MANAGEMENT'S DISCUSSION AND ANALYSIS

Overview of the Healthcare Sector

India is the second most populous country in the world with a population of 1.2 billion and growing at a rate of 1.2%. India faces a continuing challenge of fighting infectious diseases such as malaria, tuberculosis and leprosy along with increasing lifestyle related problems such as cancer, cardiovascular disease and diabetes (Source: BMI Report on Indian Medical Devices).

Healthcare infrastructure

In 2014, India had 0.8 hospital beds for a population of 1,000, which is below the average for the Asia Pacific region. However, in more populous areas in under-developed states, the ratio was 0.2 beds per 1,000 persons in the public sector. In 2010 there were an estimated 12,760 inpatient facilities in the public sector with 576,793 beds. Rural areas were served by 6,795 hospitals and community health centres ("CHCs") with 149,690 beds while urban areas were served by 3,748 hospitals and CHCs with 399,195 beds (Source: BMI Report on Indian Medical Devices).

While hospitals have grown at a CAGR of 4.5% since 2009, from 31,018 hospitals to 38,713 hospitals in 2014, the number of hospital beds has grown at a CAGR of 2.5% since 2009, from 0.7 beds per 1,000 persons to 0.8 beds per 1,000 persons in 2014.Further, inpatient admissions have grown at a CAGR of 3.1% to 44.7 patients per 1,000 persons and outpatient visits have grown at a CAGR of 1.3% to 2,282.3 per 1,000 persons, during the same period. The Draft National Health Policy, 2015 has set a target of one hospital bed per 1,000 persons with the aim of providing access to secondary care within one hour, which would require increasing the bed capacity to over 300,000 beds over the next five years (Source: BMI Report on Indian Medical Devices).

According to the BMI Report on Indian Medical Devices the private sector is the dominant healthcare provider in urban areas and the major end user of medical equipment. Private hospitals have witnessed a growth at a CAGR of 6.3% between 2009 and 2014(Source: BMI Report on Indian Medical Devices).

Healthcare expenditure

The estimated healthcare expenditure in 2013 was US$ 79.2 billion, equivalent to 4.4% of the GDP of the same year, with per capita healthcare estimated at US$ 63 in 2013. Of this private health expenditure constituted 66%, primarily in the  form of out-of-pocket spending and public health expenditure accounted for the remaining 34%. However, the 12th Five Year Plan (2012-17), formulated by the erstwhile Planning Commission of India, had set a target of doubling the level of public health expenditure to constitute 2.5% of the GDP and increasing health insurance coverage  from 25% to 75%.

According to the BMI Report on Indian Medical Devices, the increased spending by the GoI provides an opportunity to manufacturers of medical devices as new facilities are being constructed and existing ones are being upgraded, due to the lack healthcare infrastructure in the country. It further expects that foreign manufacturers of medical devices will be restricted to the private sector where there is a requirement for high quality products.

Overview of the Medical Devices Sector

India is one of the top 20 markets in the world and the fourth largest market in Asia, after Japan, China and South Korea for medical devices (Source: GoI Report on Medical Devices Sector in India). As per the BMI Report on Medical Devices in India, the medical devices industry has witnessed growth rates of up to 28.6% in 2012, in Rupee terms, and an estimated CAGR of 16.1% from 2008 to 2013.

The BMI Report in Indian Medical Devices expects a growth of 7.0% over the next five years, on the back of the Gol's pro-growth policy agenda to increase investments through initiatives such as 'Make in India' campaign. Further, considering India is largely reliant on imports, it is likely to benefit from a fall in global oil prices to help reduce current account deficit and ease inflation. Private consumption is expected to remain resilient on account of receding inflation and increased job opportunities. BMI projects FDI into India to be buoyant as investors remain positive on India's growth prospects and the government continues to promote greater inflows into various sectors of the economy, including the medical devices sector (Source: BMI Report on Indian Medical Devices).

Medical Devices Manufacturing in India

The Indian medical device manufacturing industry is fragmented with approximately 800 manufacturers, comprising small and medium enterprises undertaking manufacture of disposable medical devices and multinational companies supplying high end medical equipment. Of these, 65% of the manufacturers generate a turnover of less than X10 crore and less than 2% of the manufacturers generate a turnover of over X 500 crore (Source:GoI Report on Medical Devices Sector in India).

According to the GoI, the medical devices industry in India is brdominantly import driven, whereas the domestic firms participate in the low technology based, high volume market which is highly competitive. However, manufacturing companies are shifting their focus from capturing market share to market creation and are discovering innovative products with an aim to carve market niches for themselves (Source: GoI Report on Medical Devices Sector in India).

Although, the medical devices sector is largely import driven, the disposable medical devices and consumables imports constitute only a small part of the total medical devices imported into India. During April 2014 to October 2014, the aggregate value of disposable medical devices and consumables was X2,170.12 crore out of aggregate import of medical devices of X13,028.12 crore (Source: GoI Report on Medical Devices Sector in India).

Overview

We are an innovative and research and development focused company in the disposable medical devices industry in India. We manufacture and supply, in India and internationally, a diverse portfolio of disposable medical devices in the product verticals of infusion therapy, blood management, gastroenterology, surgery and wound drainage, anesthesia and urology. As of March 31, 2015, we had over 100 varieties of disposable medical devices, including veterinary disposable devices.

We have been recognized as the highest exporter of plastic medical disposables/ surgical devices for 2011-12 and 2012­13 by the Plastics Export Promotion Council, sponsored by Department of Commerce, Government of India, and have also received the 'Gold Award' for 2010-11 in recognition of our commendable contribution to pharmaceuticals exports from India from the Pharmaceuticals Export Promotion Council of India, supported by the Department of Commerce, Government of India. Approximately 70.83% of our total revenues were attributable to export of our products for fiscal 2015.

We have a strong focus on research and development for developing user-friendly products to expand our existing product portfolio, improving existing processes and productivity and developing processes for environmentally friendly products. Our in-house research and development facility at Faridabad has been approved by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India ("DSIR"). Based on the efforts of our research and development division, we have  successfully been granted 95 product and process patents globally and have also filed for grant of an additional 280 patents in India and worldwide. We have also developed a number of safety medical devices across product lines, including Safety I.V. cannula and Safety scalp vein sets within the infusion therapy vertical, Safety blood collection sets within the blood collection vertical and Safety fistula needles within the dialysis vertical.

Our Business

We currently have five manufacturing facilities across India and China. In India, we have four manufacturing facilities, two of which are situated at Faridabad, Haryana, and one each in Jaipur, Rajasthan and Haridwar, Uttarakhand. One of our facilities in Faridabad has been inspected by the USFDA under the Quality System/Good Manufacturing Practices ("QS/GMP") Regulation. Further, our Indian manufacturing facilities have been accredited with several international quality certifications, including CE mark certificates for quality management systems and management system certificates for compliance with ISO  9001:2008/ISO 13485:2003 by Det Norske Veritas (DNV),

Norway. Our manufacturing facility in China is certified to be compliant with Korea Good Manufacturing Practices by the Korea Food and Drug Administration ("Korea FDA") and has been accredited with a CE mark certificate for its products and EN ISO 13485:2012 for its quality management system by TUV Rheinland LGA Products GmbH. In addition, we hold a 23% equity interest in Ultra for Medical Products, Egypt, that operates a manufacturing facility in Assuit, Egypt for disposable medical devices, which is also accredited with CE mark certificates and ISO 9001:2008/ISO 13485:2003 by SGS United Kingdom Ltd.

Over the years, we have developed an extensive sales and distribution network across India. As of March 31, 2015, our distribution network included over 20 distributors and over 900 dealers with a pan-India brsence. We believe we have developed long term relationships with a majority of our distributors. Our sales division is also involved in creating awareness of our products in over 3,000 private and government hospitals and nursing homes across India. We supply our products to over 90 countries in Europe, south­east Asia, the Middle East, South and Central America and Africa through over 125 distributors in these jurisdictions.

Our Operations

Our manufacturing facilities situated in India and China. In addition, we hold a 23% equity interest in Ultra for Medical Products, Egypt, that operates a manufacturing facility in Assuit, Egypt for disposable medical devices

Our Products

Our current product portfolio comprises of over 100 varieties of disposable medical devices which are broadly divided into eight product verticals. Infusion Therapy, Anesthesia, Urology, Gastroenterology, Blood Management and Blood Collection, Surgery and Wound Drainage, Dialysis and Central Venous Access Catheters.

We also seek to further develop our portfolio of safety medical devices in several product verticals and foray into new product verticals with a focus on developing and manufacturing critical care medical devices.

Our Manufacturing Facilities

India

We currently operate four manufacturing facilities in India, two of which are located at Faridabad, Haryana, one at Jaipur, Rajasthan and one at Haridwar, Uttarakhand. Our manufacturing facilities located at Faridabad, Haryana commenced commercial operations in fiscal 1997 and fiscal 2004 and are sbrad over a total area of 3,720 square meters and 7,920 square meters, respectively. Our manufacturing facility located at Haridwar, Uttarakhand commenced commercial operations in fiscal 2008 and is sbrad over an area of 3,825.00 square meters. Our manufacturing facility in Jaipur, Rajasthan commenced commercial operations in fiscal 2015 and is sbrad over a total area of 31,211.74 square meters. Each of these four manufacturing facilities include a clean room area, aggregating to a total area of 9,753.59 square meters, which is a controlled environment designed to brvent contamination of our products during production.

China

We operate our manufacturing facility in Laiyang-Qingdao, China, through Poly Medicure (Laiyang) Co. Ltd, our wholly owned subsidiary. This facility commenced commercial operations in fiscal 2010 andis sbrad over an area of 10,913 square meters. The total manufacturing area includes a clean room area of 1,006.40 square meters.

Egypt

We hold a 23% equity interest in Ultra for Medical Products, Egypt, that operates a manufacturing facility in Assuit, Egypt for disposable medical devices. This facility commenced commercial operations in fiscal 2004 and it is sbrad over an area of 12,500 square meters.

Manufacturing Process

Our manufacturing process comprises of using raw materials in moulding or Extrusion. The moulded  components and tubes are checked dimensionally and functionally through testing equipments, following which components are assembled, including by using assembly machines. The samples are tested and the products are packed using special packaging machines and subsequently packed in boxes. Thereafter, the final products undergo sterilization and quality checks.

Manufacturing Technology

We use different technologies for manufacturing different medical devices, including injection molding, extrusion, insert molding, blow molding, ultrasonic welding, UV bonding and laser welding and we have expertise in handling different kind of specialized plastic materials. We have over 150 injection molding extrusion lines across all our manufacturing facilities.

The manufacturing of components takes place on highly advanced PLC controlled plastic injection moulding machines, which is a high technology and generates minimal scrap. Tubes are produced on highly accurate extruders with good yield. Our assembly machines are built-in with poka-yoke features and vision inspection (smart camera) systems. Our tool manufacturing facility is equipped with CNC controlled machines which enables accurate and efficient control over fabrication of moulds. We believe our flexible production platform, broad machining capabilities and Design for Manufacturing (DFM) best practices enables us to manufacture a wide range of products and meet changing conditions with efficiency while ensuring high quality products and increase in production volume with minimal additional investment.

Research and Development

We operate a research and development center at Faridabad, Haryana which is approved by DSIR. Our research and development efforts are primarily focused on developing new products within existing as well as new critical care product verticals, with a focus on fluid management within non-communicable diseases segment, and further improving existing processes and productivity. As a result of our intensive research and development activities, we have successfully been granted 95 product and process patents and have also filed for grant of an additional 280 patents in India and worldwide, including in the United States of America, Europe and the United Kingdom, South Africa, Russia, China and Australia.

Our research and development center is equipped to undertake rapid prototyping, process validation and customization of products. Through our research and development initiatives, we also seek to minimize process wastage and develop environmentally friendly products by using biodegradable materials.

Sales and Distribution Network

We also have a country-wide sales and distribution network in India which enables us to have a wide market base. As of March 31, 2015, our distribution network included over 20 distributors and over 900 dealers. We believe we have developed long term relationships with a majority of our distributors.

In addition to our distribution network, our sales & marketing division comprising of over 150 employees, as of March 31, 2015, is involved in the creating awareness of our products in over 2,000 private and government hospitals, including by conducting continuing medical education programmes in several hospitals.

Financial Performance Income

Our total revenues comprise revenue from operations (sale of products and other operating revenues, net of excise duty paid or payable) and other income (including interest income, dividend income and other non-operating income). Total revenue increased by 23.25% from Rs. 32,329.93 lacs in fiscal 2014 to Rs. 39,846.75 lacs in fiscal 2015 primarily due to growth in our revenue from operations, for reasons described below.

Revenue from Operations

Gross revenue from operations increased by 20.83% from Rs.  32,700.66 lacs in fiscal 2014 to Rs.  39,513.69 lacs in fiscal 2015 and our net revenue from operations increased by 21.13% from Rs. 32,224.82 lacs in fiscal 2014 to Rs.  39,034.70 lacs in fiscal 2015, which was primarily due to increased sales of our products.

Sale of products, net of excise duty, increased by 21.67% from Rs.  31,950.43 lacs in fiscal 2014 to Rs.  38,875.19 lacs in fiscal 2015 (which constituted sale of manufactured goods of Rs. 38,155.11 lacs and sale of traded goods of Rs.  720.08 lacs), primarily on account of increase in sales of our products, including from the continued sale of our medical devices Infusion therapy products and blood management products, and due to increase in manufacturing capacity pursuant to setting up of our manufacturing facility in Jaipur (Rajasthan) in fiscal 2015.

Other operating revenues decreased by 14.89% from Rs.  750.23 lacs in fiscal 2014 to Rs. 638.50 lacs in fiscal 2015.

Other Income

Other income increased from Rs.  105.11 lacs in fiscal 2014 to Rs.  812.05 lacs in fiscal 2015 primarily on account of increase in interest income, gains on net foreign exchange fluctuations and gains on fixed assets sold/discarded.

Expenses

Our total expenses increased by 23.48% from Rs. 24,800.28 lacs in fiscal 2014 to Rs.  30,622.42 lacs in fiscal 2015.

Cost of raw materials including packing materials consumed and purchase of stock-in-trade

Cost of raw materials including packing materials consumed (which includes plastic granules, PVC sheets, boxes, medical paper and film) and purchase of stock-in-trade increased by 31.80% from Rs.  11,119.22 lacs in fiscal 2014 to Rs.  14,655.41 lacs in fiscal 2015 due to increased production. As a percentage of our total revenue, cost of raw materials including packing materials consumed and purchase of stock-in-trade increased from 34.39% in fiscal 2014 to  36.78% in fiscal 2015.

Changes in inventories of finished goods, work-in-progress and stock-in-trade

Our change in inventory of finished goods, work-in-progress and stock-in-trade, increased by 19.71% from Rs.  332.42 lacs in fiscal 2014 to Rs.  397.94 lacs in fiscal 2015, primarily on account of increase in our volume of sales.

Employee Benefit Expenses

Employee benefit expenses increased by 23.13% from Rs.  5,278.52 lacs in fiscal 2014 to Rs.  6,499.18 lacs in fiscal 2015, primarily due to an increase in the salaries, wages and bonus, and on account of increase in the number of full time employees from 1,478 as on March 31, 2014 to 1,586 as on March 31, 2015.

Research and development expenses

Research and development expenses increased from Rs.  592.38 lacs in fiscal 2014 to Rs.  846.66 lacs in fiscal 2015, primarily on account of increase in net cost of components and material consumed for research and development, which increased by 62.29% from Rs.  361.35 lacs in fiscal 2014 to Rs. 586.45 lacs in fiscal 2015. As a percentage of our total revenue, research and development expenses increased from 1.83% in fiscal 2014 to 2.12% in fiscal 2015.

Other Expenses

Other expenses increased by 10.76% from Rs.  8,142.58 lacs in fiscal 2014 to Rs.  9,019.11 lacs in fiscal 2015, primarily on  account of increase in job work charges, power and fuel expenses and other manufacturing expenses.

Earnings before interest, tax, debrciation and amortization Our EBITDA increased by 22.51% from Rs.  7,529.65 lacs in fiscal 2014 to Rs.  9,224.33 lacs in fiscal 2015.

Debrciation and amortization expenses

Our debrciation and amortization expenses increased by 33.55% from Rs.  1,405.50 lacs in fiscal 2014, to Rs.  1,877.09 lacs in fiscal 2015, primarily on account of debrciation on setting up of our manufacturing facility in Jaipur (Rajasthan) in fiscal 2015 and increase in gross block. Further, with effect from April 1, 2014, our Company has revised the estimated useful life of all of its fixed assets in accordance with Schedule II of the Companies Act, 2013.

Finance costs

Our finance costs increased by 3.64% from Rs. 00.73 lacs in fiscal 2014, to Rs.  829.85 lacs in fiscal 2015, primarily on account of increase in borrowings.

Exceptional item

We realized an exceptional gain in fiscal 2015 of Rs.  1,957.80 lacs due to receipt of one time settlement amount on account of termination of a contract.

Profit Before Tax

Our profit before tax increased by 34.21% from Rs.  6,314.88 lacs in fiscal 2014 to X 8,475.19 lacs in fiscal 2015, largely due to the factors discussed above.

Tax Expenses

Tax expenses increased by 20.82% from Rs.  1,911.88 lacs in fiscal 2014(which consisted of current tax of Rs.  1,766.47 lacs, tax adjustment for earlier years of Rs.  1.75 lacs, deferred tax of Rs.  168.31 lacs and MAT credit for earlier years of Rs.  24.65 lacs) to Rs.  2,309.90 lacs in fiscal 2015(which consisted of current tax of Rs.  2,055.34 lacs, tax adjustment for earlier years of Rs.  2.35 lacs and deferred tax of Rs.  252.21 lacs) primarily due to an increase in the profit for fiscal 2015.

Profit for the Year

For the various reasons discussed above, profit for the year increased by 40.03% from Rs.  4,403.00 lacs in fiscal 2014 to Rs.  6,165.29 lacs in fiscal 2015.As a percentage of our total revenue, profit for the year increased from 13.62% in fiscal 2014 to 15.47% in fiscal 2015.

Share of profit from associates

Share of profit from our associate UMP decreased by 37.03% from Rs.  106.38 lacs in fiscal 2014 to Rs.  66.99 lacs in fiscal 2015, due to tax paid by our UMP in 2015, which was exempt from taxation for the brvious years.

Net profit for the year

For the various reasons discussed above, net profit for the year increased by 38.21% from Rs.  4,509.38 lacs in fiscal 2014 to Rs.  6,232.28 lacs in fiscal 2015. As a percentage of our total revenue, profit for the year increased from 13.95% in fiscal 2014 to 15.64% in fiscal 2015.

All financial performances are based on consolidated basis.

Risks Relating to Our Business and Operations

Our manufacturing facilities are subject to risks, including disruptions in or lack of infrastructure facilities and obsolete plant and machinery, which could increase our manufacturing costs or interrupt our operations and adversely impact our reputation, sales and strategies. We operate four manufacturing facilities in India and one manufacturing facility in China, operated by our wholly owned subsidiary Poly Medicure (Laiyang) Co. Ltd, China ("PMLCL").In addition, we hold a 23% equity interest in Ultra for Medical Products, Egypt ("UMP") that operates a manufacturing facility in Assuit, Egypt for disposable medical devices.Our manufacturing facilities are subject to operating risks, such as breakdown or failure of equipment, shortage of power supply, obsolescence of equipment or machinery, labour disputes, natural disasters, industrial accidents including fire hazards and the need to comply with regulatory requirements and quality control systems of various jurisdictions. These facilities are required to comply with quality control systems of various jurisdictions, including, current good manufacturing practices ("cGMP"), as brscribed under the Drugs and Cosmetics Rules, 1945, as amended ("DCR") and standards stipulated by other regulatory agencies where we manufacture and sell our products, CE Mark and ISO 13485 in the European Union. Our distributors rely on the timely delivery of our products and our ability to provide an uninterrupted supply of our products is critical to our business. Any disruption at our manufacturing facilities on account of any of these factors could result in interruption in our manufacturing process and delay the delivery of products to our distributors. Further, any labor disruptions or delay in delivery of equipment by our suppliers or any disruption in the power supply, for which we rely on local utilities, may result in us breaching our product deadlines and thereby, materially adversely affecting our business, cash flows, financial conditions and results of operations. We are exposed to foreign currency exchange rate fluctuations, which may harm our results of operations.

Our financial statements are brsented in Indian Rupees. However, our revenues, expenditure and finance charges are influenced by the currencies of those countries where we sell our products (for example, countries in Europe, south-east Asia, the Middle East, South and Central America and Africa), to a limited extent by currencies of countries from where we procure our raw material from various geographies and the country where our Subsidiary is located. The exchange rate between the Indian Rupee and these currencies, primarily the U.S. Dollar and the Euro, have fluctuated in the past and our results of operations have been impacted by such fluctuations in the past and may be impacted by such fluctuations in the future.

Quantitative and qualitative disclosure about market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices are subject to commodity price risk, foreign exchange risk and interest rate risk. The financial instruments that are affected by these include loans and borrowing, deposits, available-for-sale investments and derivative financial instruments. We, from time to time, undertake analysis in relation to the amount of our net debt, the ratio of fixed to floating interest rates of our debt and our financial instruments that are in foreign currencies.

Related party transactions

We have, in the ordinary course of our business, entered into transactions with certain related parties. For instance, we outsource certain of our manufacturing to and purchase raw material from Vitromed, a promoter group entity. Additionally, we also, sell finished goods and lease property to Vitromed.

While, in our view, all such related party transactions that we have entered into are legitimate business transactions conducted on an arms' length basis.

Opportunity

The GoI Report on Medical Devices Sector in India has identified certain key growth factors in respect of medical devices sector and classified them into market and non-market based factors. Market based factors include growing population, ageing, income base and associated disposable income, increasing socio-economic inclusion of rural and deprived in the mainstream economy, heightened manufacturing innovation to create customized products to meet needs of all income segments, changing disease brvalence pattern and growing awareness among the middle class to focus on early detection and disease brvention. Non-market based factors include development  of infrastructure, favourable regulations, FDI inflow, outsourcing of manufacturing and research and development activities to India and Government initiatives to improve healthcare access through insurance schemes. However, lack of a regulatory system, harmonized standards, accreditation, legal requirements, proper guidance on quality and best practices, amongst other factors have adversely affected the growth of the medical devices sector (Source: GoI Report on Medical Devices Sector in India).

The BMI Report on Indian Medical Devices expects the market for disposable medical devices to grow at a CAGR of 13.8% overall, with the market for needles, catheters, cannulae, etc. to grow at a CAGR of 13.2%, between 2013  and 2018.

Growing Middle Class and Urban Healthcare

The population in India is growing at a rate of 1.2% p.a. with a middle class population of approximately 300 million, having access to high quality healthcare including some of best healthcare facilities in the world. In the urban areas, wherein 30% of the Indian population resides, the private sector is the dominant healthcare provider accounting for approximately 60% of the hospitals and 75% of advanced medical technology. High quality and high technology products are sought after in such areas. An estimated 95% of all new hospital beds in recent years were created in the private sector and future demand for medical devices is expected to continue from private sector hospitals and medical centers (Source: BMI Report on Indian Medical Devices).

Increased Government Expenditure on Healthcare

The Draft National Health Policy, 2015 endorses the "Make in India" national agenda with respect to encouraging domestic production of medical devices to increase access. The Draft National Health Policy, 2015 calls for public procurement policies and public investment in research to support development of robust medical equipment for use in rural and remote areas(Source: BMI Report on Indian Medical Devices).

Improved Regulatory Environment

Although the market for medical supplies and disposable medical devices is dominated by domestic manufacturers, further development is hampered by an opaque regulatory environment and a lack of specific regulations covering medical devices and the medical devices sector has remained unregulated for long time. However, the GoI has formulated the DCA Amendment that aims to regulate medical devices and establish a Medical Devices Technical

Advisory Board, in line with the existing Drugs Technical Advisory Board (Source: BMI Report on Indian Medical Devices).

Increasing Health Insurance Cover

Currently, only 25% of the population has health insurance cover through various schemes for government employers and workers, along with the GoI run scheme known as the Rashtriya Swasthya Bima Yojana ("RSBY") for those living below the poverty line which, is jointly funded by the GoI and state governments. The GoI has targeted increasing of health insurance cover to 75% under the 12th Five Year Plan (2012-17) and bring 70 million families under the RSBY by 2017, from the current 35 million families, living below the poverty line, with the long term objective of covering the entire population living below the poverty line.

GoI is also seeking to increase acceptance of private health insurance by increasing the limit for tax relief on health insurance brmium from Rs.  15,000 to Rs.  25,000, with a higher limit of Rs.  30,000 for senior citizens. Currently, only 5% of the population has private health insurance, rising to 15% in certain urban areas. BMI believes that the number of people opting for private health cover would require to increase significantly for the GoI to attain the target of health insurance cover for 2017 (Source: BMI Report on Indian Medical Devices).

Human Resources

Our employees contribute significantly to our business operations. As of March 31, 2015, our Company had 1,586 employees, including over 75 engineers.

We place significant emphasis on the recruitment and retention of our personnel and provide continuous training for employees to achieve high quality skills. Our employees are not unionized and our operations have not been interrupted by any work stoppage, strike, demonstration or other labour or industrial disturbance. We have not experienced any industrial disputes. In addition to salary and allowances, we provide our employees benefits which include yearly leave and retirement benefits.

Insurance

We maintain insurance policies with reputed independent insurers in relation to our business and operations and our assets such as our buildings, equipment and inventories. Our principal types of insurance coverage include directors and officers insurance, product liability insurance to cover risks arising from injuries or damages caused by our products, standard fire and special perils insurance for our plants and machineries and buildings at our manufacturing  facilities to cover risks such as fire and other ancillary perils and marine cargo policy to cover various risks during the transit of goods anywhere in the country or overseas. We also maintain group personal accident insurance and group mediclaim policy for our employees. Our operations are subject to hazards inherent in our industry and other force majeure events. This includes hazards that may cause injury and loss of life, damage and destruction of property, equipment and environmental damage. Not all risks associated with our business and operations may be insurable, on commercially reasonable terms, or at all. Although we believe that the amount of insurance currently maintained by us rebrsents an appropriate level of coverage required to insure our business and operations, and is in accordance with industry standards in India, such insurance may not provide adequate coverage in certain circumstances and is subject to certain deductibles, exclusions and limits on coverage.

Our Strengths

Established brsence in the Indian disposable medical devices industry with a diversified product portfolio.

We believe we are a leading company in the disposable medical devices industry in India with over 18 years of experience. We have a diversified product portfolio with over 100 varieties of disposable medical devices in product verticals of infusion therapy, central venous access catheters, anesthesia, blood management and blood collection, urology, surgery and wound drainage, gastroenterology and dialysis and certain veterinary disposable devices. Infusion therapy is our key product vertical, which contributed to approximately 69% of our net revenue from operations in fiscal 2015. Our diversified product portfolio enables to cross-sell our products, thereby increasing our market share across product verticals and also bolstering our relationship with our primary customers, hospitals and clinics. We have also developed a number of safety medical devices across product lines. With our existing product offering of safety medical devices in various product lines and our increasing focus on developing such products in the future, we believe we are well-positioned to benefit from increasing private and public investment in healthcare and growing demand for quality healthcare.

We believe that our focus on innovation, safety and quality, product range and competitive pricing have enabled us to develop strong brand recognition in the Indian market and internationally.

Experienced management team and skilled employee base

Our business operations are led by an experienced and qualified management team. Our Promoter Directors, Mr. Himanshu Baid and Mr. Rishi Baid are qualified engineers and have over 18 years of experience in the disposable medical devices business. We believe that our Promoters' skills, experience and industry relationships have been instrumental to our growth thus far, and will continue to drive our future growth.

Our senior management team has extensive experience in the medical devices manufacturing industry, including in operations, quality assurance and human resource management. Our management and technical personnel are supported by other skilled workers who benefit from regular training initiatives. Our personnel policies are aimed towards recruiting talented individuals, facilitating their integration and promoting the development of their skills. We believe that our qualified and experienced management and technical teams provide us significant competitive advantage and enable us to function effectively and efficiently.

Our Strategies

Enhance our manufacturing capabilities and expand our product portfolio to leverage industry growth drivers. The market for syringes, needles and catheters within the disposable medical devices industry is expected to grow at a CAGR of 13.8%between 2013 and 2018, according to the BMI Report on Indian Medical Devices. We expect the growth prospects of the Indian medical devices industry to be further heightened by recent government initiatives permitting up to 100% FDI through the automatic route in the medical devices sector and the 'Make in India' campaign which aims to increase manufacturing share of GDP to 25% by 2022. We believe that the growth of the medical devices sector is driven by factors such as rising brvalence of lifestyle diseases, government initiatives aimed at improving healthcare access, expected shift in demographics with rising proportion of ageing population and increasing demand for quality healthcare.

In order to capitalize on growth opportunities in this sector, we seek to invest in physical and operational infrastructure to expand our manufacturing capabilities with a focus on diversifying our product portfolio. In tandem with continued improvement of capacity utilization at our existing facilities, one of the key objectives for enhancing our manufacture capabilities is to expand our product offering by introducing new products in existing as well as new high-margin critical care product verticals. We seek to  further leverage the expected increase in demand for quality healthcare by increasing our focus on developing, manufacturing and marketing safety medical devices across product verticals.

We believe that enhancing our manufacturing capabilities and further diversifying our product portfolio will enable us to capitalize on expected growth opportunities in this sector and increase our market share in the domestic and international markets.

Continue to focus on research and development to enhance innovation

We intend to continue our initiatives in research and development, with a focus on development of new products in order to foray into new product verticals as well as to expand our product offering in existing product verticals and further improve existing processes and production cost efficiency. We expect to make investments in research and development across new products in existing as well as new critical care product verticals.

Increase market share in domestic and international markets

We seek to increase our overall domestic market share by undertaking extensive marketing and brand awareness activities, including by increasing the strength of our sales team and by conducting continuing medical education programmes in a larger number of hospitals. We also seek to increase our profitability from sales in the domestic market, by rationalizing our manufacturing, sales and marketing costs, through optimization of our marketing and distribution capabilities and identification of new products complementing our existing product portfolio. In order to increase our brsence in international markets, we intend to increase our geographical penetration in the European, American and Asian markets by effectively leveraging our distribution network, including by adding new distributors in certain markets.

Expansion through strategic initiatives

As a part of our growth strategy, we believe that strategic investments and acquisitions of businesses engaged in the disposable medical devices industry may act as an enabler of growing our business. We may also pursue selected strategic alliances, including joint ventures, and potential strategic acquisitions, particularly in developed markets, which will complement our business and operations, including opportunities to acquire technology and know-how.

Competition

We sell our products in highly competitive markets. Certain competitors may be larger than us and may have significantly greater financial resources than us. As a result, to remain competitive in our markets, we continuously strive to reduce our costs of production and distribution and improve our operating efficiencies. The key players in the disposable medical devices industry consist mainly of multi­national companies such as B. Braun, Johnson & Johnson, Becton Dickinson, Baxter India, Schiller Healthcare India,

Terumo, Nipro Corporation and Smith & Nephew and Indian companies such as Hindustan Syringes and Medical Devices Limited, Sutures India Private Limited, Relisys Medical Devices, South India Surgical Company and Romsons etc.

Corporate Social Responsibility

Our Company is actively involved in social initiatives which include several educational initiatives, including for imparting education to blind children, supporting mid day meal scheme in various schools as well as providing relief supplies in disaster prone areas.

The Company has considered sustainability as one of the strategic priority across all process. The company has been consciously making efforts year on year towards improving the energy performance. Energy efficiency improvement initiatives have been implemented across all the Plants and Offices.

a) During the year, the Company has taken the following initiatives for conservation of energy:

i. Effective effluent and sewerage treatment, recycle and reuse of water,

ii. Reduce, renew, recycle of waste and eco-friendly water disposal,

iii. Use of Turbo Ventilators in place of electric exhaust fans resulting in conservation of energy,

iv. Replacement of conventional lamps/lights with LED lamps/lights,

v. DG Set voltage optimization and power factor improvements,

vi. Cycle time reduction in various manufacturing processes through introduction of new technology and kaizens,

vii. Energy conservation week drive at all Plants,

viii. Air audit conducted time to time to plug air leakages.

b) Additional Investments and proposals, if any, being implemented for reduction of consumption of energy:

i. Purchasing of power from open access at Faridabad location instead of running DG resulting in diesel consumption reduction and cost savings,

ii. Installation of Online UPS for all critical Machines to reduce wastage of Raw Materials, and

iii. Installed energy efficient Chillers to reduce energy consumption.

c) Impact of measures in (a) & (b) above for reduction of energy consumption and consequent impact on the cost of production of goods:

The above measures helped in reduction of power consumption and shall continue to help in reduction of power & fuel, air            and water consumption.

d) Total energy consumption percent of production - As per Form - 'A' attached.

B. Technology Absorption

Efforts made in technology absorption -As per Form - B' attached.

C. Foreign Exchange Earnings and Outgo

Activities relating to export, Initiative taken to increase exports, development of new products and service and export plans:

The Company continues to keep its focus on widening of new geographical area to augment its exports. The Company is regularly participating in major overseas exhibitions, which are very helpful in improving the visibility of various products in International markets and widening its customer base.

Research and Development

1. Specific Area in which R&D carried out by the Company

During the year, the R&D Centre of the Company was engaged in supporting all the businesses through innovations and undertook multifold research activities including:

• Development of new design, processes and models,

• Evaluation and development of new sources for various materials, and

• Development of new techniques in making process improvements.

• Carrying out ongoing research,

• Development of cost effective process for manufacturing of medical devices,

• Quality up gradation of existing medical devices,

• Optimization of products and processes to minimize waste generation and reduce environment and safety concerns,

• Introducing new products in existing production lines,

• Developing new analytical methods,

• Developing new design and products based on customer/market requirements,

• Application of New Raw Materials for better performance of the products,

• Import substitution and identification of new raw materials for development,

2. Benefits derived as a result of the above R&D

The Research and Development activities are coordinated in fully equipped Research and Development division. Some of the benefits derived as a result of Research and Development are as follows:

• Development and commercialization of new products,

• Constant up gradation and adoption of new technology has benefited the Company in form of better production processes, yield and quality,

• Reduction of cycle time in manufacturing process and material consumptions,

• Indian and International Patent filings for Protection of Intellectual Property generated through R&D activities,

• Internationally competitive prices and product quality,

• Improved Productivity /Process efficiencies,

• Significant quality improvement in existing products, and

• Enhanced Global brsence/visibility.

3. Future plan of action

Your Company considers the importance of development of technical capabilities to sustain its competitive position in the market place. In order to address the needs of the customers in a rapidly changing market palace, the Company will continue to strengthen its technical programmes and the skills of its technical personnel. Some of the future plans are as follows:

• Commercialization of new products for which the products are under trials at development stage. Several new products have been identified after a thorough study of the market and the process to manufacture these products will be developed through R&D,

• Continuing Strengthening the Research Infrastructure and capabilities complying international norms,

• Continue to develop cost effective and environment friendly processes for manufacturing of high quality Medical Devices,

• Continuing augmenting R&D capabilities and productivity through technological innovation, use of modern scientific and technological techniques, training and development, benchmarking and global networking,

• Explore new area of technology for providing low cost solutions to customers, and

• Enhance National and International Research networking and strategic alliances.

Technology Absorption, Adaption and Innovation Efforts in brief made towards technology absorption, adaption and innovation:

The Company has full-fledged Research and Development division which is continuously engaged in Research and Development of new & existing products and processes. The Company has also developed indigenous technology for the products manufactured by it. As soon as the technology is developed for a product, it is tested by Research and Development division and thereafter commercial production is taken up. It is the philosophy of the Company to continuously upgrade the technology.

ii. Benefits derived as results of the above efforts:

New products were developed and commercialized during the year. Efforts in process optimization led to cost reduction. This helped the businesses to remain cost competitive. Batch sizes and cycle times were optimized for better efficiency and manufacturing equipments were modified for overall improved productivity.