Zydus Lifesciences Ltd:Annual Report 2023-24 Analysis

Zydus Lifesciences Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Zydus Lifesciences, formerly known as Cadila Healthcare, was founded in 1952 by Ramanbhai B. Patel.

Headquarters Location and Global Presence:

The company is headquartered in Ahmedabad, India. Zydus Lifesciences has a global presence, with operations spanning across various countries including the United States, Europe, Latin America, and Africa.

Company Vision and Mission:

• Vision: To be a leading global healthcare provider improving lives through innovative and affordable solutions.
• Mission: To discover, develop, manufacture, and market a broad range of healthcare products globally, contributing to the well-being of people.

Key Milestones in Their Growth Journey:

• 1952: Founded by Ramanbhai B. Patel
• 1995: Cadila Laboratories and Cadila Healthcare merge to form Cadila Healthcare Ltd.
• 2000: Significant expansion in the US market.
• 2007: Acquisition of German generics company Bremer Pharma GmbH.
• 2015: Launch of the world’s first biosimilar of Adalimumab in India.
• 2022: Renamed Cadila Healthcare to Zydus Lifesciences.

Stock Exchange Listing Details and Market Capitalization:

Zydus Lifesciences is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Recent Financial Performance Highlights:

• Details about recent quarterly/annual revenue, net profit, and key financial ratios would be inserted here based on the most recent publicly available data.

Management Team and Leadership Structure:

• Chairman: Pankaj R. Patel
• Detailed information about the CEO, CFO, and other key management personnel would be inserted here.

Notable Awards or Recognitions:

• Details about any awards and recognition received by the company would be inserted here.

Their Products #

Complete Product Portfolio with Categories:

• Generics
• Specialty Formulations
• Biosimilars
• Vaccines
• Animal Health Products
• Consumer Wellness Products

Flagship or Signature Product Lines:

• Lipaglyn (for Type 2 Diabetes)
• Desidustat (for Anemia)
• Various vaccines and biosimilars

Key Technological Innovations or Patents:

• Developing novel drug delivery systems
• Focus on complex generics and biosimilars
• Patents related to new chemical entities and formulations

Manufacturing Facilities and Production Capacity:

Zydus Lifesciences operates multiple manufacturing facilities in India and internationally.

Quality Certifications and Standards:

The company adheres to stringent quality control measures and holds certifications like:

• WHO-GMP
• US FDA
• MHRA (UK)
• Other relevant regulatory approvals

Unique Selling Propositions or Technological Advantages:

• Focus on innovation and R&D
• Strong presence in the generics and biosimilars market
• Developing affordable and accessible healthcare solutions

Recent Product Launches or R&D Initiatives:

• Details about recent product launches in various therapeutic areas.
• Information on ongoing clinical trials or research programs.

Primary Customers #

Target Industries and Sectors:

• Pharmaceutical industry
• Healthcare sector
• Hospitals and clinics
• Retail pharmacies

Geographic Markets (Domestic vs. International):

Zydus Lifesciences caters to both the domestic (Indian) and international markets, with a significant focus on the US and emerging markets.

Distribution Network and Sales Channels:

• Direct sales force
• Distributors and wholesalers
• Strategic alliances and partnerships
• Retail pharmacy chains

Major Competitors #

Direct Competitors in India and Globally:

• Sun Pharmaceutical Industries Ltd.
• Dr. Reddy’s Laboratories Ltd.
• Cipla Ltd.
• Lupin Ltd.
• Mylan (Viatris)
• Teva Pharmaceutical Industries Ltd.
• Other major generic pharmaceutical companies

Competitive Advantages and Disadvantages:

• Details on the company’s competitive strengths (e.g., strong R&D, diverse product portfolio) and weaknesses (e.g., dependence on certain markets) would be included here.

How They Differentiate from Competitors:

• Focus on innovative generics and biosimilars
• Strong R&D capabilities
• Presence in various therapeutic areas

Market Positioning Strategy:

Zydus Lifesciences aims to be a leading global healthcare provider by offering innovative and affordable healthcare solutions.

Future Outlook #

Expansion Plans or Growth Strategy:

• Focus on expanding in key markets like the US and emerging economies.
• Strategic acquisitions and partnerships.
• Investing in R&D to develop innovative products.

Upcoming Products or Innovations:

• Details about new biosimilars, vaccines, or specialty formulations in the pipeline would be added here.

Sustainability Initiatives or ESG Commitments:

• Information on the company’s environmental sustainability efforts, social responsibility programs, and corporate governance practices would be included here.

Industry Trends Affecting Their Business:

• Increasing demand for affordable healthcare
• Rise of biosimilars
• Growing regulatory scrutiny
• Technological advancements in drug discovery and manufacturing

Long-Term Vision and Strategic Goals:

Zydus Lifesciences aims to be a leading global healthcare provider known for its innovation, quality, and commitment to improving lives.

Financial Performance Analysis #

3-Year Trend Analysis of Key Financial Metrics #

• Total Income from Operations: Increased consistently. FY2024: ₹195.5 billion, FY2023: ₹172.4 billion, demonstrating a 13% growth in FY2024.
• EBITDA: Increased, with FY2024 at ₹53,843 million (27.5% margin) vs. FY2023 at ₹38,599 million (22.4% margin), indicating margin expansion of 510 bps.
• Net Profit: Significant growth, with FY2024 at ₹38,595 million, up 97% from FY2023.
• Net Cash/Debt: Maintained a net cash position. FY2024: ₹8,561 million net cash vs. FY2023: ₹5,461 million. Net debt to EBITDA improved from -0.14 (FY2023) to -0.16 (FY2024).
• Return on Net Worth (Excluding exceptional items and discontinued operations): Improved, from 14.9% (FY2023) to 20.6% (FY2024).
• Return on Capital Employed (ROCE): Increased, from 15.5% (FY2023) to 23% (FY2024), with capital employed growing year over year.
• EPS from Continuing and Discontinued Operations: Increased. FY2024: ₹38.14; FY2023: ₹19.30

Business Segment Performance #

• India Formulations: Grew by 9% in FY2024, with branded formulations growing by 10%. Chronic portfolio contribution was 41.2% in FY2024, up 360 bps over the last 3 years.
• Lipaglyn: Grew a significant 40% in 2024.
• Consumer Wellness: Showed modest growth of 3% in FY2024, reaching ₹23,017 million in revenue. Personal care segment had double-digit growth; food and nutrition segment was flat.
• US Formulations: Surpassed US$ 1 billion in revenue, showing a 17% growth (₹86,851 million) in FY2024. Maintains 5th rank among US generic companies by prescriptions.
• International Markets Formulations: Grew by 22% in FY2024, reaching ₹19,294 million.
• API Business: Sales increased by 3% in FY2024, reaching ₹5,658 million.

Major Strategic Initiatives and Their Progress #

• Innovation Focus: Continued investment in R&D (7-8% of annual revenues) across NCEs, biosimilars, vaccines, and generics.
• Specialty and Complex Generics: Building a portfolio of specialty products, including 505(b)(2) route products for the US.
• Digital Initiatives: Implemented various digital tools to enhance supply chain efficiency, field-force operations, and R&D project management. SAP S/4 HANA implementation is progressing.
• Cost Optimization: Initiatives across manufacturing to reduce costs, including alternate vendor development and process time reduction.

Risk Landscape Changes #

• Increased Competition and Pricing Pressure: Mitigated through volume expansion, new product launches, and moving up the value chain with complex products.
• Geopolitical Risks: Evaluating global political and economic scenarios to manage exposure.
• Regulatory Risks: Building its quality culture (program called QUEST).
• Supply Chain Vulnerabilities: Addressed through vertical integration, resilient supplier ecosystem, and digitization.
• Cyber-attack on digital infrastructure: Addressed through strengthening the cybersecurity controls, and developing action plans.

ESG Initiatives and Metrics #

• ESG Governance: Dedicated CSR & ESG committee oversees performance.
• Environmental Initiatives: Focus on water conservation, wastewater recycling, renewable energy use (39% of total energy consumption), and achieving “Zero Waste to Landfill” status at manufacturing sites.
• Social Initiatives: Employee well-being programs, training, diversity initiatives, and CSR activities focused on healthcare, education, and community development.
• Governance: The gender diversity of ESG committee is 33% and overall board gender diversity is 20%. The Company has also taken conscious efforts to increase board structure by making the board independence to the level of 60%.
• Fatalities: 0 fatal incident in FY23-24.

Management Outlook #

• Global Pharmaceutical Industry: Expects mid to high-single-digit growth, reaching approximately US$ 2.3 trillion by 2028.
• Indian Pharmaceutical Market (IPM): Anticipates high single-digit / double-digit growth, reaching US$ 38-42 billion over the next five years.
• Zydus Lifesciences: Focus on continued growth through innovation, expansion in complex generics, and leveraging digital transformation.

Comparative Analysis with Industry Averages #

• Indian Pharmaceutical Market (IPM) Growth: IPM grew by 7.6% in FY2024.
• Global medicine spending: Expected to grow by more than US$ 600 bn over next five years.
• Global biotech spending: Expected to exceed US$ 890 bn by 2028.
• Indian Economy: Estimated 6.6% growth in FY2025.

Detailed Analysis #

Financial Position Analysis #

3-Year Comparative Analysis (Consolidated) #

Assets, Liabilities, and Equity (’ in Million)

Segment wise assets ’ in Million

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

• Non-Current Assets (FY24 vs FY23): Increased by 12.97%, primarily due to increases in Property, Plant and Equipment, Goodwill and Intangible Assets under development.
• GoodWill (FY24 vs FY23): Increased by 9.61%, because of the acquisition of LiqMeds Group of companies.
• Intangible Assets under Development (FY24 vs FY23): Increased Significantly, because of acquisition of LiqMeds Group of companies.
• **Non- Current Investments(FY24 vs FY23):**Increased by 8.05%.
• Non-Current Liabilities (FY24 vs FY23): Increased by 241.89%, due to an increase in other financial liabilities.
• Current Assets (FY24 vs FY23):Increased by 14.11%.

Working Capital Trends #

• Current Assets (FY24): ’ 114,198 Million.
• Current Liabilities (FY24): ’ 53,397 Million

Debt Structure (Consolidated) #

(’ in Million)

The borrowings from banks are unsecured.

Off-Balance Sheet Items #

Contingent liabilities:

• Claims against the company are not acknowledged as debts.
• In respect of demand raised by the government authorities like GST, central excise, state excise, customs & service tax authorities.
• In respect of demands related to income tax matters.
• In respect of sales tax matters.
• Guarantees.

Zydus Lifesciences Limited - FY2024 Financial Analysis #

Revenue Breakdown by Segment/Geography #

• US Formulations: 46% of consolidated revenues, ₹86,851 million, 17% YoY growth. US$1,049 million in constant currency.
• India Geography (Formulations and Consumer Wellness): 28% of consolidated revenues, ₹76,707 million, 7% YoY growth.
  • India Formulations: ₹53,690 million, 9% YoY growth. Branded formulations grew by 10%.
  • Consumer Wellness: ₹23,017 million, 3% YoY growth.
• International Markets Formulations: ₹19,294 million, 22% YoY growth.
• API Business: ₹5,658 million, 3% growth, 3% of Consolidated revenues.

Cost Structure Analysis #

• Cost of Materials Consumed: ₹30,014 million (standalone), ₹45,805 million (consolidated).
• Purchases of Stock-in-Trade: ₹2,832 million (standalone), ₹18,979 million (consolidated).
• Employee Benefits Expense: ₹15,075 million (standalone), ₹31,376 million (consolidated).
• Other Expenses: ₹21,743 million (standalone), ₹48,783 million (consolidated).

Margin Analysis #

• EBITDA Margin: 27.5%, 510 bps YoY increase.
• Net Profit Margin: 20.6%.

Non-Recurring Items #

• Exceptional Items: ₹142 million, primarily related to the acquisition of LiqMeds group of companies.
• Previous Year (FY2023): Exceptional Items were ₹6,042 million, mainly due to impairment charges and other expenses.

EPS Analysis #

• Basic & Diluted EPS (Continuing and Discontinued Operations): ₹38.14
• EPS from Continuing operation: ₹37.91

Cash Flow and Liquidity Analysis of Zydus Lifesciences Limited #

Detailed OCF, ICF, FCF Components (Consolidated) #

• OCF: Increased in FY24 reaching INR 26,888 million, up from INR 14,714 million in FY23.
• ICF: Was negative at INR (14,752) million in FY24, a significant outflow compared to positive inflow INR 15,350 million in FY23. Acquisition of Watson Pharma Private Limited was completed for cash on a going concern basis for INR467.70.
• FCF: Not directly stated, but the significant increase in OCF and large negative ICF suggest pressure on FCF.

Working Capital Management Efficiency #

• Inventory turnover ratio showed improvement to 5.95 in FY24.

• Trade receivables turnover ratio decreased to 2.50 in FY24, suggesting a potential increase in collection period.

• Trade payables turnover ratio was 4.91 in FY24.

• Overall, the financial data presents an increase of receivables, at a greater proportion than payables.

Capex Analysis by Segment #

• Consolidated net organic capital expenditure, excluding acquisition-related spending, was ’ 8.6 bn during FY24.

Dividend and Share Buyback Trends #

• Dividends: A final dividend of INR 3.00 per share was recommended for FY24.
• Dividend Payout Ratio: (including dividend and buyback) was 23.51% of profits from continuing operations for FY24.
• Share Buyback: The Company bought back 5,970,149 equity shares at INR 1,005 per share, totaling INR 6,000 million in FY24.

Debt Service Coverage #

• Debt Service Coverage Ratio (DSCR) significantly improved to 4.60 in FY24, up from 2.24 in FY23, showing an increased capability to service debt obligations.

Liquidity Position and Cash Conversion Cycle #

• Liquidity Position: The Company maintained a net cash position of INR 8,561 million as of March 31, 2024.
• Cash Conversion Cycle: Not directly provided in the document, but the increase in the trade receivables turnover ratio suggests a potential increase in the cycle.
• Current Ratio is 3.11

Financial Analysis of Zydus Lifesciences Limited #

Profitability Ratios (3-Year Trends) #

• ROE (Return on Net Worth): FY24: 20.6%, FY23: 14.9%, FY22: Not Available. The ROE improved significantly in FY24, indicating increased profitability relative to shareholders’ equity.
• ROIC (Return on Invested Capital)/ROCE (Return on Capital Employed): FY24: 23%, FY23: 15.5%, FY22: Not Available. Showed the significant increase, suggesting improved efficiency in utilizing invested capital.
• EBITDA Margin: FY24: 27.5%, FY23: 22.4% ,FY22: Not directly available. A notable expansion of 510 bps indicates improved operational profitability.
• Net profit for the year was ’ 38,595 mn, up 97% over last year.

Liquidity Metrics #

• The Company continued to hold net cash position as on 31 March, 2024 as it had a net cash of ’ 8,561 mn as on 31 March, 2024 vs. ’ 5,461 mn as on 31 March, 2023.

Efficiency Ratios #

• Inventory Turnover: IPM registered growth of 7.6%. Growth during the year was largely driven by price increases and new products as volumes displayed muted growth during the year.

Leverage Metrics #

• Debt-to-Equity Ratio: FY24: -0.04, FY23: -0.03, FY22: Not Available. A negative ratio indicates the company has more cash and cash equivalents than debt, signifying a very strong financial position.
• Net Debt to EBITDA ratio: FY24: -0.16, FY23: -0.14, FY22: Not Available.

Working Capital #

• The Company’s working capital management is robust.
• Not all components are directly available to calculate ratios, but the data presents that the company ensures continuous monitoring and control over receivables, inventories and other parameters.

Comparison with Industry Averages and Significant Deviations #

The provided information does not contain industry average data. A meaningful comparison requires external data on industry benchmarks for profitability, liquidity, efficiency, and leverage. The report indicates that the company outpaced the Indian Pharmaceutical Market (IPM) growth in its branded formulations business, demonstrating a deviation where the company grows faster.

Zydus Lifesciences Limited: Financial Analysis #

Segment Performance Analysis #

Revenue and Profitability Metrics with Growth Rates #

• India Formulations: FY24 revenue: ₹53,690 million, up 9% YoY. Branded formulations business grew by 10%.
• Consumer Wellness: FY24 revenue: ₹23,017 million, up 3% YoY. Personal care segment grew double-digit; food and nutrition segment was flattish.
• US Formulations: FY24 revenue: ₹86,851 million, up 17% YoY. Constant currency revenue: US$ 1,049 million.
• International Markets Formulations: FY24 revenue: ₹19,294 million, up 22% YoY.
• API Business: FY24 revenue: ₹5,658 million, up 3% YoY.
• Consolidated Total Income from operations: Grew by 13% to 195.5 billion.
• EBITDA: Grew by 40% to ₹53,843 million. EBITDA margin at 27.5%, up 510 bps YoY.
• Net Profit: for the year was 38,595 mn, up 97% over the last year.

Market Share and Competitive Position #

• India Formulations: Outpaced the Indian Pharmaceutical Market (IPM) growth. Seven brands among the top 300 in IPM. Nine brands recorded sales exceeding ₹1,000 million, 22 brands between ₹500-1,000 million, and 34 brands between ₹250-500 million. Grew faster than IPM in Anti-Diabetic, Anti-Infectives, Pain Management, Respiratory, and Oncology therapies. Chronic portfolio contribution increased to 41.2%.
• Consumer Wellness: Five out of six brands hold leadership positions in their categories. Nycil maintained Number one rank in pricky heat powder, Everuth scrub and peel-of at leadership position.
• US Formulations: Maintains 5th position among US generic companies by prescriptions. Top 3 players in approximately 60% of product families marketed.
• Emerging Markets: 43 Million-dollar club (MDC) brands. Leadership position maintained in Sri Lanka.

Key Products/Services Performance #

• India Formulations:
  • Lipaglyn®: Among the top 5 brands of the Company, 40% increase in patient base in FY24. Treated over 3.5 million patients since launch.
  • Bilypsa®: Inclusion in INASL guidelines for MAFLD and MASH led to significant market share increase. Secondary sales more than doubled, reaching ₹520 million. Oxemia: registered growth and provided services to 45,000 patients.
  • Ujvira™: Showed rapid volume expansion, providing access to over 4,000 patients annually.
• US Formulation:
  • Two ANDAs approved by the USFDA

Geographic Distribution and Market Penetration #

• US Formulations: Largest market, accounting for 46% of consolidated revenues.
• India: Second largest contributor, with 28% of total revenues (formulations and consumer wellness).
• Emerging Markets: Presence in Asia Pacific, Middle East, Africa, and Latin America. Key markets include Sri Lanka, Philippines, South Africa, Mexico, and Brazil.
• Europe: Direct presence in France and Spain; expansion into the UK market. Other European countries are served through a business-to-business (BTB) model.

Segment-wise CAPEX and ROIC #

• Consolidated Gross Block: Increased by ₹28 billion to ₹223.5 billion.
• ROCE: Improved by 750 bps during the year and stood at 23%
• ROE: Stood at 20.6%.
• Net Capital Expenditure: ₹8.6 billion (excluding acquisition-related spend).

Operational Efficiency Metrics #

• Return on Capital Employed (ROCE): Improved by 750 bps to 23% in FY24.
• Return on net worth: Improved by 570 bps for FY2024 and stood at 20.6%
• Net Debt to EBITDA Ratio: -0.16 in FY24 (net cash position).

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Focus on innovation: NCE research, biosimilars, vaccines, and specialty products.
  • Expansion of complex generics portfolio in the US.
  • Strengthening presence in focused therapeutic areas in India.
  • Expanding international presence, especially in emerging markets and Europe.
  • Digital transformation initiatives across various functions.
• Challenges:
  • Competition and pricing pressure in the US generics market.
  • Geopolitical tensions and economic slowdown in key geographies.
  • Regulatory risks and compliance.
  • Supply chain vulnerabilities.
• R&D Investments: Approximately 7-8% of annual revenues.

Risk Framework #

Strategic Risks #

• Severity: High. The company faces intense competition, impacting pricing power, particularly in the US formulations market.
• Likelihood: High. The global generics market is highly competitive, with many players, leading to continuous price erosion.
• Trend: Increasing. Competition in the generics space is intensifying, with new players entering existing product markets.
• Mitigation Strategies:
  • Expand the volume of the existing portfolio.
  • Launch of new products.
  • Move up to the complex product, such as value chain.
  • Continued focus on brand building.
  • Implementation of various cost optimization.
• Control Effectiveness: Partially Effective. The company’s strategies, such as focusing on complex generics and brand building, have shown some success (e.g., US revenue growth), but the overall impact on profitability margins needs further assessment over time.
• Potential financial impact:
  • Continued price erosion can significantly impact profitability, potentially offset by volume increases and cost optimization.

Operational Risks #

• Severity: High. The company’s global operations, spanning over 75 countries, with 37 manufacturing facilities, expose it to supply chain disruptions.
• Likelihood: Moderate to High. Geopolitical tensions and socio-economic threats contribute to the likelihood of supply chain interruptions.
• Trend: Stable. Geopolitical and socio-economic factors are constant, with increasing threats.
• Mitigation Strategies:
  • Vertical intergration.
  • Agile production plannig.
  • Resilient supplier ecosystem.
  • End-to-end supply chain.
• Control Effectiveness: Moderate. Vertical integration and supplier diversification help mitigate some risks, but external factors remain largely uncontrollable.
• Potential Financial Impact: Significant. Disruptions can lead to inability to service customer demand, affecting revenue and potentially increasing costs due to expedited shipping or alternative sourcing.

Financial Risks #

• Severity: Moderate. The company’s international operations expose it to currency volatility.
• Likelihood: Moderate. Currency fluctuations are ongoing, especially given the company’s presence in diverse emerging markets.
• Trend: Stable.
• Mitigation Strategies:
  • Adoption of appropriate hedging strategy.
  • Use of natural hedging.
• Control Effectiveness: Moderate. Hedging strategies are in place, but their effectiveness depends on the accuracy of currency movement predictions.
• Potential Financial Impact: Revenue, profit, assets and liabilities can vary considerably depending on the currency fluctuations. Hardening crude oil prices is presented as a headwind.

Compliance / Regulatory Risks #

• Severity: High. The pharmaceutical industry is heavily regulated, and non-compliance can result in severe penalties.
• Likelihood: Moderate. Regulatory scrutiny is constantly increasing.
• Trend: Increasing. The document indicates an “ever-increasing regulatory bar,” suggesting a trend of stricter regulations.
• Mitigation Strategies:
  • Continued evaluation of applicable regulations.
  • Build strong quality culture.
  • Adoption of new technologies and automation.
  • Independent audits.
• Control Effectiveness: Moderate to High. The company emphasizes compliance and has implemented various quality control measures, but the risk of non-compliance remains.
• Potential Financial Impact: High. Penal actions by regulators can lead to significant fines, loss of reputation, and threats to future operations.

Emerging Risks #

• Severity: High. The increasing adoption of digital tools exposes the company to potential cyber security breaches.
• Likelihood: Moderate to High. Cyber attacks are becoming increasingly sophisticated and frequent across all industries.
• Trend: Increasing. Digital transformation initiatives are accelerating, expanding the potential attack surface.
• Mitigation Strategies: Strengthened cyber security controls, multiple initiatives to lower operational and strategic risk and to take swift actions on emergence of risks across businesses.
• Control Effectivness: The effectiveness will be known with the passage of time.
• Potential Financial Impact: Significant. Cyber security breaches can lead to operational disruptions, financial loss (e.g., ransomware), reputational damage, and legal liabilities.

Strategic Analysis of Business Segments #

India Formulations #

• Strategic Goals and Progress: Sustained growth outpacing the Indian Pharmaceutical Market (IPM). Double-digit growth indicates effective strategic execution. Increasing contribution of the chronic portfolio (41.2% in FY2024, up 360 bps over three years) signifies a shift towards higher-value therapies.
• Competitive Advantages and Market Positioning: Strong position within the IPM, with seven brands in the top 300. Increasing brands exceeding sales milestones demonstrates effective brand building and market penetration. Faster growth than IPM in Anti-Diabetic, Anti-Infectives, Pain Management, Respiratory, and Oncology therapies.
• Innovation and R&D: Commercial success of Lipaglyn (Saroglitazar) and Bilypsa, with a significant patient base increase (40% for Lipaglyn), validates NCE research. Oxemia brand is gaining traction. Expanding market share of Bilypsa (more than doubled sales) after INASL guidelines shows successful leverage of external factors.
• Management Execution: Consistent double-digit growth, outpacing IPM, and successful brand-building initiatives indicate strong execution.
• Organizational Changes and Impact: Use of digital analytical tools and coaching modules enhancing sales force capabilities likely contributed to performance.

Consumer Wellness #

• Strategic Goals and Progress: Aims to expand international presence and grow core brands. Moderate growth (3%) during the year. Flattish growth in food and nutrition, stronger growth in personal care.
• Competitive Advantages and Market Positioning: Five out of six brands maintain leadership positions. Nycil and EverYuth brands grew faster than their respective categories.
• Innovation and R&D: Launch of new products like Glucon-D Activors and SugarFree I’mlite demonstrates ongoing innovation. Development of a robust pipeline is key to future growth.
• Management Execution: Personal care brands performed well, but food and nutrition segment growth suggests challenges. Progressive improvement in Complan’s volume uptake is a positive signal.
• Capital Allocation: Investment in product innovations, media campaigns, sales promotions, and digital initiatives.
• Organizational Changes and Impact: Transition towards increasing share of organized trade requires assessment.

US Formulations #

• Strategic Goals and Progress: Surpassed US$1 billion in revenue. 17% revenue growth.
• Competitive Advantages and Market Positioning: Strong position (fifth among US generic companies by prescriptions). Leadership positions in over 20% of product families, with top 3 rankings in approximately 60%.
• Innovation and R&D: Approval and launch of two 505(b)(2) NDAs (ZITUVIO and ZITUVIMET). Focus on complex generics (transdermal patches, drug-device combinations) to counter price erosion.
• M&A Strategy and Execution: Strategic licensing and supply agreements (e.g., Palbociclib tablets with Synthon BV) and entry into the US animal healthcare market.
• Management Execution: Consistent double-digit revenue growth, launch of 28 generic products, and receipt of 46 new product approvals.

International Markets Formulations #

• Strategic Goals and Progress: Aims to expand presence in emerging markets (Asia Pacific, Middle East, Africa, Latin America) and Europe. 22% revenue growth. Focus on branded generics in emerging markets and a business-to-business (BTB) model in Europe.
• Competitive Advantages and Market Positioning: Leadership in Sri Lanka and strong positions in the Philippines and South Africa. Growing million-dollar club (MDC) brands (43, with 15 added in the last 3 years).
• Innovation and R&D: Focus on launching differentiated products, value-added generics, and novel dosage forms, along with leveraging the biosimilar pipeline.
• M&A Strategy and Execution: Acquisition of the LiqMeds group expands capabilities in liquid orals.
• Management Execution: Double-digit growth in South Asia and GCC markets. Challenges in Brazil indicate the need to adapt to local market dynamics.
• Organizational Changes and Impact: Entry into the UK market and the filing process initiation.

API Business #

• Strategic Goals and Progress: Aims for sustainable growth through backward integration, cost competitiveness, and a portfolio of value-added new products. 3% revenue growth and acquisition of Watson Pharma’s API facility.
• Competitive Advantages and Market Positioning: Vertical integration provides better control over the supply chain and cost efficiencies. A broad range of over 250 products diversifies offerings.
• Innovation and R&D: Continuous work on improving process chemistry and yields.
• M&A Strategy and Execution: Acquisition of Watson Pharma’s API facility strengthens backward integration capabilities.

Capital Allocation #

• Increase in Capital expenditure, including acquisition related spend, suggests the Company invested to facilitate growth, with a focus on New facilities, and capacity expansion of existing facilities.

Environmental Metrics and Targets #

• Six manufacturing sites achieved ‘Zero Waste to Landfill’ status, with plans to extend this to all formulation manufacturing sites by the end of 2024 and API sites by 2026.
• Renewable energy consumption increased to 39% of total energy consumption in FY2024, up from 36% in FY2023.
• Energy conservation measures resulted in savings of 3,263.80 MWh of electrical energy and 1,479 tonnes of fuel energy, saving ’ 36.47 million.
• Water is recycled after treatment from generated waste at manufacturing sites, and a focus on minimizing waste to secured landfills is observed.
• Total Scope 1 and Scope 2 GHG emissions are reported, 3,07,413.65 tCO2e in FY 23-24 and 2,79,068.02 for FY 22-23

Social Responsibility Programs #

• Zydus Srishti, the Company’s CSR program, focuses on healthcare access, education, skill development, research, and environmental sustainability.
• ’ 133.07 million was contributed to CSR activities during FY2024.
• Collaborated with the Red Cross Society to establish the Zydus Red Cross Experiential Centre.
• Donated high-end medical equipment to the Institute of Medical Sciences (Banaras Hindu University).
• Partnered with the Akshaya Patra Foundation for mid-day meal programs.
• Conducted employee volunteer programs, including a ‘Save the Bird’ campaign.

Governance Structure and Effectiveness #

• The Board comprises 60% independent directors and 30% women directors.
• A dedicated CSR & ESG committee oversees ESG performance and assists the board, with 33% gender diversity.
• The Board structure has been consciously augmented to reach 60% independence.
• The Company has various committees, including an Audit Committee, Nomination and Remuneration Committee, and Risk Management Committee.
• Audit Committee is 100% composed of independent directors
• Nomination and Remuneration Committee is 100% composed of independent directors
• The Company has established policies on EHS, Human Rights, Whistle Blower, Code of Conduct, and Supply Chain.
• Zydus Business Conduct Policy mandates anti-bribery and avoidance of corrupt practices.
• Compliance with the SEBI regulations, including the Insider Trading Regulations, with a digital monitoring system in place.
• 5 (five) Board meetings were held during the Financial Year ended on March 31, 2024, and passed 4 (four) resolutions by circulation.

Sustainability Investments and ROI #

• The Company invests approximately 7-8% of its annual revenues in R&D.
• Invested in alternate vendor development, process time reduction, and packaging operation efficiencies to optimize operational costs.
• The Company has allocated 133.07 million towards various CSR activities.

Regulatory Compliance and Future Preparations #

• The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS).
• The Company has made and maintained cost accounts and records as specified under section 148(1) of the Act.
• The Company is compliant with the Secretarial Standards on Meetings of the Board of Directors and General Meetings.
• The Company adheres to the SEBI (Prohibition of Insider Trading) Regulations, 2015.
• The Company is progressing towards the implementation of SAP S/4 HANA across the enterprise.
• The Company has a BRSR as part of the annual report and the 29th AGM includes resolutions concerning dividend declarations and director appointments.

India Formulations Business #

Management Guidance and Assumptions #

• The branded prescription business is expected to outpace the market.
• Strategic interventions from prior periods are expected to continue yielding positive results.
• Focus will remain on strengthening the presence in cardiology, anti-diabetes, respiratory, gynecology, gastro-intestinal, dermatology, oncology, and nephrology.
• Chronic portfolio contribution to continue increasing

Market Growth Forecasts #

• The Indian Pharmaceutical Market (IPM) is projected to grow at a high single-digit/double-digit rate, reaching US$38-42 billion over the next five years.
• Cardiac was the largest therapeutic area followed by anti-infectives.
• Chronic therapies outpaced acute therapy growth.

Planned Strategic Initiatives #

• Strengthening presence in focused therapeutic areas, leveraging flagship brands (“Growth Booster brands”).
• Continued brand-building initiatives to scale up more brands.
• Leveraging NCEs (Saroglitazar, Desidustat) and biosimilars (Ujvira™) for market share expansion and patient base growth.
• Pan-India project for liver scanning using Shear Wave Elastography Liver Scan to improve MAFLD and MASH diagnosis.
• Generating Real World Evidence is the priority.

Potential Challenges and Opportunities #

• Challenges: Price erosion in the base portfolio and regulatory changes.
• Opportunities: Day 1 launches, next-generation drug delivery platforms, and leveraging innovation capabilities.

Consumer Wellness Business #

Management Guidance and Assumptions #

• Continued to rely on three key pillars: Accelerate growth of core brands, expand international presence, grow the scale and improve profitability.
• Continued support to the growth of existing portfolio and new products through different marketing initiatives and go-to-market [GTM] strategy

Market Growth Forecasts #

• Challenging demand scenario in both Urban and Rural markets.
• Weakness was more prevalent in rural India.
• Moderation of inflationary pressure.

Planned Strategic Initiatives #

• Drive relevance of Glucon-D brand and launch of ready-to-drink formats.
• Pilot launch for Glucon-D Activors Electrolyte Energy drink in a few key states.
• Support Complan™ brand by emphasizing nutritional differentiation.
• Expand SugarFree™ Green through new campaigns.
• Launch of I’mlite™, a sugar blended with stevia.
• Support Nutralite brand with digital media, e-commerce channel activations, and customer engagement activities.
• Build a robust pipeline of new products to satisfy the changing preference of consumers by oering them the novel solutions.
• International Focus: Build scale in international business, focusing on SAARC, MEA, SEA, and ISC regions, introducing innovations and extensions.

Efficiency Improvement Targets #

• Transitioned towards increasing the share of organised trade with channel specific oerings.

Potential Challenges and Opportunities #

• Challenges: Challenging demand scenario in the FMCG sector, particularly in rural India.
• Opportunities: Category expansion, leveraging of in-house R&D, expansion of international presence.

US Formulations Business #

Management Guidance and Assumptions #

• Expectation of sustained volume expansion in the base business.
• Continued focus on the execution of new product launches.
• Expansion in the complex generics space to offset price erosion.
• Commitment to expanding the 505(b)(2) product portfolio.

Market Growth Forecasts #

• The US animal healthcare market is valued at around US$ 9.9 bn

Planned Strategic Initiatives #

• Focus on successful execution of key launches.
• Expansion into complex generics, including injectables, transdermal patches, and drug-device combinations.
• Evaluation of partnerships to enter new dosage forms and therapies.
• Growth of the specialty product portfolio, including 505(b)(2) products.
• Continued evaluation of BD&L prospects.
• Development of orphan and ultra-rare disease products through Sentynl Therapeutics.

Potential Challenges and Opportunities #

• Challenges: Continued price erosion in the base generic portfolio.
• Opportunities: Leveraging successful execution in new product launches, and growth in complex generics, in-licensing of products. Expanding to US animal healthcare market.

International Markets Formulations Business #

Management Guidance and Assumptions #

• Emerging markets: Focus on branded generics, engaging with Key Opinion Leaders (KOLs) for disease management.
• Europe: Direct presence in generics markets of France and Spain.
• Expansion into the UK market, leveraging global R&D portfolio.

Market Growth Forecasts #

• Growth in South Africa.
• The company was ranked no. 2 in South Africa.

Planned Strategic Initiatives #

• Increasingly focusing on launching differentiated products, value-added generics and novel dosage forms.
• Leveraging innovation pipeline and filing dossiers for biosimilars.
• Expansion of pharmacy coverage and retail presence in France and Spain.
• Entry into new countries through partnerships in the BTB space.

Potential Challenges and Opportunities #

• Challenges: Business in Brazil impacted by sluggish market growth.
• Opportunities: Leverage existing pipeline to expedite filings. Penetrate high-volume public market in India. Service Global markets.

API Business #

Management Guidance and Assumptions #

• The Company manufactures and supplies a wide range of over 250 products.
• Focus on cost competitiveness, technology adoption, and building scale.
• Continuous work to ramp up the base business.

Planned Strategic Initiatives #

• Continued focus on improved process chemistry and better yields.
• Build a portfolio of value-added new products.

Capital Expenditure Plans #

• Acquisition of Watson Pharma Pvt. Ltd.’s API manufacturing facility in Ambernath, Maharashtra.

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• The auditor issued an unmodified opinion on the standalone and consolidated financial statements.
• There were no qualifications related to the audit, however the report states an exception to the maintenance of books of account not complying with audit trail requirements.

Key Accounting Policies and Changes #

• The financial statements comply with Indian Accounting Standards (Ind AS) and are prepared on a historical cost basis, except for certain financial assets and liabilities and defined benefit plans, which are measured at fair value.
• Key accounting policies include revenue recognition when control of goods or services is transferred to the customer, using the effective interest rate method for interest income, and the equity method for investments in joint ventures.
• No new accounting standards or amendments significantly impacted the financial statements during the year.

Internal Control Effectiveness #

• The company maintains adequate internal financial controls with reference to the financial statements.
• The internal financial controls were deemed to be operating effectively.

Regulatory Compliance Status #

• The Company is in compliance with applicable Secretarial Standards.
• The company has systems and processes to comply with applicable laws, rules, regulations, and guidelines.
• The Company has complied with the mandatory Corporate Governance requirements of the Listing Regulations.
• The Company had not complied fully with audit trail requirements for accounting software.

Legal Proceedings and Their Potential Impact #

• The Company and/or its subsidiaries are involved in various legal proceedings, including product liabilities, employment claims, contracts, and regulatory matters.
• The potential financial impact of these proceedings is subject to significant judgment.

Related Party Transactions #

• All related party transactions were in the ordinary course of business, on an arm’s-length basis, and had no conflict with the interest of the Company.
• The Company has disclosed all material related party transactions during the financial year.
• The Zydus Family Trust holds a controlling interest (74.98%) in the Company.

Subsequent Events #

• The Board of Directors approved the sale of the Company’s entire equity shareholding in Bayer Zydus Pharma Private Limited (BZPPL), a joint venture, to Bayer Pharmaceuticals Private Limited. The transaction was completed on May 6, 2024, and BZPPL ceased to be a joint venture of the Company.

Accounting Quality Assessment #

• The financial statements are prepared in accordance with Ind AS, indicating a commitment to high-quality accounting standards.
• The use of fair value measurements for certain assets and liabilities adds complexity, requiring significant judgments and estimates.
• The unmodified audit opinion suggests a high level of accounting quality.

Regulatory Risk Assessment #

• The Company operates in a highly regulated industry (pharmaceuticals), and regulatory compliance is a key risk.
• The involvement in legal proceedings, including product liability and antitrust claims, poses regulatory and financial risks.
• The Company’s compliance with various laws and regulations is tracked.
• Non-compliance with respect to the audit trail in books of account increased regulatory risk.