MANAGEMENT DISCUSSION & ANALYSIS Key Economic and Industry Trends The Indian economy is on a rebound with a revival in the reform process which has led to improved investor confidence. Benign inflation levels and anticipated lower interest rates are expected to give a boost to domestic consumption across the economy. Global growth in 2014-15 was positively impacted from a sharp fall in crude prices. The Indian pharmaceuticals industry is expected to grow, on the back of a rapidly growing domestic market and lucrative export opportunities. In India, focus is steadily shifting towards specialty therapies and it is expected that better growth in domestic sales will depend on the ability of companies to align their product portfolio towards chronic therapies in segments such as cardiovascular, anti-diabetes and anti-debrssants. During the year, we have completed the consolidation of all our Pharmaceuticals businesses under Jubilant Pharma, Singapore with effect from July 1, 2014. This has been financed by a US$ 147.5 million funding from International Finance Corporation (IFC), which includes US$ 87.5 million of long term loan, US$ 60 million of zero coupon optionally convertible loan and a further loan of US$ 52.5 million to be syndicated by IFC. Further, we also completed management consolidation of Pharmaceuticals and Life Science Ingredients segments and appointed separate CEOs to focus on growth in the respective segments. This is pursuant to the consolidation of Pharmaceuticals and Life Science Ingredients under two independent segments to decouple the Pharmaceuticals segment from the Life Science Ingredients segment, thereby harnessing the true potential in each business to aid focused faster growth for the Company. We also acquired the minorities' stake in Jubilant Cadista to help us in consolidating the Generics business. We took a strategic decision to make a foray into the attractive Indian pharmaceutical market through our newly set up India Branded Pharmaceuticals business with the launch of Cardiovascular and Diabetic division. We hope to translate our reputation as an international company of quality generic products into growing domestic market. Our Business Strategy We take pride in our positioning as an integrated global pharmaceutical and life sciences company. Our focus is on the following overall business strategic objectives: 1. We aim to maintain global leadership in our chosen lines of business - We believe that we enjoy a unique, long-standing relationship with global Pharmaceutical and Agrochemical players, which is underpinned by our attractive product portfolio in niche markets. 2. Vertically integrated operations, driven by strength in manufacturing and chemistry - We have, using both in-house innovative technology and inorganic growth initiatives, built strong brsence across the pharmaceuticals value chain. This has considerably reduced our dependence on third-party supplies. Some of our initiatives have been successful and we continue to work towards achieving similar feats as opportunities brsent themselves. 3. Optimise margins while maintaining prudent financial policies - Our endeavour is to exercise financial prudence and strengthen our balance sheet. We strive to enhance margins by improving capacity utilisation and moving up the value chain. Revenue Revenue from operations stood at Rs. 58,262 million in the fiscal year ended March 31, 201 5 from 58,034 million in the fiscal year ended March 31, 2014. Increase in revenue was led by 6% improvement in price. Revenue from international markets stood at Rs. 41,367 million, contributing 71% to total revenue in the fiscal year ended March 31, 2015. Key regulated markets, comprising North America, Europe and Japan contributed 58% of the total revenue. Domestic revenue stood at Rs. 16,895 million, contributing 29% to the total revenue and growing 12% Year-over-Year (YoY). Total Expenditure Expenses including Debrciation and Amortisation stood at Rs. 54,250 million in the fiscal year ended March 31, 2015 from Rs. 50,770 million in the fiscal year ended March 31, 2014, primarily attributable to an increase in cost of materials consumed. Materials cost increased 9% to Rs. 26,617 million in the fiscal year ended March 31, 2015 from Rs. 24,421 million in the fiscal year ended March 31, 2014. Employee benefit expenses decreased to Rs. 10,903 million in the fiscal year ended March 31, 2015 from Rs. 1 1,052 million in the fiscal year ended March 31, 2014. Earnings Before Interest, Taxes, Debrciation and Amortisation (EBITDA) In FY 2015, we recorded EBITDA of Rs. 7,317 million as against Rs. 10,266 million in FY 2014. The EBITDA margin stood at 12.6%. While Pharmaceuticals segment contributed to 58% of business EBITDA with 16.6% EBITDA margins, Life Science Ingredients EBITDA margins stood at 10.2%. Finance Cost and Debrciation Finance cost increased to Rs. 3,553 million in the fiscal year ended March 31, 2015 from Rs. 3,237 million in the fiscal year ended March 31, 2014. Debrciation and amortisation expenses stood at Rs. 2,880 million in the fiscal year ended March 31, 2015 from Rs. 2,812 million in the fiscal year ended March 31, 2014. Profit Before Tax Profit before Tax for the fiscal year ended March 31, 2015 stood at Rs. 403 million. Tax Expenses Tax expenses increased to Rs. 805 million in the fiscal year ended March 31, 2015 from Rs. 696 million in the fiscal year ended March 31, 2014. Profit After Tax Profit for the year stood at Rs. (578) million in the fiscal year ended March 31, 2015 with Earnings Per Share (EPS) at Rs. (3.63). However, Normalised Net Profit after Tax was Rs. (97) million, with Normalised EPS at Rs. (0.61). The revenue and profitability has been affected during the year due to continued impact of the United States Food and Drug Administration (US FDA) Warning Letter at our Spokane facility, unabsorption cost in Symtet and volume and margin reduction due to anti-dumping duty in China in Advanced Intermediates. Indebtedness Our Net Debt, comprising Working Capital Debt of Rs. 12,307 million and Net Long Term Debt of Rs. 31,681 million stood at Rs. 43,988 million as on March 31, 2015. Also, our Gross Debt stood at Rs. 47,931 million with cash and cash equivalents at Rs. 3,943 million. Adjusted for Foreign Exchange difference, Net Debt was up by Rs. 1,147 million to Rs. 42,841 million on March 31, 2015 as compared to Rs. 39,157 million on March 31, 2014. We continue to benefit from competitive average interest rate of 6% given the FOREX borrowing at about 4.7% and rupee borrowing at about 11.9% Capital Expenditure During FY 2015, we have incurred capital expenditure of Rs. 3,694 million for the Company, including product development expenditures of Rs. 1,048 million for Pharmaceuticals. We will continue to be prudent in our capex going forward with the focus on reducing debt. Operations Review - Strengths, Opportunities and Challenges Our operations comprise of products and services across Pharmaceuticals and Life Science Ingredients segments. Our Pharmaceuticals segment includes operations of (i) Generics, comprising Active Pharmaceutical Ingredients and Solid Dosage Formulations (ii) Specialty Pharmaceuticals (Sterile Products), comprising Radiopharmaceuticals, Allergy Therapy Products and CMO of Sterile Injectables (iii) Drug Discovery Solutions (iv) India Branded Pharmaceuticals Life Science Ingredients segment includes products from our following businesses (i) Advance Intermediates and Specialty Ingredients (ii) Nutritional Products (iii) Life Science Chemicals Pharmaceuticals segment revenue contribute 46% to our total Income from Operations. Revenue from this segment decreased to Rs. 26,820 million from Rs. 27,276 million last year. Generics The Generics vertical includes Active Pharmaceutical Ingredients (APIs) and Solid Dosage Formulations businesses. Total revenue from this vertical was higher at Rs. 13,920 million in FY 2015 as against Rs. 14,049 million in FY 2014. Active Pharmaceutical Ingredients (APIs) APIs are also known as bulk drugs or drug actives, and are responsible for rendering therapeutic action in a drug. Comprising the core of the drug, APIs are combined with other excipients to formulate tablets, capsules and liquids for final consumption. We are one of the leading players globally and specialise in Cardiovascular System (CVS), Central Nervous System (CNS), Anti-infectives and Anti-debrssants along with other therapeutic areas. We have a strategy of maintaining long-term relationship with leading generic drug companies with our range of world class products. The emphasis for us is on building leadership in chosen products, while delivering superior quality within supply timelines. We are the worldwide leaders in manufacturing of Carbamazepine, Oxcarbazepine, Citalopram and Lamotrigine; and among top three manufacturers in products like Risperidone, Donepezil and Olanzapine. We have commercialised 39 products as on March 31, 2015. During the year we filed 3 new Drug Master Files (DMFs) in the US, made 1 filing in Canada and 2 filings in Japan. Revenue from this business stood at Rs. 5,409 million in FY 2015 from Rs. 5,285 million in the brvious year following improvement in volumes and benefits realised from cost rationalisation initiatives. Sartans continue to be a key focus area for us and we have created a global niche for such products. Our Sartans portfolio comprises of key products such as Valsartan, Losartan, Candesartan and Irbesartan. During the year, the Company received ANDA approval for Irbesartan and Valsartan tablets, where we enjoy backward integration to our own respective APIs. The growth in Sartans will be supported on account of our expertise in CNS, CVS and also our vertical integration with our Solid Dosage Formulations business. Our expansion in this segment is based on launch of new products slated to hit the market in the next few quarters, which will help us gain market share on the backdrop of strong filings in focused markets. Our facility at Nanjangud, Karnataka in India is highly specialised and is approved by key regulators including US FDA, AFSSAPS (France), PMDA (Japan) and ANVISA (Brazil), helping us expand into newer geographies. Geographic expansion is also being looked upon as a growth driver. Our Research and Development (R&D) function remains fully geared to strengthening our new products pipeline. Solid Dosage Formulations Solid Dosage Formulations business comprises of manufacturing and selling generic formulations. Our key focus segments are CVS, CNS and Steroids. We have manufacturing facilities at Salisbury, Maryland in the US and Roorkee, Uttarakhand in India. Our strategy is to have a portfolio of high potential products backed by an integrated APIs business thus giving us the advantage of backward integration. Our Maryland facility is approved by the US FDA and Roorkee facility is approved by the US FDA, UK MHRA, ANVISA Brazil and PMDA Japan. The Company enjoys market leadership in Methylbrdnisolone and Terazosin in the US. We are ranked in top 3 in Meclizine, Prochlorperazine, Lamotrigine, Cyclobenzaprine, Donepezil and Hydrochlorothiazide Capsules in the US. As of March 31, 2015, we have 48 commercialised products which include over 20 in North America, 29 in Europe and 25 in the Rest of the World. Overall we have filed a total of 72 ANDA filings in the US, 46 dossiers in Europe, 22 filings in Canada and over 650 filings in other countries so far. As on March 31, 2015, we have received 38 ANDA approvals in the US, 16 approvals in Canada and 42 in Europe. Revenue in this business stood at Rs. 8,511 million in the year ended March 31, 2015 as compared to Rs. 8,764 million in the brvious year. This is on account of new product launches and expansion of existing products into newer geographies. The growth momentum is likely to increase going forward on the back of entry into new markets and launch of new products to drive business growth. We are adopting a unique country specific marketing and distribution strategy. In the US, our key market, we expect our business to grow on the back of growing demand. This will be complimented by new product approvals from our strong pipeline of pending approvals. In Canada, we are aggressively pursuing sales under the 'Jubilant' brand as well as have tie-ups with local companies. In Europe our strategy for expansion has been twin pronged of out-licensing to suppliers as well as entering into distribution and profit sharing agreements. In markets of Russia and CIS, we are supplying products to distributors and retail chains and also licensing products to domestic companies. In the Latin American market, growth will be driven by new launches and filings in Brazil and other growing markets. Specialty Pharmaceuticals (Sterile Products) Our Specialty Pharmaceuticals (Sterile Products) vertical includes Contract Manufacturing Operations (CMO) of Sterile Injectables & Non-sterile products businesses, Radiopharmaceuticals and Allergy Therapy Products. Our total revenue from this vertical increased to Rs. 11,597 million in the fiscal year ended March 31, 2015 from Rs. 11,181 million last year. CMO of Sterile Injectables The Company provides solutions which include sterile injectables, lyophilisation, laboratory services, non-sterile topicals, liquids, tablets and capsules in CMO of Sterile Injectables business. There is a strong accent on developing a partnership with innovators in the pharmaceutical and biopharmaceutical domain for their patented products. Emphasis is laid on compliance and Intellectual Property Rights. Manufacturing facilities are brsent at strategic locations in North America which help us directly service customers in this geography. The business reported revenue of Rs. 4,476 million in FY 2015, down from Rs. 6,963 million in FY 2014. The performance was significantly impacted by the US FDA warning letter at our Spokane facility in Washington, USA. The Company is in active dialogue with the US FDA for speedy resolution of the same. After a voluntary shutdown for remediation for about four months, operations were resumed and the incremental order backlog is being cleared. Montreal facility in Quebec, Canada was back to normal production post warning letter lifted by the US FDA and further restructuring initiatives were undertaken internally. The Montreal facility revenue has been affected due to one of the major customers' dropout and Lyo breakdowns and maintenance. Radiopharmaceuticals The Company develops, manufactures and markets radiopharmaceuticals used in Nuclear Medicine for the diagnosis, treatment and monitoring of various diseases. We serve hospital-based customers (Nuclear Medicine Physicians and Technologists) in addition to specialised radiopharmacies and through them patients, globally with high quality and reliable specialty products. The business is backed by a dedicated research and development team, specialised manufacturing, strong regulatory affairs and commercial operations. Our areas of specialisation include cardiac, lung and bone imaging as well as thyroid therapy. We have earned and maintained market leadership in North America for several products including; I-131 Therapeutic & Diagnostic for thyroid and cancer, Methylene-Diphosphonate (MDP) for bone imaging, Macro-Aggregated Albumin (MAA) for lung imaging, Diethylene Triamine Penta-acetic Acid (DTPA) for renal imaging. In FY 2015 we came to the conclusion that in order to ensure sustainability of products for patients, we needed to undertake several key strategic initiatives such as implementing value based pricing that help revitalise Radiopharmaceuticals sales and customer specific targeting for radio-iodine therapy share conversion. We continue to invest in strengthening the supply of existing products, develop new products, and increase the number of nuclear medicine procedures to create a strong pipeline of product portfolio. Revenue stood at Rs. 5,246 million as compared to Rs. 2,385 million in FY 2014. The growth related to the transformational performance of our key products. We intend to expand our range of product offerings and consolidate our market share for Radiopharmaceuticals in North America. We are also expanding in markets such as Latin America, Europe and Asia through collaboration and contractual arrangements with partners and new distribution channels to drive growth in our current and pipeline products. We have an agile research & development structure to develop new products that has yielded a rich pipeline of products at various stages of development. One of the most promising is RUBY-FILL®Sr82/Rb82 generator and elution system, which is a paradigm changing product that will help propel the Company and cardiovascular PET to a leadership position in Nuclear Cardiology. RUBY-FILL® is currently under active review with the US FDA and we continue to brpare for a market introduction subject to receiving final regulatory approvals. In addition to RUBY-FILL®, we have an active pipeline with seven commercial candidates to expand and strengthen our medical imaging portfolio. One such candidate is a generic Gadopentatate Dimeglumine injection, a Magnetic Resonance Imaging contrast agent, which was approved by Health Canada in 2014 and is currently under active review with the US FDA. We are committed to deliver value and grow our business with market leading diagnostic imaging and specialty therapy products that enable physicians to deliver brcision medicine to patients. Allergy Therapy Products With nearly 100 years of leadership in research, extract production and immunotherapy products, our Allergy business is respected worldwide in the field of allergy. Our promise has always been to provide the best products, services and resources for both physicians and patients - and we remain committed to those ideals today. At Jubilant, we strive to maintain a quality standard that meets both our expectations and our customers. We are constantly working to streamline our processes and improve our products. Our quality standards have never been higher and we are investing heavily to improve our supply chain capabilities. We have taken a partnership approach towards allergy management for both physicians and patients. In specific instances customers are also provided with brscriptions directly from our manufacturing facility. Bulk extracts are also supplied to aid diagnostic testing and delivering immunotherapy. Currently the business is comprised of over 200 allergenic extracts and mixes, along with specialised skin test diagnostic devices. The business lays special emphasis on innovation towards introducing new products to treat and cure allergies. We are keen to build on our leadership in the North America market and at the same time deepen penetration in Canada, New Zealand, France, South Korea and Australia. We are also waiting to have a strong brsence in Latin America. The business revenue for the year ended March 31, 2015 stood at Rs. 1,875 million as compared to Rs. 1,833 million in FY 2014, contributing 3% to overall revenue. The Company faced 6 week shutdown at the beginning of FY 2015 for facility remediation due to US FDA audit findings. The business continues to focus on improving efficiencies by implementing lean manufacturing and other sales force initiatives. We continue to focus on new business growth to generate new account sales. We are targeting to accelerate growth to further strengthen our leadership position in the US. Drug Discovery Solutions The Drug Discovery vertical within Jubilant is operationalised across three functional subsidiaries viz. Jubilant Biosys, Jubilant Chemsys and JDS Malvern which are engaged in discovering new small molecules and platforms across therapeutic areas. The business is oriented in a manner to offer solutions keeping in mind the strategy and expectations of our partners. The vertical leverages the capabilities in Emerging Markets to deliver global outcomes, accelerating drug discovery efforts for our collaborators in a cost effective and efficient manner. The vertical collaborates with global pharmaceutical companies, biotechnology companies, and academia in lead generation, brclinical discovery across several disease areas, including Oncology, Metabolic Disorders, CNS, and Pain & Inflammation. The discovery facilities are equipped with the latest instrumentation and automation platforms to support scientists working across multiple disciplines. These include Discovery Informatics, Molecular Modelling, Structural Biology, Medicinal Chemistry, in vitro Biology (biochemical, cell-based assays, HTS, Sample Bank), ADME, Pharmacology, Toxicology and in vivo efficacy, including a modern nude-mice facility for performing xenograft studies in support of our Oncology programs as well as in vivo labs dedicated to CNS Pain and Metabolic disorders needs. JDS Malvern with the state of the art infrastructure and globally trained scientists in therapeutic platforms to identify and validate novel small molecules and platforms. During the year the Company has setup the state of the art cGMP Scale up facility (Class 1,00,000) to cater the multi kilogram manufacturing to support the br-clinical and clinical stages of drug development with a major investment. Our strategy is to expand our customer base and build long term relationship with the existing customers by aligning our therapeutic platform and business models to their therapeutic and business strategies, especially in the area of novel target identification and validation which is highly desirable area in pharmaceutical research. Revenue in FY 2015 were at Rs. 1,235 million as compared to Rs. 1,829 million in brvious year. The revenue declined compared to brvious year due to contract terminations and delay in on-boarding of new projects. In the coming year the Company will focus on penetrating more in the US & European Union (EU) region with increase in Business Development activity. India Branded Pharmaceuticals (IBP) IBP is our first venture into the Indian Pharmaceuticals Market (IPM). The IPM brsents a good opportunity as the market is worth Rs. 85,000 crores with a CAGR (Compound Annual Growth Rate) in healthy double digits over last 5 years. As an organisation we would be focusing in the chronic specialty segments, as these are the long-term drivers of the market in the current scenario. The focus of IPM is shifting towards the chronic market as high awareness, larger life expectancy, better purchasing power and changing lifestyles contribute to high growth of these markets. The Cardiology & Diabetology markets are the fastest growing markets in the IPM. We have initiated our foray through the launch of Cardiology & Diabetology portfolio. Jubilant CVD team has launched its products in the Dyslipidemia, Anti-hypertensive and Anti-diabetic categories. Our focus has been on creating a product portfolio with all high growth molecules, like Telmisartan, Rosuvastatin & Glimepride combinations etc. We are also working on establishing newer molecules like Cilnipine. We have set-up a robust infrastructure to support the Indian operations, and have our stockist network reaching out to most part of the country. The Jubilant's C&Fs (carrying and for warding) provide the best logistic support to ensure the product reaches across the country. Our products are currently available at more than 10,000 retail pharmacies across the country. Our 200+ strong field force currently covers more than 25,000 key specialists in India. Going forward we see good opportunity for growth in this business and we look forward to leveraging our strengths into other promising therapy areas such as Neurology, Nephrology, Urology & Cosmetology. We are also strengthening our Cardiology & Diabetology portfolios by evaluating newer portfolios and geographies. Revenue for FY 2015 stood at Rs. 68 million.Life Science Ingredients segment revenue contributes 54% to our total Income from Operations. Revenue from this segment increased to Rs. 31,442 million from Rs. 30,757 million last year. Advance Intermediates and Specialty Ingredients The advance intermediates and specialty ingredients business deals in Pyridine, its derivatives, and related chemistries which have application in pharmaceutical, agrochemical and other life science industries. Backed by our three decade long expertise in Pyridine chemistry, complete backward & forward integration, world-class manufacturing facilities and customer centric approach, we have cultivated leadership positions in Pyridine, Beta Picoline and many of their other derivatives. Pyridine is used in a wide variety of active intermediates as it is a solvent and a reagent compound. We have used this characteristic to offer Fine Ingredients, which are Pyridine and Piperidine based intermediates developed through in-house research and expertise. In line with our strategic objective we have ventured into value added products through our Crop Science Ingredients business and produce Symtet (2,3,5,6-Tetrachloropyridine), PCP (2,3,4,5,6-Pentachloropyridine) and Chlormequat Chloride (CDC). During the year we undertook capacity de-bottlenecking of Pyridine and Beta Picoline and also some of our key Fine Ingredient products viz. Cetylpyridinium Chloride, 4-Dimethyl Amino Pyridine (4-DMAP), Azacyclanol and 5-Ethyl -2 Methyl Pyridine (MEP) which has also resulted into cost optimisation of these products. Our strategic push to global market viz. USA, Europe & ROW has seen volume upsurge of these products. We expect higher capacity utilisation to help increasing our market share in these markets going forward. We have also launched successfully key formulations of Zinc Pyrithiones (ZPTO) the Antimicrobial products find usage globally in coating, paints, hair care and oral care (mouth wash) industries. Our key Crop Science Ingredients product i.e. Symtet is having consistent growth in demand due to environmental issues faced by it's competing product Na-TCP (3,5,6-Trichloropyridin - 2-Ol Sodium). This has also resulted in better price realisation. We have consistently increased our production output and plan to increase it further along with focus on cost optimisation in the coming period. However, our capacity utilisation is much lower due to technical issues and the management is putting its best efforts and resources to resolve this. We have also successfully launched PCP and have acquired long term orders from customers. Demand of our Exclusive Synthesis products from pharmaceuticals and agrochemicals customers have been consistent and we are also working with international customers on new projects to grow our Exclusive Synthesis business in future. Revenue from this business stood at Rs. 1 1,785 million during the year as compared to Rs. 13,280 million in the brvious year. Increased competition in China market, supbrssed demand from the Paraquat sector and impact on realisation on account of anti-dumping duty affected our profitability in the year gone by. However, we have maintained good realisation in other export markets and have expanded our footprint in Europe and Emerging Markets. While the focus will remain on leadership products, the business will pursue new applications of Pyridines and Picolines for growth. We intend to leverage our cost competitive base to reach out into newer geographies within Europe and Emerging Markets. The integrated nature of our operations is an asset to us in this endeavour. Nutritional Products Our Nutritional Products business is a fully integrated operation and primarily manufactures and markets Vitamin B3. We are the second largest manufacturers of Vitamin B3 (Niacinamide and Niacin) in the world. Vitamin B3 finds applications in food, feed, pharmaceuticals and personal care. Customers rely on us for our manufacturing quality, reliability and high level of service standards. The biggest advantage we have is our integrated nature of operations. Beta Picoline manufactured under the Advance Intermediates and Speciality Ingredients business is the brcursor to Niacin and Niacinamide (Vitamin B3) produced. This provides us with the cost-advantage that is difficult for any player in the industry to match. Our facilities are in compliance with the leading and latest industry best practices and possess ISO, cGMP, FAMI-QS, FSSC: 2200, Kosher & Halal certificates. Our business is truly global with products being sold in more than 80 countries worldwide. Our offices and warehouses in the US, Europe and China enable us to access the major global customers. Moving forward our focus is to gain significant market share in the niche application areas such as food brmix and personal care. We are the largest manufacturer of Choline Chloride in India having different grades like 50% Silica Dry, 60% Corn Cob Dry, & 75% Liquid and all of these meet international quality standards. We offer speciality feed additives to farmers across the globe, thus helping them to continuously increase their return on investments, which are mainly Organic & Inorganic Trace Mineral Premix, Feed Acidifiers, Mould Inhibitors, Toxin Binders, Chromium based Growth Promoter, Feed Emulsifier, Encapsulated Calcium Butyrates and Liver Treatment Products. Over the last year, we have expanded our business to Bangladesh, Thailand and Nepal for our animal nutrition products which are expected to grow multi-fold in coming years. Recently, we have signed a marketing agreement with two international companies for marketing of their products in South Asia. We believe in bridging relationships and delivering consistent value to cement and sustain our customer relationships. Our revenue in FY 2015 were at Rs. 4,860 million as compared to Rs. 3,960 million in the last year, driven largely by volume growth and high capacity utilisation. The year was marked by price stabilisation in our key products. From the beginning of new financial year we are observing increase in market prices in some of our products due to reduced supply of key raw materials which will drive improvement in margins in the coming months/quarters Life Science Chemicals Our Life Science Chemicals business is engaged in production of various organic intermediates including Acetic Anhydride, Ethyl Acetate, Monochloroacetic Acid and Sodium Monochloroacetate. We are the largest producers of these Acetyls products in India and continuing to maintain global position. We enjoy the largest market share of India for our Ethyl Acetate and Acetic Anhydride for the last two decades. Globally, we are one of the fastest growing Acetyls Company. Acetic Anhydride is a key ingredient and finds several usages globally in production of Active Pharmaceutical Ingredients(APIs) and Agrochemical Actives. Ethyl Acetate is used as green solvents globally and finds usage in various growing segments like pharmaceuticals, agrochemicals, paints, printing inks, and adhesives etc. Both Ethyl Acetate and Acetic Anhydride are an essential part of important chemical reactions; Acetyls also find usage across a spectrum of industries. We reported revenue of Rs. 14,797 million in FY 2015 from Rs. 13,517 million in the brvious year. Capacity de-bottlenecking that we had undertaken, and new customer acquisition has supported this performance. Building on an improvement in our domestic market position, the exports of key Acetyl products has shown promise after we expanded operations in Europe. Our strategic push into the European and Emerging Markets is gaining traction and it should translate into volumes upsides. We expect higher capacity utilisation to help us address increased demand in Europe and Emerging Markets. Simultaneously we endeavour to optimise the cost base through intelligent deployment of multi-modal transport and facilitating reverse logistic operations. The later part of year had faced price erosion and lower demand of our key Acetyl products due to global scenario change of crude oil prices and exchange rates (especially Euro to US dollar) which we could manage with lesser impact due to our strong customer services and relationship. We expect that price hikes in near future will drive improvement in margins in the coming period. Research & Development and Intellectual Property At Jubilant, Research & Development (R&D) is the manifestation of our belief in innovation and quality that fuels our business aspirations. Over 890 well-qualified scientists, working in multi location state-of-the-art R&D centres, focus on delivering innovative, quality products and platforms across value chain of pharmaceutical research. The Company is focused on world-class R&D and over a period of time has built significant expertise in Pharmaceutical Research, Contract Research, Novel Drug Delivery Systems Research, Drug Discovery Research, Chemical Research pertaining to APIs, Radiopharmaceuticals, Advanced Intermediates, Fine Ingredients and Biological support including Pharmacokinetics and Clinical Research. Jubilant has designed a very successful R&D which continues to ensure delivery of a sustainable pipeline of high-value drug products. The Company's R&D strategy is centred on improving the speed and yield of generic products. We have always demonstrated our commitment to support humanitarian efforts by bringing quality and affordable generic medicines in the market. Regarding APIs, focus continued to be on developing commercially competitive, intellectual property compliant, robust and eco-friendly technologies with appropriate PolyState selection of APIs which are eligible for Day 1/181 launch through innovative R&D approaches. We are also putting efforts to move up in value chain on the technology curve and have developed various environment friendly technologies wherein batch processes have been replaced by continuous processes and chemical processes with enzymatic/chemo catalysis processes maintaining focus on optimum productivity and lowest effluent per unit volume of equipment. R&D innovative efforts have helped us in developing IP compliant technologies avoiding any costly intellectual property litigations by identifying newer innovative opportunities and also to create our own intellectual property which is well protected in defined geographies of our business interests. We also keep our options open to licence-in/licence-out technologies/know-how to accelerate businesses of interest. We have been conferred with various brstigious awards nationally. Manufacturing Continual improvement in all facets of Manufacturing, be it operations cost, statutory compliances, process innovations, resource conservation and people processes are the key drivers for manufacturing locations at Jubilant Life Sciences Limited. Based on a robust three year rolling strategic plan, the manufacturing facilities have been taking various initiatives to stay ahead of the competition. Improving asset productivity through value stream mapping has resulted in unlocking plant capacities at incremental investments. World-class manufacturing techniques and Total Productive Maintenance (TPM) are being institutionalised as a way of life. Plant processes have been optimised to minimise waste generation at source and stringent environment and safety safeguards are an integral part for all projects through a well-defined stage gate process. We take pride in our facilities including 7 manufacturing plants in India and 3 manufacturing facilities across North America. Our Solid Dosage Formulations facility at Salisbury, Maryland in the US is able to serve a large generics market of North America. To service business in other international markets, we manufacture and supply products globally as well as for the US from our facility at Roorkee, Uttarakhand in India. We are responding to the US FDA concerns at our facility in Spokane, Washington in the US and received four 483s on a subsequent audit and hope for an early resolution to the matter. Our two finished dosage plants in Roorkee and Maryland received one and zero 483's respectively during their last inspection. All the manufacturing facilities sites have robust systems in Quality, Environment and Occupational Health & Safety. APIs & Solid Dosage Formulations facilities in India are approved by US FDA, UK MHRA, PMDA (Japan) and TGA (Australia). Backed by the strong belief that "People are our number one asset", skill up gradation, talent succession and career plan has been a sustained and focused effort at the manufacturing locations. Emphasising the commitment to sustainable business is the strong awareness and pro-active approach to regulatory compliance. Integration of our in-house compliance monitoring system with the various internal processes facilitates and tracks the compliance status, giving advance notice to any upcoming requirement or change. To achieve greater heights and deliver right quality product in time, manufacturing function continues to act as a support and catalyst for the organisation. Awards and accolades have been a measure of the recognition of our efforts. We won FICCI Chemicals & Petrochemicals Award 2014 -"Process Innovator of the Year 2014" in Fine Chemicals category and CII Energy Efficient award for 2014 to our Gajraula Plant. Supply Chain The last year was a very volatile year for many commodity products bought by Supply Chain Management. The volatile market needs a very cautious buying strategy from Supply Chain. Supply Chain responded very well to this situation by acting with caution and pragmatism. Supply Chain also increased the use of multi-modal transport, including rail, this year. This is our further step towards 2E i.e. Economy & Ecology. Last year we did the implementation of EJ-BUY. This year we consolidated the gains from EJ-BUY by extending its use to many other categories. Besides this, we also implemented delivery tracking module of EJ-BUY which will help in better tracking of incoming material Supply Chain also started work on up gradation of Enterprise Resource Planning module to get on time in full (OTIF) details. This will definitely improve the customer satisfaction level in near future. Business Excellence Business Excellence strives to create a culture of excellence in the organisation by continuously seeking to enhance Jubilant's People, Processes and System capabilities. It uses the latest transformation methodologies to continuously improve the competitive advantage of the organisation. Over the past years a very strong foundation of using these improvement techniques in operations has been made. Projects dealing with productivity and quality improvements, capacity enhancements have significantly added to the bottom-line of the Company. While sustaining and enhancement of these gains will be done in Operations, we would like to extend Business Excellence initiatives to Supply Chain and Office functions as well. This includes Inventory and Cost Optimisation projects in Supply Chain, Process Lead time reductions and standardisation in HR, IT, Finance, R&D and Procurement processes. At the same time we continue to build continuous improvement DNA in the organisation through Lean Six Sigma Certifications and the 'Sankalp' initiative. Both these initiatives contribute significantly to improvement projects at the sites. Recently, Business Excellence function has also added competencies such as Maynard Operation Sequencing Technique (MOST) for manpower productivity enhancement and Dynamic and Steady State Simulation Modelling for enhancing efficiencies of chemical processes using tools like ASPEN and DYNOCHEM. The scope of these improvement initiatives covers all facets of the business including Manufacturing, Sales and Marketing, New Product Introduction (R&D), Supply Chain, Corporate HR, Projects and other support functions which help in creating a more efficient value chain. The Business Excellence infrastructure element helps in creating self-driven / mission directed teams which drive their operational area towards excellence in alignment to business objective through right accountability and training. Human Resource Management The Company takes extreme pride in its greatest resource and asset - the employees. Our employee base has been the backbone of the Company, in contributing towards the success of the Company and sustaining the same over the years. As on today, we provide employment to 6,085 employees across various businesses and functions We foster a work environment and culture that is based upon our core values of Inspire Confidence, Nurture Innovation, Always Stretch, and Excellent Quality. We stand by Our Promise of Caring, Sharing, Growing and it is our constant endeavour to make Jubilant Life Sciences one of the best places to work at. The Company believes in open and transparent culture and in order to sustain the same, we regularly listen to the voice of our people through engagement surveys, town halls and open houses. We have a well-defined robust leadership competency framework that inculcates and reinforces a common leadership culture across the organisation. The leadership competencies are instrumental to our talent management philosophy. Our leadership development programs are designed in order to brpare our leaders to adapt to fast paced changes in the industry and build leaders to manage growth. A total of 75 leaders across business entities and functions have been exposed to various leadership development tools like 360 degree feedback and development centres. Today's fast paced business changes make it imperative to focus on forward looking and futuristic systems and applications. As a step towards this, we have implemented PeopleSoft based Human Resource Information Systems (HRIS) across all our locations and entities. The HRIS system is designed to cover all key HR processes - Performance Management, Recruitment, Training & Development, Profile & Position Management, Career & Succession Planning, and Compensation & Benefits. Our Rewards & Recognition policy that recognises performance and significant contribution through the Chairmen's Awards and Applause is an outcome of this process. We ensure that there is full adherence to the code of business conduct and fair business practices. We have signed a policy on Confederation of Indian Industry (CII) Code of Conduct on Affirmative Action that reconfirms our commitment that equal opportunity in employment for all section of society is a component of our growth and competitiveness Risk-taking is an inherent trait of any enterprise. It is essential for growth or creation of value in a Company. At the same time it is important that the risks are properly managed and controlled, so that the Company can achieve its objectives effectively and efficiently. Internal Financial Control Framework Section 134(5)(e) of the Companies Act, 2013 requires a company to lay down internal financial controls system and to ensure that these are adequate and operating effectively. Internal financial controls, here, means the policy and procedure adopted by the company for ensuring the orderly and efficient conduct of its business including adherence to company's policies, the safeguarding of its assets, the brvention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely brparation of reliable financial information. The above requirement has the following elements: 1. Orderly and efficient conduct of business 2. Safeguarding of its assets 3. Adherence to company's policies 4. Prevention and detection of frauds and errors 5. Accuracy and completeness of the accounting records and timely brparation of reliable financial information At Jubilant Life Sciences Limited, the internal financial controls system is in place and incorporates all the five elements of Internal Financial Control Framework as mentioned below: Orderly and Efficient Conduct of Business The Company has a well laid down organisational structure which defines the authority-responsibility relationship. The Company has a formal financial planning and budgeting system in place encompassing the short term as well as long term planning. In order to ensure that the decisions are made and action taken at an appropriate level, the Board of Directors of the Company have formulated the Delegation of Authority which has been designed to ensure that there is judicious balance of authority and responsibility. The adherence to Delegation of Authority is part of Internal Audit Plan. The Company also has the risk management framework in place which has been discussed under the heading Jubilant's Vision on Risk Management. Compliance with respect to various statutes, rules and regulations applicable to Jubilant is managed by Secretariat department. Status of compliance is governed through an intranet based application 'Statutory Compliance Reporting System' (SCRS). Respective control owners certify the compliances on a quarterly basis in SCRS and a compliance report is brpared through SCRS. The objective of the SCRS certification is to ensure that the compliances are effectively managed and controlled and that they support the Company's business objectives and corporate policy requirements. Safeguarding of its Assets The Company has taken an all industrial risk policy for all of its plant as well as corporate office to safeguard its assets. The Company also carries out a physical verification of its assets. Adherence to the Company's Policies The Company has a two tier policies and procedures viz. Entity Level Controls and Process Level Controls. The entity level control includes a combrhensive code of conduct and code of ethics. The Company also has a Whistle Blower Policy in place and any employee of the Company can directly write to the Ombudsman office. We also have process level controls which cover a wide range of key operating financial and compliance related areas like Accounting, Order to Cash, Procurement to Payment, Inventory and Production, Treasury, Legal, Forex, Fixed Assets, Direct and Indirect Tax, R&D, ITGC etc. Self-assessment certifications of controls are being done by the Control Owners through a verifiable and transparent sign-off process and such certifications are reinforced by Activity and Location Owners, as they give in-principle approval to the self-assessment by the Control Owners. Result of Controls Manager certification is brpared and brsented to the audit committee every quarter by the CFO for exception review. Controls certification are also being validated by the in-house team through review of the assertions certified by the Control Owners on sample basis regularly across business units, plants, branches and corporate office and validation results of Controls Manager certification is brpared and brsented annually to the audit committee. The above policies are periodically reviewed and refreshed in line with the change in business and regulatory requirements. The Audit Committee, on a quarterly and annual basis, reviews the adequacy and effectiveness of the internal controls being exercised by various business and support functions. Prevention and Detection of Frauds and Errors Due to the brsence of strong Code of Ethics and Whistle Blower Policy, it is generally expected that serious frauds will not take place. In order to brvent and detect frauds and errors, perpetual internal audit activity is carried out by M/s Ernst & Young LLP. Action points and suggestions made by them are discussed in Sub-audit Committee meeting before brsenting the same to the Audit Committee. Subsequently, follow-up audits are also carried out by in-house internal audit team to ensure implementation of the suggestions. In addition, special audits are carried by the in-house audit team in areas that may be vulnerable to fraud. Accuracy and Completeness of the Accounting Records and Timely Preparation of Reliable Financial Information The Company has a very well documented and updated Accounting Manual based on the existing Indian Generally Accepted Accounting Principles. The Accounting Manual contains detailed guidelines on all aspects of accounting applicable to the Company and has been brpared in line with all applicable accounting standards, guidance notes and expert opinions. This helps in ensuring that the accounts and finance team is well updated on the applicable accounting requirements. Financial consolidation is carried out through an Enterprise Resource Planning system called Hyperion thereby minimising the chances of manual errors. The financial information is verified by the statutory auditors on a periodic basis as per the requirements of Companies Act, Listing agreement, ICAI guidelines, etc. The Company has an 'Accounting Centre of Excellence' headed by an expert in accounting domain. The Accounting Centre of Excellence provides structured trainings to the accounts and finance team on a wide range of topics covering Indian GAAP, Ind AS, IFRS, Companies Act, 2013, Direct & Indirect taxes, etc. through in-house & outside experts. Our Vision on Risk Management To establish and maintain enterprise wide risk management capabilities for active monitoring and mitigation of organisational risks on a continuous and sustainable basis Risk Management Strategy Jubilant has a strong risk management framework in place that enables regular and active monitoring of business activities for identification, assessment and mitigation of potential internal or external risks. The Company has in place established processes and guidelines, along with a strong overview and monitoring system at the Board and senior management levels. Our senior management team sets the overall tone and risk culture through defined and communicated corporate values, clearly assigned risk responsibilities and appropriately delegated authority. We have laid down procedures to inform Board members about the risk assessment and risk minimisation procedures. As an organisation, we promote strong ethical values and high levels of integrity in all our activities, which by itself significantly mitigates risk. Our risk management structure comprises the Board of Directors and Audit Committee at the Apex Level, supported by Executive Directors, CEOs (Chief Executive Officers), Business Chief Financial Officers, Functional Heads, Business Unit Heads and Head of Management Assurance function. As risk owners, the Heads are entrusted with the responsibility of identification and monitoring of risks. These are then discussed and deliberated at various review forums chaired by the Executive Directors & CEOs and actions are drawn upon. Progress against the risk management plan is periodically monitored and validated. The Audit Committee, Executive Directors, CEOs and Head of Management Assurance act as a governing body to monitor the effectiveness of the internal financial controls framework. Risk Mitigation Methodology We have a combrhensive internal audit plan and a robust Enterprise Risk Management (ERM) exercise which helps to identify risks at an early stage and take appropriate steps to mitigate the same. Every year an independent assessment of mitigation plan provided by business is done by in-house internal audit team. Further, a status update for change in key risks is provided by businesses. We have a quarterly certification process wherein, the concerned control/ process owners certify the correctness of entity level and process level controls. The certification process is in operation from last nine years and covers about 1,500 controls. The process level controls covers a wide verity of key operating, financial and compliance related areas, while, the entity level controls cover integrity and ethical values, adequacy of audit and control mechanism and effectiveness of internal and external communication, thereby, strengthening the internal financial controls systems and processes with clear documentation on key control points. This has made our internal controls and processes stronger and also serves as the basis for compliance with revised Clause 49 requirements mandated by the Securities and Exchange Board of India (SEBI). Management's Assessment of Risk The Company identifies and evaluates several risk factors and draws out appropriate mitigations plans associated with the same. Some of the key risks affecting its businesses are laid out below: Competition Since a significant share of the Company's business comes from exports, it faces stiff competition from both domestic as well as international markets. Manufacturers in China, who aided by economies of scale, favourable policies, lower costs amongst others may pose a risk in terms of threatening the Company's ability to maintain its market leadership, achieve planned growth and generate planned margins. Additional risk of competition manifests in the form of certain competitors being suppliers of core raw materials for Life Science Chemicals business, new entrants resorting to penetration pricing to make inroads, dumping strategy by Chinese manufacturers to fuel price wars from local players amongst others and excess availability in market which can force decreased price and margin. For its Pyridine product of Advance Intermediates business, the Company faces major competition from China because of inability to match competition prices due to dumping duty. The Company has taken several steps to deal with the above challenges, viz.: Building economies of scale in manufacturing, distribution channel and procurement to maintain cost advantage and sustained entry barrier • Building long term relationship with key customers by offering improved quality and service experience • Micro level planning of inventory • Introducing cost improvement initiatives and manufacturing efficiency improvement plans at plant • Undertaking cost optimisation opportunities which will help in successfully taking on international competition • Developed new suppliers for certain key raw materials • Significant R&D has been done focusing on improving raw material and utility consumptions and increasing the manufacturing efficiencies • Anti-dumping review is initiated in China and outcome is expected by FY 2016 • Increasing the volumes in other markets • Increasing the volume in other customer business • Improving efficiencies across business functions to enhance profitability Cost Competitiveness Constant and rising input prices amidst inflationary market conditions pose a risk to the Company's ability to retain price competitiveness and build reserves to drive future growth. There is also a risk that we may not be able to procure the planned quantities at planned prices, thereby, adversely impacting the margins. Volatility in raw material prices, sugar industry trends (Life Science Chemicals business), and increase in input prices of core material such as Acetic Acid and Ammonia have cascading impact on other businesses in terms of increased cost of input materials. Debrciation of Rupee and its consequential impact on fuel prices adversely impacts the logistic cost, thereby, putting additional brssure on the margin of the Company when competing globally. In Animal Nutrition business, the Company sold its products on lower prices in comparison to last financial year due to poultry production capacity expansion which leads to brssure on prices of broiler and eggs and uncertainty in domestic poultry market. The Company believes that it is a low-cost manufacturer for most of its products and is a major contender for outsourcing opportunities with global corporations offering products that also conform to quality standards set in developed markets. In particular the Company has taken following steps for mitigation of this risk: • Wherever feasible, the Company enters into long term contracts with volume commitments and prices which are linked to key input material prices to mitigate risks • Undertaking projects on lean six sigma to identify least cost matrix • Developing cheaper alternatives and re-engineering costs to counter increase in input cost • Passing on the increase in raw material prices to customers on the strength of excellent customer relationship and sales and distribution network • Developing local contract manufacturing facilities thereby de-risking the impact of price movement in raw materials (especially from China) • Developing new suppliers to mitigate the risk of higher input prices and non-availability of raw material in time • Focus on increasing volume to compensate the price • Diversification in-to other species (Dairy/Aqua) and exports. Foreign Currency and Interest Rate Exposures There has been a significant movement in exchange rates in the last couple of years. Due to the global operations, the Company has significant foreign currency exposures. Adverse movement in exchange rates can significantly impact the financial result of the Company. Volatility and uncertainty in foreign exchange rate creates complexity and challenges in determining the price which balances margin protection goal and at the same time is attractive to customers. Increase in borrowing cost may also adversely impact the profitability of the Company. To mitigate foreign currency related risks, the Company has a strategy in place to take measured risks through hedges and forward covers. It has a Committee of dedicated experts and professionals to periodically advise on matters relating to foreign currency risk management. The risk management team formulates policies and guidelines which are periodically reviewed to align with external environment and business exigency. Further, if required, currency and interest rate swaps are taken on loans and interest rate exposures. A quarterly update on foreign exchange exposures, outstanding forward contracts and derivatives is placed before the Board. The Company also actively pursues opportunities for reduction in borrowing costs. Capacity Planning and Optimisation There is a risk that insufficient capacity threatens the Company's ability to meet customers demand and to be competitive, or excess capacity threatens the organisation's ability to generate competitive profit margins. Delayed commissioning, cost overruns and inability to deliver as per standards can significantly threaten expected Return on Investment (ROI) amidst issues relating to customer dissatisfaction and adverse impact on reputation. Repeated break-downs, faulty designs and idle capacities contribute to inefficiencies in manufacturing process, escalate cost and impair the ability to service its customers effectively. The Company ensures that capacity creation is in sync with business plan. The business teams regularly tracks the trends for each product to ensure that there is sufficient capacity to meet the demand. The Company has robust processes in place to continuously monitor plant capacities, utilisation and drive improvements aligned with good manufacturing practices such as brventive maintenance schedules, modifications to plant designs in case of repeated breakdown. It periodically undertakes de-bottlenecking and other initiatives to improve efficiencies in terms of throughput, cost reduction and build additional capacities without committing significant capital outlay thereby generating better ROI. Further, project management processes are aligned with business goals. Reason for delay is critically analysed so as to take corrective measures for execution of future projects. Stage Gate process has also been initiated for all large capex as well as new product commercialisation to ensure timely delivery of projects. In Crop Science Ingredients business, to mitigate the challenge of Symtet production, initiatives is lined up to achieve consistent Symtet production by de-bottlenecking. Further, to achieve Penta Chloro Pyridine purification capacity, Company is exploring both external manufacturing site and in-house capability and also looking after initiatives for optimum asset utilisation of 5-Chloro-2,3-Difluoro Phyridine (CDFP) plant R&D Effectiveness Innovation, speed-to-market and a robust product pipeline are critical factors to ensure success for a life sciences company. Failure of R&D to provide innovative and cost effective products would result in non-achievement of top line/ bottom-line goals. Similarly, an R&D function which fails to meet the expectations of the business, such as, meeting target product costs and minimising product cost deviations between R&D and operational phase will adversely impact the Company's ability to launch its products competitively and, hence, put to risk, its ability to command market share. Risk of Company failing to develop products which are compliant with accepted standards documentation will significantly dent Company's reputation in addition to the financial loss associated with the failed launch. Further, emergence of new cost effective methods for producing core products supplied by the Company can pose a risk to the Company's competitive position. The Company has an effective strategy in place to mitigate this risk with earmarked budgets and investments in R&D commensurate with the business plans. R&D set up at various plant locations continuously works on cost reduction of existing products and development of new products. Further, the focus is on development of processes within minimum time limits at optimum cost. The Company has institutionalised robust processes and proven R&D methodologies to ensure successful commercialisation and minimum surprises during scale-up. The R&D keeps itself updated with the regulations, upcoming technological changes and trends and proactively aligns with pharmacopeia methods and industry best practices. Human Resources - Acquire and Retain Talent Acquisition and retention of right talent is critical to maintain desired operational standards. There is a risk that an insufficient focus on human resources processes (e.g. recruiting, talent management, labour management, development and training) threatens the possibility for Jubilant to recruit and/or hold the qualified personnel required to maintain desired operational standards. Further, given the Company's dependence on R&D activity, it is imperative that it recruits and retains high quality R&D specialists. Lack of credible successors or effective knowledge transition mechanism may adversely affect the Company's position in case of unexpected departures in key positions. Lack of availability of qualified resources, the inability to create a positive brand image amongst potential employees or inability to put in place strong systems to ensure timely recruitment of suitable candidates, could limit the ability of the Company to attract appropriate resources. Shortfall of talent could set in motion downward spiral of deterioration in business performance itself reducing attractiveness and so on. The Company has committed substantial resources to this effort given the competition for qualified and experienced human resources. Job enrichment is provided to employees at all levels. To execute its growth and diversification plans, while on one hand the Company continues to hire new, highly-skilled scientific and technical personnel staff, employees get rewarded under Reward and Recognition Program based on performance. As part of our Strategic Talent & Succession Management Process, the leadership invests valuable time in identifying High Potential and Succession Candidates for the critical positions and planning their development for next higher role. Individual development program are also being regularly conducted to develop the next line of managers. In certain businesses, campus sales trainees are being groomed for future sales positions. Portfolio and Mix: Customer and Product Concentration It is important to have a balanced portfolio in terms of customers, markets and products so as to be able to execute business strategies and monitor and assess impact of decisions. A change in customer organisation, behaviour, needs and/ or expectations may lead to a decrease in market attractiveness and / or adverse competitive position. The Company needs to seek the right balance between high margin-low volume products and low-margin-high volume products. A high customer concentration poses a risk in terms of sudden dip in market share in the event of loss of key customers or share of business due to shift of customer's brference to competitors. An over-dependence on single product or few customers may adversely impact the realisation of long term business objectives in the event of any regulation limiting the end use application. In case of high dependence on specific geography, failure to accurately forecast socio-political-economical trends or regulatory changes in key customers' markets may significantly impact business performance. In Life Science Chemical business, Company had high cost inventory of acetic acid due to sudden drop in prices of Acetic Acid. In addition to that, Ethyl Acetate prices in Europe went down sharply. Also, the Company has imported alcohol with the anticipation of higher Alcohol prices in India; however prices in India went down significantly The Company has taken the following steps to mitigate the above risk: • Developing new geographies / markets globally to reduce dependence on a particular market • Robust customer and account management programs to safeguard itself against shift in customer brference • Investment in R&D to broaden the product mix and widen the portfolio to support forward integration with value added products such as Vitamins and Symtet businesses to overcome dependence on single/ few products • Exploring new downstream opportunities in terms of applications and alternate use of the products available in its portfolio • Shifting from bulk sales to ISO sales to save freight and reduction in working capital • Selling part of our high cost inventory of acetic acid at minimum loss. Compliance and Regulatory Over the last few years the various regulators and law enforcing agencies are adopting a zero tolerance approach towards non-compliance. The Company needs to comply with a broad range of regulatory controls on testing, manufacturing and marketing of our products in the pharmaceutical and life sciences space. Besides there is a host of local laws that the Company need to comply with. In some countries, including the US, regulatory controls have become increasingly demanding leading to increased costs and reduced operating margins for our line of products and services. Failure to achieve regulatory approval of new products can mean that we do not recoup our R&D investment through the sale of final products. Any change in regulations or reassessment of safety and efficacy of products based on new scientific knowledge or other factors could result in the amendment or withdrawal of existing approvals to market our products, which in turn could result in revenue loss. This may occur even if regulators take action falling short of actual withdrawal. The Company has adopted measures to address these stricter regulations by increasing the efficiency of our R&D process, reducing the impact of extended testing and making our products available on time. The Company is proactively following-up with regulatory authorities on pending approvals and deficiencies raised by authorities are timely responded. Further, estimation of risk factor on account of failure/ delay in obtaining approvals is duly considered while designing business plans. The Company has also put in place a compliance management system to ensure compliance with all applicable laws and regulations. The Company also undertakes training and orientation programs to keep the relevant process owners updated on new regulations and changes in the existing laws. Environment Health and Safety (EHS) In the current business climate of reputational threats and rising political backlash, corporates need to tread carefully to maintain public trust. Social acceptance and Corporate Social Responsibility (CSR) have become increasingly important over the last decade. Non-compliance with stringent emission standards for the manufacturing facilities and other environmental regulations may adversely affect the business. R&D, life science services and manufacturing of products involve dangerous chemicals, process and byproducts and are subjected to stringent regulations. The Company anticipates that environmental laws and regulations in the jurisdictions, where it operates, may become more restrictive and be enforced more strictly in the future. It also anticipates that customer requirements as to the quality and safety of products will continue to increase. In anticipation of such requirements, the Company has incurred substantial expenditure and allocated other resources to proactively adopt and implement manufacturing processes to increase its adherence to environmental quality standards and enhance its industrial safety levels. For Ethanol business, the Company is looking after initiatives for reduction of effluent stocks at Gajraula and Nira plant. At Jubilant, the challenges due to Company's operations related to EHS aspects of the business, employees and society are mapped and mitigated through a series of systematic and disciplined sets of policies and procedures. For further details, investors may kindly refer to the Corporate Sustainability Report of the Company which is available on the website, www.jubl.com <http://www.jubl.com> under the 'Sustainability' section. Protecting Intellectual Property Rights (IPRs) Our success will depend, in part, on our ability in the future to obtain and protect IPRs and operate without infringing the same of others. There is a risk that our competitors may have filed patent applications, or hold issued patents, relating to products or processes that compete with those we are developing, or their patents may impair our ability to do business in a particular geography. Besides patents, the Company relies on trade secrets, knowhow and other proprietary information and, hence, our employees, vendors and suppliers sign confidentiality agreements. |