Aarti Pharmalabs Ltd Management Discussions

ECONOMIC REVIEW

Global Economy

The global economy is facing headwinds namely, ongoing geopolitical tensions, supply chain bottlenecks and persistent inflationary pressure, which have led to slower economic growth and stringent monetary policies by several central banks. Global growth is estimated to decline slightly from 3.4% in 2022 to 2.8% in 2023 and 3% in 2024. Advanced economies grew 2.7% in 2022 and are expected to grow 1.3% in 2023 and 1.4% in 2024. Emerging market and developing economies which grew 4% in 2022 are expected to continue to grow at 3.9% in 2023 and 4.2% in 2024. About 84% countries are expected to have lower headline (consumer price index) inflation in 2023 than in 2022. Global inflation is set to fall from 8.7% in 2022 to 7% in 2023 and 4.9% in 2024 wherein the impact of tight monetary controls by central banks across the globe, will begin to show benefits.

(Source: World Economic Outlook-IMF, April 2023)

Indian Economy

The Indian economy has exhibited strong resilience amidst testing times driven by strong domestic consumption and fixed investment. According to the Provisional estimates of National Income 2022-23, the economy is expected to grow at 7.2% in FY 2022-23. Exports of goods and services accounted for 23.5% of GDP, the highest level since FY 2014-15. Private consumption hit the highest level since FY 2006-07 at 58.5% and gross fixed capital information, reflecting a sustained increase, is at the highest point since FY 2013-14 at 34% of GDP. Apart from high services exports, the year saw moderation in oil prices and fall in import-intensive consumption demand. All these factors have aided the expectations of fall in current account deficit in FY 2022-23 and FY 2023-24, further aided by robust revenue collections.

According to the World Bank, the Indian GDP growth is estimated at 6.9% in FY 2022-23 and 6.6% in FY 2023-24 with India expected to become the fastest growing economy in FY 2023-24. The inflation trajectory in India is likely be determined by extreme weather conditions like heatwaves and the possibility of an El Nino year, volatility in international commodity prices and pass-through of input costs to output prices.

(Source: NSO, World Bank, PIB)

GLOBAL PHARMACEUTICAL INDUSTRY

The global pharmaceutical industry underwent a sea change during the pandemic as it strived to fight against the virus with vaccine creation, production and distribution. The companies adapted to new ways of working and interacting with patients and healthcare providers as digital transformation gained centre-stage. Telemedicine, remote patient monitoring, and digital health solutions have since then, become more prevalent in the industry. While doing so, the industry was grappled with multiple challenges, including increasing healthcare costs, heightened competition from generics and biosimilars, and several regulatory changes. Supply chains were disrupted and clinical trials and drug development timelines faced delays. Additionally, the industry faced growing scrutiny over issues such as drug pricing, intellectual property rights, and the ethics of clinical research. Overall, the global pharmaceutical industry exhibited strong resilience and adaptability during the fourth year of the pandemic, despite the many challenges it has faced. The industrys response to the pandemic has underscored its critical role in safeguarding public health and promoting global wellbeing.

In 2022, the global medicine market was valued at US$ 1.5 trillion, using invoice price levels, as compared to US$ 1.42 trillion in 2021. The market is expected to grow at 3-6% CAGR through 2027 reaching US$1.9 trillion, driven by Asia-Pacific, India, Latin America, Africa/Middle East, and China, all of which are expected to exceed global volume growth.

The global pharmaceutical market is segmented into developed and pharmerging markets. The developed market group, with 70% market share, mainly comprises of the United States, the top five European markets (namely Germany, France, Italy, United Kingdom, and Spain), Japan, Canada, and Australia. The pharmerging group mainly comprises of China, India, Brazil, Russia, and South Africa, where consumption of medications is relatively low but steadily increasing.

INDIAN PHARMACEUTICAL INDUSTRY

India, the largest global provider of generic drugs, ranks third in pharmaceutical production by volume. Generic drugs, over-the-counter medications, bulk drugs, vaccines, contract research & manufacturing, biosimilars, and biologics are some of the major segments of the Indian pharmaceutical industry. India operates over 250 facilities approved by the US Food and Drug Administration (USFDA) and UK Medicines and Healthcare products Regulatory Agency (UKMHRA) and provides generic pharmaceuticals at affordable prices to millions of people worldwide.

With the largest number of (USFDA) compliant pharmaceutical manufacturing facilities outside the US, the sector supplies over 50% of the global demand for various vaccines, 40% of the generic demand for US and 25% of all medicines for UK. The Indian pharmaceutical industry has 500+ API producers, constituting ~8% of the API market globally. India is the largest producer of vaccines worldwide, accounting for ~60% of the total vaccines, as of 2021.

Indias drug and pharmaceutical products exports grew by 125% from 90,415 Crores in FY 2013-14 to 2,04,110 Crores in FY 2022-23, constituting 5.71% of the total exports from India. Indian pharmaceutical industry exports to around 200 countries/territories with the top 5 destinations being the USA, Belgium, South Africa, UK, and Brazil. (https://www. thehansindia.com/business/indias-pharma-exports-grow-over-125-in-last-9-years-802776).

According to the Indian Economic Survey 2021, the domestic pharmaceutical market is expected to grow 3x in the next decade. Indias domestic pharmaceutical market stood at US$ 42 billion in 2021. The market is expected to be valued at US$ 65 billion by 2024 and at US$ 120-130 billion by 2030. In terms of spending on healthcare, India spent 2.1% of its GDP on healthcare in FY 2022-23, against 1.6% in FY 2020-21. (Source: Economic Survey Complete PDF.pdf) The government has set a target of increasing this to 2.5% by 2025 given this value being relatively low compared to other developed countries.

In addition to strong government support, rising population, increasing life expectancy, and increasing burden of chronic diseases are driving demand for pharmaceutical products. Indias highly skilled workforce, with a strong scientific and technical knowledge base, has helped the country establish itself as a major player in the global pharmaceutical industry. Indian companies are known for producing high-quality generic drugs at competitive prices, giving them a competitive advantage in the global market.

The government raised the allocation on healthcare expenditure by 13% in the Union Budget 2022-23, allocating 3,201 Crores for research and 83,000 Crores for the Ministry of Health and Family Welfare. The National Health Mission has been allocated with 37,000 Crores and the ministry of AYUSH 3,050 Crores. Main highlights of policy changes for healthcare sector include pharma innovation through Centre of Excellence (COEs), collaborative research and innovation, multi-disciplinary courses for upskilling, 157 new nursing colleges and mission sickle cell anemia elimination.

India is the largest supplier of generic medicines globally, accounting for 20% of the global export volume, according to a report by the World Health Organization (WHO). The success of Indian pharmaceutical companies in developing and manufacturing complex generic drugs such as biosimilars and oncology drugs, is due to high level of expertise and technology advancement.

KEY SEGMENTS AND GROWTH DRIVERS

Active Pharmaceutical Ingredients (APIs)

An active pharmaceutical ingredient (API) is a part of any drug that produces its effects. Some drugs, such as combination therapies, have multiple active ingredients to treat different symptoms or act in different ways. They are produced using highly technological industrial processes, both during the research and development and the commercial production phase. Key Starting Material (KSM) are intermediates used as the building blocks of the drug industry. According to Coherent Market Insights, the Indian API market is estimated to be valued at US$20 billion in 2021 and is expected to exhibit a CAGR of 8.3% during 2021-2028.

The COVID-19 pandemic proved to be a boon for the Indian API market as on the one hand supplies from China were severely impacted, while on the other the Indian government initiatives to increase the production of APIs aided in restoring supplies of APIs. The government launched several schemes to boost the domestic production of APIs like production-linked incentives (PLIs) to companies that invest in domestic manufacturing of critical KSMs, which require APIs, for drugs used to treat diabetes, tuberculosis, steroids, and antibiotics. Several other factors are also aiding market growth like the increasing prevalence of infectious, genetic, cardiovascular, and other chronic disorders, the rising geriatric population, expanding adoption of biologics and biosimilars, and the rising production of generic drugs in the country. For the APIs being indigenously manufactured, bulk drug parks and the PLI schemes, have enabled companies to expand operations and increase growth prospects. India is expected to become self-sufficient in APIs in the near future and the backward integration of APIs will enable the sector growth.

Source: India Active Pharmaceutical Ingredients (API) Market Size & Share Analysis - Industry Research Report - Growth Trends (mordorintelligence.com);

Contract Research and Manufacturing Services (CRAMS)

The Contract Research and Manufacturing Services industry (CRAMS) is expected to reach US$ 20 billion by 2024 and is expected to grow at a CAGR of 12%. CRAMS in India has two main segments, the major segment being Contract Manufacturing Services which accounts for 60%, while the Contract Research Services accounting for the rest. The industry growth is hindered by lack of unified authority as enforcement of law leading to differences from state to state and also the lack of medical professionals doing research on diseases and its sub sector.

Biosimilars

Biosimilars are biotherapeutic products similar in terms of quality, safety, and efficacy to an already licensed reference biotherapeutic product. Biologics are used for treatment of chronic diseases such as cancer and autoimmune diseases. Development of biologics is a costly and time-consuming process while biosimilar development saves time and resources by avoiding unnecessary duplication of clinical trials. Due to the increase in patent expiries for biologic drugs, there exists a valuable opportunity for the development of more productive biopharmaceutical industry in India. The biosimilar guidelines of India are in regulations with the EMA and WHO. India pharmaceutical companies are enhancing their manufacturing skills, and for clinical trials, they are working together with pharmaceutical companies worldwide. Also, due to the cost advantage of lower manufacturing cost, India has more benefit than its contesting nations which will further create a favourable scenario for the biopharmaceutical market. The Indian biosimilar market includes product segments such as insulin, G-CSF, vaccines, erythropoietin, interferon-alpha, hormones, fibrinolytic and plasma proteins.

Formulations

Driven by a high demand in one of Indias biggest export markets, the US market, along with a depreciating rupee, the exports of formulations by domestic pharmaceutical companies grew 12% during FY 2022-23. The export of formulations by domestic pharmaceutical companies is likely to witness robust growth in the coming years led by lower price erosion of existing products, higher number of new product launches in the US and steady demand from other countries. To aid exports growth, large players are focusing on developing higher margin complex/specialty drugs and introducing new low competition generics which have gone off-patent only recently.

Source: Pharma Formulations Exports Rise 12% In FY 2022-23 : Ahmedabad News - Times of India (indiatimes.com)

COMPANY OVERVIEW

Established in 2019, Aarti Pharmalabs Limited (APL) is an established, internationally recognised manufacturer of generic Active Pharmaceutical Ingredients (API), pharmaceutical intermediates, CDMO/CMO service provider for development and manufacturing of RSMs, Intermediates and Drug substances for NCEs, largest manufacturer for Xanthine derivatives (caffeine & other) & Allied products situated in India. Over the past two decades, enabled by cutting-edge R&D and manufacturing capabilities APL has evolved as a reliable partner of choice for Innovators and leading pharmaceutical companies focusing on regulated markets across the globe.

The Company specialises in manufacturing of APIs, advance intermediates, and xanthine derivatives.

The company offers CDMO and CMO services for drug substance/NCE development and manufacturing for innovative pharmaceutical and biotech firms with a focus on the Ph-I/II/III, launch, and commercial phases. The Company has dedicated facilities for the production of HPAPIs, corticosteroids, cytotoxic medicines, and oncology products.

The Company has six manufacturing units meeting globally accepted standards, three of which are USFDA approved. Currently, the Company manufactures over 150 products comprising of 40 US Drug Master Files (USDMF) and 20 Certificates of Suitability (CEP). It also has three dedicated R&D facilities which have aided in patenting 52+ files, serving the needs of 500+ customers globally.

The products are exported to key regulated markets globally, namely the USA, various nations in the European Union and Japan. With a view to build a sustainable future, the Company integrates process chemistry proficiency (recipe focus) with scale-up engineering proficiency (asset utilisation). The Company has its own backward-integrated intermediates for most of the APIs that are manufactured.

Products and Services

Active Pharmaceutical Ingredient (API) & Advance Intermediates The Companys API manufacturing facility in Maharashtra has general, corticosteroid and oncology API production blocks with USFDA and EUGMP accreditation. The Company has dedicated facilities for the production of HPAPIs, corticosteroids, cytotoxic medicines, and oncology products. The Company has established dominance in the segment owing to its strong backward integration strategy for key raw materials for most of its products. The Company manufactures APIs for a wide range of therapeutic purposes like anti-hypertensive, anti-asthmatic, anti-cancer, Central Nervous System (CNS) agents, skincare, decongestant, anti-thalassaemic, analgesic and ophthalmologic. The Company also manufactures intermediates for most of its APIs which are exported to regulated markets across geographies including the US, several countries in the European Union and Japan. These exports contribute ~53% of total exports. The Company enjoys a distinct advantage over competition in having dedicated US, EU and Japan approvals. The Company has emerged as one of the preferred partners in the regulated markets led by robust regulatory documentation and IPR support for global markets with 20 CEPs and 40 USDMFs. The Company has commercialized 50 APIs since the year 2000, 10 new APIs are under development and ~100 generic intermediates are available at R&D, pilot and commercial scales. The Company provides complete CMC documentation support.

In 2007, the Company started a large manufacturing site at Vapi focusing on advance intermediates, RSM/KSM for APIss. Over the years, the Company has leading position in offering USFDA approved, regulatory compliant, cost competitive and right quality intermediate manufacturing hub for many global players, including innovators and large pharmaceutical companies.

CDMO/CMO services

The Company is one of the leading small molecules Contract Development and Manufacturing Organisation (CDMO/ CMO) in India offering services for drug substance projects including NCE, API, RSM, and Intermediates, to global innovator pharmaceuticals and biotech companies. The Company provides end-to-end services for small molecules NCE drug development programmes from lab scale to pilot and manufacturing scales focusing on the clinical phases (Ph-I/II/III), launch and commercial phase projects. The Company is involved in the development and manufacturing of RSMs, KSMs for NCEs. The Company focuses on the creation of customised processes, their scaling up, and efficient manufacturing of API intermediates. CRAMS activity is focussed on APIs and intermediates. By signing confidentiality agreements with customers, the Company imposes stringent intellectual property protection on the services offered. This helps in providing the customers with a solidanddependableplatformthatwillenablethemtoexpedite their API development projects effectively. The Company has dedicated R&D and pilot facilities focusing on CDMO. Till date, the Company has successfully commercialised 16 products and 12 products are under development by innovators.

With dedicated scientific and project teams, rapid development, superior manufacturing capabilities and strong cultural ethos, the Company acts as an extension to the customers laboratories. The Company aims to be the ‘preferred CDMO/CMO partner with the ability to successfully bring the molecules to market faster. The Company is currently working with 14 innovators and big pharma companies.

Given the lucrative growth prospects, the Company is building a universal capacity for API intermediates which will largely be targeted at newer opportunities.

Xanthine Derivatives & Allied

The Company is a reputed manufacturer of distinct xanthine derivatives including, caffeine, theophylline anhydrous, aminophylline, etophylline, and theophylline that find application in beverages, nutraceuticals, and pharmaceutical industries. The segment has two dedicated manufacturing facilities with star certifications for manufacturing and testing, including Star Kosher, Hazard Analysis Critical Control Point (HACCP), Sedex SMETA-4PillarP, FSSC-22000 (GFSI), and GMP.

The Company specialises in the manufacturing of caffeine led by its province manufacturing facilities. It is amongst the biggest caffeine manufacturers globally with annual capacities ranging to up to 5,000+ Metric Tonnes (MT). Its superior product quality, capacities and warehouse with a global supply chain, make it the preferred supplier of caffeine. The Company enjoys 15-20% global market share. Being the sole non-Chinese integrated manufacturer, the Company is benefitting immensely from China plus one strategy adopted globally by various countries.

With a wide range of product packaging solutions like Jumbo bags, carton boxes, fibre drums, etc, the Company also handles the product packaging requirements of its customers.

The Company is proficient in producing a variety of compounds based on sulphur and sulphonation. These include sulphuric acid, sulphur trioxide (SO3), oil, dimethyl sulphate, diethyl sulphate, sodium vinyl sulfonate and dimethyl urea. Dimethyl urea is a crucial basic ingredient for xanthine derivatives These chemicals serve as alkylating agents in the production of dyes, medicines, and perfumes as well as a solvent for the extraction of aromatic hydrocarbons. Sodium vinyl sulphonate is used as a wetting agent, dispersion, and anti-static in polymerisation and surfactant. The production facility for these agents is ISO -9901, 14001, and 45001 certified.

Financial Performance

The Scheme of Arrangement for the demerger of Pharma Business Undertaking from Aarti Industries Limited into its wholly owned subsidiary Aarti Pharmalabs Limited was approved by NCLT on September 21, 2022 effective from appointed date July 1, 2021. Hence, financial results for the year ended March 31, 2022 are reported with only nine months as declared by Aarti Industries limited for the period from July 1, 2021 to March 31, 2022. For this reason, the financial results for the year ended March 31, 2023 are not comparable with previous year ended March 31, 2022.

In Crores	FY 2022-23	FY 2021-22 (9 months)
Total income	1,947.6	1,202.5
COGS	1,169.8	725.1
Employee costs	129.7	85.2
Other expenses	303.7	182.7
EBITDA	344.4	209.5
EBITDA margin	17.7%	17.4%
Depreciation	62.5	42.1
EBIT	281.8	167.3
EBIT margin	14.5%	13.9%
Finance costs	21.1	12.0
PBT	260.8	155.4
Tax	67.3	32.0
PAT	193.5	123.4
PAT margin	9.9%	10.3%

The Company has been assigned rating, Crisil A+/Stable, for its working capital limits from banks.

Business Outlook

The Company is progressing well and achieving greater heights in the pharmaceuticals industry. The Company is committed to investing in its future business growth. The strategies adopted for the same include:

Increase in capacities of existing products and adding new 40+ Value added products every year

Invest in Atali project, to add 400+ KL reactor volume in Phase 1 and targets of adding similar capacities in future. The construction work has commenced and commercialization is expected in FY25.

Increase presence in regulated markets

Develop and explore more opportunities for innovator for APIs and intermediates In FY24, the Company is looking to ramp up new expended blocks at unit IV, Tarapur and xanthine derivatives. EBITDA growth is expected at 10-15%. From FY25, the blocks at Atali will commission in a phased manner. Ramp up in Atali project will bring in operating leverages in FY26 and beyond. The EBITDA growth is expected to come in at 12-17% over the coming 2-3 yers.

Knowledge management

APLs Intellectual Property (IP) framework comprises stringent terms for access control, information sharing and authorised disclosure. The framework is designed to ensure complete confidentiality of its processes and knowledge while meeting ISO 27001:2013 requirements.

The Knowledge Management team is equipped with databases and skills to effectively undertake chemical searches in the perspective of Freedom-to-Operate/Non-Infringed Process development. This team is also entrusted with the responsibilities of efficiently implementing and monitoring accreditation requirements of integrity, confidentiality and availability).

Research and Development (R&D)

The Company has been able to transform itself from a vendor to a preferred partner, led by deep knowledge, rich experience, strong technical prowess, and ample resources. The Company has expertise in specific chemistry, strong analytical capabilities, state-of-the-art synthesis and process development laboratories, robust process chemistry infrastructure and a dedicated team of scientists. It has two technically advanced R&D facilities along with pilot plants are located at Gujarats Dombivli and Vapi, consistently striving for:

Route Scouting and Design

New Product/process Development

Process Optimization and Scale-up

Life Cycle Technology Management

The Company initiates every project in R&D through a programme management system to enable an efficient flow from new enquiry to commercialisation. It enables the deployment of suitable resources for various activities, ensuring a methodical execution and its evaluation. Unexpected contingencies are provisioned for, while any deviations are anticipated and mitigated on time. The process also helps to generate and communicate the expected timelines of the project to the stakeholders effectively.

Risks and Mitigation

The Company has in place a robust Risk Management framework for effective monitoring, mapping and mitigating the various risks to business operations. The Board of Directors has constituted a Risk Management Committee responsible for managing various organisational risks, and devising and executing appropriate mitigation plans to address such risks. The Committee monitors changes in both internal and external environment to keep a check on emergence of a new threat /risk.

Regulatory Risk: The Company is subject to several rules and regulations across global markets. Non-compliance or misinterpretation may lead to inadequate observance. The Company also faces the risk of non-compliance to newly introduced regulations or modification in existing ones.

Mitigation: The Companys robust internal control system has in place various policies and review mechanisms to ensure strict adherence to all applicable rules and regulations.

R&D Risk: It is imperative for the Company to innovate molecules/formulations in keeping with changing times and changes in science and technology. Inadequate or untimely R&D may impact profitability.

Mitigation: The Company gives due importance to investment in R&D and strives to stay ahead of the curve. It has technologically advance R&D units and its focussed team is constantly endeavouring to innovate novel molecules/ formulations.

Competition risk: Marked step up in competitive intensity given the lucrative growth prospects of the industry poses a threat to revenue and earnings.

Mitigation: The Company has created a moat for itself with rich employee experience, strong brand equity, advanced R&D, strict adherence to compliance, strong connect with all stakeholders, backward integration and a skilled management team. The Companys strong focus on R&D enables it to develop differentiated products enabling it to keep competition at bay.

Raw Material Risk: The Company faces the risk of unavailability or limited availability of raw materials and fluctuation in prices.

Mitigation: The Companys long-standing relationships with its suppliers enables it to secure raw material supplies at competitive prices. The Company follows a RM-plus pricing mechanism eliminating the risk on margin pressure.

Quality Risk: Non-compliance with GxP (Good Laboratory Practices, Good Manufacturing Practices, and similar standards) by APL, its contractors, or suppliers during any phase of product manufacturing may result in substandard product quality and present substantial health risks to our customers. Furthermore, such non-compliance can impede our operations due to regulatory penalties and sanctions.

Mitigation: Each manufacturing site has a dedicated group of quality experts who are responsible for overseeing and supporting the achievement of high-quality performance. Their main objective is to ensure that all sites are audit-ready at all times and establish quality system by doing "RIGHT AT FIRST TIME". We leverage information technology to digitize and enhance our quality assurance and quality control processes. This enables us to streamline and optimize these crucial procedures. As part of our commitment to continuous improvement, we maintain a consistent quality improvement and training program. This program specifically addresses historical quality concerns, allowing us to proactively address and prevent issues. When non-conformities are identified, we conduct thorough investigations and implement robust Corrective and Preventive Action (CAPA) plans. This ensures that necessary actions are taken to rectify the situation and prevent its recurrence in the future.

Health, Safety & Environment Risk: Ensuring safety at all workplaces is of utmost importance, not only as a top priority but also as a mandatory requirement set by regulations. Incidents related to Health, Safety, and Environment (HSE) present significant risks to regulatory compliance, reputation, and business continuity, affecting the long-term sustainability of the organization. APL is committed to minimizing practices that have a negative impact on the environment and the well-being of individuals involved in our supply chain.

Mitigation: As an independent function of corporate HSE, the role is to oversee safety and operational exposures, and to establish standardized corporate Health, Safety and Environment (HSE) guidelines for all our manufacturing sites. Across the organisation, we prioritize compliance with local regulations and adhere to industry-leading safety standards. To proactively identify potential risks, we have implemented an HSE management system, ensuring timely risk identification. To mitigate HSE risks, we employ various programs, such as regular internal audits, external audits following ISO14001 and ISO45001 standards, as well as specialist external audits that focus on specific HSE aspects. We also conduct Hazard Study Checklist (design stage of product life cycle), Hazard Identification and Risk Assessment, as well as HAZOP Studies throughout product life cycle and operation. Additionally, we organize monthly HSE campaigns centered around different priority elements, aiming to raise awareness and promote a safer working environment.

Information Technology

In our organization, information technology plays a vital role, focusing on data privacy, cybersecurity, and data security. As technology continues to transform our sector, it is crucial to address the associated concerns. We recognize the importance of safeguarding data privacy to maintain the confidentiality and integrity of sensitive information. Our cybersecurity measures protect against malicious attacks and unauthorized access, thereby preserving the reputation and operations of our organisation. We prioritize data security, ensuring reliable storage and transmission of critical data, preventing losses, and enabling accurate decision-making. At APL, we have implemented robust procedures, controls, and governance, assigning responsibilities to employees, contractors, customers, vendors, suppliers, and visitors to ensure compliance with our information security management system. Moreover, we are committed to protecting the personal data of our people and stakeholders, taking appropriate measures to secure our operations. We have also developed a comprehensive Business Continuity and Disaster Recovery plan to minimize impacts, ensure rapid recovery, and restore operations.

Quality Assurance

The Company constantly endeavours to improve the Quality of its products and services and surpass customers & relevant stakeholders needs & expectations. The Companys robust quality systems enable it to manufacture and deliver superior quality products complying with high quality standards. In accordance, all the R&D, manufacturing units and quality control labs meet the various safety, quality and efficacy global standards. The Company strives to create value for the customer with proactive approach towards customers future needs & expectations. The Company is committed to upgrade its manufacturing technologies and quality standards to achieve and maintain quality leadership, with trust on eco-friendly processes. The Companys quality management system adheres to "RIGHT THE FIRST TIME" approach in planning and execution of all the process, products and services through a life cycle approach which enables it to improve effectiveness and efficiency. Through constant customer feedback the Company strives to identify and address the opportunities for improvement. The Company recognizes the importance of compliance to various national and international standards and ensures all business processes are strictly compliant. The Company thus has created a motivated team with a world-class competency and continuously provides training to enhance knowledge and skill base.

INTERNAL CONTROLS, SYSTEMS AND ADEQUACY

The Company has devised a robust and adequate internal control framework commensurate with the size, nature of complexity of its business operations. The internal control system enables the Company to safeguard its assets and restrict unauthorised use or disposition. The internal control system ensures that all transactions are authorized, recorded and reported correctly. The internal control system is responsible to ensure all applicable rules and regulations are adhered to. Apart from compliance, the system monitors and controls optimum utilization of resources and high level of efficiency in operations.

The Company has introduced an innovative and novel tool ‘Compliance Management System to deal with regulatory risk. This tool has unique features including, a readily available comprehensive list of applicable laws at any given point of time, user-friendly alerts/escalations, customised reporting and mechanism to deal with timely regulatory updates. The tool enables the Company to ensure robust good governance is practised across all the business locations.

CAUTIONARY STATEMENT

The Company may, from time to time, make additional written and oral forward-looking statements, including statements contained in the Companys filings with Bombay Stock Exchange and National Stock Exchange, and the reports to shareholders. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company. All information contained in this report has been prepared solely by the Company. The Company does not accept any liability whatsoever for any loss, howsoever, arising from any use or reliance on this Annual Report or its contents or otherwise arising in connection therewith.