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Sequent Scientific Ltd.

BSE: 512529 Sector: Health care
NSE: SEQUENT ISIN Code: INE807F01027
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OPEN 94.45
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VOLUME 9425
52-Week high 99.90
52-Week low 52.00
P/E 108.49
Mkt Cap.(Rs cr) 2,317
Buy Price 93.55
Buy Qty 292.00
Sell Price 93.75
Sell Qty 148.00
OPEN 94.45
CLOSE 93.30
VOLUME 9425
52-Week high 99.90
52-Week low 52.00
P/E 108.49
Mkt Cap.(Rs cr) 2,317
Buy Price 93.55
Buy Qty 292.00
Sell Price 93.75
Sell Qty 148.00

Sequent Scientific Ltd. (SEQUENT) - Director Report

Company director report

Dear Members

We hereby present the 34th Annual Report of your Company along with theAudited Financial Statements of the Company for the financial year ended March 31 2019.

1. Financial Summary

The financial performance of the Company for the financial year ended 31 March 2019 isgiven below:

Particulars Standalone Consolidated
2018-19 2017-18 2018-19 2017-18
Total revenue from operations 1676.77 1072.36 10393.07 8494.48
Other Income 135.25 242.69 86.72 165.81
Profit/ (Loss) before Interest Depreciation Tax & 166.87 58.83 1336.06 995.61
Exceptional Items
Less: Interest 32.20 3.92 328.02 330.69
Less: Depreciation and amortisation expenses 72.64 36.67 419.2 413.43
Profit/(Loss) Before Tax & Exceptional Items 62.03 18.24 588.84 251.49
Exceptional Items - 11.61 - 15.04
Profit/(Loss) Before Tax from continuing operations 62.03 6.63 588.84 236.45
Provision for - Current Tax (including Deferred tax) (0.54) 29.06 56.71 134.96
- MAT credit entitlement (net) (13.29) (0.39) (36.64) (0.39)
Profit/(Loss) after Tax from continuing operations 75.86 (22.04) 568.77 101.88
Profit/(loss) from discontinued operations - 170.74 - 105.47
Gain on demerger of Human API operations - 3915.37 - 4100.95
Provision for - Current Tax - 36.27 - 36.27
- MAT credit entitlement - (36.27) - (36.27)
Profit/(loss) for the Year 75.86 4064.07 568.77 4308.30
Other comprehensive income
Re-measurements gain/(loss) on defined benefits plans 0.44 (3.73) (4.33) 8.25
Fair value gain/(loss) from investment in equity instruments (421.75) (1419.54) (421.75) (1419.54)
Exchange differences on translation of foreign operations - - 54.65 24.47
Exchange differences on net investment in foreign operations - - (165.11) (0.36)
Total other comprehensive income for the year (421.31) (1423.27) (536.54) (1387.18)
Total Comprehensive Income for the year (345.45) 2640.80 32.23 2921.12

2. Business Performance Review

FY 2018-19 was our first full year as a pure play animal healthcare company and wedelivered a strong performance. The year was full of challenges such as BREXIT globalshortage of API due to regulatory shutdown in China regulatory disruption in Turkey anddepreciation of Turkish Lira. Despite these challenges we moved from the single digitEBITDA margin to the double-digit EBITDA margin and our investments have also played out.We have significantly ramped up growth during the financial year and have delivered robust22% growth in top-line.

On consolidated basis Company's revenue for the year 2018-19 stood at र 10393million as against र 8494 million in the financial year 2017-18. The Company postedan EBITDA of र 1327 million as against र 871 million in 2017-18. EBITDA marginduring the year stood at 12.8% up by 250 bps over previous year.

During the financial year 2018-19 on a standalone basis Company's revenues stood atर 1677 million as against र 1072 million in 2017-18. The Company posted anEBITDA of र 32 million in the year 2018-19 as against र (184) million in 2017-18.The Company made a net profit of र 76 million.

A detailed analysis on the Company's operational and financial performance for the yearis covered under ‘Management's Discussion and Analysis Report' which forms part ofthe Annual Report.

Business Overview:

• India's only FDA approved API manufacturing facility in Vizag –re-inspected and re-approved this year

• Completed the first US filing from the USFDA approved facility – Key growthdriver

• Strong presence across key geographies Europe LATAM Turkey India Africa& South East Asia

• Robust R&D program and capabilities strengthened R&D team - capable ofhandling 10+ projects in a year

• Established relationship with top 10 veterinary companies with a steady customerbase across US Europe LATAM & India

• Wide range of products predominantly in Anthelmintics & emerging NSAIDportfolio

3. Corporate Actions

1. Acquisition of EU-GMP API facility Mahad

Acquired EU-GMP API facility at Mahad which complements our current manufacturing atVizag (USFDA approved) and Tarapur (Intermediates). The facility is a Comprehensive APImanufacturing facility spanning over 6 acres with 23 reactors having a cumulative 76KLcapacity Given the recent developments in China Mahad will also be used for keyintermediates thereby de-risking the supply chain for key APIs.

2. Acquisition of Bremer Pharma Germany

We have added the injectables capabilities which strengthens our portfolio. We filedour first in-house developed injectable in EU and in February completed the first newproduct validation of a valuable injectable at Bremer. Currently we are in the process ofdebottlenecking Bremer for the next phase of growth. We believe that this facility is keyto our injectables growth strategy for regulated markets.

4. Dividend

The Board has recommended dividend at the rate of 10% i.e. र 0.20 per share for thefinancial year 2018-19.

In accordance with Regulation 43A of Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (‘Listing Regulations')your Company has formulated a dividend distribution policy which ensures a fair balancebetween rewarding its Shareholders and retaining enough capital for the Company's futuregrowth. This Policy is available on the Company's website: www.sequent.in.

5. Transfer to reserves

During the Financial Year the Company has not made any transfer to the reserves..

6. Share Capital

As on date the authorised share capital of the Company is र 500000000/-dividedinto 250000000 equity shares of र 2/- each.

The issued subscribed and paid up equity capital of the Company as on date is र493741990 divided into 246870995 equity shares of र 2/- each.

During the year ended March 31 2019 the Company had allotted 3134800 equity sharesto Sequent Scientific Employee Stock Option Plan Trust.

The Company has not allotted any equity shares after the balance sheet date i.e. March31 2019.

7. Subsidiaries

As at March 31 2019 the Company has 24 subsidiaries out of which 9 Companies arewholly owned Subsidiaries and the Company does not have any Joint Ventures/ AssociateCompanies.

Changes in subsidiaries during the financial year ended March 31 2019:

Bremer Pharma Alivira Animal Health Limited acquired
GMBH 100% in "Bremer Pharma GMBH" through its subsidiary Alivira Animal Health Limited (Ireland).
Evance Saude Brazil Incorporated as a Subsidiary on December 26 2018 with 70% holding of Alivira Brazil.
Alivira Italia S.R.L Incorporated as a subsidiary as of January 21 2019.

Accounts of Subsidiaries

In accordance with Section 129(3) of the Companies Act 2013 the Company has prepareda consolidated financial statement of the Company and all its subsidiary companies whichis forming part of the Annual Report. Statement containing salient features of thefinancial statements of Company's subsidiaries joint ventures and associate companies asrequired in Form AOC-1 is enclosed as Annexure 1 to this Report.

The Audited Consolidated Accounts and Cash Flow Statement comprising of the Companyand its subsidiaries form part of this Report. The Auditors Report on the AuditedConsolidated Accounts is attached and the same is unqualified.

Further financial statements together with related reports and information of each ofthe subsidiary companies of the Company have been placed on the website of the Companywww.sequent.in.

8. Annual Return

Extract of Annual Return in terms of section 92(3) of the Companies Act 2013 in FormMGT-_9 is attached as Annexure 2. The same is also updated_ on the website of the Companyi.e. www.sequent.in.

9. Public Deposit

During the financial year 2018-19 the Company has not accepted or renewed any publicdeposits in terms of Sections 73 and 74 of the Companies Act 2013 and rules framedthereunder.

10. Board of Directors & Key Managerial Personnel

Board Composition

As on March 31 2019 the Board comprises of 7 Directors consisting of 2 ExecutiveDirectors 2 Non-executive Directors and 3 Independent Directors. Chairman of the Board isan Independent Director.

Proposal for the appointments/ re-appointment/ continuation of directorship of thefollowing Directors shall be placed before the Members' of the Company at the ensuingAnnual General Meeting:

Dr. S Devendra Non-Executive Director who retires by rotation at the ensuing AnnualGeneral Meeting (AGM) and being eligible offers himself for reappointment.

Re-appointment of Dr. Gopakumar Nair Independent Director and Chairman for a term of 3(three) years with effect from September 29 2019 upto September 28 2022. Further interms of the SEBI Listing Regulations proposal for continuation of Dr. Nair'sdirectorship in the Company who has attained the age of 75 years will also be placed forMembers' approval.

Re-appointment of Dr. Kausalya Santhanam Independent Director for a term of 5 (five)years with effect from October 28 2019 upto October 27 2024.

Re- appointment of Manish Gupta Managing Director for a term of five years.

Re-appointment of Sharat Narsapur Joint Managing Director for a term of five years.

Brief profile of directors seeking appointment / re- appointment is given as an exhibitto the AGM notice.

As on date the Company has the following Key Managerial Personnel:

• Mr. Manish Gupta – Managing Director (DIN: 06805265)

• Mr. Sharat Narasapur – Joint Managing Director (DIN: 02808651)

• Mr. Tushar Mistry – Chief Financial Officer Mr. Krupesh Mehta CompanySecretary has resigned from the position and ceased to be a Company Secretary w.e.f June29 2019.

The Company has received necessary declarations from Independent Director(s) that theymeet the criteria of independence laid down in Section 149 (6) of the Companies Act 2013.

11. Meetings of the Board

During the year ended March 31 2019 5 (Five) Board Meetings were held. These meetingswere held on May 24 2018 August 9 2018 September 27 2018 November 2 2018 andFebruary 1 2019.

12. Policy on Directors Appointment and Remuneration

The Directors of the Company are appointed by members at the General Meetings of theCompany.

As regards the appointment and tenure of Independent Directors the Company has adoptedthe provisions of the Companies Act 2013 read with Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) 2015.

The Nomination and Remuneration Committee at its meeting held on July 30 2015 hasadopted a policy namely Sequent Policy on Nomination and Remuneration ("thePolicy") in adherence to Section 178(3) of the Companies Act 2013 and provisions ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015. The policy shall act as a guideline on matters relating to theremuneration appointment removal and evaluation of performance of the Directors KeyManagerial Personnel and other employees of the Company. The policy is given as Annexure 3to this report.

13. Evaluation of Board of Directors

Pursuant to provisions of schedule IV of the Companies Act 2013 and rules thereto andprovisions of Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has formulated a policy called SeQuent BoardPerformance Evaluation Policy ("the Policy"). Based on this the Company hasprepared a questionnaire to carry out the evaluation of performance of every Directorincluding the Independent Directors at regular intervals and at least on an annual basis.

The questionnaire is structured to embed various parameters based on which theperformance of a Board can be evaluated. Customised questionnaires are formulated forevaluating Independent Directors Non-Executive Directors Whole-time DirectorsChairperson of the Board and the Board as a whole.

Based on the policy the evaluation was conducted by the Company.

14. Audit Committee

The Composition of Audit Committee of the Company is given below:

• Dr. Gopakumar G Nair – Chairman

• Dr. Kausalya Santhanam – Member

• Mr. Narendra Mairpady– Member

The Board of Directors of the Company has accepted all recommendations given by theAudit Committee.

15. Auditors

Statutory Auditors

M/s. Deloitte Haskins & Sells Chartered Accountants ("DHS") wereappointed as Statutory Auditors of your Company at the Annual General Meeting held onSeptember 29 2014 for a term of five consecutive years. Their tenure as the StatutoryAuditors of the Company comes to an end at the thirty fourth Annual General Meeting.

In terms of Section 139 of the Companies Act 2013 an Auditor's term can be for amaximum tenure of 5 years for 2 such terms. DHS has completed 2 terms and hence it isproposed to appoint M/s. S R B C & Co. LLP Chartered Accountants (Firm RegistrationNo. 324982E/E300003) as Statutory Auditors of the Company for a period of 5 (Five) yearsto hold the office from the conclusion of this Annual General Meeting till the conclusionof Thirty Ninth Annual General Meeting.

There are no qualifications observations or adverse remarks in the Audit Report issuedby the Statutory Auditors of the Company for financial year ended 31 March 2019.

Cost Auditor

Pursuant to section 148(1) the Company needs to maintain cost records and accordinglyyour Company has made and maintained cost audit record.

Pursuant to section 148(3) and Companies (Cost records and audit) Rules 2014 M/s.Kirit Mehta & Co practicing Cost Accountants were appointed as the cost auditor forthe financial year 2018-19. The Cost Audit Report for the financial year ended would befiled within the due date prescribed by law.

The remuneration proposed to be paid to the Cost Auditor forms part of the Notice ofthe Annual General Meeting for the approval of the Shareholders.

Secretarial Audit Report

Pursuant to the provisions of section 204 (1) of the Companies Act 2013 and theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed M/s. Nilesh Shah Practicing Company Secretary (Certificate of Practice No:2631) to carry out the Secretarial Audit for the financial year 2018-19. The SecretarialAudit Report is annexed as annexure 4 to this Report.

With regard to an observation in the Secretarial Auditor on one instance of delay infiling of intimation as required under Regulation7 (2) (b) of SEBI (Prohibition of InsiderTrading Regulation) 2015 we confirm that the Company has been prompt in filing requisitedisclosures under various SEBI statutes and this was purely an oversight and an isolatedcase of delay. The Company will make all efforts to continue to be prompt in making suchdisclosures.

Reporting of Fraud

None of the Auditors have reported any frauds as specified as specified under Section143 of the Companies Act 2013 (including and statutory modification or re-enactment forthe time being in force).

16. Particulars of Employees

The statement containing particulars of employees as required under Section 197(12) ofthe Companies Act 2013 read with Rule 5 (1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is provided as an Annexure 5 formingpart of this report except the report as per Rule 5 (2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014. In terms of Section 136 of theCompanies Act 2013 the said report is open for inspection at the Registered Office ofthe Company during working hours and any member interested in obtaining a copy of the samemay write to the Company Secretary at the registered office of the Company.

17. Vigil Mechanism / Whistle Blower Policy

Pursuant to provisions of section 177(9) of the Companies Act 2013 and ListingRegulations the Company has established Whistle Blower Policy for the directors andemployees to report concerns about unethical behaviour actual or suspected fraud orviolation of Company's code of conduct.

It also provides adequate safeguards against the victimisation of employees who availthis mechanism and allows direct access to the Chairperson of the Audit Committee inexceptional cases. The Board amended the existing Whistle Blower Policy to extend theapplicability of the Policy to all the stakeholders of the Company and incorporate theapplicable provisions of the listing regulations in the policy and confirm that nopersonnel have been denied access to the Audit Committee.

18. Particulars of loans guarantees or investments by the Company

Details of loans Guarantees and Investments covered under the provisions of section186 of the Act are given in the notes to the financial statements.

19. Particulars of Contracts or Arrangements with Related Parties

All the transactions entered with related parties are in the ordinary course ofbusiness and on arm's length basis.

Further there are no materially significant related party transactions with itspromoters the directors or the management their subsidiaries or relatives etc. that mayhave potential conflict with the interests of the Company at large.

The particulars of material contracts or arrangements with related parties referred toin Section 188(1) as prescribed in form AOC-2 of the rule 8(2) of Companies (Accounts)Rules 2014 is given as an Annexure 6.

All transactions with the related parties are disclosed in Note to the financialstatements in the Annual Report.

20. Corporate Social Responsibility

As per section 135(1) the Company has constituted a Corporate Social ResponsibilityCommittee comprising of Mr. Manish Gupta Dr. Gopakumar G Nair and Dr. Kausalya Santhanamas its members. The Company has adopted a policy on corporate social responsibility.

The disclosure as required under Companies (Corporate Social Responsibility Policy)Rules 2014 is set out in Annexure 7 of this report.

21. Risk Management

The Company has a risk management framework for identifying and managing risks.Additional details are provided in the ‘Management Discussion and Analysis' reportforming part of this report.

22. Internal Financial controls

The Company has in place adequate Internal Financial controls with reference tofinancial statements. During the year such controls were tested and no reportablematerial weakness in the design or operations were observed.

Internal Financial controls have been designed to provide reasonable assurance withregard to the recording and providing reliable financial and operational informationcomplying with applicable Accounting Standards.

The Company has adopted accounting policies which are in line with the IndianAccounting Standards notified under Section 133 of the Companies Act 2013 read togetherwith the Companies (Indian Accounting Standards) Rules 2015.

23. Significant and material orders passed by the Regulators or Courts or Tribunals

There are no significant and material orders passed by the Regulators Courts orTribunals that would impact the going concern status of the Company and its futureoperations.

24. Directors' Responsibility Statement

In accordance with Section 134(5) of the Companies Act 2013 the Directors of yourCompany to the best of their knowledge and ability confirm that:

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

(b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the company at the end of the financial year and of the profitand loss of the company for that period;

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

(d) they have prepared the annual accounts of the Company have been prepared on a goingconcern basis;

(e) they have laid down internal financial controls to be followed by the company andthat such internal financial controls are adequate and were operating effectively.

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

23. Conservation of Energy Technology Absorption Foreign Exchange Earnings/ Outgo andResearch & Development

The particulars as prescribed under Section 134(3) (m) of the Companies Act 2013 readwith rule 8(3) of the Companies (Accounts) Rules 2014 is enclosed as an Annexure 8 tothis Report.

24. Policy on prevention of Sexual Harassment at work place

Your Company has in place a Prevention of Sexual Harassment Policy in line with therequirements of The Sexual Harassment of Women at the workplace (Prevention Prohibition& Redressal) Act 2013. A committee has been set up to redress complaints receivedregarding sexual harassment. All permanent employees of the Company and that of itssubsidiaries are covered under this policy.

During the financial year the Company has received no complaint pertaining to sexualharassment of women employee

25. Corporate Governance

The Company has complied with all the mandatory requirements of Corporate Governancespecified by the Securities and Exchange Board of India ("SEBI") through andprovisions of Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 ("Regulations"). As per Regulation 34(3) andSchedule V of the Regulations a separate Report on Corporate Governance forms part of theAnnual Report of the Company. A certificate from the Statutory Auditors of the Companyregarding compliance with Corporate Governance requirements as stipulated in theregulations and listing agreement entered with Stock Exchange also forms part of theAnnual Report.

26. Management Discussion and Analysis

Pursuant to Regulation 34 (3) and Schedule V of Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 a detailed analysison the Company's operational and financial performance for the year is covered under aseparate section Management Discussion and Analysis Report which forms part of this AnnualReport.

27. Employee Stock Option Scheme

The Company has formulated an employee stock option plan titled "SSL ESOP Scheme2010 " (the "ESOP 2010") in accordance with the provisions of Securitiesand Exchange Board of India (Share Based Employee Benefits) Regulations 2014 (the"SEBI ESOP Guidelines") and the scheme is administered through a trust. Duringthe year the Nomination and Remuneration Committee has granted 2660000 options toidentified employees and 50000 options lapsed due to resignation of employees. As at 31March 2019 4552620 Stock options are outstanding.

The ESOP scheme of the Company is in Compliance with the Securities and Exchange Boardof India (Share Based Employee Benefits) Regulations 2014.

Further disclosure under section 62 of the Companies Act 2013 read with rule 12 ofCompanies (Share Capital and Debentures) Rules 2014 and SEBI (Share Based EmployeeBenefits) Regulations 2014 given as an Annexure 9 to this report.

28. Transfer of Equity Shares of the Company to the Investor Education and ProtectionFund (IEPF) Account

Section 124(6) of the Companies Act 2013 ("Act")readwiththeInvestorEducationandProtectionFund Authority) Accounting Audit Transfer andRefund) Rules 2016 for transfer of unclaimed dividend and transfer of Shares to IEPF inrespect of which dividend remains unclaimed for seven consecutive years. The Company hasalso published Notices in newspapers and sent individual communication to the concernedshareholders at their registered address whose shares are liable to be transferred toIEPF. Kindly note that the Company has transferred unclaimed Shares to IEPF.

Shareholders/claimants whose shares unclaimed dividend have been transferred to theIEPF Demat Account or the Fund as the case may be may claim the shares or apply forrefund by making an application to the IEPF Authority in Form IEPF-5 (available onwww.iepf.gov.in).

Appreciation

Your Directors place on record their sincere gratitude and place on record theirappreciation for all the employees at all levels for their staunch dedication and highlymotivated performance across the globe which contributed greatly for persistentperformance of the company.

Your Directors also sincerely thank all the stakeholders medical professionalsbusiness partners government & other statutory bodies banks financial institutionsanalysts and shareholders for their continued assistance co- operation and support.

Note: The information given herein above is as on 31 March 2019 unless otherwisestated.

For and on Behalf of the Board of Directors
Place: Thane Dr. Gopakumar G Nair
Date: 31 July 2019 Chairman