MANAGEMENT DISCUSSION AND ANALYSIS REPORT GLOBAL MARKET Demographic trends in both developed and emerging markets create the basis for pharmaceuticals sector growth. These include an aging population; increasing population growth and rising wealth; and an increase in lifestyle and chronic diseases. While these trends are heartening from a pharmaceutical company's perspective, pharmaceutical companies around the globe continue to be battered by blockbuster drug patent expirations, ever increasing competition from generics makers, and government and health care industry efforts to control costs which is broadly demonstrated by price controls, pro-generic policies and patent challenges. Across the globe, Governments and health care payers are looking at ways to reduce cost of rapidly rising healthcare. In recent times heavy cost of drugs has become a contentious issue and focus remains on reducing the burden on payers. Changing demographics around the world, growing awareness, affordability and patent expiries every year worth billions of dollars are offering global pharmaceutical companies tremendous opportunities for consistent growth. According to the EIU Data Services, pharmaceutical sales are projected to increase an average of 6.9% annually over 2014-2018, outpacing the estimated global health care spending rate of 5.2% during that same period. Pharmaceutical spending growth in North America is expected torise an average of 6.4% annually, bolstered by rising employment, continued economic recovery, and the expansion of insurance coverage in the U.S. Latin America's projected growth rate is slightly lower, at around6.1% annually in 2014-2018. In contrast, pharmaceutical sales in Asia and Australasia should rise by an average of 10% in 2014-2018. (Source: Deloitte 2015 Global life sciences outlook Adapting in an era of transformation) DOMESTIC PHARMACEUTICAL MARKET The Indian Pharmaceutical Market (IPM) is expected to grow to USD 55 billion by 2020 mainly driven by steady increase in affordability, rise in frequency and treatment of chronic diseases, greater health insurance penetration, enhanced accessibility and launch of newer products. Further, the population growth in India is expected to increase by 1.3% every year and a steady rise in disease brvalence will increase patient pool. Secondly, theaffordability of medicines will improve owing to persistent growth in incomes and higher penetration of Health/Medical Insurance. (Source: Mckinsey& Co, India Pharma 2020) The Indian Pharmaceutical Industry, particularly, has been the front runner in a wide range of specialties involving complex drug's manufacture, development and technology. With the advantage of being a highly organised sector, the pharmaceutical companies in India are growing at the rate of $ 4.5billion, registering further growth of 8-9% annually. COMPANY PERSPECTIVE Tyche Industries Ltd. has developed reputation as a quality and reliable manufacturer and exporter of Active Pharmaceutical Ingredients, Intermediates and Nutraceuticals. Tyche Industries Ltd. is one of the largest manufacturers in India of Glucosamine Products, which are mainly exported to USA and Europe. The company is continuously upgrading its manufacturing facilities and systems with a view to obtain certification from US and European Regulatory Agencies. Once these approvals are obtained, the company's products can be sold in the Regulated Markets.Presently, the company has got EU-GMP, WHO-GMP and ISO 9001-2008 Certificates. OPPORTUNITIES AND THREATS The Indian Pharmaceutical Companies having the advantages of Competent Workforce, Cost-effective Chemical Synthesis, Solid legal framework and Strong financial markets.The Indian Pharmaceutical Industry consists of quality producers and a large number of units are approved by regulatory agencies of USA and European Countries.Indian Pharmaceutical companies are very strong in Chemistry and Chemical Process Development.In view of the above, Indian Pharmaceutical companies are expected to grab a major share of the outsourcing opportunities from Global generic companies. However, increasing infrastructural problems and high power tariff are bound to make the company's products more expensive.The company also has to watch the new patent regime which may restrict the manufacture of some of the newer drugs. The Indian Pharma Industry would have to contend with several challenges, particularly the effects of new product patent, Drug Price Control, Regulatory Reforms, Infrastructure Development, Quality Management and Conformance to Global Standards. The Company believes that competition in the market has to be met squarely by developing production systems based on cost efficiency, high productivity, modern technology, quality assurance and timely deliveries. Accordingly, the Company is gearing itself to exploit the opportunities by developing innovative product process and applications. Constant efforts are being made to meet the stringent quality requirements in all markets. New markets are being explored and efforts are on-going to widen the depth and penetration of the existing markets. SEGMENTWISE OR PRODUCTIONWISE PERFORMANCE Company's operations are brdominantly related to the manufacture and processing of bulk drugs intermediates, as such there is only one primary reportable segment. Secondary reportable segments are identified taking into account the geographical markets available to the products, the differing risks, returns and internal reporting system. COMPANY'S FINANCIAL PERFORMANCE AND ANALYSIS The Company's financial performance and analysis is already discussed in the Directors' Report which forms a part of the Annual Report. FUTURE OUTLOOK The company has been manufacturing its core products for several years and has built up a steady clientele. In addition several new products are in the pipeline with which the company hopes to increase its revenues and profitability in the ensuing years. For future expansion, the company acquired 5 acres of land at Ramky Pharma SEZ, Visakhapatnam. RISKS AND CONCERNS Any business activity is confronted with various risks and an efficient business concern would take cognizance of the various risks and arrange for taking corrective actions to mitigate the risks. Some of the risks are listed below along with the suggested actions for mitigation. 1. COMPETITION: The competition is mainly from other suppliers in India and more so from Chinese suppliers. To brserve its market share, the company has embarked on aggressive programme to improve the cost efficiency of processes and production of key products vis- a- vis increase in input cost of raw materials, power, labour etc. 2. MARKETING: Constant efforts are being made to diversify the product portfolio, increase the number of customers and introducing newer products. The company is also focussing on obtaining regulatory approvals and entering into new markets. 3. EXCHANGE RATE: High volatility in the foreign currency is a big concern for the company as the company is going to import raw material for the new products. Finance Department is constantly monitoring the situation and taking action against major fluctuations. 4. ENVIRONMENTAL MANAGEMENT The company is very much aware of its responsibilities towards environment and commissioned the Multiple Effect Evaporation System to concentrate and collect the solid effluent and send it for incineration to government approved agency. INTERNAL CONTROLS Tyche Industries Limited has proper and adequate internal control system commensurate with the size and complexity of the organization and a well-defined internal control system which is adequately monitored. Checks and balances and control systems have been established to ensure that assets are safe guarded, utilized with proper authorization and recorded in the books of account. There is a proper definition of roles and responsibilities across the organization to ensure information flow and monitoring. An Internal Audit was conducted in various areas of operations of the Company. The Management duly considered and takes appropriate action on recommendations made by the Statutory Auditors, Cost Auditors, Internal Auditors and The Independent Audit Committee of the Board of Directors. The Company has an Audit Committee consisting of three Directors out of which two are the Independent Directors. This Committee reviews the statutory audit reports, the quarterly and annual financial statements and discusses all significant audit observations and follow up actions arising from them. HUMAN RESOURCES / INDUSTRIAL RELATIONS: The Company recognizes the immense value addition made by its employees to the growth and development. In turn, the Company is committed to train and develop its people and motivates them to enhance their potential and industrial relations have been cordial and mutually beneficial. As on March 31, 2015 the Company had 352 employees. CAUTIONARY STATEMENT: The financial statements have been brpared in compliance with the requirements of the Companies Act, 2013, guidelines issued by Securities and Exchange Board of India (SEBI), Generally Accepted Accounting Principles in India and Accounting Standards issued by The Institute of Chartered Accountants of India (ICAI). Our management accepts responsibility for the integrity and objectivity of the financial statements as well as for various estimates and judgments used therein. The judgments relating to the financial statements have been made on a prudent and reasonable basis so that the financial statements reflect in a true and fair view of the state of affairs of the Company. Readers are advised to kindly note that the above discussion contains statements about risks, concerns, opportunities, etc., which are valid only at the time of making the statements. A variety of factors known/unknown expected or otherwise may influence the financial results. These statements are not expected to be updated or revised to take care of any changes in the underlying brsumptions. Readers may therefore apbrciate the context in which these statements are made before making use of the same. |