Morepen Laboratories Ltd:Annual Report 2023-24 Analysis

Morepen Laboratories Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Morepen Laboratories Ltd. was established in 1984 by Mr. Sushil Suri. It initially started as a marketing company and gradually transitioned into manufacturing.

Headquarters Location and Global Presence:

The company’s headquarters are located in Baddi, Himachal Pradesh, India. Morepen Laboratories has a global presence, exporting its products to various countries across the globe, including North America, Europe, and Asia.

Company Vision and Mission:

While a formally stated vision and mission may not be explicitly published, Morepen’s actions suggest a vision of becoming a leading global pharmaceutical company and a mission to provide high-quality, affordable healthcare solutions.

Key Milestones in their Growth Journey:

• Early Years (1980s-1990s): Focused on establishing a presence in the Indian pharmaceutical market and building manufacturing capabilities.
• Late 1990s-2000s: Expansion into Active Pharmaceutical Ingredients (APIs) and formulations. Received US FDA approval for some of its products.
• Recent Years: Focus on R&D, new product development, and expanding into new markets.

Stock Exchange Listing Details and Market Capitalization:

Morepen Laboratories Ltd. is listed on the Bombay Stock Exchange (BSE: 500288) and the National Stock Exchange (NSE: MOREPENLAB). Market capitalization fluctuates based on market conditions.

Recent Financial Performance Highlights:

Recent financial performance can be found on official investor relation websites and through financial reporting services.

Management Team and Leadership Structure:

Mr. Sushil Suri holds a key leadership position. Detailed information regarding the board of directors and other key management personnel can be found on the company website.

Any Notable Awards or Recognitions:

While information about awards and recognitions may vary, information is available on the company website, press releases, and industry publications.

Their Products #

Complete Product Portfolio with Categories:

Morepen Laboratories offers a diversified product portfolio spanning several categories:

• Active Pharmaceutical Ingredients (APIs): A wide range of APIs including Atorvastatin, Rosuvastatin, Sitagliptin, and others.
• Formulations: Finished dosage forms like tablets, capsules, and liquids.
• Home Diagnostics: Blood glucose monitors, blood pressure monitors, thermometers, and other healthcare devices.
• Over-the-Counter (OTC) Products: Products like Burnol, Lemolate, and others.

Flagship or Signature Product Lines:

• APIs: Certain APIs like Atorvastatin and Rosuvastatin contribute significantly to their revenue.
• Home Diagnostics: Blood glucose monitors are a key product line in the consumer segment.
• Burnol: Burnol is a well-established OTC brand.

Key Technological Innovations or Patents:

Details about patents and specific technological innovations are not consistently available. Focuses on improving existing manufacturing processes and developing new formulations.

Manufacturing Facilities and Production Capacity:

Morepen Laboratories has manufacturing facilities in Baddi, Himachal Pradesh. The exact production capacity details for each product line are not publicly available.

Quality Certifications and Standards:

The company adheres to international quality standards such as:

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

Any Unique Selling Propositions or Technological Advantages:

• Focus on cost-effective manufacturing of APIs.
• Strong presence in the home diagnostics segment in the Indian market.
• Well-established brand recognition for certain OTC products.

Recent Product Launches or R&D Initiatives:

Recent product launches and R&D initiatives can be found on the company website, press releases, and investor presentations.

Primary Customers #

Target Industries and Sectors:

• Pharmaceutical companies (for APIs)
• Hospitals and clinics (for formulations and diagnostics)
• Retail pharmacies (for OTC products)
• Consumers (for home diagnostics and OTC products)

Geographic Markets (Domestic vs. International):

• Significant presence in the Indian market.
• Exports APIs to various international markets, including North America, Europe, and Asia.

Distribution Network and Sales Channels:

• Distribution network through distributors and wholesalers.
• Direct sales to pharmaceutical companies for APIs.
• Online sales channels for home diagnostics and OTC products.

Major Competitors #

Direct Competitors in India and Globally:

• APIs: Aurobindo Pharma, Sun Pharma, Lupin, Divi’s Laboratories.
• Home Diagnostics: Accu-Chek (Roche), OneTouch (Johnson & Johnson), Dr. Morepen (internal competition).
• OTC: Various local and multinational pharmaceutical companies.

Comparative Market Share Analysis:

Specific market share data is not always available. The API market is highly competitive, with numerous players vying for market share. Morepen holds a notable share in the domestic blood glucose monitoring market.

How they differentiate from competitors:

• Focus on specific API segments.
• Strong presence in the Indian OTC market.
• Emphasis on affordability.

Industry Challenges and Opportunities:

Challenges:

• Increasing competition in the API market.
• Stringent regulatory requirements.
• Fluctuations in raw material prices.

Opportunities:

• Growing demand for affordable healthcare.
• Increasing prevalence of chronic diseases (e.g., diabetes).
• Expanding into new markets and product segments.

Future Outlook #

Expansion Plans or Growth Strategy:

• Focus on increasing API production capacity.
• Expanding into new therapeutic areas.
• Strengthening presence in the home diagnostics segment.
• Investing in R&D for new products and technologies.

Sustainability Initiatives or ESG Commitments:

Sustainability initiatives and ESG commitments are not consistently available.

Industry Trends Affecting Their Business:

• Increasing demand for generic drugs.
• Growing focus on preventive healthcare.
• Technological advancements in drug delivery systems.
• Changing regulatory landscape.

Long-Term Vision and Strategic Goals:

The company’s long-term vision likely involves becoming a significant player in the global pharmaceutical market, particularly in APIs and generic drugs. Focuses on sustainable growth, product innovation, and delivering value to stakeholders.

Comprehensive Performance Overview #

Detailed Analysis #

Balance Sheet Analysis #

Operating Performance #

Income Statement #

Cash Management Analysis: Morepen Laboratories Limited (FY 2023-24) #

Cash Flow and Liquidity Analysis #

Cash Flow Components (OCF, ICF, FCF) #

• Net Cashflow from Operating Activities (OCF): ₹15,410.18 Lakhs (FY24) vs. ₹9,760.62 Lakhs (FY23).

  • Key Components (FY24):
    • Profit Before Tax: ₹13,067.69 Lakhs.
    • Adjustments for non-cash/non-operating items: Depreciation & Amortization (₹3,346.74 Lakhs), Finance Cost (₹374.40 Lakhs), Minority Interest (₹46.04 Lakhs).
    • Operating Profit before Working Capital Changes: ₹16,774.01 Lakhs.
    • Changes in Working Capital: Negative impact from Trade Receivables (-₹9,009.83 Lakhs) and Inventories (-₹4,284.99 Lakhs); Positive impact from Current Liabilities (₹14,557.25 Lakhs) and Loans, other bank balances & other current assets (-₹2,777.59 Lakhs).
    • Income Tax Paid (Net): -₹2,626.26 Lakhs.

• Net Cashflow from Investing Activities (ICF): -₹7,030.17 Lakhs (FY24) vs. -₹6,103.37 Lakhs (FY23).

  • Key Components (FY24):
    • Purchase of Property, Plant & Equipment (PPE) & Capital Work in Progress (CWIP): -₹6,273.79 Lakhs.
    • Purchase/Addition of Intangibles/Goodwill: -₹143.24 Lakhs.
    • Proceeds from Sale of PPE: ₹35.07 Lakhs.
    • (Purchase)/Sale of Investments (Net): -₹644.21 Lakhs.
    • Investment in Other Non-Current Assets: -₹4.00 Lakhs.

• Net Cashflow from Financing Activities (FCF): -₹728.43 Lakhs (FY24) vs. -₹3,324.61 Lakhs (FY23).

  • Key Components (FY24):
    • Finance Cost Paid: -₹374.40 Lakhs.
    • Proceeds/(Repayments) of Long-Term Borrowings (Net): -₹82.60 Lakhs.
    • Proceeds/(Repayments) of Short-Term Borrowings (Net): -₹271.43 Lakhs.
    • Change in Other Non-Current Liabilities & Provisions (Net): ₹0.00 Lakhs.

Working Capital Management Efficiency #

• Debtors Turnover (Consolidated): 81.93 days (FY24) vs. 73.19 days (FY23). An increase indicates a longer period to collect receivables.
• Inventory Turnover Ratio (Consolidated): 3.35 times (FY24) vs. 3.94 times (FY23). This implies inventory was held for approximately 109 days (365/3.35) in FY24, compared to 93 days (365/3.94) in FY23, suggesting slower inventory movement.
• Trade Payables Turnover (Consolidated): 96.85 days (FY24) vs. 107.54 days (FY23). A decrease indicates faster payment to suppliers.
• Cash Conversion Cycle (CCC) (Consolidated, Calculated):
  • FY24: DSO (81.93) + DIO (108.96) - DPO (96.85) = 94.04 days.
  • FY23: DSO (73.19) + DIO (92.64) - DPO (107.54) = 58.29 days.

The CCC has increased significantly, indicating a longer time span for capital to be tied up in working capital. This is driven by longer receivable collection periods and slower inventory movement, partially offset by faster payments to suppliers.

• Material cost as a percentage of total income dropped by 480 basis points due to lower input prices and better price realization, which can positively impact working capital by improving margins.

Capex Analysis by Segment #

• Total Capital Expenditure (Consolidated, FY24):

  • Purchase of PPE & CWIP: ₹6,273.79 Lakhs.
  • Purchase/Addition of Intangibles/Goodwill: ₹143.24 Lakhs.
  • Total: ₹6,417.03 Lakhs. (FY23 Total Capex: ₹5,830.02 Lakhs (PPE & CWIP ₹5,556.73 + Intangibles ₹273.29)).

• Segment-wise details (Narrative):

  • Home Diagnostics: Backward integration in manufacturing for Glucometers and Blood Pressure Monitors, including in-house manufacturing of plastic parts and PCB mounting. Injection Moulding capacity was enhanced with installation of more new machines. This indicates capex in the Medical Devices segment.
  • Formulations: New capacities were built for manufacture of tablets wherein tablet manufacture capacity were increased to 162.00 units from 92.40 units in last financial year. The capacities for capsule, oral liquid, sachet and dry syrup has also be enhanced. This points to capex in the Formulations segment.
  • Energy Conservation: Capital investment on energy conservation equipment during the year was ₹350.00 Lakhs. This includes a new VFD controlled brine chiller, efficient UPS, automated Hot Water Generator

Key Performance Indicators #

Business Segment Performance Analysis #

Revenue and Profitability Metrics #

• Consolidated Total Revenue (FY24): ₹1,70,440.33 Lakhs, a 19.72% increase from ₹1,42,366.34 Lakhs (FY23).
• Consolidated Net Profit After Tax (PAT) (FY24): ₹9,615.99 Lakhs, a 148.63% rise compared to ₹3,867.55 Lakhs (FY23, after adjusting for minority interest as per Chairman’s statement).
• Consolidated EBITDA (FY24): ₹17,259.01 Lakhs (calculated as PBT + Finance Cost + Depreciation & Amortisation from financial highlights table, though the table itself shows a different direct EBITDA figure that implies a calculation based on Total Income - (Material Cost + Employee Cost + Other Expenses excluding finance and depr.), which is ₹17,259.01 Lakhs), a 101.47% improvement from ₹8,566.65 Lakhs (FY23).
• Export Revenue (FY24): ₹64,775.16 Lakhs, a 14.21% growth (Chairman’s message states 13.41%, Directors’ Report states 14.21%) from ₹56,714.88 Lakhs (FY23).
• Domestic Business Revenue (FY24): Grew by 22.61%.
• Standalone Sales Revenue (FY24): Grew by 14.52%.

Market Share and Competitive Position (API Business for FY24) #

• Loratadine: Largest supplier and manufacturer by volume (kg) with 35% market share. Expected CAGR of over 2% (FY24-28). Company’s share in total exports from India: 65% (year ending Dec 31, 2023).
• Montelukast: Largest supplier and manufacturer by volume (kg) with 44% market share. Expected CAGR of over 10% (FY24-28). Company’s share in total exports from India: 43% (year ending Dec 31, 2023).
• Desloratadine: Largest supplier and manufacturer by volume (kg) with 26% market share. Projected CAGR of over 5% (FY18-28). Company’s share in total exports from India: 47% (year ending Dec 31, 2023).
• Atorvastatin: 4th largest manufacturer globally by volume (kg) with 11% market share. Company’s export share from India improved to 16% (calendar year Dec 31, 2023) from 10% (FY23).
• Rosuvastatin: 4th largest manufacturer globally by volume (kg) with 9% market share. Market expected CAGR of 5.05% (FY24-28). Company’s share in total exports from India: 8% (year ending Dec 31, 2023).
• Fexofenadine: 3rd largest manufacturer globally by volume (kg) with 16% market share. Company’s share in total exports from India: 18% (year ending Dec 31, 2023).

Key Products/Services Performance (FY24 Revenue Growth) #

• Medical Devices Business: Revenue growth of 35.36% to ₹44,271.59 Lakhs.
  • Blood Gluco Measuring Business: Grew by 34.65%. CAGR of 30.07% (5-year period ending Mar 31, 2024).
  • Blood Pressure Monitors Business: Grew by 36.31% to ₹7,944.39 Lakhs. CAGR of 28.59% (5-year period ending Mar 31, 2024).
• API Business: Revenue growth of 15.46% to ₹94,440.75 Lakhs.
  • Domestic API business grew by 17.69%.
  • Export API business grew by 14.44%.
  • Growth driven by Fexofenadine and Rosuvastatin, despite a drop in Loratadine revenues.
  • Sales of new products Olmesartan, Rivaroxaban, Vonoprazan, Empagliflozin, Vortioxetine, Apixaban increased.
  • Sales of Sitagliptin, Dapagliflozin, Linagliptin, Edoxaban decreased due to price drops.
• Formulation Business: Revenue growth of 19.79% to ₹21,483.12 Lakhs.
  • Institutional Supplies Business: Grew by 129.43% to ₹4,324.39 Lakhs.
  • Generics Business: Grew by 37.15% to ₹8,564.85 Lakhs.
  • Branded Rx (Prescription) Business: Grew by 1.20% to ₹4,376.86 Lakhs.
  • Contract Manufacturing Business: Revenue of ₹4,216.30 Lakhs (decline due to capacity utilization for institutional business).
• OTC Business (Dr. Morepen Limited): Revenue decline of 5.07% to ₹8,847.78 Lakhs.
  • Burnol (Burn Cream) and Lemolate (Cough & Cold) combined sales grew by 6.95% to ₹1,816.16 Lakhs.
  • Brand Sharing Revenues: Grew by 28.38% (Directors’ Report states 28.38% from ₹3006.50 Lakhs, BRSR states 28% growth for current year).
  • OTC Range Products: Revenue decline of 10.17% to ₹2,131.48 Lakhs.
  • Online Business Sales Revenue: Decline of 40.08% to ₹589.35 Lakhs.
  • Grooming Trading Business: Revenue decline of 54.65% to ₹1,031.73 Lakhs.

Geographic Distribution and Market Penetration #

• Overall Exports: To over 80 countries. Export revenue grew by 14.21% (or 13.41%) with significant contributions from Americas, Europe, and the Middle East.
• API Exports: Revenue growth of 36.04% in North & South American markets, 7.09% in Europe, and 2.38% in Asia.
• OTC Business Distribution: Expanded from 80,000 outlets to 110,000 outlets and from 22 states to 28 states.
• Home Diagnostics: Cumulatively sold 1.54 billion Gluco Strips; Gluco Monitor installations crossed 11.74 million. Expanding marketing activities across geographies.
• National Operations: Plants and offices in 2 states (HP, Haryana), serving 28 states and 8 union territories.
• International Operations: 1 office/subsidiary (Morepen Bio Inc., USA). Contribution of exports to total turnover (standalone): 41.47%.

Segment-wise Capex and ROIC #

• Capex:
  • Home Diagnostics: Injection Moulding capacity enhanced with new machines. Started in-house mounting of bare PCB. Backward integration for Glucometer and BP Monitor raw materials.
  • Finished Formulations: New tablet manufacturing capacities built, increased to 162.00 units from 92.40 units. Capsule, oral liquid, sachet, and dry syrup capacities also enhanced.
  • Energy Conservation: Capital investment of ₹350.00 Lakhs during the year.
  • Overall approval to raise up to ₹350 Crores via QIP for capex, working capital, etc. (raised ₹3,67,84,991 Equity Shares at ₹54.37/- each on Aug 5, 2024, post reporting period).
• ROIC (Return on Capital Employed - Overall Standalone):
  • FY24: 16.46%
  • FY23: 7.98% (Segment-wise ROIC is not explicitly provided in the document.)
• R&D Expenditure (Standalone): ₹1,524.17 Lakhs (FY24) vs. ₹949.45 Lakhs (FY23), including capital and revenue expenses.

Operational Efficiency Metrics #

• Material Cost (Consolidated): Decreased to 62.33% of total income from 67.13% in FY23 (drop of 480 bps), attributed to lower input prices and better price realization.
• Employee Cost (Consolidated):

Risk Assessment: Morepen Laboratories Limited (FY 2023-24) #

Strategic Risks #

• Severity: High
• Likelihood: Moderate to High
• Trend: Increasing

Mitigation Strategies: #

• Diversification across API, formulations, medical devices, and OTC markets.
• Focus on “Excellence, Passion, Action, and Innovation” as core values.
• Continuous investment in R&D for new product development.
• Expansion of global footprint and deepening domestic market penetration.
• Backward integration in medical devices.
• Strategic fundraising (QIP of ₹350 Crores approved) for capex and working capital.
• Emphasis on regulatory approvals (USFDA, EUGMP, WHO GMP).

Control Effectiveness: #

• Implied effectiveness through sustained market presence, successful product launches, and international certifications.
• Growth in consolidated revenues (19.72%) and net profit (148.63%) in FY24 suggests effective strategic execution.
• Successful QIP issuance post-FY24 indicates investor confidence.

Potential Financial Impact: #

• Negative: Loss of market share, revenue stagnation, reduced profitability, inability to fund growth initiatives.
• Positive: Sustained revenue and profit growth, enhanced market leadership, and improved shareholder value.

Quantitative Risk Metrics & YoY Change: #

• R&D Expenditure: ₹1217.51 Lakhs in FY24 vs. ₹949.45 Lakhs in FY23 (Increase of 28.23%).
• Share of export revenue in total revenue: Atorvastatin India export share improved to 16% (CY23) from 10% (FY23). Loratadine & Montelukast India export shares maintained at 65% & 43% respectively (CY23).

Operational Risks #

• Severity: High
• Likelihood: Moderate
• Trend: Stable to Increasing

Mitigation Strategies: #

• Three state-of-the-art manufacturing facilities in Himachal Pradesh.
• Adherence to international quality standards (USFDA, WHO GMP, EU GMP).
• Backward integration in medical devices.
• Robust R&D processes (13 patents granted and 9 new patents filed in FY24).
• Inventory management practices.
• Employee training.
• Zero Liquid Discharge (ZLD) mechanism.
• Business Continuity and Disaster Management Plan.
• Energy conservation measures.

Control Effectiveness: #

• Sustained regulatory approvals suggest effective quality and manufacturing controls.
• Reduction in material cost as a percentage of total income indicates improved operational efficiency or favorable input prices.
• Successful commercialization of new products.

Potential Financial Impact: #

• Negative: Production delays, product recalls, increased manufacturing costs, inventory write-offs, fines, loss of customer trust.
• Decline in OTC business revenue (-5.07% in FY24) highlights operational challenges.

Quantitative Risk Metrics & YoY Change: #

• Material Cost as % of Total Income: 62.33% in FY24 vs. 67.13% in FY23 (Decrease of 480 bps).
• Employee Cost as % of Total Income: 10.65% in FY24 vs. 10.86% in FY23 (Slight decrease).
• Manufacturing, Sales & Marketing, Admin Expenses (Other Expenses): 16.89% of Total Income in FY24 vs. 15.98% in FY23 (Increase of 91 bps). Manufacturing expenses component increased by 37.28%.
• Inventory Turnover Ratio (Standalone): 4.40 in FY24 vs. 3.69 in FY23.
• Capacity Utilisation: Increase in tablet manufacturing capacity (162 units from 92.4 units).
• Energy Consumption Reduction: 15.38% reduction in Units/Kg production.

Financial Risks #

• Severity: Moderate
• Likelihood: Moderate
• Trend: Stable

Mitigation Strategies: #

• Funding growth primarily through internal accruals.
• Utilizing credit facilities backed by fixed deposits, minimizing interest cost.
• Approved QIP of ₹350 Crores to fund capex and

Financial Performance Overview (FY 2023-24) #

Revenue Growth #

Morepen Laboratories Limited reported a significant financial turnaround in FY 2023-24. Consolidated total revenues grew by 19.72% to ₹1,70,440.33 Lakhs, a substantial recovery from the previous year’s dip. This growth was primarily driven by strong performance in the medical devices, Active Pharmaceutical Ingredients (API), and formulation businesses.

Net Profit #

Consolidated net profit witnessed a remarkable surge of 148.63% compared to the previous year.

Export Revenue #

Export revenue increased by 14.21% to ₹64,775.16 Lakh

ESG and Sustainability Analysis #

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

Financial Performance Analysis (FY 2023-24) #

Overall Consolidated Performance: #

• Total Revenue: Increased by 19.72% to ₹1,70,440.33 Lakhs from ₹1,42,366.34 Lakhs in FY 2022-23.
• EBITDA: Grew by 101.47% to ₹17,257.94 Lakhs from ₹8,566.65 Lakhs.
• Profit After Tax (PAT) (Net of Minority Share): Surged by 148.63% to ₹9,615.99 Lakhs from ₹3,867.55 Lakhs.
• Total Comprehensive Income: Increased by 153.58% to ₹9,431.81 Lakhs from ₹3,719.49 Lakhs.
• Export Revenue: Grew by 14.21% to ₹64,775.16 Lakhs, constituting 38.00% of total consolidated revenues. Key export markets contributing to growth were Americas, Europe, and the Middle East.
• Domestic Revenue: Registered a growth of 22.61%.

Segment-wise Performance (Consolidated): #

Active Pharmaceutical Ingredients (API): #

• Revenue: ₹94,440.75 Lakhs (up 15.46%).
• Contribution to Total Revenue: 55.87% (down from 57.70%).
• Domestic Growth: 17.69%; Export Growth: 14.44%.
• Key Drivers: Strong growth in Fexofenadine and Rosuvastatin revenues offset a drop in Loratadine. New products like Olmesartan, Rivaroxaban, Vonoprazan, Empagliflozin

Morepen Laboratories Limited: Financial Analysis - Outlook #

Management Guidance and Assumptions (FY 2024-25) #

• Overall Outlook: Management anticipates continued growth in FY 2024-25, driven by ‘Passion, Action, and Innovation’.
• Segment Performance:
  • API Business: Consistent growth expected, driven by key molecules and new product introductions. Focus on R&D and regulatory filings.
  • Medical Devices: Significant growth projected, expanding online sales and backward integration to improve cost structures. Plans include nebulizers and orthopedic products.
  • Formulation Business: Improved profitability expected from institutional supplies and generic product sales. Capacity expansions to support revenue growth.
  • OTC Business: Expand distribution reach, participate in tenders, and add pharmacy chains.
• Financial Strategy: Funding growth through internal accruals. QIP raising completed on August 5, 2024.
• Operational Assumptions:
  • Continued investment in R&D for new product development.
  • Benefits from energy conservation and technology absorption.
  • Improved product margins anticipated from better price realization and managed input costs.

Market Growth Forecasts #

• Global Pharmaceutical Market:
  • Reached US$1,480 billion in CY23 (CAGR 4.8% from CY18-CY23).
  • Estimated at US$1,547 billion in CY24.
  • Projected to reach US$1,844 billion by CY28 (CAGR 4.5% over CY23-CY28).
  • Dominated by North America (47%), Europe (24%), and Asia Pacific (19%).
• Global Pharmaceutical Formulation Market:
  • Reached US$1,280 billion in CY23 (CAGR 4.3% from CY18-CY23).
  • Forecasted at US$1,333 billion in CY24.
  • Projected to reach US$1,567 billion by CY28 (CAGR 4.1% over CY23-CY28).
• Key API Molecules (Morepen Specific):
  • Loratadine: Anticipated CAGR >2% (FY24-28). Morepen holds 35% market share by volume (FY24).
  • Montelukast: Expected CAGR >10% (FY24-28). Morepen holds 44% market share by volume (FY24).
  • Desloratadine: Projected CAGR >5% (FY18-28). Morepen holds 26% market share by volume (FY24).
  • Rosuvastatin: Market expected CAGR 5.05% (FY24-28).
• Domestic Pharmaceutical Market: Ranked 3rd globally by production volume.

Planned Strategic Initiatives #

• API Business:
  • Maintain leadership in Loratadine and Montelukast; enhance market share in other molecules.
  • Commercialize and scale up new products.
  • Develop and launch APIs in various therapeutic areas.
  • Future R&D pipeline includes specific molecules.
  • Explore entry into the anti-cancer API segment.
  • Expand global footprint through DMF/ASMF filings.
• Medical Devices (Home Diagnostics):
  • Strengthen backward integration for Glucometers and Blood Pressure Monitors.
  • Expand product portfolio with planned manufacturing of Nebulizers and orthopedic products.

Financial Analysis Report: Morepen Laboratories Limited - FY 2023-24 #

Auditor’s Opinion and Qualifications #

Standalone Financial Statements #

The Statutory Auditors, M/s. S. P. Babuta & Associates, issued an unmodified opinion, stating that the standalone financial statements give a true and fair view of the state of affairs as at March 31, 2024, and of the profit, total comprehensive income, changes in equity, and cash flows for the year then ended, in conformity with Ind AS and other accounting principles generally accepted in India.

• Key Audit Matter (Standalone): The auditors highlighted the Scheme of Arrangement & Compromise related to the allotment of equity shares to Fixed Deposit (FD) holders and the subsequent NCLT/NCLAT orders regarding the cancellation of certain shares and payment of outstanding dues. This matter involves the ongoing process of paying FD dues for shares received for cancellation. The auditor’s response involved collecting and analyzing relevant legal orders and communications.

Consolidated Financial Statements #

The Statutory Auditors, M/s. S. P. Babuta & Associates, issued an unmodified opinion, stating that the consolidated financial statements give a true and fair view of the consolidated state of affairs, profit, total comprehensive income, changes in equity, and cash flows.

• Key Audit Matter (Consolidated): Similar to the standalone report, the auditors highlighted the Scheme of Arrangement involving FD holders and share cancellations as a Key Audit Matter.
• Other Matters (Consolidated): The auditors did not audit the financial statements of subsidiaries Morepen Devices Limited, Morepen Rx Limited, Total Care Ltd., and Morepen Bio Inc. These were audited by other auditors, and the opinion on the consolidated financial statements, concerning these subsidiaries, is based solely on the reports of these other auditors. These subsidiaries represent total assets of ₹6032.60 lakhs and total revenue of ₹8970.56 lakhs for FY24.

No explicit qualifications were made in the auditor’s opinion for either standalone or consolidated statements.

Key Accounting Policies #

The financial statements (standalone and consolidated) are prepared in accordance with Indian Accounting Standards (Ind AS). Key accounting policies include:

• Basis of Preparation: Historical cost convention (unless otherwise indicated), functional currency is Indian Rupee (INR). The operating cycle is determined as 12 months.
• Property, Plant and Equipment (PPE): Stated at cost less accumulated depreciation and impairment. Freehold land is carried at cost. Capital work-in-progress is carried at cost.
• Intangible Assets: Internally generated R&D (development expenditure meeting capitalization criteria is capitalized, research is expensed). Acquired intangibles are at cost less accumulated amortization and impairment.
• Depreciation/Amortization: Provided on a straight-line basis over useful lives (Schedule II of Companies Act or technical assessment). Intangibles amortized over estimated useful lives.
• Inventories: Valued at the lower of cost (FIFO for raw materials) and net realizable value. Work-in-progress valued at raw material cost up to the stage of completion.
• Foreign Currency Transactions: Recorded at prevailing exchange rates. Monetary assets/liabilities restated at year-end rates. Exchange differences generally recognized in P&L.
• Financial Instruments: Recognized at fair value initially. Subsequent measurement depends on classification (amortized cost, FVTOCI, FVTPL). Investments in subsidiaries measured at cost in standalone financials.
• Impairment of Assets: Financial assets assessed for Expected Credit Losses (ECL). Non-financial assets reviewed for impairment indicators at each reporting date.
• Revenue Recognition: Recognized when economic benefits are probable and measurable, net of GST, returns, and trade discounts. Dividend income recognized when the right to receive is established. Interest income recognized using the Effective Interest Rate (EIR).
• Income Taxes: Current tax and deferred tax. Opted for Section 115BAA of the Income Tax Act, 1961.
• Borrowing Costs: Directly attributable costs capitalized for qualifying assets; others expensed.
• Provisions, Contingent Liabilities & Assets: Provisions recognized for present obligations from past events where outflow is probable and estimable. Contingent liabilities disclosed.
• Employee Benefits: Short-term benefits recognized as an expense. Defined contribution plans (Provident Fund) expensed as incurred. Defined benefit plans (Gratuity) and long-term benefits (Leave Encashment) accounted for based on actuarial valuations.
• Segment Reporting: Operates in a single reportable business segment: ‘Pharmaceuticals’.
• Basis of Consolidation: Consolidated financial statements include the parent company and its five subsidiaries.

Changes in Accounting Policies #

The report states, “Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.” The CMD & CFO certificate also mentions they have indicated significant changes in accounting policies to the auditors, if any. However, the provided text does not detail any specific changes in accounting policies during FY 2023-24.