Vineet Laboratories Ltd Management Discussions.

1. INDUSTRY STRUCTURE AND DEVELOPMENTS:

Global pharmaceutical market is expected to grow in the coming years despite recent slowdown inkey markets across the globe. The primary reasons include aging, growing population, risingincome levels, emerging medical conditions and emergence of new diseases. The global pharmaceutical industry is expected to touch USD 1.57 trillion by 2023. The growth in this market ispredicted on the basis of various factors like market drivers, current & upcoming trends, and currentgrowth pattern and market challenges.

North America is expected to retain its leading position in the global pharmaceuticals market with market share of 45.33% in 2023. Europe on the contrary is expected to see a decline in its market share and be worth 20.24% of global pharma industry by 2023. Asia Pacific pharmaceuticalsmarket is expected to retain its second position with a market share of 24.07% in 2023. LatinAmerica and Middle East and Africa (MEA) are expected to retain 7.53% and 2.96% market shareof global pharmaceuticals market in 2023.

DOMESTIC

The Indian pharma industry is now at the cusp of developing new molecules for treatment of various

Medical conditions. Many Indian firms already have molecules in clinical trials. Developing newdrugs costs huge resources and the government needs to provide the conditions for sufficientprofits for investment in new molecules while holding the firms accountable for producing newdrugs for India and the world. Currently Indian pharmaceuticals companies occupy almost 85% ofdomestic pharmaceuticals markets against 5% share held five decades ago. Over this periodIndian firms have been successful both in terms of both meeting the domestic needs as well asbuilding a leading position in the global pharmaceuticals landscape. India already contributes over20% by value to the global generics market, with Indian products contributing over 40% of US drugsby volume.

OPPORTUNITIES AND THREATS

The worldwide population is likely to cross 9.3 billion by 2050 and around 21% of this population is expected to be aged 60 and above. Apart from ageing and rising population the improvements inpurchasing power and access to quality healthcare and pharmaceuticals to poor and middle-classfamilies worldwide also is driving the growth of global pharma industryIndian medicine prices are already amongst the lowest in the world. In addition, research evidencebased on data from 2011-2018 for 108 molecules suggests that price control has not increasedaccess and affordability. There is, thus, a need to fine-tune the drug pricing policy to generateenough surpluses to invent new molecules while keeping the price levels reasonable with theobjective of providing affordable healthcare.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

Company is operating only in one segment i.e., API intermediates and the performance is discussed in the Directors report.

OUTLOOK

The outlook for emerging market economies is expected to broadly improve, though volatility in capital now will remain a challenge.

The pharmacy sector in India is highly regulated, yet the sector suffers from circulation of substandard and counterfeit drugs which hampers the retail segment of the business. Measuresare being taken by the pharmacy regulatory bodies of the country to control the menace as ithampers the revenue earning drastically. The government is also taking major initiatives to providemedicines at subsidized rates and distribution of medicines in the rural belt. The pharmacy retail industry in India operates predominantly in the unorganized format and is currently having approximately 20 major players operating in organized format. However, most organized players are operative regionally and are far from having a pan India presence. A variety ofvalue added services are being incorporated by the organized players to attract a larger marketshare and initiatives are being taken to engage customers in brand loyalty.

RISKS AND CONCERNS

The adoption of cost control policies along with tightening of rules by governments in key markets are expected to impact the growth prospect of the global pharmaceuticals industry. The pharmaceuticals companies are forced to reduce their research and development (R&D) spending due to slowdown of growth in last few years which is also expected to hamper growth of the global pharma market as new drugs revenue form large part of pharma firms revenue due to exclusivity of the drug. Apart from these generics pharma market is facing decreasing return on investment dueto price erosion in key markets which is forcing many firms to look for other avenues and markets tosustain growth.

For the increase the domestic production of diagnostics devices, the government needs to launchtargeted financial incentives to promote the manufacturing of diagnostic kits and other medicaldevices - especially given that the raw material for manufacturing of these devices is heavilydependent on imports. This is also an opportunity to bring a much larger proportion ofmanufacturing of APIs back into India, so that the country is not dependent on imports of criticalinputs.

The real focus of attention for the pharmaceutical industry is on how to respond to that suddendemand changes as well as to changes in the production and distribution network of variouspharmaceutical products. Out- of-stock products are a serious issue for consumers, but the biggerquestion is how pharmaceutical manufacturers will be able to maintain their sales chain in the face of more long-lasting changes than those brought about by a sudden spike in demand due toCOVID-19.

As a consequence of COVID-19, the pharmaceutical industry has been simultaneouslyexperiencing an acceleration in growth and a supply bottleneck. While the demand for anddevelopment of medicines has not slowed, the crisis is limiting the access to ingredients that usuallycome from China and India. This is causing a gap that could alter the distribution chain andmanufacturing model in a radical way. Pharma brands based in Europe and the United States willneed to begin to consider establishing their own factories and plants closer to home in order toensure access to raw materials in the event of another crisis situation. Already, the prices of certaindrugs have shot up and the possibility of an impact on volumes, as well as margins, remains high.Our risk management framework is intended to ensure that risks are identified in a timely manner.We have implemented an integrated risk management framework to identify, assess, prioritize,manage/mitigate, monitor and communicate the risk across the county.Senior management personnel meet at regular intervals to identify various risks, assess, andprioritize the risks. After due deliberations, appropriate strategies are made for managing/mitigatingthe risks. The company takes the help of independent professional firms to review the riskmanagement structure and implementation of risk management policies. Audit Committee on aquarterly basis, review the adequacy and effectiveness of the risk management strategies,implementation of risk management/mitigation policies, it advises the board on matters ofsignificant concerns for Redressal.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains a system of well-established policies and procedures for internal control ofoperations and activities, and these are continually reviewed for effectiveness.

The internal control system is supported by qualified personnel and a continuous program ofinternal audit. The prime objective of such audits is to test the adequacy and effectiveness of allinternal control systems laid down by the management and to suggest improvements. We believethat the companys overall system of internal control is adequate given the size and nature ofoperations and effective implementation of internal control selfassessment procedures andensure compliance to policies, plans and statutory requirements.

The internal control system of the company is also reviewed by the Audit Committee periodically.The Management duly considers and takes appropriate action on the recommendations made bythe statutory auditors, internal auditors and the independent Audit Committee.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONALPERFORMANCE

As discussed above.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT,INCLUDING NUMBER OF PEOPLE EMPLOYED

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including:

RATIOS:

Particulars 2020-21 2019-20 Remarks
Debtors turnover ratio 5.53 NA There are no any operations in the previous year 2019- considered as per the Honble NCLT order on Demerger of the Company
Inventory turnover ratio 3.07 NA There are no any operations in the previous year 2019-20 and considered as per the Honble NCLT order on Demerger of the Company
Interest coverage ratio 2.52 NA There are no any operations in the previous year 2019- considered as per the Honble NCLT order on Demerger of the Company
Current ratio 1.16 NA There are no any operations in the previous year 2019- considered as per the Honble NCLT order on Demerger of the Company
Debt equity ratio 0.47 NA There are no any operations in the previous year 2019- considered as per the Honble NCLT order on Demerger of the Company
Operating profit margin (%) 15.60% NA There are no any operations in the previous year 2019- consi on Demerger of the Company
Net profit margin (%) 0.82% NA There are no any operations in the previous year 2019- considered as per the Honble NCLT order on Demerger of the Company
Return on Net worth 7.59% NA There are no any operations in the previous year 2019- considered as per the Honble NCLT order on Demerger of the Company

DISCLOSURE OF ACCOUNTING TREATMENT

The Company has not carried out any treatment different from that prescribed in Accounting Standards.

CAUTIONARY STATEMENTS

Certain statements in the Management Discussion and Analysis describing the Companys objectives, predictions may be "forward-looking statements" within the meaning of applicable lawsand regulations. Actual results may vary significantly from the forward looking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India, volatility in interest rates, new regulations and Government policies that may impact the Companys business as well as its ability to implement the strategy. The Company does not undertake to update these statements.

For and on behalf of the Board

Vineet Laboratories Limited

Sd/- Sd/-
G. Venkata Ramana Bh. Satyanarayana Raju
Place: Hyderabad Managing Director Whole Time Director & CFO
Date: 30.06.2021 (DIN:00031873) (DIN:02697880)