Poised to Capitalize
on Opportunities

CFO’s Letter

We remain optimistic about Lupin’s future prospects in FY24. We are poised to capitalize on emerging opportunities in both established and new markets, driven by our differentiated portfolio, and focus on operational excellence.

Dear Shareholders,
FY23 was a year of transformation for Lupin in several ways. It was a year in which we worked on several initiatives and took active steps to make the business a lot more robust. Whilst we achieved good outcomes on several of the initiatives, secular inflation across several categories of input material, eroded into the overall gains. Our financial performance in FY23 reflected margin improvements in every successive quarter, the first quarter performance being marred by one-time events. The efforts culminated in improving margins in the U.S. as well as growth and better margin profiles in India, API, EMEA and APAC regions.

Strengthening the Core

Our sales regained growth momentum throughout the year and were driven by a combination of factors, including the successful launch of new products and the resumption of demand post COVID-19. Despite some pricing challenges faced in the U.S. market, our overall performance remained resilient, recording $632 Mn in sales. Our North America revenues stood at ₹54,173 Mn compared to ₹57,556 Mn in FY22, accounting for 33% of Lupin’s global sales. In the U.S., we improved our margins through portfolio optimization, maximizing the highvalue products and continued cost optimization efforts.

In India, Lupin’s formulation or finished drug sales are at ₹60,759 Mn, up 1.2% compared to ₹60,042 Mn in FY22, accounting for 37% of Lupin’s global sales. In India, our branded formulations business recorded 3.3% growth as we faced certain headwinds in our anti-diabetes business due to loss of exclusivity and genericization, but growth in other areas, such as gynecology and GI was in double digits.

Our EMEA sales region witnessed impressive growth; year-on-year, sales grew by 14.1%, accounting for 10% of Lupin’s global sales. In South Africa, sales were ZAR 1,364 Mn for FY23, compared to ZAR 1,375 Mn for FY22.

UK sales for FY23 were at GBP 15.8 Mn, up 75.6% compared to GBP 9 Mn in FY22. In Germany, we experienced year-on-year growth of 23.6% in sales clocking EUR 40 Mn for FY23, compared to EUR 32 Mn for FY22. In Brazil, the Bausch brands acquisition helped to improve margins and grow the core business by 21%. On similar lines, the acquisition of Southern Cross in Australia helped the company to grow 30%. API business was commendable, with sales growing by 12% on a year-on-year basis from ₹9,904 Mn in FY22 to ₹11,092 Mn in FY23, accounting for 6.8% of Lupin’s global sales.

Focus on Efficiencies

Profitability improvement remained a key focus area throughout FY23, reflecting the successful implementation of various cost management initiatives and operational efficiencies. These initiatives straddled across most cost lines including workforce planning for Manufacturing and R&D functions, freight costs optimization, penalties on failure to supply and other value eroders. Some of these initiatives, coupled with the continuous work on strategic buying, continuous improvement of yields and development of alternate vendors, helped us to reach ~60% of gross margin in H2, which helped in driving EBIDTA % to ~14% in Q4. This sharp focus will continue to remain a dominant theme, and with things improving on the revenue front across markets, especially the USA, we are confident of delivering margin improvements in the quarters to come.

We use contemporary techniques like Integrated Business Planning (IBP) in order to optimize on supply chain inefficiencies and reduce our inventory and operating working capital. Process improvement is a constant focus as we look to improve productivity of our employees through greater automation including RPAs and analytics.

Investing for a Promising Future

Lupin has always been committed to innovation and the development of high-quality, affordable pharmaceutical products. Our R&D expenditure amounted to ₹12,800 Mn during FY23, representing 7.9% of our total revenue. In FY23, we continued to pivot our R&D investments largely towards complex generics, especially, in the inhalation and injectables space, to drive future growth and address unmet medical needs.

Our commitment to innovation remains steadfast as we pivot towards more complex products and platforms while maintaining a strong focus on cost efficiencies and outcomes across the value chain.

Lupin also continues to invest in information technology, with our total IT spends exceeding 1.5% of our sales. We see information technology as a very valuable partner in progress across all areas of business and invest in the latest technologies and platforms for greater efficiencies across the entire value chain.

In FY23, we continued to invest in research and development (R&D) to drive future growth and address unmet medical needs.

Responsible Approach to Taxation

We are proud to present Lupin’s first Tax Transparency Report, reflecting our responsible approach to taxation. Through open communication with tax authorities and strict adherence to regulations, we ensure ethical tax compliance. Our commitment to fairness, integrity, and societal benefit is evident in our contributions to the economies where we operate. This report highlights our dedication to transparency, accountability, and sustainable growth, underscoring our pledge to make a positive impact through responsible tax practices at Lupin.

Building Sustainable Value

As part of our ESG initiatives, we have implemented various measures to reduce our environmental impact. We have invested in energy-efficient technologies, waste management systems, and water conservation practices across our manufacturing facilities. These efforts have resulted in a significant reduction in our carbon footprint and resource consumption. We are also actively exploring renewable energy sources to further reduce our reliance on fossil fuels.

In terms of social initiatives, we have maintained our efforts to increase access to medicines by actively registering anti-tuberculosis (TB) and antiretrovirals (ARVs) in low- and middle-income countries. Lupin also is one of the largest first-time generic medicines providers to various regulated markets, reducing the burden on the local governments and giving them flexibility in allocating more resources to other lifesaving medications. Lupin remains dedicated to promoting the well-being of our employees and the communities in which we operate. We have implemented robust occupational health and safety programs to ensure a safe working environment for our employees. Additionally, we continue to foster diversity and inclusion, promoting equal opportunities and creating an inclusive workplace culture that values different perspectives and talents.

Our governance practices are designed to uphold the highest standards of transparency, ethics, and accountability. In FY23, we successfully completed a comprehensive assessment of double materiality, obtained membership in the United Nations Global Compact (UNGC), and reinforced and improved our existing environmental, social, and governance (ESG) policies. We have also initiated a framework to assess all third-party suppliers, allowing us to evaluate their compliance with our standards.

Furthermore, our employees have demonstrated their commitment to social responsibility through our Employee Volunteering Program in India, which has accumulated a remarkable 9,200 hours of service. We have also successfully completed the assessment of Scope 3 greenhouse gas (GHG) emissions, contributing to our ongoing commitment to environmental sustainability.

Looking ahead, we have several key initiatives in the pipeline for FY24. These include the initiation of a Human Rights Assessment at all Lupin premises, ensuring that our operations align with international human rights standards. Additionally, we plan to augment our renewable energy capacity by adding over 22 megawatts, bringing our total capacity to more than 36 megawatts. Furthermore, we are actively engaged in the ongoing process of reporting in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Our commitment to corporate governance is further strengthened by a robust framework that encompasses regular board evaluations, the appointment of independent directors, and effective risk management systems. Upholding the highest principles of corporate governance, we remain dedicated to preserving the trust of our shareholders.

Strategy to Stay Abreast of Changing Risks and Opportunities

Our performance in FY23 showcases our resilience and ability to navigate various market conditions. Despite some challenges faced in certain regions and the impact of external factors, we have managed to achieve growth and make progress toward our optimization goals. We remain committed to driving innovation, improving our gross margins, and optimizing our operations to deliver long-term value for our shareholders.

Looking forward, we remain optimistic about Lupin’s future prospects in FY24. We are poised to capitalize on emerging opportunities in both established and new markets, driven by our strong product pipeline, growing portfolio, and focus on operational excellence through cost optimization. We are committed to launching products like Tiotropium, among others, in the U.S. and driving consistent double-digit growth in our India business too. Our unwavering commitment to quality, innovation, and patient-centric healthcare solutions will continue to be the cornerstone of everything we do at Lupin.


Ramesh Swaminathan

Executive Director, Global CFO & CRO and Head – Corporate Affairs
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