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Zenotech Laboratories Ltd.

BSE: 532039 Sector: Health care
NSE: N.A. ISIN Code: INE486F01012
BSE 15:24 | 08 Dec 47.70 -0.60
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NSE 05:30 | 01 Jan Zenotech Laboratories Ltd
OPEN 48.50
PREVIOUS CLOSE 48.30
VOLUME 101564
52-Week high 62.65
52-Week low 26.20
P/E 51.29
Mkt Cap.(Rs cr) 291
Buy Price 46.60
Buy Qty 300.00
Sell Price 47.70
Sell Qty 5.00
OPEN 48.50
CLOSE 48.30
VOLUME 101564
52-Week high 62.65
52-Week low 26.20
P/E 51.29
Mkt Cap.(Rs cr) 291
Buy Price 46.60
Buy Qty 300.00
Sell Price 47.70
Sell Qty 5.00

Zenotech Laboratories Ltd. (ZENOTECHLAB) - Director Report

Company director report

Your Directors take pleasure in presenting the 32nd Annual Report andaudited accounts of the Company for the financial year ended March 31 2021:

Financial Results

Rs. in Lakhs
Particulars 2020-21 2019-20
(i) Revenue from operations 1937.33 2593.83
(ii) Other Operating Income 301.54 8.23
(iii) Other income 46.49 117.02
(iv) Total Revenue (i+ii+iii) 2285.36 2719.08
(v) Depreciation 645.60 484.96
(vi) Finance cost 154.75 89.25
(vii) Other expenses 1606.52 1704.09
(viii) Total Expenses (v+vi+vii) 2406.87 2278.29
(ix) Profit/(Loss) before exceptional items and tax (iv-viii) (121.51) 440.79
(x) Exceptional items - 636.96
(xi) Profit/(Loss) after tax (121.51) 1077.75
(xii) Other Comprehensive Income (0.57) (4.68)
(xiii) Total Comprehensive Income for the period (xi+xii) (122.08) 1073.07
(xiv) Loss brought forward from previous year (22094.47) (23167.54)
(xv) Profit/(Loss) carried forward to Balance Sheet (xiii+xiv) (22216.55) (22094.47)

Performance review and the state of Company's affairs

During the year under review the Company recorded revenue of Rs.1937.33 Lakhs(previous year Rs.2593.83 Lakhs) from its operations over the corresponding previousyear. The Company reported a loss of Rs.121.51 Lakhs as against the previous year reportedprofit of Rs.1077.75 Lakhs (includes exceptional items of Rs.636.96 Lakhs. The Earningsper Share (EPS) of your Company has come down to Rs.(0.20) per share in fiscal 2020-21from the previous year EPS of Rs.1.77 per share in fiscal 2019-20. The operationalperformance of the Company's Oral Solid Dosage (OSD) facility and its newly commissionedDepot formulations facility were in growing trend during the year. However the sluggishmarket demand to Cyto & General Injectables and ophthalmic formulations hindered toattain optimum utilization of operational capacities. Based on the projected businessplans for the current and forthcoming years the Company believes that it can maintain itspositive performance by utilizing its existing resources to its maximum. Your Company isconstantly striving to optimize its operational capacities control costs to remaincompetitive which would help to improve the operational efficiency.

The Company renovated its Biotech API manufacturing facility and the same has beenleased to Sun Pharmaceutical Industries Limited for their R&D activities. Company'sother operating income is generated from leasing of its idle facility and equipmentseffective from July 2021.

Impact of COVID-19 pandemic

The Company is fully operational during the year under review despite manpower crunchamid lockdown and social distancing measures. However the production timelines havechanged drastically due to non-availability or disrupted supply of raw materials andpacking materials during COVID-19. The Company is moving forward very confidently byamending concerned SOP's to meet COVID-19 impact & challenges.

The COVID-19 pandemic has continued affecting the global economy from almost more thana year and second wave of the COVID-19 continued the restrictions and disruption in theroutine. We remain committed to the health and safety of our employees and their familiesas well as business continuity to safeguard the interests of our partners customers andother stakeholders.

Dividends

In view of loss incurred your Directors do not recommend any dividend for the yearunder review.

Reserves

In view of loss incurred during the year under review your Directors do not proposeany amount to carry to any reserves.

Subsidiaries Joint Ventures or Associates

The Company does not have any joint venture or associate company. All three overseassubsidiaries are reported defunct and no information with regard to their operations isavailable with the Company. During the year 2019-20 pursuant to the approval of membersof Zenotech Laboratories Nigeria Limited Nigeria (Zenotech Nigeria) the Corporate AffairsCommission Nigeria (CAC) has approved the members' voluntary winding up of the entity asubsidiary of the Company. Due to COVID-19 pandemic the winding up process of ZenotechFarmaceutica Do Brasil Ltda Brazil during the financial year 2020-21 came to standstill.The Company has evaluated and concluded that it is not controlling Zenotech Inc. a USsubsidiary. For more information on subsidiaries please refer to section"Consolidated financial statements" in this Report.

Annual Return

Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of theCompanies Act 2013 read with Rule 12 of the Companies (Management and Administration)Rules 2014 the Annual Return as at March 31 2021 in Form MGT-7 can be accessed atCompany's website http://www.zenotechlab.com/annual-report.

Internal Control Systems

Your Company has in place adequate systems of internal control commensurate with itssize and the nature of its operations. They have been designed to provide reasonableassurance with regard to recording and providing reliable financial and operationalinformation complying with applicable statutes safeguarding assets from unauthorized useor losses executing transactions with proper authorization and ensuring compliance ofinternal policies. The internal control system is supplemented by extensive internalaudits conducted by independent firm of chartered accountants.

Human Resources & Industrial Relations

The Company believes that Human Resource is its most valuable resource which has to benurtured well and equipped to meet the challenges in the Industry the Company operates.The staff is highly motivated with good work culture training remuneration packages andthe values. The total number of people employed in the Company as on March 31 2021 is217. Your Directors would like to record their appreciation of the efficient and loyalservice rendered by the employees.

Remuneration Policy

In terms of the provisions of Section 178(3) of the Act and Regulation 19 read withSchedule II Part D of Listing Regulations the Nomination and Remuneration Committee isresponsible for formulating the criteria for determining qualifications positiveattributes and independence of a Director.

The Nomination and Remuneration Committee is also responsible for recommending to theBoard a policy relating to the remuneration of the Directors Key Managerial Personnel andSenior Management.

The purpose of the Remuneration Policy is to establish and govern the procedureapplicable:

a) To evaluate the performance of the members of the Board.

b) To ensure remuneration payable to Directors KMP & other senior Managementstrike appropriate balance and commensurate among others with the functioning of theCompany and its long term objectives.

c) To retain motivate and promote talent within the Company and to ensure long termsustainability of the managerial persons and create competitive advantage.

The Remuneration policy is available on the website of the Companyhttp://zenotechlab.com/wp- content/uploads/2015/07/Remuneration-Policy.pdf.

Particulars of Employees

Disclosure pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rules 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is annexed herewith as Annexure 1 tothis Report.

Further the information pertaining to Rule 5(2) and 5(3) of the aforesaid Rules astatement showing the names and other particulars of the top ten employees in terms ofremuneration drawn is available for inspection at the Registered Office of the Company andpursuant to the proviso to Section 136(1) of the Companies Act 2013 the report and theaccounts are being sent to the members of the Company excluding this information. Anyshareholder interested in obtaining such information may write to the Company Secretary atthe Registered Office address of the Company. During the year under review none of theemployees was in receipt of remuneration in excess of the limits as stipulated in the Rule5(2) of the aforesaid Rules.

Evaluation of performance of the Board its Committees and individual directors

Pursuant to the provisions of the Companies Act 2013 and the Corporate Governancerequirements as prescribed under Regulation 17(10) 25(4) and other applicable provisionsof the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Boardhas carried out an annual evaluation of the Board's performance its Committees andindividual Directors.

Board performance evaluation evaluation of Committees and individual Directors iscarried out through a questionnaire encompassing upon various areas that provide aninsight and feedback into the functioning of the Board its Committees individualDirectors and areas of development.

The following are some of the broad issues that are considered in performanceevaluation:

Criteria for evaluation of Board and its Committees:

- Setting up of performance objectives and performance against them

- Board's contribution to the growth of the Company

- Whether composition of the board and its committees is appropriate with the right mixof knowledge and skills sufficient to maximize performance in the light of future strategy

- Board's ability to respond to crisis

- Board's communication with the management team

- Flow of quality information to the Board

- Whether Board procedures are conducive to effective performance and flexible enoughto deal with all eventualities Criteria for evaluation of Independent Directors:

- Quality and value of their contributions at Board meetings

- Contribution to development of strategy and risk management policy

- Exhibits understanding of policies of the Company

- Level of attendance and participation in the Board and Committee Meetings Criteriafor evaluation of Non-Independent Directors:

- Demonstrates knowledge of the sector in which the company operates

- Knowledge of industry issues and exhibition of diligence in leading the organization

- Level of attendance at the Board and Committee meetings

- Effectiveness in working with the Board of directors to achieve the desired results

- Providing direction and support to the Board regarding its fiduciary obligations andgovernance role

- Provides well-balanced information and clear recommendations to the Board as itestablishes new policies

The Chairperson of the Company interacted with each Director individually forevaluation of performance of the individual Directors. The evaluation for the performanceof the Board as a whole and of the Committees was conducted by way of questionnaires.

In a separate meeting of Independent Directors performance of Non IndependentDirectors and performance of the Board as a whole was evaluated.

The Board of Directors were satisfied with the overall performance of the Directorsindividually and that the Directors generally met their expectations of performance.

Familiarization programme for Independent Directors

In compliance with the requirements of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has put in place a Familiarisation Programmefor the independent Directors to familiarize them with the Company their roles rightsresponsibilities in the Company nature of the industry in which the Company operatesbusiness model etc. The policy is available on the website of the Companyhttp://zenotechlab.com/wp-content/uploads/2021/08/ Familiarization-Programme.pdf.

Share Capital

During the financial year under review there was no change in the Share Capital of theCompany. The Share Capital of the Company stood at Rs.610305680/- (61030568 EquityShares of Rs.10/- each).

Auditors and their Reports Statutory Auditors

M/s. PKF Sridhar & Santhanam LLP (Firm registration number- 003990S/S 200018)Chartered Accountants Hyderabad were re-appointed as the Statutory Auditors of theCompany in the 31st Annual General Meeting of the Company held on September 262020 for a further period of five years i.e. till the conclusion of the 36thAnnual General Meeting to be held in the year 2025.

The Notes on the financial statements referred to in the Auditors' Report areself-explanatory and do not call for any further comments. The Auditors' Report isunmodified i.e. it does not contain any qualification reservation or adverse remark ordisclaimer.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorsof the Company had appointed Mr. Mahadev Tirunagari Company Secretary in PracticeHyderabad to undertake the Secretarial Audit of the Company for the financial year202021. The Secretarial Audit Report for the financial year ended March 312021 isappended herewith as Annexure 2 to this Report. The Secretarial Audit Report does notcontain any qualifications reservation or adverse remark.

Cost Audit

The Company is not required to maintain cost records as specified by the CentralGovernment under section 148 (1) of the Act and accordingly the Cost Audit is notapplicable.

Secretarial Standards

The Company has complied with the applicable Secretarial Standards as amended from timeto time.

Reporting of Frauds by Auditors

During the year under review the Statutory Auditors and Secretarial Auditor have notreported any instances of frauds committed in the Company by its Officers or Employees tothe Audit Committee under section 143(12) of the Companies Act 2013 details of whichneeds to be mentioned in this Report.

Consolidated financial statements

Books of accounts and other related records/documents of the overseas subsidiaries ofthe Company were missing and due to non-availability of those records/information theCompany is unable to prepare consolidated accounts and attach the required statements andparticulars in terms of the applicable provisions of the Companies Act 2013 and the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015. The facts of the casehad already been reported in earlier years.

Overseas subsidiaries were apparently created; investments and loans were made duringthe period from 2006-07 to 2010-11 under the erstwhile management headed by Late Dr.Jayaram Chigurupati. Therefore it was the responsibility of that management to handoverthose details to the Company during the transition. However no details on thosesubsidiaries were made available to your Company. Despite several attempts by the Companyto recover them details concerning those subsidiaries including the documents andcertificates related to the foreign exchange transactions which included loans andinvestments made to those foreign subsidiaries could not be obtained.

The Company has evaluated and concluded that it is not controlling the US subsidiary.Further the Board had initiated the winding up process for the defunct subsidiary inBrazil however due to COVID-19 pandemic the process came to standstill. Accordingly theCompany is of the view that it does not have subsidiaries within the definition of IndAS110 and hence it is not required to prepare and present Consolidated FinancialStatements.

The Company had filed a complaint before the Hon'ble Economic Offences Court NampallyHyderabad under the provisions of Section 630 of erstwhile Companies Act 1956 againstthe former Managing Director Late Dr. Jayaram Chigurupati who was in complete controlover the Company affairs during the period of these events. However due to demise of Dr.Jayaram Chigurupati on January 31 2019 the case before Economic Offence Court was abated.

Directors' Responsibility Statement

Pursuant to Section 134 (5) of the Companies Act 2013 directors of your Companyhereby state and confirm that:

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

(b) they had 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 ended March 312021 and of the loss of the Company for that period;

(c) they had 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 had prepared the annual accounts on a going concern basis; and

(e) they had laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively;

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

Report on Corporate Governance & Management Discussion and Analysis

Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 aseparate section titled 'Report on Corporate Governance' and 'Management Discussion andAnalysis' forms part of this Annual Report.

The compliance certificate of Mr. Mahadev Tirunagari Company Secretary in PracticeHyderabad confirming compliance with the conditions of Corporate Governance as stipulatedin Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 is appended as Annexure to the Report of CorporateGovernance.

Public Deposits

The Company has not accepted any deposit from the public during the year under reviewunder the provisions of the Companies Act 2013 and the rules framed thereunder.

Directors & Key Managerial Personnel

Pursuant to Section 152 of the Companies Act 2013 Dr. Azadar Husain Khan (DIN:01219312) Director is liable to retire by rotation at the ensuing 32nd AnnualGeneral Meeting and being eligible has offered himself for re-appointment. The Boardrecommends his appointment.

During the year under review Mr. Rajendra Singh Parihar on attaining the age ofsuperannuation has ceased to be Chief Executive Officer of the Company on the closinghours of August 14 2020. The Board on the recommendation of the Nomination andRemuneration Committee appointed Mr. Devendra Chandrakant Shenvi Kenkre as ChiefExecutive Officer of the Company w.e.f January 23 2021.

Pursuant to Section 2(51) and Section 203 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 Mr. DevendraChandrakant Shenvi Kenkre Chief Executive Officer Mr. Poly K.V. Chief Financial Officerand Mr. Abdul Gafoor Mohammad Company Secretary & Compliance Officer continued as the'Key Managerial Personnel' of the Company.

Further the Independent Directors of the Company are exempted from the requirement toundertake online proficiency self-assessment test conducted by the Indian Institute ofCorporate Affairs in terms of Section 150 of the Act read with Rule 6 of the Companies(Appointment and Qualification of Directors) Rules 2014.

Declaration by Independent Directors

The Company has received declarations from all the independent directors of the Companyunder Section 149(7) of the Act that they meet the criteria of independence as prescribedunder the applicable provisions of Section 149 of the Act and Regulation 25 of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015.

Number of Meetings of the Board

The Board of Directors of the Company met 5 (five) times during the financial yearended March 312021. The details are given in Corporate Governance report that forms partof this Report. The intervening gaps between the meetings were within the periodprescribed under the Companies Act 2013 SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and also revised Secretarial Standard-1 (SS-1) on'Meetings of the Board of Directors'.

Audit Committee

The details pertaining to composition and other particulars of Audit Committee areincluded in the Corporate Governance Report which forms a part of this Report.

Particulars of Loans Guarantees or Investments

During the year under review your company has not granted any loans or made anyinvestments or provided any guarantees or securities to the parties covered under Section185 and 186 of the Companies Act 2013.

Related Party Transactions:

Related party transactions entered during the financial year ended March 31 2021 aredisclosed in Notes No. 27 of the Financial Statements of the Company. These transactionswere entered in the ordinary course of business and at arm's length. Form AOC-2containing the note on the aforesaid related party transactions is appended as Annexure 3to this Report.

The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the web link athttp://zenotechlab.com/wp-content/uploads/2015/07/Policy_on_Related_Party_Transactions_Annex_1.pdf.

Risk Management Policy

The Company's policy for Risk Management is to apply best practice in identifyingevaluating and cost-effectively controlling risks to ensure that any residual risks are atan acceptable level. Whilst it is not possible to eliminate the risk absolutely effort isunderway to actively promote and apply best practices at all levels and to all itsactivities including its dealing with external partners.

Corporate Social Responsibility

The Company has attracted criteria for Corporate Social Responsibility (CSR) bycrossing net profit beyond Rs. 5 crores (in the last financial year ended on March 312020) pursuant to the provisions of Section 135 of the Companies Act 2013 including Rulesframed there under.

The Company has constituted the Corporate Social Responsibility Committee and itcomprises of Dr. Azadar Husain Khan as Chairperson of the Committee Mr. Jignesh AnantrayGoradia and Smt. Jagruti Prashant Sheth as Members. The Company is in the process offormulating CSR policy in consultation with CSR Committee in terms of Section 135 andother applicable provisions if any of the Companies Act 2013 and read with Companies(Corporate Social Responsibility Policy) Rules 2014. The CSR spend is not applicable tothe Company for the financial year 2020-21 since the average net profits for thepreceding three financial years is resulting in the loss.

Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment policy in line with therequirements of the Sexual Harassment of Women at the Workplace (Prevention Prohibitionand Redressal) Act 2013. An Internal Complaints Committee has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees and visitors) are covered under this policy. During the year 2020-21no complaints were received by the Company related to sexual harassment.

Environment Health & Safety

The Company's Environment Health & Safety (EHS) imperatives are part of itsbroader sustainability journey. These initiatives focus on reducing the environmentfootprint help enhance well-being of employees and set high safety standards foremployees contractors and visitors.

The Company continued to ensure that environmental norms were abided by its Formulationunits. The operating formulation units have conformed to the regulations for disposal ofwaste water to Common Effluent Treatment Plants (CETPs). The Company's EHS policy providesframework for compliance with applicable laws and regulations and commitment to thecontinuous improvement of Environment personnel skills and conservation of naturalresources.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

Information required under section 134(3)(m) of the Companies Act 2013 read with Rule8 of the Companies (Accounts) Rules 2014 is appended herewith as Annexure 4 to thisReport.

Vigil Mechanism/Whistle Blower Policy

Pursuant to the provisions of section 177(9) & (10) of the Companies Act 2013 aVigil Mechanism or 'Whistle Blower Policy' for directors and employees to report genuineconcerns has been established.

A copy of the Policy is available on the website of the Company www.zenotechlab.com andmay be accessed through the web linkhttp://zenotechlab.com/wp-content/uploads/2015/07/Vigil-Mechanism.pdf.

Significant and Material Orders passed by the Regulators or Courts or Tribunals

No significant or material Orders were passed by the Regulators or Courts or Tribunalsduring the year under review which may impact the Going Concern status of the Company'soperations in the future.

Material Changes

No material changes and commitments occurred after the close of the financial year tillthe date of this Report which affect the financial position of the Company.

Further it is hereby confirmed that there has been no change in the nature of businessof the Company.

Acknowledgement

Your Directors would like to express their sincere appreciation for the assistance andco-operation received from the banks Government authorities customers vendors andmembers during the year under review. Your Directors also wish to place on record theirdeep sense of appreciation for the committed services by the Company's executives staffand workers.

For and on behalf of the Board of Directors
Place: Delhi
Date: May 01 2021 Chairperson

.