TO THE MEMBERS OF AARTI DRUGS LIMITED

Your Directors have pleasure in presenting the 34^th (Thirty Fourth) AnnualReport on the business and operations of the Company together with the Audited FinancialStatements along with the Report of the Auditors for the year ended March 312019.

COMPANY'S FINANCIAL HIGHLIGHTS

Note : Post the applicability of GST with effect from 1^st July 2017 Salesare disclosed net of GST. Accordingly the Gross Sales figures for the year ended 31^stMarch 2019 are not comparable with the sales figures depicted for the previous years.

FINANCIAL PERFORMANCE

During the year under review Standalone Revenue from operations of the Company is '1454.25 Crores (Previous Year: र 1140.46 Crores) (net of excise duty and VAT)registering a growth of 27.51%.

The Company has achieved Export Sales of र 546.62 Crores as against र 429.28 Crores forthe last year registering a growth of 27.33%.

EBITDA has been र 205.57 Crores (Previous Year: र 183.02 Crores) registering a growthof 12.32%. PAT has been र 87.26 Crores (Previous Year र 73.41 Crores) registering agrowth of 18.87%.

DIVIDEND

Your Directors are pleased to recommend a Dividend of र 1/- (Rupee One only) per Equityshare [10% of face value of र 10/- each] aggregating to र 2.33 Crores (considering theextinguishment of 282100 Equity shares pursuant to buy back). Your Company will pay theTax on dividend as per the provisions of the income Tax Act 1961.

The Final Dividend subject to approval of members at the ensuing Annual GeneralMeeting (AGM) will be paid within the statutory period to those members whose nameappears in the Register of Members as on the date of Record Date i.e. Tuesday July 302019.

As per Regulation 43A of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (hereinafter referred to as"SEBI LOdR Regulations") top five hundred listed entities based on the marketcapitalization are required to formulate Dividend Distribution Policy. However theCompany has voluntarily formulated its Dividend Distribution Policy and the details ofwhich are available on the Company's website viz. www. aartidrugs.co.in.

TRANSFER TO RESERVES

Your Company has transferred र 8.70 Crores to General Reserves.

SHARE CAPITAL

The Board of Directors in its meeting held on March 15 2019 had offered for buy backof 282100 (Two Lacs Eighty Two Thousand One Hundred) fully paid - up Equity shares offace value of र 10/- (Rupees Ten only) each representing 1.20% of the total number ofEquity shares at a price of र 900/- (Rupees Nine Hundred only) per Equity share (includingpremium of र 890/- per Equity share) payable in cash for an aggregate amount of '253890000/- (Rupees Twenty Five Crores Thirty Eight Lacs and Ninety Thousand only) ona proportionate basis through the tender offer using stock exchange mechanism inaccordance with prevailing regulations. Post Buy-back the paid- up Equity Share Capitalof the Company would be र 233000000/- (Rupees Twenty Three Crores Thirty Lacs only).

The Company has neither issued shares with differential rights as to the dividendvoting or otherwise nor issued sweat equity shares. There is no scheme for employee stockoption or provision of money for shares of the Company to the employees or Directors ofthe Company.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management's Discussion and Analysis Report for the year under review as stipulatedunder Regulation 34 read with Schedule V to the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations") is presented in a separate section forming part of this Annual Report.

CORPORATE GOVERNANCE

Corporate Governance essentially involves balancing the interests of a Company'sstakeholders. Corporate Governance practices of our Company are a reflection of ourvalues polices and relationship with our stakeholders. Your Company has complied with themandatory Corporate Governance requirements stipulated under Regulation 34(3) of theListing Regulations. Report on Corporate Governance is annexed hereto forming part of thisreport.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated in Section 134(3)(m) of the Companies Act 2013("the Act") and rules framed thereunder is enclosed herewith as "Annexure- E".

Composition

The composition of the Board is in conformity with Section 149 of the Act andRegulation 17 of the SEBI LODR Regulations. The Board continues to comprise of 12 (Twelve)Directors out of which 5 (Five) are Executive Directors 1 (One) Non - Executive Directorand 6 (Six) Non-Executive Independent Directors. The Chairman of the Board is an ExecutiveDirector. The Board has highly qualified members and having varied experience in theirrespective fields.

Shri Prakash M. Patil Chairman Managing Director & Chief Executive Officer (CEO)Shri Rashesh C. Gogri Managing Director Shri Harshit M. Savla Jt. Managing DirectorShri Harit P Shah Whole-time Director Shri Uday M. Patil Wholetime Director ShriAdhish P. Patil Chief Financial Officer (CFO) and Shri Rushikesh V. Deole CompanySecretary & Compliance Officer of the Company are the KMPs of the Company as on thedate of this report.

Approval of the Members has been received by passing a Special Resolution throughpostal ballot for re-appointment of Independent Directors Shri Ramdas M. Gandhi ShriBhavesh R. Vora Shri Vilas G. Gaikar for the period of three years and Shri Navin C.Shah Krishnacharya G. Akamanchi Smt. Priti P. Savla for period of 5 years respectivelyw.e.f. April 1 2019.

Shri Rushikesh Deole has been appointed as Company Secretary and Compliance Officer inplace of Shri Vibhav S. Ranade w.e.f. April 23 2019.

Except as stated above there is no change in the composition of the Board of Directorsand KMPs during the year under review.

Retirement by Rotation

In accordance with the provisions of the Act and the Articles of Association of theCompany Shri Harit P Shah (DIN: 00005501) Whole-time Director of the Company retires byrotation at the ensuing AGM and being eligible offers himself for re-appointment asDirector. The Board recommends his re-appointment for the consideration of the Members.Brief profile of Shri Harit P. Shah has been given in the Notice convening 34^thAGM.

Independent Directors

Independent Director have given written declarations to the Company confirming thatthey meets the criteria of independence as mentioned under Section 149(6) of the Act andRegulation 16(b) of SEBI LODR Regulations. The terms and conditions of appointment of theIndependent Directors are placed on the website of the Company viz. www.aartidrugs.co.in

Number of Meetings of the Board

During the year under review the Board of Directors met 6 (Six) times. The agenda ofthe meeting is circulated to the members of the Board in advance along with necessarydocuments reports recommendations etc. so that each Board member can activelyparticipate on agenda items during the meeting. The details of Board and CommitteeMeetings and the attendance of the Directors at such meetings are provided in theCorporate Governance Report which forms part of this Annual Report. The intervening gapbetween the meetings was within the prescribed period under the Act and SEBI LODRRegulations.

FAMILIARISATION PROGRAMME

The Chairman and Managing Director have one to one discussion with all the Directors tofamiliarize them with the Company's operations and nature of industry in which Companyoperates. Further the Company has put in place a system to familiarize the IndependentDirectors about the Company its products business and on-going events relating to theCompany. The details of such familiarization programmes for Independent Directors areplaced on the website of the Company viz. www.aartidrugs.co.in

BOARD EVALUATION

Pursuant to the provisions of Companies Act 2013 and the SEBI LODR Regulations astructured questionnaire was prepared after taking into consideration various aspects ofthe Board's functioning composition of the Board and its Committees culture executionand performance of specific duties obligations and governance.

The performance evaluation of the Independent Directors was completed. The performanceevaluation of the Chairman and Non-Independent Directors was carried out by theIndependent Directors. The Board of Directors expressed their satisfaction with theevaluation process.

1. Audit Committee

The Audit Committee is constituted in conformity with the provisions of Section 177 ofthe Act and Regulation 18 of the SEBI LODR Regulations. The details regarding thecomposition terms of reference meetings and attendance of members of Audit Committee ofthe Company are disclosed in the report of Corporate Governance which forms part of thisAnnual Report.

During the year under review the Board of Directors of the Company had accepted allthe recommendations of the Audit Committee.

2. Nomination & Remuneration Committee

The Nomination & Remuneration Committee of Directors is constituted in accordancewith the requirements of Section 178 of the Act and Regulation 19 of SEBI LODRRegulations.

The Company strives to maintain an appropriate combination of Executive Non-Executiveand Independent Directors. In terms of provisions of Section 178 of the Act theNomination and Remuneration Committee considers and recommends the Board on appointmentand remuneration of Directors and KMPs.

The details regarding composition term of references powers functions scopemeetings and attendance of members are included in Corporate Governance Report which formspart of the Annual Report.

The policy of the Company on remuneration of Directors KMPs and other employeesincluding criteria for determining qualifications positive attributes Independence of aDirector and other matters provided under sub section (3) of Section 178 of the Act isposted on the website of the Company on the weblink https://www.aartidrugs.co.in/index.phpरoption=comcontent&view=article&id=114&ltemid=117.

3. Stakeholders Relationship Committee

The Stakeholders Relationship Committee is constituted in accordance with theprovisions of Section 178 of the Act and Regulation 20 of SEBI LODR Regulations.

The details regarding composition term of references powers functions scopemeetings and attendance of members are included in Corporate Governance Report whichforms part of the Annual Report.

4. Corporate Social Responsibility Committee (CSR)

As per the provisions of Section 135 of the Act read with Companies (Corporate SocialResponsibility Policy) Rules 2014 the Board of Directors has constituted a CSR Committeeand the Board of Directors of the Company has approved CSR Policy based on therecommendations of the CSR Committee.

The CSR Policy is available on the Company's website at www.aartidrugs.co.in

Your Company actively contributes to the following segments -

i) Education & Skill Development

ii) Health

iii) Environment

iv) Social Welfare

v) Rural Development

vi) Women Empowerment

Your Company through Aarti Foundation and various other NGO's has been doing work inthese segments. In this year the Company has provided the funds for construction ofschool located at Boisar Dist. Tarapur Maharashtra. The Company has also activelycontributed towards education welfare during the year under review.

During the year under review the Company was required to spend र 208.55 Lakhs on CSRActivities. However the Company has spent र 207.63 on CSR Activities. There was adifference between estimated expenditure and actual expenditure on account of change inproject's cost estimate. The Company is constantly evaluating various projects to fulfilits obligations towards the society.

The Annual Report on CSR activities is annexed as "Annexure - A" andforms an integral part of the Report.

HUMAN RESOURCES DEVELOPMENT AND INDUSTRIAL RELATIONS

Your Company recognizes its human resources as one of its prime resources. Therelations between the Management and the Staff Members remained very cordial throughoutthe year under review. As on March 31 2019 the Company had 1173 permanent employees atits manufacturing plants and administrative office. The Company care for its StakeholdersCustomers Suppliers and Community at large which reflects in company's policy programsand development efforts. Your Company is committed to build and strengthen our humancapital by defining policies that support their growth goals and help them achieveexcellence.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013

Your Company has Zero tolerance towards any action on the part of any one which mayfall under the ambit of 'Sexual Harassment' at workplace and is fully committed to upholdand maintain the dignity of every women working with the Company. The Company hasconstituted an Internal Complaint Committee pursuant to the provisions of SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013 forprevention prohibition and redressal of complaints/grievances on the sexual harassment ofwomen at work places. Your Directors further states that during the year under reviewthere were no cases filed pursuant to the above Act.

PARTICULARS OF EMPLOYEES

Disclosure pertaining to the remuneration and other details as required under Section197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is given in annexure and forms part of this report.However as per the provisions of the section 136(1) of the Act this Report is sent tothe shareholders excluding the said information. Any shareholder interested in obtainingsuch particulars may write to the Company Secretary at the Registered Office of theCompany.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year of the Company to whichthe financial statements relate and the date of this Boards' Report.

a) Statutory Auditor

At the 33^rd AGM held on August 10 2018 M/s. Kirtane & Pandit LLPChartered Accountants (Firm Regn. No. 105215W/W100057) were appointed as StatutoryAuditors of the Company to hold office till the conclusion of the 34^th AGM.

In the 34^th Annual General Meeting (AGM) of the Company reappointment ofM/s. Kirtane & Pandit LLP (Firm Registration No: 105215W/ W100057) CharteredAccountants would be considered by the members of the Company to hold office from theconclusion of 34^th AGM until the conclusion of 38^th AGM of theCompany.

b) Cost Auditor

M/s. GMVP & Associates LLP were appointed as Cost Auditor by the Company underSection 148(5) read with Section 141 of the Act. Shareholders approval is being sought forratification of the Remuneration proposed to be paid to M/s. GMVP & Associates LLPCost Auditor of the Company in respect of Cost Audit for the financial year ended March31 2020 as mentioned in the Notice convening 34^th AGM.

The due date for filing the Cost Audit Reports in XBRL mode for the financial yearended March 31 2018 was September 27 2018 and the Cost Audit Report was filed onSeptember 11 2018. The due date for filling the cost audit report for the financial yearended March 312019 is September 27 2019.

c) Secretarial Auditor

Pursuant to provisions of Section 204(1) of the Act the Secretarial Audit Report forthe financial year ended March 31 2019 issued by CS Sunil M. Dedhia of Sunil M. Dedhia& Co. Practicing Company Secretaries and the Secretarial Auditor of the Company isannexed as "Annexure - D".

Explanation or Comments on disqualifications reservations adverse remarks ordisclaimers in the auditor's reports:

As regards observations of the Statutory Auditors and the Secretarial Auditor in theirrespective reports in respect to unpaid/ unclaimed dividend/ shares required to becredited/ transferred to IEPF it is clarified that delay in credit of unpaid dividendoccurred due to administrative difficulties and filing of e-forms and transfer ofunclaimed shares was missed inadvertently due to oversight. The Company has initiatedactions to comply in this regards.

INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY

Your Company's internal control systems commensurate with the nature and size of itsbusiness operations. Your Company has maintained a proper and adequate system of internalcontrols. This ensures that all Assets are safeguarded and protected against loss fromunauthorized use or disposition and that the transactions are authorised recorded andreported diligently.

The Audit Committee and M/s. Raman S. Shah & Associates Chartered AccountantsIndependent Internal Auditors regularly review internal financial controls operatingsystems and procedures for efficiency and effectiveness. The Internal Auditor's Reportsare regularly reviewed by the Audit Committee and provides decisive guidance.

BUSINESS RISK MANAGEMENT

During the year under review the Company has identified and evaluated elements ofbusiness risk. Business risk inter-alia further includes fluctuations inforeign exchange Raw Material Procurement risk Environmental & Safety Risk WorkingCapital Risk Market Risk and Business Operations Risk. The risk management frameworkdefines the risk management approach of the Company and includes periodic review of suchrisk and also documentation mitigating controls and reporting mechanism of such risks.

The Board of Directors and senior management team currently assess the operations andoperating environment to identify potential risks and take necessary mitigation actions.

SAFETY HEALTH AND ENVIRONMENT

Your Company is committed to ensure a sound Safety Health and Environment (SHE)performance related to its activities products and services. Your Company had beencontinuously taking various steps to develop and adopt Safer Process technologies and unitoperations.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The transactions entered with related parties are approved by the Audit Committee toensure that the same are in line with the provisions of the Act and the Related PartyTransaction Policy. Prior omnibus approval of the Audit Committee is obtained for thetransactions which are of a foreseen and repetitive in nature. The transactions enteredinto pursuant to the omnibus approval so granted are audited and statement specifying thenature value and terms & conditions of all related party transactions are placedbefore the Audit Committee for its review on a quarterly basis. The statement is supportedby a certification from the Jt. Managing Director and the CFO. The details of relatedparty transactions are provided in the accompanying financial statements.

In conformity with the requirements of the Act read with SEBI LODR Regulations thePolicy on Related Party Transactions as approved by the Board is available on theCompany's website and can be accessed through www.aartidrugs.co.in

All transactions entered into with related parties during the year under review were inthe ordinary course of business and on arm's length basis. Accordingly the disclosure ofRelated Party Transactions as required under Section 134(3)(h) of the Act in Form AOC-2is not applicable to your Company.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has a vigil mechanism/whistle blower policy to deal with instance of fraudand mismanagement. The said policy is posted on the website of the Company viz. www.aartidrugs.co.in

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

Pursuant to the provisions of Section 186 of the Act the details of Loans Guaranteesand Investments made by the Company as at March 31 2019 are given in the notes to theFinancial Statements.

DEPOSITS

Your Company has not accepted any deposits within the meaning of Section 73 of the Actand the Companies (Acceptance of Deposits) Rules 2014 and no amount on account ofprincipal or interest on public deposits was outstanding as on March 31 2019.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return in Form MGT-9 is enclosed as "Annexure-B" and Annual Return in Form MGT-7 is available on the website of the Companyhttp://www.aartidrugs.co.in/index.phpरoption = comcontent&view=article&id=115&Itemid=119.

SUBSIDIARY

The Company has one subsidiary namely Pinnacle Life Science Private Limited (PLSPL).The Company has attached along with its financial statements a separate statementcontaining the salient features of the financial statements of the said subsidiary in"Form AOC-1" which is annexed as "Annexure - C".

Also in conformity Section 134 of the Companies Act 2013 and Rule 8(1) of the Company(Accounts) Rules 2014 Note 33 of consolidated financial statement cover thehighlights of performance of subsidiary an its contribution to the overall performance ofthe Company during the year.

The Company does not have any material subsidiary. A policy on material subsidiarieshad been formulated and is available on the website of the Company viz.www.aartidrugs.co.in

CONSOLIDATED FINANCIAL STATEMENTS

As stipulated under the provisions of the SEBI LODR Regulations the ConsolidatedFinancial Statements have been prepared by the Company in accordance with the applicableAccounting Standards issued by Institute of Chartered Accountants of India (ICAI). TheAudited Consolidated Financial Statement together with Auditors' Report forms part of theAnnual Report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS COURTS OR TRIBUNALS

There are no significant material orders passed by the Regulators/Courts/Tribunalswhich would impact the going concern status of the Company and its future operations.

DIRECTORS' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134(3)(c) of the Companies Act 2013 :

a) in the preparation of the Annual Accounts for the financial year ended March 312019 the applicable accounting standards have been followed. There are no materialdepartures from the applicable accounting standards;

b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as on March 31 2019 and of the profit ofthe Company for that period;

c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors had prepared Annual Accounts on a going concern basis;

e) the Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively and

f) the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and such systems were adequate and operating effectively.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETINGS

During the Financial Year your Company has complied with the applicable SecretarialStandards issued by the Institute of Company Secretaries of India (ICSI).

GREEN INITIATIVE

Your Company has adopted green initiative to minimize the impact on the environment.The Company has been circulating the copy of the Annual Report in electronic format to allthose members whose email addresses are available with the Company. Your Company appealsother Members also to register themselves for receiving Annual Report in electronic form.

APPRECIATION

The Board of Directors places on record its sincere appreciation for the dedicatedservices rendered by the employees of the Company at all levels and the constructiveco-operation extended by them. Your Directors would also like to express their gratefulappreciation for the assistance and support by all Shareholders Government AuthoritiesAuditors Bankers Financial Institutions Customers Employees Suppliers other businessassociates and various other stakeholders.