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Krebs Biochemicals & Industries Ltd.

BSE: 524518 Sector: Health care
NSE: KREBSBIO ISIN Code: INE268B01013
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VOLUME 5417
52-Week high 227.95
52-Week low 96.00
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Mkt Cap.(Rs cr) 253
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Krebs Biochemicals & Industries Ltd. (KREBSBIO) - Director Report

Company director report

To

The Members

The directors submit the 30th annual report of Krebs Biochemicals & IndustriesLimited (the Company) along with the audited financial statements for the financial yearended 31st March 2022.

1. Financial Summary

(Rs. in lacs)

Particulars 2021-22 2020-21
Net Sales 5294.06 3860.64
Other Income 791.83 1571.53
Total Income 6085.89 5432.17
Expenditure 9369.80 7127.73
P(L)BDIT (3283.92) (1696.56)
PBDIT(After Extra Ordinary Items) (3283.92) (1696.56)
Finance Charges 539.10 627.90
Depreciation 629.67 512.40
Profit/(Loss) Before Tax (4452.68) (2835.86)
Net profit/(Loss) after Tax (4452.68) (2835.86)
Other Comprehensive Income (34.64) 17.26
Total comprehensive income for the period (comprising Profit/(loss) and other comprehensive income for the year) (4487.32) (2818.60)
Add: balance brought Forward (18124.26) (15305.67)
Add: Transferred from Profit & Loss Account (4487.32) (2818.60)
Balance Carried to Balance Sheet (22611.60) (18124.26)

3. Financial Performance

During the year under review the Company has posted net sales of Rs. 5294.06 lakhsand Rs. 791.83 lakhs as other income. For the FY 2021-22 the company has incurred a lossof Rs. (4452.68) lakhs as against loss of Rs. (2835.86) lakhs of the previous year ended31st March 2021. Detailed Performance of the Company is given in the Management andDiscussion analysis forming part of the Corporate Governance report.

It was operationally a difficulty financial year for the Company. As a aftermath ofcovid pandemic and ongoing geo political conflict the availability as well as prices ofkey starting materials of the APIs being manufactured by your Company drasticallyincreased and the Company could not pass on the increased cost to its customers andthereby severely impacted the position of the Company to continue to manufacture thoseAPIs. The multifold increase in the coal prices further restricted the ability of Companyto continue to operate the fermentation based manufacturing facilities at its Vizagmanufacturing facility which further impacted the viability of APIs being manufactured.Coal cost is a major overhead cost and the Company's manufacturing plant needed hugequantity of coal to continue to operate its fermentors. The Vizag manufacturing facilityof your Company has since started manufacturing few drug intermediates having good

volumes on job work basis so that the manufacturing operations can be sustained.Manufacturing process of these drug intermediates does not need operation of fermentors.At the same time your Company is also in discussion with its potential customers formanufacturing tie up for fermentation based products so as to optimally utilise theCompany's Vizag manufacturing unit. The Nellore manufacturing unit of the Company iscurrently manufaturing and selling an API having good volume and is slowly moving towardsstabilizing its operations and recovering costs. Few more products are also currentlyunder various stages of development.

4. Change in nature of business

During the year under review there is no change in the nature of business of theCompany.

5. Dividend

On account of losses incurred during the year no dividend is proposed to be declaredfor the financial year 2021-22.

1. Material changes and commitments affecting the financial position of the Company:

a. Covid-19

In the FY 2021-22 the COVID-19 pandemic has continued to contribute to the globalcrisis forcing many governments to enforce lock-downs in between thereby stalling ofeconomic activity many countries. The Company continued its manufacturing operationsthrough out the pandemic with due regard to the health and wellbeing of all employees atwork place. There were issues relating to availiability of materials which are imported aswell as logistic problems during some part of the financial year under report. Theseissues are now slowly getting resolved.

b. Issue of Preference shares

The Company has issued and allotted Redeemable NonConvertible Non-Cumulative PreferenceShares to IpcA Laboratories Limited to the extent of Rs. 100 crores divided into 1 0000 000/- (One Crore ) Preference shares of Rs. 100/- (Rupees One Hundred) each formingpart of the authorised capital of the company. These shares are not listed on the stockexchange(s).

8. Share Capital

a. Conversion of Warrants:

Pursuant to the exercise of conversion option by Ipca Laboratories Ltd. and uponreceipt of the balance application money the Board of directors of the Company at theirmeeting held on 6th April 2021 have converted 19 40 000 warrants and allotted 19 40000 (Nineteen Lakhs Forty Thousand) Equity shares of Rs. 10/- each of the Company at aprice of Rs. 86/- per Equity Share including premium of Rs. 76/- per share to M/s IpcaLaboratories Limited the entity forming part of the promoter group.

b. Increase of Authorised Share Capital:

The Authorised Share capital of the Company has been increased from Rs. 53 croresdivided into 2 30 00 000 (Two Crore Thirty Lakhs) Equity Shares of Rs. 10 each and 3000 000 (Thirty Lakh) Preference Shares of Rs. 100 each to Rs. 153 00 00 000 (RupeesOne Hundred Fifty- Three Crore only) comprising of Rs.230000000 (Rupees Twenty-ThreeCrore) equity share capital divided into 2 30 00 000 (Two Crore thirty Lakh ) EquityShares of Rs. 10/- each and Rs.1300000000 (Rupees One Hundred Thirty Crore only)preference share capital divided into 1 30 00 000 (One crore thirty Lakhs ) PreferenceShares of Rs. 100/- each after obtaining the approval of the members in the EGM held on29th November 2021.

c. Issue of Preference shares:

The Company has issued and allotted Redeemable NonConvertible Non-Cumulative PreferenceShares (RNNCPS) to Ipca Laboratories Limited to the extent of Rs. 100 crores divided into10000000(One Crore ) Preference shares of Rs. 100/- (Rupees One Hundred) each. Theseshares are not listed on the stock exchange(s).

Consequent to the aforesaid allotments the authorised subscribed issued and paid upcapital of the company stands as follows:

Authorised Share Capital Rs. 153 00 00 000 (Rupees One Hundred Fifty-Three Crore) comprising of Rs. 23 00 00 000 (Rupees Twenty-Three Crore) equity share capital divided into 2.30.00. 000 (Two Crore thirty Lakh ) Equity Shares of Rs. 10/ - each and Rs.1300000000 (Rupees One Hundred Thirty Crore) preference share capital divided into 1.30.00. 000 (One crore thirty Lakhs) Preference Shares of Rs. 100/- each
Issued Capital Subscribed Capital Paid up Capital Rs. 1515605860 (Rupees One Hundred Fifty one crore Fifty Six Lakhs Five Thousand Eight Hundred Sixty only) comprising of equity share capital of Rs.215605860 (Rupees Twenty One crore Fifty Six Lakh Five Thousand Eight Hundred Sixty ) divided into 21560586 (Two crore Fifteen Lakh Sixty Thousand Five Hundred Eighty Six ) Equity Shares of Rs.10/- each and Rs.1300000000 (Rupees One Hundred Thirty Crore ) preference share capital divided into 13000000 (One crore thirty Lakhs ) Preference Shares of Rs. 100/- each

9. Investor Education and Protection Fund

No amounts and/or shares were transferred to the Investor Education and Protection Fundduring the year under review.

10. Statutory Auditors

At the twenty-seventh AGM held on September 25 2019 the Members approved appointmentof Bhavani & Co Chartered Accountants (Firm Registration No. 012139S) as StatutoryAuditors of the Company to hold office for a period of five years from the conclusion ofthat AGM till the conclusion of the Thirty Second AGM. The requirement to place the matterrelating to appointment of auditors for ratification by Members at every AGM has been doneaway by the Companies (Amendment) Act 2017 with effect from May 7 2018. Accordingly noresolution is being proposed for ratification of appointment of statutory auditors at thisAGM.

EXPLANATION OR COMMENTS ON QUALIFICATIONS RESERVATIONS OR ADVERSE REMARKS ORDISCLAIMERS MADE BY THE AUDITORS

Qualification raised by the Auditors in the Main Report: Management's Reply:
We draw your attention to note no. 2.21.2 to the financial statements which states that the Company has incurred loss before tax of Rs. 1131.39 lakhs for the quarter ended 31st March 2022 and Rs. 4452.68 lakhs for the year ending 31st March 2022. As of 31 st March 2022 the total liabilities exceeded it's total assets by Rs. 7509.32 lakhs as compared to Rs. 4273.29 lakhs as at 31st March 2021. These factors indicate that material uncertainty exists that may cast significant doubt on the Company's ability to continue as going concern and therefore the Company may be unable to realise it's assets and discharge it's liabilities in the normal course of business. The Company's management has carried out an assessment of the Company's financial performance and has obtained a confirmation providing comfort of financial support from the Promoter Company if required to meet its obligations. There has been continued improvement in production during the current year. During the FY 2021-22 the Company has prepared strategic plan for next five years. Pursuant to the said plan the Company continues to focus on various initiatives including cost optimisation through operational efficiency improvement initiatives rationalisation of existing operations and increase in sales volumes from the existing and new customers. With continued efforts the Company expects to address the material uncertainty in future. The company is confident of having full scale operations on three new products to be launched which are under testing.

11. Internal Auditors:

The Board of Directors based on the recommendation of Audit Committee has re-appointedM/s Suryanarayana & Suresh Chartered Accountants Hyderabad as Internal Auditors ofthe Company for the Financial Year 2022 - 23 at their meeting held on 23rd May 2022.

The internal auditors submitted their reports at quarterly intervals to the AuditCommittee and the Board.

12. Directors and Key Managerial Personnel

During the year the non-executive directors of the company had no pecuniaryrelationship or transactions with the company other than sitting fees and reimbursementof expenses incurred by them for the purpose of attending meetings of the Company.

Appointments:

a) During the year under review Mr. Jitendra Shah has been appointed an an additionalDirector by the Board on 9th November 2021 liable to retire by rotation and subject toapproval of shareholders at the ensuing Annual general meeting.

b) During the year under review Mr. Pabitra Kumar Kalipada Bhattacharya has beenappointed as the Director as well as the Managing Director of the company at its Boardmeeting held on 30th July 2021 w.e.f 1st August 2021.

Re-appointments:

a) During the year under review Mr. E J Babu (holding DIN-06759124) has retired byrotation and being eligible for re-appointment at the 29th Annual General Meeting held on23rd September 2021 he has been re-appointed as the Director on the Board of the company

Change in Designation:

Mr. Avinash Ravi has ceased to be the Managing Director on the Board of the company ofthe company w.e.f 31st July 2021. However he continue to be a Director of the Company.

Cessation:

a) Mr. E. J. Babu ceased to be a Director on the Board of the company w.e.f 9thNovember 2021.

b) Mr. Manish Jain ceased to be a Director of the Board of the Company with effect from31 st July 2021.

The Board places on record its appreciation for the services rendered by both theDirectors during their association with the Company.

Key Managerial Personnel

The Board of Directors at its meeting held on 30th July 2021 appointed Mr.Pabitrakumar Kalipada Bhattacharya as the Managing Director and Key Managerial Personnelof the Company.

Mr. Avinash Ravi ceased to be the Managing Director of the company and his designationhas been changed to Non-Executive Director (Promoter group) w.e.f 31st July 2021.

Pursuant to the provisions of Section 203 of the Companies Act 2013 the KeyManagerial Personnel of the Company as on the date of this report are:

Mr. Avinash Ravi - Managing Director (ceased w.e.f 31st July 2021)

Mr. Pabitrakumar Kalipada Bhattacharya-Managing Director (w.e.f 1st August 2021)

Mr. R. Ravi Babu - Chief Financial Officer Ms. Taruni Banda - Company Secretary

Ms. Taruni Banda has resigned as Company Secretary and Compliance officer with effectfrom 6th August 2022 due to her personal reasons. The Company is in the process ofappointing a new Company Secretary and compliance officer.

13.1

Retire by Rotation

Dr. R T Ravi retires by rotation as a Director and he offers himself forre-appointment at the ensuing 30th Annual General Meeting.

Mr. Avinash Ravi retires by rotation as a Director and he offers himself forre-appointment at the ensuing 30th Annual General Meeting.

13.2 Declaration of Independence

The Company has received the declarations under Section149 (6) of the Companies Act2013 from the independent directors that each of them meets the criteria of independenceand there has been no change in the circumstances which may affect their status asindependent directors during the year.

All the Independent Directors have registered themselves under independent directordata bank.

14. Board Meetings

During the financial year 2021-22 Seven (7) meetings of the Board were held. Detailsof the meetings of the board and attendance of the Directors have been provided in thecorporate governance report which forms part of this report.

15. Corporate Social Responsibility

Your Company regards the wider community in which it operates to be an importantstakeholder and actively contributes towards its welfare. According to the provisions ofSection 135 of the Companies Act 2013 the Company doesn't fall under the categories ofthe companies to which the Corporate Social Responsibility is applicable. However yourcompany feels that making a positive contribution to the local community is the rightthing to do and to this end during the year has voluntarily contributed towards somewelfare measures for the poor old aged and differently abled persons.

16. Quality Initiatives

Company is committed to meet the customers Quality requirements and satisfaction bymaintaining high degree of assurance in Quality Safety efficacy of the productsmanufactured. We maintain mutual and beneficial relationship with the Suppliers Vendorsand Customers.

We provide continual training to all the employees working in the plants for upgradingtheir knowledge of cGMP practices. Your Company continuously focus on developing newproducts with innovative knowledge and robust practices meeting / fulfilling theRegulatory and statutory requirement.

Company is committed to meet the regulatory standards set by USFDA WHO-GMP & EDQMand our Unit-II Vizag site has been Accredited certified by EDQM Europe. Many customershave audited Unit-I Nellore plant and have approved the plant as qualified Vendor. Companyis totally focusing to be as an integrated company emerging in the Pharma market byimproving and implementing best-in class methodologies to meet the customer requirementswith zero complaints and by implementing the ALCOA Practices in the plants.

17. Policy on directors' appointment and remuneration and other details

The Company's policy on directors' appointment and remuneration and other mattersprovided in Section 178(3) has been disclosed in the Corporate Governance Report whichforms part of this report.

18. Board Evaluation

The Nomination and Remuneration Committee lays down the criteria for performanceevaluation of independent directors Board of Directors and Committees of the Board. Thecriteria for performance evaluation is based on the parameters like attendance andparticipation at the meetings of the Board and Committees thereof contribution tostrategic decision making review of financial statements business performance.

The evaluation of Board of Directors is performed by the Board after seeking all theinputs from the Directors and the Board Committees by seeking inputs from the Committeemembers.

19. Familiarisation program for Independent Directors

The Company has conducted familiarisation programs for the independent directors asrequired under the provisions of Companies Act 2013.

20. Internal Financial Control Systems and their adequacy

The details in respect of internal financial controls and their adequacy are includedin the Management Discussion and Analysis Report which forms part of this report.

21. Secretarial Standards

The company is in due compliance with the applicable secretarial standards.

22. Audit Committee

Your Company has a duly constituted Audit Committee and the Board has accepted all therecommendations of Audit Committee during the year under review. The members of the AuditCommittee are:

a) Mr. G V L Prasad - Chairman
b) Mr. Satish Khivsara - Member
c) Mrs. Malati Tangirala - Member

The details pertaining to meeting role and responsibilities of Audit Committee areprovided in the Corporate Governance Report which forms part of this report.

23. Nomination and Remuneration Committee

Your Company has in place a duly constituted Nomination and Remuneration Committeewhich has following members :

a) Mr. Satish Khivsara - Chairman
b) Mr. G V L Prasad - Member
c) Mrs. Malati Tangirala - Member
d) Dr R T Ravi - Member

Details pertaining to meetings role and responsibilities of Nomination andRemuneration Committee are provided in the corporate Governance Report which forms part ofthis report.

24. Stakeholders Relationship Committee

Your Company has constituted a Stakeholders Relationship Committee as required underthe provisions

of SEBI Listing Regulations and the Companies Act 2013. Members of the committee are:

a) Mr. G V L Prasad - Chairman
b) Mr. Satish Khivsara - Member
c) Mr. Avinash Ravi - Member
d) Dr R T Ravi - Member

Details pertaining to meetings role and responsibilities of Stakeholders RelationshipCommittee are provided in the corporate Governance Report which forms part of this report.

25. Loans and Investments

During the year under review the company has not given any loans and not made anyinvestments under the provisions of Section 186 of the Companies Act 2013.

26. Particulars of Employees.

Pursuant to the provisions of Section 197 of the Companies Act 2013 read with Rule 5 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 noemployee of the Company is drawing salary of more than Rs. 1.02 crores (Rupees One CroreTwo Lakhs) per financial year or Rs. 8.5 lakhs (Eight Lakh Fifty Thousand) per month asthe case may be for the year ended 31st March 2022.

Details of the remuneration drawn by the Key Managerial Personnel is provided inAnnexure I to the Board's Report.

The statement containing particulars of employees as required under Section 197(12) ofthe Act read with Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is provided in a separate annexure forming part of this report.Further the report and the accounts are being sent to the members excluding the aforesaidannexure. In terms of Section 136 of the Act the said annexure is open for inspection atthe Registered Office of the Company. Any shareholder interested in obtaining a copy ofthe same may write to the Company Secretary.

27. Cost Audit and Cost records:

The provisions of Cost Audit is applicable to your Company from the financial year 2022- 2003. Accordingly the Board of Directors based on the recommendations of the AuditCommittee approved the appointment of BOJANAPALLI & ASSOCIATES Cost Accountants(Firm

Registration No. 100849) as the Cost Auditors. The provisions relating to maintenanceof cost records are already applicable to your company and your company is in compliancewith the said provisions.

28. Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s DSMR and Associates Practicing Company Secretaries as Secretarial Auditorsto undertake the secretarial audit of the Company. The Secretarial Audit Report is annexedherewith as Annexure- II to the Board's Report.

Qualifications in Secretarial Audit Report:

S. Observations in No Secretarial Audit Report Board's explanation/ comments
1 Non maintenance of 100% promoter shareholding in dematerialized form 1000 shares of Mrs. Hemalata Ravi and 19400 shares of Dr R T Ravi are under legal dispute in the court of law and hence the same could not be dematerialized and the circular given by SEBI vide No SEBI/ Cir/ISD/1/2012 dated March 30 2012 gives exemption from 100% promoter(s) holding in demat form. Thus the company stands exempted.
2 Delay in filing of few Forms with Ministry of Corporate Affairs (MCA) There was an inadvertent delay in filing of Forms with the Ministry but the same has been filed before the date of this report.
3 There was delay in Intimating the Closure of Trading window for the Quarter ending 30thJune 2021 There was an inadvertent delay due to the then covid restrictions.
4. Pursuant to Regulation 47 Audited financial results for the Quarter and year ending 31st March 2021 were not published in the newspapers. Non publication of the financial results in the news paper was inadvertently missed out in view of the then covid restrictions.

29. Annual Secretarial Compliance Report

The Company has undertaken an audit for the financial year 2021-22 for all applicablecompliances as per Securities and Exchange Board of India Regulations andCirculars/Guidelines issued thereunder. The Annual Secretarial Compliance Report issue byM/s. DSMR & Associates Prop. Mr. DSM Ram Company Secretary in Whole time PracticeHyderabad has been submitted to the Stock Exchanges within the specified time and same isannexed herewith as Annexure - III

30. Transactions with related parties

Information on transactions with related parties are given in Annexure-IV in Form AOC-2and the same forms the part of this report.

31. Fixed Deposits

Your Company has not accepted any fixed deposits and as such no principal or interestwas outstanding as on the date of the Balance Sheet.

32. Extract of Annual Return:

Pursuant to Section 92(3) read with Section 134(3)(a) of the Act the Annual Return ason March 31 2022 is available on the Company's website- www.krebsbiochem.com

33. Directors' Responsibility Statement

Pursuant to Section 134(5) of the Companies Act 2013 the Board of Directors to thebest of their knowledge and ability confirm that:

i) In the preparation of the annual accounts the applicable accounting standards havebeen followed and there are no material departures;

ii) They have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a fair and true viewof the state of affairs of the Company at the end of the financial year;

iii) They 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.

iv) They have prepared the annual accounts on a going concern basis.

v) They have laid down internal financial controls to be followed by the Company andsuch internal financial controls are adequate and operating effectively.

vi) They have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

34. Disclosures relating to Subsidiaries Associates and Joint Ventures

The company doesn't have any subsidiary companies or Joint Ventures during the yearunder review.

35. Disclosure Requirements

As per SEBI Listing Regulations Corporate Governance Report with Auditors' Certificatethereon and Management Discussion and Analysis are attached which form part of thisreport.

36. Prevention of Insider Trading

The Company has also adopted a code of conduct for prevention of insider trading. Alldirectors senior management employees and other employees who have access to theunpublished price sensitive information of the company are governed by the Code. Duringthe year under report there has been due compliance with the code of conduct forprevention of insider trading.

The said code is available in the company's website www.krebsbiochem.com.

37. Vigil Mechanism/Whistle Blower Policy

The Company has in place whistle blower policy and no personnel have been deniedaccess to the Chairman of the Audit Committee. The policy also provides for thesafeguarding of whistle blowers. The whistle blower policy

is available on website of the company www.krebsbiochem.com.

38. Energy conservation technology absorption and foreign exchange earnings outgo.

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134(3)(m) of the Companies Act

2013 read with Rule 8 of the Companies (Accounts) Rules

2014 is annexed herewith as "Annexure-V" to this report.

39. Safety Environment and Health

The Company considers safety environment and health as the management responsibility.The employees are provided training programs at regular intervals on manufacturingfacilities on safety and environment.

40. Significant or material orders passed against the company.

During the year under review there were no significant or material orders passedagainst the company by regulators/ Courts/Tribunals impacting the going concern status andoperations of the company in future.

41. Disclosure on Corporate Insolvency Resolution Process initiated under theInsolvency and Bankruptcy Code (IBC).

During the year under review there were no IBC proceedings initiated against thecompany.

42. Disclosures pertaining to the Sexual Harassment of Women at the workplace(Prevention Prohibition and Redressal) Act 2013.

The Company has complied with the provision relating to the constitution of InternalComplaints Committee under the Sexual Harassment of Women at the Workplace (PreventionProhibition and Redressal) Act 2013.

There are no complaints registered in this matter during the year under review.

43. Acknowledgments

Your Directors take this opportunity to express their sincere appreciation to theshareholders customers bankers employees suppliers and other business associates forthe excellent support and co-operation extended by them.

Your Directors gratefully acknowledge the on-going cooperation and support provided bythe Central and State Governments Stock Exchanges and SEBI and other Regulatory Bodies.

For and on behalf of the Board of
Krebs Biochemicals & Industries Limited
Sd/-
Dr. R T Ravi
Chairman
(DIN- 00272977)
Place: Hyderabad
Date: 01-08-2022

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