Mankind Pharma Ltd:Annual Report 2023-24 Analysis

Mankind Pharma Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Mankind Pharma was founded in 1986 by Mr. R.C. Juneja and Mr. Rajeev Juneja.

Headquarters Location and Global Presence:

The company’s headquarters is located in New Delhi, India. Mankind Pharma has a presence in several international markets, including Southeast Asia, Africa, and CIS countries.

Company Vision and Mission:

• Vision: To become a leading global pharmaceutical company known for affordability, accessibility, and quality.
• Mission: To deliver high-quality, affordable healthcare solutions to people worldwide.

Key Milestones in Their Growth Journey:

• 1986: Incorporation of Mankind Pharma.
• 1995: Entry into the acute therapeutic segment.
• 2007: Launch of Manforce Condoms.
• 2010: Expansion into chronic therapeutic segments.
• 2023: Initial Public Offering (IPO) and listing on the stock exchanges.

Stock Exchange Listing Details and Market Capitalization:

Mankind Pharma is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). As of [Insert Date - Replace with Current Date], the market capitalization is approximately [Insert Market Cap - Replace with Current Market Cap].

Recent Financial Performance Highlights:

• [Include Revenue Growth, Profit Margins, Key Financial Ratios from most recent Annual Report or Public Filings]

Management Team and Leadership Structure:

• Chairman: R.C. Juneja
• Managing Director & CEO: Rajeev Juneja

Notable Awards or Recognitions:

• [List any notable awards or recognitions received by the company in recent years]

Their Products #

Complete Product Portfolio with Categories:

Mankind Pharma has a diverse product portfolio spanning various therapeutic areas:

• Pharmaceuticals: Anti-infectives, cardiovascular, gastrointestinal, respiratory, vitamins/minerals/nutrients, dermatology, gynecology, pain management.
• Consumer Healthcare: Condoms (Manforce), pregnancy test kits (Prega News), emergency contraceptives (Unwanted 72), skincare (AcneStar), gas relief (Gas-O-Fast), cough and cold (Health OK).
• Animal Healthcare: Products for livestock and poultry.

Flagship or Signature Product Lines:

• Manforce Condoms
• Prega News
• Unwanted 72
• AcneStar
• Gas-O-Fast

Manufacturing Facilities and Production Capacity:

Mankind Pharma operates multiple manufacturing facilities across India. These facilities are equipped to produce a wide range of pharmaceutical formulations and consumer healthcare products.

Quality Certifications and Standards:

Mankind Pharma maintains high-quality standards and holds certifications such as:

• WHO-GMP
• ISO 9001
• ISO 14001

Recent Product Launches or R&D Initiatives:

• [List recent product launches, including new formulations, line extensions, or entry into new therapeutic areas.]
• [Mention any significant R&D investments or partnerships.]

Primary Customers #

Target Industries and Sectors:

• Healthcare providers (doctors, hospitals, clinics)
• Pharmacies and retail outlets
• Consumers (direct sales)
• Animal healthcare (veterinarians, farmers)

Geographic Markets (Domestic vs. International):

• Strong presence in the domestic (Indian) market.
• Growing international presence in Southeast Asia, Africa, and CIS countries.

Distribution Network and Sales Channels:

• Extensive distribution network across India, reaching urban and rural areas.
• Partnerships with distributors and wholesalers.
• Direct sales force.
• Online sales channels.

Major Competitors #

Direct Competitors in India and Globally:

• Indian: Sun Pharmaceutical Industries, Cipla, Dr. Reddy’s Laboratories, Lupin.
• Global: [List key global players in similar therapeutic areas or consumer healthcare segments, for example, Teva Pharmaceuticals, Viatris (formerly Mylan), Sanofi, etc.]

How they differentiate from competitors:

• Focus on affordability and accessibility.
• Strong brand recognition in key segments (e.g., condoms, pregnancy tests).
• Extensive distribution network in India.
• Diversified product portfolio across pharmaceuticals and consumer healthcare.

Industry Challenges and Opportunities:

• Challenges: Price competition, regulatory changes, rising raw material costs, generic drug pressure.
• Opportunities: Growing healthcare expenditure in emerging markets, increasing demand for consumer healthcare products, expansion into new therapeutic areas, strategic acquisitions.

Market Positioning Strategy:

Mankind Pharma positions itself as a provider of affordable and accessible healthcare solutions. They focus on building strong brands in key segments and expanding their reach through a wide distribution network.

Future Outlook #

Expansion Plans or Growth Strategy:

• Continue expanding their presence in the domestic and international markets.
• Focus on organic growth and strategic acquisitions.
• Invest in R&D to develop new and innovative products.
• Strengthen their presence in the consumer healthcare segment.

Sustainability Initiatives or ESG Commitments:

• [Mention any sustainability initiatives, environmental commitments, or social responsibility programs undertaken by the company.]

Long-term Vision and Strategic Goals:

Mankind Pharma’s long-term vision is to become a leading global pharmaceutical company known for its affordability, accessibility, and quality. They aim to achieve this by expanding their product portfolio, strengthening their distribution network, and investing in R&D.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics: #

• Revenue from operations (Consolidated): Increased from INR 8,749 crore (FY 2022-23) to INR 10,335 crore (FY 2023-24), demonstrating an 18% YoY growth.
• EBITDA: Increased to INR 2,550 crore in FY24, from INR 1,913 crore in FY23, and INR 2004 Cr in FY22. EBITDA Margins increased by 280 bps YoY to 25%.
• PAT: Grew by 48% YoY, reaching INR 1,942 crore in FY24 from INR 1,310 crore in FY23. PAT margin stood at 19%.
• Net Cash: Increased significantly to INR 3,260 crore in FY24 from INR 412 crore in FY22.
• ROCE (Ex-Cash): Increased to 34% in FY24, compared to 25% in FY23 and 31% in FY22.
• ROE (Ex-Cash): Stood at 29% in FY24, and 34% in FY22.
• Net Operating Working Capital Days: Improved to 42 days in FY24 from 45 days in FY23 and FY22.

Business Segment Performance: #

• Domestic Formulations: The domestic business constitutes 85% of total sales, excluding consumer healthcare and exports, and has consistently outperformed the Indian Pharmaceutical Market (IPM). The covered market share is 6.4% as of FY24.
• Chronic Therapies: Chronic share of the domestic revenue increased by 160 bps, representing nearly 36% of the total as per IQVIA TSA MAT Mar'24 data. Market share in key chronic therapies like cardiac and anti-diabetic reached all-time highs of 4.9% and 4.3%, respectively. Chronic segment grew by 15% in FY24.
• Acute Therapies: Grew consistently during FY22 and FY23. However, faced headwinds in FY24 due to regulatory limits on Codistar and increased competition in Dydrogesterone, but these were partly offset by advances in modern trade.
• Consumer Healthcare: Contributed 7% of total sales in FY24. Primary sales growth was muted, but secondary and tertiary sales showed healthy growth, leading to market share gains across key brands.
• International Business: Export revenue share increased from 3% in FY23 to 8% in FY24, driven by an increase in our base business and new product launches.

Major Strategic Initiatives and Their Progress: #

• Expansion in Product Offering: Detailed analysis to identify whitespaces in the market, with teams actively working on in-house developments and inorganic projects.
• Market Penetration and Expansion: Focus on expanding presence in existing and emerging trade channels, such as Modern Trade and E-Commerce. Initiatives include engaging with Key Opinion Leaders (KOLs), hospital partnerships, and launching specialty divisions, particularly in Metro and Tier 1 cities.
• Operational Optimization: Implemented technology-driven initiatives like Project PACE (digital procurement transformation), Project Wave (warehouse and distribution transformation), and Project Adapt (AI/ML-enabled supply chain planning).
• R&D Focus: GPR 119 agonist, an NCE molecule for tackling obesity, anti-diabetics, and metabolic disorders, successfully completed Phase 1 clinical trials. Investment in a clinical-stage specialty pharmaceutical company, Actimed, to support R&D initiatives in cancer-related drugs.
• In-Licensing and M&A: In-licensed Symbicort from Astra Zeneca to boost its position and portfolio in inhaler segment. In-licensed Inclisiran from Novartis to strengthen cardiac portfolio.

Risk Landscape Changes: #

• Regulatory Challenges: The Company is in the process of complying with the ongoing reviews of regulatory and statutory requirements.
• Supply Chain Disruptions: The Company focuses on diversifying sources for a reliable and cost-efficient supply chain to mitigate production and profitability risks.
• Foreign Exchange Fluctuations: The Company is deliberating on hedging mechanisms to mitigate potential future exposures.
• Environmental, Health, and Safety (EHS) Risks: Investments in infrastructure enhancements and training initiatives are aimed at fostering compliance and mitigating financial liabilities.
• Cybersecurity/Data Privacy Risk: The Company has a seven-layer cybersecurity framework.

ESG Initiatives and Metrics: #

• Environmental: Became a 100% plastic-neutral company, reduced carbon emissions by 85% compared to FY23, and achieved a 52% renewable energy share in total energy consumed.
• Social: Impacted over 160,000 lives across 9 states and 140 villages through CSR activities. Focused on health awareness, quality education, environmental conservation, and sustainable livelihoods.
• Governance: Published operational ESG goals aligned with the United Nations Sustainable Development Goals (UNSDGs). Maintained high standards of compliance and ethics backed by a robust corporate governance framework.

Management Outlook: #

• The management has committed to consistently increase CVM share, volume outperformance to IPM, scaling up of brands bigger, and further increase chronic share to IPM levels in the mid-term.
• Continued focus on the domestic market, with strategies to increase market share in chronic therapies and consumer healthcare.
• Strategic investments in R&D, technology, and infrastructure to enhance operational efficiency and product quality.
• Emphasis on expanding through both organic and inorganic routes, including strategic partnerships, in-licensing, and M&A.

Detailed Analysis #

Financial Analysis of Mankind Pharma Limited #

Balance Sheet Analysis (Standalone) #

3-Year Comparative Analysis #

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

• Property, Plant & Equipment (Non-Current): Increased significantly from FY23 to FY24.
• Capital Work-in-Progress: Decreased significantly from FY23 to FY24.
• Other Intangible Assets: Shows a steady decrease YOY.
• Intangible assets under development: Increased from FY23 to FY24.
• Right-of-use-assets: Increased from FY23 to FY24.
• Non-Current Investments: Increased from FY22 to FY24.
• Other Non-Current Financial Assets: Decreased significantly from FY23 to FY24.
• Current Investments: Increased significantly.
• Trade Receivables: Increased significantly from FY23 to FY24.
• Other bank balances (current): Increase is notable from FY23 to FY24
• Loans (Current): Decreased significantly from FY23 to FY24.
• Other financial assets(current): Decrease is significantly large from FY23 to FY24.
• Other Equity: Increased substantially, due to profits and other comprehensive income.
• Lease Liabilities (Non-Current & Current): Increased.
• **Provisions(Current):**Increased
• **Other current liabilities:**Increased

Working Capital Trends #

• Inventories: Increased slightly, indicating potential scaling of operations or increased production.
• Trade Receivables: Increased substantially, which may warrant investigation into collection efficiency.
• Cash and Cash Equivalents: Increased, indicating improved liquidity.
• Trade Payables: Increased, but the increase in receivables is much larger, suggesting potentially tighter credit terms with suppliers.
• Overall Working Capital: Increased, driven by the rise in current assets. A detailed analysis of the working capital cycle (days inventory outstanding, days sales outstanding, days payables outstanding) would be needed for a complete assessment.

Asset Quality Metrics #

• Impairment Allowances: The presence of allowances for doubtful debts and advances to vendors indicates some credit risk, but the amounts are relatively small compared to the total assets.
• Non-Current Investments Impairment: A substantial amount has been provided for impairment in investments.

Debt Structure and Maturity Profile #

• Lease Liabilities: Are present, divided into current and non-current.
• There is no other current and non current borrowing as at March 31,2024.

Off-Balance Sheet Items #

• Contingent Liabilities: Include claims against the company not acknowledged as debts (tax demands) and contingencies in respect of input credit availed under GST Act. These represent potential future obligations.
• Commitments: Capital commitments and corporate guarantees exist.
• The Group did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

Consolidated Statement of Cash Flows #

Year Ended March 31, 2024 (INR Lacs) #

Mankind Pharma Limited FY24 Financial Analysis #

Revenue Breakdown #

Segment/Geography Revenue and Growth #

• Domestic: FY24 revenue: INR 9,522 crore, 13% YoY growth. FY23: INR 8,453 crore.
• Consumer Healthcare: FY24 revenue: INR 706 crore, 2% YoY growth. FY23: INR 692 crore.
• International Business (Exports): FY24 revenue: INR 820 crore, 175.2% YoY growth. FY23: INR 296.67 crore.
• Overall Revenue: FY24 revenue: INR 10,335 crore, 18.1% YoY growth. FY23: INR 8,749 crore.

City-wise Sales (FY24) #

• Metro & Class 1 Cities contributed 53%

Therapy-wise Sales Mix (FY24 - IQVIA, TSA MAT Mar'24) #

• Anti-infectives: 15%
• Cardiovascular: 14%
• Gastrointestinal: 10%
• Respiratory: 9%
• Vitamins/Minerals/Nutrients: 8%
• Anti-diabetic: 9%
• Gynaecology: 8%
• Dermatology: 6%
• Pain/Analgesics: 5%
• Neuro/CNS: 3%

Cost Structure Analysis #

• FY24 Cost of Raw Materials and Components Consumed: INR 86,174.36 lacs, 15.58% increase from INR 71,104.83 lacs in FY23.
• FY24 Purchases of Stock-in-Trade: INR 2,07,192.12 lacs, 11% increase from INR 1,86,582.32 lacs in FY23.
• FY24 Employee Benefits Expense: INR 2,27,473.12 lacs, 18.54% increase from INR 1,91,847.15 lacs in FY23.
• FY24 Other expenses: INR 2,31,527.54 lacs, 14.8% increase.

Margin Analysis #

• FY24 EBITDA Margin: 24.7%, a 280 bps increase from 21.9% in FY23.
• FY24 PAT Margin: 19%, a 380 bps increase from 15% in FY23.
• FY24 Gross margin: improved due to increase in selling prices and growth in chronic segments.

Operating Leverage #

• EBITDA grew by 33.3% YoY, outpacing the 18.1% YoY revenue growth.

EPS Analysis #

• FY24 Basic EPS: INR 47.75 (45.52 under standalone financial statements).
• FY24 Diluted EPS: INR 47.68 (45.45 under standalone financial statements).
• FY23 Basic EPS: INR 32.00 (31.16 under standalone financial statements).
• FY23 Diluted EPS: INR 32.00 (31.16 under standalone financial statements).

Risk Framework #

Strategic Risks #

• Severity: High. The pharmaceutical industry is highly competitive, with both domestic and international players, putting pressure on pricing and market share.
• Likelihood: High. The Indian pharmaceutical market is growing, but competition is intensifying.
• Trend: Increasing. The number of INR 100 Cr. brand families increased, but growth rates in some key therapies are slowing.
• Mitigation Strategies: Diversifying product portfolio, expanding into chronic therapies, pursuing inorganic growth (M&A, in-licensing), focusing on metro and tier-1 cities, and launching DMF grade API products.
• Control Effectiveness: Partially effective. The chronic segment share increased to 36% in FY24, demonstrating success in diversification. Market share in key therapeutic segments presents a mix bag, with increases in some and decreases in others.
• Potential Financial Impact: Revenue growth is dependent on successful execution of strategic initiatives; Failure to gain significant market share could lead to flat or declining revenue.

Operational Risks #

• Severity: Medium. Disruptions in the supply chain can significantly impact production and profitability. Reliance on in-house manufacturing (75%) increases control but also concentrates operational risk.
• Likelihood: Medium. Operational disruptions occurred, such as the temporary shutdown of the Sikkim plant due to floods.
• Trend: Stable. Supply chain resilience strategies were effective in mitigating the impact of the Sikkim plant shutdown.
• Mitigation Strategies: Diversifying sourcing, implementing advanced technologies like AI/ML for supply chain planning (Project Adapt), warehouse and distribution transformation (Project Wave), and adopting Lean and Six Sigma methodologies.
• Control Effectiveness: Effective. The Sikkim plant shutdown had minimal impact, and the Net Operating working capital days were optimized to 42 days.
• Potential Financial Impact: Capex investments in new facilities and technology upgrades (INR 389 crore in FY24) represent ongoing operational investment.

Financial Risks #

• Severity: Medium. Fluctuations in currency value can impact the cost of production and international revenue.
• Likelihood: Low.
• Trend: Stable.
• Mitigation Strategies: Prudent financial planning including hedging mechanisms.
• Control Effectiveness: Effective. Crisil & ICRA rating is AA+/ Stable.
• Potential Financial Impact: Export revenue increased significantly, suggesting some vulnerability to currency fluctuations.

Compliance/Regulatory Risks #

• Severity: High. Non-compliance with regulations (NLEM, FDC ban, GST, Schedule M) can lead to penalties, operational disruptions, and reputational damage.
• Likelihood: Medium. Regulatory scrutiny is increasing, especially regarding product quality and pricing.
• Trend: Increasing. Mentioned regulatory changes and updates (e.g., updated Schedule M) require constant adaptation.
• Mitigation Strategies: Implementing a strong compliance management system, establishing a Regulatory Monitoring Team, adhering to global quality standards (WHO GMP, USFDA certifications).
• Control Effectiveness: Good. No major compliance breaches were reported.
• Potential Financial Impact: Non-compliance could lead to financial penalties, product recalls, and market share loss.

Emerging Risks #

Cybersecurity/Data Privacy Risk: #

• Severity: High. Data breaches and non-compliance with data privacy regulations can cause significant financial losses, reputational damage, and legal issues.
• Likelihood: High. Increasing reliance on digital systems and data-driven insights makes cybersecurity a growing concern.
• Trend: Increasing. The Company is actively strengthening its cybersecurity framework and working towards ISO 27001 certification.
• Mitigation Strategies: Implementing a seven-layer cybersecurity framework, adopting a ‘Digital DNA’ approach, investing in IT talent and solutions, and strict adherence to regulatory standards.
• Control Effectiveness: Under assessment. The Company has not reported any data breaches in the current year.
• Potential Financial Impact: Data breaches could lead to substantial financial losses, legal liabilities, and damage to brand reputation.

Patent Risk #

• Severity: Medium. The Company has developed an in-house version of dydrogesterone and holds a 20% market share, demonstrating patent risks.
• Likelihood: Medium.
• Trend: Increased from prior years.
• Mitigation Strategies: Due diligence and strategic negotiations in developmental and commercial agreements, bolstered by legal expertise, to safeguard intellectual property assets.
• Control Effectiveness: The company completed India’s first fully integrated facility for Dydrogesterone.
• Potential Financial Impact: Undermines market exclusivity and revenue streams.

Strategic and Management Analysis of Mankind Pharma Limited #

Long-Term Strategic Goals and Progress #

• Increase chronic segment share to Indian Pharmaceutical Market (IPM) levels in the mid-term. Chronic segment share increased by 160 bps to 36% in FY24, compared to 34% reported on FY23, and 28% reported in FY18.
• Expand presence in Metro and Tier 1 cities, with these areas contributing over 50% of revenue.
• Provide international quality API medicines at affordable prices, shown by launch of ~150 SKUs of DMF grade API in India.
• Outperform the IPM by 1.3-1.4x with improved EBITDA margins of 25-26%.

Competitive Advantages and Market Positioning #

• 4th largest pharmaceutical company in India by value and 3rd by volume as per IQVIA, TSA MAT Mar'24.
• #1 prescription rank for the last 7 years.
• Product portfolio is significantly more affordable compared to peers.
• One of the largest distribution networks in India, with deep penetration, particularly in Tier 2 to Tier 6 cities and rural areas.
• 75% in-house manufacturing.
• 23 brand families are worth over INR 100 Crore.

Innovation Initiatives and R&D Effectiveness #

• Completed Phase 1 clinical trials for GPR119 agonist, a new chemical entity (NCE) for obesity, anti-diabetics, and metabolic disorders.
• Preparing to commence Phase 1 clinical trials for a JAK inhibitor molecule for autoimmune disorders.
• Invested in Actimed, a clinical-stage specialty pharmaceutical company, for R&D in cancer-related drugs.
• R&D expenditure was maintained at 2 - 2.5% of revenue.
• Dedicated team of 660+ scientists, including 60+ PhD holders.
• Successfully developed Dydroboon in-house and commissioned India’s first fully integrated facility at Udaipur for Dydrogesterone.

M&A Strategy and Execution #

• Actively pursuing inorganic growth through M&A and in-licensing.
• In-licensed Symbicort from Astra Zeneca, strengthening the inhaler portfolio.
• In-licensed Inclisiran from Novartis, strengthening the cardiac portfolio.
• Acquired oncology and transplant products from Panacea Biotech in 2022.
• Acquired Upakarma Ayurveda in 2022 to foray into the Ayurveda segment.
• Focused on M&A and in-licensing opportunities aligned with expanding the chronic portfolio.

Management’s Track Record in Execution #

• Domestic business has consistently grown faster than the IPM.
• Recorded a revenue of INR 10,335 crore in FY24, with PAT margin at 19%.
• Successful IPO in May 2023, placing Mankind Pharma among the top 100 listed companies in India.

Capital Allocation Strategy #

• Maintains a strong balance sheet and prioritizes financial discipline without overleveraging, as evidence by INR 3,260 crore in net cash.
• Focus is on organic growth, supplemented by strategic M&A.
• Capex of INR 389 crore in FY24, reduced from INR 832 crore in FY23, excluding Panacea acquisition related capex.

Organizational Changes and Their Impact #

• Implemented several technology-driven efficiency programs, including Project PACE for digital procurement transformation, Project Adapt for AI/ML-enabled supply chain planning, and Project Wave for warehouse and distribution transformation.
• Operationalised India’s first fully integrated manufacturing facility for dydrogesterone in Udaipur, Rajasthan, increasing cumulative capacity from 42 billion units to 43.5 billion units.
• Upskilling across all levels with ~12 Lakh training hours on skill upgradation, maintaining a 90% retention rate for employees associated >5 years.
• Board of Directors and the Committees were reconstituted during the year.

ESG Framework: Analysis and Key Metrics #

Environmental Metrics and Targets #

• Emission Reduction: Achieved an 85% reduction in carbon emissions compared to FY23 and aims for carbon neutrality by 2030 (FY21 base year).
• Energy Consumption: 52% of total energy consumption from renewable sources, with a goal of 100% renewable power by 2030. Solar energy generated was 2.4%.
• Waste Management: 45% of wastewater was recycled and 100% of hazardous waste was sent for co-processing at the Sikkim facility. Goal to send 70% of hazardous waste for co-processing and 30% for landfilling by 2027. 100% plastic neutral.
• Water Management: Aims to reduce ground water intensity in operations by 50% by 2030.

Social Responsibility Programs #

• Community Impact: Positively impacted over 160,000 lives across 9 states and 140 villages.
• CSR Expenditure: Spent INR 36 crore on CSR, focusing on health awareness, education, environmental conservation, and livelihood generation.
• Health and Hygiene: Invested over INR 2 crore in health and hygiene infrastructure, including toilets and health programs.
• Employee Well-being: Recorded a 90% retention rate for employees associated for over 5 years. Zero Lost Time Injury Frequency Rate (LTIFR).
• Diversity: Hired 207 female employees, reaching a total of 534 female employees.

Governance Structure and Effectiveness #

• Board Composition: The Board consists of 9 members, including 4 Executive Directors and 5 Independent Directors (including one woman).
• Board Committees: Includes Audit, Nomination and Remuneration, Stakeholders Relationship, Risk Management, and Corporate Social Responsibility Committees.
• Policy Compliance: Complied with SEBI Listing Regulations, Secretarial Standards and implemented a Code of Conduct, including a Vigil Mechanism Policy and Related Party Transaction policy.
• Executive Compensation: Total remuneration to Executive Directors including Mr. Ramesh Juneja, Mr. Rajeev Juneja, and Mr. Sheetal Arora, constituted a significant portion of the executive pay.

Sustainability Investments and ROI #

• Capex: INR 389 crore in capex.

ESG Ratings and Peer Comparison #

• CRISIL and ICRA Rating: AA+/Stable, indicating strong financial stability.

Regulatory Compliance and Future Preparations #

• Regulatory Compliance: Adhered to relevant regulations with no cases of non-compliance for penalties or fines and 100% attendance in certain training coverage for principles P1 to P9.
• Risk Management: Systems and processes to ensure compliance with applicable laws, rules, regulations, and guidelines.

Forward Outlook: Future Projections and Guidance #

Management Guidance and Assumptions #

• Management’s primary objective is to improve access to quality medicines at affordable prices, with a particular focus on DMF-grade API products.
• The company has become 100% plastic neutral.
• Commenced India’s first fully integrated facility at Udaipur for Dydrogesterone.
• Management anticipates continued growth in the chronic segment, aiming to increase its share to IPM levels in the mid-term.
• Management believes in providing high quality medicines at a price affordable to everyone.
• Management expects to outperform the IPM in volume growth.
• The company plans to add new molecules under development
• Management uses factors like market standing, experience, and client base when making recommendations for auditor appointments.
• The company has assembled a panel of scientific key opinion leaders, that support with valuable insights and help to shape strategy for development of new molecules.

Market Growth Forecasts #

• The Indian pharmaceutical industry is anticipated to grow to USD 120-130 billion over the next decade.
• The domestic pharmaceutical industry has exhibited a CAGR of 10.4% over the last 10 years.
• The Indian economy is projected to reach a valuation of USD 5 trillion in FY2028.
• The IMF projects an 18% Indian contribution to the world’s incremental GDP growth by 2028.
• The domestic consumer healthcare market is poised for continued growth due to changing lifestyle patterns and rapid urbanization.
• The global pharmaceutical sector is expected to grow at a CAGR of 5-8% by CY2028, reaching an estimated value of USD 2,300 billion.
• Defined daily doses are expected to grow at a CAGR of 2.3% by 2028 to reach nearly 3,800 billion, compared to 3,400 billion in 2023.

Planned Strategic Initiatives #

• Focus on further expanding presence in existing, emerging and faster-growing trade channels such as Modern Trade and E-Commerce.
• Detailed analysis undertaken to identify and address “whitespaces” through in-house development or inorganic projects.
• Strategic focus on chronic therapies, with market share gains in key areas like cardiac and anti-diabetic therapies.
• Strengthening digital ecosystem to improve operational efficiency, productivity, quality compliance, and cost-effectiveness.
• Expansion of the OTC business beyond pregnancy care and sexual wellness to consumer wellness, with planned line extensions and premiumization.
• Strengthening cybersecurity measures and transitioning to smart manufacturing processes.
• Continuous investment in technological innovations to cater to the dynamic regulatory landscape and bring in-house production of dosage forms previously outsourced.
• Increasing engagement with Key Opinion Leaders (KOLs) and establishing strategic hospital partnerships in Metro and Tier 1 cities.
• Planned expansion into gynaecology, pain management, stomatology, infertility, PCOD, dental health, urology, and nephrology.
• Revamping the packaging of the products, to provide comprehensive product information, combat counterfeits and add a flavour of OTC.
• Transition from high-speed diesel to compressed or piped natural gas.

Capital Expenditure Plans #

• Capex of INR 389 crore in FY24, with INR 2,346 crore incurred in FY22 related in part to the Panacea acquisition.
• Commercialization of new plants in Udaipur, Rajasthan and Birgunj, Nepal.
• Cumulative manufacturing capacity increased from 42 billion units to 43.5 billion units.
• Maintain a strict budget of 2–2.5% of revenue for R&D.
• The company had invested in Actimed, a clinical stage speciality pharmaceutical company to support R&D in cancer related drugs.
• The company is planning to invest in gynaecology, pain management, stomatology, infertility, Polycystic Ovarian Disorder (PCOD), dental health, urology and nephrology.
• Continued investment in technological innovations to cater to regulatory changes and in-house production needs.

Efficiency Improvement Targets #

• Streamlining and digitizing operations, leveraging economies of scale to improve profitability.
• Optimizing Net Operating Working Capital Days, reduced to 42 days in FY24 from 45 days in FY23.
• Targeting 50% efficiency improvement in Source-to-Pay (S2P) process with substantial bottom-line gain.
• Implementing advanced forecasting, demand, and supply planning tools (e.g., O9) to enhance supply chain management.
• 7-10 days reduction in inventory and >50% reduction in probable Loss of Sales is targeted.
• 30% process time reduction through RPA implementation.
• 31% increase in productivity from FY21 to FY24.
• Implementation of predictive maintenance, energy management systems and dispensing automation to enhance operational efficiencies is a key focus area.
• Targeted reduction in energy consumption.
• Leveraging Lean and Six Sigma methodologies to minimize waste.

Potential Challenges and Opportunities #

• Challenges:
  • Regulatory non-compliance risks could lead to financial instability and reputational damage.
  • Supply chain disruptions or cost increases can affect production and profitability.
  • Foreign exchange fluctuations can impact international revenue and production costs.
  • Lapses in environmental, health, and safety (EHS) standards can result in penalties and operational halts.
  • Compromised product quality can lead to recalls, litigations, and erosion of brand trust.
  • Intense competition from diverse sources threatens market share and profitability.
  • Dependence on China for bulk drugs poses a risk.
  • Counterfeit medicines in the value chain undermine product efficiency.
  • Shortage of a skilled workforce could hinder growth.
• Opportunities:
  • Expanding presence in Metro and Tier 1 cities.
  • Growing geriatric population increasing demand for pharmaceuticals.
  • Increased investments in the pharmaceutical industry driving R&D and new product development.
  • Rise in chronic diseases fueling demand for pharmaceutical products.
  • Expansion of health insurance coverage leading to increased healthcare demand.
  • Rising income levels and changing lifestyle patterns driving demand for quality healthcare.
  • Growth of e-commerce platforms and modern trade channels.
  • Leveraging targeted marketing strategies in vernacular languages.
  • Development of novel medications to meet evolving market demands.
  • Shift from penetration to premiumization in the consumer healthcare segment.
  • Expansion into new growth avenues such as modern trade, hospitals, and contemporary channels.
• The Company’s ‘China Plus One’ strategy may be beneficial as countries seek alternative manufacturing hubs.

Scenario Analysis and Sensitivity to Key Assumptions #

• Sensitivity Analysis for R&D: A dedicated team of 660+ scientists, including 60+ PhD holders, is driving innovation. Key projects like the GPR119 agonist and JAK inhibitor are advancing in clinical trials.
• Sensitivity Analysis for Quality: A commitment to maintaining high-quality standards is recognized through USFDA accreditation for one of its R&D centers, and implementation of DMF grade API products.
• Sensitivity analysis for market diversification: A 160 bps increase in chronic share to 36% of domestic revenue and a strategic partnership with AstraZeneca for Symbicort distribution.
• Sensitivity Analysis for Financial Metrics: Revenue growth of 18% YoY to INR 10,335 crore, EBITDA increase of 33% YoY to INR 2,550 crore, and PAT increase of 48% YoY to INR 1,942 crore.
• Sensitivity Analysis for Supply Chain: The Company have established a robust supply chain, powered by human resource, technological adoption and operational efficiency.
• Sensitivity Analysis for Product Quality: A robust Quality Management Systems (QMS) and global regulatory accreditations are in place, with 70% of manufacturing sites running on green energy. A Quality by Excellence (QbX) program has reached 500+ employees, showing a 15% reduction in critical events and a 10% increase in lab efficiency.
• Sensitivity Analysis for Impairment: The Company has performed sensitivity analysis by +/- 2% for each of the key assumptions used in impairment testing, and management believes that any changes will not cause the carrying amount to exceed its recoverable amount.
• Sensitivity Analysis for Foreign Currency Risk: For every 1% increase or decrease in foreign currency rates, there is corresponding impact in profit before tax, based on financial assets and liabilities held as on 31.03.2024 and 31.03.2023
• Sensitivity analysis for CSR initiatives: INR 35.9 crore expenditure on CSR.

Audit & Compliance #

Auditor’s Opinion and Qualifications #

• Unmodified audit opinion on standalone and consolidated financial statements for FY 2023-24.
• Matter of emphasis related to an Income Tax Department search under Section 132 of the Income Tax Act, 1961. Opinion was not modified.
• Accounting software used for record keeping, audit trail feature not enabled for direct data changes, with privileged access.
• Reports of other auditors for subsidiaries, associates, and joint ventures were considered.

Key Accounting Policies and Changes #

• Financial statements comply with Indian Accounting Standards (Ind AS) and Division II of Schedule III of the Companies Act, 2013.
• Basis is going concerns.
• New and amended standards adopted effective April 1, 2023, including amendments to Ind AS 8 (Definition of Accounting Estimates) and Ind AS 1 (Disclosure of Accounting Policies), with no material impact.
• Amendments to Ind AS 12 (Deferred Tax related to Assets and Liabilities from a Single Transaction) resulted in the recognition of separate deferred tax assets and liabilities on leases, with no impact on opening retained earnings.
• Measurement of inventories changed.

Internal Control Effectiveness #

• Maintains an internal financial control system.
• Board asserts the adequacy and operating effectiveness of internal financial controls for financial reporting.
• Internal controls to prevent and detect fraud.

Regulatory Compliance Status #

• In compliance with applicable Secretarial Standards.
• Policies align with National Guidelines on Responsible Business Conduct (NGRBC).
• Dedicated Regulatory Monitoring Team to track changes.
• Adherence to the SEBI Listing Regulations.
• Maintains records as per Section 148(1) of the Act.

Legal Proceedings and Their Potential Impact #

• Disclosed the impact of pending litigations, including income tax demands and GST matters, on its financial position.
• Management and legal counsel believe the Company’s position will likely be upheld in the litigations.
• An Income Tax Department search was conducted, and the Company is complying with related notices. Management does not foresee a material adjustment from this.

Related Party Transactions #

• All related party transactions during FY 2023-24 were in the ordinary course of business and on an arm’s length basis.
• No material transactions with related parties were in conflict with the Company’s interests, as per the Company’s policy.
• Disclosures on related party transactions comply with Ind AS-24.
• Outstanding balances with related parties are unsecured and interest-free, except for loans provided.

Subsequent Events #

• Board approved a slump sale of the Over the Counter (OTC) business to Mankind Consumer Products Private Limited, a wholly-owned subsidiary.
• On May 10, 2024, the company has alloted 46,698 equity shares.

Analysis of Accounting Quality #

• Adoption of new accounting standards and amendments to Ind AS did not materially impact the financial statements.
• Existence of a detailed impairment assessment process for investments and other intangible assets.
• CSR contributions were disclosed.

Regulatory Risk Assessment #

• Faces regulatory risks associated with non-compliance with tax regulations.
• Ongoing legal proceedings which the management is contesting.
• Exposed to risks from fluctuations in foreign currency rates.