Innovate. Sustain. Flourish

Granules India Limited ANNUAL REPORT 2019-20 INNOVATE. SUSTAIN. FLOURISH. Contents A Corporate Overview Granules at a Glance 02 Key Financial Indicators 04 Global Footprint 06 Message from Chairman’s desk 08 The Year in Review 11 Profile of Board of Directors and 12 Management Team Scan the QR Code for additional information B Statutory Reports Management Discussion and 16 Analysis Board’s Report 28 Corporate Governance Report 63 Business Responsibility Report 87 C Financial Statements Standalone Financial Statements 95 Consolidated Financial Statements 153 To see the report online please log on to Notice 218 www.granulesindia.com Forward looking statement Some information in this report may contain forward-looking statements. We have based these forward looking statements on our current beliefs, expectations and intentions as to facts, actions and events that will or may occur in the future. Such statements generally are identified by forwardlooking words such as “believe,” “plan,” “anticipate,” “continue,” “estimate,” “expect,” “may,” “will” or other similar words. A forward-looking statement may include a statement of the assumptions or basis underlying the forward-looking statement. We have chosen these assumptions or basis in good faith, and we believe that they are reasonable in all material respects. However, we caution you that forward looking statements and assumed facts or bases almost always vary from actual results, and the differences between the results implied by the forwardlooking statements and assumed facts or bases and actual results can be material, depending on the circumstances. INNOVATE. SUSTAIN. FLOURISH. New technology, increased visibility and rapid globalization calls for continuous change- to remain relevant and responsive in an extremely dynamic and vibrant world. For Granules, innovation is a way of life and the best weapon in its armour to keep competition at bay. It marks our way ahead, encourages us to stay focused and strategically unlock possibilities for sustained and prolonged growth. As an integrated pharma company, we are constantly lubricating engines of growth, exploring prospects for revenue generation and aiming to deliver exceptional outcomes. With aspirations to continuously enhance our products, processes and services, we realize our potential as torchbearers of change – to drive unparalleled efficiencies and empower Granules and its employees to sustain and flourish, now and forever. 02 Granules India Limited | Annual Report 2019-20 Granules at a Glance Granules India Limited is one of the vertically integrated, high-growth pharmaceutical manufacturing company in India today. Based out of Hyderabad, India, we are into manufacturing Active Pharmaceutical Ingredients (APIs), Pharmaceutical Formulation Intermediaries (PFIs) and Finished Dosages (FDs). Our offerings APIs: PFIs: Vision Inhouse Active World’s largest To be the Global leader in Pharmaceutical Ingredients Pharmaceutical Formulation (API) manufacturing with Ingredients (PFI) facility pharmaceutical manufacturing focus on efficiently creating at Gagillapur. PFIs taken by process innovation and high-quality APIs in key from drums to hopper and therapeutic categories compressed into tablets unparalleled efficiencies directly FDs: Multiple Finished Dosage (FDs) forms comprising tablets, caplets and press- fit capsules in bulk, blister packs and bottles Mission Our drive to be the best is unparalleled. We will match our drive by partnering with global leaders in our markets, building lasting relationships, and the foundation for mutual growth and success Granules India Limited | Annual Report 2019-20 03 Our business segments Core Business US Generics Emerging Business • Focus on volume-based • Focus on R&D with our • Fully integrated facility to products integrated structure that offer APIs and FDs in various includes manufacturing therapeutic areas. • First line of treatment and marketing capabilities • Multi-product and multi-stage • Less R&D and more with ‘Make in America’ API to FD manufacturing site manufacturing-based capability concept • New Products filing through • Business-to-Consumer R&D model (B2C) • Medium R&D and Manufacturing capabilities Paracetamol, Ibuprofen, Metformin, Focus on developing controlled Losartan, Cetirizine and Methocarbamol and Guaifenesin substances and niche/ Fexofenadine differentiated modified and extended-release products in varied dosage forms Manufacturing capacity snapshot 39,360TPA 60+ 250+ Countries of presence Customers in our portfolio 352 KL API 24,640TPA 3,029 7 PFI Number of employees Manufacturing plants as on March 31, 2020 21.3 BN Finished Dosages 04 Granules India Limited | Annual Report 2019-20 Key Financial Indicators Revenue Revenue Growth EBITDA without other income EBITDA Growth (J in lakhs) (%) (J in lakhs) (%) 169,184.83 227,919.77 259,864.65 17.9 34.7 14 27,842.07 38,403.77 52,531.83 37.9 36.8 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020 -6.8 Net Profit Net Profit Growth Return on Equity Net Debt to Equity Ratio (J in lakhs) (%) (%) (in times) 13,259.12 23,640.85 33,539.83 78.3 41.9 12 16.70 19.90 0.60 0.30 0.70 2018 2019 2020 2018 2019 2020 -19.4 2018 2019 2020 2018 2019 2020 Granules India Limited | Annual Report 2019-20 05 Revenue Break-up (in%) 40 35 52 31 2018 2020 16 25 (H in lakhs) (H in lakhs) API H 59,827.33 PFI H 41,835.43 FD H 67,522.07 API H 81,706.65 PFI H 42,139.97 FD H 136,018.03 47 36 2019 17 (H in lakhs) API H 81,967.02 PFI H 38,690.47 FD H 107,262.28 06 Granules India Limited | Annual Report 2019-20 Global Footprint Market presence in more than 60+ Countries 53 % North America Share of Revenue 8 % Latin America Share of Revenue Granules India Limited | Annual Report 2019-20 07 North America Latin America Europe (J in lakhs) (J in lakhs) (J in lakhs) 66,104.12 111,130.32 138,789.17 19,722.77 19,769.93 21,012.76 40,831.58 40,290.40 50,546.88 % Europe Share of Revenue 19 2018 2019 2020 2018 2019 2020 2018 2019 2020 India Rest of the World (J in lakhs) (J in lakhs) 15 % India Share of Revenue 33,673.57 45,734.35 37,950.58 8,852.79 10,994.77 11,565.25 2018 2019 2020 2018 2019 2020 08 Granules India Limited | Annual Report 2019-20 Message from Chairman’s desk Granules India is focussed on building a business for the long- term through the efficient use of capital, strong and profitable revenue growth and focussed risk management. Dear shareholders, I am delighted to present a second Our success strategy is dependent on growth of 14% from H227,919.77 lakhs consecutive excellent year for your mainly on the following five verticals in FY2019 to H259,864.65 lakhs in Company – FY2020. Your company had FY2020, which was mainly contributed a record-breaking performance in terms 1) Continue customer centric approach by PFI and FD growth by 9% and 27% of revenue and earnings growth along and API sales was flat over the previous 2) Continue to strengthen operational with achievements of key business, as year. The increases were mainly from capability we took strides to become a truly global the US and Europe market driving the pharmaceutical product manufacturing 3) Value creation by choosing right higher volume Sales of FD. We applied company. partners and having long term financial discipline to ensure that our contracts with them cost levers underpin our targeted It has been almost three decades that growth, while safeguarding profitability. your company is engaged in providing 4) Organisational agility and human collaborative and strategic partnership capital creation The gross profit improved by 28.7% to global pharmaceutical leaders by over the previous year from H102,363.55 producing best quality API and PFI 5) Continuous review of existing and lakhs to H131,771.51 lakhs which through manufacturing excellence, pipeline portfolios. was mainly due to higher FD sales process innovation and regulatory and increased contribution from GPI I am confident that we have now started expertise. Continuous focus on building business over the previous year. execution excellence over the last our orbit changing transformation journey and will grow in many folds in the years to several years coupled with recent EBITDA for the year stood at H52,531.83 come focus on launching our own products lakhs after recognising the H2,171.53 in US and other regulated markets has lakhs as impairment charge which is a resulted in a fairly backward integrated Performance highlights FY20 36.8% increase over the EBITDA of the Pharmaceutical company trying to previous year which was H38,403.77 FY20 was another excellent year for establish its foot print in almost all the lakhs. The primary reasons are increased sectors including the finished dosage. Granules India with a robust revenue Granules India Limited | Annual Report 2019-20 09 capacities of Metformin which we had in bringing down the cash-to-cash R&D commissioned in the past and are now cycle days to 104 days and generated being used for most of our internal as H26,432.76 lakhs free cash flow. We We stand committed to continue to well as the external customers. Better would like to emphasize that we were invest in our R&D, and the overall FD margins and new product launches able to reduce our short-term working R&D expenditure for the year stood at from GPI have also contributed to an capital debt despite an increase in H10,828 lakhs out of which H7,890.91 increase in EBITDA over the previous our working capital requirement by lakhs have been charged to the P&L in year. Our API unit - 4 in Vizag had also improved cash management. the current year. We remain focussed started contributing to EBITDA growth in selecting our product portfolio with with higher margin products.

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