windlas biotech ltd Management discussions

Discussion and Analysis

Global Economy

Overview

The year 2021 was a mix of events. The global economy registered growth of 6.1% in 2021 against a contraction of 3.3% registered in the year 2020. With advanced and developing economies growing by 5.1% and 7.3%, respectively, in 2021. The first half witnessed nationwide vaccination drive, ease of restrictions and pent-up demand post opening of up nations. Government initiatives, quantitative easing helped stabilise the economies and reverse the economic losses to some extent. The recurrent Covid-19 waves continued throughout the year. As things started getting back to the new normal, the world witnessed a new set of challenges emerging from supply chain disruptions, rising commodity prices, and soaring inflation, resulting in tightening of monetary policy. The situation was further aggravated with the Russia-Ukraine war. Amid the on-going turmoil, the global GDP is likely to report growth of 3.2% in 2022.

World Economic Outlook Growth Projection
(Real GDP, annual percent change)			Projections
	2021	2022	2023
World Output	6.1	3.2	2.9
Advance Economies	5.2	2.5	1.4
United States	5.7	2.3	1.0
Euro Area	5.4	2.6	1.2
Germany	2.9	1.2	0.8
France	6.8	2.3	1.0
Italy	6.6	3.0	0.7
Spain	5.1	4.0	2.0
Japan	1.7	1.7	1.7
United Kingdom	7.4	3.2	0.5
Canada	4.5	3.4	1.8
Other Advance Economies	5.1	2.9	2.7
Emerging market and Developing Economies	6.8	3.6	3.9
Emerging and Developing Asia	7.3	4.6	5.0
China	8.1	3.3	4.6
India	8.7	7.4	6.1
ASEAN-5	3.4	5.3	5.1
Emerging and Developing Europe	6.7	-1.4	0.9
Russia	4.7	-6.0	-3.5
Latin America and the Caribbean	6.9	3.0	2.0
Brazil	4.6	1.7	1.1
Mexico	4.8	2.4	1.2
Middle East and Central Asia	5.8	4.8	3.5
Saudi Arabia	3.2	7.6	3.7
Sub-Saharan Africa	4.6	3.8	4.0
Nigeria	3.6	3.4	3.2
South Africa	4.9	2.3	1.4
Memorandum
Emerging Market and Middle-Income Economies	7.0	3.5	3.8
Low-Income Developing Countries	4.5	5.0	5.2

(Source: IMF, World Economic Outlook Update, July 2022)

Note: For India, data and forecasts are presented on a fiscal year basis, with FY 2021-22 starting in April 2021. For July 2022 WEO Update, Indias growth projections are 7.4% in 2022 and 5.3% in 2023 based on calendar year.

Indian Economy

Overview

India is the fastest-growing economy among the emerging nations, as testified by the nations progress post-Covid-19 outbreak. The financial year 2021-22 proved itself as a year of recovery. Indias GDP grew by 8.7% in 2021-22 against a contraction of 6.6%in 2020-21. Despite the second wave and its impact on the economic progress, the Gross Value Added (GVA) grew by 8.1% in 2021-22, compared to the contraction of 4.8% in 2020-21. On the other hand, contact-intensive services like Trade, Hotels, Transport, Communication and Broadcasting also showcased robust recovery and grew by 23.1% in 2021-22 against a contraction of 17.6%.

(Source: https://pib.gov.in/PressReleseDetail. aspx?PRID=1829784)

Owing to the re-calibrated opening of the markets along with improved vaccination rates/drives,the economic output gradually moved towards its pre-Covid-19 levels. This revival, coupled with higher levels of actual spending both by the private and Government sector, and the accommodative stance of RBI during the fiscal year, augmented growth. The Government of India had announced a set of structural reforms in 2021 to boost the Indian economy, of which the Production-Linked Incentive (PLI) scheme is aimed at benefiting multiple sectors and boost indigenous production. The capital expenditure for the current fiscal year is estimated to be Rs 6.03 Lakh Crore, 35% higher compared to 2020-21.

(Source: https://www.zeebiz.com/india/news-india-marginally-slashes-gdptarget-for-2021-22-analysts-say-omicron-curbs-rising-crude-russiaukraine-war-may-pose-challenges-in-achieving-target-179876)

(Source: https://indianexpress.com/article/business/economy/ india-q3-october-december-fy-2021-22-gdp-updates-gross-domesticproduct-data-7794780/)

The second half of 2021 witnessed a lot of upheavals including pronounced issues of coal, supply chain disruptions, growing inflation and outbreak of the Omicron variant. These events hampered consumer confidence and investor sentiments. Additionally, rising geopolitical tensions elevated crude oil prices as India imports almost 80% of its oil needs through imports. Further rise in oil prices widened the fiscal deficit, weakening the value of rupee, thus heightening inflation. Despite these headwinds, our economy gained higher resilience and grew by 8.7% 2021-22, retaining its position as the fastest-growing major economy in the world.

Outlook

As per IMF, the Indian economy is likely to grow by 7.4% in 2022-23 and 6.1% in 2023-24. However, various concerns such as rising inflation, supply chain disruption and geopolitical tension remain a key concern for the economy.

Global Pharmaceutical Market

The global pharmaceutical market has evolved significantly in the fight against the pandemic. The industry has ensured continuous supply of medicines to support the health infrastructure across nations. The global pharmaceutical market is estimated to be USD 1.4 trillion size in 2021, registering a CAGR of 3-6% through 2026 and expanding to reach ~USD 1.8 trillion market by 2026. The growth will be driven by the pharmerging markets and high-end speciality medicines developed in the developed markets. However, this growth will be partially offset by slower growth in developed markets on account of loss of exclusivity, to the tune of USD 188 billion over 2022-2026. (Source: IQVIA, 2022)

The US dominates close to half of the global pharmaceutical market, and is estimated to register CAGR of 0-3% over 2021-26

Spending in Europe is likely to rise by USD 35 billion over the next five years on account of focus on generics and biosimilars

Continued biennial price cuts and shift to generics in Japan will result in contraction of growth

Spending in China is projected to rise on account of higher uptake and use of new original medicines

Key enablers for growth of the global pharmaceutical sector

Rising aging population

According to the World Population Prospects Report by UN, of the total estimated population of 9.3 billion by 2050, close to two billion of the worlds population is expected to be above the age of 60, by 2050. With aging population, the requirement of medicines related to chronic diseases will be high.

Access to quality healthcare

Increase in purchasing power, expansion in insurance coverage and easy access to quality healthcare specially in the developing nations will drive the growth of the industry. Majority of the increased usage will be driven from markets like China, India, Brazil and Indonesia. The extent of Governments initiatives and expenditure towards healthcare infrastructure will also be a key determinant.

Increasing chronic diseases

Accelerating urbanisation, rising working population will lead to a more sedentary lifestyle resulting in increasing chronic diseases globally. Emerging countries will be hit the most with burgeoning population growth. Cardiovascular disease, obesity and diabetes will be more prevalent and prominent. The global chronic disease market is estimated to reach USD 3,990 million by 2026 registering CAGR of 8% over 2021-22.

Higher Government spend

The pandemic has been a wake-up alarm for the need of a proper healthcare system in place. This will encourage Government spending and attract investments in the sector.

Rising demand for generics

In the next five years, patent expiries is expected to reach USD 188 billion. This will increase the investments for generics and biosimilars. Consistent launch backed by pipeline of higher number of pending ANDAs along with complex or niche generics will further drive demand.

Innovation and R&D

Innovations in advanced biologics, gene and cell therapy will attract significant interest for R&D and manufacturing in the future.

Global Formulations Industry Contract Development & Manufacturing Organisation (CDMO)

The global formulations industry or Contract Development & Manufacturing Organisation (CDMO) has attained a more prominent position post the pandemic as drug developers are facing challenges across multiple aspects right from biopharma industry, drug development, clinical trials, supplies, and manufacturing, to supply chain logistics. The CDMOs have established themselves as feasible alternatives to the in-house R&D and manufacturing units of the big pharma. They have become an integral part of the large pharma businesses. The global CDMO market valued at USD 160 billion in 2020 is likely to be worth USD 237 billion by 2026, registering CAGR of 6.5% over 2020-2026.

Global Formulations Outsourcing Market

The global formulation outsourcing market stood at USD 18 billion in 2020 and is estimated to be USD 30 billion by 2026. The industry is growing at a much higher pace compared to the global pharmaceutical industry. The rising demand for generic medicines and biologics, capital intensive nature of the business and complex regulatory requirements have augmented the demand for outsourcing. Additionally, the big pharma companies are directing their energy and resources to the core areas of competency and diverting the other activities to outsourced model.

North America holds the dominant position in formulation outsourcing followed by Europe and Asia-Pacific. Asia-Pacific is expected to lead the total global formulations outsourcing revenue.

Formulation Development Outsourcing Market

Revenue in USD million, by Geography, Global, 2018-2026

Region	2018	2019	2020	2021	2026	CAGR (%)
North America	7,067.33	7,430.71	7,996.57	8,933.60	12,289.83	6.59%
Europe	4,368.18	4,635.36	5,040.53	5,692.39	8,225.06	7.72%
Asia-Pacific	3,314.58	3,570.38	3,935.40	4,505.61	6,955.28	9.07%
Middle East & Africa	661.02	687.59	731.86	809.22	1,047.51	5.30%
South America	964.67	1,005.23	1,071.91	1,187.31	1,553.21	5.52%

(Source: Mordor Intelligence)

Oncology is the largest therapy segment under global formulations outsourcing. It is valued at close to USD 4 billion in 2018 and is estimated to rise to ~USD 7 billion by 2026.

Formulation Development Outsourcing Market

Revenue in USD million, by Application, Global, 2018-2026

Application	2018	2019	2020	2021	2026	CAGR (%)
Oncology	3,297.47	2,556.21	3,924.32	4,498.21	6,978.97	9.18%
Genetic Disorders	614.85	647.04	696.93	779.63	1,077.61	6.69%
Neurology	1,645.93	1,726.14	1,852.78	2,065.48	2,802.39	5.29%
Infectious Diseases	1,191.20	1,315.00	1,483.37	1,738.85	2,946.88	11.13%
Respiratory	1,012.79	1,099.33	1,220.64	1,407.97	2,242.52	9.76%
Cardiovascular	1,225.73	1,305.34	1,422.84	1,610.72	2,362.92	7.97%
Other Application	7,382.81	7,680.21	8,175.39	9,027.27	11,689.60	5.30%

(Source: Mordor Intelligence)

Key Growth Drivers for CDMO

Rising demand for generics and biologics

The pharmaceutical companies are outsourcing the R&D activities to CDMOs and CROs to reduce the drug development costs and timelines. The rising demand of generics and biologics and capital intensive nature makes outsourcing a viable option for the big players.

Reduced costs and expertise

The emerging countries have access to low cost skilled pool of talent, expertise, technology and access to specialised knowledge. Speed and agility along with low costs compared to developed nations have encouraged outsourcing.

Rising drug approvals

The rise in approvals by the regulatory bodies is expected to fuel the manufacturing of the pharmaceutical formulations. From 2018 till 2021, around 210 drugs have been approved. This will accelerate the formulation development outsourcing markets demand as outsourcing allows the pharmaceutical clients to expand the technical resources without increased overhead.

End-to-end services

The CDMOs provide end-to-end services and invest heavily on technology, people and infrastructure.

Global Injectables Market

The global injectable drugs market was valued at USD 398 billion in 2020 registering CAGR of 7.9% over 2020-26. The market is expected to reach USD 670 billion by 2026.

The major factors attributing to the growth of this industry include:

Rising R&D focus on development of biotechnology-engineered anti-cancer drugs

Rapid growth in the usage of pre-filled syringes for biologic products

Increased outsourcing activities

By region, North America continues to hold the largest position, followed by Europe and Asia. By application injectable the oncology segment has the highest share followed by neurology and cardiovascular diseases.

Injectable drugs market

Revenue in USD billion, by Geography, Global, 2018-2026

Region	2018	2019	2020	2021	2026	CAGR (%)
North America	143.09	154.19	168.70	193.80	278.42	7.52%
Europe	89.32	96.61	106.09	122.32	179.00	7.91%
Asia-Pacific	74.31	81.06	89.78	104.40	159.42	8.84%
Middle East and Africa	11.62	12.50	13.65	15.66	22.31	7.34%
South America	16.73	17.94	19.53	22.30	30.84	6.70%

(Source: Mordor Intelligence)

Injectable drugs market

Revenue in USD billion, by Application, Global, 2018-2026

Application	2018	2019	2020	2021	2026	CAGR (%)
Oncology	99.20	107.40	118.05	130.17	200.33	9.00%
Neurology	12.30	13.17	14.32	15.61	22.73	7.80%
Cardiovascular Diseases	37.86	40.64	44.29	48.42	71.41	8.08%
Autoimmune Diseases	53.06	57.56	63.39	70.03	108.82	9.22%
Infectious Diseases	86.77	94.77	105.09	137.33	187.97	6.48%
Pain	14.81	15.52	17.15	18.66	26.84	7.54%
Other Application	31.05	32.94	35.45	38.24	51.89	6.29%

(Source: Mordor Intelligence)

Growth Drivers for Global Injectable Market

Rise in chronic diseases

There is an increase in the prevalence of diabetes and other chronic diseases for which treatment is primarily administered using injectables.

Emergence of New Drug Delivery Systems (NDDS)

The development of new injectables delivery devices has facilitated increased access to self-administered medications which are convenient and safe to use. Moreover, NDDS helps the patients reduce frequency of their hospital visits.

New therapeutic areas for injectables

The market for injectables is growing for new ailments such as rheumatoid arthritis, multiple sclerosis, cancers and autoimmune disorders. Pharmaceutical players, especially in the injectable segment are investing in research and technology that will cater to formulations in this new segment of diseases.

Growth of biologics

In the next few years, many biologic drugs are expected to witness patent expiry. This is expected to result in a surge in their biosimilar and biologics products which in turn is expected to increase demand for the injectables drug delivery devices for such formulations.

Indias Pharmaceutical Market (IPM)

India enjoys a critical position in the global pharmaceutical market. Globally, India ranks 3^rd in terms of pharmaceutical production by volume and 14^th by value. Over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK are supplied from India. Indias domestic pharma industry is projected to expand three-fold by 2030. Valued at USD 42 billion in 2021, the industry is anticipated to be worth USD 130 billion by 2030.

The IPM is expected to witness growth of 9-11% in 2021-22. Over April-Jan 2022, all the segments have registered strong growth. However sales growth of acute therapies like anti-infectives, gastro, respiratory and pain have risen at faster pace during the year. Higher sales related to Covid-19 products along with continued outperformance of chronic therapies will drive the market growth.

Niche product launch pipeline of the US market, higher price and volume growth in domestic market will drive the growth of IPM.

India Exports

Globally, the largest supplier of generic medicines, generic drugs account for 20% of the total global export, in terms of volume Indias pharma exports grew by 18.2% in 2021, highest growth recorded in last exports eight years. For 2021-22, Indias pharma exports have touched Rs1.8 trillion FDI investments in the sector has reached USD 1.2 billion between April-Dec 2021 The United States, the United Kingdom, South Africa, Russia, and Nigeria are Indias top five pharmaceutical export destinations. Around 55% of our pharmaceutical exports are destined for highly regulated markets North America is the largest market for Indias pharma exports with a share above 30% followed by the US, Canada and Mexico

Formulation Exports

New product launches and opportunities in limited competition products amid reducing pricing pressure in the US have augmented the growth of Indias formulations exports. An increase in demand for pharmaceutical products, induced by the pandemic, and hoarding of supplies by some nations in the wake of production disruptions, have increased exports. The formulation export market growth is estimated to register CAGR of 13-14% over 2021-25 as compared to 6-7% in previous five years.

Advantage India	One-time grant was announced for three bulk drug parks with a maximum limit of USD 140 million per park during 2021-25. This will include Infrastructure facilities solvent storage systems, logistics, and effluent treatment plant facilities
Drug Parks	Further, ‘Ind-CEPI mission and the ‘Covid Suraksha Mission (Financial outlay Rs 900 Crore or USD 119 million approximately) have been launched by the Government to boost the development and testing of indigenous vaccine candidate With the onset of pandemic, companies are contemplating on reducing their dependence on China
China plus one policy Production Linked Incentive (PLI) schemes	MNCs are augmenting their operations in other countries, including India, thus, making India the potential candidate for manufacturing opportunities China plus one policy is being adopted by companies to move production facilities to more lucrative markets such as India, and other ASEAN countries Production Linked Incentive (PLI) schemes announced for Kev Starting Materials (KSMs) and APIs to boost domestic manufacturing of 53 bulk drugs, with a financial outlay of Rs 6,940 Crore (USD 908 million) It includes financial incentives to eligible manufacturers of identified 41 products on incremental sales over base year 2019-20 for six years Domestic manufacturing and exports of APIs, KSMs and other drugs is set to be implemented at a cost of Rs 15,000 Crore (USD 1,963 million)
Biotechnology related:	For strengthening biotechnology sector, initiatives such as Bio-NEST and BioTech Science Clusters were implemented by the Government
Bio-NEST, BioTech Science clusters	Four bio-clusters have been established at Faridabad, Bangalore, Kalyani and Pune, focused on bridging industry-academia research and innovation gaps, incubation space to start-ups and bio-clusters for catalysing R&D and entrepreneurship activities

Over the last five years, Governments expenditure on healthcare has doubled. Further to this, in March 2022,

Rs 500 Crore (USD 666 million) was earmarked for the Strengthening of Pharmaceutical Industry scheme. This would be invested over a period of five years over 2021-2026.

Domestic CDMO Sector

The pharmaceutical companies are consolidating their supplier base and concentrating on their core strengths of R&D and drug discovery. They are focusing to develop alternate sources for supplying APIs as well as manufacturing their critical products to ensure minimum supply disruptions. These factors are expected to provide strong growth for CDMOs in the coming years on the back of continued growth in the pharmaceutical industry and companies striving to reduce their fixed costs through outsourcing of their manufacturing activities.

CDMOs that offer services across drug substance and drug product as well as development and manufacturing are preferred. Responding to this need of the hour, the CDMOs continue to expand their capabilities across all phases of development and commercialisation to eliminate the need for technology transfer and to serve customers end-to-end. Indias CDMO market worth USD 10 billion in 2020 is projected to reach a size of USD 22 billion by 2026, registering CAGR of 13.3%. API and intermediates occupy the biggest market size and finished dosage is likely to witness highest CAGR of 14% over 2020-26.

Key Trends in the CDMO Industry

Low costs

India is the preferred destination for the pharmaceutical players in terms of cost competitiveness. The capital costs ranging from setting up manufacturing plant to hiring specialised talent, is much lower compared to western counterparts. With lower cost manufacturers capturing a major portion of the market, there is a tectonic shift with major players outsourcing in India. India is in a pole position in the area of dosage form and end-to-end efficiency in outsourcing.

Quality compliant infrastructure and technical expertise

After the US, India has the highest number of facilities compliant as per USFDA norms. The number of approved USFDA is 665 and several facilities are under various stages of redressal of grievances, if any.

Proven track record

India holds the 12^th position in the world for export of medical goods. The countrys pharmaceutical sector contributes 6.6% to the total merchandise exports. Indian CDMO players have significant experience in development and manufacturing of pharmaceutical products. This has enabled them to build good business practices and quality manufacturing processes. This experience has aided the Indias position as the leading manufacturer of Pharmaceutical products.

A wide range of product mix

Led by a wide range of product mix comprising high-end research services, biologics, and complex technology services, all offered at a low cost, CRAMS industry has witnessed tremendous growth in the Indian subcontinent. With externalisation of research to emerging markets,

India presents a strong case for outsourcing research and manufacturing. Whilst contract manufacturing is expected to garner a larger share of revenues in the range of over 50-60%.

Higher growth in CDMO of domestic formulation

The strong demand for outsourcing both by big pharma and Indian pharma companies have outstripped the growth of contract manufacturing of formulations compared to the growth of formulations. The CDMO for formulations is expected to see a CAGR of ~14% over 2020-25 and domestic formulations market is likely to witness CAGR of 11% during the same time period.

Chronic therapies to lead the market

With higher urbanisation, rising population and sedentary lifestyles, the prevalence of chronic diseases have grown significantly paving way for increasing demand for chronic therapies. Anti-diabetes and cardiac therapies occupy a major chunk of formulations outsourcing market.

Growth trajectory in Oral solids outsourcing to continue

In dosage terms, the oral solid formulations outsourcing occupies a major share among others. Solid dosages are the mainstay of the pharmaceutical market. Low costs, patent, compliance and ease of maintenance have fuelled the growth of this segment.

Integrated services

Innovation and speed-to-market occupy the centre stage in the pharmaceutical industry. One of the primary drivers of growth for the CDMO players is their ability to provide integrated services across the drug lifecycle. Various pharma players are keen on tie-ups with CDMOs offering advanced supply chain opportunities. In order to optimise development time and cost, drug developers are keen to progress their product with minimal supply chain complexities. This has helped CDMOs to expand their capabilities and emerge as the preferred partner of choice.

Indian Trade Generics Market

Trade generics are generics i.e. drugs for which the patents have expired and which are sold directly to the distributor and not marketed through medical representatives. They account for 10% of the generics segment. The trade generics imbibe the same quality and efficacy that of the branded generics. However, the push for high-margin branded generics by the medical representatives have overpowered this segment. Trade generics provide good opportunity for Indian generics manufacturer to export to some of the semi-regulated market as these market share similar disease profile as well as have lower healthcare expenditure.

Advantage of trade generics

Substitute for expensive brands

More affordable

Same efficiency levels as branded generics

Growth

Indias trade generics have observed a CAGR of 6.2% over 2016-2020. The trade generics market is expected to outperform the domestic formulations market by volume. The sales volume of trade generics is likely to be 13% compared to 5% for formulations over the next five years. The segment is likely to record CAGR of 8.2-9.2% over 2021-25, reaching a market size of ~Rs 33 billion.

Key Trends in the Trade Generics

Easy access to low cost healthcare

As trade generics are a relatively less expensive alternatives to branded generics, it caters to the healthcare needs of the underprivileged. The rural markets are characterised by lower penetration of healthcare facilities, low per capita consumption of medicines, a wide base of patients with acute and chronic diseases, and low penetration of generics. With low affordability trade generics becomes the favourable option, limiting expenses and ensuring cure.

Government push for schemes such as Jan Aushadhi Yojana

The Government scheme Jan Aushadi Yojana aims to reduce the healthcare budgets of every citizen and provide quality generic medicines at affordable prices. This is likely to see a substantial improvement in sales of generics and may account for 2% of total domestic pharmaceutical sales by 2024.

Domestic Injectables CDMO Market

The domestic injectable CDMO industry focuses on manufacturing injectable formulations primarily for domestic formulation companies. Injectables, though a small segment in the CDMO space but is expected to experience significant growth on account of rising chronic therapies. The domestic injectables CDMO industry, valued at Rs 31 billion in 2020 is positioned for a CAGR of 11.5-12.5% over the next five years.

There is an increasing demand for injectable manufacturing globally on account of Covid-19 and increase in drug approvals.

Key trends

The liquid dosage sector is predicted to develop steadily due to the continuous use of liquid dosage formulation in the nasal and ophthalmic segments. This expansion is likely to be bolstered by increased R&D.

The rising prevalence of chronic diseases in India as a result of rising pollution levels and the populations unhealthy lifestyle are the primary drivers of the generic injectables industry.

Company Overview

In the domestic pharmaceutical formulations Contract Development and Manufacturing Organisation (CDMO) industry, we are the leading players ranking among the top five (by revenue) in India. We are present across the value chain providing a comprehensive range of CDMO services ranging from product discovery, product development, licensing and commercial manufacturing of generic products, including complex generics, in compliance with current Good Manufacturing Practices. Additionally, our own branded products are sold in the trade generics and OTC markets as well as export generic products to several countries. Currently, we own and operate four manufacturing facilities located in Dehradun, Uttarakhand.

Total installed operating capacity per annum

Categories	2019-20	2020-21	2021-22	Capacity Utilisation
Tablets & Capsules	5,258 million	7,064 million	7,064 million	42.7%
Pouch & Sachet	43 million	54 million	54 million	5.5%
	packs	packs	packs
Liquid Bottles	61.1 million	61.1 million	61.1 million	51.7%

We have three distinct strategic business verticals (SBV):

	Domestic Trade
CDMO Services and Products	Generics and Over-The- Counter (OTC) Brands	Exports

CDMO Services and Products

Our CDMO Services and Products SBV are focused on providing products and services across a diverse range of pharmaceutical and nutraceutical generic products. These products are sold to Indian and foreign multinationals who market these products under their own name. We are catering to top 7 out of 10 Indian Pharmaceutical Formulations Companies.

Domestic Trade Generics and OTC Brands

Trade generic products are generic medicines, i.e. drugs for which the patents have expired, which are sold directly to the distributor and not marketed through medical representatives. These products compete with the branded generics and are typically used as a substitute for more expensive branded generic medicines.

Our Domestic Trade Generics and OTC Brands SBV consists of (i) trade generic products; and (ii) OTC brands, which include nutraceutical and health supplement products. These products do not require prescription and are distributed and promoted in India under Windlas brand names through online and offline channels and majorly manufactured by us.

Exports

Export vertical is engaged in identifying high growth opportunities in semi-regulated international markets and selected regulated markets. The aim is to develop and register product applications in order to obtain marketing authorisations for medicines and health supplements. These products are sold to pharmaceutical companies and pharmacies in the respective markets.

Financial Performance

On a consolidated basis, the net adjusted revenue from operations grew 9% Y-o-Y to Rs 466 Crore for 2021-22. EBITDA margins stood at 11.3% as against 12.7% Y-o-Y. A decline in EBITDA margins was primarily due to change in product mix, increased R&D expenses, additional plant manpower and higher product development or registrations. Our Company also incurred Rs 1.8 Crore of ESOP-related expenses during the year. Adjusted profit after tax stood at Rs 38 Crore as against Rs 16 Crore Y-o-Y. Profit after tax has doubled on account of higher other income.

CDMO vertical highlights: For the full year 2021-22, revenue for CDMO vertical stood at Rs 398 Crore as compared to Rs 362 Crore in 2020-21, growing by 5% on YoY basis. CDMO vertical contributed approximately 81% and 85% for 2021-22 and 2020-21, respectively to the consolidated revenue.

Trade generics vertical highlights: For the full year 2021-22, revenue for trade generics vertical stood at

Rs 61 Crore as compared to Rs 44 Crore in 2020-21, growing by 39% on YoY basis. Trade generics vertical contributed approximately 13% and 10% for 2021-22 and 2020-21, respectively to the consolidated revenue.

Export vertical: For the full year 2021-22, revenue for export vertical stood at Rs 21 Crore as compared to

Rs 19 Crore in 2020-21, growing by 10% on YoY basis. The export vertical generics vertical contributed 4% of the consolidated revenue in both the years.

Over the next five years, we expect to double our CDMO revenue, triple revenues from trade generics, and quadruple export revenues. Our three-pronged CDMO vertical strategies of increasing revenue share from existing customers, new customer addition, and innovative product launches fuelled by strong R&D will augment the growth.

R&D and Innovation

Innovation is at the core of our spirit at Windlas. We aim to deliver customised, innovative and complex generic products to our customers. Our R&D team works closely with customers or prospective customers, and provides innovative and cost-efficient solutions tailored to meet specific customer requirements. Our R&D laboratories (which include formulation development, analytical development and chemical research areas) are located at Dehradun Plant - I, and are recognised as an in-house R&D unit by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India. Our R&D laboratories are focused on developing cost-efficient processes.

We have successfully utilised our R&D capabilities to develop various products, processes and technologies for diverse therapeutic segments. Over the years our Company has obtained more than 55 product marketing authorisations across various export markets, such as, Cambodia, Ivory Coast, Philippines, Thailand, Vietnam, Myanmar and Sri Lanka. Additionally, we have also entered into a technology licensing agreement in relation to nanoparticle-encapsulated curcumin solid dispersion technology with the National Institute of Pharmaceutical Education and Research, Mohali.

At WBL, we ensure that all our products go through the quality check by our R&D team and ensure to meet the global standards. The R&D team continues to assist us in developing newer technologies, delivery systems and manufacturing processes for existing as well as new products. This will eventually bring in economies of scale, efficiency, simplified processes, improvement in safety and reduced environmental load.

Quality, Health, Safety and Environment

Windlas Biotech Limited has well-defined electronic Quality Management System in place across all manufacturing facilities. Our Company ensures that all products manufactured are suitable for their intended use in term of safety, identity, strength, quality and purity. We ensure that the end-products are in conformity with the various regulatory directives and CGMP (Current Good Manufacturing Practices).

Our Company is constantly working on innovative technologies to create efficient waste management, Wastes are collected in separate waste disposal area and disposed through authorised outer vendor within ninety days following norms of State Pollution Control Board.

Our Companys primary focus has been around reducing emission and promoting cleaner environmental solutions. Eco-friendly boiler Briquette fire boiler is used at site, along with other common utilities to adjacent plant to minimise environmental load. We have significantly reduced water consumption through our innovative production processes and introduced rain water harvesting system at site.

Fuming hood with filtration system is installed at site lab to control the volatile organic carbon. To reduce industrial emission at sites, air conditioning system and heat ventilation system were also installed.

To optimise entire effluent stream, our Company has continuously innovated several techniques to reduce effluent generation in the process, Additionally, site the introduced UF plant to treat effluent discharge water and recirculated into the system.

Our Company is continuously innovating processes to reduce waste by maintaining higher yields.

During the year, our Company conducted various training programmes in all units regarding the use and value of personal protective equipment (PPE), safety awareness, and safety actions.

To monitor the fire threat, all our units have fire hydrant systems, fire extinguishers, and smoke and heat detectors and sprinkle system. Fire safety equipment are maintained and monitored as per specified frequency.

An external safety audit in accordance with PSCI checklist was conducted in year 2021 through Sanofi, at site to check safety, health and environment.

Employees

Our employees contribute significantly to our business operations. As of March 31, 2022, we had 959 permanent employees. In addition, we have entered into arrangements with third-party personnel companies for the supply of contract labour. The number of contract labourers varies from time-to-time based on the nature and extent of work contracted to independent contractors.

We train our employees on a regular basis to increase the level of operational excellence, improve productivity and maintain compliance standards on quality and safety. We also conduct training workshops for our employees to develop a variety of skill sets and organise modules at regular intervals to promote teamwork and personal growth of employees. In addition, our Company has adopted the ESOP 2021 with the aim to attract, retain and motivate the key talents by way of rewarding their performance and motivate them to contribute to the overall corporate growth and profitability. Our employees are not unionised into any labour or workers unions and we have not experienced any major work stoppages due to labour disputes or cessation of work in the last three years.

Information Technology

An appropriate Information Technology (IT) infrastructure is important in order to support the growth of our business. Our IT systems are vital to our business and we have adopted an IT policy to assist us in our operations. The key functions of our IT team include establishing and maintaining enterprise information systems and infrastructure services to support our business requirements, maintaining secure enterprise operations through, among others, risk assessment, planning and mitigation policies, and identifying emerging technologies which may be beneficial to our operations. We have implemented an enterprise resource planning solution system to handle purchase of goods, services, inventory, supply chain management, invoicing, accounting, payments, collections, reconciliation, taxation, regulatory compliance, human resources management and other business functions.

We have also implemented a sales personnel management system which has the capability to record data at the headquarter-level as well as in relation to each employee, including presenting analysis and historical trends. It is capable of importing ERP data and generating reports which assist in effective management. The integration of our information technology systems with our sales and distribution infrastructure enables us to standardise our processes, reduce cost, enhance productivity, improve workflow and communications and improve our risk control mechanisms.

Risk Management

Our risk identification and management activities are continuous and ongoing. Each functional area is responsible for assessing, articulating and controlling relevant risks.

Industry Risk	Operational Risk	Competition Risk	Suppliers Risk	Financial Risk
Any negative impact on the industry can impact the prospects of our Company.	Any manufacturing or quality control issues may damage our Companys reputation, adversely affecting business, results of operations, and financial conditions.	Competition from domestic and international players. Our Company is focused on building economies of scale, two decades into the business, WBL has strengthened	Profitability and margins are directly impacted by the volatility in prices. In case of a significant change in the raw materials prices and operational cost among others, profitability, too, will shift.	The revenues are spread across various currencies, any drastic fluctuations will.
Windlas has presence across various geographies, we periodically evaluates various developments across the countries and identifies any risks and implements immediate action.	Windlass facilities are all as per GMP standards. We also house a R&D team which does rigorous checks to ensure the quality and efficacy of the products as per customer standards.	our business long- term relation with marquee customers. Our Company undertook R&D initiatives which focuses on reducing costs, improving efficiency and turnaround time.	Our Company has developed alternative suppliers to safeguard the raw material supply chain.	Our Company has robust hedging strategy and framework in place to safeguard against fluctuations.

Internal Control Systems

Our Company has adequate internal control systems commensurate with our business size and nature of business. WBL firmly believes that change is the only permanent thing, and in line with that spirit, our Company regularly updates our systems for incremental improvements. The Audit Committee of the Board periodically reviews these systems, which record transactions, assets, and report on developments timely. Internal audit is carried out by an independent firm of Chartered Accountants on a quarterly basis. The Audit Committee also regularly reviews the periodic reports of the Internal Auditors. Issues raised by Internal Auditors and Statutory Auditors are discussed and addressed by the Audit Committee.

During the year, our Company conducted various training programmes in all units regarding the use and value of Personal Protective Equipment (PPE), safety awareness, and safety action work stoppages due to labour disputes or cessation of work in the last three years.

Cautionary Statement

The Management Discussion and Analysis contains ‘forward-looking statements, identified by words like ‘plans, ‘expects, ‘will, ‘anticipates,‘ believes, ‘intends, ‘projects, ‘estimates and so on within the meaning of applicable securities laws and regulations concerning WBLs future business prospects and business profitability. All statements that address expectations or projections about the future, the Companys strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements. All these prospects are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward-looking statements.

The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, ability to manage growth, competition (both domestic and international), economic growth in India and the target countries worldwide, ability to attract and retain highly skilled professionals, time and cost overruns on contracts, ability to manage international operations, Government policies and actions with respect to investments, fiscal deficits, regulations, interest and other fiscal costs generally prevailing in the economy, etc. Past performance may not be indicative of future performance. The Company does not undertake to make any announcement in case any of these forward-looking statements become materially incorrect in future nor shall the Company update any forward-looking statements made from time to time by or on its behalf.