Themis Medicare Ltd Management Discussions

Cautionary Statement:

The statements in the "Management Discussion and Analysis Report" describe your Companys objectives, projections, estimates and expectations which may be "forward-looking statements" within the meaning of the applicable laws and regulations. The actual results could differ materially from those expressed or implied, depending upon the economic and climatic conditions, government policies, taxation and other laws and other incidental factors.

Financial Overview:

The financial performance of the Company for the financial year ended 31st March, 2024, is as follows:

Total revenue from operations stood at Rs. 381.76 Crores for the year ended 31st March, 2024, as against Rs. 354.32 Crores for the corresponding previous period, an increase of 7.74 %

The total cost of raw materials rendered for the financial year ended 31st March, 2024 was Rs. 136.71 Crores as against Rs. 118.36 Crores for the corresponding previous period.

The EBIDTA (earnings before interest, depreciation and tax, excluding other income) was Rs. 51.51 Crores for the year ended 31st March, 2024, as against Rs. 67.45 Crores for the corresponding previous period, a decrease of 23.64%.

The finance cost for the financial year ended 31st March, 2024 was Rs. 9.38 Crores as against Rs. 9.56 Crores for the corresponding previous period.

The PAT (profit after tax) was Rs. 43.52 Crores for the year ended 31st March, 2024, as against Rs. 56.90 Crores for the corresponding previous period, a decline of 23.51%.

Resources and Liquidity:

The cash and cash equivalents at the end of 31st March, 2024 were Rs. 9.92 Crores. The total debt to equity ratio of the Company stood at 0.25 as on 31st March, 2024.

Business category wise performance:

The Company operates in one segment i.e. pharmaceuticals. The results of the Company under review depict business growth during the period. The Company is presently manufacturing formulations and API.

Risk & Concerns:

The business of the Company is exposed to certain risks. Risks, liabilities and losses are part and parcel of any industry and need to be tackled through well forecasted mitigation strategies and actions.

Unfavorable Policy Changes

In the past few years, the Government of India has made frequent changes in the drug pricing and other laws impacting the operations of the Company. Further, adverse changes in government policies with respect to essential medicines and pricing with respect to the products may impact margins of the Company.

Credit Risk

To manage its credit exposure, Themis Medicare Limited (Themis Medicare) has a credit policy with credit limit requests and approval procedures. The Company does its own research of a counterpartys financial health and business prospects. Timely and rigorous process is follow with clients for payments as per schedule. The Company has suitably streamlined the process to develop a focused and aggressive receivables management system to ensure timely collections.

Interest Rate Risk

The Company has judiciously managed its debt- equity ratio. It has been using a mix of loans and internal cash accruals. Themis Medicare has well managed the working capital to maintain the overall interest cost at reasonable levels.

Competition Risk

Like in most other industries, growth opportunities lead to a rise in competition. We face different levels of competition, from domestic as well as multinational companies. Themis Medicare has created strong differentiators in execution, quality and delivery, which make it resilient to competition.

Furthermore, the Company continues to invest in R&D and its people to maintain a competitive edge. Stable and long-standing client relationships further help maintain a strong order book and insulate the Company from this risk. We also mitigate this risk with the quality of our infrastructure, our product portfolio and specialized formulation methodologies, coupled with prudent financial and human resources management and better control over costs.

Input Cost Risk

Our profitability and cost effectiveness may be affected due to change in the prices of raw materials, power and other input costs.

Opportunities

1. Clinical Trials Market

• India is among the leaders in the clinical trial market.

• Due to a genetically diverse population and availability of skilled doctors, India has the potential to attract huge investments to its clinical trial market.

2. High-End Drugs

• Due to increasing population and income levels, demand for high-end drugs is expected to rise.

• Growing demand could open up the market for production of high-end drugs in India.

3. Penetration In Rural Market

• With 70% of Indias population residing in rural areas, pharma companies have immense opportunities to tap this market.

• Demand for medicines in rural markets has seen a sharp growth. Various companies are investing in the distribution network in rural areas.

4. Crams

• Contract research and manufacturing services (CRAMS) is one of the fastest growing segments in the pharmaceutical and biotechnology industry. The pharmaceutical market uses outsourcing services from providers in the form of contract research organizations (CROs) and contract manufacturing organizations (CMOs).

Source: IBEF Report Dec 2023

Threats

• Varying regulatory requirements across domestic and export markets

Procurement and transferring drug management involves addressing current regulatory frameworks. In India, various laws regulate the flow and sale of medicines around the region, creating complexities for Supply Chain Management. The policy sets prescription costs and the state government implements various drug-pricing programs for multiple forms of medication. This kind of regulation of activities sometimes negatively affects the supply chain process. A variance in specifications and requirements, on the other hand, increases the expense and uncertainty of export markets. For example, Indian Pharma is now experiencing a growing onslaught of multinational companies litigation in the US and Europe opposing their drugs on the grounds of product patent rights infringements. Also, the Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) stipulation made it overbearing for the Indian pharmaceutical companies to launch their R&D or face the challenge of being limited to having just off-patent drug suppliers.

• Increased competition

Competition is a topic that is always relevant to health care discussion and pharmaceuticals are no different. Over the past five to ten years, several markets have seen steady growth, including China, Germany, Brazil, Italy, etc. Currently, several products with identical characteristics, bioequivalence and price ranges are commercialized by several multinational companies. This increasing competition and the emergence of new competitors represent a significant threat to the pharmaceutical industry in India.

• Poor supplier service

In terms of APIs, Indian pharmaceutical companies extensively depend on China. Around 70% of the total raw material is imported from China. Therefore, it creates considerable uncertainty and vulnerability to disruption in the SCM, especially during the global crisis. This problem became acute when China was locked to seek to stop the COVID-19 disease. Pharmaceutical firms and the Government of India are deeply worried about the insecurity of the Indian PSC.

• Uncertainty in demand

The heterogeneity of customers leads to substantial volatility in drug demand. Pharmaceutical settings are typically highly diversified in the real world, with numerous products and decision-making phases. It becomes more crucial for the vendors due to these uncertainties in demand. For online pharmacy services, significant fines are sometimes imposed when consumer demand is unmet.

Source: httDs://www.emerald.com/insiaht/ con ten t/doi/10.1108/AGJSR-03-2023-0102/full/ html

Internal control system and adequacy:

The Company ensures the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013. This involves the timely and accurate communication of financial and operational information to stakeholders, both internal and external. The Company identifies and assesses the risks it faces and develops necessary strategies to mitigate or manage those risks.

The Statutory Auditors while conducting the statutory audit, review and evaluate the internal controls and their observations are discussed with the Audit Committee of the Board. Other statutory requirements especially, in respect of pharmaceutical business are also vigorously followed in order to have better internal controls over the affairs of the Company.

Indian Pharmaceutical Overview

The pharmaceutical industry in India is expected to reach $130 Bn by 2030. The domestic pharmaceutical industry would likely reach US$ 57 billion by FY25 and see an increase in operating margins of 100-150 basis points (bps). India is a major exporter of Pharmaceuticals, with over 200+ countries served by Indian pharma exports. India supplies over 50% of Africas requirement for generics, ~40% of generic demand in the US and ~25% of all medicine in the UK. India also accounts for ~60% of global vaccine demand, and is a leading supplier of DPT, BCG and Measles vaccines. 70% of WHOs vaccines (as per the essential Immunization schedule) are sourced from India.

During FY18 to FY23, the Indian pharmaceutical industry logged a compound annual growth rate (CAGR) of 6-8%, primarily driven by an 8% increase in exports and a 6% rise in the domestic market. The Indian pharmaceutical industry has seen a massive expansion over the last few years and is expected to reach about 13% of the size of the global pharma market while enhancing its quality, affordability, and innovation.

India is one of the biggest suppliers of low-cost vaccines in the world. Because of the low price and high quality, Indian medicines are preferred worldwide, thereby rightly making the country the Pharmacy of the World. India has been traditionally quite strong in the pharma sector, with a low cost of manufacturing (30%-35% lower than in the US and Europe), cost-efficient R&D (about 87% less than in developed markets), and cheap skilled labour.

India, as the second-largest contributor to the global biotech and pharmaceutical workforce, plays a pivotal role on the global stage. The industry encompasses a diverse spectrum, including generic drug development, over-the-counter (OTC) medicines, bulk drug manufacturing, vaccines, contract research, biosimilars, and biologics.

The heart of this pharmaceutical revolution beats within Indias 118 pharmaceutical clusters spread across 19 states and union territories. Maharashtra takes the lead with the highest number of 40 pharma clusters, followed by Gujarat, Andhra Pradesh, Himachal Pradesh, and other key regions contributing to this thriving ecosystem. In addition to pharma production, Telangana boasts Indias largest medtech R&D and manufacturing cluster at the Medical Devices Park, attracting investors.

The future of Indias pharmaceutical industry is not limited to domestic growth alone. Indian drugs are exported to over 200 countries, with the United States, Belgium, South Africa, UK, and Brazil leading as the top destination markets. The exports of Indian drugs and pharmaceuticals reached INR 2.04 trillion (US$24.51 billion) in 2022-23, constituting 5.71 percent of the countrys total exports.

As we navigate this landscape, it is clear that Indias pharmaceutical industry is on a trajectory of unprecedented growth, driven by supply-side and demand-side factors. This evolution is poised to redefine the global pharmaceutical landscape and create remarkable opportunities for investors, professionals, and healthcare providers.

In a world where healthcare is more vital than ever, Indias pharmaceutical industry stands as a beacon of hope, innovation, and progress, dedicated to improving global health outcomes.

Source: https://www.ibef.org/industry/ pharmaceutical-india

h ttps://www.linkedin.com/pulse/future-indian- pharma-opportunities-growth-projections- boyapati-a3bqc/

Government Initiatives

• The Union Cabinet, on April 26, 2023, approved the National Medical Devices Policy, 2023. The National Medical Devices Policy, 2023 is expected to facilitate an orderly growth of the medical device sector to meet the public health objectives of access, affordability, quality and innovation.

• Strengthening of Pharmaceutical Industry (SPI): The Ministrys scheme "Strengthening of Pharmaceutical Industry (SPI) with a total financial outlay of Rs. 500 crore (US$ 60.6 million) extends support required to existing pharma clusters and MSMEs across the country to improve their productivity, quality and sustainability.

• Pradhan Mantri Bhartiya Jan Aushadhi Kendras (PMBJKs): The Government has set a target to increase the number of PMBJKs to 10,500 by the end of March 2025. Product basket of PMBJP comprises of 1,451 drugs and 240 surgical instruments.

• Up to 100%, FDI has been allowed through automatic route for Greenfield pharmaceuticals projects. For Brownfield pharmaceuticals projects, FDI allowed is up to 74% through automatic route and beyond that through government approval.

• The cumulative FDI equity inflow in the Drugs and Pharmaceuticals industry is US$ 21.58 billion during the period April 2000- September 2023. This constitutes almost 3.3% of the total FDI inflow received across sectors.

• Indian pharma companies have a substantial share in the prescription market in the US and EU. The largest number of FDA-approved plants outside the US is in India.

As per the Union Budget 2023-24:

For innovation in the pharmaceutical sector, through centres of excellence, a new initiative to encourage pharmaceutical research and innovation will be implemented. The government persuades business to spend money on R&D in a few chosen priority fields. At the grassroots level, government has also announced on building 157 nursing colleges in colocation with government medical colleges.

• Ayushman Bharat Digital Mission (ABDM): Under the ABDM, citizens will be able to create their ABHA (Ayushman Bharat Health Account) numbers, to which their digital health records can be linked. This will enable creation of longitudinal health records for individuals across various healthcare providers and improve clinical decision making by healthcare providers.

• The pilot of ABDM is completed in the six Union Territories of Ladakh, Chandigarh, Dadra & Nagar Haveli and Daman & Diu, Puducherry, Andaman and Nicobar Islands and Lakshadweep with successful demonstration of technology platform developed by the NHA.

Source: https://www.ibef.org/industry/ pharmaceutical-india

Outlook on Indian Pharmaceutical Sector:

The pharmaceutical industry in India is a significant part of the nations foreign trade and offers lucrative potential for investors. Millions of people around the world receive affordable and inexpensive generic medications from India, which also runs a sizable number of plants that adhere to Good Manufacturing Practices (GMP) standards set by the World Health Organization (WHO) and the United States Food and Drug Administration (USFDA).

Among nations that produce pharmaceuticals, India has long held the top spot. Medicine spending in India is projected to grow 9-12% over the next five years, leading India to become one of the top 10 countries in terms of medicine spending. Going forward, better growth in domestic sales would also depend on the ability of companies to align their product portfolio towards therapies such as such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers for chronic diseases, which are on the rise.

The Indian Government has taken many steps to reduce costs and bring down healthcare expenses. The National Health Protection Scheme, which aims to offer universal healthcare, the ageing population, the rise in chronic diseases, and other government programmes, including the opening of pharmacies

that offer inexpensive generic medications, should all contribute to boost the Indian pharmaceutical industry.

Source: https://www.ibef.org/industry/ pharmaceutical-india

ACTIVE PHARMACEUTICAL INGREDIENTS (APIS)

• Active Pharmaceutical Ingredient (or API) is a crucial segment of the pharma industry, contributing to around 35% of the market. API is the biologically active component of a drug that causes an intended medical effect.

• India is the 3rd largest producer of API accounting for an 8% share of the Global API Industry. About 500+ different APIs are manufactured in India, and it contributes 57% of APIs to prequalified list of the WHO.

FORMULATIONS

• India is the largest exporter of formulations in terms of volume, with 14% market share and 12th in terms of export value.

• Double-digit growth is expected over the next five years.

• According to Allied Market Research, the Indian pharmaceutical packaging market was valued at US$ 1,434.1 million in 2020 and is expected to reach US$ 3,027.14 million by 2030, at a CAGR of 7.54%.

Supply-side drivers of Indian pharmaceuticals sector

• Following the introduction of product patents, several multinational companies are expected to launch patented drugs in India.

• Growth in the number of lifestyle diseases in India could boost the sale of drugs in this segment.

• High Court allowing to export patent drugs, to foreign players in the Indian market.

• The presence of a skilled workforce as well as high managerial and technical competence is a source of attraction for private players. Pharma companies have already increased spending in the country to tap rural markets and develop better infrastructure.

• Promotion of Medical Devices Parks: Objective of the scheme is Creation of world class infrastructure facilities in order to make Indian medical device industry a global leader

• About 120 drugs are expected to go off-patent

over the next 10 years; with expected worldwide revenue between US$ 80 to 250 billion.

• A draft notification issued by the Union health ministry has proposed that the 16 drugs, which include common antipyretic medicine such as paracetamol 500 mg, some laxatives, nasal decongestants and topical antifungal creams be included in the OTC drug category.

Demand drivers of Indian pharmaceuticals sector

• Rising levels of education to increase acceptability of pharmaceuticals.

• Patients to show greater propensity to self- medicate, boosting the OTC market.

• Acceptance of biologics and preventive medicines to rise.

• Surge in medical tourism due to increased patient inflow from other countries

• As per Mckinseys report (July 2019), > US$ 200 billion to be spent on medical infrastructure in the next decade.

• New business models expected to penetrate tier-2 and 3 cities.

• Over 160,000 hospital beds expected to be added each year in the next decade.

• Indias generic drugs account for 20% of global exports in terms of volume, making the country the largest provider of generic medicines globally.

• Patient pool expected to increase over 20% in the next 10 years (until 2030), mainly due to rise in population.

• New diseases and lifestyle changes to boost demand.

Source: IBEF Report Dec 2023

Outlook on Global Pharmaceutical Industry

The Global Pharmaceutical Manufacturing Market is projected to reach a size of US$ 2,346.33 billion by 2032, up from US$ 859.5 billion in 2023, at a CAGR of 11.56% during the forecast period 20242032.

Digitalization and automation trends are transforming the landscape of pharmaceutical manufacturing market, resulting in greater efficiency and cost savings. Furthermore, drug manufacturers are increasingly outsourcing parts of their R&D to clinical research organizations (CROs) as a cost-reduction strategy. The application of big data in clinical research is another significantdevelopment within the pharmaceutical R&D sphere.

The projections indicate that top global biopharma drugs could achieve lifetime sales of up to $28 billion by 2028. However, pharmaceutical companies face patent expiration risks between 2023-2028, with estimated revenue losses ranging from $23-28 billion.

The global active pharmaceutical ingredients (API) market continues to grow, reaching a value of $238.47 billion in 2023. This market is expected to expand at a CAGR of 6.6% from 2024 to 2032, with the Asia-Pacific region holding the largest share in 2023. China maintains its position as the largest producer and exporter of APIs worldwide.

Contract manufacturing organizations (CMOs) are vital components of the pharmaceutical industry. The global pharmaceutical contract manufacturing market was valued at $172.8 billion in 2023, projected to grow at a CAGR of 7.7% from 2024 to 2032. Pharmaceutical companies benefit from outsourcing to CMOs, reducing costs, enhancing efficiency, and allowing them to focus on core competencies.

The United States holds the highest pharmaceutical spending per capita globally, reaching $1,310 in 2022. Germany and Japan follow with per capita spending of $883 and $864 respectively. These figures underscore the substantial role pharmaceutical spending plays in the overall healthcare expenditures of many nations.

Overall, against the backdrop of evolving technologies, shifting demographics, and persistent health challenges, the global pharmaceutical sector stands poised for continued growth and advancement, offering investors and stakeholders abundant opportunities to contribute to improved health outcomes and societal well-being.

Source: https://www.globenewswire.com/ news-release/2024/04/16/2863741/0/en/ Pharmaceutical-Manufacturing-Market-to- Surpass-USD-2-301-6-Billion-By-2032-Generic- Prescription-Drugs-to-Remain-at-Top-with- Over-61-Contribution-Says-Astute-Analytica. html#:~:text=New%20Delhi%2C%20April%20 16%2C%202024,the%20forecast%20period%20 2024%E2%80%932032.

Indian & Global Hospital Sector

The Indian hospital industry is set to grow at a healthy Compound Annual Growth Rate (CAGR) of approximately 12 per cent over the next three fiscal years, driven by a confluence of positive factors driven by factors such as increasing healthcare awareness, a surge in lifestyle diseases, a growing elderly population, expanded health insurance coverage, improved disposable income, augmented public expenditure on healthcare, and the rise in medical tourism.

The global hospital services market was valued at USD 12.31 trillion in 2023 and is expected to reach around USD 22.57 trillion by 2033 and is poised to grow at a compound annual growth rate (CAGR) of 6.05% during the forecast period 2024 to 2033.

Rising cancer incidence globally, increasing number of knee replacement surgeries, and availability of next-generation stents are key factors that are anticipated to drive the global hospital services industry over the years. However, high cost of surgical procedures coupled with lack of insurance coverage will subsequently restrain the market growth.

Cost of medical facilities has seen a spike in the past few decades. Advanced diagnostic technologies have paved their way for early and improved detection of disease as well as supported research for terminal disease treatment such as cancer. Due to increasing affordability and awareness among people, medical services market expected to spur, which is already evident in many countries, as it contributes significantly towards the growth of Gross Domestic Product (GDP). Pharmaceutical companies, term care services, medical devices sector, medical consumables industry, and healthcare facility management services together contribute prominently toward the healthcare services market. As an end-use segment, hospitals capture significant consumer base in the healthcare industry.

Hospitals, therefore, are an integral part of healthcare industry as well as a major revenue source for the overall industry that also fuels research & innovation in the stream. Various healthcare product manufacturers invest prominently in terms of both marketing strategies and revenue to promote their product and services among hospitals. Hence, strategic decisions within the hospital sector affects notably to the other associated industry within healthcare steam. Source: https://www.business-standard.

com/industrv/news/hospital-industrv-set-to- grow-at-12-cagr-driven-bv-post-pandemic- recoverv-123121101085 1.html https://www.precedenceresearch.com/hospital- services-market

Companys Strategy

The company is focusing primarily on expanding its presence in the hospital business across the country. We believe there are numerous opportunities in this sector, especially with our strong lineup of products.

TML is one of the top three players in the country and offers a comprehensive range of anesthesia products, which is advantageous for the hospital business. We also have divisions in critical care and intensive care, which are key parts of their longterm growth plan.

Besides the hospital and API business, the company is also investing in trade and co-marketing, seeing them as areas with potential for growth.

Discussion on financial performance with respect to operational performance

The consolidated Profit after Tax decreased by 23.51% compared to previous year. The production capacity was utilized to the optimum level during the year. Your Company has generated profit during the year under review as well as in the previous year.

Material developments in Human Resources / Industrial Relations front, including number of people employed

The core of the Human Resource philosophy at Themis Medicare Ltd. is empowering human resources towards achievement of company aspirations. Your Company has a diverse mix of youth and experience, which nurtures the business. As on 31^st March, 2024 the total employee strength was 1541.

(g) Details of significant changes in key financial ratios (i.e. change of 25% or more as compared to the immediately previous financial year):

Sr. No. Particulars	2023-24	2022-23
1 Interest Coverage Ratio	4.70: 1	7.16 : 1
2 Operating Profit Margin (%)	12%	19%
3 Net Profit Margin (%)	6%	12%

(h) Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.:

Financial year	2023-24	2022-23
Return on net worth (%)	9%	17%

The Return on net worth decreased during the year 2023-24 as compared to previous year 2022-23 due to decrease in Net Profit after tax compare to increase in Shareholders equity.

ACKNOWLEDGEMENTS AND APPRECIATION:

Your Directors take this opportunity to thank the customers, shareholders, suppliers, bankers, business partners/associates, collaborators, employees, financial institutions and Central and State Governments for their consistent support and encouragement to the Company.