Kopran Ltd:Annual Report 2023-24 Analysis

Kopran Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Kopran Ltd. was established in 1958. The company was founded by the Kothari family.

Headquarters Location and Global Presence:

The company is headquartered in Mumbai, India. Kopran has a presence across various international markets, primarily focusing on exports.

Company Vision and Mission:

• Vision: To be a leading pharmaceutical company, providing high-quality and affordable healthcare solutions globally.
• Mission: To develop, manufacture, and market a wide range of pharmaceutical products while adhering to the highest ethical and quality standards.

Key Milestones in Their Growth Journey:

• Established in 1958 as a textile company.
• Diversified into pharmaceuticals in the 1980s.
• Significant expansion of manufacturing capabilities and product portfolio over the years.
• Focus on export markets to drive growth.

Stock Exchange Listing Details and Market Capitalization:

Kopran Ltd. is listed on the Bombay Stock Exchange (BSE) - (BSE: 500204). The market capitalization fluctuates.

Recent Financial Performance Highlights:

Recent financial results showcase ongoing profitability.

Management Team and Leadership Structure:

• Executive Chairman: Surendra H. Kothari
• Managing Director: Ashok Kothari
• The company has a board of directors comprising experienced professionals from various fields.

Any Notable Awards or Recognitions:

Kopran has received awards and recognitions for its export performance.

Their Products #

Complete Product Portfolio with Categories:

Kopran manufactures and markets a diverse range of pharmaceutical products, including:

• Active Pharmaceutical Ingredients (APIs): Penicillin, Rifampicin, Erythromycin, Clarithromycin, and other bulk drugs.
• Finished Dosage Forms (FDFs): Tablets, capsules, liquids, and injectables.
• Intermediates: Key components for the production of APIs.
• Herbal & Nutraceutical Products:

Flagship or Signature Product Lines:

Kopran is known for its expertise in manufacturing Penicillin and Macrolide APIs.

Key Technological Innovations or Patents:

The company has patents related to the manufacturing processes of certain APIs.

Manufacturing Facilities and Production Capacity:

Kopran has multiple manufacturing facilities in India that are certified by various international regulatory agencies.

Quality Certifications and Standards:

Kopran’s manufacturing facilities adhere to international quality standards, including:

• WHO-GMP
• EDQM (European Directorate for the Quality of Medicines)
• US FDA approval for certain products

Any Unique Selling Propositions or Technological Advantages:

• Backward Integration: Kopran has a strong backward integration with its own manufacturing of key raw materials.
• Established Manufacturing Capabilities: Kopran has a long history in manufacturing and has high levels of expertise.

Recent Product Launches or R&D Initiatives:

The company continues to invest in R&D to develop new products and improve existing processes.

Primary Customers #

Target Industries and Sectors:

• Pharmaceutical companies (API and FDF sales)
• Healthcare providers
• Wholesalers and distributors

Geographic Markets (domestic vs. international):

• Domestic: India
• International: Exports to regulated and semi-regulated markets, including Europe, Latin America, Africa, and Asia.

Distribution Network and Sales Channels:

Kopran utilizes a combination of direct sales, distributors, and channel partners to reach its customers.

Major Competitors #

Direct Competitors in India and Globally:

• India: Alembic Pharmaceuticals, Aurobindo Pharma, Sun Pharma, Cipla
• Global: Teva Pharmaceutical Industries, Mylan (Viatris), Sandoz

Competitive Advantages and Disadvantages:

• Advantages: Backward integration, established manufacturing capabilities, strong presence in key API segments.
• Disadvantages: Intense competition in the generic pharmaceutical market, fluctuating raw material prices.

How they differentiate from competitors:

Focus on API manufacturing, established presence in specific therapeutic segments, quality compliance.

Future Outlook #

Expansion Plans or Growth Strategy:

• Expanding manufacturing capacities to meet growing demand.
• Increasing focus on regulated markets to drive revenue growth.
• Investing in R&D to develop new products and technologies.
• Exploring strategic partnerships and collaborations.

Sustainability Initiatives or ESG Commitments:

Focus on environmentally responsible manufacturing processes and waste management.

Industry Trends Affecting Their Business:

• Growing demand for generic pharmaceuticals.
• Increasing regulatory scrutiny and compliance requirements.
• Rising raw material costs.
• Technological advancements in drug development and manufacturing.

Long-term Vision and Strategic Goals:

Kopran aims to be a leading pharmaceutical company, providing high-quality and affordable healthcare solutions globally. They are focusing on strengthening their position in key therapeutic areas and expanding their geographic reach.

Kopran Limited: Financial Analysis (FY 2023-24) #

Three-Year Financial Trend Analysis (Consolidated Basis, FY22-FY24) #

• Revenue from Operations: Consistent growth from ₹47,752 Lakhs (FY22) to ₹55,098 Lakhs (FY23) and ₹61,459 Lakhs (FY24). CAGR of approximately 13.5%.
• EBITDA: Volatility observed. Peaked in FY22 at ₹9,691 Lakhs, dipped to ₹5,180 Lakhs in FY23, recovered to ₹7,441 Lakhs in FY24.
• Net Profit: Declined from ₹6,640 Lakhs (FY22) to ₹2,724 Lakhs (FY23), rebounded to ₹5,096 Lakhs in FY24 (87.1% YoY).
• Net Worth: Increased steadily from ₹42,617 Lakhs (FY22) to ₹49,125 Lakhs (FY24).
• Return Ratios (RoCE & RoE): RoCE decreased from 25.3% (FY22) to 8.3% (FY23) and recovered to 14.1% (FY24). RoE: 20.1% (FY22), 6.3% (FY23), and 11.0% (FY24).
• Earnings Per Share (EPS): ₹13.77 (FY22), ₹5.65 (FY23), and ₹10.57 (FY24).
• Debt/Equity Ratio: Remained low and stable (0.17 in FY24 vs 0.16 in FY23).

Conclusion: Strong revenue growth. Profitability and return ratios dipped in FY23 but recovered in FY24. Healthy balance sheet with consistent net worth growth and low debt.

Business Segment Performance (FY24 vs FY23) #

• Formulations:
  • Total Revenue: Increased by 23.57% YoY to ₹33,746 Lakhs (FY24) from ₹27,309 Lakhs (FY23).
  • Export Revenue: Grew 14.05% YoY to ₹28,563 Lakhs.
  • Local Revenue: Showed substantial growth (128.8%) to ₹5,183 Lakhs.
  • Key Strength: Vertical integration through in-house API production. Focus on export markets.
• Active Pharmaceutical Ingredients (API - via subsidiary KRLL):
  • Total Revenue: Decreased marginally by 1.42% YoY to ₹31,985 Lakhs (FY24) from ₹32,445 Lakhs (FY23).
  • Export Revenue: Declined by 6.14% YoY to ₹14,198 Lakhs.
  • Local Revenue: Increased slightly by 2.71% YoY to ₹17,787 Lakhs.
  • Key Products: Sterile Cephalosporins, Carbapenems, Macrolides, etc. Focus on quality and compliance (CEP, DMFs).

Conclusion: Formulations segment demonstrated robust growth, driven by exports and local sales. API segment saw a slight contraction due to lower exports.

Major Strategic Initiatives and Progress #

• Vertical Integration & API Development: Developing API intermediates. R&D pipeline (Ertapenem, Edoxaban, etc. to be commercialized) and USFDA/CEP filings for multiple APIs.
• Operational Efficiency: Optimizing costs and automating formulation packing lines.
• Supply Chain Resilience: Reducing reliance on specific geographies by diversifying suppliers and expanding production capabilities (Panoli API plant expected operational by end Q3 FY25).
• Market Expansion: Expanding into new customer segments and geographies, supported by new regulatory filings (549+ product approvals in 46 countries) and certifications (MHRA UK, MCC SA, EU GMP Malta, etc.).
• R&D and Innovation: Emphasis on niche, high-value/volume APIs and intermediates. Commercialized Montelukast and Rosuvastatin in FY24. Leveraging customer base for market insights (e.g., Amoxy Clauv).

Conclusion: Multi-pronged strategy focused on vertical integration, operational efficiency, market expansion, and R&D-led innovation. Progress visible through new product commercialization, regulatory approvals, and infrastructure development.

Risk Landscape Changes #

• Regulatory Risk: Compliance with changing global standards. Mitigation via GMP, international accreditations, and proactive filings.
• Raw Material Risk: Dependency on key starting materials (KSMs). Mitigation involves developing KSMs/intermediates internally and maintaining multiple suppliers.
• Supply Chain Risk: Emphasis on “Reducing Reliance” suggests a perceived increase in geopolitical or supply chain risk.

Detailed Analysis #

Financial Analysis of Kopran Limited (FY 2023-24) #

Financial Performance Highlights (Consolidated) #

• Revenue Growth: Revenue from operations increased by 11.54% YoY to INR 61,459 Lakhs in FY24. Over a 5-year period (FY20-FY24), revenue demonstrated strong growth from INR 35,949 Lakhs.
• Profitability Surge:
  • EBITDA grew significantly by 43.67% YoY to INR 7,441 Lakhs in FY24.
  • Profit Before Tax (PBT) increased sharply by 87.25% YoY to INR 6,754 Lakhs.
  • Profit After Tax (PAT) rose by 87.11% YoY to INR 5,096 Lakhs.
  • Net Profit Margin improved substantially to 8.29% in FY24 from 4.94% in FY23.

Kopran Limited: Financial Analysis (FY 2023-24) #

Note: Analysis based on provided Annual Report excerpts for FY 2023-24. Ratios are based on Consolidated Financials unless otherwise specified. 3-Year trends are provided where data is available or calculable from the text.

Profitability Analysis #

• Net Profit Margin (NPM):
  • FY 2023-24: 8.29% (Calculated: 5,096 / 61,459)
  • FY 2022-23: 5.00% (Calculated: 2,754 / 55,098)
  • Trend: Significant improvement in FY24, driven by better realization and product mix as per MD&A. Consolidated NPM increased by 68% YoY (Note 58). Standalone NPM decreased by 6% YoY (Note 55).
• Return on Equity (RoE):
  • FY 2023-24: 11.0%
  • FY 2022-23: 6.3%
  • FY 2021-22: 20.1%
  • Trend: Substantial YoY increase in FY24 due to higher profitability (Note 58 reports 55% variance). However, RoE remains below FY22 levels. 5-Year trend shows volatility (FY21: 28.3%, FY20: 11.8%).
• Return on Capital Employed (RoCE):
  • FY 2023-24: 14.1%
  • FY 2022-23: 8.3%
  • FY 2021-22: 25.3% (Note: FY22 value missing in scorecard, taken from FY21)
  • Trend: Marked improvement in FY24 compared to FY23, reflecting better operational efficiency and profitability. Still below FY21 levels. 5-Year trend shows significant fluctuation (FY20: 14.5%).
• EBITDA Margin:
  • FY 2023-24: 12.11% (Calculated: 7,441 / 61,459)
  • FY 2022-23: 9.40% (Calculated: 5,180 / 55,098)
  • Trend: Consolidated EBITDA margin improved due to higher revenue and better product mix (MD&A). Consolidated EBITDA grew 43.67% YoY. Standalone EBITDA grew 32.29% YoY.

Liquidity Analysis #

• Current Ratio:
  • FY 2023-24 (Consolidated): 2.08 (Calculated: 45,513 / 21,913) - Note 58 reports 2.08x (vs 2.26x in FY23, -8% variance).
  • FY 2023-24 (Standalone): 2.15 (Calculated: 18,801 / 8,732) - Note 55 reports 2.15x (vs 1.84x in FY23, +17% variance).
  • Trend: Consolidated current ratio slightly decreased but remains healthy. Standalone current ratio improved significantly.
• Quick Ratio (Acid-Test Ratio):
  • FY 2023-24 (Consolidated): 1.46 (Calculated: [45,513 - 13,709] / 21,913)
  • FY 2022-23 (Consolidated): 1.48 (Calculated: [39,993 - 13,720] / 27,027 - Using FY23 Trade Payables+Other Current Fin Liab+Other Current Liab+Provisions as approx Current Liab)
  • FY 2023-24 (Standalone): 1.65 (Calculated: [18,801 - 4,928] / 8,732)
  • FY 2022-23 (Standalone): 1.36 (Calculated: [19,010 - 4,787] / 10,419)
  • Trend: Consolidated quick ratio remained stable, indicating sufficient liquid assets to cover short-term liabilities excluding inventory. Standalone quick ratio showed improvement.

Kopran Limited: Financial Analysis Report (FY 2023-24) #

Revenue and Profitability Performance #

• Revenue Growth: Consolidated revenue from operations reached ₹61,459 lakhs, an 11.54% increase from ₹55,098 lakhs in FY 2022-23. Standalone revenue grew significantly by 22.47% to ₹35,417 lakhs. The Formulations segment was the primary driver, with turnover increasing by 23.57% to ₹33,746 lakhs, while the API segment saw a marginal decline of 1.42% to ₹31,985 lakhs.
• Profitability Surge: Consolidated Profit Before Tax (PBT) surged by 87.28% to ₹6,754 lakhs (vs. ₹3,607 lakhs YoY). Consolidated Profit After Tax (PAT) rose similarly by 87.11% to ₹5,096 lakhs (vs. ₹2,724 lakhs YoY). This significant improvement was attributed to higher revenue realization and a better product mix. Consolidated EBITDA increased by 43.67% to ₹7,441 lakhs.
• Margin Expansion: Consolidated Net Profit Margin improved substantially to 8.31% in FY24 from 4.92% in FY23 (calculated based on PAT/Revenue from Ops). Standalone Net Profit Margin saw a slight dip to 9.82% from 10.83% YoY.
• Return Ratios: Consolidated Return on Net Worth (RoNW) improved markedly to 11.00% from 6.3% YoY, driven by enhanced profitability. Consolidated Return on Capital Employed (RoCE) also increased to 14.1% from 8.3% YoY.

Market Share and Competitive Position #

• Industry Standing: Kopran operates within the Indian pharmaceutical industry, noted as the world’s third-largest by volume. The company leverages India’s strengths in generic drug manufacturing and API production.
• Integrated Model: The company highlights its integrated approach, covering both API (through KRLL) and Formulations, as a key strength, providing cost efficiency and quality control.
• Global Reach & Accreditation: Exporting to over 50 countries, Kopran possesses significant international accreditations for its facilities (USFDA, EDQM for API; MHRA UK, EU GMP, MCC South Africa etc. for Formulations), positioning it well in regulated and semi-regulated markets.
• Competitive Factors: Advantages cited include a skilled workforce, strong manufacturing processes, R&D capabilities, and adherence to international quality standards (cGMP). The company benefits from India’s position as a global pharmacy hub and initiatives like “Make in India”.

Key Products/Services Performance #

• Segment Contribution: API and Formulations contribute significantly to the consolidated turnover. In FY24, Formulations accounted for roughly 54.9% of operating revenue (₹33,746 L / ₹61,459 L) and API for 52.1% (₹31,985 L / ₹61,459 L) (Note: Sum exceeds 100% likely due to inter-segment eliminations or differing calculation bases in the report).
• Formulations Focus: Specializes in Penicillin and Non-Penicillin based oral solid dosages and dry powder forms, catering exclusively to export markets. Key product categories include Amoxycillin range, Macrolides, Cardiovascular, Anti-diabetic, CNS, and Pain Management.
• API Specialization: Key API products include Sterile Cephalosporins and Carbapenems. Other therapeutic areas served are Macrolides, Antibacterials, Anticonvulsants, and Cardiovascular drugs. Carbapenems were the largest API revenue contributor in FY24 at ₹14,004 lakhs.
• R&D Pipeline: Products commercialized in FY24 include Montelukast sodium and Rosuvastatin calcium. Products targeted for FY25 commercialization include Ertapenem sodium, Edoxaban tosylate, Canagliflozin, Lacosamide, and Imipenem (Non-sterile).

Geographic Distribution and Market Penetration #

• Export Dependence: Exports constitute a significant portion (73.10% in FY24) of the company’s business, reaching over 50 countries.
• Key Markets: South Africa is a major market, accounting for ₹13,325 lakhs (approx. 21.7% of total operating revenue). Other significant markets mentioned include Ethiopia, UK, Tanzania, and Zambia.
• Market Expansion Strategy: The company explicitly states expansion into new customer segments and geographies as a core future growth strategy, aiming to diversify revenue streams and strengthen its global footprint. This includes obtaining new regulatory filings and certifications for market access.

Segment-wise Capex and ROIC #

• Capital Expenditure: Significant capex is directed towards the API segment, particularly the new facility under construction at Panoli, Gujarat, expected to commence production by end-Q3 FY25. Consolidated Fixed Assets (Net Block) increased to ₹25,761 lakhs in FY24 from ₹20,266 lakhs in FY23 (Gross Block figures). Capital Work-in-Progress stood at ₹7,765 lakhs (Consolidated).
• Return on Investment: Consolidated RoCE improved to 14.1% in FY24 from 8.3% in FY23. Consolidated RoE increased to 11.0% from 6.3% YoY. While segment-specific ROIC is not provided, the significant investment in the new API plant indicates a strategic focus on enhancing capacity and capabilities in that segment for future returns.

Operational Efficiency Metrics #

• Turnover Ratios: Consolidated Inventory Turnover Ratio improved by 17% YoY, while Debtors Turnover Ratio decreased by 14% YoY. Standalone Inventory Turnover improved 19% YoY, with Debtors Turnover showing a 3% improvement.
• Interest Coverage: Consolidated Interest Coverage Ratio decreased by 7% YoY, while the Standalone ratio decreased by 27%. This likely reflects increased finance costs associated with borrowings for expansion. Finance costs increased to ₹758 lakhs (Consolidated) from ₹679 lakhs YoY.
• Efficiency Initiatives: Stated initiatives include automating packing lines in formulations, optimizing operational costs through process enhancements, improving yields of existing products, and investing in intermediates to enhance vertical integration.

Growth Initiatives and Challenges #

• Growth Strategies: Key initiatives include developing niche, high-value APIs and intermediates, optimizing costs, automating processes, reducing reliance on single-source suppliers (especially from China), expanding geographically, securing new regulatory approvals, and leveraging existing customer relationships for new product development. The upcoming Panoli API plant is central to future growth.
• Identified Risks: The company acknowledges risks including:
  • Regulatory: Changes in policies, non-compliance impact. Mitigation through adherence and safety focus.
  • Raw Material: Availability and price volatility. Mitigation through developing intermediates and multi-sourcing.
  • Innovation: Need to keep pace with technology. Mitigation through R&D investment and partnerships.
  • Competition: Pricing pressure and market share. Mitigation through continuous improvement and strategic positioning.
  • Forex: Exposure due to high export levels. Mitigation through hedging by the treasury department.
  • Economic: Macroeconomic factors impacting demand and costs. Mitigation via monitoring and hedging.
  • Environmental: Adherence to regulations. Mitigation through stringent compliance.

Risk Assessment: Kopran Limited (FY 2023-24) #

Strategic Risks #

Competitive Pressure #

• Severity: Medium
• Likelihood: High
• Trend: Increasing
• Mitigation: Focus on cost leadership, niche APIs, vertical integration, geographic expansion, R&D.
• Control Effectiveness: Moderately Effective. Revenue growth suggests competitiveness. RoCE improved, indicating better capital efficiency.
• Financial Impact: Pressure on pricing, market share erosion, need for continuous investment. Net Profit Margin improved, suggesting successful margin management.

Innovation & Product Pipeline Risk #

• Severity: High
• Likelihood: Medium
• Trend: Stable/Increasing Focus
• Mitigation: Dedicated R&D, pilot plant, focus on niche APIs, newer dosage forms, leveraging customer base, continuous process improvement.
• Control Effectiveness: Partially Evident. Successful commercialization in FY24. Future success depends on execution of FY25 pipeline.
• Financial Impact: Failure to innovate could lead to revenue stagnation. Successful innovation drives future revenue and profitability.

Geographic Expansion & Market Penetration Risk #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing Focus
• Mitigation: Pursuing new regulatory filings, leveraging existing customer relationships, targeting regulated and non-regulated markets.
• Control Effectiveness: Evident Progress. Product approvals in 46 countries. Export reach covers 50+ countries. Export revenue is significant.
• Financial Impact: Successful expansion diversifies revenue and fuels growth. Failure results in wasted investment. High dependence on exports exposes the company to global market dynamics.

Vertical Integration & Supply Chain Dependency #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing Mitigation Focus
• Mitigation: Developing API intermediates, diversifying supplier base, leveraging in-house API, new API plant construction.
• Control Effectiveness: Ongoing. In-house API production provides a competitive edge. New plant expected to commence production. Developing multiple suppliers for KSMs.
• Financial Impact: Reduced reliance mitigates supply disruption risks. Vertical integration potentially improves margins. Delays in new plant could impact strategy.

Operational Risks #

Manufacturing Efficiency & Yield #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing Focus
• Mitigation: Continuous improvement, R&D focus on process optimization, dedicated manufacturing plants.
• Control Effectiveness: Partially Evident. Improved profitability ratios suggest some success in operational management.
• Financial Impact: Improved yields reduce production costs and enhance profitability. Failure leads to higher costs and margin pressure.

Supply Chain Disruptions (Raw Materials & Logistics) #

• Severity: High
• Likelihood: Medium
• Trend: Stable/Elevated Awareness
• Mitigation: Developing KSMs and intermediates internally, maintaining multiple suppliers for KSMs, diversifying away from China, strong logistics division.
• Control Effectiveness: Procedures in place. Inventory Turnover Ratio improved.
• Financial Impact: Stock-outs, increased raw material costs, higher logistics expenses, delayed revenue recognition.

Quality Control & Product Safety #

• Severity: High
• Likelihood: Low/Medium
• Trend: Stable/Continuous Focus
• Mitigation: Comprehensive Quality & Safety Management System, adherence to GMP, international accreditations.

Kopran Limited: Financial Analysis Report (FY 2023-24) #

Financial Performance Analysis #

• Revenue Growth: Consolidated Revenue from Operations grew 11.5% YoY to ₹61,459 Lakhs. Standalone revenue (primarily Formulations) showed stronger growth at 22.5% YoY to ₹35,417 Lakhs. Formulations segment was the primary growth driver.
• Profitability Surge: Consolidated Net Profit saw a significant 87.1% YoY increase to ₹5,096 Lakhs. Consolidated EBITDA rose 43.7% YoY to ₹7,441 Lakhs. This substantial improvement outpaced revenue growth, suggesting margin expansion likely driven by better product mix and potentially improved performance in the API segment (KRLL) compared to the prior year, alongside the strong Formulations performance. Standalone Net Profit growth was more moderate at 10.8% YoY to ₹3,471 Lakhs.
• Margin Expansion: The Consolidated Net Profit Margin improved significantly to 8.3% from 4.9% in FY23. The Standalone Net Profit Margin saw a slight contraction to 9.8% from 10.8%, indicating cost pressures or mix changes specific to the formulations business, despite higher revenue.
• Return Ratios: Consolidated Return on Equity (RoE) improved markedly to 11.0% from 6.3% in FY23. Consolidated Return on Capital Employed (RoCE) also increased substantially to 14.1% from 8.3%, reflecting enhanced profitability and capital efficiency at the group level. Standalone RoNW reportedly showed a 7% increase.
• Leverage: The Group maintains a conservative capital structure with a low Debt/Equity ratio of 0.17 reported in the overview. Consolidated debt-equity ratio showed a slight increase (5% per MDA), while standalone showed a decrease (22% per MDA). Finance costs remain relatively low.
• Segment Contribution: Formulations revenue grew 23.6% YoY to ₹33,746 Lakhs (Standalone). API revenue (KRLL - Consolidated) experienced a slight decline of 1.4% YoY to ₹31,985 Lakhs.

Strategic Direction and Execution #

• Core Strategy: Kopran pursues sustainable growth through an integrated model covering APIs (via subsidiary KRLL) and Formulations. Key strategic pillars include cost leadership, innovation (R&D), enhanced vertical integration, regulatory compliance, and market expansion.
• Key Initiatives & Execution:
  • Vertical Integration: Focus on developing API intermediates to reduce reliance and control quality/cost.
  • Operational Efficiency: Initiatives include automating packing lines (Formulations), optimising costs, and enhancing yields of existing products.
  • Capacity Expansion: Significant investment in the Panoli API plant (KRLL), which received Environmental Clearance and is expected to commence production by the end of Q3 FY25. This is crucial for future API growth.
  • Market & Product Development: Strategy involves developing niche, high-value APIs, expanding into new geographies/customer segments, securing new regulatory filings/certifications globally, and leveraging the customer base for growth. FY24 saw commercialization of products like Montelukast sodium and Rosuvastatin calcium; FY25 plans include Edoxaban tosylate and Canagliflozin hemihydrate.
  • Supply Chain: Actively working to reduce reliance on suppliers based in China.
• Management Execution: The significant jump in consolidated profitability and improvement in return ratios suggest effective execution on operational efficiency and product mix strategies in FY24. Progress on the key Panoli project appears on track. Funds from the FY21 preferential issue have been fully

Financial Analysis: Kopran Limited (FY 2023-24) #

Financial Performance #

Consolidated #

• Revenue: Revenue from Operations grew 11.54% YoY to ₹61,459 Lakhs (₹55,098 Lakhs in FY23). Total Revenue increased 13.56% YoY to ₹62,920 Lakhs.
• Profitability: EBITDA surged 43.67% YoY to ₹7,441 Lakhs. PBT increased sharply by 87.28% to ₹6,754 Lakhs. PAT rose 87.11% to ₹5,096 Lakhs.
• Margins: Net Profit Margin improved significantly by 68% YoY. Return on Net Worth (RoNW) increased substantially to 11% from 6.3% (up 55%). Return on Capital Employed (RoCE) improved to 14.1% from 8.3%.
• EPS: Basic Earnings Per Share (Consolidated) rose to ₹10.57 from ₹5.65 in FY23.

Standalone #

• Revenue: Income from Operations (primarily Formulations) increased 23.57% YoY to ₹33,746 Lakhs (₹27,309 Lakhs in FY23). Total Revenue was up 22.47% to ₹35,417 Lakhs.
• Profitability: EBITDA increased 32.29% YoY to ₹3,992 Lakhs. PBT grew 20.59% to ₹4,452 Lakhs. PAT saw a more moderate increase of 10.83% to ₹3,470 Lakhs.
• Margins: Net Profit Margin decreased slightly by 6% YoY. RoNW showed a modest increase of 7% YoY. Interest Coverage Ratio declined by 27%.

Dividend #

• A final dividend of ₹3.00 per share (30%) has been recommended, consistent with the previous year.

Segment Performance (Consolidated) #

Formulations (Standalone Operations) #

• Revenue increased significantly by 23.57% YoY to ₹33,746 Lakhs. Export focus remains key, serving regulated and non-regulated markets.

Active Pharmaceutical Ingredients (API - via Subsidiary KRLL) #

• Revenue experienced a slight decline of 1.42% YoY to ₹31,985 Lakhs. The upcoming Panoli plant (expected End Q3 FY25) is a strategic initiative for future API growth.

Financial Position and Liquidity #

Leverage #

• The Consolidated Debt-to-Equity ratio remains low at 0.17, although it saw a marginal 5% increase YoY.

Kopran Limited: Financial Analysis FY 2023-24 #

Financial Performance Overview (Consolidated) #

• Revenue Growth: Consolidated Revenue from Operations grew 11.54% YoY to ₹61,459 Lakhs in FY24. Total Revenue increased by 13.56% YoY to ₹62,920 Lakhs.
• Profitability: EBITDA surged 43.67% YoY to ₹7,441 Lakhs. Profit Before Tax (PBT) increased significantly by 87.28% YoY to ₹6,754 Lakhs. Profit After Tax (PAT) rose 87.11% YoY to ₹5,096 Lakhs. Net Profit Margin improved substantially to 8.29% in FY24 from 4.86% in FY23.
• Return Ratios: Return on Net Worth (RoNW) improved significantly to 11.0% in FY24 from 6.3% in FY23. Return on Capital Employed (RoCE) also increased to 14.1% from 8.3% in the previous year.
• Balance Sheet: Net Worth increased by 11.84% YoY to ₹49,125 Lakhs. The Debt-to-Equity ratio remained low at 0.17 (Consolidated). Fixed Assets grew.
• Key Ratios (Consolidated):
  • Debtors Turnover Ratio decreased by 14%.
  • Inventory Turnover Ratio increased by 17%.
  • Interest Coverage Ratio decreased by 7%.
  • Current Ratio decreased slightly by 8%.
• Dividend: The Board recommended a final dividend of ₹3.00 per equity share (30%).

Segment Performance Analysis (Consolidated) #

• Formulations: Revenue grew strongly by 23.57% YoY to ₹33,746 Lakhs. Exports constituted the majority of formulation revenue at ₹28,174 Lakhs. Domestic sales also showed significant growth to ₹5,572 Lakhs.
• Active Pharmaceutical Ingredients (API): Revenue saw a marginal decline of 1.42% YoY to ₹31,985 Lakhs.

Strategic Initiatives & Future Growth Outlook #

• Management Guidance & Assumptions: Management focuses on sustainable growth, cost leadership, profitability, future investments, and business development.
• Market Growth & Opportunities: The Indian pharmaceutical industry is projected to exceed USD 130 billion by 2030.
• Key Strategic Initiatives:
  • Vertical Integration: Development of API intermediates to reduce external dependence and ensure quality control.
  • Operational Efficiency: Focus on cost optimization and automation.
  • Supply Chain Resilience: Diversifying supplier base to reduce reliance on China.
  • R&D Focus: Developing niche, high-value/volume APIs and intermediates.
  • Market Expansion: Expanding into new customer segments and geographies. Secured 549 product approvals in 46 countries.
  • Regulatory Compliance: Pursuing new regulatory filings and certifications.
  • Customer Leverage: Utilizing customer relationships for innovation and product development.
• Capital Expenditure: Significant investment in the new API plant at Panoli (Gujarat), expected to commence production by the end of Q3 FY25.

Efficiency Improvements #

• Management is actively pursuing operational cost optimization and process enhancements to improve yields.
• Automation of packing lines in the formulation division aims to enhance throughput and reduce errors.
• Energy conservation measures are being implemented.
• Inventory Turnover Ratio improved (Consolidated).

Risk Assessment & Mitigation #

• Identified Risks: Regulatory changes, raw material price volatility/availability, innovation failure, competition, forex fluctuations, economic downturns, logistics disruptions, and environmental compliance.
• Mitigation Strategies: Adherence to regulations, development of KSMs/intermediates in-house, maintaining multiple suppliers, continuous R&D investment, strategic partnerships, forex hedging, robust logistics division, and adherence to environmental norms.
• Financial Risks:
  • Credit Risk: Managed via established policies and creditworthiness assessment.
  • Liquidity Risk: Managed by ensuring sufficient funds availability.
  • Interest Rate Risk: Exposure exists on floating rate debt.
  • Forex Risk: Significant exposure due to high export revenue. Hedging strategies are employed using forward contracts.

Scenario Analysis & Sensitivity #

• The annual report provides sensitivity analysis for interest rate risk and foreign currency risk.
• The company’s performance is sensitive to raw material price fluctuations and regulatory changes in key export markets.
• Successful commissioning of the Panoli API plant represents a significant positive scenario.
• The overall outlook is dependent on the successful execution of strategic initiatives, R&D outcomes, maintaining regulatory compliance, and navigating macroeconomic/industry headwinds.

Disclaimer: This analysis is based solely on the information provided in the Kopran Limited Annual Report for FY 2023-24 dated August 17, 2024. It does not incorporate external data or independent verification. Forward-looking statements are subject to risks and uncertainties as outlined in the report.

Audit & Compliance Analysis: Kopran Limited - FY 2023-24 #

Auditor’s Opinion and Key Audit Matters #

• Opinion: Unqualified opinion issued on both Standalone and Consolidated Financial Statements for the year ended March 31, 2024, indicating a true and fair view in conformity with Ind AS and the Companies Act, 2013.
• Key Audit Matters (KAMs):
  • Valuation of Inventory: Highlighted due to the inherent risk in accurately valuing closing stocks and the volatility in prices of key raw materials. Auditor procedures included reviewing stock records, management discussions, and verifying valuation calculations.
  • Allowance for Trade Receivables / Credit Losses: Significant due to the large value of receivables and the judgment required in estimating recoverability using the Expected Credit Loss (ECL) model. Auditor procedures included understanding the estimation process, testing subsequent settlements, and evaluating the basis for overdue receivables assessment.

Accounting Policies and Quality Analysis #

• Basis: Financial statements prepared under Ind AS on a going concern and historical cost basis, except for specific financial instruments measured at fair value. Functional and presentation currency is INR.
• Key Policies:
  • Revenue Recognition: Recognized upon transfer of control of goods/services to customers, measured at transaction price net of discounts/returns. Percentage-of-completion method used for certain fixed-price contracts.
  • Property, Plant & Equipment (PPE) & Intangibles: Stated at cost less accumulated depreciation/amortization and impairment. Depreciation/amortization is on a Straight-Line Method (SLM) based on useful lives aligned with Schedule II of the Companies Act, 2013.
  • Inventories: Valued at the lower of cost (FIFO for raw materials/stores; absorption costing for WIP/finished goods) and net realizable value (NRV).
  • Financial Instruments: Classified and measured based on business model and cash flow characteristics (Amortised Cost, FVTOCI, FVTPL). Trade receivables are assessed for impairment using the ECL model (simplified approach).
  • Leases: Short-term and low-value leases are expensed on an SLM basis (Ind AS 116 election).
  • Foreign Currency: Transactions translated at transaction date rates; monetary items at closing rates. Gains/losses generally recognized in P&L. For consolidation, foreign subsidiary assets/liabilities are translated at closing rates, income/expenses at average rates, with differences routed through Foreign Currency Translation Reserve (FCTR).
• Changes & Pronouncements: No new standards or amendments notified by MCA were applicable for FY 2023-24.
• Accounting Quality: Assessed as generally high, supported by the unqualified auditor opinions and detailed disclosures in line with Ind AS. Reliance on significant management estimates and judgments for inventory valuation (NRV) and trade receivable impairment (ECL) are inherent areas of estimation risk.

Internal Financial Controls (IFCoFR) #

• Opinion: Unqualified opinion on the adequacy and operating effectiveness of the company’s IFCoFR for both Standalone and Consolidated financial statements as of March 31, 2024.
• Observations: The audit trail (edit log) feature in accounting software was noted to be enabled in a phased manner during June/July 2023 and not enabled at the database level for direct data changes (Standalone & Consolidated). However, where enabled, no tampering was observed. This observation did not modify the overall opinion on IFCoFR effectiveness.
• Oversight: Management and the Board are responsible for IFCoFR. Oversight is provided by the Audit Committee and Risk Management Committee.

Regulatory Compliance and Risk Assessment #

• Compliance Status: Reports compliance with major applicable laws, including the Companies Act, 2013, SEBI (LODR) Regulations, 2015, and Secretarial Standards (SS-1 & SS-2). Accreditations from multiple international bodies indicate adherence to stringent pharmaceutical manufacturing norms (GMP).
• Regulatory Risk:
  • Product Quality & Manufacturing Standards: Continuous compliance with cGMP and requirements from multiple regulatory agencies (USFDA, EDQM, MHRA, TGA, WHO etc.) is critical.
  • Pricing Controls: Subject to pricing regulations like the Drug Price Control Order (DPCO) in India.
  • Environmental Regulations: Must comply with environmental laws (Water Act, Air Act, Environment Protection Act).
  • SEBI & Stock Exchange Compliance: Ongoing adherence to listing obligations and disclosure requirements.
  • Foreign Regulations: Meeting diverse regulatory requirements in over 50 export countries.
• Mitigation: Emphasizes new regulatory filings, certifications, continuous process improvements, and robust quality systems as mitigation strategies.

Legal Proceedings and Contingent Liabilities #

• Disputed Tax Matters: Contingent liabilities exist for disputed demands related to Central Excise Duty, Service Tax, MVAT, GST, and Income Tax pending at various appellate forums.
• DPCO Demand: A disputed demand under the Drug Price Control Order, 1995 is pending appeal in the High Court, Mumbai.
• Provident Fund Contribution: Uncertainty persists regarding the impact of the 2019 Supreme Court judgment on the computation of PF contribution on certain allowances.
• Guarantees: The Holding company has provided corporate guarantees for loans taken by its subsidiary, Kopran Research Laboratories Limited (KRLL), amounting to ₹12,475 Lakhs. KRLL has provided guarantees for Kopran Limited loans (amount utilized ₹2,049 Lakhs).

Related Party Transactions (RPTs) #

• Policy & Basis: RPTs entered into during FY24 were on an arm’s length basis and in the ordinary course of business, compliant with Sections 177 & 188 of the Companies Act, 2013 and the company’s RPT policy.
• Significant Transactions:
  • Subsidiary (KRLL): Significant purchases from KRLL (Standalone: ₹1,716 Lakhs), sales to KRLL (Standalone: ₹165 Lakhs). Corporate guarantees given by Kopran Ltd for KRLL loans (₹12,475 Lakhs). Balances payable to KRLL (Standalone: ₹1,847 Lakhs).
  • Key Management Personnel (KMP): Remuneration paid to Executive Vice Chairman, CFO, Company Secretary, and other KMPs.
  • Other Related Parties: Purchases from Oricon Enterprises Ltd (Consolidated: ₹99 Lakhs), Rent paid to Meenual Metallizing Pvt. Ltd. (Consolidated: ₹150 Lakhs).