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Morepen Laboratories Ltd.

BSE: 500288 Sector: Health care
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OPEN 26.00
VOLUME 301312
52-Week high 34.95
52-Week low 7.21
P/E 33.54
Mkt Cap.(Rs cr) 1,086
Buy Price 24.15
Buy Qty 3165.00
Sell Price 24.15
Sell Qty 23191.00
OPEN 26.00
CLOSE 25.40
VOLUME 301312
52-Week high 34.95
52-Week low 7.21
P/E 33.54
Mkt Cap.(Rs cr) 1,086
Buy Price 24.15
Buy Qty 3165.00
Sell Price 24.15
Sell Qty 23191.00

Morepen Laboratories Ltd. (MOREPENLAB) - Director Report

Company director report


Dear Shareholders

Your Directors have pleasure in presenting the 33 Annual Report on business operationsand achievements of the Company together with the audited financial statements for thefinancial year ended March 31 2018.

Particulars Standalone Consolidated
2017-18 2016-17 2017-18 2016-17
Sales 55294.67 53964.99 59775.29 58640.63
Other Operating Income 788.37 785.96 875.62 906.78
Other Income 354.01 371.58 372.27 371.58
Total Income 56437.05 55122.53 61023.18 59918.99
Operating Surplus 6380.93 6420.27 6845.02 6509.53
Finance cost 429.46 747.35 435.73 756.10
Cash Surplus 5951.47 5672.92 6409.29 5753.43
Non-Cash Items:
Depreciation & Amortisation 3339.95 3356.17 3432.20 3390.41
Profit/(Loss) before Tax 2611.52 2316.75 2977.09 2363.02
Tax Expense:
- Tax (MAT) (351.38) (351.38)
- MAT Credit Entitlement 351.38 351.38
Profit/(Loss) before non-controlling interest 2611.52 2316.75 2977.09 2363.02
Non - controlling interest 17.95 (0.45)
Profit/(Loss) after non-controlling interest 2611.52 2316.75 2959.14 2363.47
Other Comprehensive Income 10.95 (61.68) 8.87 (58.79)
Total Comprehensive Income 2622.47 2255.07 2968.01 2304.68
EPS (Basic/Diluted) 0.58 0.52 0.66 0.53

Note: Figures for the Financial Year 2016-17 have been restated wherevernecessary as per Ind AS and therefore may not be comparable with financials approved bythe Directors and disclosed in the Financial Statement of previous year (Financial Year2016-17).


The financial statements for the year ended March 31 2018 have been prepared inaccordance with Indian Accounting Standards (Ind AS) notified under the Companies (IndianAccounting Standards) Rules 2015 together with the comparative period data as at and forthe previous year ended March 31 2017. Further the Company has prepared the openingconsolidated balance sheet as at April 1 2016 (the transition date) in accordance withInd AS.


Active Pharmaceutical Ingredients (API) business constituting 57% of consolidatedsales revenues of the Company has witnessed increased focus on value delivery but themargins shrank because of growing intensity of competition. To remain competitive in theAPI business the Company is investing its resources in process improvements and takingsteps for cost reduction. In view the above the Company is also putting greater focus ondomestic markets.

API business on account of lower price realisation has recorded a fall of 1% in itscurrent year revenues. However Home Diagnostics business continues to remain upbeat andhave recorded astounding revenue growth of 34% during the current financial year. TheFormulation business has remained steady at last year level with marginal growth. OTC(over the counter) business carried under wholly owned subsidiary 'Dr. Morepen Limited'has registered marginal de-growth of 1%.

Financial Performance: Sales

Your Company attained new heights in terms of sales and profits during the year endedMarch 31 2018. Consolidated sales revenues of Rs. 59775.29 Lakhs as against Rs.58640.63 Lakhs of the previous year grew marginally by 1.9% mainly driven by volumes.Export business now contributes 32% to the consolidated sales revenues of the Company.

On standalone basis the Company registered sales revenues of Rs. 55294.67 Lakhs ascompared to Rs. 53964.99 Lakhs during previous financial year a growth of 2.5 %.

Material Cost

Consolidated Material cost as a percentage of sales has come down to 61.66% ascompared to 62.39% in the previous year primarily because of cost reduction and buyingefficiencies. There has been decrease in sales realisation because of general reduction indrug prices.

Employee Cost

During the year under review the people strength of the Company has increased by14.29%. The increase in employee cost is both on account of annual merit based increase aswell as on account of increased manpower. The current year consolidated employee cost is12.80% of the sales revenue against 11.88% in the preceding year.

Other Expenses

Consolidated expenditure on manufacturing sales & marketing and administrativeactivities has come down to 16.17% of sales revenues against 16.81% in the previous year.Keeping in view the debt servicing commitments spending on sales and marketing activitieshas been kept under tighter control.

Finance Cost & Depreciation

Consolidated Finance cost at Rs. 435.73 Lakhs has come down by 42% against previousyear cost of Rs. 756.10 Lakhs. Depreciation cost for the year has been at Rs. 3432.20Lakhs against Rs. 3390.14 Lakhs of previous year an increase of 1.23% mainly on accountof additional charge on assets discarded during the year.

Other Operating Income & Other Income

Consolidated Other Operating Income represents export incentives income from foreignoperations & others. Current year export incentives are at Rs. 777.32 Lakhs against

Rs. 779.95 Lakhs whereas others have come down to Rs. 98.30 Lakhs during the currentyear as against Rs. 126.83 Lakhs in the previous year.

Consolidated Other Income representing currency fluctuations and interest income at Rs.372.27 Lakhs is almost at previous levels of Rs. 371.58 Lakhs.

Profit after Tax

Consolidated Profit before interest depreciation and tax is higher at Rs. 6845.02Lakhs as against Rs. 6509.53 Lakhs in the previous year. Net profit after tax but beforeshare of profit from non-controlling interest is at Rs. 2977.09 Lakhs. Consolidated Netprofit exclusive of minority share is at Rs. 2959.14 Lakhs an increase by 25% overprevious years' profit. Total Comprehensive Income for the year stood at Rs. 2968.01Lakhs vis-a-vis Rs. 2304.68 Lakhs of previous year.

On standalone basis the Company has registered Net profits of Rs. 2611.52 Lakhs asagainst Rs. 2316.75 Lakhs during previous financial year. Total Comprehensive Income forthe year stood at Rs. 2622.47 Lakhs vis-a-vis Rs. 2255.07 Lakhs of previous year.

Division wise Business Performance: Active Pharmaceutical Ingredients (API)

Sales revenues for the API business have come down to

Rs. 33738.91 Lakhs against last year revenues of Rs. 34016.64 Lakhs a fall of 0.82%.Fall in export revenues at 6.31% has been made up by increase in domestic revenues by13.08%. Though volume growth across various products has been recorded but there have beenlower sales price realisation particularly in Loratadine and Montelukast. Rosuvastatin andFexofenadine business recorded growth of 17% and 54% respectively. LoratadineMontelukast and Atorvastatin sales revenues are down between 1% to 8%.

With Sales revenue of Rs. 11221.88 Lakhs Loratadine continues to be leading revenuegenerator for the API business closely followed by Montelukast with sales revenue of Rs.9076.68 Lakhs recorded during the current year. Rosuvastatin sales revenues for the yearunder review are at Rs. 2885.91 Lakhs against Rs. 2459.93 Lakhs of last year.Fexofenadine sales revenue for the current year is at Rs. 2196.67 Lakhs whereas duringlast year revenues of Rs. 1430.34 Lakhs were recorded.

Continuous focus on research quality of the products offerings and cost reduction havehelped the Company to face competitive pricing pressure. API business has recorded acompound annual growth rate (CAGR) 13.56% of during last 5 years.

The Company has recently received US FDA (United States Food and DrugAdministration) approvals for both its bulk drugs manufacturing facilities situated inHimachal Pradesh. The Baddi facility has got US FDA approval for the manufacture of bulkdrug 'Atorvastatin Calcium' a Cholesterol reducing drug; while the Masulkhana facilityhas got the nod for manufacturing anti-asthma bulk drug 'Montelukast Sodium' for export tothe US market. It is significant to note here that the US market size for these two bulkdrugs viz. Atorvastatin Calcium and Montelukast Sodium is approximately Rs. 5000 Croresand Rs. 2000 Crores respectively.

Home Diagnostics

The Home Devices portfolio has been growing with fast pace and has recorded a compoundannual growth rate (CAGR) of 24% during last 5 years. Blood Gluco Monitors with Salesrevenues of Rs. 6481.42 Lakhs have registered a CAGR of 38% during last 5 years. GlucoMonitor installations during the current year were 56% more than the previous year and hascompleted the target of 2 million installations. Glucose Testing Strips sold during theyear has crossed 68 million registering a jump of 43% over the previous year. The BloodGluco testing business has recorded a CAGR of 39% during last 5 years.

Blood Pressure Monitors with current year sales revenues of Rs. 2175.87 Lakhs hasposted astounding growth of 75% over the previous year. It has recorded a CAGR of 35%during last 5 years.

Nebulisers with current year sales revenues of Rs. 583.99 Lakhs also recorded a robustgrowth of 34% in this fiscal whereas Thermometers with current year sales revenues of Rs.464.98 Lakhs has gone up by 12%.

In line with its commitment of delivering good health at home at affordable prices theCompany started in house manufacture of Blood Glucose Monitors. The Company has becomeself-reliant in the production of Glucometers. It has manufactured 6.5 Lakh Blood GlucoseMonitors in the current year. This makes Morepen one of the largest manufacturer of BloodGlucose Monitors in India and the SAARC region. The Company has started adopting state ofthe art robotic technology in its production process of medical devices to improve qualityand efficiency. Glucometer production has replaced import of around US$ 3 Million duringthe current year. The Company has also started production of Glucometer strips and itsfirst batch was successfully produced in May 2018. The Company has plans to startproduction of Nebulizer & Thermometers in the coming months. Home Diagnostics businessis growing in the right direction and will be achieving many more milestones in comingyears.

The Company has also invested heavily in Glucometers placement in the market to expandthe customer base by supplying these free or at the subsidized cost. The investment hashelped the Company to expand its customer base for the gluco strips and is also expectedto pay off in the coming years.

Finished Formulations

Finished Dosages has been growing steadily with a CAGR of 10% during last 5 years andrecorded annual sales revenues of Rs. 11036.11 Lakhs a marginal growth of 0.2%. BrandedPrescription (Rx) products forming part of Finished Formulation business with annual salesrevenues of Rs. 2562.49 Lakhs are marginally up by 0.5% vis-a-vis last year. BrandedGenerics business having suffered during GST implementation period has also bounced backwith better last quarterly results. Antibiotics and Vitamins therapeutic categoriesrecorded better results during the current year with their respective growth of 8.83% and10.69% recorded during the current year.

Revenues from distribution based and contract manufacturing remained stable at Rs.8473.62 Lakhs.


For the year under review the Directors do not recommend any dividend due to absenceof distributable surplus.


Standalone Net Profit after tax of Rs. 2611.52 Lakhs is carried forward to theRetained Earning. During the year under review no amount was transferred to the GeneralReserve.


Your Company has not accepted any deposits from the public during the year underreview within the meaning of Section 73 of the Companies Act 2013 ('the Act') read withthe Companies (Acceptance of Deposits) Rules 2014 and no amount of principal or intereston deposits from the public was outstanding as on the date of Balance Sheet.

During the financial year ended March 31 2010 the Company had allotted 92490413Equity Shares to the fixed deposit holders in settlement of their dues pursuant to theScheme of Arrangement & Compromise under Section 391 of the Companies Act 1956approved by the Hon'ble Shimla High Court vide its order dated August 4 2009. In anappeal preferred by the Central Government before Division Bench of Hon'ble High Court ofHimachal Pradesh at Shimla the Division Bench vide its order dated September 14 2010 setaside the order of the Hon'ble Single Judge dated August 4 2009 and remanded the caseback to the Hon'ble Single Judge to decide the Petition afresh after hearing all theparties and considering the representation of the Central Government.

On the constitution of National Company Law Tribunal (NCLT) this petition underSection 391 of the Companies Act 1956 was later transferred to the Chandigarh Bench ofNCLT. The Hon'ble NCLT Chandigarh on March 12 2018 dismissed the Company's petitionseeking approval of the Scheme of arrangement with the Fixed Deposit holders. The Hon'bleNCLT directed the Company to cancel the shares issued under the aforesaid scheme whichhave not yet been transferred by original allottees (FD holders) and payment of dues asper Company Law Board order within 3 months from the date of receipt of the certified copyof the judgment.

The Company preferred an appeal before the Hon'ble National Company Law AppellateTribunal (NCLAT) at New Delhi against the aforesaid Judgement of NCLT Chandigarh. TheHon'ble NCLAT vide its order dated April 27 2018 has issued notice to the respondents andin the meantime stayed the direction issued by NCLT Chandigarh.


It has been the management's endeavor to maximize the return on investment in all thebusiness segments while keeping its commitment of profitable growth across all businesssegments.

Major portion of the outstanding debt has been discharged during the year as per theterms approved by lenders of the Company. The Company is poised to be debt free soon.Internal accruals are being channelized to drive the growth of different businessverticals of the Company. However growth was marginal during the year owing to lowersales realisation and limited spending on sales and marketing activities to drive volumegrowth.

Under the provisions of the Act past accumulated losses restricts the ability of theCompany to redeem Preference Shares issued to lenders under the Corporate DebtRestructuring (CDR) Scheme and also to other entities as per CDR terms. As a result theCompany has not been able to redeem these Preference Shares during the year althoughthey have become due for redemption. The Company has taken up matter with its preferenceshareholders to work out a scheme which is in the interest of all the stakeholders.


During the year under review there was no change in the paid-up equity share capitalof the Company which as on March 31 2018 was Rs. 8995.86 Lakhs.

The Equity Shares issued by the Company are listed at following Stock Exchanges as onMarch 31 2018:

1. National Stock Exchange of India Limited (NSE)

2. Bombay Stock Exchange (BSE)

Annual listing fee for the financial year 2018-19 has been paid to both the StockExchanges. The Equity Shares continue to be listed on both NSE and BSE.

The provisions of the Act have placed statutory restriction on the Company havingaccumulated losses from payment of dividends on Preference Shares. As a result dividendson Preference Shares have not been paid for more than two years thereby making theholders of these shares entitled to vote on all resolutions placed before the Company. Theproportion of voting rights of Equity Shareholders to the voting rights of PreferenceShareholders shall be in proportion to their paid up capital.


The Company has three subsidiaries as on March 31 2018 namely:

1. Dr. Morepen Ltd.

2. Total Care Ltd. (Subsidiary of Dr. Morepen Ltd.)

3. Morepen Inc. USA

Dr. Morepen Limited

The consumer business of the Company is being promoted under brand 'Dr. Morepen'. OTCbusiness carried under wholly owned subsidiary Dr. Morepen Limited is growing steadilywith a CAGR of 10% during last 5 years. On standalone basis the Company has recorded atopline of

Rs. 4890.71 Lakhs as against Rs. 4924.16 Lakhs recorded in the preceding year a dropof 0.68%. The management foresees a huge potential in its consumer facing business andhopes that with conclusion of debt servicing greater amount of resources will beavailable for this business towards brand building and marketing.

The Company's lead brands like Burnol (Burn Cream) Lemolate (Cough & Cold) andFiber-X (Sat Isabgol) have bounced back in last quarter after some slowdown in first 2-3quarters due to GST implementation and have registered a growth of 6% during the currentyear. Other small brands which are distribution and reach based have recorded de-growth of7% however 5 years CAGR has been at 14%.

The Brand Sharing business has nearly 400 Stock Keeping Units (SKUs) under variousproduct categories comprising of Cough & Cold Relief General Wellbeing Vitamins& Minerals Skin Hair & Oral Care. The Company expects to continue its growth inthe OTC and Brand Sharing business with the continuous addition of fresh products underthe existing or new brands entering new markets and increasing product reach andavailability.

The Grooming business of the Company launched two years back has registered growth of15.49% during current year with annual revenues of Rs. 645.57 Lakhs. The revenues areexpected to increase in the coming years.

The 'Dr. Morepen - NOW (Nation on Wellness)' business which offers customizedcomprehensive programme on wellness for individuals is yet to catch up. The managementwill consider various business models which do not require the Company to deploy largecapital on this business. The brand 'Life Spring' owned by its subsidiary 'Total careLimited' also is now owned by the Company for achieving brand synergies and recognition.

Total Care Limited

The Company is dealing in OTC & Health Care products. The scale of Company'soperations has been very small during past few years with no operating revenue recordedduring the year. The brand 'Life Spring' is now being owned by Dr. Morepen Limited forachieving better synergies.

Morepen Inc.

Morepen Inc. is the marketing and distribution interface of the Company in USA for itsAPI business various OTC & other products. During the year under review the Companyrecorded a growth of 33% with revenue at Rs. 87.25 Lakhs (US$134606) as against Rs. 65.25Lakhs (US$101089) in the previous year. The Company has recorded a profit of Rs. 31.65Lakhs against loss of Rs. 32.62 Lakhs in the preceding year.


The consolidated financial statements for the year ended March 31 2018 has beenprepared in accordance with Indian Accounting Standards (Ind AS) notified under the

Companies (Indian Accounting Standards) Rules 2015 together with the comparativeperiod data as at and for the previous year ended March 31 2017. Further the Company hasprepared the opening consolidated balance sheet as at April 1 2016 (the transition date)in accordance with Ind AS.

In accordance with the Companies Act 2013 and Indian Accounting Standards (Ind AS) 110on 'Consolidated Financial Statements' read with Ind AS 112 on 'Disclosure of Interest inother entities' the Audited Consolidated Financial Statements is provided in the AnnualReport.

In accordance with the provisions of Section 129(3) of the Act read with the Companies(Accounts) Rules 2014 a report on the performance and financial position of each of thesubsidiaries is attached as ANNEXURE 'A' to this Report in the prescribed form AOC-1.


Changes in Directors & Key Managerial Personnel

The members at the 32 Annual General Meeting (AGM) of the Company held on September 222017 approved the re-appointment of Dr. Arun Kumar Sinha Whole-time Director of theCompany who was liable to retire by rotation pursuant to Section 152 and other applicableprovisions of the Act read with Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 as amended or re-enacted from time to time.

The members also appointed Ms. Anju Suri (DIN: 00042033) as a Non-Executive Director(Woman Director) who shall be liable to retire by rotation pursuant to the provisions ofSection 149 152 161 and other applicable provisions if any of the Act read with theCompanies (Appointment and Qualification of Directors) Rules 2014 and Regulation 17 ofSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (ListingRegulations) as amended or re-enacted from time to time.

Mr. Sushil Suri Chairman and Managing Director of the Company who is liable to retireby rotation pursuant to the provisions of Section 152 and other applicable provisions ofthe Act read with Companies (Appointment and Qualification of Directors) Rules 2014 asamended or re-enacted from time to time has given his consent and being eligible hasoffered himself for re-appointment in the ensuing AGM.

Your Directors also recommend the re-appointment of Mr. Sushil Suri Chairman &Managing Director of the Company who holds office up to October 19 2018 and beingeligible has offered himself for re-appointment pursuant to the provisions of Section196 197 198 203

Schedule V and other applicable provisions of the Companies Act 2013 read withCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 as amendedor re-enacted from time to time as the Chairman & Managing Director of the Companyfor another term of 5 years w.e.f. October 20 2018 in the ensuing AGM.

Declaration by Independent Director(s) and re-appointment

The Company has received necessary declaration from each Independent Director as perthe provisions of Section 149(7) of Act that they meet the criteria of independence laiddown in Section 149(6) of the Act.

Evaluation of Board Committees and Directors

Pursuant to the provisions of the Act and Regulation 17 of Listing Regulations theBoard has carried out its own performance evaluation that of the Committees and theindividual performance of its Directors. The manner in which the evaluation has beencarried out has been detailed in the Corporate Governance Report.

Familiarization Programme for Independent Directors

The details pertaining to Familiarization Programme for Independent Directors has beenincorporated in Corporate Governance Report.

Meetings of Board of Directors

The Board of Directors met 5 (five) times during the year under review to transact thebusiness of the Company the details of which are given in Corporate Governance Report.

Independent Directors Meeting

During the year under review a separate meeting of the Independent Directors of theCompany was held on January 22 2018 without the presence of Non-Independent Directorsand members of the Management. The Independent Directors reviewed the performance ofNon-Independent Directors and the Board as a whole performance of Chairperson of theCompany and assessed the quality quantity and time-lines of flow of information betweenthe Company Management and the Board. All the Independent Directors of the Company werepresent in the meeting.


As required under Section 134 (3) (c) of the Act your Directors to the best of theirknowledge and belief and according to the information and explanations obtained by themconfirm that: a) in the preparation of annual accounts the applicable accountingstandards have been followed along with proper explanation relating to materialdepartures wherever applicable; b) your Directors have selected such accounting policiesand applied them consistently and made judgments and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company at theend of the financial year and of the profit and loss of the Company for that period;

c) your 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 prevention and detecting of fraud and other irregularities;

d) the annual accounts have been prepared on a going concern basis;

e) internal financial controls to be followed by the Company have been laid down andsuch internal financial controls are adequate and were operating effectively; and

f) proper systems to ensure compliance with the provisions of all applicable laws havebeen devised and that such systems were adequate and operating effectively.


Disclosure pursuant to Section 197 of the Act read with Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014:

a) Ratio of the remuneration of each Director to the median remuneration of theemployee's (MRE) and other details pursuant to Section 197 (12) of the Act read with Rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014:The aforesaid disclosure is annexed and forms part of this report as


b) Detail of every employee of the Company as required pursuant to Rule 5(2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014: Theaforesaid disclosure is annexed and forms part of this report as ANNEXURE 'C'.

c) No Director of the Company including its Managing Director or Whole-Time Directoris in receipt of any commission from the Company or its Subsidiary Company.


Your Company has an Audit Committee in compliance of the provisions of Section 177 ofthe Act and Regulation 18 of Listing Regulations. The complete details with respect toAudit Committee as required to be given under the aforesaid provisions is given in the'Corporate Governance Report'.


The Company has established a Whistle Blower Policy/Vigil Mechanism through which itsDirectors Employees and Stakeholders can report their genuine concern about unethicalbehaviors actual or suspected fraud or violation of the Company's Code of Conduct orEthics Policy. The said policy provides for adequate safeguard against victimization andalso direct access to the higher level of superiors including Chairman of the AuditCommittee in exceptional cases. The same is reviewed by the Audit Committee from time totime.


The Company has in place a mechanism to inform the Board about the risk assessment andminimisation procedures and periodical review to ensure that management controls riskthrough means of a properly defined framework.

The Company has formulated and adopted Risk Management Policy to prescribe riskassessment management reporting and disclosure requirements of the Company.


Your Company has a Nomination and Remuneration Committee in compliance to theprovisions of Section 178 of the Act and Regulation 18 of Listing Regulations. Thecomplete details with respect to Nomination and Remuneration Committee as required to begiven under the aforesaid provisions is given in the 'Corporate Governance Report'.

The Company has adopted a Nomination and Remuneration Policy for Directors KeyManagerial Personnel (KMP) and other employees of the Company as formulated by Nominationand Remuneration Committee pursuant to provisions of Section 178 of the Act and Para A ofPart D of Schedule II of Listing Regulations which acts as a guideline for determininginter-alia qualifications positive attributes and independence of a Director mattersrelating to the remuneration appointment removal and evaluation of performance of theDirectors Key Managerial Personnel Senior Management and other employees.

The detailed policy formulated by Noutmination and Remuneration Committee is annexed tothe Directors Report of the Company as ANNEXURE 'D' and can be accessed at:


M/s. Satinder Goyal & Co. (Chartered Accountants FRN: 027334N) the StatutoryAuditors of the Company were appointed by the shareholders in the last AGM held onSeptember 22 2017 pursuant to provisions of Section 139 141 142 and other applicableprovisions if any of the Act read with the Companies (Audit and Auditors) Rules 2014(including any statutory modification(s) or re-enactment thereof for the time being inforce) and subject to all the applicable laws and regulations for a term of five (5)consecutive years i.e. to hold office from the conclusion of the 32 AGM until theconclusion of 37 AGM to be held in the year 2022.


The Auditors vide Para (vii)(a) & (viii) of the Annexure-A to the Auditors' Reporthave commented on delay in deposit of Employee's State Insurance (ESI) Provident Fund(PF) Income Tax (TDS) Value Added Tax (VAT) & Goods and Service Tax (GST) dues anddelay in payment of dues to the lenders. The Company has however deposited all the duesin respect of ESI PF VAT GST and Income Tax (TDS) for the year under review. TheCompany is taking requisite steps for the payment of interest dues to the lenders apartfrom timely deposit of above noted dues.


Pursuant to the provisions of Section 204 of the Act read with Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 Mr. Praveen Dua Company SecretaryProprietor of M/s. PD And Associates Company Secretaries was appointed by Board ofDirectors of the Company as Secretarial Auditor of the Company for the financial year2017-18. The Secretarial Audit Report is annexed and forms part of this report as ANNEXURE'E'.


The Secretarial Auditor has observed that the Company has not redeemed the PreferenceShares due for redemption. The reasons for not redeeming the Preference Shares have beenexplained in Note No. 18 to the Financial Statements for the year ended March 31 2018.


Pursuant to Section 148 of the Act read with the Companies (Cost Records and Audit)Rules 2014 the Cost Accounting Records maintained by the Company in respect of its BulkDrugs and Formulations activity are required to be audited by Cost Auditors. The Board ofDirectors of the Company has on the recommendation of the Audit Committee appointed M/s.Vijender Sharma & Co. Cost Accountants as the Cost Auditor of the Company for thefinancial year ended March 31 2019 at a remuneration of Rs. 3.00 Lakhs subject to theratification of their remuneration by the shareholders in the ensuing AGM.


The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The internal financial controls are adequate and areoperating effectively so as to ensure orderly and efficient conduct of businessoperations. The Company's internal financial control procedures ensure that Company'sfinancial statements are reliable and prepared in accordance with the applicable laws.

To maintain its objectivity and independence the Internal Audit Team reports to theChairman of the Audit Committee of the Board. Based on the Internal Audit Report processowners undertake corrective action in their respective areas and thereby strengthening thecontrols. Significant audit observations and corrective actions thereon are presented tothe Audit Committee of the Board. Team engaged in internal audit carries out extensiveaudits throughout the year across all functional areas and submits its reports from timeto time to the Audit Committee of the Board of Directors.


The Corporate Social Responsibility (CSR) Committee of the Company was constituted bythe Board on May 10 2016 to monitor implementation of CSR activities by the Company inaccordance with Section 135 read with Schedule VII of the Act. Based on the recommendationof the CSR Committee your Board has adopted a CSR Policy indicating the activities to beundertaken by the Company as specified in Schedule VII.

The Report on CSR Activities with details of the composition of CSR Committee CSRPolicy CSR initiatives and activities during the year is annexed and forms part of thisreport as



The Company has in place a policy on Prevention Prohibition and Redressal of SexualHarassment of Women at Workplace pursuant to the requirements of The Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013. An InternalComplaints Committee (ICC) has been set up to redress complaints received regarding sexualharassment. The policy has set guidelines on the redressal and enquiry process that is tobe followed by complainants and the ICC while dealing with issues related to sexualharassment at the work place. All women employees whether permanent temporarycontractual and trainees are covered under this policy. The Company has not received anycomplaint during the year.


The Equity Shares preferentially issued as per the in terms of the Debt RestructuringScheme approved by the CDR cell to two allottees are pending for listing on NSE & BSEwherein certain observations were made by the Stock Exchanges. The Company has approachedthe allottees and the Stock Exchanges to find a suitable resolution in the matter and forthe listing of these shares.

On the basis of investigation carried under Section 235 of the Companies Act 1956prosecutions were filed by the Registrar of Companies/Central Government against theCompany and its Directors which are being defended by the Company.

The Company's appeal against the appointment of special Directors on the board of theCompany under Section 408 of the Companies Act 1956 is pending for final disposal withthe Hon'ble Supreme Court. Meanwhile a 'Status Quo' ordered by Supreme Court is beingmaintained.


The detailed extract of Annual Return in Form MGT-9 as required under Section 134(3)(a)of the Act is annexed and forms part of this report as ANNEXURE 'G'.


There have been no material changes and commitments affecting the financial positionof the Company which have occurred between the end of the financial year of the Companyand the date of this report.


The information relating to Conservation of Energy Technology Absorption and ForeignExchange Earnings and outgo as required under Section 134(3)(m) of the Act read with theCompanies (Accounts) Rules 2014 is annexed and forms part of this report as ANNEXURE'H'.


Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Act are given in the notes to the Financial Statements.


All the related party transactions that were entered into during the financial yearwere on arm's length basis and in the ordinary course of business. During the year underreview there were no materially significant related party transactions including arm'slength transactions; hence disclosure in Form AOC 2 is not required.

The complete details with respect to contracts or arrangements with related parties asrequired to be given under the Act and Part C of Schedule V of Listing Regulations isgiven in the 'Corporate Governance Report'.


A detailed review of the operations and performance of the Company is set out in theManagement Discussion and Analysis Report pursuant to Part B of Schedule V of ListingRegulations which forms part of the Annual Report for the year under review as ANNEXURE'I'.


A detailed review of Human Resources of the Company is set out in the ManagementDiscussion and Analysis Report.


A Report on Corporate Governance along with a certificate from the Practicing CompanySecretary regarding compliance with conditions of Corporate Governance as stipulated inPart E of Schedule V of Listing Regulations forms part of this report and is annexed as ANNEXURE'J'.


Your Directors place on record their heartfelt appreciation towards the ShareholdersEmployees Customers Suppliers Collaborators Company's GMP consultants DirectorsAuditors Bankers Financial Institutions Medical & Legal Professionals Drug ControlAuthorities Government Agencies and Business Associates for their continued patronage andtrust in the Company and its Management.

Your Directors look forward to your continued support in our efforts to grow togetherand enhance health through delivery of quality products.

For and on behalf of Board of Directors
Sushil Suri
Place: New Delhi (Chairman & Managing Director)
Date: August 13 2018 DIN: 00012028