Divis Laboratories Ltd Management Discussions

1. Economy and Industry Outlook

Global Pharma Industry Outlook & Emerging Trends

In the dynamic pharmaceutical landscape, marked by significant transformations and emerging challenges, the industry is witnessing a surge in growth, innovation, and market expansion. According to IQVIA Inc., the global pharmaceutical market is expected to grow at a CAGR of 6-9%, surpassing previous projections by $400 Billion to reach $2.3 trillion by 2028, excluding COVID-19 products. Over five years, an estimated 350 novel active substances (NAS) are poised to enter the market, driving medicine spending growth, particularly in key areas like oncology, obesity & diabetes, cardiovascular, and neurology. Medicine use has been growing across therapeutic areas propelled by the increasing prevalence of chronic diseases and the escalating demand for specialty medications.

• The glucagon-like peptide 1 agonists (GLP-1 agonists) have begun a dramatic wave of rapid new product uptake in both obesity and diabetes, primarily in the US and other developed markets. While global obesity spending reached nearly $24 Billion in 2023, up from just $3.2 Billion in 2020, diabetes - despite recent slower growth - is expected to be the third-largest therapy area globally reaching $184 Billion by 2028.

• The two leading global therapy areas · oncology and immunology are forecast to grow 14 17% and 2 5% CAGR, respectively, through 2028. Oncology is projected to add 100 new treatments over five years, contributing to an increase in spending of $224 Billion to a total of more than $440 Billion in 2028 and facing limiting new losses of exclusivity.

• The impending expiration of brand exclusivity rights (LOE) is anticipated to more than double to $192 Billion in five years, from 2024 to 2028, with $133Billion from small molecules, creating pivotal revenue opportunities for generic manufacturers.

In addition to these trends, established markets with larger economies are expected to experience slower growth rates. On the contrary, emerging growth markets in Eastern Europe, Asia, and Latin America are anticipated to see growth in both volume and spending.

The Asia-Pacific region, India, Latin America, Africa, the

Middle East, and China are anticipated to experience the most significant growth in medicine consumption, primarily on account of population expansion and enhanced accessibility.

Global API and CDMO Industry

The global Active Pharmaceutical Ingredients (API) market is experiencing a steady rise with the growing demand for pharmaceutical drugs worldwide. As stated in the Grand View Research analysis, the global API market was estimated at $237.47 Billion in 2023 and is growing at a CAGR of 5.75% from 2024 to 2030. The API market is divided into innovative and generic APIs. The innovative API market was estimated at $122 Billion in 2020 and is projected to reach $209.5 Billion by 2030, growing at a CAGR of 5.8% between 2022 and 2030. Additionally, the global generic

API market estimated at $65.66 Billion in 2020, is projected to reach $114.6 Billion by 2030, growing at a CAGR of 6.2% from 2022 to 2030. This growth is primarily attributed to the rising need for specialty medicines and the widespread adoption of generic drugs.

The Grand View Research also reported that the global CDMO market size was valued at $100.4 Billion in 2023 and is projected to grow at a CAGR of 7.4% from 2024 to 2030, driven by factors such as the rising prevalence of chronic diseases, demand for specialised treatments, increasing consumption of biopharmaceuticals, and the rising need for advanced manufacturing technologies.

Indian Pharma Industry

The Indian pharmaceutical industry continues to demonstrate a positive outlook characterised by a deeper emphasis on quality manufacturing, drug affordability, and the adoption of innovation and technology. As of the latest reporting period, the industry holds a third position globally in the pharmaceutical production by volume, reflecting a consistent growth trajectory with a CAGR of 9.43% over the past nine years. The domestic pharmaceutical market was reported to hold an estimated total value $49.78 Billion in FY23 as perIndia Brand Equity Foundation (IBEF). According to recent projections from an EY FICCI report, the pharmaceutical market in India is anticipated to reach a value of $130 Billion by 2030, reflecting significant growth prospects and evolving market dynamics.

Similarly, medicine spending in India is projected to grow 9-12% through 2028, positioning India to become one of the top 10 countries in terms of medicine spending. As per PharmExcil, the industry growth was further driven by Indias pharmaceutical exports, which rose by 9.34% to $25.04 Billion in the initial 11 months of FY24.

Overall, the Indian pharmaceutical industry remains poised for sustained growth, driven by a combination of industry innovation, government support, and evolving market dynamics.

According to the Grand View Research analysis, the Indian API market is estimated to be $18.29 Billion in 2023 and is expected to grow further at a CAGR of 7.7% from 2024 to 2030. This growth reflects the critical role that APIs play in the Indian pharmaceutical sector, which accounts for over half of the countrys pharmaceutical exports. With over 3,000 pharmaceutical companies and a network of more than 10,500 manufacturing facilities, the country hosts 500 Active Pharmaceutical Ingredient (API) manufacturers, accounting for approximately 8% of the global API market.

Furthermore, the Indian nutraceuticals market size was estimated at $26.87 Billion in 2023 and is projected to grow at a CAGR of 13.5% from 2024 to 2030. Key growth drivers are changing consumer lifestyles, increasing health consciousness, and increasing health-related incidences.

Company Overview

Divis Laboratories Limited is a prominent manufacturer and supplier of high-quality Active Pharma Ingredients (APIs) and Intermediates for global innovator companies. We have established ourselves as a reliable partner to several of the worlds leading pharma companies, including 12 of the top 20 Big Pharma.

With a presence in over 100 countries, our Generic APIs division has been instrumental in our overall success and positioned us as the worlds largest API manufacturer in 10 of the 30 generic APIs we manufacture. Our product portfolio includes a diverse range of APIs used in the manufacture of drugs for therapeutic areas such as cardiovascular, anti-inflammatory, anti-cancer, and central nervous system drugs.

Our Nutraceutical Facility located at Visakhapatnam is a global, technology-driven manufacturer of high-quality Carotenoid, Lutein and vitamin ingredients used in the food, beverages, dietary supplements, pet food and feed industries. Our carotenoid and vitamin product forms are designed specifically for dietary supplements, while others are suitable for the fortification of a broad range of food and beverage applications.

Divis is headquartered in Hyderabad, India, and operates two manufacturing facilities equipped with state-of-the-art utilities, environment management, and safety systems. These facilities have been inspected multiple times by USFDA, EU GMP (UK, Slovenia, German, Irish authorities), HEALTH CANADA, TGA, ANVISA, COFEPRIS, PMDA and MFDS health authorities.

Furthermore, with ongoing infrastructural developments, the construction of our new third manufacturing unit at Kakinada is under progress.

We have been consistently recognised for our excellence in quality, research and development, and occupational health and safety.

In line with our commitment to sustainability, we continuously strive to expand our production capacity while maintaining compliance with environmental and safety regulations, as well as upholding our social responsibility initiatives.

2.1 Manufacturing Facilities

The Company operates from two manufacturing facilities:

• Unit-I, located at village Lingojigudem in YadadriBhuvanagiri District near Hyderabad comprises:

the first manufacturing facility operating from the year 1995 the DC-SEZ Unit operating from the year 2020

• Unit-II, located at village Chippada, Bheemunipatnam Mandal, Visakhapatnam District, Andhra Pradesh State comprises: an Export Oriented Unit operating from the year 2003

an SEZ Unit operating from the year 2006

DSN-SEZ Unit operating from the year 2011 the DCV-SEZ Unit operating from the year 2020 All these Units have been adding production capacities and utility infrastructure and are upgraded and modernised from time to time.

2.2 New Manufacturing Facilities

The Company is setting up a new manufacturing facility (Unit-3) at Ontimamidi Village (Kona), Thondangi Mandal, Kakinada District, Andhra Pradesh in two phases. Setting up of Phase-1 of the facility has been commenced in April 2023 and expected to commence commercial operations in FY 2024-25. The estimated capital outlay for Phase-1 of this facility is about H1,200 crores to H1,500 crores..

2.3 Research and Development Centres

The Company has Research Centres called as Divis Research Centre (DRC) at Sanath Nagar, Hyderabad and

Process Development & Support Centres (PDSCs) at the existing two manufacturing facilities at Hyderabad and at Visakhapatnam. These centres are involved in development of processes for both new compounds and improvement of processes for compounds on the market.

PDSCs work on process development and scale up from gram scale further through various stages of development, process optimisation, impurity profile, pilot studies, pre-validation batches, validation of process and transfer of technology to Plant. PDSCs also review improvement of processes and give process support to the Plants from time to time.

2.4 Subsidiaries

The Company has two subsidiaries M/s. Divis Laboratories (USA) Inc., at New Jersey in the United States of America and M/s. Divis Laboratories Europe AG at Basel in Switzerland for marketing its nutraceutical products and to provide a greater reach to customers within these regions.

3. Internal Control systems

The Company has an adequate system of internal controls commensurate with the nature, size and complexity of its manufacturing, finance and marketing operations, including controls over financial reporting.

The Company has adopted well laid down processes and procedures, encapsulating all its operations, financial and compliance functions, for efficient and orderly conduct of its business, adherence to the Companys policies, safeguarding its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information and compliance with applicable statutes and rules and regulations thereunder.

Appropriate review and control mechanisms are in place for ensuring the internal control systems are operating effectively. The internal control system is supported by qualified personnel and a continuous programme of internal audit. The prime objective of such audits is to test the adequacy and effectiveness of all internal control systems laid down by the Management and to suggest improvements, robustness of internal processes, policies and accounting procedures, compliance with applicable laws and regulations. For this purpose, a yearly audit plan will be made with the approval of the Audit Committee of the Board of Directors.

The internal audit function reports directly to the Audit Committee, maintaining independence and objectivity in its function. Based on the reports of internal audit function, respective process owners carryout corrective action in their areas. The Audit Committee reviews the significant audit observations and status of rectification measures thereon regularly.

The Audit Committee also reviews internal controls over financial reporting and ascertains with the statutory auditors about its adequacy and effective operation.

Based on Committees review and report of the statutory auditors, the internal financial controls during the year are adequate and operating effectively. The Company also encourages and recognises improvements in work practices. The Management duly considers and takes appropriate action on the recommendations made by the internal auditors, statutory auditors, and the Audit Committee.

4. Risk Management

Divis lays emphasis on risk management and has an enterprise-wide approach to risk management, that emphasises on identifying and managing key operational and strategic risks with a dynamic business continuity plan. The Company strives to identify opportunities that enhance organisational values while managing or mitigating risks that can adversely impact its future performance through:

• Integrated process for identification, assessment and reporting

• Decentralised management of specific opportunities and risks

• Aggregation at corporate level monitored by the Risk Management Committee with the overall direction and control by the Board The Company continues its initiatives aimed at assessment and avoidance or minimisation of various risks affecting its business and towards cost control and efficiency across its businesses and functions, taking appropriate measures and reviewing them from time to time. The companys risk management and control procedures involve prioritisation and continuous assessment of these risks and devise appropriate controls, evaluating and reviewing the control mechanism and redesigning from time to time in the light of its effectiveness.

4.1 Global Markets

Divis is engaged in manufacturing of generic APIs, custom synthesis of active ingredients for innovator companies, other specialty chemicals and nutraceuticals. The Company is very selective in its product portfolio with a focus on export markets within the domain of its capabilities. As the Company has significant exposure to export markets, will have an impact of change in global economy or changing dynamics in the supply chain of its products in the global markets besides any protective actions by governments of recipient countries.

4.2 Competition

In order to stay competitive vis-?-vis its peers in Europe and the USA, the Company lays great stress on leveraging its inherent skills and strengths in chemistry by building strong customer relationships supported by cost competitive and fast delivery structure. However, competition is inherent in the business of the Company as there are constant efforts in process innovation and cost competitiveness. Divis continues to work towards optimising its processes and upgrading its plant capacities and capabilities at its multi-purpose manufacturing facilities to stay competitive and compliant to regulations; and is also creating additional capacities addressing the anticipated or increasing business opportunities. This would enable the Company minimise risks/ threats and avail the opportunities that emerge for business growth.

4.3 Regulatory and Quality Compliances

The Company devotes significant importance to the regulatory compliances as it accesses advanced markets like Europe and the USA for a major part of its business. Risks relating to regulatory compliances with such markets are inherent to the Companys business. Divis has put in place appropriate systems, processes, operations, and procedures to monitor and ensure consistent practice for the evolving compliance regime for market access to the recipient countries of its products and specifications. The chemists and staff are periodically retrained so that they are fully aware of the latest regulations, quality testing, standard operating procedures, and norms. Divis has invested in extensive training to incorporate the cGMP updates into its operating systems. The Company constantly reviews its policies and procedures to adhere conformity of the various global and domestic regulations for its manufacturing facilities or statutory compliances.

4.4 Patent Compliance

From the inception of its manufacturing operations, the Company has its stated policy of conforming to intellectual property rights (IPR) and does not violate patents. The Company manufactures either patent-expired generics or undertakes custom synthesis of compounds for the innovator MNC companies. Divis continually reviews patent compliance in its process development of active ingredients and has a monitoring mechanism to validate non-infringement of the processes developed.

4.5 Human Resources

Divis always considers employees as an integral part of its operations and has put in place appropriate compensation plans, feedback processes, continuing training and upgradation of skills in their functional areas. Employee relations are affable and harmonious with safe and healthy working environment and all-round contribution and participation in the growth.

4.6 Commercial and Financial Risks

With predominance of revenue from export of goods and services, the Company is exposed to a wide spectrum of risks relating to markets, legal disputes relating to contracts, various statutory compliances, credit from suppliers or to customers or from banks/ lenders, interest rates, liquidity as well as foreign exchange rate volatility, continuity in supply of raw materials and prices or of any non-foreseen changes relating to trade and regulations by countries where company does business; and addresses these appropriately to mitigate or minimise these risks. The Company constantly reviews its systems and processes and takes adequate measures to address these risks or meet its obligations.

The Company has significant exports, besides imports of inputs and hence has a large exposure to exchange rate risks. Given the instability in the global, political and economic environment and bilateral trade issues, there has been significant volatility of foreign currency rates. Such events are outside the control or horizon of Indian companies and it is becoming very difficult to accurately predict currency movements. In the long run, we realise the best way to manage currency fluctuations is to have a better geographic balance in revenue mix factoring the Companys competitive positioning, and to ensure a foreign currency match between receivables and payables.

The Company constantly reviews and aligns its policies and takes appropriate decisions to minimise the commercial and financial risks.

4.7 Insurance

The Companys current and fixed assets as well as its personnel and products are adequately insured against various risks like transit, fire and allied risks, public and product liability, personnel, Directors and officers liability, etc.

4.8 Environment, Health, and Safety

As the Companys manufacturing operations involve complex chemical reactions, risks exist on any issues relating to safe operations, health and safety of employees and environment management compliances. Divis policies and processes are designed and reviewed from time to time to adhere to all applicable regulations on the environment management, employee health and safety. Divis continually strives to optimise the resources and upgrade its processes in order to reduce the environmental impact of its processes, products and services, besides ensuring health and safety of employees involved in the processes.

4.9 Information Technology (IT)

The Company has put in place an IT policy in order to ensure consistency, protection and security of data and IT systems to ensure smooth business processes. The systems used for information security are constantly tested, continuously updated and expanded. In addition, our employees are regularly trained on data protection and safety including secure online banking transactions. IT-related risk management exercise is conducted using appropriate protocols and tools.

The Company has implemented EDR (Extended Detection and Response), end point and server protection, automated prevention and detection solutions, including perimeter security controls with web security tools, enhanced internal vulnerability detection and multiple network segmentations based on business criticality. The internal team regularly performs VAPT scan which is also reviewed by external consultants. Implemented absolute zero trust security architecture.

4.10 Business Continuity

The Company has appropriate strategies for business continuity for addressing disruptive events, of various nature, on business operations and has set up a comprehensive and proactive framework to mitigate such disruptive events by deploying available alternative solutions; and reduce their potential damages.

4.11 Sustainable Operations

As part of our efforts towards sustainable business operations, we assess the opportunities and risks associated with sustainable sourcing/utilisation of resources and manufacturing activity; and continually evaluate alternatives and implement optimum processes for sustainable and safe operations in order to minimise, mitigate or de-risk our business operations.

5. Regulatory Filings/Approvals

Divis has triple certificationsISO

ISO 14001 (Environment Management Systems) and

ISO 45001 (Occupational Health and Safety systems) for its manufacturing facilities and adheres to cGMP and standard operating practices in its manufacturing/ operating activities and these certifications are renewed from time to time.

The Company has also obtained Food Safety System

Certification (FSSC) 22000 for vitamins and carotenoids, GMP+B2 certification

All the manufacturing sites are periodically inspected by USFDA, EU and other agencies.

Divis has a total of 41 drug master files (DMFs) with US-FDA, 26 CoSs (Certificates of Suitability) filed with 25 DMFs with Health Canada and 7 DMFs with PMDA, Japan and several filings at various other agencies. Divis has filed for a total of 43 patents for generic products.

6. Business Distribution

Our product portfolio comprises of two broad categories i) Generic APIs (Active Pharma Ingredients) and Nutraceuticals and ii) Custom Synthesis of APIs and specialty ingredients for innovator pharma giants. The Company operates predominantly in export markets and has a broad product portfolio under generics and custom synthesis. Among Divis well-distributed product range, some of the components of the business, as percentage in value terms, are given below:

Particulars	2023-24	2022-23
Exports	87%	88%
Imports	45%	45%
Top 5 Products	41%	46%
Top 5 Customers	37%	41%
Exports in $ terms	84%	86%
Exports in Pounds	10%	9%
Exports in Euro	6%	5%

7. Performance and Operations Review

Analysis of profitability (on a standalone basis) for the current and the previous financial years is given hereunder:

( H in crores)

Particulars	2023-24	2022-23
Revenue from Operations	7,665	7,625
Other Income	337	349
Total Income	8,002	7,974
Expenditure before Depn. & Fin. Cost 9001 (Quality Systems),	5,491	5,277
PBDIT	2,511	2,697
Finance Cost	3	1
Depreciation	376	342
Profit before Tax (PBT)	2,132	2,354
Tax expense:
Current Tax	511	438
Deferred Tax	45	108
Profit (PAT) after Tax production of Feed Ingredients.	1,576	1,808
Other Comprehensive Income (net of tax)	(1)	2
Total Comprehensive Income	1,575	1,810
Earnings per Share (EPS) Basic & Diluted (C)	59.37	68.11

During the current year, we have been able to achieve a total revenue from operations of H7,665 crores despite experiencing pricing pressures on some of our generic products. The current financial year has seen a double-digit growth ex the COVID portfolio.

Our net material consumption for the year remains about 40% of the revenue from operations for the year. Our

Profit Before Tax for the year is lower at C 2,132 crores as against C2,354 crores during the last financial year primarily due to the increase in staff cost and other expenses as well as higher depreciation.

Tax expense for the year amounted to C556 crores as against a tax expense of C546 crores. The effective tax rate for the year has increased over the last year due to the changes in product mix and the resultant profitability across the Companys manufacturing units.

Profit After Tax for the year amounted to C1,576 crores as against C1,808 crores during the previous year.

7.1 Exports

Exports constituted 87% of sales revenue during the year. Exports to advanced markets comprising Europe and America accounted for 69% of business.

7.2 Region-wise Sales Revenue

Our revenue from products and services region-wise is given below:

( H in crores)

	FY 2023-24		FY 2022-23
Region	Revenue fromSale of Goods and Services	% Share	Revenue from Sale of Goods and Services	% Share
Europe (*)	4,003	52.31	3,063	40.27
North America (*)	1,310	17.12	2,196	28.87
Asia	1,017	13.29	1,041	13.69
Rest of the World	351	4.59	349	4.59
India	971	12.69	957	12.58
Total	7,652	100.00	7,606	100.00

* Based on despatch schedule of the MNC customers which have business in both these regions.

7.3 Other Income

Other Income mainly comprises of interest on deposits and investments, gain on forex transactions and gain in fair value of non-current investments. Other Income for the year amounted to C 337 crores as against C349 crores of last year. This year, we have a gain on forex transactions and translations amounting to C28 crores against a gain of C134 crores in last year.

7.4 Distribution of Total Income

7.5 Material Costs

Particulars	FY 2023-24	FY 2022-23
Material consumption	3,210	2,979
Changes in inventories of finished goods and work-in-progress	(127)	50
Net Material Consumption	3,083	3,029
Revenue from Operations including other operating revenue	7,665	7,625
% of consumption to Revenue	40.22%	39.72%

Material consumption varies from product to product. The Company manufactures several active pharmaceutical ingredients and intermediates within the Generic and Customs synthesis groups as well as nutraceuticals. Manufacture of any product involves stage-wise controlled processing through its chemistry to the specifications under the standard operating practices complying to cGMP conditions.

Material consumption net of increase/decrease in stocks is about 40.22% of revenue from operations during the year as compared to 39.72% of last year.

7.6 Employee Benefits Expense

Employee benefits expense represent salaries and benefits to employees as also fixed and variable managerial remuneration of Whole-time Directors as approved by the Members.

Employee benefit expense for the yearis C1,067 crores against C953 crores during last year. Of this, remuneration to Whole-time Directors accounted to C144 crores during the year as against C157 crores last year.

Employee cost for the year works out to about 13.3% of total income earned for the year.

7.7 Other Expenses

Major items of Other Expenses are Power and Fuel,

Repairs, Stores & Spares, Packing Materials, R&D Expenses, Carriage Outward, Travelling & Conveyance,Sales Commission, Environment Management Expenses, Political Contributions and CSR Expenses.

Other Expenses for the year accounted for C1,341 crores as against C1,295 crores during the last year. There has been increase in Other expenses, some of which are non recurring items.

Other Expenses account for 16.76% of total income for the year against 16.24% last year.

7.8 Capital Expenditure

During the year, we have capitalised Property, Plant and Equipment (PPE) and Intangible Assets valuing C402 crores. Implementation of Unit-3 manufacturing facility at Ontimamidi Village (Kona), Thondangi Mandal, Kakinada District, Andhra Pradesh has commenced during the year; and an amount of C749 crores has been spent till March 31, 2024, including advances for capital items of C99 crores and expenditure pending allocation of C44 crores.

Total Capital WIP at all locations as at the year-end is C778 crores as against C212 crores as at the previous year end.

7.9 Non-current Investments

Non-current investments as at the end of the current year amounted to C89 crores as against C84 crores as at the end of the last year.

7.10 Income Tax Assets

Income tax assets of C29 crores as at the end of the year represents prepaid taxes relating to financial year 2019-20 refund of which has been claimed.

7.11 Other Non-current Assets

Other Non-current assets at the year-end accounted to C129 crores and this includes advances for capex programmes of C119 crores and other receivables.

7.12 Inventory position

Inventory position for the last two years is as under:

		( C in crores)
Particulars	As on March 31, 2024	As on March 31, 2023
Raw Materials	1,067	946
Work-in-Progress	1,620	1,526
Finished Goods	143	110
Packing Materials	8	9
Stores and Spares	147	190
Total	2,985	2,781

The Company undertakes campaign production of large volume products like Naproxen, Dextromethorphan and Gabapentin by running the plant at full stream and stock these products for sale · thus, freeing the multi-purpose plants for producing other products; and hence carries significant volume of work-in-progress to be able to service the large volume products. As the Company has a good market share for these products, we do not foresee any constraints in marketing these products and managing the inventory cycle. We further augmented stock of raw materials to avoid any supply disruptions and ensured continued operations. Slow moving and non-moving items have been fully provided for.

7.13 Trade Receivables

		( C in crores)
Particulars	As on March 31, 2024	As on March 31, 2023
Outstanding Receivables	2,274	1,965
Less: Allowances for doubtful debts	1	1
Net Receivables	2,273	1,964
Average receivable days	108	94

Net Trade Receivables at the year end came to C 2,273 crores as against C1,964 crores last year. Trade Receivables include an amount of C260 crores due from subsidiaries.

All these are considered good.

7.14 Other Current Assets

( C in crores)

Particulars	As on March 31, 2024	As on March 31, 2023
Indirect Taxes- Input Tax Credits	202	138
Prepaid Expenses	35	26
Advances to suppliers	80	34
Other receivables	1	1
Total	318	199

These assets are monitored and reviewed periodically.

7.15 Other Financial Assets

Other Financial Assets at the year end are C63 crores against C57 crores of last year. These comprise of security and other deposits and receivables of export incentives and all of them are receivables in the normal course of business.

7.16 Deferred Tax Liabilities

Deferred tax liabilities represent temporary differences arising between the tax base of assets using the liability method, liability on account of obligations for SEZ Units under the Income Tax Act as also of employee benefit obligations. Deferred tax liability as of March 31, 2024 amounted to C582 crores as against C537 crores as of March 31, 2023.

7.17 Trade Payables

Trade Payables for raw materials/services amounted to C807 crores as at the end of the year as against C743 crores as at the end of previous year. Of the trade payables, an amount of C35 crores relates to dues to micro and small enterprises and these are paid by the due dates. The company follows consistent practices of procurement and avails efficient credit terms from vendors.

7.18 Other Financial and Current Liabilities

Other Financial Liabilities at the year-end of C 100 crores consist of Capital Creditors of C99 crores. All obligations are discharged as per the terms agreed with the Vendors.

Other Current liabilities for the current year amounted to C303 crores as against C288 crores as at the end of the last year. Employee benefits and all statutory dues are paid well within the due dates. Liability for CSR Activities of C31 crores will be discharged within the statutory time lines specified in the Companies Act 2013.

7.19 Key Financial Ratios

			( C in crores)
Particulars	As on March 31, 2024	As on March 31, 2023	Change
Return on Net Worth/	12.04%	14.82%	(18.76%)
Equity (%)
Return on Capital	15.62%	18.57%	(15.89%)
Employed (%)
Basic EPS (C)	59.37	68.11	(12.83%)
Debtors Turnover	3.61	3.36	7.44%
Inventory Turnover	2.65	2.80	(5.35%)
Current ratio	7.60	8.56	(11.21%)
Debt Equity ratio*	0.00	0.00	-
Operating profit margin (%)	32.76%	35.37%	(7.38%)
Net profit margin (%)	19.70%	22.67%	(13.10%)

* There is no debt outstanding as on March 31, 2024 and as on March 31, 2023.

Detailed explanation of ratios:

(i) Return on Net Worth/(Equity)

Return on Net Worth/(Equity) is a measure of profitability generated to Equity holders. It is calculated by dividing the Net profit after tax for the year with

Average Shareholders equity during the year.

(ii) Return on Capital Employed

Return on Capital Employed is a ratio that measures the efficiency of the Company with which its capital is being employed. In other words, the ratio indicates the ability of the Company to generate returns for both equity and debt holders. It is calculated by dividing net operating profit (EBIT) by average capital employed i.e.

Tangible net worth + total debt + Deferred Tax liability.

(iii) Basic EPS

Earnings Per Share is the portion of a Companys profit allocated to each share. It serves as an indicator of a Companys profitability. It is calculated by dividing the profit after tax for the year by weighted average number of shares outstanding during the year.

(iv) Debtors Turnover

This ratio is used to quantify a Companys effectiveness in collecting its receivables or money owed by customers. The ratio shows how well a Company uses and manages the credit it extends to customers and how quickly that short-term debt is collected. It is calculated by dividing the Total Revenue from Operations by average trade receivables.

(v) Inventory Turnover

Inventory Turnover is the number of times a Company sells and replaces its inventory during a period. It is calculated by dividing the Revenue from sale of goods by average inventory.

(vi) Current Ratio

The Current Ratio is a liquidity ratio that measures a Companys ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities.

(vii) Debt Equity Ratio

The ratio is used to evaluate a Companys financial leverage. It is a measure of the degree to which a Company is financing its operations through debt versus wholly owned funds. It is calculated by dividing a Companys net borrowings by its shareholders equity.

(viii) Operating Profit Margin

Operating Profit Margin is a profitability or performance ratio used to calculate the percentage of profit a Company produces from its operations. It is calculated by dividing the Operating Profit (PBDIT) by Revenue from Operations.

(ix) Net Profit Margin

The net profit margin is equal to how much net income or profit is generated as a percentage of total revenue. It is calculated by dividing the profit after tax for the year by total revenue for the year.

7.20 Cautionary Statement

This report may contain certain statements that the Company believes are or may be considered to be ‘forward looking statements which are subject to certain risks and uncertainties. These estimates and judgements relating to the financial statements have been made on a prudent and reasonable basis, in order that the statements reflect, in a true and fair manner, the state of affairs and profits for the year. Actual results may differ materially from those expressed or implied. Significant factors that could influence the Companys operations include government regulations, tax regimes, market access related regulatory compliances, patent laws and domestic and international fiscal policies.