Ajanta Pharma Ltd:Annual Report 2023-24 Analysis

Ajanta Pharma Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Ajanta Pharma was founded in 1973 as a family-owned business.

Headquarters Location and Global Presence:

The company’s headquarters is located in Mumbai, India. Ajanta Pharma has a significant presence in emerging markets like India, Africa, Southeast Asia, and Latin America.

Company Vision and Mission:

While a specifically stated vision and mission statement were not easily found, Ajanta Pharma’s activities reflect a commitment to:

• Developing, manufacturing, and marketing high-quality, affordable pharmaceuticals.
• Focusing on therapeutic segments with unmet needs.
• Expanding its global reach in emerging markets.

Key Milestones in their Growth Journey:

• Early Years (1973-1990s): Focus on developing and marketing generic pharmaceuticals in India.
• Expansion into Emerging Markets (2000s): Strategic expansion into Africa, Southeast Asia, and Latin America.
• Specialty Focus (2000s-Present): Increasing focus on specialty therapeutic areas such as cardiology, dermatology, ophthalmology, and pain management.
• R&D Investments (Ongoing): Significant investments in research and development to develop innovative products and formulations.

Stock Exchange Listing Details and Market Capitalization:

Ajanta Pharma is listed on the Bombay Stock Exchange (BSE: 532331) and the National Stock Exchange of India (NSE: AJANTPHARM). As of late 2023, the market capitalization is in the range of $2.5-$3 billion USD, but this is subject to change.

Recent Financial Performance Highlights:

For the financial year ending March 2023, Ajanta Pharma reported revenue of ₹38.6 billion (approximately $470 million USD). The company’s financial performance is typically driven by sales in the domestic market and key export markets.

Management Team and Leadership Structure:

The leadership team includes senior executives with experience in pharmaceuticals, finance, and operations. The current Managing Director is Yogesh Agrawal.

Notable Awards or Recognitions:

• Ajanta Pharma has been recognized for its quality manufacturing practices and export performance.

Their Products #

Complete Product Portfolio with Categories:

Ajanta Pharma has a diversified product portfolio spanning multiple therapeutic areas:

• Cardiology: Medications for heart conditions, hypertension, etc.
• Dermatology: Products for skin disorders, acne, eczema, etc.
• Ophthalmology: Treatments for eye diseases, glaucoma, infections, etc.
• Pain Management: Analgesics, anti-inflammatory drugs.
• Anti-malarial: Medications for prevention and treatment of malaria.
• Gastrointestinal: Drugs for acidity, ulcers, and other digestive issues.
• Respiratory: Medications for asthma, bronchitis and cough.
• Women’s Health: Products for various conditions unique to women.

Flagship or Signature Product Lines:

• Sildenafil Citrate (Oral Jelly): ED treatment.
• Eye Care range: Wide variety of eye drops and medications.
• Dermatology: Treatments for various skin conditions.

Key Technological Innovations or Patents:

Ajanta Pharma focuses on developing innovative drug delivery systems, including:

• Oral dissolving films
• Extended-release formulations
• Transdermal patches

Manufacturing Facilities and Production Capacity:

Ajanta Pharma operates several manufacturing facilities in India, with capacities for producing a range of pharmaceutical formulations. Specific production capacity figures are not readily available publicly.

Quality Certifications and Standards:

Ajanta Pharma’s manufacturing facilities are certified by various international regulatory agencies, including:

• US FDA (United States Food and Drug Administration)
• WHO-GMP (World Health Organization Good Manufacturing Practices)
• Various European regulatory agencies

Unique Selling Propositions or Technological Advantages:

• Focus on niche therapeutic segments and emerging markets
• Strong R&D capabilities for developing innovative formulations
• Affordable pricing strategy

Recent Product Launches or R&D Initiatives:

Ajanta Pharma regularly launches new products in its focus therapeutic areas. Specific details of recent launches can be found in their annual reports and press releases. The company invests in R&D to develop new formulations and drug delivery systems.

Primary Customers #

Geographic Markets (domestic vs. international):

Ajanta Pharma derives revenue from both domestic and international markets. While the exact split varies, a significant portion of revenue comes from:

• India (Domestic Market)
• Africa (Key export market)
• Southeast Asia
• Latin America

Distribution Network and Sales Channels:

Ajanta Pharma utilizes a combination of sales channels:

• Direct sales to hospitals and pharmacies
• Distribution network through wholesalers and distributors
• Partnerships with local distributors in international markets

Major Competitors #

Direct Competitors in India and Globally:

• Sun Pharmaceutical Industries Ltd.
• Cipla Ltd.
• Dr. Reddy’s Laboratories Ltd.
• Lupin Ltd.
• Torrent Pharmaceuticals Ltd.
• Global Generic Pharmaceutical Companies

Competitive Advantages and Disadvantages:

• Advantages: Strong presence in emerging markets, focus on niche therapeutic areas, innovative formulations, and affordable pricing.
• Disadvantages: Smaller size compared to some global giants, heavy reliance on specific geographic markets, and potential regulatory challenges.

How they differentiate from competitors:

• Focus on niche therapeutic areas, emerging markets, innovative formulations, and affordable pricing.

Future Outlook #

Expansion Plans or Growth Strategy:

• Continue expanding its presence in emerging markets.
• Invest in R&D to develop new products and formulations.
• Strengthen its distribution network.
• Explore strategic acquisitions and partnerships.

Sustainability Initiatives or ESG Commitments:

Information regarding specific sustainability initiatives or ESG (Environmental, Social, and Governance) commitments was not readily available but will be disclosed in company reports.

Industry Trends Affecting their Business:

• Increasing demand for affordable medicines in emerging markets.
• Growing prevalence of chronic diseases.
• Stringent regulatory requirements.
• Competition from generic and branded pharmaceutical companies.

Long-Term Vision and Strategic Goals:

Ajanta Pharma’s long-term vision is likely to be to become a leading pharmaceutical company in emerging markets by:

• Developing and marketing high-quality, affordable medicines.
• Expanding its geographic reach.
• Strengthening its R&D capabilities.

Financial Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue Growth: Consolidated revenue from operations increased by 12% to ₹4,209 crore in FY2024, up from ₹3,743 crore in FY2023, and exhibited a three-year CAGR of 13%.
• EBITDA Growth: EBITDA increased by 50% to ₹1,172 crore in FY2024, compared to ₹783 crore in FY2023. The EBITDA margin improved to 28% in FY2024 from 21% in FY2023 and 26% from FY2022.
• Profit After Tax (PAT) Growth: PAT increased by 39% to ₹816 crore in FY2024 from ₹588 crore in FY2023. PAT margin expanded to 19% in FY2024 from 16% in FY2023.
• Return on Equity (ROE): ROE improved to 23% in FY2024 from 18% in FY2023 and 13% in FY22.
• Return on Capital Employed (ROCE): ROCE increased to 31% in FY2024 from 22% in FY2023.
• Earnings Per Share (EPS): Basic EPS increased to ₹65 in FY2024 from ₹46 in FY2023.
• Cash and Liquid Investments: Stood at ₹460 crore as of 31 March,2024.
• Free Cash Flow: Generated free cash flow of ₹637 crore in FY2024, 78% of PAT.
• Capex: Maintenence CAPEX for FY2024 was H160 cr.

Business Segment Performance #

• Branded Generics (India): Contributed 31% to total revenue, with sales of ₹1,308 crore in FY2024, an 11% growth from FY2023. Growth was driven by 15 new product launches.
• Branded Generics (Asia): Sales were ₹1,057 crore in FY2024, a 10% growth, contributing 26% to total sales. 18 new products were launched in this region.
• Branded Generics (Africa): Sales reached ₹585 crore, a 5% growth. 9 new products were launched.
• US Generics: Contributed 23% to total revenue, with sales of ₹964 crore, a 16% growth driven by new product launches and market opportunities.
• Africa Institutional: Grew by 31% to ₹249 crore, contributing 6% to total sales.

Major Strategic Initiatives and Progress #

• New product launches: 42 new products were launched in Branded Generics markets, with 300+ field personnel added.
• Market Share Expansion: Ajanta outperformed the Indian Pharmaceutical Market (IPM) by 180 basis points.
• Digitalization and Data Analytics: Focus on digital transformation across all functions for efficiency gains.
• Renewable Energy: A new 6.4 MW solar power plant was commissioned, bringing renewable energy to 30%+ of total consumption. The goal is to exceed 50% in the next two years.

Risk Landscape Changes #

• Identified risks include regulatory changes, competition, supply chain disruptions, cyber and data security, economic and political risks, and ESG risks. Enterprise Risk Management (ERM) framework is in place.

ESG Initiatives and Metrics #

• Renewable Energy: Commissioned a 6.4 MW solar plant, increasing solar energy capacity to 12.69 MW, fulfilling 30%+ of energy requirements. Aim to reach over 50% within two years.
• CO2 Emission Reduction: The new solar plant led to a reduction of 4,200 tonnes of CO2 emissions annually.
• Water Conservation: Maintained water neutrality and zero-discharge policy at facilities.
• Sustainability Awards: Received the SKOCH ESG Award 2024 and Apex India Green Leaf Platinum Award for Sustainability 2023.

Management Outlook #

• US Generics: Expect slower growth in FY2025 due to fewer product launches.
• Africa Institutional: High uncertainty, neutral outlook.
• Branded Generics: Expect to grow faster than the market.
• EBITDA Margins: Expect EBITDA margins to remain stable or improve slightly.
• Financial Discipline: A continued focus on financial discipline and profitable growth.

Detailed Analysis #

Financial Position Analysis #

3-Year Comparative Analysis (Consolidated) #

Assets #

Restated: Note 8 shows 2022 PPE without right of use assets as 2075.10 and total assets were restated for comparison by subtracting it, as the previous report was prepared on a standalone basis and not consolidated.

Liabilities #

*Trade Payables for 31-Mar-2022 extracted from MD&A.

Equity #

Significant Changes in Major Line Items (>10% YoY) #

• Non-Current Investments: Decreased by 25.98% (from 25.10 Crore to 18.58 Crore).
• Deferred Tax Assets (Net) Increased by 38.95% (from 96.77 Crore to 134.45 Crore).
• Other Non-Current Assets: Increased by 77.44% (from 5.32 Crore to 9.44 Crore).
• Current Investments: Decreased by 35.32% (from 510.27 Crore to 330.05 Crore).
• Trade Receivables: Increased by 18% (from 1,056.90 Crore to 1,246.84 Crore).
• Cash and Cash Equivalents: Decreased by 60.73% (from 329.83 Crore to 129.49 Crore).
• Current Loans: Increased by 95.28% (from 17.39 Crore to 33.96 Crore).
• Other Current Financial Assets: Increased by 666.94% (from 2.48 Crore to 19.02 Crore).
• Other current assets: Increased by 45.26% (from 91.61 cr to 133.07 cr).
• Current Borrowings: Increased by 727.78% (from 0.18 Crore to 1.49 Crore).
• Other Current Financial Liabilities: Decreased by 53.2% (from 636.84 cr to 298.03 cr).
• Other current liabilities: Increased by 158% (from 23.15 cr to 59.73 cr).
• Non-Current Provisions: Increased by 63.73% (from 24.15 Crore to 39.54 Crore).
• Deferred Tax Liabilities (Net): Increased by 11.03% (from 97.72 Crore to 108.50 Crore).
• Current tax liabilities (net): increased by 35.36% (from 33.07 Cr to 44.77 Cr)
• Other Equity: Increased by 5.33% (from 3,362.72 Crore to 3,542.09 Crore).

Working Capital Trends #

Analysis: #

The working capital has increased by 140.44 Crore, indicating an improvement in the Company’s short-term liquidity position.

Asset Quality Metrics #

Analysis: #

There is no Impairment on Financial Asset during the current year.

Debt Structure and Maturity Profile #

• Maturity Profile: The current portion of long-term debt is minimal, indicating low immediate refinancing risk.

Off-Balance Sheet Items #

*Customs duty, disputed taxes, and other matters represent potential liabilities that are contingent upon future outcomes.

Ajanta Pharma Limited: Financial Performance Analysis (FY2024) #

Revenue Breakdown by Segment/Geography #

• Branded Generics - India: ₹1,308 crore (31% of total revenue), 11% YoY growth.
• Branded Generics - Asia: ₹1,057 crore (26% of total revenue), 10% YoY growth.
• Branded Generics - Africa: ₹585 crore (15% of total revenue), 5% YoY growth.
• US Generics: ₹964 crore (23% of total revenue), 16% YoY growth.
• Africa Institution: ₹249 crore (6% of total revenue), 31% YoY growth.
• Total Consolidated Revenue: ₹4,209 crore, a 12% growth from FY2023’s ₹3,743 crore.
• Exports contributed 68% of revenue.

Cost Structure Analysis #

• Material Costs: Decreased to 25% of revenue in FY2024 from 28% in FY2023 (a 300 basis point improvement).
• Employee Expenses: 21% of revenue in both FY2024. Absolute cost was ₹900 crore in FY2024 vs ₹785 crore in FY2023.
• Other Expenses: Decreased to 25% of revenue in FY2024 (₹1,070 crore) from 31% in FY2023 (₹1,124 crore), a 600 basis point decrease. International logistics costs decreased by approximately ₹103 crore. R&D spend decreased to ₹208 crore (5% of revenue) in FY2024 from ₹237 crore in FY2023.

Margin Analysis #

• EBITDA Margin: Increased to 28% in FY2024 from 21% in FY2023. EBITDA grew by 50% to ₹1,172 crore.
• Net Profit Margin: Expanded to 19% in FY2024 from 16% in FY2023. PAT grew by 39% to ₹816 crore.

EPS Analysis #

• Basic EPS: Increased to ₹65 in FY2024 from ₹46 in FY2023, after adjusting for a bonus issue.
• Diluted EPS: Increased to ₹64.77 for FY2024 from ₹45.89.

Cash Management: Financial Year 2024 Analysis #

Cash Flow Analysis #

Operating Cash Flow (OCF) #

Operating Cash Flow slightly decreased to H 785 crore in FY24, compared to H 792 crore in FY23. Profit before tax was H 1,114 crore, with positive adjustments for depreciation and amortization ( H 135.40 crore) and negative impacts from working capital.

Investing Cash Flow (ICF) #

Investing Cash Flow showed a positive inflow of H 65 crore in FY24, a significant change from an outflow of H (560) crore in FY23. This is largely due to a reduction in the purchase of current investments and proceeds from the sale of current investments. Capital expenditure was lower in FY24.

Financing Cash Flow (FCF) #

Financing Cash Flow showed a larger outflow of H (1,051) crore in FY24, compared to H (108) crore in FY23. Major impacts included dividend payments (H 642 crore) and buyback of shares and payment of buyback tax.

Working Capital Management #

Receivables Days #

Receivables days slightly increased to 109 days in FY24 from 104 days in FY23.

Inventory Days #

Inventory days improved to 73 days in FY24 from 80 days in FY23.

Trade Payable Days #

Trade payable days increased from 79 days in FY23 to 85 days in FY24.

Capital Expenditure (CAPEX) Analysis #

Total CAPEX #

Total CAPEX for FY24 was H 160 crore, described as mostly maintenance CAPEX. The estimated CAPEX for FY25, including maintenance, is about H 250 crore.

Research & Development (R&D) #

R&D expenditure was categorized as part of “Other expenses,” not capex. R&D spend decreased to H 208 crore (5% of revenue) in FY24 from H 237 crore in FY23.

Dividends and Share Buybacks #

Dividends #

The Company distributed H 642 crore as dividends in FY24.

Share Buyback #

The Company approved a share buyback of H 351 crore, including tax, in FY24, constituting 0.82% of the total paid-up equity share capital.

Liquidity Position #

Cash and Investments #

The Company maintains a strong liquidity position with H 460 crore in cash and liquid investments as of FY24.

Current Ratio #

Improved to 3.05 in FY24 from 2.49 in FY23.

Free Cash Flow #

Free cash flow was H 637 crore in FY24, which is 78% of PAT.

Financial Analysis: Key Metrics and Trends #

Profitability Ratios (3-Year Trends) #

• ROE, ROCE, and PAT margin show a significant increasing trend, demonstrating improved profitability year-over-year.
• EBITDA margins show a V recovery from the previous year, demonstrating improved profitability.
• EBITDA was lower in FY23 as a result of new product launch in the US market.

Liquidity Metrics #

• The Current Ratio improved in FY 2024, indicating enhanced short-term liquidity and a better ability to meet current obligations.

Efficiency Ratios #

• Receivable days slightly increased to 109 days from 104 due to the increase in business.
• Inventory in terms of the number of days to sales improved to 73 days from 80 due to easing of the supply chain.

Leverage Metrics #

• Debt-Equity ratio remains extremely low, indicating minimal reliance on debt financing.
• The balance sheet position is nearly debt free with cash of 460 cr.

Working Capital Ratios #

• Net Capital Turnover Ratio has slightly increased.

Comparison with Industry Averages and Significant Deviations: #

• The company’s EBITDA Margin (28%) and PAT Margin (19%) for FY 2024 were mentioned as “among the best in the industry”, indicating a significant positive deviation.
• Receivable days and inventory days would need a comparison with a specific industry benchmark to determine deviations. Without specific industry benchmarks, the magnitude of deviation cannot be reported.

Ajanta Pharma Limited: Segment Performance Analysis #

Revenue and Profitability Metrics with Growth Rates #

• Branded Generics - India: FY2024 revenue of ₹1,308 crore, an 11% growth from FY2023’s ₹1,174 crore. Contributed 31% to total revenue.
• Branded Generics - Asia: FY2024 revenue of ₹1,057 crore, a 10% growth from FY2023’s ₹957 crore. Contributed 26% to total sales.
• Branded Generics - Africa: FY2024 revenue of ₹585 crore, a 5% growth from FY2023’s ₹559 crore.
• US Generics: FY2024 revenue of ₹964 crore, a 16% growth from FY2023’s ₹828 crore. Contributed 23% to total revenue.
• Africa Institutional: FY2024 revenue of ₹249 crore, a 31% growth from FY2023’s ₹190 crore. Contributed 6% to total sales.
• Consolidated Revenue from Operations: Grew by 12% to ₹4,209 crore in FY2024.
• EBITDA: Grew by 50% to ₹1,172 crore, with the margin expanding to 28% from 21%.
• Profit After Tax (PAT): Grew by 39% to ₹816 crore, with the margin expanding to 19% from 16%.

Market Share and Competitive Position #

• India: Outpaced the Indian Pharmaceutical Market (IPM) growth by 180 basis points (9.4% vs. IPM’s 7.6%). Company’s ranking improved to 26th in IPM. The company is the fourth largest in IPM in its covered market.
• Asia and Africa (Branded Generics): Holds leadership positions in many molecules and sub-therapeutic segments across multiple markets. Among the top 10 players in many African markets.
• Africa Institutional: 1st Generic prequalified by WHO.

Key Products/Services Performance #

• India: Cardiology contributed 38%, Ophthalmology 31%, Dermatology 22%, and Pain Management 9% of India business sales. Launched 15 new products, including 4 first-to-market. 3 brands featured in the top 500 list of brands.
• Asia and Africa (Branded Generics): Focus on chronic therapies (Cardiac, Antidiabetic, Ophthalmology, Dermatology, Pain Management). Over 200 products in each market.
• US Generics: 44 products are available on shelf.
• Africa Institution: Primarily antimalarial products.

Geographic Distribution and Market Penetration #

• Branded Generics: Operations in India and 30+ emerging market countries across Asia and Africa.
• Asia: Presence across the Middle East, South East, and Central Asia (around 10 countries).
• Africa: Operations spread across 20 countries.
• US: Focus on the generics market.

Segment-wise CAPEX and ROIC #

• Overall CAPEX: ₹160 crore for FY2024 (mostly maintenance CAPEX). Estimated CAPEX for FY2025 is about ₹250 crore.
• Return on Capital Employed (ROCE): 31% in FY2024, up from 22% in FY2023.

Operational Efficiency Metrics #

• Material Costs: Reduced to 25% of revenue in FY2024 from 28% in FY2023.
• Other Expenses: Decreased to 25% of revenue in FY2024 from 31% in FY2023, attributed to operational efficiencies (e.g., reduced international logistics costs by over ₹100 crore).
• R&D Spend: Reduced to ₹208 crore, 5% of revenue.
• Inventory Days: Improved to 73 days in FY2024 from 80 days in FY2023.
• Receivables Days: Slightly increased to 109 days from 104 days in FY2023.
• Cash Conversion Ratio: is 78% of PAT.

Growth Initiatives and Challenges #

• Growth Initiatives:
  • New product launches across markets.
  • Increased market share in existing products.
  • Selective expansion of field force.
  • Entry into new countries.
  • Focus on digitalization and data analytics.
• Challenges:
  • High level of uncertainty in the Africa Institutional business due to dependence on agency funding.
  • The Management Discussion and Analysis references global economic risks, including potential escalation of Middle East conflict, high inflation and supply chain issues.

Risk Assessment #

Strategic Risks #

• Severity: High (Branded Generics), Medium (US Generics)
• Likelihood: Medium
• Trend: Increasing (Branded Generics), Stable (US Generics)
• Mitigation Strategies:
  • Branded Generics: Diversified geographical presence, deeper market penetration, expansion into new countries, focus on chronic therapies, new product launches, field force expansion, continuous medical education programs.
  • US Generics: Flawless and excellent execution.
• Control Effectiveness: Partially Effective (Branded Generics), Effective (US Generics)
• Potential Financial Impact: High

Operational Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Decreasing
• Mitigation Strategies: Robust supply chain management, “no stock-out” policy, seven manufacturing facilities, advanced ‘Form Fill Seal’ technology, digitalization across operations.
• Control Effectiveness: Effective
• Potential Financial Impact: Medium

Financial Risks #

• Severity: Medium
• Likelihood: Decreasing
• Trend: Improving
• Mitigation Strategies: Vendor collaboration, proactive mitigation of API price volatility.
• Control Effectiveness: Highly Effective
• Potential Financial Impact: Reduction of EBITDA margin.

Currency Risk (Foreign Exchange) #

• Severity: Medium
• Likelihood: High
• Trend: Stable
• Mitigation Strategies: Hedging up to 50%-75% of net foreign exchange earnings using forward exchange contracts and/or options.
• Control Effectiveness: Effective
• Potential Financial Impact: Refer to sensitivity analysis in point 49.B(iv) in the notes.

Interest Rate Risk #

• Severity: Low
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Refer to sensitivity analysis in point 49.B(iv) in the notes.
• Control Effectiveness: Effective
• Potential Financial Impact: Low, details in the notes.

Compliance/Regulatory Risks #

• Severity: High
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Robust internal controls, Enterprise Risk Management (ERM) framework, compliance monitoring tool, regular audits, dedicated internal audit team.
• Control Effectiveness: Effective
• Potential Financial Impact: High

Emerging Risks #

• Severity: High
• Likelihood: High
• Trend: Increasing
• Mitigation Strategies: Increasing use of renewable energy (aiming for 50% within two years), water neutrality, zero-discharge policy, well-defined safety, health, and environmental policy.
• Control Effectiveness: Improving
• Potential Financial Impact: Costs associated with transitioning to green energy, potential penalties for non-compliance with environmental regulations, reputational damage.

Cyber and Data Security #

• Severity: High
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Structured Digital Database for monitoring the sharing of unpublished price sensitive information.
• Control Effectiveness: No data breaches reported.
• Potential Financial Impact: Data breaches can carry legal/financial penalties.

Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

• Branded Generics: Aiming for faster-than-market growth in India, Asia, and Africa. Progress is demonstrated by deeper penetration in select countries, expansion into new countries, new product and therapy additions, and field force expansion.
• US Generics: Focused on flawless execution and maintaining preferred partner status with distributors. Progress includes clearing US FDA inspections with zero observations for Paithan and Dahej facilities.
• Africa Institution: Maintaining a neutral stance due to the business’s dependency on funding availability with high uncertainty.
• Sustainability: Aim is to fulfill over 50% of energy requirements from green energy within the next two years. Current, progress involves 30%+ of total energy from renewable sources.

Competitive Advantages and Market Positioning #

• Branded Generics: Well-diversified business across India, Asia, and Africa, providing surety, scalability, and sustainability. Holds leadership positions in many molecules and sub-therapeutic segments in multiple markets.
• India: Possesses a strong product portfolio with over 50% first-to-market products. Maintains a solid market position with a 3,000-strong field force. Growth in India was 11%, outpacing the IPM 9.4%. Ranks 4th largest in Indian Pharmaceutical Market (covered market).
• Asia: Leadership in many molecules and sub-therapeutic segments across approximately 10 countries.
• Africa: Leadership in many molecules and sub-therapeutic segments.
• US Generics: Flawless execution and preferred partner status for distributors. Recognized with the DIANA Award for the third time.
• Africa Institution: First generic company to obtain WHO Pre-Qualification, with over 1 billion patients treated.

Innovation Initiatives and R&D Effectiveness #

• Strengthened R&D capabilities with a focus on efficiencies across formulation development, analytical development, and regulatory affairs.
• Investment in a team of 800+ scientists and state-of-the-art infrastructure.
• Development of complex/difficult-to-make products and differentiated product pipeline.
• R&D spend was H 208 cr. in 2024, which is 5% of revenue.
• Filed 7 New ANDAs with USFDA and received 6 approvals. Developed and stabilized 26 new products for branded generic and ROW markets.

Management’s Track Record in Execution #

• Successful margin scaling due to enhanced contribution of Branded Generics and freight cost normalization.
• Operational efficiencies achieved across functions, with a focus on maximizing output from the existing base.
• Significant reduction in international logistics costs (₹103+ crore) and R&D expenses, despite increased product filings.
• Distribution of H 642 crore to shareholders as dividends.
• US FDA inspections cleared with zero observations at Paithan and Dahej facilities.
• Commissioned a 6.4 MW solar power plant and recognition for ESG and ‘Great Place to Work’.
• Buyback of shares for H 351 crore.

Capital Allocation Strategy #

• Accelerated product filing and enhanced ground presence in the Branded Generics business.
• Higher resource allocation for product registrations, promotions, and new product launches.
• Maintenance CAPEX of H 160 Crore.
• Return of excess cash generated to shareholders through dividends (₹642 crore) and share buyback (₹351 crore, including tax).

Organizational Changes and Their Impact #

• No changes in subsidiaries.
• The CSR Committee has been renamed as the ‘CSR & Sustainability Committee’.
• Suspension/withdrawal of the ESOS 2011 scheme due to dormancy.
• Appointment of new Independent Directors (Mr. Rajesh Dalal, Mr. David Rasquinha, Ms. Medha Joshi, and Ms. Simi Thapar).
• Change of Cost auditors from M/s. Sevekari Khare & Associates to M/s. RA & Co.

ESG Framework: Ajanta Pharma Analysis #

Environmental Metrics and Targets #

• Ajanta Pharma aims to fulfill over 50% of its energy requirements from green energy within the next two years, up from over 30% currently.
• A new 6.4 MW solar power plant commissioned in FY 2024 increased solar energy capacity to 12.69 MW, contributing to 30+% of energy requirements.
• CO2 emissions were reduced by 10,436 tonnes in FY 2024, from the 6.4 MW solar unit and reduced by an estimated 4,200 from the new solar plant alone.
• Water withdrawal per unit of production decreased by 14% during FY23-24.
• Waste reduction per unit of production improved by 8% compared to the last financial year.
• Scope 1 and Scope 2 emissions per unit were reduced by 27% in FY 2024 compared to the last year.
• The company’s target is to decrease waste generation 10% annually, and 30% by 2030.

Social Responsibility Programs #

• CSR spending exceeded the 2% of average net profits requirement, with H 17.34 crore spent against an obligation of H 16.38 crore.
• CSR thrust areas include healthcare, education, rural development, community welfare, socio-economic upliftment, women empowerment, and promoting sports.
• Healthcare initiatives include cataract surgeries, eye and skin camps, and support for patients from rural areas.
• Education support is provided via school fee assistance and infrastructure funding.
• Ajanta Pharma actively supports athletes, sponsoring both Olympic and Paralympic contenders.

Governance Structure and Effectiveness #

• The Board of Directors includes a mix of Executive, Non-Executive, and Independent Directors. Independent Directors constitute 50% of the Board.
• Board committees include Audit, Nomination and Remuneration, CSR (renamed CSR & Sustainability), Stakeholders’ Relationship, Risk Management, Executive, and ESG Committees. All committee recommendations were accepted by the Board.
• All Related Party Transactions (RPTs) were conducted on an arm’s length basis and in the ordinary course of business.
• The Whistle-Blower Policy provides direct access to the Chairperson of the Audit Committee and the Managing Director.
• A Code of Conduct is in place for Board members and senior management, with annual compliance affirmations.
• The Risk Management Committee oversees the implementation of the Risk Management Policy. Major risks identified include regulatory, competition, supply chain, cyber security, economic & political, and ESG risks.
• The Internal Audit function reports directly to the Chairperson of the Audit Committee.

Sustainability Investments and ROI #

• Capital investment was made in energy conservation equipment across all units, but the specific amount is only stated as ‘significant’.
• R&D spend for FY 2024 was H 208 crore, 5% of revenue.
• Specific ROI data on sustainability investments is not provided, although reduced energy consumption and cost, reduced production costs, and CO2 emission reductions are mentioned.

ESG Ratings and Awards #

• Ajanta Pharma received the SKOCH ESG Award 2024 for Clean & Green Energy Utilisation.
• Ajanta Pharma received the Apex India Green Leaf Platinum Award for Sustainability 2023.
• Ajanta Pharma’s manufacturing facility at Paithan received the Apex India Safe Workplace Gold Award 2023.
• ISO Certifications were achieved for Dahej and Paithan facilities for quality management systems.

Regulatory Compliance and Future Preparations #

• The company maintains cost accounts and records as per Section 148(1) of the Companies Act, 2013.
• The Company has a comprehensive framework for monitoring statutory compliances and internal policies.
• No instances of material non-compliance or penalties/strictures were imposed by Stock Exchanges, SEBI, or other statutory authorities during the last 3 financial years.
• The Company is preparing for compliance with future regulations and laws, including the new Code on Social Security, 2020.
• The company is compliant with Extended Producer Responsibility (EPR).
• The Company follows Business responsibility and sustainability report.

Forward Outlook: Future Projections and Guidance #

Branded Generics (India, Asia, Africa) #

Management Guidance and Assumptions #

Management expects this segment to outgrow the market, targeting growth beyond normal industry rates. India’s growth is projected at 11%. This assumption relies on continued successful execution of their strategic approach, achieving operational efficiency in API sourcing and logistics, and favorable market conditions.

Market Growth Forecasts #

IQVIA MAT March 2024 data indicates Ajanta’s growth in India (9.4%) outpacing the Indian Pharmaceutical Market (IPM) growth (7.6%) India Branded market growth is 11%. Market-wise contributions in Branded Generics are: India 31%, Asia 26% and Africa 15%.

Planned Strategic Initiatives #

Focus is on deeper market penetration, expansion into new countries, new product launches (42 new products launched in FY24 in emerging markets, another 200 planned next year), therapeutic segment expansion, field force increase, and continuous medical education programs.

Capital Expenditure Plans #

An overall company CAPEX (including maintenance) of H 250 crore is planned for FY2025. It is assumed a portion is allocated to support Branded Generics growth.

Efficiency Improvement Targets #

Savings of 300 basis points in API procurement and H 100+ crore in logistics costs were achieved in FY2024.

Potential Challenges and Opportunities #

• Challenges: Market competition, regulatory changes (such as government-led price revisions in India), inventory rationalization by distributors (as seen in Africa in FY24).
• Opportunities: Expansion of chronic therapies, first-to-market product launches, market share gains in existing products, and leveraging digital initiatives.

US Generics #

Management Guidance and Assumptions #

FY2025 growth is expected to be slower, attributed to fewer product launches that took place towards the end of FY24. It relies on the continued flawless execution.

Market Growth Forecasts #

The US market is growing. There is a Softening of price erosion and leveraging opportunities from market shortages.

Planned Strategic Initiatives #

Focus on a selective product portfolio, maintaining a strong supply chain, and maintaining robust quality compliance.

Capital Expenditure Plans #

Part of the overall H 250 crore CAPEX for FY2025 will likely support the US FDA-approved facilities (Dahej and Paithan).

Potential Challenges and Opportunities #

• Challenges: Price erosion (although softening), regulatory compliance (US FDA inspections).
• Opportunities: New product launches, capitalizing on market shortages.

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• The auditor’s report presents an unmodified opinion on the consolidated and standalone financial statements.
• An “Other Matter” paragraph exists due to financial statements of three subsidiaries being audited by other auditors.
• The Secretarial Audit report is unmodified.

Key Accounting Policies and Changes #

• Financial statements are prepared on an accrual and historical cost basis, except for certain financial instruments measured at fair value.
• Revenue recognition occurs upon the transfer of control of goods to the customer.
• Inventory is valued at the lower of cost (moving weighted average) and net realizable value.
• Depreciation is provided on a straight-line basis.
• Leases are accounted for in accordance with Ind AS 116.
• The company formulated ESOS 2011 and SBIP 2019 schemes.
• During the year, the company decided to suspend/withdraw ESOS 2011.
• No changes in accounting policies during the period.

Internal Control Effectiveness #

• The company maintains an adequate and effectively operating internal financial controls framework.
• The internal audit function reports to the Audit Committee.
• An internal control framework is in place to mitigate fraud risks.
• No sexual harassment complaints were received during the year.

Regulatory Compliance Status #

• The company complies with applicable Secretarial Standards.
• No penalties or strictures were imposed by regulatory bodies on capital market matters in the last three years.
• The company has a comprehensive compliance monitoring tool and framework.
• The company complies with applicable laws and regulations, including industry-related laws.
• The company is registered on the SEBI’s Online Dispute Resolution Portal.
• The company discloses pledge/de-pledge of shares by Promoters timely.

Legal Proceedings and Potential Impact #

• Pending litigations exist, including disputes related to taxes and duties.
• Two ongoing patent litigations exist, but no liability is expected.
• The company does not anticipate a material adverse impact from these proceedings.

Related Party Transactions #

• All related party transactions (RPTs) were on an arm’s length basis and in the ordinary course of business.
• These transactions had Audit Committee approval.
• No material transactions with related parties requiring reporting in Form AOC-2.
• Details of transactions with related parties are disclosed in Note No. 54 of the Financial Statements.

Subsequent Events #

• The Board approved a buyback of equity shares on 02 May 2024.
• The CSR Committee has been renamed as the ‘CSR & Sustainability Committee’.
• Additional Independent Directors were appointed.