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Zenotech Laboratories Ltd.

BSE: 532039 Sector: Health care
NSE: N.A. ISIN Code: INE486F01012
BSE 00:00 | 13 Apr 38.20 -0.45
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NSE 05:30 | 01 Jan Zenotech Laboratories Ltd
OPEN 37.00
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VOLUME 7523
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OPEN 37.00
CLOSE 38.65
VOLUME 7523
52-Week high 47.90
52-Week low 17.95
P/E
Mkt Cap.(Rs cr) 233
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Zenotech Laboratories Ltd. (ZENOTECHLAB) - Director Report

Company director report

Your Directors take pleasure in presenting the Thirtieth Annual Report and auditedaccounts of the Company for the financial year ended March 31 2019.

Financial Results

(Rs. in Lakhs)

Particulars 2018-19 2017-18
(i) Revenue from operations (net) 1302.91 1114.42
(ii) Other income 470.96 236.91
(iii) Total Revenue (i+ii) 1773.87 1351.33
(iv) Depreciation 420.20 390.31
(v) Other expenses 1665.61 2139.99
(vi) Loss before tax* (311.94) (1178.97)
(vii) (Loss) after tax (311.94) (1178.97)
(viii Loss brought forward from previous year (22855.61) (21676.64)
Profit/(Loss) carried forward to Balance Sheet (vi+vii) (23167.54) (22855.61)

* includes Other Comprehensive Income items

Performance review and the state of company's affairs

During the year under review the Company's revenue stood at Rs. 1773.87 Lakhs(previous year Rs. 1351.33 Lakhs) with a steep increase of 31% over the correspondingprevious year. The Company reported a loss of Rs. 311.94 Lakhs reduction of 74% asagainst the reported loss of previous year (1178.97 Lakhs). The occupancy level of theCompany was at par with its operational capacity for the Oral Solid Dosage (OSD) and Eyecare facilities. However the Cyto Injectables and General Injectables are yet to attainits optimum utilization due to low market demands. As per the projected business plans forthe forthcoming years the Company believes that it can contain its operational losses byutilizing its resources to its maximum. Your Company is constantly striving to optimizeits operational capacities control costs to remain competitive which would help toimprove the operational efficiency.

During the year the Company has initiated revamping of its Biotech facility. TheCompany had invested in enhancing its utilities infrastructure and manpower to supportits future operations.

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. Pursuant to the approval of members of Zenotech LaboratoriesNigeria Limited Nigeria (Zenotech Nigeria) the Corporate Affairs Commission Nigeria(CAC) has approved the members voluntary winding up of the entity a subsidiary of theCompany vide its Letter dated April 17 2019 and it shall be deemed dissolved on theexpiration of three months w.e.f. April 16 2019. Further the winding up process ofZenotech Farmaceutica Do Brasil Ltda Brazil is going on. For more information onsubsidiaries please refer to section "Consolidated financial statements" inthis Report.

Extract of Annual Return:

The extract of Annual Return as provided under sub-section (3) of Section 92 of theCompanies Act 2013 in prescribed form MGT-9 is appended herewith as Annexure 1 to thisReport.

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 312019 is 92.Your Directors would like to record their appreciation of the efficient and loyal servicerendered 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.

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 2 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.

Employee Stock Option Scheme

Disclosures as on March 31 2019 is appended herewith as Annexure 3 to this Report.

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 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 details of such programme are available on the website of theCompany www.zenotechlab.com.

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 appointed as the Statutory Auditors of the Companyin the 26th Annual General Meeting of the Company held on September 28 2015for a period of five years i.e. till the conclusion of the 31st Annual GeneralMeeting to be held in the year 2020 subject to ratification of their appointment at everyannual general meeting.

Pursuant to the Notification issued by the Ministry of Corporate Affairs on May 72018 amending Section 139 of the Companies Act 2013 the mandatory requirement forratification of appointment of Statutory Auditors by the Members at each Annual GeneralMeeting has been omitted and hence the Company has not proposed ratification ofappointment of M/s. PKF Sridhar & Santhanam LLP Chartered Accountants at theforthcoming AGM.

The Notes on the financial statements referred to in the Auditors' Report are selfexplanatory and do not call for any further comments. The Auditors' Report is unmodifiedi.e. it does not contain any qualification reservation or adverse remark or disclaimer.

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 year2018-19. The Secretarial Audit Report for the financial year ended March 312019 isappended herewith as Annexure 4 to this Report.

With regard to Observations/remarks contained in the Secretarial Auditors' Report yourdirectors' wish to respond/state as under:

Observation no.1 (a): As you are aware that there are ongoing litigations between theerstwhile promoters and the present promoters of the Company. The present management ofthe Company took over the possession of the Company's premises effective from 11 November2011 pursuant to an Order passed by Company Law Board. Consequent to the takeover it wasfound that among others various statutory books and records of the Company was missing.In order to recover the related missing records the Company has initiated appropriateactions against Dr. Jayaram Chigurupati the erstwhile Managing Director. The matter iscurrently subjudice. However Dr. Jayaram Chigurupati was demised on January 31 2019 andall the criminal cases against him were closed.

As reported by Secretarial Auditor all the Civil Cases against the said person arestill continuing against the legal heirs of Dr. Jayaram Chigurupati.

Observation no. 1 (b): In light of the non availability of records of the Company aswell its subsidiaries the Company is unable to prepare consolidated accounts. In aneffort to recover these missing related records appropriate actions have already beeninitiated against the previous Managing Director Dr. Jayaram Chigurupati who was incontrol over the affairs of the Company during the period of offence including filing ofcriminal complaint under the provisions of Section 630 of the erstwhile Companies Act1956 before the Economic Offence Court Nampally Hyderabad. Due to demise of Dr. JayaramChigurupati on January 31 2019 the case before Economic Offence Court was deemed to closefrom this date.

The Company has evaluated and concluded that it is not controlling the US subsidiary.Further the Board has decided to initiate the winding up process for the defunctsubsidiaries in Brazil and Nigeria. Accordingly the Company is of the view that it doesnot have subsidiaries within the definition of IndAS 110 and hence it is not required toprepare and present Consolidated Financial Statements.

Observation no. 1(c): Responded at observation no. 1(b) supra.

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 Dr. JayaramChigurupati. Therefore it was the responsibility of that management to handover thosedetails to the Company during the transition. However no details on those subsidiarieswere made available to your Company. Despite several attempts by the Company to recoverthem details concerning those subsidiaries including the documents and certificatesrelated to the foreign exchange transactions which included loans and investments made tothose 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 subsidiaries inBrazil and Nigeria. Accordingly the Company is of the view that it does not havesubsidiaries within the definition of IndAS 110 and hence it is not required to prepareand present Consolidated Financial Statements.

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 Dr. Jayaram Chigurupati who was in complete control overthe Company affairs during the period of these events. Due to demise of Dr. JayaramChigurupati on January 31 2019 the case before Economic Offence Court was deemed to closefrom this date.

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 312019 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 Director(DIN: 01219312) is liable to retire by rotation at the ensuing 30th AnnualGeneral Meeting and being eligible has offered himself for reappointment. The Boardrecommends his appointment.

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. RajendraSingh Parihar Chief Executive Officer Mr. Poly K.V. Chief Financial Officer and Mr.Abdul Gafoor Mohammad Company Secretary & Compliance Officer continued as the 'KeyManagerial Personnel' of the Company.

Declaration by Independent Directors

The Company has received declaration from each independent director under Section149(7) of the Act that they meet the criteria of independence as prescribed under theapplicable provisions of Section 149 of the Act and Regulation 25 of SEBI (ListingObligations 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 312019. 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 2019 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 5to 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.

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 does not come under the purview of the provisions of Section 135 of theCompanies Act 2013 and the rules made there under.

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 2018-19no 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). Standardized practices fordisposal of organic wastes to cement units for reuse as auxiliary fuel in cement kilnscontinues. While inorganic and miscellaneous solid wastes are being disposed to treatmentstorage and disposal facilities (TSDF).

The Company's EHS policy provides framework for compliance with applicable laws andregulations and commitment to the continuous improvement of Environment personnel skillsand conservation of natural resources.

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 6 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: Mumbai

Date: May 18 2019

Chairperson

.