers (in Hmillion)	328.87	989.55	682.26
Total Quantity sold (MT)	5,640.21	5,932.84	4,212.49
Average Revenue per Quantity sold (in Hper MT)	317,386.55	562,816.80	692,044.00

Risks and Mitigations

Risks	Impact	Mitigation strategy
Risk of Competition, pricing pressure and government control on prices	Impact on profitability and rendering some products unavailable at times.	• Expanding the current portfolio and introducing new products.
• The arrival of new competitors in established product categories intensifies competition, exerting pressure on the pricing.		• Advancing in the product value chain and introducing complex products with substantial entry barriers to minimise new competition.
• In certain nations, government regulations periodically control medicine prices, aiming to enhance affordability for the patients.		• Executing various cost optimisation strategies throughout the value chain.
Risk related to economic and political situations	Considerable uncertainty surrounds the Companys operations in regions affected by political instability.	• Ongoing assessment of political and economic conditions around the world in order to limit exposure to the affected regions.
• Regular political shifts, including civil unrest and situations resembling warfare in various locations, affect the economic operations within those regions.
		• Securing receivables via letters of credit or advance payments.
Risk of regulatory actions due to noncompliance of quality standards	• Regulatory penalties or compliance notices issued by authorities and customers.	• Ongoing assessment of relevant regulations to maintain compliance consistently.
• Failure to adhere to regulations in specific regions affect the Companys presence in those areas.	• Damage to reputation posing a threat to future operations.	• Fostering a solid quality culture throughout the organisation and integrating new technologies and automation for enhanced compliance.
		• Taking measures to enhance systems and processes in response to regulatory actions taken against other entities.
Risk of litigation related to intellectual properties	• Launching products may be deterred due to patents held by innovators.	• Introducing a review mechanism to assess potential infringement of intellectual property rights before initiating development and filing dossiers.
• Legal disputes may arise from infringement of patents owned by innovators.
• Litigation with tax authorities can occur due to differing interpretations of various provisions stemming from frequent changes in tax laws.		• Ensuring adherence to diverse statutory requirements.
Risk of Market Volatility in Raw Materials	Unexpected price hikes forthe raw material could erode profit margins and impact overall financial performance.	• Valiant Labs is continuously evaluating its production processes and exploring ways to improve resource efficiency. This can help reduce the overall impact of raw material price fluctuations on production costs.
• The global market for para-amino phenol (PAP) , a key component used in Valiant Labs', is susceptible to significant price fluctuations.
	High market volatility can introduce uncertainty into production planning and budgeting, making it challenging to maintain efficient operations.
Risk of delay in new product approvals	It affects the growth and profitability of operations in various markets.	• Implementing a mechanism to thoroughly review all new product dossiers prior to submission to regulatory authorities.
• Delay in the launch of newly developed products		• Promptly addressing queries raised by regulators regarding product dossiers to accelerate approvals.
Risk of international operations including forex risk	The Companys growth, profitability, investments and foreign currency debt obligations fluctuate in response to currency fluctuations.	• Implementing a suitable hedging strategy to protect against unfavourable currency fluctuations.
• Operating in various geographic locations exposes the company to fluctuations in currencies across different countries.
Risk of cyber-attack on digital infrastructure	Financial, operational and reputational loss.	• Initiating efforts to reduce operational and strategic risk profiles and promptly address emerging risks across all business areas.
• Disruption to the Companys operations resulting from a cybersecurity breach on its digital infrastructure.
Risk of supply chain vulnerability	• Substantial impact on profitability due to rising costs of raw materials, utilities and logistics.	• Identifying critical APIs, excipients
• Increased costs of raw materials, utilities and logistics.	• Inability to meet global customers demand.	and other inputs and continuously monitoring pricing trends to make informed purchasing decisions and mitigate cost increases.
• Supply chain disruptions due to geopolitical and socio-economic threats.		• Identifying alternative vendors for essential raw materials and nurturing domestic suppliers in India to enhance cost, quality and supply control.
Risk of failure to achieve the objectives of large projects	Significant impact on profitability and return on investments.	• Ensuring a pragmatic approach to valuation and conducting thorough evaluation and due diligence on all aspects of the project.
• Failure or delay in accomplishing objectives of major inorganic opportunities or capital projects.		• Regularly monitoring the implementation of key strategies and the achievement of milestones compared to the plan.
		• Maintaining discipline in investments and debt procurement.

IPO

Valiant Laboratories Limited IPO was opened from 27th September, 2023 to 3rd October, 2023. The Company was involved in the business of pharmaceutical ingredient manufacturing with a focus on manufacturing paracetamol. The IPO includes a fresh issue of 1,08,90,000 equity shares worth H2152.46 crore. The share allotment date is 5th October and the IPO was listed on 6th October on the stock exchanges. The price band was H133 to H140 per share and the lot size was 105 shares.

Quality Control

The Company places significant emphasis on quality control in all activities of the organisation. The management system, with respect to its manufacturing facility and head office has been certified to conform to ISO 9001:2015. The Company holds Good Manufacturing Practices (GMP) certificate for manufacture and sale of bulk drugs/API for exports. It has quality check protocols which aid it to ensure that all raw materials, work-in-progress and final products conform to the desired quality standards. The Company has implemented internal procedures to ensure quality control at the various stages of production, from procurement of raw materials, production to the inventory storage. The analytical laboratory is well equipped with the required testing equipment to ensure the quality of the products delivered.

Human Resources

The Company has a diverse workforce that collaborates to maintain high service standards while adhering to industry best practices in HR policies. The Company attracts top talent and encourages cross-functional collaboration to build an inclusive work environment. Committed to growth, the Company empowers employees through various training programmes, leadership development modules and engagement sessions. These initiatives include product and process training, behavioural training, sales training, self-management programmes and fraud and risk management training. Utilising HR analytics, the Company ensures leadership transitions through succession planning for the executive committee,

emphasising on the organisational fit. Engaging employees through quarterly newsletters, virtual sessions, workshops and confluences, the Company provides platforms for interaction with business leaders, talent showcasing and family engagement. The Company offers long-term incentives and competitive compensation to retain its top talent.

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.

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.