SMS Pharmaceuticals Ltd

Delivering on our promise of growth

It is a pleasure to address you once again as we reflect on the past financial year and reaffirm our strategic priorities and commitment to building a sustainable future. If the past two financial years showcased our organisation's resilience, this year was all about delivering on our promise of growth.

Once again, we demonstrated our ability to capitalise on emerging market opportunities. Guided by our strategic priorities, we remained nimble, resilient and efficient; a fact reflected in our FY2024 performance.

During the year gone by, SMS Pharma completed 35 years of growth and innovation because of the consistent trust, support, and partnership from our customers and suppliers and the commitment and dedication of our employees.

A year of strong performance

I am pleased to report that our performance has shown significant improvement over the past year. In FY2024, we delivered an impressive 36% increase in revenue, reaching Rs709 crore compared to Rs522 crore in FY2023. This growth reflects robust performance across all our therapeutic areas, driven by higher sales volumes. We have enhanced our product mix by focusing on high- margin products and therapeutic areas with strong market demand.

Our commitment to backward integration has been pivotal in managing raw material costs and mitigating price fluctuations, ensuring stability in our product portfolio and gross margins. Additionally, our concerted efforts in cost optimisation have resulted in a significant increase in our EBITDA margins, up by 601 basis points to 16.4% in FY2024. This translated into a PAT of Rs50 crore in FY2024.

Segment-wise, the ARV segment contributed ~20% to our revenue, supported by a solid market presence and healthy demand. We have made significant strides in expanding our ARV product range and production capabilities to meet ongoing demand and solidify our position in this key therapeutic area. The anti-inflammatory segment also has shown outstanding performance, with optimised production processes and stable raw material costs fuelling sustainable growth. Furthermore, the anti-diabetic segment has performed exceptionally well, driven by significant market penetration and rapid growth.

We remain committed to further

strengthening our presence in this segment, with several promising products in development anticipated to drive future growth. With increased healthy demand for our products and off-patent opportunities in the short term, we anticipate multiple growth opportunities over the next 3 to 5 years.

Most importantly, we continued our journey to maximise shareholder value, with our Board of Directors recommending a final dividend of Rs0.40 per equity share for FY2024. Looking ahead, we remain steadfast in our commitment to providing sustainable, long-term value to our shareholders

through a balanced approach that includes both capital appreciation and dividend payments.

Strengthening our capabilities

At SMS Pharmaceuticals, Research and Development has always been fundamental to our growth, laying the groundwork for our ongoing advancement and success. Beginning with a modest lab in 2001, we have evolved into a premier research centre in Hyderabad, adeptly managing all aspects from product development to technology transfer.

Our R&D facility, recognised by the Department of Scientific and Industrial Research (DSIR) under the Ministry of Science and Technology, highlights our expertise across a wide range of reaction technologies. Our API portfolio features specialised, high-value products in key therapeutic areas, including antidiabetic, anti-epileptic, anti-migraine and anti-anginal.

During FY2024, our R&D efforts remained concentrated on high-demand therapeutic areas, where we anticipate ongoing growth. We are dedicated to addressing increasing market needs with innovative solutions and utilising our extensive expertise to explore new therapies and markets.

Our modern manufacturing facilities emphasise both efficiency and innovation. We are currently expanding our Visakhapatnam site to enhance our production capacity, particularly for Ibuprofen, with the aim of becoming a global leader in this sector. This expansion is primarily financed through internal accruals, reinforcing our financial stability and driving increased profitability.

We uphold stringent quality standards, evidenced by our ISO:14001:2015 AND ISO:45001:2018 and WHO GMP certifications across all facilities. Our integrated value chain and vertical

integration through Associate Company VKT Pharma provide stability and meticulous control over our operations.

Leading with purpose

At SMS Pharmaceuticals, we aim to minimise our impact on the communities and the environment. As the first Indian pharmaceutical Company to receive the Indo-US GCNC award for green chemistry, we have always committed to advancing growth with sustainability. We efficiently convert by-products from production into valuable materials and operate as a Zero Liquid Discharge (ZLD) unit at Hyderabad, employing advanced water recycling technologies in both the units.

We continually invest in our people by fostering a supportive work environment that encourages growth, career advancement and continuous learning. Our focus on open communication, employee recognition and inclusion drive innovation within our organisation. Through our Corporate Social Responsibility (CSR) initiatives, we contribute to healthcare, education, and rural development. Significant projects include establishing an R.O. water plant in near by villages at vizianagaram and construction of school buildings at AP Balayogi Gurukulam (APSWRS) Premises at Kopperla Village, Poosapatirega (M), Vizianagaram District and health care support in Andhra Pradesh and Telangana.

Our strong Corporate Governance framework upholds ethical practices and maximises shareholder value. Our Board of Directors oversees this through committees for Audit, Nomination and Remuneration, Stakeholders Relationship, Corporate Social Responsibility, and Risk Management.

Poised for growth

As we look forward to FY2025, SMS Pharmaceuticals is positioned for substantial growth, with a planned CAPEX of around Rs150 crore. This investment will support enhanced backward integration, expanded production capabilities and the introduction of new high-margin products. The funding will be sourced from internal resources, term loans and a recent convertible equity warrant issuance totalling Rs114.3 crore.

With most of our Capex funded through internal accruals and minimal debt, we are positioned to achieve margin expansion and healthy revenue growth.

Acknowledging your impact

I extend my heartfelt appreciation to our dedicated teams for their relentless innovation and commitment and to our shareholders for their enduring trust and support. I also wish to thank our valued business partners and the communities we engage with, whose collaboration enables us to deliver sustained value. Together, we shall continue to advance towards a future defined by new possibilities, exceptional quality and enhanced value.