STRIDES SHASUN LIMITED : COMPANY REPORT

Industry Outlook

The Pharmaceutical Industry is a large and exciting one where affordable access to quality medicines is a
global challenge, especially with the year 2017 being characterised by Volatility, Uncertainty, Complexity
and Ambiguity (VUCA). There were many challenges faced for which the company had to take multiple
actions in multiple directions to keep up with the industry. The external challenges were characterised by
wild forex movements, tough pricing environment, demonetisation, tepid growth in emerging markets, slow
regulatory approvals, GST implementation, low investor confidence in the healthcare sector and the overall
credit squeeze.
The global medicine spending is projected to reach nearly US$ 1.5 trillion by 2021 on an invoice price basis,
up nearly US$ 370 billion from the 2016 estimated spending level. Importantly, spending growth is slowing
in 2016, declining from nearly 9% growth in 2014 and 2015 to just 4-7% CAGR over the next five years.
India’s pharmaceutical sector accounts for about 2.4% of the global pharmaceutical industry in value terms
and 10% in volume terms. The country’s pharmaceutical industry is expected to expand at a CAGR of
12.89% over 2015-20 to reach US$ 55 billion. Generic drugs form the largest segment of Indian pharma
market and offers immense potential for growth in future. By 2020, India is likely to be among the top three
pharmaceutical markets by incremental growth and sixth largest market globally in absolute size. Growing
middle class households, coupled with the improvement in medical infrastructure and increase in the
penetration of health insurance in India will also influence the growth of pharmaceuticals sector.

Company Outlook
Strides Shasun is a vertically integrated global pharmaceutical company. It operates across two business
verticals in regulated markets and emerging markets. The Company has global manufacturing footprint with
nine manufacturing facilities spanning three continents, including seven USFDA approved facilities and two
facilities for the emerging markets. It has two dedicated R&D facilities in India with global filing
capabilities and a strong commercial footprint across 100+ countries.
The company is focusing on new product launches and expanding distribution network. Moreover, it will
facilitate local manufacturing of institutional products in Africa. At the same time, it will continue to drive
pan-India prominence.
The focus is also to execute the Strides 2.0 strategy by
• Stepping up US new product filing to 15-20 per year
• Expanding the portfolio and go to- market footprint in Australia
• Sales force productivity in Emerging Markets
• Highest standards of quality and compliance integrity
• Competitiveness driven by best in- class efficiency.
The company has the building blocks in place, a winning team, a shared vision and the passion to excel to
make Strides 2.0 a direct, diversified, driven company.

Significant events during the year

1. The Company acquired 100% stake in Strides Chemicals Private Limited (formerly known as
‘Perrigo API India Private Limited’), effective April 6, 2017. Strides Chemicals is a company based
out of Ambernath, Maharashtra and has a US FDA approved API manufacturing facility, which will
manufacture all strategic APIs primarily used for captive consumption and will augment the
Company’s resources to handle high velocity of new product development and commercial launches
in the formulations portfolio. The facility has a potential capacity of 600 tons per year and had zero
483s during its last US FDA inspection in the year 2013.
 2. The Company exited from the Probiotics Business, which was acquired in December 2015 from
Medispan Limited, through its subsidiary, Strides Biologix Private Limited. Considering that the
business had not been able to achieve the intended strategic objectives and milestones, the Board of
Directors of the Company decided to hive off the business. The business was sold to Higher
Pharmatech Private Limited, a Promoter Group entity, for an aggregate consideration of 5.75 Crores.

3. It also accomplished sharper execution for Strides Version 2.0 through restructuring. The company’s
aim was to position themselves to serve diverse markets, they continued to build business scale and
scope during the year, with several mergers and acquisitions. Their strategy is to build an integrated,
customer-facing, B2C business, with a diversified portfolio and the highest standards of quality and
compliance integrity in the industry. In essence, Strides 2.0 is a company that is Direct. Diversified.
Driven.

Future events

During the year, the company announced their intent to demerge their Commodity API business to Solara
Active Pharma Sciences Limited (Solara). The human API business of SeQuent Scientific Limited (a
promoter owned listed company) is also proposed to be carved out and merged into Solara, thereby
providing critical size to this business. The API business is the Shasun business an entity which got merged
into Strides Arcolab in ’15-’16 to form Strides Shasun Limited The combined entity, to be listed in the BSE
and NSE, will emerge as one of the largest standalone API companies in India. With robust manufacturing
facilities and a strong compliance culture, the business is suitably poised to grow sustainably. Solara will
have a strong portfolio of DMF filings and will be complemented by five manufacturing sites (including
three USFDA approved facilities) having key global regulatory approvals.
Going forward, the company plans to expand its product range in Africa with a pipeline of approximately
500 product registrations. Additionally, it will strengthen its presence across Africa’s market by adding more
feet-on-street. In India, its designs will go beyond developing a portfolio of established brands in high-
growth, niche therapeutic categories.
5
Specific Items
• The Company has given corporate guarantees of ₹29855 million to financial institutions and other
parties, including on behalf of its subsidiaries in the ordinary course of business. It also has disputed
tax liabilities of ₹1368 million arising from assessment proceedings relating to earlier years from the
income tax authorities. The outflow, if any, on account of disputed taxes is dependent on completion
of assessments/ disposal of appeals and adjustments for payment made under protest. These two
items have been treated as Contingent liabilities in the balance sheet.
• The consolidated financial statements have been prepared in accordance with Indian Accounting
Standards (“Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015 and
Companies (Indian Accounting Standards) Amendment Rules, 2016, as applicable. For periods up to
and including the year ended March 31, 2016, the Company prepared its financial statements in
accordance with the then applicable Accounting Standards in India (‘previous GAAP’). These are the
Group’s first Ind AS financial statements. The date of transition to Ind AS is April 1, 2015.

My Learnings
• I learnt about the allocation of shares in a demerger through the demerger to Solara Active Pharma
Science Limited which has a proposed scheme of share allotment. Every shareholder of Strides
Shasun will get 1 equity share of Solara for every 6 shares held by them in Strides Shasun.
• I also learnt how to analyse a company’s operations to some extent. Strides is divesting its
commodity API business (Shasun business) but has also acquired another business Perrigo which is
again an API manufacturer. Basically the company is looking for a backward vertical integration
which it tried with Shasun failed, divested & again bought a company.