Bajaj Healthcare Ltd

Dear Shareholders,

I am excited to present the prospects of the Company for the next few years. The year FY23 was challenging as well as exciting for us.

One either succumbs in the face of crisis or emerges stronger. Crises and challenges etch the true colours of a character. It is with this thought I announce with pride that our Company has shown extraordinary resilience and perseverance while navigating a challenging FY23.

The year FY23 was marked by a plethora of obstacles. Starting with the tepid demand from the pharma sector, with the pandemic residing investments in the pharma sector witnessed a decline and many companies focused on cost optimisation.

A renewed demand from the end-users sectors revived hope temporarily, but abrupt fluctuations in the raw-material prices intensified the competition, resulting in price rivalry and a growing price war.

In the face of these formidable challenges, our unwavering dedication persisted in forging pathways for fresh growth prospects, steering us back onto the trajectory of progress. I seize the opportunity to extend my utmost admiration to the indomitable spirit of our people who stood at the frontline, orchestrating our triumph over these adversities.

Despite the many challenges, I am happy to state that we showcased good resistance and navigated the challenges appreciably. Although in terms of absolute numbers, our growth in FY23 may not be remarkable, we did contain revenue fall to just 1% to C6,732.92 million in FY23 compared to C6,798.90 million in FY22. Further, an increase in overhead and finance costs hit our profitability as well. Additionally, EBITDA declined to C1,068.45 million in FY23 compared to C1,185.02 million in FY22, and EBITDA margins declined by 156 basis points to 15.87%. Similarly, net PAT also decreased by ~39% to stand at C430.24 million at the end of FY23, whereas PAT margin declined to 6.37% in FY23 compared to 10.48% in FY22.

In terms of exports, our revenue stood at 33.59% during FY23, as compared to 24.78% in the previous year. This was mainly owing to the new customer acquisitions in FY23 and the successful increase in the wallet share with the existing clientele.

Despite the challenges, we achieved a few important milestones in FY23. Chief among them, we have been successful in securing a highly regulated contract from the government of India for processing opium, making us the first and only private player in the Indian pharmaceutical industry to achieve this. This achievement marks a groundbreaking milestone, as we become the pioneering private entity to undertake such a responsibility.

Another key milestone for us, we are elated to share our triumph in passing the stringent USFDA inspection for our API manufacturing facilities situated in Vadodara, Gujarat, with ZERO 483 observation. These approvals stand as a resounding affirmation of our unwavering commitment to scrupulously adhere to regulatory norms and sustain the utmost benchmarks of quality.

Additionally, our dedicated research and development team achieved a notable feat by enabling us to launch new molecules in the Nutraceuticals, APIs, and Formulations. These new developments have stirred the pot within the industry and are expected to be instrumental in propelling our business with speed in the near future.

To navigate through the turbulent times, the Company has prioritised a few strategic focus areas: regular technological up-gradation, product innovation and value-addition, and focused financial planning. These measures are likely to help BHL route back on its growth trajectory with a focus on emerging as a technology-driven global enterprise.

We are adapting to the changing dynamics of the global pharma industry. Throughout the course of 2023, we focused on realigning our Company with the global demand, optimising costs, and enhancing returns for the shareholders. Despite challenging macroeconomic conditions, we continued to pursue our long-term strategic goals, harnessing our internal strengths, and delivering value to our customers and shareholders.

Throughout FY23, our unwavering dedication was directed towards bolstering our research and development endeavors to elevate our product development capabilities through a synergy of innovation and cutting-edge technological platforms. Upholding our pledge to adhere to compliance and uphold the highest standards of quality.

During the year, our central objective revolved around the expansion of our product portfolio. This pursuit entails the development of non-patented products utilizing reverse engineering, a process we diligently undertake within our state-of-the-art in-house R&D center. Moreover, our strategic vision encompasses the augmentation of our global footprint by penetrating new countries. Concurrently, our commitment to innovation propels us to consistently enrich our existing repertoire with novel pharmaceuticals.

These strategic endeavours have been meticulously designed to amplify our Capacities and enhance the capability of our portfolio. Speaking of the new molecule launches, a total of 9 new molecules has been launched during the year. At BHL, our steadfast commitment lies in delivering inventive. Our unrelenting focus on research and development has borne fruit in the form of several novel product launches throughout the year. With a promising array of products in the developmental pipeline, our optimism remains steadfast.

We deeply acknowledge the paramount importance of sustainability across all our diverse functions. Over the course of the year, remarkable steps have been undertaken to establish a resilient governance system and embrace an all-encompassing policy framework that will steer our relentless efforts towards sustainability.

Our primary focus is on reducing our carbon emissions, conserving resources, and promoting responsible business practices. As we move forward, we are dedicated to delivering sustainable benefits to our stakeholders and making a positive impact on the environment for a cleaner and healthier planet.

We believe it is our duty to have a workforce that includes people from all the different communities we serve. In order to attract and retain the most talented individuals, it is crucial to establish a workplace that fully supports diversity.

We are happy to announce that over the past year, we have made great progress in creating an organization that is truly inclusive.

FY23 was challenging for us, but that didn't deter us from persevering and finding new opportunities for growth and a successful journey ahead. Despite the challenges we faced, we remained resilient and focused on our goals. We recognised that in times of adversity, it is crucial to adapt and innovate.

We plan to expand our business into new international markets and diversify our portfolio. Our aim is to use our expertise and resources to create an innovative and expanding portfolio that meets the needs of both domestic and international clients. We want to become a pharmaceutical product manufacturer that focuses on providing solutions across the APIs, FDFs and Intermediates and aligns with sustainability principles. In the coming years, thanks to the FDA approvals, we are excited to explore further opportunities in more regulated regions like the USA, EU, Southern America and Africa, among others, and maximize our growth potential.

Given the positive macroeconomic conditions slowly returning to the global pharma industry, we believe that BHL is well-positioned to take advantage of opportunities. Additionally, I am optimistic that the ongoing China plus one strategy and India emerging as the next manufacturing hub of the world, is like to keep our journey long and successful. This optimism has the potential to establish a solid foundation for sustained business growth for companies like us.

This offers us with an excellent chance to generate value, particularly in our attempts to navigate our way back onto the growth track. On behalf of every member of the BHL family, I would like to thank our shareholders for the trust they have reposed in us. We are truly grateful for your sustained cooperation throughout our journey. Together, we will achieve a better and more sustainable future.

Chairman and Managing Director Bajaj Healthcare Limited