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Sequent Scientific Ltd.

BSE: 512529 Sector: Health care
NSE: SEQUENT ISIN Code: INE807F01027
BSE 00:00 | 22 Feb 66.10 -0.65
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67.35

HIGH

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NSE 00:00 | 22 Feb 65.85 -0.85
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OPEN 67.35
PREVIOUS CLOSE 66.75
VOLUME 21892
52-Week high 89.00
52-Week low 42.45
P/E 188.86
Mkt Cap.(Rs cr) 1,611
Buy Price 66.10
Buy Qty 77.00
Sell Price 66.10
Sell Qty 73.00
OPEN 67.35
CLOSE 66.75
VOLUME 21892
52-Week high 89.00
52-Week low 42.45
P/E 188.86
Mkt Cap.(Rs cr) 1,611
Buy Price 66.10
Buy Qty 77.00
Sell Price 66.10
Sell Qty 73.00

Sequent Scientific Ltd. (SEQUENT) - Director Report

Company director report

Dear Members

We hereby present the 33rd Annual Report of your Company along with theaudited financial statements for the financial year ended 31 March 2018.

1. Financial Summary

The financial performance of the Company for the financial year ended 31 March 2018 isgiven below:

(' in million)

Particulars

Standalone

Consolidated

2017-18 2016-17 2017-18 2016-17
Revenue from operations 1072.36 945.33 8494.48 6890.06
Other income 242.69 190.67 165.81 110.77
Profit/(loss) from continuing operations before interest depreciation tax & exceptional items 58.83 (114.91) 995.61 540.22
Less: Interest 3.92 4.23 330.69 283.40
Less: Depreciation and amortisation expenses 36.67 32.52 413.43 400.73
Profit/(loss) from continuing operations before tax & exceptional items 18.24 (151.66) 251.49 (143.91)
Exceptional items 11.61 - 15.04 -
Profit/(loss) before tax from continuing operations 6.63 (151.66) 236.45 (143.91)
Tax expense 28.67 - 134.57 (5.27)
Profit/(loss) from continuing operations after tax (22.04) (151.66) 101.88 (138.64)
Profit/(loss) from discontinued operations 170.74 151.54 105.47 (24.09)
Gain on demerger of Human API operations 3915.37 - 4100.95 -
Tax expense of discontinued operations - - - 1.14
Profit / (loss) from discontinued operations after tax 4086.11 151.54 4206.42 (25.23)
Profit / (loss) for the year 4064.07 (0.12) 4308.30 (163.87)
Other comprehensive income
Re-measurements on defined benefits plans (3.73) 0.70 8.25 (1.44)
Fair value gain / (loss) from investment in equity instruments (1419.54) 33.91 (1419.54) 33.91
Exchange differences on translation of foreign operations - - 24.47 (34.85)
Exchange differences on net investment in foreign operations - - (0.36) (40.79)
Total other comprehensive income for the year (1423.27) 34.61 (1387.18) (43.17)
Total comprehensive income for the year 2640.80 34.49 2921.12 (207.04)

2. Business Performance Review

During the year the Company positioned itself as a pure-play animal health company. Ata strategic level we made considerable progress in FY18 by executing our long-termstrategy of becoming a global Animal Health player with successful integration of thevarious acquisitions globally over last 18 months. Our next level of growth will be drivenby the commercialisation of our R&D products both APIs and formulations.

During the financial year 2017-18 on a standalone basis your Company's revenues stoodat ' 1315.05 million as against ' 1136.00 million in 2016-17. The Company posted anEBITDA of ' (184.14) million in the year 2017-18 as against ' (305.58) million in 2016-17.The Company made a net profit of ' 4064.07 million.

On a consolidated basis your Company's revenue for the year 2017-18 stood at '8494.48 million as against ' 6890.06 million in the financial year 2016-17. The Companyposted an EBITDA of ' 871.00 million as against ' 578.32 million in 2016-17. EBITDA marginduring the year stood at 10.3% up by 190 bps over previous year.

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 of theAnnual Report.

Business Overview

• India's only FDA approved API manufacturing facility in Vizag

• USFDA approved facility for foray into United States - the largest animal healthmarket - Key growth driver

• Strong presence in Europe LATAM Turkey India Africa & South East Asia

• Global R&D approach with localised manufacturing capabilities in regulatorygeographies

• Recent foray into France & Ukraine

• 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

Corporate Actions

De-merger of Human API

• During the financial year 2016-17 the Board of Directors of the Companyapproved a Composite Scheme of Arrangement (Scheme) between Strides Shasun Limited theCompany and Solara Active Pharma Sciences Limited wherein the Company's human API businesswas proposed to be de-merged to Solara Active Pharma Sciences Limited with an appointeddate of 1 October 2017. The Scheme envisaged issue of 1 equity share of ' 10/- each ofSolara Active Pharma Sciences Limited for every 25 equity shares of ' 2/- each held in theCompany.

• The shareholders through postal ballot /evoting and also at the National CompanyLaw Tribunal (NCLT) convened meeting held on 26 December

2017 approved the Scheme. The Scheme was also approved by the Mumbai Bench of NCLT on 9March

2018 and orders were issued on 22 March 2018.

Solara Active Pharma Sciences Limited issued shares to the shareholders of the Companyon 11 April 2018. The equity shares of Solara were listed on BSE Limited and NationalStock Exchange of India and commenced trading on June 27 2018.

3. Dividend

The Board of Directors of your Company had approved payment of an interim dividend @10% on equity share of ' 2 each ('0.20 per equity share) which was declared in the monthof November 2017 and same was paid in first week of December 2017. The Board is notrecommending any final dividend and the interim dividend of ' 0.20 per equity share betreated as the final dividend for the financial year 2017-18.

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 distributionpolicy which ensures a fair balance between rewarding its Shareholders and retainingenough capital for the Company's future growth. This Policy is available on the Company'swebsite: www.sequent.in.

4. Transfer to reserves

During the financial year the Company has not made any transfer to the reserves.

5. Share Capital

As on date the authorized share capital of the Company is ' 500000000/- divided into250000000 equity shares of ' 2/- each.

The issued subscribed and paid up equity capital of the Company as on date is '487472390 divided into 243736195 equity shares of ' 2/- each.

During the year ended 31 March 2018 the Company has not allotted any equity shares.

The Company has not allotted equity shares after the balance sheet date i.e. 31 March2018.

6. Subsidiaries

As at 31 March 2018 the Company has 21 subsidiaries out of which 7 Companies arewholly owned subsidiaries and the Company does not have any joint ventures/ associatecompanies.

Changes in subsidiaries during the financial year ended 31 March 2018:

Alivira France Alivira Animal Health Limited acquired majority stake in "Alivira France" through its subsidiary Alivira Animal Health Limited (Ireland)
SeQuent Global Ceased to be a subsidiary with effect
Holdings Limited from 6 April 2017
SeQuent Scientific Ceased to be a subsidiary with effect
Pte Limited from 8 January 2018

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 whichforms part of the Annual Report. Statement containing salient features of the financialstatements of Company's subsidiaries joint ventures and associate companies as requiredin 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.

7. Annual Return

Extract of Annual Return in terms of section 92(3) of the Companies Act 2013 in FormMGT- 9 is enclosed as annexure 2 to this Report.

8. Public Deposit

During the financial year 2017-18 the Company has not accepted or renewed any publicdeposits in terms of sections 73 and 74 of the Companies Act 2013 and rules framedthereunder.

9. Board of Directors & Key Managerial Personnel

Board Composition

As on 31 March 2018 the Board comprises of 7 Directors consisting of 2 ExecutiveDirectors

2 Non-executive Directors and 3 Independent Directors. Chairman of the Board is anIndependent Director.

Mr. KEC Rajakumar (DIN: 00044539) retires by rotation at the ensuing Annual GeneralMeeting and being eligible offers himself for re-appointment.

Brief profile of Mr. KEC Rajakumar is given in the corporate governance report whichforms part of this report.

Your director recommended their appointment/ reappointment to the members of theCompany.

There were no changes in Key Managerial Personnel of the Company during the year.

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 - Company Secretary

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.

10. Meetings of the Board

During the year ended 31 March 2018 4 (Four) Board Meetings were held. These meetingswere held on May 23 2017 August 3 2017 November 9 2017 and February 9 2018.

11. 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 and Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) 2015.

The Nomination and Remuneration Committee has adopted a policy namely SeQuent Policy onNomination and Remuneration ("the Policy") in adherence to Section 178(3) of theCompanies Act 2013 read with the rules and provisions of Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015. The policyshall act as a guideline on matters relating to the remuneration appointment removal andevaluation of performance of the Directors Key Managerial Personnel and other employeesof the Company. The policy is given as annexure 3 to this report.

12. 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 as SeQuentBoard Performance Evaluation Policy ("the Policy"). Based on this the Companyhas prepared 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.

Detailed data on composition of Board of Directors Committees of Board of Directorsmeeting details charter for each committee and attendance details forms part of theCorporate Governance Report.

13. 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

All the recommendations given by the Audit Committee were accepted by the Board ofDirectors of the Company.

14. Auditors Statutory Auditors

At the Annual General Meeting held on 29 September 2014 M/s. Deloitte Haskins &Sells Chartered Accountants (Firm's Registration Number: 008072S) were appointed asStatutory Auditors of the Company for a period of 5 years from 29th AnnualGeneral Meeting till the conclusion of 34th 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 2018.

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).

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 2017-18. 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 for the Shareholders. The Board recommends thesame for approval of the Members at the ensuing Annual General Meeting.

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 2017-18. The SecretarialAudit Report is annexed as annexure 4 to this Report. There are no qualificationsobservations or adverse remarks in the Secretarial Audit Report.

15. 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 and Remuneration ofManagerial Personnel) Rules 2014 is provided as an annexure 5 forming part of thisreport except the report as per rule 5 (2) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014. In terms of section 136 of the Companies Act 2013the said report is open for inspection at the registered office of the Company duringworking hours and any member interested in obtaining a copy of the same may write to theCompany Secretary at the registered office of the Company.

16. 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.

17. 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.

18. 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 45 to the financialstatements in the Annual Report.

19. 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.

20. Risk Management

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

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.

21. 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.

22. 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) the annual accounts of the Company have been prepared on a going concern 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 received regarding sexualharassment. All permanent employees of the Company and that of its subsidiaries arecovered under this policy.

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.

The confirmation from Mr. Manish Gupta Managing Director regarding compliance withthe code of Business Conduct and Ethics forms part of the Report on Corporate Governance.

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 50000 options toidentified employees and 189200 options lapsed due to resignation of employees. As at 31March 2018 2441000 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") read with the InvestorEducation and Protection Fund Authority) Accounting Audit Transfer and Refund) Rules2016 for transfer of unclaimed dividend and transfer of Shares to IEPF in respect of whichdividend remains unclaimed for seven consecutive years. The Company has also publishedNotices in newspapers and sent individual communication to the concerned shareholders attheir registered address whose shares are liable to be transferred to IEPF. Kindly notethat 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).

29. 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 cooperation and support.

Note: The information given herein above is as on 31

March 2018 unless otherwise stated.

For and on behalf of the Board of Directors
Place: Mumbai Dr. Gopakumar G Nair
Date: 09 August 2018 Chairman