Trident Lifeline Ltd Management Discussions

Management Discussion and Analysis

Economic overview

Global economy

The global economy is expected to experience a measured trajectory in the upcoming years. Projections indicate a modest slowdown, with growth anticipated to decline from an estimated 3.4% in 2022 to 2.9% in 2023. However, a gradual recovery is anticipated, with growth projected to rebound to 3.1% in 2024. This outlook is influenced by various factors, such as central bank rate hikes to combat inflation and geopolitical tensions, notably Russias conflict in Ukraine, which continue to shape global economic activity.

The rapid spread of COVID-19 in China presented unique challenges, initially hampering growth in 2022. Nevertheless, recent efforts to reopen the economy have laid the foundation for a faster-than-expected recovery. The resilience demonstrated in overcoming these obstacles has positioned the global economy on a path toward renewed stability.

Inflation, a pivotal factor impacting the economic landscape, is expected to follow a downward trajectory. Global inflation rates are projected to decrease from 8.8% in 2022 to 6.6% in 2023, and further decline to 4.3% in 2024. These shifts create a more favourable environment for economic activities and investment.

While there are encouraging signs, risks persist, albeit moderated since October 2022. Downside risks include potential adverse health outcomes in China hindering the recovery, escalation of geopolitical tensions in regions like Ukraine, and the potential impact of tighter

global financing conditions on debt distress. On the other hand, upside possibilities encompass a significant boost from pent-up demand in various economies

and a more rapid decline in inflation, which could fuel

economic growth and stability.

Overall, the global economic landscape is expected to navigate through these challenges and gradually recover, providing opportunities for stability and growth.

Source: IMF

Indian economy

Following an impressive 8.7% growth in FY22, the Indian economy is poised for continued expansion, with an expected real growth rate of 7% in FY23. This strong growth has been driven by private consumption and capital formation, resulting in increased employment opportunities and a decline in urban unemployment.

The success of Indias second-largest vaccination drive, administering over 2 billion doses, has played a pivotal role in boosting consumer confidence and fostering sustained consumption growth.

Optimistic growth forecasts for India are supported by several positive factors. The rebound in private

consumption has energised production activities, while increased capital expenditure (CAPEX) has further strengthened economic prospects. With widespread vaccination coverage, individuals are regaining confidence to spend on contact-based services such as restaurants, hotels, shopping malls, and cinemas. The return of migrant workers to cities has also revitalised the construction sector by reducing housing market inventory. Well-capitalised public sector banks and improved corporate balance sheets are expected to support credit supply and facilitate credit growth to the Micro, Small, and Medium Enterprises (MSME) sector.

Credit growth to the MSME sector has been particularly notable, averaging over 30.6% from January to November 2022, supported by the extended Emergency Credit Linked Guarantee Scheme (ECLGS) introduced by the government. The recovery of MSMEs is evident from their contributions to the Goods and Services Tax (GST), while the ECLGS has alleviated their debt servicing

concerns. The central governments increased Capital Expenditure (CAPEX) of 63.4% in the first eight months of FY23 has also been a significant driver of economic growth, attracting private CAPEX since Q1 2022.

Looking ahead, India is expected to witness GDP growth of 6.0% to 6.8% in FY24. The anticipated robust credit disbursal and capital investment cycle will unfold as the corporate and banking sectors strengthen their balance sheets. Furthermore, the expansion of public digital platforms and the implementation of transformative measures such as PM GatiShakti, the National Logistics Policy, and Production-Linked Incentive schemes will enhance manufacturing output, providing additional support to economic growth in India.

Source: Ministry of Finance, Government of India

Industry structure and recent developments

Global pharmaceutical industry

The global pharmaceutical market is experiencing remarkable growth and is projected to reach a value of USD 1.57 trillion by 2023. This expansion is driven by various factors, including the growing and ageing population in key markets. The United Nations World Population Prospects indicate that the global population is expected to surpass 9.3 billion by 2050, with approximately 21% of this population aged 60 and above. Alongside population growth, improved

purchasing power and access to quality healthcare have contributed to increased demand for pharmaceuticals, benefiting families across different income levels.

Technological advancements, cost-effective manufacturing methods, and significant investments have transformed the pharmaceutical landscape.

Mergers and acquisitions have also become prevalent, as established companies seek to strengthen their market positions in the competitive environment. At the same time, smaller to mid-sized pharmaceutical firms are being sought after for their innovative capabilities, fostering collaborative growth opportunities.

Stringent regulations aimed at controlling pharmaceutical prices have influenced the industry, driving a number of mergers and acquisitions. Looking ahead, the expiration of patents for many drugs in

2023-2024 presents significant opportunities for generic

drug manufacturers to enter the market.

In conclusion, the global pharmaceutical market is undergoing substantial growth driven by population trends, improved access to healthcare, technological advancements, and regulatory factors. The industrys landscape is evolving, with companies adopting innovative strategies to meet the growing demand and address the challenges ahead.

Indian pharmaceutical industry

Indias pharmaceutical industry holds a significant position in the global market, serving as a major player and exporter of generic drugs and vaccines to various regions. With a current value of approximately $50 billion, it ranks as the third-largest pharmaceutical industry worldwide. Projections suggest that the sectors revenue will grow to $130 billion by 2030.

The Indian government has demonstrated its commitment to the health sector by increasing its allocation to ?89,155 crores in the 2023-24 fiscal year, with a focus on capacity building and promoting growth within the pharmaceutical industry. This investment is expected to strengthen the healthcare system, evident in the planned establishment of 157 medical colleges and the goal to eliminate sickle cell anaemia in the country by 2047.

The sector aims to enhance its position in the value chain by increasing investments in research and development (R&D) and aligning regulatory

requirements with global standards. Robust intellectual

Source: NAVADHI

property (IP) laws and rights are emphasised to support this endeavour. The Indian government has demonstrated its commitment to innovation by enhancing the capacity of the Indian Council of

Medical Research (ICMR), enabling public and private pharmaceutical companies to engage in extensive research and collaborations. This focus on new product development through R&D efforts is expected to drive the industrys future growth and global recognition.

While the Indian pharmaceutical industry anticipates normalising trends observed over the past few years, it remains cautious about potential challenges from global fronts. The sector recognizes the importance of research, development, and harmonisation of regulatory requirements to position India as a leading player in the global pharmaceutical market. Through these efforts, the industry aims to establish itself as a

global powerhouse, fulfilling the vision of transforming

India into the ‘pharmacy of the world.

Source: TOI

Global nutraceutical industry

In a world where health and wellness take centre stage, the global nutraceuticals market emerges as a powerhouse, surging from $372.27 billion in 2022 to $409.12 billion in 2023 at an impressive growth of

9.9%. This robust growth can be attributed to the rising demand for health-promoting diets and preventive healthcare solutions that empower individuals to take charge of their well-being.

However, amidst this growth, the global economic recovery from the COVID-19 pandemic faces challenges due to the Russia-Ukraine war. Economic sanctions and supply chain disruptions have led to inflation across goods and services, impacting markets worldwide.

Despite these obstacles, the nutraceuticals market remains resilient, projected to reach $596.81 billion in 2027 at a CAGR of 9.9%.

A multitude of factors fuels this remarkable growth. The increasing prevalence of lifestyle-related disorders and rising consumer focus on self-directed care have driven demand for nutraceutical products. Moreover, the growth of high-growth economies has given consumers more spending power, further propelling the demand for dietary supplements. In this evolving landscape, the nutraceutical industrys potential to address health challenges, such as cardiovascular disorders and malnutrition, shines bright.

The COVID-19 pandemic has underscored the importance of preventive healthcare, leading to a surge in the demand for dietary supplements and functional foods. Immunity-boosting supplements have become mainstream, and consumers now seek holistic self-care solutions as part of their everyday lives. This shift in consumer behaviour offers new opportunities for the nutraceuticals industry to foster global health and

well-being.

North America, with a commanding 38% share of the global nutraceutical market in 2022, stands poised to reap substantial rewards by 2032, driven by the burgeoning consumer expenditure on plant-derived products. The year 2023 is projected to witness North America further consolidating its position as the largest contributor to the nutraceutical products

market. Meanwhile, the Asia-Pacific region is primed to showcase the highest CAGR during the period spanning 2023 to 2030. This growth surge can be attributed to escalating demand for dietary supplements, increasing awareness about the health advantages of nutritional products, rising disposable incomes, rapid urbanisation, and a burgeoning wellness consciousness.

Moreover, the robust economic expansion in countries like China, Japan, and India is fueling the demand for fortified nutritional food and beverages, bolstering the markets growth between 2023 and 2030.

Source: Research and Markets, GMI Insights, Meticulous ResearchI

Company overview

Trident Lifeline Limited is a dynamic and fast-growing pharmaceutical company with an export-focused business model, operating across various markets such as African, Latin American, CIS, and East Asian countries. The Company markets its products under its

own brands using an asset-light contract manufacturing model. Moreover, to further enhance its position in the value chain, the company is strategically investing in valuable manufacturing assets. Being export-oriented, Trident Lifeline has been progressively increasing its revenue share from exports, and it has been actively investing in export product registrations to drive revenue growth. Trident Lifeline has filed 1,478 export market product registration applications, out of which 411 have been successfully registered. The ultimate objective is to establish strong brand recall for its own brands in each export market, and to achieve this goal, Trident operates with a dedicated sales and marketing team focused on building brand awareness and recognition.

FY23 Performance Discussion

Trident Lifelines performance in FY23 has been remarkable, culminating in a highly successful financial year. The company achieved its highest-ever Revenue from Operations, reaching an impressive ? 3,285.02 lakhs, compared to ? 2,237.14 lakhs in the previous year. This substantial growth is evident across all key parameters, with EBITDA registering a remarkable 124% increase, standing at ? 740.88 lakhs, and PAT rising by 52% to ? 601.53 lakhs in FY23.

Exports continue to play a pivotal role in the companys success, contributing to 76% of its total revenues in FY23. Despite encountering challenges in the export market, such as currency depreciation in certain African and South American markets and a shortage of FOREX reserves in some countries, Trident Lifeline has adeptly navigated through these obstacles, ensuring sustainable growth for its stakeholders.

Operationally, the company has made significant strides in product registration, filing over 450 registrations

in Q4FY23 alone. Currently, there are more than a thousand registrations under process in 25 countries, providing Trident Lifeline with ample opportunities to expand its presence in the coming years.

An important milestone for FY23 was the strategic acquisition of TNS Pharmas 51% equity, which has now become a subsidiary of Trident Lifeline since

21st December 2022. This acquisition includes a state- of-the-art facility being constructed in Sachin GIDC,

Surat, which is expected to be commissioned in Q1FY24. This facility will be a valuable asset to the companys business model, enhancing its capabilities for future growth. Additionally, Trident Lifeline remains committed to exploring similar assets and strategic investments

to strengthen its current business positioning further. With such remarkable achievements, Trident Lifeline is poised for continued success and growth in the future.

Opportunities & Threats

Opportunities:

• Growing population base. India is now the most populous country in the world.
• Government support for increasing domestic manufacturing through various schemes and incentives like the PLI scheme.
• Increasing access to modern and innovative medicines through improving healthcare infrastructure.
• Steady improvement in health care & insurance coverage.
• Demographics and lifestyle changes leading to increased incidence of chronic diseases such as Diabetes and Hypertension.

Threats:

• The current geopolitical tension have caused uncertainties related to supply chains, inflation and overall economic growth
• Potential fresh outbreaks of the pandemic across the world and subsequent disruption in economic activities may impact economic growth
• Significant volatility in the FOREX market, availability of FOREX reserves, especially for emerging market currencies, may adversely impact growth of these markets where the Company has a decent exposure

Risks and Concerns

• Project execution risk: The Company is executing projects such as setup of manufacturing facilities through subsidiaries which may face project execution risk, cost overruns, delay in commissioning of project, etc.
• FOREX risk: The Company derives majority of its revenues from exports and thus it is exposure to FOREX related risks
• Intellectual property risk: IP protection is an important element of the Companys business, any threats to its IP may lead to may harm the Companys business.

Financial Ratios

Ratios	FY22	FY23	Change in %	Reason
Debt Equity ratio	1.89	0.24	(87.43%)	Due to increase in shareholders funds.
Current ratio	1.41	4.63	228.89%	Due to increase in current assets.
Debt service coverage ratio	9.41	10.46	11.13%	Due to good profits, the ratio has improved.
Return on equity ratio	229.19	26.08	(88.62%)	Due to increase in shareholders funds.
Inventory turnover ratio	4.85	5.83	20.21%	Due to increase in turnover during the year and lower inventory level in the year.
Trade payable turnover ratio	2.83	4.72	66.88%	Due to an increase in business during the year.
Net capital turnover ratio	7.07	0.84	(88.05%)	Due to increase in current assets on account of utilisation of shareholders funds in current assets.
Trade receivable turnover ratio	7.77	3.70	(52.34%)	Due to increase in receivable level in the year.
Net profit ratio	18.14	18.97	4.60	Due to increase in business.
Return on capital employed	0.49	0.15	(69.61%)	Due to high increase in capital employed.
Return on investment	229.19	26.08	(88.62%)	Due to high increase in shareholders fund.

Outlook

Looking ahead, Trident is poised for a promising future after a successful listing. The Companys growth strategy includes expanding its formulation categories in the portfolio and intensifying efforts in key markets such as Peru, Cameroon, Guatemala, Tajikistan, and

Uzbekistan. With over 1,067 registrations in the pipeline across 25 countries, including advanced stages of approval, Trident anticipates significant revenue growth as these registrations enable access to new markets and reinforce the Companys presence in existing ones.

Additionally, by focusing on molecules going off-patent in developed markets, Trident aims to leverage emerging opportunities for growth. Furthermore, the Companys strategic investments in valuable manufacturing assets through partnerships reinforce its asset-light approach while enhancing operational efficiency and control over the value chain. These initiatives collectively position Trident Lifeline for continued success and sustained growth in the coming years.

Internal control systems and their

adequacies

Trident Lifeline Limited is dedicated to maintaining strong and efficient internal control systems to ensure the smooth functioning of its operations.

The Companys comprehensive framework comprises policies, procedures, and practices aimed at safeguarding assets, preventing fraud, ensuring accurate financial reporting, and compliance with regulatory requirements. Regular risk assessments and internal audits are conducted to identify areas for

improvement, fostering a culture of ethical conduct and accountability. By upholding these high standards, the Company aims to instil confidence among stakeholders and sustain its position as a reliable and trustworthy pharmaceutical enterprise.

Human resources

Trident recognizes that its success is deeply attributed to the dedication and hard work of its skilled and talented workforce. The company places great emphasis on nurturing a positive work environment that encourages employee growth and development, ensuring the retention of top talents. With a robust sales and marketing network spanning across various countries, Trident effectively manages its export- oriented operations. As of 31st March 2023, the Company proudly boasts a team of highly motivated 40 employees, each contributing to the organisations overall growth and excellence.

Cautionary statement

Statements in the Management Discussion and Analysis and other parts of the report describing the Companys objectives, projections, estimates and expectations

may be forward-looking statements. Actual results may differ materially from those expressed or implied due to various risks and uncertainties. Important factors that could make a difference to the Companys operations include economic and political conditions in India and other countries, in which the Company may operate. Other factors that may impact the Companys

operations include volatility in interest rates, changes in government regulations and policies, tax laws, statutes, and other incidental factors. The Company does not intend to update these statements.