Ajanta Pharma Chairman Speech

LETTER TO SHAREHOLDERS

Dear Shareholder,

Performance for the last financial year was in line with our expectation, where we could withstand the sharp decline in institution business by recouping it with growth in other segments. Our strategy to de-risk the business through diversification of portfolio across markets, segments and products proved to be very useful.

We used this opportunity to build efficiency across the organisation through productivity enhancement, cost rationalisation, capacity building and above all, remaining agile for our next phase of growth.

We continue to be passionate about finding unmet medical needs of our customers and use our R&D capabilities to fulfil the same, ahead of competition. Our concentrated strategy in terms of selected markets and therapies along with on-ground presence in each market, has been instrumental in ensuring sustainability of our business for long-term.

SEGMENT REVIEW

Our branded generic business in India grew 16% against industry growth of 11% as per IMS MAT March 2019. During the year, we launched 28 products in branded generic space in the country. We aspire to continue beating industry growth with reasonable margin on the back of strong brands and new product launches.

In other emerging markets of Asia and Africa, our branded generic sales remained almost flat as a result of pipeline filling in the previous year that got normalised. Our brands in all our key markets continue to post satisfactory growth, reflecting strong inherent fundamentals built over the years. We continue to build more brands in these markets and are very positive about the same.

The anti-malarial institutional business of Africa, faced a sharp decline as guided in the beginning of FY 2019.

It came down by 49% in FY 2019 compared to previous year. We have been always upfront about the nature of such institutional businesses being lumpy in nature, where there is always uncertainty about its continuation. We expect this business to remain uncertain in coming years.

US generics industry saw some stability after last year''s sharp price erosion, but with increasing cost of servicing that market continues to pose challenges for Indian players. We registered strong growth of 46% at the back of 8 new product launches during the year. We remain optimistic about growth from this market, with 10-12 new filings every year.

FINANCIAL HIGHLIGHTS

Consolidated income from operations was lower at Rs. 2,055 cr. against Rs. 2,131 cr. in the previous year. The major impact was from Africa''s anti-malarial institutional business. While this is the first annual decline of revenue for Ajanta over the last 15 years, we remain confident of future opportunities with our carefully selected product pipeline for the generics market in US and branded generics in India and other emerging markets.

Our EBITDA (Earnings before interest, tax, depreciation and amortisation) margin fell by over 250 basis points to 28% in FY 2019 as operational expenses from our two new facilities at Dahej and Guwahati are fully charged to P&L. The capacity utilisation at both these plants are low as we are in the process of gradually ramping up product approvals from these facilities. Our net profit for FY 2019 consequently declined by 17% to Rs. 387 cr.

Despite the challenging year, we generated net cash flow from operating activities of Rs. 375 cr. which allowed us to fund our entire capex for the year from internal accruals. We have been proactive in terms of capacity building to meet our emerging needs for the next 5 years along with bringing efficiency.

We would like to take this opportunity to thank our dedicated employees for their passion with which they continue to contribute to the culture of excellence.

We thank you all for your continued support in our growth. And we hope that you will continue to repose your faith in us.

Warm regards,

Yogesh M. Agrawal Rajesh M. Agrawal

Managing Director Joint Managing Director