wintac ltd Management discussions

INDUSTRY STRUCTURE AND DEVEOPMENTS

India is the largest provider of generic drugs globally. Indian pharmaceutical industry supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in UK.

The pharmaceutical sector was valued at US$ 33 billion in 2017. The countrys pharmaceutical industry is expected to expand at a CAGR of 22.4 per cent over 2015-20 to reach US$ 55 billion. Indias pharmaceutical exports stood at US$ 17.27 billion in FY18 and have reached US$ 15.52 billion in FY19 (up to January 2019). Pharmaceutical exports include bulk drugs, intermediates, drug formulations, biologicals, Ayush & herbal products and surgicals. The country accounts for around 30 per cent by volume and about 10 per cent by value in the US$ 70-80 billion US generics market.

OPPORTUNITIES AND THREATS

The Government of India unveiled Pharma Vision 2020 aimed at making India a global leader in end-to-end drug manufacture. Approval time for new facilities has been reduced to boost investments.

The Indian government has taken many steps to reduce costs and bring down healthcare expenses. Speedy introduction of generic drugs into the market has remained in focus and is expected to benefit the Indian pharmaceutical companies. In addition, the thrust on rural health programmes, lifesaving drugs and preventive vaccines also augurs well for the pharmaceutical companies.

India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers who have the potential to steer the industry ahead to an even higher level.

Impact of COVID-19 on Business:

The management has considered the possible effects that may result from the Covid-19 pandemic on the carrying value of assets. In developing the assumptions relating to the possible future uncertainties in the economic conditions because of this pandemic, the company, as at the date of approval of these financial results has used internal and external sources of information to assess the expected future performance of the company. The company has internally performed sensitivity analysis on the assumptions used and based on the current estimates, the company expects that the carrying amount of these assets, as reflected in the balance sheet as at March 31, 2020, are fully recoverable as on reporting date. The management has also estimated the future cashflows for the company with the possible effects that may result from the COVID-19 pandemic and does not foresee any adverse impact on its ability to continue as going concern and in meeting its liabilities as and when they fall due. The actual impact of the COVID-19 pandemic may be different from the estimated as at the date of approval of these financial results.

OPERATIONAL PERFORMANCE & OUTLOOK

The net sales during the year under review was Rs 8511.01 lakhs as compared to Rs 7192.01 lakhs during the previous year, registering a growth of 18.34%. The net loss after tax during the current year was Rs 306.22 lakhs as against the profit of Rs 10.91 lakhs during the previous year. The total comprehensive income for the year was a loss of Rs 378.67 lakhs as compared to a loss of Rs 15.96 lakhs during the previous year.

RISKS AND CONCERNS

The operational costs of the Manufacturing plant are considerably higher to meet the international quality standards. The additional capacities built during the year would further increase the cost of operations. The approval and commercialization of more products and optimum utilization of capacities would be very crucial for the Company to turn around the operations. The delay in approval of more products by the regulatory authorities increases the risk of losses.

The Delisting proposal from Promoters - The Department of Pharmaceuticals (DOP) has accorded approval during March 2019 to the promoters proposal for increasing their shareholding in Wintac Limited to 100% which is a pre-requisite for carrying out the delisting proposal. The promoters have once again reaffirmed that they would pursue the delisting proposal in compliance with the SEBI (Delisting of Equity Shares) Regulations, 2019. However, in view of the National Lock down imposed by the Central and State Governments prohibiting/closure of all commercial and social activities from March 23, 2020 to May 17,2020 in view of COVID 19 pandemic, the delisting process could not be commenced immediately.

The Manufacturing facility at Nelamangala was inspected by USFDA Authorities during February 2020 and now USFDA has classified the facility as Official Action Indicate (OAI). OAI indicates that this facility may be subject to a CGMP regulatory or enforcement action and FDA may withhold approval of any pending applications. Companys Technical team is working with USFDA to address the concerns of USFDA in order to clear the CGMP issues INTERNAL CONTROL SYSTEMS

The Company has adequate Internal Control System commensurate with its size and nature of business. The Internal controls are regularly audited by an external firm of Chartered Accountants. The internal audit program aims at reasonable reassurance of operating controls and continuously upgrading controls to meet requirements of the changing environment. The Audit Committee oversees the internal audit function, compliance with the Companies policies and procedures and facilitates the management to take preemptive steps to minimize exceptions based on the materiality of transactions.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Company reported a net operating loss of Rs 306.22 lakhs during the year as compared to operating profit of Rs 10.91 lakhs during the previous year. The operating profit before interest, depreciation and exceptional items was Rs 552.67 lakhs as compared to a profit of Rs 532.50 lakhs during the previous year. The total interest cost for the year was at Rs 191.27 lakhs as against Rs 93.38 lakhs during the previous year. The increase in interest cost is due to higher borrowings for Capex purposes.

The servicing of interest and repayment instalments of the bank borrowings was regular and on time during the year.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

As on 31st March 2020, there were 367 employees on the rolls of the Company and the relationship with the employees has been very cordial.

KEY FINANCIAL RATIOS:

Sl.No	Particulars	2019-20	2018-19
i.	Debtors Turnover	33.94	52.96
Ii	Inventory Turnover	1.61	1.98
iii	Interest Coverage Ratio	(0.89)	0.84
iv	Current Ratio	0.31	0.25
v	Debt Equity Ratio	(3.48)	(11.00)
vi	Operating Profit Margin (%)	0.02%	0.01%

	For Wintac Limited
Date : 22.06.2020	Sunil Gundewar
Place: Bengaluru	Manager & C.O.O.