Corporate Presentation

February 15, 2019

Aarey Drugs & Pharmaceutical Ltd

2

DISCLAIMER

This presentation and the accompanying slides (the “Presentation”), which have been prepared by Aarey Drugs & Pharmaceuticals Limited (Aarey, the “Company”)solely for information purposes and do not constitute any offer, recommendation or invitation to purchase or subscribe for any securities, and shall not form thebasis or be relied on in connection with any contract or binding commitment what so ever. No offering of securities of the Company will be made except by meansof a statutory offering document containing detailed information about the Company.

This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes norepresentation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness ofthe contents of this Presentation. This Presentation may not be all inclusive and may not contain all of the information that you may consider material. Any liabilityin respect of the contents of, or any omission from, this Presentation is expressly excluded.

Certain matters discussed in this Presentation may contain statements regarding the Company’s market opportunity and business prospects that are individuallyand collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknownrisks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to, the performance of the Indianeconomy and of the economies of various international markets, the performance of the industry in India and world-wide, competition, the company’s ability tosuccessfully implement its strategy, the Company’s future levels of growth and expansion, technological implementation, changes and advancements, changes inrevenue, income or cash flows, the Company’s market preferences and its exposure to market risks, as well as other risks.

The Company’s actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by thisPresentation. The Company assumes no obligation to update any forward-looking information contained in this Presentation. Any forward-looking statements andprojections made by third parties included in this Presentation are not adopted by the Company and the Company is not responsible for such third party statementsand projections.

3

BRIEF PROFILE

Aarey Drugs & Pharmaceuticals Limited, promoted by the

Ghatalia family, is engaged in active pharmaceutical

ingredient (API)/Bulk Drugs manufacturing and offers a range

of products for various industrial applications. The Company is

engaged in trading and manufacturing activities. The

Company is a manufacturer and supplier of pharmaceutical

raw materials, chemicals, pharmaceutical ingredients, API's

drugs, food colors and flavors.

The Company's assortment of pharmaceutical products

includes Metronidazole and Metronidazole Benzoate. Its

products include Monomethyl Urea (MMU, Dimethyl Urea

(DMU), Theobromine (THB), Theophylline (THP). Its other

businesses include trading aromatics chemical, chemical

acid, chlor alkalis, industrial alcohols, industrial ketones, glycols

and glycol ethers, fiber intermediates, industrial amines,

acetates and esters, chlorinated solvents, industrial

intermediates and industrial chemicals.

After a long hiatus it is reinvesting in its manufacturing

Business

Shareholding Pattern

Market Data

Share Price (INR) 30

Market Capitalization (Rs cr) 72

No. of Shares Outstanding (Cr) 2.34

Face Value (INR) 10

52 week High-Low (INR) 64/26

Promoters,

50.44

FII's, 14.61

Public, 34.95

4

KEY MILESTONES

1990Incorporated

1993Public Limited

company

2000Added 5 new products

in trading portfolio

2008Manufacturing plant was setup

2012Achieved 100cr sales

2015Entered into API manufacturing

2016Production of MMU &

DMU

2017Achieved sales of Rs

300 cr plus and ventured into

production of OPNA & BMD

2018Ventured in production

of Mefanamic acid

5

THREE PRONGED - BUSINESS MODEL

Restarted its manufacturing business in 2015-2016, currently has 3 products in its basket, and strong pipeline of 5-6 products to be launched over next 2-3years.

Has leveraged its low cost manufacturing capability and knowledge of chemistry to introduce 2 products in the market and doing contract manufacturing for exclusive clients.

Over the years the company has leveraged its knowledge and expertise in chemicals to expand its products range in its trading basket. Thus raw material procurement has become a key strength for the company.

Manufacturing Contract Manufacturing Trading

6

STRATEGIC SHIFT IN FOCUS – TO MANUFACTURING

Manufactuirng, 8.80%

Trading, 91.20%

FY17Manufactuirng,

30.30%

Trading, 69.70%

FY19E

7

CURRENT PRODUCTS CONTRIBUTION TO REVENUES(%)

MMU, 11

DMU, 8

Mefanamic Acid, 17

BMD, 11ONCB, 29

DPL & Others, 24

8

MANUFACTURING PLANT

APDL has four manufacturing units inTarapur, Maharashtra a notifiedchemical units Hub. Spread over anarea of 85,000sq.ft., the manufacturingunits are designed for manufacturing ofAPIs, intermediates and specialtychemicals.

The company has started re-investingin modernization and de-bottlenecking.

Currently capacity expansion of the4th manufacturing plant is already inprogress.

9

KEY CUSTOMERS

10

KEY STRENGTHS

Strong Raw materials procurement skills

Strategic shift to value addition

Enough potential to grow with existing

product basket

More than 40-45 chemicals in trading portfolio . Strong customer

relationships, with more than 30 decades experience in industry

Increasing focus on manufacturing,leveraging strengths to do backward

and forward integration

Current utilization at 60-62%With opportunities to further enhance

capacity with de-bottleneckingNo high capex requirement.

11

PROFESSIONALLY MANAGED COMPANY

Mihir Ghatalia - Managing Director

Mr. Mihir Ghatalia completed his B.S. in chemical engineering from Virginia Polytechnic Institute & State University in the UnitedStates. Initially he has worked as a consultant for 2 years with French based, The Renoir Group; which specializes in management &industrial projects. Thereafter he started leading the management of our Company and now supervises its routine operations. He is anew generation entrepreneur, and his strong academics, skill set and expertise have helped us to roll out manufacturing at theTarapur plant. He has worked in various team including designing, costing, building, maintenance, safety and quality control ofeffluent treatment plants. His ground level expertise, sharp business acumen and visionary leadership have helped us evolve ourbusiness and achieve consistent results.

Mr. Rajesh P. Ghatalia - CFO

Mr. Rajesh P. Ghatalia is the main founder of Aarey Drugs & Pharma Ltd. A textile engineer by education was involved in textile loomsduring his early days. Later, along with his brother Mr. Atul Ghatalia they started trading in chemicals & Solvents and after 10 years ofbusiness, he forayed into a new venture of manufacturing API’s. Started with the manufacturing of Imidazoles, under his leadershipAarey Drugs flourished and has exports to different corners of the world. Apart from being a hands on first generation entrepreneur,his sharp business acumen and astute financial skills have been a major driving force behind the company & his strong willpowerapart from the go get it attitude have been instrumental in getting us where we stand today.

Parmeshwar Dond - Production HeadMr. Parmeshwar Dond completed his B.Sc (Chemistry) from Shivaji University. He has been in the industry for more than 25 years, hismajor USP lies in the manufacturing bulk drugs, intermediate & API plant, which are important facets for the company. Hisexperience play a key role in making sure that the day to day operations of the organisations is running smoothly and efficiently.

Dr. Vilas Lokhande- R&D HeadDr. Vilas has completed his M. Pharma Ph. D. from Haffkine Institute, Mumbai and has a wide experience in manufacturing and R & Dpharmaceuticals and intermediates since the last 25 years. He has served a number of multinationals and reputed Indian companies.Now he is using all his experience towards development of World Class API’s and intermediates at our Tarapur unit

Dr. Sanjay Pallav – Quality control Head

Dr. Sanjay Pallav has completed his his Ph. D in Organic chemistry from Haffkine Institute, University of Mumbai. He has over 20 yearsof experience in the field of the API research and development from reputed pharmaceuticals industries such as Arch Pharmalabslimited, Piramal Healthcare Limited, Sarex Overseas &Unichem Laboratories Limited to name a few. His skill set bagged with theabundance of knowledge Mr. Pallav hold key to the further enhancing new product development and also making sure the quality ofthe product is maintained as per the industry norms.

12

FINANCIAL STATEMENTS – PROFIT & LOSS ACCOUNT

Value (Rs in mn) FY2015 FY2016 FY2017 FY2018

Net Sales 2134 2460 3960 3493

Other Income 26 31 33 32

Total Income 2160 2492 3993 3525

Expenditure 2121 2450 3864 3417

Operating Profit 39 42 129 108

Interest 15 17 43 19

Depreciation & Amortization 11 6 6 7

Profit Before Tax 14 18 80 82

Tax 3 5 21 20

Profit After Tax 11 13 59 62

EPS 0.7 0.8 3.3 2.6

FV 10.0 10.0 10.0 10.0

13

BALANCE SHEET NUMBERS

LIABILITIES Rs. In Mn ASSETS Rs. In Mn

FY14-15 (Audited)

FY15-16 (Audited)

FY16-17 (Audited)

FY17-18 (Audited)

FY14-15 (Audited)

FY15-16 (Audited)

FY16-17 (Audited)

FY17-18 (Audited)

Shareholder’s Funds 354.1 367.0 503.6 802.4 Non- Current Assets 63.6 82.9 125.9 125.0

Share Capital 168.1 168.1 180.8 233.8

Reserves & Surplus 185.9 198.8 316.1 545.5 a)Tangible Assets 58.9 78.5 121.5 120.5

Share Warrants 0.0 0.0 6.7 23.2 Non Current Investments 4.4 4.4 4.4 4.4

Other Non Current Assets

0.3 0.0 0.0 0.1

Total Debt 110.2 145.4 103.9 32.4

Long Term Debt 0.0 0.9 0.7 0.6 Current Assets 1085.9 1167.1 1306.8 1572.9

Short Term Debt 110.2 144.5 103.2 31.8 Current Investments 0.0 0.0 0.0 0.0

Trade Payables 671.4 719.5 745.5 775.8 Inventories 41.7 20.8 52.1 147.7

Other Current Liabilities 2.8 6.3 46.4 42.6 Trade Receivables 667.1 724.8 818.6 953.0

Short Term Provisions 10.9 11.9 33.2 31.8 Cash and Bank 1.7 16.2 10.4 33.9

Deffered Tax Liabilities 0.0 0.0 0.0 13.0 Loans and Advances 15.9 19.9 27.4 0.2

Other Current Assets 359.4 385.4 398.3 438.0

Total Liabilities 1149.5 1250.0 1432.7 1697.9 Total Assets 1149.5 1250.0 1432.7 1697.9

14

Q3 &9M FY18-19, PERFORMANCE HIGHLIGHT

Value (Rs in mn) Q3FY18-19 Q3FY17-18 YoY (%) 9MFY18-19 9MFY17-18 YoY (%)

Net Sales 784.4 895.6 -12.4% 2,174.3 2,325.1 -6.5%

Other Income 7.3 3.4 116.8% 25.2 15.1 67.2%

Total Income 791.7 899.0 -11.9% 2,199.5 2,340.1 -6.0%

Expenditure 764.5 873.1 -12.4% 2,120.2 2,268.9 -6.6%

Operating Profit 27.2 25.8 5.3% 79.2 71.2 11.3%

Operating Margin 3.47% 2.89% 3.64% 3.06%

Interest 9.8 6.3 56.4% 15.7 12.6 25.2%

Gross Profit 17.4 19.6 -11.1% 63.5 58.7 8.3%

Depreciation 1.8 1.5 21.0% 5.5 5.1 7.9%

Profit before Extraordinary items and tax

15.5 18.0 -13.8% 58.1 53.6 8.3%

Tax - - - - - -

Profit before Extraordinary items 15.5 18.0 -13.8% 58.1 53.6 8.3%

Extraordinary Items - - - - - -

OCI (net of tax) - - - - - -

Net Profit 15.5 18.0 -13.8% 58.1 53.6 8.3%

EPS 0.66 0.90 -26.7% 2.48 2.67 -7.1%

Face Value (in Rs) 10.00 10.00 10.00 10.00

15

DRIVERS FOR FUTURE GROWTH

• Increase in utilization with existing products

Profitability Growth

•Higher contribution from manufacturing with lower capex

•New product introduction•Higher operating margins &

Stronger bottom-line growth

16

INDUSTRY DYNAMICS – GLOBAL & INDIAN PHARMA MARKETS

Global Pharma Market to grow at a CAGR of 4.5+%over 2015-20E

Generic Pharma spend growth at a CAGR of 8%;higher Branded Pharma growth

Generic Market accounts for 9-11% (by value) and55% (by volume) in Global Pharma Market

55 New FDA approvals in 2017

Indian Pharma Market to expand at a CAGR of 22.4%over 2015–20E to reach US$ 55 billion

Indian Generic Market Growth at a CAGR of 16.3%over 2015-20E

India generic export accounts for 30% (by volume) and10% (by value) in US generic Market

304 ANDA approvals from USFDA in 2017

17

INDUSTRY DYNAMICS – GROWTH POTENTIAL

-

400

800

1,200

1,600

FY15 FY16 FY17 FY18 FY19E FY20E

Global Pharma Market US$bn

-

10

20

30

40

50

60

FY15 FY16 FY17 FY18 FY19E FY20E

Indian Pharma Market

18

INDUSTRY DYNAMICS – INDIAN API MARKET

World, 92%India, 8%

-

5

10

15

FY15 FY16 FY17 FY18 FY19E FY20E

Indian API Market US$bn

19

SPECIALITY CHEMICALS INDUSTRY - GROWTH TRENDS

-

400

800

1,200

FY15 FY16 FY17 FY18 FY19E FY20E

Global Specialty Market US$bn

-

10

20

30

40

50

60

FY15 FY16 FY17 FY18 FY19E FY20E

Indian Specialty Market US$bn

20

DRIVERS FOR HELATHCARE INDUSTRY

Rising need For Healthcare

Ageing Population: the aged population (60 years or above) will rise from 8.9% in 2015 to 12.5% in 2030

Increasing chronic disease: The common chronic diseases (lasting for more than three months) affecting India with cardiovascular disease, diabetes and cancers. NCD deaths to account for 60% of death; rising to 52 mn in 2030 from 38mn in 2015

Healthcare Spend & Financing

Rising Healthcare Spend: Healthcare expenses rose to US$118 per head from US$76.1 per head

Health Insurance: Rising disposable income and government initiative will flourish primary healthcare and disease management

Opportunity Size Is Big

It is estimated that drugs worth US$40bn in US and US$25bn in Europe will be going off-patent in next 5 years. This is expected to be the major export booster for the generics and API Industries based out of India.

21

CHINESE THREAT IS DIMINISHING

● Overdependence on China - API imports account for 32% of API domestic consumption, of which 57-60% is imported from China

● Recently the prices in the Chines market are on rise and due to environmental concerns more than 1.5 lakh small companies have closed down; resulting in shortage of supply

● India emerges as the only alternative and reliable sources for global as well as domestic pharma majors

22

INDIA OFFERS ITS OWN POSITIVES

Government incentives & support through favorable policies

Availability of raw materials at competitive prices

Strong domestic demand

Skilled manpower available at competitive cost

Manufactuirng infrastructure & investment in R&D

Thank You

For Further Information Please contact-

Mr. Sonal Kumar Shrivastava(M) – 9324748334

sonalkumar@kirinadvisors.com