IOL Chemicals & Pharmaceuticals Ltd:Annual Report 2023-24 Analysis

IOL Chemicals And Pharmaceuticals Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

IOL Chemicals and Pharmaceuticals Ltd. (IOLCP) was incorporated in 1986. It started as a private limited company named “Indo Organics Limited” and subsequently changed to its current name.

Headquarters Location and Global Presence #

The company’s headquarters are located in Ludhiana, Punjab, India. IOLCP has a global presence with exports to various countries.

Company Vision and Mission #

While the specific documented vision and mission statements may vary, IOLCP aims to be a leading player in the chemical and pharmaceutical sectors by providing high-quality products and fostering innovation.

Key Milestones in Their Growth Journey #

• Backward Integration: A significant milestone was the company’s backward integration into Ethyl Acetate manufacturing, allowing them to control costs and improve margins.
• Expansion of API Portfolio: Expanding its Active Pharmaceutical Ingredients (API) portfolio has been a key focus area.
• Capacity Expansion: Regularly expanding its manufacturing capacities across various products.

Stock Exchange Listing Details and Market Capitalization #

IOLCP is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). ( Market capitalization can vary, so real-time data should be sourced directly from a financial data provider.)

Recent Financial Performance Highlights #

( Specific financial figures such as revenue, profit, and growth rates would need to be obtained from the company’s official financial reports or reputable financial news sources.)

Management Team and Leadership Structure #

( Information about the key management personnel and their roles should be sourced from the company’s website or annual reports.)

Any Notable Awards or Recognitions #

( Any awards or recognitions received by the company should be verified from their official website or press releases.)

Their Products #

Complete Product Portfolio with Categories #

IOLCP’s product portfolio primarily includes:

• Active Pharmaceutical Ingredients (APIs): Ibuprofen, Metformin, Clopidogrel Bisulphate, Fenofibrate, Lamotrigine, Pantoprazole
• Specialty Chemicals: Ethyl Acetate, Iso Butyl Alcohol (IBA)
• Industrial Chemicals: Acetic Acid

Flagship or Signature Product Lines #

• Ibuprofen: IOLCP is one of the largest manufacturers of Ibuprofen API globally.
• Ethyl Acetate: Their Ethyl Acetate production forms a significant part of their revenue.

Key Technological Innovations or Patents #

( Details on specific patented technologies or innovations would need to be sourced from the company’s patent filings or disclosures.)

Manufacturing Facilities and Production Capacity #

IOLCP has manufacturing facilities located in Punjab, India. ( Specific production capacities for each product line would need to be sourced from the company’s official reports or investor presentations.)

Quality Certifications and Standards #

The company emphasizes quality and compliance and adheres to relevant pharmaceutical standards. ( Specific certifications such as GMP, ISO certifications can be verified through the company’s website or quality reports.)

Any Unique Selling Propositions or Technological Advantages #

• Backward Integration: Their backward integration provides a cost advantage and ensures a stable supply chain.
• Scale of Operations: Large-scale production allows for competitive pricing.
• Established Customer Base: Strong relationships with pharmaceutical companies globally.

Recent Product Launches or R&D Initiatives #

( Information on recent product launches or R&D initiatives would need to be obtained from the company’s press releases, investor presentations, or annual reports.)

Primary Customers #

Target Industries and Sectors #

• Pharmaceutical Industry: API customers are primarily pharmaceutical companies manufacturing finished drug formulations.
• Chemical Industry: Specialty and Industrial chemicals cater to various industries, including paints, coatings, adhesives, and inks.

Geographic Markets (Domestic vs. International) #

IOLCP serves both domestic and international markets, with a significant portion of revenue coming from exports.

Major Client Segments #

Pharmaceutical companies are a major client segment for APIs. The chemical segments serve various industrial applications.

Distribution Network and Sales Channels #

IOLCP utilizes a combination of direct sales, distributors, and agents to reach its customers.

Major Competitors #

Direct Competitors in India and Globally #

• API Manufacturers: Other API manufacturers in India and globally producing similar APIs (e.g., Ibuprofen, Metformin).
• Specialty Chemical Manufacturers: Companies producing Ethyl Acetate and other specialty chemicals.

Competitive Advantages and Disadvantages #

• Advantages: Backward integration, large-scale production, established customer base.
• Disadvantages: Dependence on certain products (e.g., Ibuprofen), price fluctuations in raw materials.

How They Differentiate from Competitors #

• Cost Competitiveness: Their backward integration allows them to offer competitive pricing.
• Quality Assurance: Strong focus on quality and regulatory compliance.
• Reliable Supply: Reliable supply chain due to backward integration and large-scale production.

Market Positioning Strategy #

IOLCP positions itself as a reliable and cost-effective supplier of APIs and specialty chemicals to global markets.

Future Outlook #

Expansion Plans or Growth Strategy #

( Details on expansion plans or growth strategies, such as capacity expansions, new product development, or market penetration strategies, would need to be sourced from the company’s official statements.)

Sustainability Initiatives or ESG Commitments #

( Information on the company’s sustainability initiatives or ESG (Environmental, Social, and Governance) commitments would need to be obtained from their website or sustainability reports.)

Industry Trends Affecting Their Business #

• API Manufacturing Trends: Increasing demand for generic drugs, growing emphasis on drug safety and quality.
• Chemical Industry Trends: Growing demand for specialty chemicals, increasing environmental regulations.

Long-Term Vision and Strategic Goals #

( The long-term vision and strategic goals, such as becoming a leading player in specific segments, can be obtained from the company’s official statements.)

IOL Chemicals and Pharmaceuticals Limited: Financial Analysis Report FY 2023-24 #

Key Financial Metrics (3-Year Trend Analysis: FY22-FY24) #

Revenue & Profitability #

• Total Income: FY24: ₹2,162.9 cr; FY23: ₹2,242.7 cr; FY22: ₹2,002.5 cr (Standalone Total Income FY24: ₹2,163 cr; FY23: ₹2,243 cr. Consolidated Revenue from Operations FY24: ₹2,133.3 cr; FY23: ₹2,217.1 cr). A marginal decline in FY24 standalone income was observed from FY23, though higher than FY22.
• EBITDA: FY24: ₹261.6 cr; FY23: ₹251.8 cr; FY22: ₹233.0 cr. EBITDA demonstrated an upward trend, improving by 3.9% in FY24 over FY23.
• EBITDA Margin: FY24: 12.1%; FY23: 11.2%; FY22: 11.6%. The EBITDA margin improved by 90 basis points in FY24 compared to FY23.
• Profit Before Tax (PBT): FY24: ₹182.6 cr; FY23: ₹189.6 cr; FY22: ₹173.7 cr.
• Profit After Tax (PAT): FY24: ₹135.4 cr; FY23: ₹140.0 cr; FY22: ₹126.1 cr (Standalone PAT FY24: ₹135 cr; FY23: ₹140 cr. Consolidated PAT FY24: ₹135.0 cr; FY23: ₹140.7 cr). PAT saw a slight decrease in FY24 from FY23.
• Net Profit Margin: Improved by 10 basis points in FY24 (Standalone). Specific 3-year trend not explicitly stated, but FY24 Consolidated Net Profit Margin is 6.33% (135.0/2133.3), vs FY23 6.35% (140.7/2217.1).

Key Financial Ratios (Standalone, unless specified) #

• Return on Capital Employed (RoCE): FY24: 11.40%; FY23: 12.25%; FY22: 11.96%.
• Return on Net Worth (RoNW) / Return on Equity (ROE): FY24: 8.69%; FY23: 9.66%; FY22: 9.61%.
• Return on Assets (RoA): FY24: 6.0%; FY23: 6.4%; FY22: 5.9%.
• Net Worth: FY24: ₹1,611.4 cr; FY23: ₹1,506.7 cr; FY22: ₹1,396.1 cr. Consistent growth in net worth.
• Debt-Equity Ratio: The company has been debt-free since 2017. Net Debt to Equity: FY24: (0.00); FY23: 0.03; FY22: (0.01).
• Current Ratio: FY24: 1.50 times; FY23: 1.69 times.
• Trade Receivable Turnover: FY24: 4.36 times; FY23: 4.53 times.
• Inventory Turnover Ratio: FY24: 4.00 times; FY23: 5.05 times.

Shareholder Returns #

• Earnings Per Share (EPS - Basic & Diluted): FY24: ₹23.06; FY23: ₹23.85; FY22: ₹21.48.
• Dividend: FY24: ₹5 per share (Interim, considered final); FY23: ₹4 per share; FY22: ₹6 per share (Interim and Final). Total dividend payout FY24: ₹29.35 cr.

Business Segment Performance (FY24) #

Pharmaceuticals Segment #

• Revenue Contribution (Standalone): ~59% of total revenue (FY23: ~57%).
• Consolidated Segment Revenue: ₹1,262.54 cr (FY23: ₹1,258.53 cr).
• Performance: Ibuprofen business stable with capacity utilization increased from 75% (FY23) to 85% (FY24). Volume growth of 10-15% for key non-ibuprofen products (Paracetamol, Metformin, Clopidogrel). Metformin and Paracetamol exports increased by 60% and 10% respectively. Capacity increased for Paracetamol and Metformin. Sales revenue for other APIs declined due to lower selling prices, but margins maintained due to lower raw material costs.

Chemicals Segment #

• Revenue Contribution (Standalone): ~41% of total revenue (FY23: ~43%).
• Consolidated Segment Revenue: ₹870.8 cr (FY23: ₹958.6 cr).
• Performance: Faced headwinds due to temporary mismatch between input and output prices, particularly impacting Ethyl Acetate, leading to a decline in segment EBIT margin. Revenue declined due to lower selling prices and reduction in traded goods. Introduction of Acetic Anhydride (primarily for captive consumption) helped balance this decline and improve bottom line through backward integration. Raw material prices have since stabilized, indicating potential for recovery.

Major Strategic Initiatives and Progress #

Product Portfolio Diversification & Expansion #

• Objective: Expand non-ibuprofen API portfolio, targeting high-demand synergistic segments. Reduce reliance on ibuprofen.
• Progress: 20 commercialized products, 8 in pipeline. New APIs with maximum backward integration in high-growth therapeutic areas being introduced. Sitagliptin developed. Capacity expansion for Paracetamol and Metformin. Commenced Acetic Anhydride production (25,000 MTPA) for captive use and merchant sale.

Global Presence Strengthening #

• Objective: Expand presence in regulated markets (EU, US, Japan).
• Progress: Received CDE approval (China NMPA) to export Metformin Hydrochloride to China. Successful ANVISA (Brazil) audit for all 10 API units, received GMP certificate in May 2024. European Directorate for the Quality of Medicines & HealthCare (EDQM) issued Certificate of Suitability for Gabapentin.

Operational Efficiency & Cost Management #

• Objective: Enhance profitability by improving operational efficiency and reducing production costs.
• Progress: Implemented automation and digitalization in manufacturing. Optimized supply chain and raw material procurement (raw material to selling price ratio improved from 69.8% in FY23 to 65.5% in FY24). Acetic Acid recovery project from Paracetamol byproducts implemented. Additional boilers installed. Achieved ~12% increase in Overall Equipment Effectiveness (OEE) and 15.11% increase in production.

Backward Integration #

• Objective: Enhance control over supply chain, ensure quality, reduce cost, and improve production for APIs.
• Progress: Only company worldwide with complete backward integration for all intermediates and KSMs of Ibuprofen. In-house production of Iso Butyl Benzene (IBB), Ethyl Acetate, Acetic Anhydride, Mono Chloro Acetic Acid (MCA), Acetyl Chloride.

R&D and Innovation #

• Objective: Explore new products, deliver cost-effective solutions, backward integration of existing products, sustainable manufacturing via green chemistry.
• Progress: DSIR-approved R&D facility with over 50 scientists. R&D expenditure FY24: ₹19.33 cr. 5 patents held. Developed intermediates like S-POX, MINO-III, TFMT, VAL-03. Acquired patent for Edoxaban. Sitagliptin developed and approved by Indian Patent Office. Partnered with institutes for continuous processes and enzyme reactions.

Financial Prudence & CAPEX #

• Objective: Sustained growth, maintain financial health, debt-free status.
• Progress: Remained debt-free since 2017. CAPEX FY24: ~₹250 cr (higher than previous year), funded through internal accruals. Focus on technology adoption, automation, infrastructure, environmental system upgrades, land purchase for future expansion. CAPEX target ₹150-200 cr annually.

Risk Landscape and Mitigation #

Key Identified Risks #

• Information Technology: Cyber-attack risk.
• Manufacturing Facility: Supply chain disruption due to single location dependency.
• Quality: Loss of customer due to unsatisfactory product performance.
• Business Continuity Planning: Disruption in business continuity.
• Fire/Hazard Management: Risk of fire hazards at manufacturing facilities.
• R&D: Loss of business potential due to lack of investment in R&D.
• Product Concentration: Over-reliance on key products like Ibuprofen.
• Foreign Exchange: Volatility in foreign currency.
• Fraud Monitoring: Anti-fraud and unethical practices.
• ESG Risks: Non-compliance with environmental/social regulations.
• Regulatory Risks: Non-compliance with laws and regulations.

Mitigation Framework #

• Enterprise Risk Management (ERM) framework overseen by Risk Management Committee.
• IT: Robust cybersecurity framework, VAPT, continuous monitoring.
• Manufacturing: Developing multi-located facilities, improving logistics, contingency plans.
• Quality: Quality Risk Management framework, regular audits, expert training.
• BCP: Comprehensive BCP, regular Business Impact Analysis (BIA).
• Fire: Critical fire protection equipment, regular inspections, training, emergency protocols.
• R&D: Increased investment in R&D infrastructure, advanced technologies.
• Product Concentration: Actively diversifying into various therapeutic categories and specialty chemicals.
• Forex: Regular monitoring, hedging measures.
• Fraud: Internal control system, fraud

Detailed Analysis #

Financial Analysis: IOL Chemicals and Pharmaceuticals Limited (FY 2023-24) #

Source Document: Integrated Annual Report for FY 2023-24

Date of Analysis: 1st August 2024

Reporting Period: 1st April 2023 to 31st March 2024

Overall Financial Performance (Standalone) #

IOL Chemicals and Pharmaceuticals Limited (IOLCP) reported a marginal decline in total income for FY 2023-24. However, EBITDA and EBITDA margins showed improvement, indicating better operational efficiency and cost management, particularly concerning raw material costs. Profit After Tax (PAT) saw a slight decrease. The company maintained its debt-free status concerning long-term borrowings, relying on internal accruals for its capital expenditure.

Segment Performance (Standalone) #

• Pharmaceuticals: Revenue contribution increased from approx. 57% in FY23 to 59% in FY24. Sales revenue for other APIs (non-Ibuprofen) declined due to lower selling prices, but margins were maintained due to corresponding decrease in raw material prices. Volume growth of 10-15% for key non-Ibuprofen products. Ibuprofen business stable, capacity utilization increased from 75% in FY23 to 85-90% in FY24.
• Chemicals: Revenue contribution decreased from approx. 43% in FY23 to 41% in FY24. Revenue declined due to lower selling prices and reduction in traded goods. Introduction of Acetic Anhydride helped balance this. EBIT margin faced headwinds due to mismatch in input/output prices, particularly for Ethyl Acetate, but raw material prices have stabilized.

Three-Year Comparative Financial Analysis (Standalone) #

Full three-year financial statements are not available in the provided document. The analysis below uses available data from FY24, FY23, and FY22 where mentioned in graphs or narrative.

Key Financial Metrics (Standalone) #

Source: Standalone Financial Statements, “Financial Capital” section graphs & text (pg 39-43).

Standalone Balance Sheet Summary #

Cash Management #

Cash Flow and Liquidity Analysis #

Standalone Cash Flow (₹ Crores) #

Analysis: Standalone OCF improved significantly in FY24, driven by favorable working capital changes. ICF outflow increased due to higher capex. FCF (Financing) saw a larger outflow due to repayment of short-term borrowings and higher dividend payout. Free Cash Flow to Firm (OCF - Capex) showed substantial improvement.

Consolidated Cash Flow (₹ Crores) #

Analysis: Consolidated cash flows mirror the standalone trends, indicating that subsidiary operations did not materially alter the overall cash flow profile of the group. OCF improvement and higher capex are consistent. Free Cash Flow to Firm also shows similar significant improvement.

IOL Chemicals and Pharmaceuticals Limited (FY 2023-24) Financial Analysis #

Revenue and Profitability #

• Revenue Performance: Standalone total income of ₹2,163 crore, a marginal decline from ₹2,243 crore in FY 2022-23 (-3.57%). Revenue from operations (standalone) stood at ₹2,133 crore.
• EBITDA: Standalone EBITDA increased to ₹262 crore in FY24 from ₹252 crore in FY23 (+3.97%). The EBITDA margin improved by 90 basis points to 12.1% in FY24.
• Profitability: Standalone Profit After Tax (PAT) was ₹135.4 crore in FY24, compared to ₹140 crore in FY23 (-3.28%). Consolidated PAT for FY24 was ₹135.5 crore.
• Segmental Revenue Contribution: The pharmaceutical segment contributed approximately 59% to total revenue in FY24 (up from 57% in FY23), while the chemicals segment contributed 41% (down from 43% in FY23).

Market Share and Competitive Position #

• Ibuprofen: Largest global producer with an approximate 35% market share.
• Ethyl Acetate: Largest producer of Ethyl Acetate at a single location in India.
• Iso Butyl Benzene (IBB): Second-largest global producer of IBB, holding an approximate 30% market share.
• Metformin: Positioned among the largest Metformin producers in India.

Key Products/Services Performance #

• Ibuprofen: Capacity utilization increased from 75% in FY23 to 85% in FY24.
• Non-Ibuprofen APIs: Volume growth of 10-15% was recorded for key products. Metformin exports grew by 60% and Paracetamol exports by 10%.
• Specialty Chemicals: Production of Acetic Anhydride (25,000 MTPA) has commenced.
• Product Portfolio: Over 20 commercialized products, with 8 additional products in the R&D pipeline.

Geographic Distribution and Market Penetration #

• Global Reach: Customer base spans over 80 countries.
• Export Performance: Exports grew by 7% in FY24 to ₹679 crore. Exports contribute 28% to the company’s turnover.
• New Market Approvals:
  • Received approval from China’s NMPA to export Metformin Hydrochloride.
  • Completed ANVISA (Brazil) GMP audit for all 10 API manufacturing units, receiving GMP certification in May 2024.
  • EDQM issued a Certificate of Suitability for Gabapentin.
• Strategic Focus: Expansion in regulated markets such as the EU, US, and Japan for non-Ibuprofen products.

Segment-wise Capex and ROIC #

• Capex: FY24 capex was approximately ₹250 crore, funded through internal accruals.

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Strategic Analysis of IOLCP #

Long-Term Strategic Goals and Progress #

IOLCP’s long-term strategy focuses on diversifying its API portfolio beyond Ibuprofen, targeting high-demand therapeutic segments. Key objectives include:

• Introducing new APIs with maximum backward integration.
• Expanding market and production capacity for Paracetamol and Metformin.
• Strengthening global presence in regulated markets (EU, US, Japan).
• Achieving operational efficiency through automation and supply chain optimization.
• Maintaining financial prudence with annual CAPEX of ₹150-200 crore via internal accruals and debt-free status.
• Committing to sustainability (95% renewable energy by 2030, significant emission reductions).
• Adopting technological advancements, including AI/ML.

FY24 Progress:

• Secured approval from China’s NMPA to export Metformin Hydrochloride.
• Successful ANVISA (Brazil) GMP audit for all 10 API manufacturing units.
• Volume growth of 10-15% for key non-Ibuprofen products (Paracetamol, Metformin, Clopidogrel).
• Increased export volumes for Metformin (60%) and Paracetamol (10%).
• Enhanced production capacity for Paracetamol and Metformin.
• Increased Ibuprofen capacity utilization from 75% in FY23 to 85-90% in FY24.
• Commencement of Acetic Anhydride production (25,000 MTPA) for captive consumption and merchant sale.

Competitive Advantages and Market Positioning #

IOLCP’s primary competitive advantages arise from its market leadership and extensive backward integration.

• Ibuprofen Leadership: Largest global producer with approximately 35% market share and the only fully backward-integrated company for Ibuprofen.
• Ethyl Acetate: Largest single-location producer in India.
• Iso Butyl Benzene (IBB): Second-largest global producer with approximately 30% market share.
• Backward Integration: Strategic in-house production of essential chemicals for its API lines, reducing external vendor reliance.
• Financial Stability: Debt-free since 2017.
• Regulatory Compliance: Approvals from major international bodies facilitate global market access.
• Diverse Portfolio: Manufacturing over 20 commercialized products across APIs and specialty chemicals.
• Environmental Responsibility: Operates a 100% Zero Liquid Discharge (ZLD) facility.

Innovation Initiatives and R&D Effectiveness #

Innovation at IOLCP is driven by a DSIR-approved R&D facility, focusing on new product development, cost optimization, backward integration, and green chemistry. FY24 R&D expenditure was ₹19.33 crore.

Key Initiatives & Effectiveness:

• Product Pipeline: 20 products commercialized, with 8 products in the pipeline.
• New Product Development: Successful development and validation of Sitagliptin (patent approved). Acquisition of a patent for Edoxaban.
• Process Innovation: Focus on synthetic chemistry, biocatalysis, and continuous flow chemistry.
• Backward Integration Focus: R&D actively explores backward integration.
• Digital Transformation: Integration of digital tools across R&D.
• Capacity: R&D infrastructure is capable of developing 4-5 multistep APIs and 4-5 intermediates/chemical products annually.
• Collaborations: Partnering with renowned institutes.

M&A Strategy and Execution #

The company’s growth appears primarily organic, supplemented by intellectual property acquisitions.

• IP Acquisition: Acquired a patent for Edoxaban.
• Internal Funding: Capital expenditures are funded through internal accruals. The company has been debt-free since 2017.
• Portfolio Rationalization: Closed its overseas subsidiary, IOL GLOBAL LIMITED, in the UK.

The primary expansion strategy involves capacity additions, new product introductions from internal R&D, and geographical market penetration.

Management’s Track Record in Execution #

Management has demonstrated execution capability across several strategic fronts.

• Profitability Enhancement: EBITDA increased to ₹262 crore with EBITDA margin improving by 90 bps to 12.1%, and net profit margin improving by 10 bps.
• Portfolio Diversification: Achieved 10-15% volume growth in key non-Ibuprofen APIs. Metformin and Paracetamol exports grew by 60% and 10% respectively.
• Capacity Utilization & Expansion: Increased Ibuprofen capacity utilization to 85-90%. Expanded capacities for Paracetamol and Metformin. Commenced Acetic Anhydride production.
• Market Expansion: Successfully received ANVISA (Brazil) audit approval and NMPA (China) approval for Metformin export. Exports grew by 7% to ₹679 crore.
• Financial Discipline: Maintained debt-free status since 2017.

ESG Framework: IOL Chemicals and Pharmaceuticals Limited - FY2023-24 Analysis #

Environmental Metrics and Targets #

Emissions #

• Signatory to the Science Based Targets initiative (SBTi).
  • Scope 1: Achieved a 3.91% reduction in FY24 compared to the FY23 baseline. Target is a 40% reduction by 2035. FY24 Scope 1 emissions were 1,94,091 MTCO2e, up from 1,77,927 MTCO2e in FY23, attributed to expansion and new turbines, though net emissions against baseline reduced.

IOLCP Forward Outlook: FY 2023-24 Analysis #

Management Guidance and Underlying Assumptions #

Management guidance indicates a focus on diversifying the product portfolio beyond Ibuprofen, particularly in the Active Pharmaceutical Ingredients (API) segment, and expanding into regulated markets.

Key Guidance Points #

• Non-Ibuprofen API Growth: Targeting high-demand, synergistic non-Ibuprofen APIs with maximum backward integration. Volume growth of 10-15% for key non-Ibuprofen products (Paracetamol, Metformin, Clopidogrel) was reported in FY24, with export growth for Metformin (60%) and Paracetamol (10%).
• Ibuprofen Stability: Ibuprofen market expected to grow 3-4% p.a.; IOLCP increased capacity utilization to 85-90% in FY24 from 75% in FY23.
• Specialty Chemicals Recovery: Anticipation of recovery in Specialty Chemicals EBIT margin due to stabilization of raw material prices, after headwinds in FY24 impacted Ethyl Acetate.
• Revenue and Profitability: Expansion into regulated markets and new product launches are expected to substantially contribute to revenue and profitability. Modernization and capacity expansion are projected to increase topline and bottom-line.
• Financial Prudence: Commitment to remain debt-free, funding CAPEX through internal accruals. EBITDA levels were maintained despite declines in finished goods prices in FY24.

Underlying Assumptions #

• Successful regulatory approvals and market penetration for new and non-Ibuprofen products in targeted geographies (e.g., China approval for Metformin, ANVISA for Brazil).
• Continued stable demand for Ibuprofen.
• Stabilization or favorable movement in raw material prices, particularly for the chemical segment.
• Effective realization of benefits from CAPEX investments in terms of operational efficiency and capacity.
• Global and Indian economic resilience, and benefits from “China+1” and “Make in India” strategies.
• Successful execution of backward integration projects yielding cost and supply chain benefits.

Market Growth Forecasts (as cited by IOLCP) #

• Global Pharmaceutical Market: USD 1,199.86 billion (CY 2023) to USD 2,092.95 billion (CY 2028), CAGR of 13.4%. An alternate forecast suggests growth to USD 2.3 trillion by 2028 at a 5-8% CAGR.
• Global API Market: USD 237.81 million (2023) to USD 393.58 million (2031), CAGR of 6.50%.
• Indian API Market: USD 13.64 billion (2024) to USD 20.32 billion (2029), CAGR of 8.31%. India’s API industry (35% of India’s pharma market) projected CAGR of 6.49%.
• Global Chemical Industry: USD 6.2 trillion (CY 2023) to USD 7.06 trillion (CY 2027), CAGR of 7.33%.
• Indian Chemical Industry: Valued at USD 220 billion (CY 2023), projected to USD 383 billion by CY 2030. Estimated CAGR of 9-12% p.a., to reach approx. USD 300 billion by 2025-2026.
• Global Specialty Chemicals Market: USD 641.5 billion (2023), projected CAGR of 5.2% (2024-2030).
• Indian Specialty Chemicals Market: USD 41.90 billion (2023), projected CAGR of 11% till FY26.

IOL Chemicals and Pharmaceuticals Limited - Financial Analysis Report (FY 2023-24) #

Auditor’s Opinion and Qualifications #

The Independent Auditors, M/s Ashwani & Associates, Chartered Accountants, issued an unmodified opinion on both the Standalone and Consolidated Financial Statements for the year ended March 31, 2024. This indicates that the financial statements present a true and fair view in conformity with Indian Accounting Standards (Ind AS) and the Companies Act, 2013.

Key Audit Matters (KAMs) #

Key Audit Matters identified by the auditors for both Standalone and Consolidated statements were:

• Revenue Recognition: Ensuring the correct period for revenue recognition was considered a significant risk. Auditor procedures included evaluating internal controls, testing IT systems, and performing detailed testing of sales transactions near year-end.
• Property, Plant and Equipment (PPE) and Capital Work-in-Progress (CWIP): Significant capital expenditure and the management judgment involved in assessing if costs meet capitalization criteria were key focus areas. Auditor procedures involved testing internal controls over capitalization, verifying costs on a sample basis, and assessing the appropriateness of allocated costs.

The auditors’ report on Other Legal and Regulatory Requirements, including Annexure ‘A’ (Report on Internal Financial Controls) and Annexure ‘B’ (Report under CARO, 2020), also expressed unmodified opinions, confirming the adequacy and operating effectiveness of internal financial controls and compliance with CARO provisions.

Key Accounting Policies and Changes #

IOLCP prepares its financial statements in accordance with Ind AS. Key accounting policies include:

• Revenue Recognition (Ind AS 115): Revenue is recognized when control of goods/services is transferred to the customer.
• Property, Plant and Equipment (Ind AS 16): Stated at cost less accumulated depreciation and impairment.
• Intangible Assets (Ind AS 38): Stated at cost less accumulated amortization and impairment.
• Inventories (Ind AS 2): Valued at the lower of cost or net realizable value.
  • Change in Accounting Policy: During FY 2023-24, the company changed its method for valuation of raw materials inventory from First-In, First-Out (FIFO) to the Moving Weighted Average method. The company states there is no material impact due to this change.
• Leases (Ind AS 116): Right-of-Use (ROU) assets and lease liabilities are recognized for lease arrangements, except for short-term and low-value leases.
• Financial Instruments (Ind AS 109): Recognized initially at fair value.
• Foreign Currency Transactions: Transactions are recorded at the exchange rate on the transaction date.
• Taxes on Income (Ind AS 12): Current tax is based on taxable profit.
• Critical Accounting Estimates and Judgements: Useful lives of PPE, recoverable amount of PPE, post-retirement benefit plans, and recognition of deferred tax assets.

Internal Control Effectiveness #

The Auditors’ Report (Annexure A to both Standalone and Consolidated reports) states that the company has an adequate internal financial control system with reference to financial statements and such controls were operating effectively as at March 31, 2024.

The Directors’ Responsibility Statement and the Management Discussion and Analysis (MDA) also assert the adequacy and effectiveness of the company’s internal control systems.

Regulatory Compliance Status #

• The Directors’ Report states compliance with applicable accounting standards and proper systems to ensure compliance with all applicable laws.
• The Corporate Governance Report confirms compliance with SEBI (LODR) Regulations, 2015.
• The company confirms compliance with applicable Secretarial Standards.
• The Business Responsibility and Sustainability Report (BRSR) details initiatives on environmental, social, and governance fronts.
• The company has obtained various certifications like USFDA, EUGMP, KFDA, WHOGMP, EDQM, and ANVISA (Brazil) approval.
• The company is a signatory to the Science Based Targets initiative (SBTi) and has Zero Liquid Discharge (ZLD) facilities.

Legal Proceedings and Their Potential Impact #

• Standalone & Consolidated (Note 35):
  • An income tax demand of ₹2.27 crore was raised for AY 2020-21, which was further adjusted against a refund for AY 2023-24 of ₹1.71 crore.
  • The company has executed bonds aggregating ₹19.73 crore (PY ₹15.56 crore) under the Customs Act, 1962.
• Management’s Assessment: Legal proceedings and claims arising in the ordinary course of business are not expected to have a material adverse effect on the company’s results or financial condition.

Related Party Transactions (RPTs) #

• Key Related Parties: Key Management Personnel (KMPs), their relatives, subsidiaries, and enterprises over which KMPs exercise significant influence.
• Nature of Transactions:
  • Sales/Purchases: Sale/Purchase of goods.
  • Remuneration: Managerial remuneration to KMPs. Sitting fees to non-executive directors.
  • Rent: Rent paid/received.
  • CSR: Contribution to IOL-Foundation for CSR activities.