SOLARANSE2 May 2022

Solara Active Pharma Sciences Limited has informed the Exchange about Updated Investor Presentation

Solara Active Pharma Sciences Limited

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Communication Address: Solara Active Pharma Sciences Limited 2nd Floor, Admin Block

27, Vandaloor Kelambakkam Road,

Keelakottaiyur Village, Melakottaiyur (Post)

Chennai – 600 127, India Tel : +91 44 43446700 Fax : +91 44 47406190 E-mail : investors@solara.co.in www.solara.co.in

May 2, 2022

The BSE Limited Phiroze Jeejeebhoy Towers Dalal Street, Mumbai – 400 001

The National Stock Exchange of India Limited Exchange Plaza, Bandra-Kurla Complex Bandra (E), Mumbai – 400 051

Scrip Code: 541540

Scrip Code: SOLARA

Dear Sirs,

Sub: Updated Investor presentation

Please find attached updated Investor Presentation and request you to take the same on record.

Thanking you, Yours faithfully, For Solara Active Pharma Sciences Limited

S. Murali Krishna Company Secretary

Encl: As above.

Solara Active Pharma Sciences Limited - CIN : L24230MH2017PLC291636 REGD. OFF: 201, Devavrata, Sector 17, Vashi Navi Mumbai - 400703. India/ Tel: 91-22-2789 2924 / 2789 3199 / Fax: 91-22-2789 2942

SOLARA ANNOUNCES Q4’22 AND FY22 EARNINGS; COMPANY DECIDES TO CALL OFF MERGER WITH AURORE AND FOCUS ON ORGANIC GROWTH AND RESET

Solara Active Pharma Sciences | Q4'22 Earnings Presentation

April 29, 2022

Solara’s Board today decided not to go ahead with the proposed merger with Aurore, to enable the company’s focus on its core competency and organic growth

Background

► In April 2021, Solara announced a significant corporate action to merge with Aurore Life Sciences (Aurore)

and build Solara into India’s second-largest pure-play API Company.

► The merger was designed to further accelerate Solara’s Global reach by combining the two companies.

Headwinds in the interim

► When the transaction was announced, Solara and Aurore delivered their highest ever EBITDA performance,

and the momentum was expected to continue.

► Aurore has not achieved its financial goals set for FY22 mainly due to weak demand for covid products and

other tactical opportunities.

► Consequently, the assumptions considered in the valuation for the merger scheme have undergone significant

changes.

► Further, there are uncertainties in the merger scheme process due to disputes raised by one of the minority

shareholders at a step-down subsidiary of Aurore.

Board’s Direction

► Basis the above, the Board of Solara is of the opinion that this is not the opportune time for a merger with

Aurore. The Board believes that Solara should reflect on the course-correction strategy and deliver targeted outcomes with organic growth.

► The Company believes that the reset strategy focused on strengthening Core Business, new R&D Programs, Continuous Improvement Programs, and effective utilization of capacities will result in long-term benefits.

► The Board of the two companies thereby agrees to withdraw the merger scheme and has further agreed that

the opportunities to collaborate between Solara and Aurore will be pursued at arm’s length.

The Board is delighted to welcome Jitesh Devendra as its new Managing Director, with S. Hariharan as the ED & CFO to drive the reset of the Company. Both Jitesh and Hari have held similar positions at Solara from its inception until 2020

Change in leadership

► Given the decision on the proposed merger, Rajender Rao Juvvadi, the incumbent Managing Director & Chief

Executive Officer of Solara and co-founder of Aurore, has decided to resign from the Board of Solara.

► Jitesh Devendra, the Former CEO and Managing Director(MD) of Solara has been re-appointed as the

company's Managing Director.

► Jitesh, along with S. Hariharan (ED and CFO) will significantly focus on driving the growth and profitability at

Solara.

Brief Profile

Jitesh Devendra, Managing Director

Jitesh is the former CEO and MD of Solara. With over 21 years of experience, Jitesh led the North America API business and managed the Formulation P&L business of Shasun, which later merged with Strides. His efforts have led the Division into new markets, forging business relationships and introducing new products for out-licensing and partnership. Post- merger, he was responsible for the P&L business for North America and Europe Finished Dosage Form (Regulated Markets-Region 1) and the overall API business P&L.

S. Hariharan, Executive Director and CFO

Hari is a Cost Accountant with rich and varied experience of over 30 years in the field of Corporate Finance, Accounts, and Strategic Planning. He played a vital role in the merger process of Shasun with Strides. He has rich experience in the fields of Finance, Accounts, Secretarial, Taxation, Legal, and Information Technology functions. He has extensive experience in mergers and acquisitions.

Resetting Solara for a stronger bounce back

Our course correction strategy will play out for each of the business verticals during the year

P&L

Core Business

R&D Led Growth Business

Enhance capacity use at Vizag

▸ Base Ibuprofen and Ibuprofen

▸ High R&D velocity to deliver new

derivative business with 30+ years legacy and dual manufacturing site with backward integration

▸ Non-Ibuprofen business comprising

of high-value products differentiated by scale or integration

▸ Fast Growing CRAMS business with

a wide gamut of service offerings

products every year

▸ Product selection strategy on new

molecules, quick to launch approaches, and market extensions

▸ Focus on the selection of higher

margin molecules with emphasis on leveraging strong chemistry capabilities

Underlying Value Drivers

▸ Diversification of customer base on

large volume products

▸ Build on the good market presence in many of the settled business products

▸ Continued focus on CIPs and

backward integration

▸ High GTM focus to seed customers

for new products

Value Enablers

▸ Focus on new markets for existing

▸ Leverage relationships with

products

▸ Building levers for higher regulated

market sales

innovators and partner on newer offerings

▸ Phase 1 of the Vizag facility was commissioned in Q2'21 in order to expand capacities for Ibuprofen and other multiple products

▸ Capacity designed to support

backward integration and enable new API launches with supply chain security

▸ Multipurpose Plant to support new

product validation for future growth

▸ The capacity has significant under- recovery due to a lack of regulatory approvals (Covid related delays)

▸ Get Vizag triggered for inspection

▸ Focus to get new business through

new launches or leverage facility for multiple products

▸ Implement a CIP program through Vizag for better margins on existing products

Our key focus in FY23 remains to resolve for the under-recoveries in the Vizag facility

Q4'22 Performance

FY22 Performance

Revenue

EBITDA

EBITDA %

Profit Before Tax

Profit After Tax

Revenue

EBITDA

EBITDA %

Profit Before Tax

Profit After Tax

Particulars

Core Business (Ex-Vizag)

R&D Led Growth Business

Vizag Led Business

Total

3,669

404

11%

330

(119)

(148)

(109)

(164)

Particulars

Core Business (Ex-Vizag)

R&D Led Growth Business

Vizag Led Business

Total

12,884

2,045

16%

586

914

(538)

(656)

(585)

(841)

3,669

176

(310)

12,884

922

(911)

(583)

 Core Business: EBITDA at ₹ 2,045 million with 16% margins resulting in Profit Before Tax of ₹ 586 million

 R&D Led Growth Business: R&D cost at ₹ 538 million. There is no new product validation sales in Q4’22 and FY22 which has resulted in

EBITDA loss. Historically, there would be six-eight new product validation sales which will reduce the R&D cost.

 Vizag Led Business: Under recoveries of ₹ 585 million. Vizag facility was commissioned during Q3’21 and base products were

manufactured for less regulated markets. However, in FY22, due to reduction in demand of base products, there were no production of base products in Vizag which resulted in under recovery of cost. The Vizag facility to be maintained at cGMP condition to meet the regulatory requirement. Due to COVID, the regulatory inspection was not triggered and the Company expects to trigger the same in FY23.

Q4’22 and FY22 Financial Results

Q4’22 Performance is on the expected lines and our business has shown sign of recovery across all the verticals

Business Performance

► Q4’22 performance has been on the expected lines as revenues stood at ₹3,669m, a 249% growth over Q3’22 and a 19%

decline versus Q4’21.

► Reported EBITDA at ₹176m for Q4’22, with margins at 4.8%. Adjusting for the inventory changes and Vizag under

recovery, our Operating EBITDA now tracks at 19.7%, demonstrating a return towards the historical run rate for the base business (Ex-Vizag and R&D investments)

► Under-recovery continues at Vizag site

Business Update

► Positive trends across our businesses viz. Ibuprofens, Non-Ibuprofen Base business and CRAMS. ► While there was a situational impact on Ibuprofen revenues, the order book trends for the business remained upward. ► Our actions in strategic areas of developing the Non-Ibuprofen product portfolio, CRAMS business and new customer

addition have started to yield favorable results.

Operational Update

Jitesh Devendra Managing Director

► Continued focus on developing new products and market extensions filings ► The new business can be serviced from the currently under-utilized multi-product facility at Vizag. ► New programs were introduced for cost improvement, better site utilization, and operating cost savings. ► As the Regulatory inspection resumes, resolution of OAI at Cuddalore and triggering inspection of Vizag facility for

regulated markets targeted in FY23

Future Focus

► Navigating through the short-term challenges of our overall business, however, the base business (ex-Vizag and R&D) is

returning to normalcy, and we expect the business to bounce back in H2 of FY23

► Solara remains optimistic about accelerating all the levers of our strategy and we are confident in delivering long-term

value to our stakeholders.

Q4’22 has seen positive signs of demand recovery, Solara tracking at an operating EBITDA of 19.7% in Q4’22

QoQ Performance (₹ In Million)

 Positive Signs of demand recovery in Ibuprofen business especially in the

Particulars

Q4’22

Q3’22

Change

Regulated markets.

Revenue Gross margins - Normalised Gross margins % Operating EBITDA Operating EBITDA Margins R&D Cost Under recovery - Vizag Forex gain/(Loss) Adjusted EBITDA Adjusted EBITDA Margins Increase / (decrease) in Stock EBITDA EBITDA Margins PAT Basic EPS (₹/Share)

3,669 1,619 44.1% 724 19.7% -119 -109 4 500 13.6% -323 176 4.8% 18 0.53

1,051 327 31.1% -808 -76.9% -135 -163 12 -1,094 -104.1% 154 -940 -89.5% -1,399 -38.93

249% 395% 1300 bps 190%

119%

101%

YoY Performance (₹ In Million)

Particulars

Q4’22

Q4’21

Change

-19% -28% -570 bps -34% -437 bps

3,669 1,619 44.1% 724 19.7% -119 -109 4 500 13.6% -323 176 4.8% 18 0.53

4,535 2,260 49.8% 1,093 24.1% -140 - -13 940 20.7% 110 1,051 23.2% 566 15.57

e t a d p U s n o i t a r e p O d n a s s e n i s u B

 Demand recovery in the other molecules business is seen in the Regulated

markets.

 Strong performance in new products: 11% of quarterly sales in Q4’22 vs.

5% in Q4’21. New product sales indicate the sales of new products validated / commercialized during previous years.

 CRAMS continued to deliver strong growth. CRAMS revenue at 7% of Q4’22 revenues and current business visibility indicates similar growth momentum for FY23.

 Regulated markets revenues at 63% of Q4‘22 revenues (vs. 57% in Q4’21)

 R&D: 4 regulated market filings this quarter. 5 market extensions were done for 4 products in this quarter. There are no new product validated revenue during current quarter.

 Operations: Manufacturing performance on cost reductions continues to be

solid

 Profitability: Drop in Profitability in Q4 on account of Under-recoveries, Input cost pressures and volatility coupled with logistics cost increases further added to margin pressure.

 Increase / (Decrease) in Stock: ₹ 323 Mn decrease in stock in Q4’22

indicates the impact of overheads pertaining to sale of products from opening stock. In the normal circumstances, the opening stock and closing stock will remain at same levels and there will be minimal impact of Increase / (Decrease) in Stock.

 Regulatory approval delays leading to under-recoveries in Vizag

-83% -1836 bps -97%

Q3’22 and Q4’21 data were re-casted to reflect the impact of changes in inventory and Vizag Under recovery The gross margins reported in Q3’22 were ₹ 481 million and in Q4’21 were ₹ 2,374 million The gross margins % reported in Q3’22 were 45.8% and in Q4’21 were 52.3% Operating EBITDA reported in Q3’22 were ₹ -817 million and in Q4’21 were ₹ 1,203 million Operating EBITDA % reported in Q3’22 were -77.8% and in Q4’21 were 26.5%

One off commercial reset impact fully factored, the focus remains on driving strong growth starting from H2’23

YoY Performance (₹ In Million)

Particulars

FY22

FY21

Change

Revenue

Gross margins

Gross margins %

Operating EBITDA

Operating EBITDA Margins

R&D Cost

Under recovery – Vizag

Increase / (decrease) in Stock

Forex gain/(Loss)

EBITDA

EBITDA Margins

PAT

Basic EPS (₹/Share)

12,884

6,129

47.6%

1,912

14.8%

-538

-585

108

922

7.2%

-583

-16.18

16,457

9,006

54.7%

4,486

-21%

-32%

-710 bps

-57%

27.3%

-1250 bps

-529

-17

4,004

-77%

24.3%

-1710 bps

2,213

69.00

-127%

FY21 data re-casted to reflect the impact of changes in inventory and Vizag Under recovery Gross margins reported in FY21 were ₹ 9,070 million; Gross margins % reported in FY21 were 55.1% Operating EBITDA reported in FY21 were ₹ 4,550 million; Operating EBITDA % reported in FY21 were 27.7%

e t a d p U s n o i t a r e p O d n a s s e n i s u B

 Commercial strategy reset in the Less regulated market in Q3’22

impacted FY22 performance

 New products contributed 5% of FY22 vs. 9% in FY21. New product sales indicate the sales of new products validated / commercialized during previous years.

 CRAMS continued to deliver strong growth

 CRAMS revenues at 8% of FY22 revenues  Eight new customers added in FY22  Significant increase in the opportunity pipeline and increasing

trend in ticket size of wins

 R&D performance continues to gain momentum

 Ten regulated market filings during the year. 12 market extensions were filed during the year for 17 products.  There are no new product validated revenue during FY22.

 Operations: Manufacturing excellence programs are well anchored

and good progress on operational performance

 Regulated markets revenues at 58% of FY22 revenues (vs. 71%

last year)

 Regulatory approval delays due to COVID restrictions led to muted

sales and under-recoveries from Vizag site

 Input cost pressures and volatility impacted the overall margins.  Increasing logistics costs is further adding to the margin pressures

We expect the Net Debt to EBITDA to be at the historical levels by the end of FY23

Sources of funds (₹ In Million)

Net Debt movement (₹ In Million)

Particulars

Shareholders' funds

Less: Goodwill

Net worth

Term Loan

Working capital Loan

Gross Debt

Less: Cash including ICD

Net Debt

Total

Mar’20

10,860

-3,651

7,209

3,530

3,538

7,068

-1,068

6,000

13,209

Mar’21

15,885

-3,651

12,234

2,460

3,609

6,069

-1,985

4,084

16,318

Dec’21

15,291

-3,651

11,640

4,432

6,228

10,660

-1,748

8,912

20,552

Mar’22

15,272

-3,651

11,621

4,147

6,099

10,246

-973

9,273

20,894

Particulars

Term Loan

Working Capital

Cash incl. ICD

Net Debt

Opening as on 1.4.2021

Add: Fresh Term loan

Less: Term loan repaid

Increase in Working capital

Support Working capital / Capex

2,460

2,624

(937)

Closing as on 31.3.2022

4,147

3,609

(1,985)

2,490

6,099

1,012

(973)

4,084

2,624

(937)

2,490

1,012

9,273

 Net Debt

to EBITDA is ~10x in FY22 and expected to reduce with combination of Debt Reduction and Improved Business Performance in FY23

Use of funds (₹ In Million)

 Focus on improving Net Debt to Equity which is at ~0.8x and Fixed Assets

Turnover ratio at 1.4 x in FY22

Particulars

Mar’20

Mar’21

Dec’21

Mar’22

 Net debt has increased from ₹ 4,084 million to ₹ 9,273 million in this Financial

10,359

11,383

11,620

Year, driven by the following reasons:

Net Tangible Fixed Assets

Net Non-current Assets

Net Working Capital

9,932

183

3,094

735

5,224

1,011

8,158

1,147

8,126

Total

13,209

16,318

20,552

20,894

 Fresh Term loan to support Capex across the locations  Increased inventory build-up planned for COVID related business which is

expected to be reduced substantially in FY23.

 Increase in KSMs and raw material inventories to offset the current market

volatility which is expected to normalize in FY23.

 Actions to structurally optimize inventory and right-size the working capital

underway

Solara Earnings Conference Call on Friday, 29th April 2022 at 3:30 pm IST

Solara Leadership Participants

Arun. Kumar Founder

Jitesh Devendra Managing Director

S. Hariharan Executive Director & CFO

1530hrs , IST

Friday, April 29

+91 22 6280 1346 +91 22 7115 8247

Pre-register here for diamond pass*

https://services.choruscall.in/DiamondPassRegistration/register?confirmationNumber=9048206&linkSecurityString=265f9fe7a2

Thank you

REGISTERED OFFICE 201, Devavrata, Sector 17, Vashi, Navi Mumbai - 400 703. Tel.: +91 22 2789 2924 Fax No. +91 22 2789 2942 Email: investors@solara.co.in Website: www.solara.co.in CIN: L24230MH2017PLC291636

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Solara Active Pharma Sciences Limited has informed the Exchange about Updated Investor Presentation

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