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Laurus Labs Ltd.

BSE: 540222 Sector: Health care
NSE: LAURUSLABS ISIN Code: INE947Q01028
BSE 00:00 | 03 Dec 511.45 -5.45
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NSE 00:00 | 03 Dec 511.40 -5.40
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OPEN 518.20
PREVIOUS CLOSE 516.90
VOLUME 124181
52-Week high 723.55
52-Week low 310.00
P/E 28.02
Mkt Cap.(Rs cr) 27,444
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 518.20
CLOSE 516.90
VOLUME 124181
52-Week high 723.55
52-Week low 310.00
P/E 28.02
Mkt Cap.(Rs cr) 27,444
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Laurus Labs Ltd. (LAURUSLABS) - Director Report

Company director report

To

The Members of

Laurus Labs Limited

Your Directors have pleasure in presenting the 16th Annual Report of the Companytogether with the Audited Financial Statements for the Financial Year ended March 312021.

Standalone and Consolidated Financial Highlights:

( Rs in crore)
Consolidated Standalone
Particulars 2020-21 2019-20 2020-21 2019-20
Gross Income 4814 2832 4769 2797
Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) 1573 570 1532 575
Finance Charges 68 90 66 88
Depreciation/Amortisation 205 187 197 184
Net Profit Before Tax 1301 294 1275 305
Provision for Tax 317 38 319 37
Net Profit After Tax carried to Balance Sheet 984 255 956 267
Dividend paid - - 107 16
Dividend Tax on Dividend - - -- 3
Proposed Dividend amount - - -- 11

Company's Affairs:

(i) Operations:

The year 2020-21 is a most chaellenging year due toCOVID-19. Even during thesedifficult times Your Company could be able to deliver the best performance since itsinception. Your Company exhibited all-round performance by all the business areas andimproved operational leverage. During the year under review the Turnover of your Companyincreased from Rs 2832 crore to Rs 4814 crore an increase of 70% and the Profit AfterTax increased from Rs 255 crore to Rs 984 crore an increase of 286%. This stellarperformance was possible due to the proper vision and strategy of leadership teamefficient execution of operational team and with the support of dedicated employees andother committed stakeholders of the Company.

During the year under review –

The API Division has shown excellent performance and achieved a turnover ofRs 2621 crore. A Robust growth was achieved due to ARV-API CVS Anti Diabetic and PPIs

• The FDF Division which has started its commercial operations two years ago hasachieved a record growth and contributed a turnover of Rs 1664 crore and also suppliedARVs to 47 countries in access market;

• The Synthesis division also achieved its all time high growth and contributed aturnover of Rs 519 crore.

• The Company has undertaken expansion with a capex of Rs 689 crore.

• The Company has acquired 74% of stake in Richcore Lifesciences Private Limitedon fully diluted basis (presently Laurus Bio Private Limited) with around Rs 260 croreinvestment which has bright future in Bio-pharma space in future.

• The Company has also acquired a company in South Africa and renamed it as LaurusGenerics (SA) Pty Ltd. to cater to the needs to South African Market.

• The Company has incorporated a couple of subsidiaries to cater the futurerequirements of Synthesis division.

• The Company has purchased 18 acres of land in Hyderabad to set up a greenfieldFinished Dosage Forms Unit.

• The Company has also applied to APIIC and got allotment of 40 acres land and 24acres land to its subsidiary in Atchutapuram Visakhapatnam district to set up greenfieldprojects in next couple of years time.

• Maiden EIR received for Unit 4

(ii) COVID-19

Your company supported colleagues and their families society and Government bodiesduring these tough times. A thorough thermal scanning and sanitisation protocol wasintroduced at all the plants and offices. Monitoring employees for signs & symptomsthrough voluntary disclosure. Additional buses provided to maintain physical distance.Work from home was provided wherever possible to maintain lean staff in the work area.

The Company's contributions to help the government respond to COVID-19 containmentexceeded Rs 5.50 Crores. The Company has donated 480000 doses of Hydroxychloroquine (HCQ)to the governments of Telangana Andhra Pradesh and Kerala in addition to a financialcontribution of Rs 50 Lakhs to each AP & Telangana States. The Company has alsoprovided groceries to the needy. Also provided PPEs to frontline workers in the policedepartment and medical colleges who are treating COVID-19 patients and containmentcenters. Your Company is committed to support the Government and other authorities toextend its helping hand in the fight against COVID-19 pandemic.

(iii) Outlook:

Business prospects may remain positive because of the growing global demand forgenerics and opportunities provided by the expiry of patents in developed markets. PostCovid-19 there may be new business opportunities for the pharmaceutical industry inparticular our company.

Management Discussion & Analysis:

Various business aspects including market conditions business opportunitieschallenges etc. have been discussed at length in the Management Discussion and Analysis(MD&A) which forms part of this Annual Report.

Dividend:

Your directors are pleased to inform you that the Board has declared an interimdividend @ 40% (i.e. Rs 0.80 ps per share of the face value of Rs 2/- each) and paid tothe Shareholders in November 2020 and also another interim dividend @ 20% (i.e. Rs 0.40ps per share of the face value of Rs 2/- per share) which was paid to the Shareholders inFebruary 2021 and also approved a third interim dividend @ 40% (i.e. Rs 0.80 ps per shareof the face value of Rs 2/- each) for FY2021 aggregating to 100% dividend i.e. Rs 2/- pershare of the face value of Rs 2/- each. Therefore the dividend paid for this year isthree times higher than the dividend paid in the previous financial year (25%).

Transfer to Reserves:

Your Company does not propose to transfer any portion of profits to Reserves.

Share Capital:

During the year under review -

• The Company had allotted 284500 equity shares of Rs 10/- each to the eligibleemployees under ESOP Schemes 2011 & 2016 in July 2020. Accordingly the sharecapital has increased to Rs 1071989990/- divided into 107198999 equity shares of

Rs 10/- each.

• Pursuant to the resolution approved by the Shareholders in the Annual GeneralMeeting held on July 9 2020 the Company has taken necessary steps and the each share ofthe Company of

Rs 10/- had been split into 5 shares of face value of Rs 2/- each effective fromOctober 1 2020. As a result the paid up share capital as on October 1 2020 stood at Rs1071989990/- divided into 535994995 shares of Rs 2/- each.

• The Company had also allotted 607390 equity shares of Rs 2/- each to theeligible employees under ESOP Schemes 2016 in December 2020. Accordingly the sharecapital has increased to

Rs 1073204770/- divided into 536602385 shares of Rs 2/- each.

Change in the nature of the business if any:

There is no change in the nature of the business of the Company or any of itssubsidiaries or associates during the year under review. However the Company hasacquired 79.21% and 74.37% (on fully diluted basis by considering pending ESOPs and ShareWarrants) equity share capital of Laurus Bio Private Limited (formerly RichcoreLifesciences Private Limited) making the same as Subsidiary of the Company. Laurus Bio isinto Biotech space producing Enzymes non-animal cultured meat etc. and thereby yourCompany has entered into Biotech space as well.

The name of Richcore Lifesciences Private Limited was changed to Laurus Bio PrivateLimited effective from April 15 2021.

Material Changes and commitments affecting the financial position of the Company:

There are no material changes and commitments affecting the financial position of theCompany that have occurred between the end of the financial year of the Company to whichthe financial statements relate and the date of the report i.e. between March 31 2020 toApril 29 2021.

Fixed deposits:

The Company did not accept any fixed deposits.

Subsidiaries Associates and Joint Ventures:

The Company has the following Wholly Owned Subsidiaries (i) Sriam Labs PrivateLimited India; and (ii) Laurus Holdings Ltd. United Kingdom (UK)

During the year the following subsidiaries were incorporated/ acquired : a) TheCompany has incorporated Laurus Synthesis Private Limited as its 100% wholly ownedsubsidiary and Laurus Synthesis Private Limited in turn incorporated a 100% wholly ownedsubsidiary namely Laurus Ingredients Private Limited.

b) The Company has acquired 100% stake of Phecklong Pharmaceuticals a South AfricanCompany from Pharmacare (Aspen Group Company) and the name has been changed to LaurusGenerics (SA) Pty Ltd.

c) The Company has acquired 79.21% (74.37% on fully diluted basis) shareholding inLaurus Bio Private Limited (formerly Richcore Lifesciences Private Limited) making it assubsidiary of the Company.

During the year the Company's wholly-owned subsidiary i.e Laurus Synthesis Inc. USAwas merged into Laurus Generics Inc. USA which is a step down subsidiary of the Company.

• Laurus Holdings Ltd. UK in turn holds a wholly owned subsidiary namelyLaurus Generics GmbH Germany and a subsidiary Laurus Generics Inc. USA.

Therefore at the end of the year the status of the subsidiaries is as follows:

Name of the Holding Company Name of the Subsidiary Country % Shareholding Status
Laurus Labs Limited Sriam Labs Private Limited India 100% WOS *
Laurus Holdings Limited United Kingdom 100% WOS
Laurus Synthesis Private Limited India 100% WOS
Laurus Generics (SA) Pty Ltd. South Africa 100% WOS
Laurus Bio Private Limited India 79.21% Subsidiary
Laurus Synthesis Private Limited Laurus Ingredients Private Limited @ India 100% WOS
Laurus Holdings Ltd. UK Laurus Generics GmbH @ Germany 100% WOS
Laurus Generics Inc. @ USA 62% # Subsidiary

* WOS means wholly owned subsidiary # Balance 38% is held by Laurus Labs Limited

@ Laurus Ingredients Pvt Ltd. Laurus Generics GmbH Germany and Laurus Generics Inc.USA are step-down subsidiaries of Laurus Labs Limited

As per Sec.129(3) of the Companies Act 2013 the consolidated financial statement ofthe Company and all its Subsidiaries and Associates prepared in accordance with theapplicable accounting standards forms part of this Annual Report. Further a statementcontaining salient features of the financial statements of our subsidiaries and associatesin the prescribed form in AOC-1 is attached as Annexure-1 to the Board's Report.

Consolidated Financial Statements:

Consolidated Financial Statements have been prepared by the Company in accordance withthe requirements of applicable Accounting Standards and the provisions of Companies Act2013. As per the provisions of Section 136 of the Companies Act 2013 the Company hasplaced separately the audited financial statements of its subsidiaries on its websitewww.lauruslabs.com and copies of audited financial statements of the subsidiaries will beprovided to the Members at their request.

Particulars of Loans Guarantees and Investments:

The Company has also issued a Corporate Guarantee to the Bankers of Sriam Labs PrivateLimited in the previous financial year for an amount of Rs 20 crore and to the Bankers ofLaurus Synthesis Private Limited for an amount of Rs 55 crore both of which are wellwithin the limits prescribed under Sec.186 of the Companies Act 2013.

Board of Directors and Key Management Personnel:

As per the provisions of the Companies Act 2013 Dr. Satyanarayana Chava and Dr.Lakshmana Rao C V Directors will retire at the ensuing annual general meeting and beingeligible seek reappointment. The Board of Directors recommends their re-appointment.

Mr. Narendra Ostawal has resigned from the Board of the Company with effect from July1 2020 as he was the nominee director of Bluewater Investments Ltd. and the saidBluewater Investments Ltd. sold of its entire equity in the Company.

Board Meetings:

The Board and Committee meetings are pre-scheduled and a tentative calendar of themeetings shall be finalised in consultation with the Directors to facilitate them to plantheir schedule. However in case of urgent business needs approval is taken by passingresolutions through circulation. During the year under review nine board meetings wereheld. The details of the meetings including the composition of various committees areprovided in the Corporate Governance Report.

Performance Evaluation:

The formal annual evaluation of the performance of the Board as well as non-independentdirectors was undertaken by the Nomination and Remuneration Committee. The performance ofBoard Committees and of individual independent directors was undertaken by the Boardmembers.

The manner of the evaluation of the Board and other Committees has been determined bythe Nomination and Remuneration Committee as per SEBI circular dated January 5 2017.

Declaration from Independent Directors:

The independent directors have submitted the declaration of independence stating thatthey meet the criteria of independence as prescribed in sub-section (6) of Section 149 ofthe Companies Act 2013 as well as under Regulation 16(1)(b) of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015.

Policy on Directors' Appointment and Remuneration:

The policy of the Company on directors' appointment and remuneration includingcriteria for determining qualifications positive attributes independence of a directorand other matters are adopted as per the provisions of the Companies Act 2013. Theremuneration paid to the Directors is as per the terms laid out in the nomination andremuneration policy of the Company.

The nomination and remuneration policy is adopted by the Board and the salient featuresof the policy are as follows:

• Non-Executive and Independent Directors ("NEDs") will be paidremuneration by way of sitting fees and commission. The remuneration/ commission/compensation to the NEDs will be determined by the Nomination and Remuneration Committee ("CompensationCommittee") and recommended to the Board for its approval.

• As approved by the shareholders at the shareholders meeting held on July 202016 commission will be paid at a rate not exceeding 1% per annum of the profits of theCompany computed in accordance with section 198 of the Act.

• The payment of the Commission to the NEDs will be placed before the Board everyyear for its consideration and approval. The sitting fee payable to the NEDs for attendingthe Board and Compensation Committee meetings will be fixed subject to the statutoryceiling. The fee will be reviewed periodically and aligned to comparable best in classcompanies.

• NEDs will not be eligible to receive stock options under the existing employeestock option scheme(s) ("ESOP") of the Company.

• The compensation paid to the executive directors (including the ManagingDirector) will be within the scale approved by the shareholders. The elements of the totalcompensation approved by the Compensation Committee will be within the overall limitsspecified under the Act.

• The Company's total compensation for Directors and Key Managerial Personnel asdefined under the Act / other employees will consist of:

• fixed compensation

• variable compensation in the form of annual incentive

• benefits

• work related facilities and perquisites

Changes made to the policy: Nil

The Nomination and Remuneration Policy is placed on the Company's website and thefollowing is web address of the said policy.

http://www.lauruslabs.com/sites/all/themes/lauruslab//Investors/PDF/Policies/Remuneration_Policy.pdf

Dividend Distribution Policy:

The Dividend Policy of the Company is attached as Annexure-2 to this report.

The said Dividend Distribution policy is placed on the website of the Companyhttps://lauruslabs.com/Investors/PDF/Policies/Dividend_ Policy.pdf.

Risk Management:

Your Company had formulated a risk management policy for dealing with different kindsof risks that it faces in the day-to-day operations of the Company. Risk Management Policyof the company outlines different kinds of risks and risk mitigating measures to beadopted by the Board. The Company has adequate internal financial control systems andprocedures to mitigate the risk. The risk management procedure is reviewed by the RiskManagement Committee and Board of Directors on a regular basis at the time of review ofquarterly financial results of the Company. Further your Company had constituted a RiskManagement Committee which lays down various risk mitigating practices that your Companyis required to implement in the Company.

Adequacy of Internal Financial Controls:

The internal financial controls with reference to the Financial Statements apart fromstatutory audit internal audit and cost compliance are adequate to the size andoperations of the Company.

Directors' Responsibility Statement:

In terms of Section 134(3)(c) of the Companies Act 2013 the Board of Directors of theCompany states that:

(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(b) the directors had 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 at the end of the financial year and ofthe profit and loss of the Company for that period;

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

(d) the directors had prepared the 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 operativeeffectively; and

(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operative effectively.

Related Party Transactions:

In accordance with SeRs 134(h) of the Companies Act 2013 and Rule 8(2) of Companies(Accounts) Rules 2014 the particulars of contracts or arrangements entered into by theCompany with the Related Parties referred to in Sec.188(1) of the Act have been providedin Form AOC-2 and attached the same as Annexure-3.

The details of related party disclosures as stated in the notes to the financialstatements forms part of this annual report.

Vigil Mechanism / Whistle Blower Policy:

The Company established a whistle blower policy in order to assure that the business isconducted with integrity and that the Company's financial information is accurate.

Auditors:

(i) Statutory Auditors:

M/s. Deloitte Haskins & Sells LLP Firm Registration No.117366W/W-100018 who wereappointed as Statutory Auditors of the Company by the Shareholders of the Company in their12th Annual General Meeting held in July 2017 for a period of five years shall be theStatutory Auditors of the Company.

The requirement under the proviso to Sec.139(1) that "the Company shall place thematter relating to such appointment (of auditors) for ratification by members at everyannual general meeting" has been omitted from the Companies Act 2013. Therefore theCompany does not propose ratification of appointment of statutory auditors for theapproval of the members.

(ii) Cost records and Auditors:

The Company is required under Section 148(1) of the Companies Act 2013 read withCompanies (Audit & Auditors') Rules 2014 and the Companies (Cost Records and Audit)Amendments Rules 2014 the Company is required to maintain the cost records in respect ofits business and accordingly such accounts and records are made and maintained.

Your Board has appointed M/s. Sagar & Associates Cost Accountants as the CostAuditors of the Company for the Financial Year 2021-22. As required by the Act theremuneration of the Cost Auditors has to be ratified by the Members and accordingly theresolution relating to the Cost Auditors is being placed before the Members for theirratification.

(iii) Secretarial Auditors & Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Companies Act 2013 and Rule 9 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed Y. Ravi Prasada Reddy Practising Company Secretary (CP No. 5360) proprietorof RPR & Associates to undertake the Secretarial Audit of the Company for thefinancial year 2020-21. The Secretarial Audit Report issued in Form MR-3 is in Annexure-4to this report. There are no qualifications reservations or adverse remarks in theSecretarial Audit Report.

Auditors' Qualifications/reservations/adverse remarks/ Frauds reported:

There are no Auditors' Qualifications or reservations or adverse remarks on thefinancial statements of the Company. The Auditors have not reported any frauds to theAudit Committee as prescribed under Sec. 143(12) of the Companies Act 2013.

Significant and material orders passed by the Courts/ Regulators:

There are no significant and material orders passed by the Courts or Regulators againstthe Company.

Rating:

CARE has revised and improved its rating of "AA- with a stable outlook" to"AA- with Positive outlook" on the long term bank facilities of the Company andA1+ on the short term bank facilities of the Company.

Insurance:

All properties and insurable interests of the Company including buildings plant andmachinery and stocks have been fully insured.

Corporate Social Responsibility initiatives:

Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act 2013CSR Committee of the Board of Directors had framed the policy on Corporate SocialResponsibility and the Projects and Programs undertaken by the Company during the yearunder review have been provided in Annexure-5 and forms part of this report.

Annual Return:

As required pursuant to section 92(3) of the Companies Act 2013 and rule 12(1) of theCompanies (Management and Administration) Rules 2014 (as amended) a copy of the AnnualReturn of the Company shall be placed on the Website of the Company at www.lauruslabs.com.

Statement of Particulars of Appointment and Remuneration of Managerial Personnel/employees:

In accordance with the provisions of Section 134 and Rule 5 of Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 the statement of particulars ofappointment and remuneration of managerial personnel and employees is attached in Annexure-6to this report.

Human resources:

The management believes that competent and committed human resources are vitallyimportant to attain success in the organisation. In line with this philosophy utmost careis being exercised to attract quality resources and suitable training is imparted onvarious skill-sets and behavior. Various initiatives were undertaken to enhance thecompetitive spirit and encourage bonding teamwork among the employees even during theCOVID pandemic outbreak which resulted to uninterrupted operations of the Company andcould achieve the targeted growth in the performance of the Company.

Employee Stock Options:

During the year the Company has allotted 284500 (Two lakh eighty four thousand fivehundred only) equity shares of Rs 10/- to various eligible employees of the Company underEmployee Stock Option Schemes-2011&2016 upon exercise of their vesting rights in July2020.

During the year the Company has allotted 607390 (Six lakh seven thousand threehundred and ninety only) equity shares of

Rs 2/- to various eligible employees of the Company under Employee Stock Option Scheme2016 upon exercise of their vesting rights in December 2020.

The details of stock options are as mentioned in Annexure-7 and forms part ofthis Report. Further the details of the stock options stated in the notes to accounts ofthe financial statements also forms part of this Annual Report.

The Company is proposing a new ESOP Scheme 2021 with one million stock options which isaround 0.20% of the paid up capital of the Company to be gratned to the eligible employeesin future to attract and retain talented employees.

Conservation of energy technology absorption and foreign exchange earnings/outgo:

The information required under Section 134 (3) (m) of the Companies Act 2013 readwith Rule 8(3) of Companies (Accounts) Rules 2014 is appended hereto as Annexure-8and forms part of this report.

Policy on Prevention of Sexual Harassment:

The Company has formulated and implemented a policy for Prevention of Sexual Harassmentof Women at workplace. During the year under review the Company has not received anycomplaints under the policy.

The Company has many systems processes and policies to ensure professional ethics andharmonious working environment. We follow Zero Tolerance towards Corruption and unethicalconduct. These are ensured through Whistle Blower Policy Anti-Corruption Policy GiftPolicy Sexual Harassment Policy and Redressal Guidelines.

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

BSE 500:

The Equity Shares of your Company have been inducted in S&P BSE 500 indices witheffect from March 31 2017

Corporate Governance:

A separate section on Corporate Governance practices followed by your Company asstipulated under Schedule V(C) of the SEBI (LODR) Regulations 2015 is enclosed andforming part of this report.

The certificate of the Practising Company Secretary Mr. Y. Ravi Prasada Reddy withregard to compliance of conditions of corporate governance as stipulated under Schedule V(E) of the SEBI (LODR) Regulations 2015 is annexed to the Report on Corporate Governance.

Business Responsibility Report (BRR)

The Listing Regulations mandate the inclusion of the BRR as part of the Annual Reportfor top 500 listed entities based on market capitalisation. In accordance with the ListingRegulations we have integrated BRR disclosures into our Annual Report.

Awards:

Your Company has won the prestigious Golden Peacock Award for Excellence in CorporateGovernance in the Pharma Sector during the year. Your Company has also won India"Pharma Leader Award" announced by the Department of Pharmaceuticals theMinistry of Chemicals and Fertilizers Government of India. Your Company also won theprestigious CNBC-TV18 Indian Business Leaders Awards 2021 as "Most Promising Companyof the Year 2021". Your Company certified as "Great Place to Work" for the3rd consecutive year.

Acknowledgements:

Your Directors would like to place on record their sincere appreciation to customersbusiness associates bankers vendors government agencies and shareholders for theircontinued support.

Your Directors are also happy to place on record their sincere appreciation to theco-operation commitment and contribution extended by all the employees of the Laurusfamily and look forward to enjoying their continued support and cooperation.

Dr. Satyanarayana Chava Mr. V. V. Ravi Kumar
Executive Director & Executive Director &
Chief Executive Officer Chief Financial Officer
DIN: 00211921 DIN: 01424180
Hyderabad
April 29 2021

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