Driving Complex Generics

Our strategic focus on complex generics has been a key driver of our success. Building on our historical strength in the oral solids platform, we have diversified our portfolio to include a wide range of complex generics. This shift, initiated as part of our R&D strategy five years ago, has begun to yield significant results. Our North America business had phenomenal growth, with sales increasing by 33.8% to INR 72,462 Mn from INR 54,173 Mn last year. This growth was primarily driven by our U.S. business, which registered sales of USD 815 Mn. Complex generics accounted for around 40% of these sales, and our inhalation portfolio doubled over the previous year. Key products such as Tiotropium, Darunavir, and Suprep showcased strong performance, contributing significantly to our revenue.

In India, our regional formulation businesses delivered a reported growth of 8.7% as against market growth of 7.6%, which is higher by 15%. Our respiratory business grew by 7.9%, well ahead of the market growth of 2.7%. The launch of Vilfuro-G, the world’s first fixed triple-dose combination for COPD, is proof of our commitment to innovation in complex generics. Overall, our India Formulation business grew by 9.6% to INR 66,564 Mn in FY24 from INR 60,759 Mn in FY23.

Our EMEA region also performed strongly, with sales growing by 24% to INR 19,235 Mn from INR 15,514 Mn, despite a 7% currency erosion in South Africa. Key drivers included our complex generics portfolio and strong performances in Germany and the UK. Complex generics accounted for over 25% of our sales in the EMEA region.

In the APAC region, Australia recorded its highest-ever sales, and the Philippines business grew by 35% to PHP 2.6 Bn from PHP 1.9 Bn last year. Although the LATAM region experienced a slight decline, with overall sales down by 7.8%, the opening of our plant in Mexico and stabilization in Brazil indicate positive future prospects.

Continuous Improvement on Cost

Our continuous improvements to achieve cost optimization with focus on reducing inefficiencies have driven profitability. Improved gross margins, which went up to 66% from 58% last year, were the primary drivers for EBITDA growth. Our procurement team has effectively engaged and negotiated deals and timed strategic purchases well, while our R&D team has helped us implement various initiatives to enable cost optimization for our existing products. This has served as a catalyst to improving our margins and securing additional business by making us more competitive.

We also optimized our supply chain-related costs through better planning with Integrated Business Planning and the Kinaxis platform. Along with a singular focus on green energy and automation, this effort has significantly reduced our overall utility costs and inventory inefficiencies. Additionally, digitizing our returns payment processing and close tracking of distributors’ inventory helped prevent leakages and optimize sales returns. Overall, all these strategies have resulted in continuous improvement in yields, development of alternate vendors, and operating with a lean workforce, significantly boosting our bottom line.

Investing in the Future

Investing in R&D and strategic acquisitions remains crucial to sustain our growth trajectory. Aligned to this, our R&D investment has significantly increased to over INR 15,265 Mn from INR 12,800 Mn last year. The FDA’s approval of our Nagpur injectable facility denotes a significant milestone, enhancing our capabilities in complex generics and biosimilars.

Our acquisition of Medisol in France has strategically strengthened our presence as the second-largest injectable market in Europe, adding to our complex generics portfolio through its injectable products. The acquisitions of Ondero and Menarini complement our existing offerings in cardiac, gastro, and anti-infective therapies.

Our focus on R&D has led to the launch of various new products in our India Region Formulations, many of which have been well received by the market. Lupin India NPLs recorded the highest sales in the industry in FY24.

Sharpening Resource Allocation

Efficient resource allocation and robust governance have been key pillars in our growth journey. Our capital allocation policy is deeply rooted in the company’s longterm strategy, rigorously converting strategic priorities into resource planning and budgeting guidelines. This disciplined approach ensures a balanced capital allocation, considering growth, risk, and returns across various business segments. We optimize capital by tracking business evolution using predetermined metrics. Our policy incorporates clearly defined financial metrics to evaluate capital allocation for both organic and inorganic initiatives, including profitability and payback benchmarks.

We identified prime levers in our balance sheet, optimizing working capital and reducing overall borrowing. By improving receivables, payables, and inventory management, we liberated cash of over INR 11,513 Mn and reduced gross borrowing from over INR 42,441 Mn to less than INR 26,699 Mn.

We also focused on optimizing our capital work in progress, which has reduced from INR 12,380 Mn in the last year to INR 7,725 Mn in the current year through concerted efforts to minimize the productivity of spent funds, the lowest in many years. This helped improve our financial efficiencies and enabled us to leverage our existing assets for future growth.

Our commitment to process improvement is unwavering. By leveraging analytics and automation, we have enhanced productivity across the organization, ensuring that we extract maximum value from our investments and operations.

Tax Transparency and Governance

At Lupin, we prioritize compliance and transparency in taxation. Our annual Tax Transparency Report, introduced in FY23, highlights our responsible tax compliance, integrity, and commitment to ethical practices. This has contributed to improving our Dow Jones Sustainability Indices score and underscores our dedication to making a positive societal impact.

We have continued to digitize our tax related information, resulting in speed and agility in responding to queries from tax authorities and providing relevant supporting documents efficiently. We also ensured comprehensive assessments of all tax related compliance during acquisitions and the restructuring of entities to avoid future litigations.

ESG Commitment

Sustainability is at the heart of our business strategy. We have made significant progress in various aspects of ESG, from environmental stewardship to human rights and patient-centric innovation. We invested INR 776 Mn in green and renewable energy projects, reducing our Scope 1 and 2 emissions by more than 20% year-on-year. Water recycling and conservation initiatives resulted in 44% of withdrawn water being recycled in FY24.

Focus on Human Capital

Our focus on the development of our employees and thrust on Diversity, Equity, and Inclusion has resulted in greater employee satisfaction across the organization. Programs such as GROW (Get Ready for Opportunities at Work) and ASCENT (Advanced Studies for Capabilities Enhancement) to upgrade the knowledge and skills of our manufacturing executives/managers have been moot points in enhancing efficiencies. Initiatives such as iMpact and Returnity (a program for returning parents) ensure an inclusive work environment.

Our Social Initiatives

Digital Transformation and Innovation

Our strategic embrace of digital transformation and Gen AI exemplifies our commitment to innovation. Our digital journey focuses on integrating advanced technologies - from automating supply chain processes to leveraging big data analytics for better decision making; digital solutions enable us to streamline operations and reduce our environmental footprint. This transformation extends to our R&D division, where digital tools accelerate drug discovery and development, helping us bring effective treatments to market faster.

Gen AI is at the heart of our innovation strategy. By harnessing the power of AI, we can analyze vast amounts of data. Our initiatives are designed with a strong ethical foundation, ensuring data privacy and security while promoting transparency and accountability. Our digital and AI-driven initiatives align closely with our ESG goals. Digital tools facilitate better stakeholder engagement, fostering trust and collaboration with our communities, partners, and regulators. We are dedicated to leveraging digital transformation and Gen AI to build a more sustainable, efficient, and patient-centric future.

We understand the critical need for a sophisticated risk management approach to successfully navigate regulatory shifts, emerging delivery methods, and the rapid pace of data driven innovation. In an environment marked by uncertainty, our ability to adapt to evolving expectations is paramount. Our robust risk management framework, overseen by the Board Committee, provides a cohesive and strategic response to risk mitigation across all our operations, fortifying our resilience and agility in a dynamic landscape.

Further, as cyber threats get more sophisticated, protection of our digital infrastructure has become paramount. Our cybersecurity strategy is integral to our risk management framework, employing advanced measures to safeguard sensitive data and ensure operational resilience. This proactive stance on cybersecurity underpins our commitment to maintaining the trust of our stakeholders and securing our digital transformation efforts.

Looking Ahead

As we move to FY25, we remain committed to transforming Hope into Healing. Our strategic investments in R&D, recent acquisitions, capex investments, technological advancements, and process improvements will continue to drive innovation and growth. We aim to introduce new products that bring affordable healthcare solutions to patients while creating value for our shareholders.

The turnaround in FY24 was a result of our focused approach and foreseeing the needs of a constantly evolving world. The strategy of moving toward complex molecules, which was initiated more than five years ago, is now yielding significant benefits. The pandemic taught us the significance of agility and robust supply chain processes, which have made a substantial difference to our operations. We have also refined our approach to asset utilization, ensuring that people, processes, and systems work harmoniously to maximize efficiency and shareholder value.

Resilience and flexibility are crucial for success, and we continue to adapt quickly to emerging trends and ensure that we provide excellent healthcare solutions through our innovative medicines and services.

Our customers, partners, shareholders, and communities have been essential to our journey, and we remain committed to serving them with integrity and excellence. As we move forward, we are excited about the opportunities ahead and remain steadfast in our mission to bring innovative healthcare solutions to patients worldwide.