Zenlabs Ethica Ltd Management Discussions

[As per Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015] Introduction

Zenlabs Ethica Ltd. is one of the leading marketing companies engaged in the trading and distribution of a wide range of branded pharmaceutical products across key therapeutic segments, including Gastrointestinal (GIT) disorders, Anti-Diabetics, Anti-Hypertensives, Anti-Infectives, Soaps and Antibacterial products, Nutraceuticals, and other healthcare products.

The Company remains committed to responsible and sustainable growth. Its approach to corporate sustainability is reflected in fair, transparent and ethical governance practices; meaningful engagement with marginalized and vulnerable communities; adherence to and respect for human rights; initiatives aimed at reducing the environmental impact of its operations; and continuous efforts to promote employee well-being, health and safety.

Over the past years, the Company has undertaken various strategic initiatives to optimize its business models, reshape its product portfolio and expand its presence across key geographies. These initiatives have strengthened the Companys competitive position and enabled it to respond more effectively to evolving market dynamics and customer requirements.

Going forward, the Company remains focused on sustainable growth by strengthening its market presence, expanding its product portfolio and improving operational efficiencies. The Company also recognizes that its people are central to its long-term success and is committed to investing in talent and developing an agile, innovation-driven and excellence-focused organizational culture.

The Company will continue to pursue opportunities that enhance stakeholder value while maintaining its commitment to responsible business practices, quality, ethical governance and sustainable development. The Management remains cautiously optimistic about the Companys future prospects and is focused on building a resilient and competitive business capable of delivering consistent long-term growth.

(a) Industry Structure and development:

The Indian pharmaceutical industry remains an important and rapidly evolving sector of the Indian economy. The industry continues to benefit from increasing healthcare awareness, rising life expectancy, growing healthcare expenditure, and sustained demand for affordable and quality medicines. India has emerged as a major global pharmaceutical manufacturing and supply hub, particularly in generic medicines, supported by its established manufacturing ecosystem, skilled workforce, cost competitiveness, and growing technical capabilities.

The industry is witnessing increasing emphasis on product quality, regulatory compliance, manufacturing efficiency, technological advancement, research and development, and environmentally sustainable operations. At the same time, changing regulatory requirements, pricing pressures, competition, and evolving customer expectations continue to influence the operating environment.

Against this backdrop, the Company remains focused on maintaining high standards of quality and compliance. The Company continues to invest in manufacturing infrastructure, quality systems, process improvements, and product development capabilities to address evolving market requirements.

Management remains confident about the long-term growth prospects of the pharmaceutical sector and intends to leverage emerging opportunities through operational efficiency, quality enhancement, innovation, regulatory preparedness, and expansion into new markets. The Company will continue to pursue a balanced growth strategy aimed at strengthening its market position and creating sustainable value for stakeholders.

(b) Opportunities and Threats:

The pharmaceutical industry continues to evolve, with increasing emphasis on operational reorganization, development of new markets, innovative marketing strategies, global expansion, and strengthening customer relationships. The fragmented nature of the market presents significant opportunities for the Company to expand its market presence and increase market share. Entry into new geographical and therapeutic markets also provides opportunities to diversify the Companys product and service portfolio and create additional avenues for sustainable growth.

At the same time, the industry remains exposed to various regulatory, political, and economic risks. Changes in government policies, rules, and regulations may adversely affect business operations, pricing, compliance requirements, and profitability. Political and regulatory uncertainties may further increase business risks and require the Company to adopt flexible and proactive strategies. Volatility in input and operating costs may also place pressure on margins, while cautious planning and regulatory requirements may result in delays in product development and commercialization.

Overall, while regulatory and cost-related challenges may continue to influence the industry, the Company believes that market expansion, portfolio diversification, operational efficiency, and stronger customer engagement will provide opportunities for sustained growth and long- term value creation.

(c) Segment wise or product-wise performance:

The Company has a diverse and well-balanced product portfolio spanning multiple therapeutic categories and pharmaceutical segments. The Companys offerings include products across various areas such as cardiology, anti-diabetic, gastroenterology, anti-infective, respiratory, central nervous system, dermatology, vitamins and nutritional products, and other therapeutic segments. This diversified portfolio enables the Company to address a broad range of healthcare requirements and reduces its dependence on any single product, therapeutic category or market.

The Company continues to focus on strengthening its existing product portfolio while introducing new products and line extensions in selected therapeutic areas. The diversity of the portfolio, supported by established brands, product development initiatives and a broad distribution network, provides the Company with opportunities to participate in different areas of the pharmaceutical market and supports sustainable business growth.

During the year under review, the Companys performance across its product portfolio was influenced by changes in demand, product mix, volume growth, pricing, competitive intensity and regulatory developments. The Company remains focused on optimizing its product mix, strengthening key brands and expanding its presence in high-growth and strategically important segments.

(d) Outlook:

The pharmaceutical distribution and trading sector is expected to maintain steady demand, supported by increasing healthcare awareness, growing healthcare expenditure and the continuing need for pharmaceutical and healthcare products. The Company remains focused on strengthening its position in the market through an expanded product portfolio, strong supplier relationships and efficient distribution capabilities.

Going forward, the Company intends to focus on expanding its customer and distribution network, identifying opportunities for adding new products and strengthening relationships with manufacturers and suppliers. The Company will also continue to focus on efficient inventory management, working capital optimisation and cost control to support sustainable business growth and maintain healthy operating margins.

The Company remains mindful of challenges such as competition, changes in product pricing, fluctuations in procurement costs, regulatory requirements, credit risks and changes in market demand. Management will continue to monitor these factors closely and take appropriate measures to manage associated risks.

With its established market presence, customer relationships and focus on operational efficiency, the Company believes it is well positioned to benefit from the long-term growth prospects of the pharmaceutical and healthcare sector. The Company will continue to pursue sustainable growth while maintaining appropriate standards of regulatory compliance, quality and responsible business practices.

(e) Risks and concerns:

In this competitive market, the company faces the following risks:

Regulatory and Financial Risks

The Company operates in a competitive and regulated pharmaceutical trading and distribution environment and is exposed to various operational, financial and regulatory risks. Changes in applicable laws and regulations, pricing policies, licensing requirements and other regulatory developments may have an impact on the Companys operations and profitability. The Company continues to monitor the regulatory environment and remains committed to maintaining appropriate standards of compliance.

Dependence on Suppliers and Manufactures

The Company also faces competition from existing and new market participants, which may result in pricing pressure and impact operating margins. Dependence on suppliers and manufacturers exposes the Company to risks relating to product availability, changes in supplier terms, supply disruptions and fluctuations in procurement costs. Company focuses on maintaining strong relationships with suppliers and customers, offering a diversified range of pharmaceutical products, and improving operational and cost efficiencies. Management also continues to review procurement and pricing strategies to maintain competitiveness while protecting margins

Inventory Risk

Inventory management remains an important area of focus given the nature and shelf life of pharmaceutical products. Slow-moving or expired inventory may result in financial losses and increased working-capital requirements. The Company therefore continues to monitor inventory levels, product movement and expiry periods to improve inventory efficiency.

Credit and Liquid Risk

The Company is also exposed to credit and liquidity risks arising from trade receivables and working-capital requirements. Delays in collection from customers may affect cash flows and increase the requirement for working capital. Management continues to monitor customer creditworthiness, receivables and cash flows to manage these risks.

Storage and Quality Risk

In addition, risks relating to logistics, storage and transportation, product quality, market demand and changes in economic conditions may affect the Companys operations. The Company seeks to mitigate these risks through appropriate internal controls, regular monitoring, prudent inventory and credit management, diversification of suppliers and customers, and adherence to applicable regulatory and quality requirements.

(f) Internal control systems and their adequacy:

The Company has established an adequate internal control system commensurate with the size, scale and complexity of its operations. The internal controls are designed to safeguard the Companys assets, ensure accuracy and reliability of financial and operational information, promote operational efficiency, and ensure compliance with applicable laws, regulations and internal policies.

The Company maintains appropriate controls over procurement, inventory management, sales, receivables, payments and accounting activities. Particular emphasis is placed on inventory controls, including proper recording, periodic reconciliation and monitoring of stock movement and shelf life of pharmaceutical products.

The internal control framework is supported by appropriate segregation of duties, authorization procedures, accounting controls, periodic reconciliations and management review. Financial and operational performance is monitored regularly, and significant deviations are reviewed by management for timely corrective action.

Based on the managements assessment, the Company believes that its internal control systems are adequate and operating effectively in relation to its operations. No material weakness in the internal control system was identified during the year under review. The Company continues to review and strengthen its internal control procedures to ensure that they remain appropriate in view of changes in the business environment and regulatory requirements.

Discussion on financial performance with respect to operational performance:

During the year under review, the Company continued its operations in the pharmaceutical trading and distribution business. The financial performance of the Company was primarily influenced by the volume of pharmaceutical products traded, customer demand, product mix, procurement costs and operating expenses.

The Company recorded revenue from operations of ^4,692.25 lakhs during the year under review, as compared to ^5,142.25 lakhs in the previous year, representing a decrease of approximately 8.75%. Consequently, the Company reported a Loss Before Tax of ^181.31 lakhs and a Loss After Tax of ^193.56 lakhs, as compared to a Profit Before Tax of ^42.79 lakhs and a Profit After Tax of ^26.92 lakhs, respectively, in the previous year. The decline in revenue and profitability was primarily attributable to change in product mix and other applicable market factors.

Management continues to focus on improving operational efficiency, controlling costs, strengthening inventory and working-capital management, and enhancing margins in order to improve the Companys financial performance in the coming year.

Overall, the financial performance during the year reflects a challenging operating environment. The management remains committed to strengthening the Companys core trading operations and taking appropriate measures to improve revenue, profitability and operational efficiency.

Material developments in Human Resources / Industrial Relations front, including number of people employed:

Human resources are an integral part of the Companys operations. During the year under review, there were no material developments in the area of human resources or industrial relations that had a significant impact on the Companys operations. The Company maintained cordial and healthy relations with its employees and continued to provide a conducive working environment.

As on 31 March 2026, the Company had 63 employees. The management considers its existing human resource strength to be adequate for the Companys current scale of operations and remains committed to developing and retaining competent personnel to support the Companys future growth.

(g) Details of significant changes in Key Financial Ratios

Ratio/Measure	Methodology	As on 31st March, 2026	As on 31st March, 2025	% Variance
Current Ratio (times)	Current assets/ Current liabilities	1.29	1.33	-2.54%
Debt - Equity Ratio (times)	(Non-current borrowings + Current borrowings + Non- current Lease liabilities + Current lease)/Total Equity	1.29	1.22	5.81%
Debt Service Coverage Ratio (Times)	Earning available for debt service/ Debt Services (Interest and Lease Payments +Principal Repayments)	1.02	1.07	-4.67%
Return on Equity (ROE) (%)	Net Profit after tax/ Average Shareholders Equity	-20.44%	2.62%	-879.99%
Inventory turnover ratio (Times)	Revenue from operation/ Average Inventory	3.34	4.10	-18.54%
Trade receivables turnover Ratio (Times)	Revenue from operation/ Average Trade Receivable	2.66	2.55	4.26%
Trade payables turnover Ratio (Times)	Purchases of stock in trade and other expenses/ Average Trade Payables	2.73	3.25	-16.21%
Net capital turnover ratio (Times)	Revenue from operation/ Average Working Capital	5.45	5.79	-5.86%
Net profit ratio (%)	Net Profit After Tax/ Revenue from operation	-4.13%	0.52%	-887.88%
Returnon Capital employed	Earning before interest and taxes/ Capital Employed	-5.15%	5.85%	-187.93%
Return on investment (%)	Interest Income/ Average Fixed Deposits	NA	NA	NA

Explanation for change in the ratio by more than 25%: The ratio has changed by more than 25% primarily due to decrease in net profit after tax.

	On behalf of the Board For
	Zenlabs Ethica Limited
	Sd/-
	Sanjeev Kumar
Date: 2nd September, 2026	Managing Director
Place: Chandigarh	DIN: 01154896