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Directors Report of Hester Biosciences Ltd.

Mar 31, 2015

Dear Members,

The Directors are pleased to present the 28th Annual Report with the Audited Accounts of the Company for the year ended 31 March 2015.

FINANCIAL RESULTS:

(RS In Million)

Particulars Standalone

2014-15 2013-14

Total income 903.66 698.22

Profit before depreciation and tax 247.43 196.69

Less: Depreciation 52.91 53.78

Profit before tax 194.52 142.91

Less: Provision for tax 40.62 -

Deferred tax 4.55 23.27

Income tax of earlier year 3.53 18.76

Fringe benefit tax -- --

Net Profit after tax 145.82 100.88

Balance of profit and loss account 256.69 200.71

Profit available for appropriation 402.51 301.59

Less: Dividend on equity shares 26.37 17.01

Less: Dividend tax 5.40 2.89

Less: Transfer to General reserve 25.00 25.00

Balance carried to Balance sheet 345.74 256.69

Earnings per share (basic/diluted) (in H) 17.14 11.86

FINANCIAL HIGHLIGHTS

Sales

Your Company posted a turnover of H900.37 million in the financial year ended on 31 March 2015, as compared to H690.48 million in the previous year.

Profitability

Your Company's PBT for the year ended 31 March 2015 was recorded at Rs.194.52 million, as compared to Rs.142.91 million in the previous year.

Earnings per share

EPS was at Rs.17.14 as on 31 March 2015 as against Rs.11.86 as on 31 March 2014.

Transfer to Reserves

Rs.25 million is proposed to be transferred to the General Reserve and Rs.345.74 million is proposed to be retained in the surplus.

Net Worth

The Company's net worth as on 31 March 2015 was at Rs.860.28 million as compared to Rs.759.72 million as on 31 March 2014.

Dividend

Your Directors have recommended a dividend payment of Rs.3.10 per equity share of Rs.10 each for the financial year 2014-15, as compared to Rs.2 per equity share in the earlier year. This dividend is subject to approval by the shareholders at the ensuing AGM.

The total dividend appropriation (excluding dividend tax) for the current year is Rs.26,371,080 as against Rs.17,013,600 in the earlier year, resulting in a payout of 18.08% of the stand-alone profit, and is in line with the dividend policy adopted by the Company.

REVIEW OF OPERATIONS

The financial year saw an increase in sales by 30%.

We started off the year with a clear objective to increase our market share as well as add new products.

The business got clearly divided into four divisions:

1. Poultry vaccines

2. Poultry health products

3. Large animal vaccine

4. Large animal health products

The poultry vaccine division saw a growth of 29%, an increase in sales to Rs.827.20 million from Rs.641.10 million in the previous year. The growth in this division came from increasing our market share as well as from the growth of the poultry industry. Another hallmark achieved is that the sales have been fully derived from our own produced vaccines, without any dependency on any intermediate, as what we were otherwise dependent on till 2012-13. We have 40 licensed poultry vaccines and hope to add eight more in the current financial year.

The poultry health products division, being one year old, has just taken off, generating sales of Rs.7.70 million as compared to negligible sales of Rs.3.90 million from the previous year. The range includes one medicine, seven feed supplements and one disinfectant. We hope to substantially increase the range in all the three subdivision.

The large animal vaccine division, having started on 25 March 2015, had negligible contribution in the sales in the financial year. We have two licensed large animal vaccines, PPR and Goat Pox, and hope to add five more in the current financial year.

The large animal health products division saw a growth of 19%, an increase in sales to Rs.54.20 million from Rs.45.50 million. In the current financial year, we hope to grow by over 40%. The current range includes 14 medicines, six feed supplements and three disinfectants and we hope to add more products in this financial year.

Exports grew by 55%; an increase in sales to Rs.50.89 million from Rs.32.83 million in the previous year. The exports comprised mainly of poultry vaccines. Having registered at least one product in 13 countries and with on-going registrations in 23 countries, the exports are poised to grow at over 100% on a year-to-year basis for the next few years.

The Company earned a non-recurring operational income for Rs.11.30 million.

The Nepal plant would be commissioned in October 2015. During the year, CARE upgraded our credit ratings as follows:

* Long-term rating from 'BBB' to 'BBB '

* Short-term rating from 'A3' to 'A3 '

Current certifications held by us are:

1. WHO-GMP

2. GLP (Good Laboratory Practices)

3. ISO 9001:2008

4. ISO 14001:2004

5. OHSAS 18001:2007

6. DSIR approved R&D centre

CONSOLIDATED FINANCIALS

The Group's consolidated total income from operations is Rs.909.36 million and net profit after minority interest is Rs.123.88 million for the financial year 2014-15 as compared to the Group's consolidated total income from operations of Rs.696.54 million and net profit after minority interest of Rs.94.54 million for the previous financial year 2013-14.

Consolidated financial results include the financial results of Hester Biosciences (Mauritius) Limited, Gujarat Agrofarm Limited and Diavetra Lifesciences Private Limited, the wholly owned subsidiaries of Hester Biosciences Limited and Hester Biosciences Nepal Private Limited, the step down subsidiary of Hester Biosciences Limited.

LISTING OF SECURITIES

The Company's Equity Shares are listed on the Bombay Stock Exchange Limited (BSE) and National Stock Exchange India Limited (NSE).

During the year, the Company has obtained the final approval letter of the listing of its equity shares on NSE and the trading for the equity shares of the Company at the NSE was started with effect from 13 March 2015.

The Company has already paid the listing fees to the both the Stock Exchanges for the Financial Year 2015-16.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

Board Meeting

The Board consist of Eight members as on 31 March 2015, four of whom are Promoters and Non Independent Directors and remaining four are Independent Directors.

Regular meetings of the Board are held at least once in a quarter, inter-alia, to review the quarterly results of the Company. Additional Board meetings are convened to discuss and decide on various business policies, strategies and other businesses.

During the year under review, Board of Directors of the Company met Seven times, viz 7 April 2014, 30 May 2014, 24 July 2014, 18 October 2014, 24 December 2014, 21 January 2015 and 28 March 2015.

Committee of Board

Your Company has several Committees which have been established as part of best corporate governance practices and are in compliance with the requirements of the relevant provisions of applicable laws and statutes.

The Company has following Committees of the Board:

* Audit Committee

* Nomination and Remuneration Committee

* Stakeholders' Grievances and Relationship Committee

* Corporate Social Responsibility Committee

* Management Committee

* Share Transfer Committee

A detailed note on the committees with respect to composition, meeting, powers, and terms of reference is provided under the corporate governance report section in this Annual Report.

Appointment, Re-appointment and Resignation of Directors

During the year, Ms. Nina Gandhi was appointed as an Alternate Director for Mr. Ravin Gandhi in place of Mr. Parimal Tripathi with effect from 30 May 2014. Subsequently, Ms. Priya Gandhi was appointed as an Alternate Director for Mr. Ravin Gandhi in place of Ms. Nina Gandhi with effect from 18 October 2014.

Mr. Darayus Lakdawalla has resigned as an Independent Director of the Company with effect from 24 July 2014. The terms of appointment of Mr. Vimal Ambani, as an Independent Director of the Company, has expired with effect from 1 April 2015. Further, Dr. Siba Samal has resigned from the Board with effect from 10 August 2015. The Board places on record their appreciation for the services rendered by them during their tenure with the Company.

Ms. Grishma Nanavaty was appointed as an Independent Director of the Company with effect from 24 July 2014. The said appointment was approved by the Members at the last Annual General Meeting.

During the year, Mr. Rajiv Gandhi, CEO and Managing Director of the Company was re-appointed, for a further period of three years, with effect from 1 April 2014. Members have approved the said re-appointment through Postal Ballot.

After the completion of the term of appointment for Mr. Vishwesh Patel, Ms. Grishma Nanavaty and Dr. Siba Samal as an Independent Directors of the Company, the Board of Directors have appointed all of them as an Additional Directors of the Company, with effect from 01 April 2015.

Considering their valuable contribution to the organisation, the Nomination and Remuneration Committee has recommended appointment of all the three Independent Directors for the next term of five consecutive years i.e. up to 31 March 2020. The Company has received requisite notice in writing from a member proposing Mr. Vishwesh Patel, Ms. Grishma Nanavaty and Dr. Siba Samal for appointment as an Independent Directors of the Company. Members in their ensuing General Meeting shall consider their appointment for further period up to 31 March 2020.

Mr. Naman Patel was appointed as an Alternate Director for Dr. Siba Samal with effect from 18 October 2014 and subsequently resigned as on 30 June 2015. Pursuant to the provisions of Section 161(1) of the Companies Act, 2013 and Articles of Association of the Company, Mr. Naman Patel was appointed as an Additional Director designated as an Independent Director with effect from 30 June 2015. Further, Mr. Am it Shukla was appointed as an Additional Director of the Company with effect from 11 August 2015. They both shall hold office up to the date of the ensuing Annual General Meeting. The Company has received requisite notice in writing from a member proposing them for appointment as an Independent Directors of the Company. Further, Nomination and Remuneration Committee of the Company has recommended their appointment for a period up to 31 March 2020.

In terms of the provision of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a Company shall have at least one Woman Director on the Board of the Company. Your Company has Ms. Grishma Nanavaty as an Independent Director on the Board of the Company.

In accordance with the provisions of the Articles of Association and Section 152 of the Companies Act 2013, Mr. Ravin Gandhi, Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

None of the Directors of the Company is disqualified for being appointed as Director as specified in Section 164 (2) of the Companies Act, 2013.

Declaration by Independent Directors

The Company has received necessary declaration from each independent director under Section 149(7) of the Companies Act, 2013, that they meet the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The terms and conditions of the Independent Directors are incorporated on the website of the Company at: http://www.hester.in/polices.php

Training of Independent Directors

To familiarise the new inductees with the strategy, operations and functions of our Company, the executive directors / senior managerial personnel make presentations to the inductees about the Company's strategy, operations, product and service offerings, organisation structure, finance, human resources, technology, quality and facilities. Further, the Company has devised a Familiarisation Programme for Independent Directors and the same been placed on the website of the Company at: http://www.hester.in/polices.php

Details of Key Managerial Personnel

Mr. Rajiv Gandhi, CEO & Managing Director, Mr. Jigar Shah, Chief Financial Officer and Ms. Amala Parikh, Company Secretary of the Company are the Key Managerial Personnel as per the provisions of the Companies Act, 2013 and were already in the office before the commencement of the Companies Act, 2013.

None of the Key Managerial Personnel has resigned or appointed during the year under review.

Nomination and Remuneration Policy

The Company has, in order to attract motivated and retained manpower in competitive market, and to harmonise the aspirations of human resources consistent with the goals of the Company and in terms of the provisions of the Companies Act, 2013 and the listing agreement as amended from time to time, devised a policy on the nomination and remuneration of Directors, key managerial personnel and senior management. Key points of the policy are:

A. Policy on appointment of Directors, key managerial personnel and senior management personnel

* The policy is formulated to identify and ascertain the integrity, qualification, expertise and experience of the person for appointment as Director, KMP and senior management personnel and recommend to the Board for his/her appointment.

* A person should possess adequate qualification, ex- pertise and experience for the position he/she is con- sidered for appointment.

* In case of appointment of Independent Director, the Committee shall satisfy itself with regard to the inde- pendent nature of the Director vis-a-vis the Company so as to enable the Board to discharge its function and duties effectively.

B. Policy on remuneration of Director, key managerial personnel and senior management personnel

The Company's remuneration policy is driven by the success and performance of the Director, KMP and Senior Management Personnel vis-a-vis the Company. The Company's philosophy is to align them and provide adequate compensation with the Objective of the Company so that the compensation is used as a strategic tool that helps us attract, retain and motivate highly talented individuals who are committed to the core value of the Company. The Company follows a combination of fixed pay, benefits and performance-based variable pay. The Company pays remuneration by way of salary, benefits, perquisites and allowance. The remuneration and sitting fees paid by the Company are within the salary scale approved by the Board and Shareholders.

Board Evaluation

Clause 49 of the Listing Agreement mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and individual Director. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors excluding the director being evaluated.

A structured questionnaire was prepared after taking into consideration of the various aspects of the Board's functioning, composition of the Board and Committees, culture, execution and performance of specific duties, obligation and governance.

The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The Board approved the evaluation results as suggested by the Nomination and Remuneration Committee.

The performance evaluation of the Independent Directors was completed. During the year under review, the Independent Directors met on 28 March 2015 interalia, to discuss:

* Performance evaluation of Non Independent Directors and Board of Directors as a whole;

* Performance evaluation of the Chairman of the Company;

* Evaluation of the quality of the flow of information between the Management and Board for effective performance by the Board.

The Board of Directors expressed their satisfaction with the evaluation process.

CORPORATE SOCIAL RESPONSIBILITY ("CSR")

The Corporate Social Responsibility Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy ("CSR Policy") indicating the CSR activities to be undertaken by the Company, which has been approved by the Board.

The CSR policy encompasses the Company's philosophy for delineating its responsibility as a corporate citizen and lays down the guidelines and mechanism for undertaking socially useful programmes for welfare and sustainable development of the community at large. The CSR Policy may be accessed on the company's website at: http://www.hester.in/polices. php

The Company is contributing to sustainable development by its economic activities combined with the fulfillment of its social responsibilities relating to the education, health, safety and environment aspects.

Aligning with the guidelines, your Company has constituted a Corporate Social Responsibility Committee. The CSR Committee is responsible for indicating the activities to be undertaken by the Company, monitoring the implementation of the framework of the Corporate Social Responsibility Policy and recommending the amount to be spent on CSR activities.

Corporate Social Responsibility (CSR) Committee and statutory disclosures with respect to CSR Committee and an Annual Report on CSR Activities form part of this Directors' Report as Annexure-1.

SUBSIDIARY, JOINT-VENTURE AND ASSOCIATES COMPANIES

As on 31 March 2015, your Company has four subsidiary companies namely Hester Biosciences (Mauritius) Limited, Gujarat Agrofarm Limited and Diavetra Lifesciences Private Limited (wholly owned subsidiaries) and Hester Biosciences Nepal Private Limited (step-down subsidiary).

Further, there has been no material change in the nature of business of the subsidiaries.

The Board of Directors of the Company has formulated a policy for determining "Material Subsidiaries" to comply with the requirement of Clause 49 of the Listing Agreement for such material subsidiaries. However, the Company has no material subsidiary Company as defined under Clause 49 of the Listing Agreement. The policy for determining "Material Subsidiaries" may be accessed on the Company's website at the link: http://www.hester.in/polices.php.

During the year, Gujarat Agrofarm Limited became a wholly owned subsidiary of the Company.

The Company does not have any joint ventures as on 31 March 2015. There is one Associate Company, namely Innoves Animal Health Pvt. Ltd.

The audited financial accounts of the Subsidiary Companies will be available for inspection during business hours at our registered office. Further, the financial highlights of Subsidiary, Joint Venture and Associates Companies are part of this Directors' Report as Annexure-2 as prescribed in Form AOC-1.

The performances of the Subsidiary Companies are as under:

Hester Biosciences (Mauritius) Limited (HBML)

This Company was incorporated in 2011, as a wholly (100%) owned subsidiary of Hester Biosciences Limited. The Company has not yet started its activities and hence, only administrative expensed are incurred.

Diavetra Lifesciences Private Limited

This Company, though established with an objective to develop and market veterinary diagnostics kits, it has not yet started its activities and hence, only administrative expensed are incurred.

Hester Biosciences Nepal Private Limited (HBNPL)

HBNPL is a subsidiary of HBML. HBML holds 79.20% stake in HBNPL, hence becoming an indirect subsidiary of Hester Biosciences Limited. HBNPL will be in the business of manufacturing large animal vaccines in Nepal. The project is expected to complete before the end of the current financial year.

Gujarat Agrofarm Limited (GAFL)

In November, 2014, the Company has formed a new subsidiary namely Gujarat Agrofarm Limited with an objective of manufacturing, selling and distributing growth media used for animal vaccines industries.

PUBLIC DEPOSITS

During the period under review, the Company has not accepted deposits from shareholders and public falling within the ambit of Section 73 of the Companies Act, 2013 and rules made thereunder. Further, as per Section 74 of the Companies Act, 2013, the Company has repaid all the existing deposit accepted under the Companies Act, 1956. There were no deposits, which were claimed and remained unpaid by the Company as on 31 March 2015.

SHARE CAPITAL

The paid up equity share capital as at 31 March 2015 stood at Rs.85.07 million. During the year under review, the Company has not issued any share capital.

FINANCE

The working capital requirement was funded through enhanced bank limits. The capital expenditures were funded through the additional working capital and term loans from the bank as well as through internal accruals.

SCHEME OF ARRANGEMENT

The Board of Directors has approved the draft Scheme of Arrangement involving the amalgamation of Hester Biosciences (Mauritius) Limited, Gujarat Agrofarm Limited and Diavetra Lifesciences Private Limited to Hester Biosciences Limited and demerger of the trading unit of Innoves Animal Health Private Limited into Hester Biosciences Limited, between the Companies and its Equity Shareholders and Creditors, in its meeting held on 24 December 2014, pursuant to the provisions of Sections 391 to 394 and Section 261 to 264 of the Mauritius Companies Act, 2001 and other applicable provisions of the 1956 Act, the Companies Act, 2013 ("the 2013 Act") and the Mauritius Companies Act, 2001. The same scheme was filed with the stock exchanges as on 9 March 2015 at BSE and 20 March 2015 at NSE. The Company has received final observations letters from both the Stock Exchanges for the Scheme. The above Scheme is yet to be filed with the Hon'ble High Court of Gujarat.

VIGIL MECHANISM

The Company has established a vigil mechanism and accordingly framed a Whistle Blower Policy. The policy enables the employees to report instances of unethical behaviour, actual or suspected fraud or violation of Company's Code of Conduct to the management. Further the mechanism adopted by the Company encourages the Whistle Blower to report genuine concerns or grievances and provide for adequate safeguards against victimisation of the Whistle Blower who avails of such mechanism and also provides for direct access to the Chairman of the Audit Committee in exceptional cases. The functioning of vigil mechanism is reviewed by the Audit Committee from time to time. No whistle blower has been denied access to the Audit Committee of the Board. The Whistle Blower Policy of the Company is available on the website of the Company.

SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

There were no incidences of sexual harassment reported during the year under review, in terms of the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a separate section on Corporate Governance and the certificate obtained from practicing Company Secretary confirming its compliance is provided separately and forms a part of this Report. The Board of Directors supports the basic principles of corporate governance. In addition to this, the Board lays strong emphasis on transparency, accountability and integrity.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Your attention is drawn to the perception and business outlook of your management for your company for current year and for the industry in which it operates including its position and perceived trends in near future. The Management Discussion and Analysis Report, as required under Clause 49 of the Listing Agreement with the Stock Exchange is attached and forms part of this Directors' Report.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statement.

MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY

There was a fire in one of the secondary production buildings at Hester's Mehsana plant at 5 pm on Monday 29 June 2015. The fire was completely brought under control by 7 pm. There had been no loss or damage to any life. Having a full insurance cover, the company has claimed INR 13.20 million from the insurance company. The fire had caused a temporary loss in production which has not much impacted our sales.

EXTRACT OF ANNUAL RETURN

Pursuant to Sub-section 3(a) of Section 134 and Sub-section (3) of Section 92 of the Companies Act, 2013 read with Rule 12 of Companies (Management and Administration) Rules, 2014, the extract of the Annual Return as at 31 March 2015 in Form MGT-9 forms part of this Directors' Report as Annexure-3.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All the related party transactions that were entered during the financial year were in the ordinary course of business of the Company and were on arm's length basis. There were no materially significant related party transactions entered by the Company with its Promoters, Directors, Key Managerial Personnel or other persons which may have potential conflict with the interest of the Company.

All Related Party transactions are placed before the Audit Committee for approval, wherever applicable. Prior omnibus approval for normal business transactions is also obtained from the Audit Committee for the related party transactions which are of repetitive nature and accordingly, the required disclosures are made to the Committee on a quarterly basis in terms of the approval of the Committee.

The policy on Related Party Transactions, as approved by the Board of Directors, is uploaded on the website of the Company www.hester.in. All the related party transactions entered into by the Company were in the ordinary course of business and were on an arm's length basis as provided in Annexure 4.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information relating to conservation of energy, technology and foreign earning and outgo, as required under Section 134(3)(m) of the Companies Act, 2013 forms part of this Directors' Report as Annexure 5.

PARTICULAR OF EMPLOYEES

The ratio of remuneration of each Director to the median employee's remuneration and other details in terms of Sub-section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 form part of this Directors' Report as Annexure 6.

The details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel), 2014 is not applicable as there is no employee (except Managing Director and CFO) in the Company employed throughout the financial year with salary above Rs.60 lac p.a. or employed in part of the financial year with average salary above Rs.5 lac per month.

Further, there is no employee employed throughout the financial year or part thereof, who was in receipt of remuneration of in aggregate is in excess of that drawn by the Managing Director or Whole-time Director or Manager and holds, by himself or along with his spouse and dependent children, not less than two percent (2%) of the equity shares of the Company.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has laid down the set of standards, processes and structure which enables it to implement internal financial control across the organisation and ensure that the same are adequate and operating effectively. To maintain the objectivity and independence of internal audit, the Internal Auditor reports to the Chairman of the Audit Committee of the Board.

The Internal Auditor monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with the operating systems, accounting procedures and policies of the Company. Based on the report of Internal Auditor, the process owners undertake the corrective action in their respective areas and thereby strengthen the control. Significant audit observation and corrective actions thereon are presented to the Audit Committee of the Board.

AUDITORS Statutory Auditors

M/s. Shah Narielwala & Co., Chartered Accountants, Ahmedabad (Firm Registration No. 109708W), was appointed as the Statutory Auditors of the Company, to hold the office from the conclusion of the 27th Annual General Meeting to the conclusion of the 28th Annual General Meeting.

Further, M/s. Shah Narielwala & Co., Chartered Accountants, Ahmedabad, has shown unwillingness to act as Statutory Auditor of the Company after completion of audit for the FY2014-15. He has resigned as an Auditor due to his preoccupation with other professional assignment, with effect from 27 June 2015. Due to this casual vacancy, the Company has recommended M/s. Apaji Amin & Co. LLP, Chartered Accountants, Ahmedabad, as the Statutory Auditors of the Company in the terms of the provisions of the companies Act, 2013 and the rules made thereunder, subject to approval by the members in the ensuing Annual General Meeting. The Company has received the consent from M/s Apaji Amin & Co. LLP, Chartered Accountants confirming that they are not disqualified to be appointed as the Auditors of the Company.

Accordingly the Board of Directors, based on recommendation made by the Audit Committee, has recommended the appointment of M/s. Apaji Amin & Co. LLP, Chartered Accountants, Ahmedabad, as the Statutory Auditors of the Company to hold the office from the ensuing AGM till the conclusion of the next AGM on such remuneration, as may be determined by the Audit Committee, in consultation with the auditors.

Internal Auditors and their report

M/s Apaji Amin & Co., Chartered Accountants, Ahmedabad, has been the internal auditor of the Company for the FY2014-15. The Internal Auditor is appointed by the Board of Directors of the Company on a yearly basis, based on the recommendation of the Audit Committee. The Internal Auditor reports its findings on the internal audit of the Company to the Audit Committee on a quarterly basis. The scope of internal audit is approved by the Audit Committee.

The Company has appointed M/s Naresh J. Patel & Co., Chartered Accountants, Ahmedabad for the FY2015-16 in the Board meeting held on 28 May 2015, after obtaining his willingness and eligibility letter for appointment as Internal Auditor of the Company.

Cost Auditors and their report

As per Section 148 read with Companies (Audit & Auditors) Rules, 2014 and other applicable provisions, if any, of the Companies Act, 2013 the Board of Directors of your Company has appointed M/s. Kiran J. Mehta & Co., Cost Accountants, Ahmedabad, as the Cost Auditor of the Company for the financial year 2015-16 on the recommendations made by the Audit Committee subject to the approval of the Central Government. The remuneration proposed to be paid to the Cost Auditors, subject to the ratification by the members at the ensuing Annual General Meeting, will be Rs.125,000 (Rupees hundred and twenty five thousand only) excluding out of pocket expenses, if any.

The Cost Audit report for the financial year 2013-14 was filed within the due date. The due date for submission of the Cost Audit Report for the year 2014-15 is within 180 days from 31 March, 2015.

Secretarial Auditor and their report

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company had appointed Mr. Tapan Shah, Practicing Company Secretary to undertake the Secretarial Audit of the Company for the FY 2014-15. The Secretarial Audit Report for the FY 2014-15 is annexed to this Directors' Report as Annexure-7.

DIRECTORS' RESPONSIBILITY STATEMENT

As stipulated in Section 134(3) (c) read with 134(5) of the Companies Act, 2013, Directors subscribe to the "Directors' Responsibility Statement" and confirm that:

a) In preparation of annual accounts for the year ended 31 March 2015, the applicable accounting standards have been followed and no material departures have been made from the same;

b) The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that year;

c) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) The Directors had prepared the annual accounts for the year ended 31 March 2015 on going concern basis.

e) The Directors had laid down the internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

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

AUDITORS' REPORT

The Auditors' Report on the accounts of the Company for the accounting year ended 31 March 2015 is self-explanatory and does not call for further explanations or comments that may be treated as adequate compliance of Section 134 of the Companies Act, 2013.

GENERAL

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Issue of equity shares with differential rights as to dividend, voting or otherwise.

2. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and ESOS.

3. The Managing Director of the Company has not received any remuneration or commission from any of its subsidiaries.

4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.

ACKNOWLEDGEMENT

Your Directors express their appreciation for the assistance and cooperation received from the State Bank of India, various government authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the executives, staff and workers of the Company.

By order of the Board Date: 11 August 2015 Rajiv Gandhi Place: Ahmedabad CEO & Managing Director




Mar 31, 2014

Dear Shareholders,

The Directors are pleased to present the 27th Annual Report with the Audited Accounts of the Company for the year ended 31.3.2014.

FINANCIAL RESULTS: (Rs. In Million)

Particulars Current year Previous Year

Total Income 698.22 653.08

Profit before Depreciation & Tax 196.69 194.22

Less : Depreciation 53.78 43.95

Profit Before Tax 142.91 150.27

Less : Provision for Tax - 51.83

Deferred Tax 23.27 1.51

Income tax of earlier year 18.76 0.03

Net Profit After Tax 100.88 96.90

Balance of Profit & Loss Account 200.71 148.72

Profit available for appropriation 301.59 245.62

Dividend on equity shares 17.01 17.01

Dividend Tax 2.89 2.89

General Reserve 25.00 25.00

Balance carried to Balance sheet 256.69 200.72

Earnings per share (Basic/Diluted) 11.86 13.44

FINANCIAL HIGHLIGHTS

Sales

Your company posted a turnover of H690.48 million in the financial year ended on 31.3.2014, as compared to Rs. 651.04 million in the previous year.

Profitability

Your company''s PBT for the year ended 31.3.2014 was recorded at Rs. 142.91 million, as compared to Rs. 150.27 million in the previous year.

Earnings Per Share

EPS was at Rs. 11.86 as on 31.3.2014 as against Rs. 13.44 as on 31.3.2013.

Net Worth

The company''s net worth as on 31.3.2014 was at Rs. 759.72 million as compared to H678.75 million as on 31.3.2013.

Dividend

Your Directors have recommended a dividend payment of Rs. 2 per equity share of H10 each for the financial year 2013-14, which is equal to the dividend declared for 2012-13. This dividend is subject to approval by the shareholders at the ensuing AGM. The company has now formulated a dividend policy that would be implemented from the current financial year. The proposed policy endeavors to maintain a minimum dividend payout @ of 18% of PAT.

REVIEW OF OPERATIONS AND FUTURE PROSPECTS

The last financial year saw a small growth in the sales. The year began on an anxious note, having lost the number one product which contributed 23% to the total sales in the earlier year. As the year progressed, we not only made up those lost sales with our other products as well as by adding large animal health products, but we ensured that a higher profitability is achieved in the year. We therefore achieved our 2 objectives as defined last year to gain a higher market share in India and to increase the product range.

Though we are yet struggling in the LAH division, we are confident of turning it around by reaching at a breakeven in the current financial year. The addition of Large Animal vaccines in the third quarter will accelerate the growth of this division.

We have successfully re-launched our bivalent Marek''s Disease Live vaccine for the poultry, containing HVT & SB1 strains, which contributed 23% to sales in 2012-13, after removing the dependency on imported intermediate. We proudly say that we are no more dependent on any intermediate imports towards manufacturing any vaccines. In the current financial year, we hope to recover a sizable portion of the lost market besides providing a cost advantage to the Indian poultry farmers.

The important volume building large animal vaccines to be launched in the third quarter of this financial year are PPR vaccine for sheep & goat and Brucella vaccine for cattle. These 2 vaccines would contribute towards the disease eradication programs of the Government of India.

During the last year, Hester terminated its JV (in the name of Diavetra Lifesciences Private Limited) with Ubio Biotechnology Systems Private Limited. The JV was set up with an objective to manufacture veterinary diagnostics. Hester still independently pursues the objective to manufacture veterinary diagnostics. This initiative shall gain momentum in 2015-2016.

During the year, Hester did not renew its agreement with CRISIL but entered into a contractual agreement with CARE towards credit rating. Our current CARE ratings are as follows:

* Long Term rating: CARE BBB

* Short Term rating: CARE A3

Company and product registration activities are ongoing in over 15 countries. The fruits of this would be seen mainly from 2015-2016, which would have an upward spiral in exports. It is estimated that in 4 years, international business would be equal or more than the domestic sales.

In March 2014, the company got the recognition by DSIR (department of Science and Industrial Research), Government of India. This recognition entails a tax benefit of 200% on capital and revenue expenditure incurred by Hester on in-house R&D activities. Besides working on applied R&D, the company has embarked on basic R&D activities towards the development of recombinant vaccines.

ENERGY CONSERVATION

(Information under section 217(1 )(e) of the Companies Act, 1956.)

The increase in energy cost has been mainly due to hike in prices of unit cost of electricity and of diesel. Nonetheless, the company has a continuous focus on energy conservation. Regular studies are conducted to analyse quantitative energy conservation patterns. In order to address the high rising costs of energy, the company has embarked on strict audit and conservation measures.

DIRECTORS

In accordance with the provisions of the Articles of Association and of the Companies Act 1956, Mr. Sanjiv Gandhi, Director of the Company, retiring by rotation at the ensuring Annual General Meeting and being eligible, offer themselves for re- appointment.

The brief particulars of all directors, for which approval of members for their appointments or re-appointments are sought, have been provided in the Notice of The Annual General Meeting pursuant to Clause 49 of the Listing Agreement relating to Corporate Governance.

Impending notification of Section 149 and other applicable provisions of the Companies Act, 2013, your directors are seeking appointment of Mr. Vimal Ambani, Mr. Vishwesh Patel, Dr. Siba Samal and Ms. Grishma Nanavaty, as Independent Directors for a term upto 31st March, 2015.

All the Directors of the Company are qualified for being appointed as Director as specified in Section 164 (2) of the Companies Act, 2013.

For the perusal of shareholders, a brief resume of the above said director, nature of his expertise, his shareholding in the company and other required details are given in the section of Corporate Governance Report elsewhere in the Annual Report.

TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND:

Pursuant to the provisions of the section 205A(5) and 205C of the Companies Act, 1956 and corresponding section 124 of the Companies Act, 2013 which mandates that companies transfer dividend that has been unclaimed for a period of seven years from the unpaid dividend account to the to the Investor Education and Protection Fund. The company has duly complied the above provisions by transferring the amount of unclaimed or unpaid dividend to the Investor Education and Protection Fund within the due dates.

Pursuant to the provisions of the Investor Education and Protection Fund (uploading of information regarding unpaid and unclaimed amounts lying with the Company as on 30th September, 2013 (date of last Annual General Meeting) on the website of the Company (www.hester.in) as also on the Ministry of Corporate Affairs website.

LISTING OF SECURITIES

8,506,800 equity shares of Rs. 10/- each fully paid, are listed on the following Stock Exchanges:

The Bombay Stock Exchange Ltd. (BSE)

The company has already paid listing fee to the Bombay Stock Exchange for the financial year 2014-2015.

PUBLIC DEPOSITS

Your Company has started accepting of Fixed Deposit w.e.f. 20th August 2013, Company has received total deposit of Rs. 12.16 million during financial year 2013-2014. Since 1st April, 2014 Company is not accepting Fixed Deposit under New Companies Act, 2013.

FINANCE

The working capital requirement was funded through enhanced bank limits. The capital expenditures were funded through the additional working capital & term loans from the bank as well as through internal accruals.

SUBSIDIARY COMPANY

Your Company has three subsidiary Companies namely Hester Biosciences (Mauritius) Limited (Wholly Owned Subsidiary), Diavetra Lifesciences Private Limited (Wholly Owned Subsidiary) and Hester Biosciences Nepal Private Limited (Step down subsidiary), Details of all the subsidiaries are as under:

Hester Biosciences (Mauritius) Limited (HBML)

This Company has been incorporated in the Month of February 2011, as a wholly (100%) owned subsidiary of Hester Biosciences Limited. The Company has not yet started its activities and hence only administrative expensed are incurred.

Diavetra Lifesciences Private Limited

The company though established with an objective to develop and market Veterinary Diagnostics Kits, it has not yet started its activities and hence only administrative expensed are incurred.

Hester Biosciences Nepal Private Limited (HBNPL)

HBNPL is a subsidiary of HBML. HBML holds 65% stake in HBNPL, hence becoming an indirect subsidiary of Hester Biosciences Limited. HBNPL will be in the business of manufacturing large animal vaccines in Nepal and the commencement of business will be in this financial year.

CHANGE IN LEGISLATION GOVERNING COMPANIES IN INDIA

During the year under review, the provisions of the new Companies Act have been made effective replacing the Companies Act of 1956 vintage by the induction of the Companies Act, 2013. The Government has notified 287 sections out of total 470 sections, which covers all the material provisions of the new Companies Act, 2013.

However, as clarified by the Ministry of Corporate Affairs, the provisions of Companies Act, 1956 would remain applicable in respect of financial accounts, auditor''s report and directors'' report thereon for the financial year ended on 31st March, 2014.

CHANGE IN NOMENCLATURE OF COMMITTEES AND ENHANCED THEIR SCOPE

Pursuant to the introduction of the Companies Act, 2013 and the rules thereunder the Nomenclature of the Shareholders Grievance Committee has been changed to "Security holders'' Grievances Committee" and the nomenclature of Remuneration Committee has been changed to "Nomination and Remuneration Committee".

The scope of terms of reference/scope for Audit Committee has been enhanced in line with the provisions of Section 177 of the Companies Act, 2013 with additional scope on vigil mechanism, safeguards against victimization of persons who use such mechanism, direct access to chairman of audit committee in appropriate or exceptional cases etc.

VIGIL MECHANISM

The provisions of section 177 (9) and (10) of the Companies Act, 2013 mandates every listed company to establish vigil mechanism for directors and employees to report genuine concern in such manner as may be prescribed. The provisions of the said policy, provided for adequate safeguards against the victimization of persons who use such mechanism and make provisions for direct access to the chairman of the Audit Committee in appropriate or exceptional cases.

The Board of Directors of the Company have at their meeting held on 28th May, 2014, approved whistle blower policy to be in line with the provisions of Companies Act , 2013 read with the listing agreement.

Any director or employee of the company, who observes any Unethical Behavior or Improper Practices or Wrongful Conduct and/or financial or non financial malpractices or non- compliance with legal requirements concerning the company, is free to report to the specified officer in the mode as provided in the policy.

CORPORATE SOCIAL RESPONSIBILITY

The Company is contributing to sustainable development by its economic activities combined with the fulfillment of its social responsibilities relating to the education, health, safety and environment aspects.

As per the Companies Act, 2013 all the Companies having net worth of Rs. 500 Crores or more, or turnover of Rs. 1000 Crores or more or a net profit of Rs. 5 Crores or more during any financial year will be required to constitute a Corporate Social Responsibility Committee of the Board of Directors comprising three or more director, at least one of whom will be an independent director. Aligning with the guidelines, your Company has constituted a Corporate Social Responsibility Committee comprising of Mr. Rajiv Gandhi, CEO and Managing Director as a Chairman, Mr. Vishwesh Patel, Non - Executive & Independent Director as a Member and Ms. Grishma Nanavaty, Non - Executive & Independent Director as a Member. The CSR Committee is responsible for formulating and recommending to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, monitoring the implementation of the framework of the Corporate Social Responsibility Policy and recommending the amount to be spent on CSR activities.

COMPLIANCE OF SECTION 212 OF THE COMPANIES ACT, 1956

In terms of general exemption granted by Ministry of Corporate Affairs vide General Circular No. 2/2011 dated 8.2.2011, under section 212(8) of the Companies Act, 1956, the Audited Balance Sheet, Profit and Loss Account, Report of the Board of Directors and Auditors of our subsidiaries need not to be attached with the Balance Sheet of the Company subject to complying with the certain conditions. These documents will be made available upon request by any member of the Company interested in obtaining the same. However, the brief financial details of the subsidiaries have been furnished under "Financial details of Subsidiary Company", forming part of the Annual Report. Further, pursuant to Accounting Standard AS- 21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company includes financial information of its subsidiaries. These documents will also be available for inspection during business hours at our registered office. The details of the accounts of individual subsidiary companies are available on the website of the Company.

CORPORATE GOVERNANCE:

Pursuant to clause 49 of the Listing Agreement with the Stock Exchange, a separate section on Corporate Governance and certificate obtained from practicing Company Secretary confirming its compliance, is provided separately and forming part of this Report. The Board of Directors support the basic principles of corporate governance. In addition to this, the board lays strong emphasis on transparency, accountability and integrity.

Report on Management Discussion and Analysis is provided in separate section, forming part of this report.

FORMATION OF VARIOUS COMMITTEES:

Details of various committees constituted by the Board of Directors are given in the annexed Corporate Governance Report which forms part of this report.

PARTICULARS OF EMPLOYEES:

The information required under section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of employees is not applicable to the Company, as no employees drawing remuneration of H6,000,000 or more per annum employed throughout the year or H500,000 or more per month employed for a part of the year.

DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to Section 217 (2AA) of the Companies Act, 1956 would like to state the following:

In the preparation of the Annual Accounts, the applicable accounting standards have been followed.

The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company, at the end of the financial year ended on 31st March2014.

The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

The Directors have prepared the attached statements of accounts for the year ended 31st March, 2014 on a going concern basis.

AUDITORS & AUDITORS REPORT

M/s. Shah Narielwala & Co.; Chartered Accountants, retire at the forthcoming Annual General Meeting and have confirmed their eligibility and willingness to accept the office, if re-appointed.

Notes forming part of the accounts are self explanatory and therefore, do not require any further comments.

ACKNOWLEDGEMENT

Your Directors express their appreciation for the assistance and cooperation received from State Bank of India, various government authorities, customers, vendors and members during the year under review. Your directors also wish to place on record their deep sense of appreciation for the committed services by the executives, staff and workers of the company.

By order of the Board

Place: Ahmedabad Rajiv Gandhi Date: 30 May, 2014 CEO & Managing Director


Mar 31, 2013

Dear Shareholder''s

The Directors are pleased to present the 26th Annual Report with the Audited Accounts of the Company for the year ended 31.3.2013.

FINANCIAL RESULTS (Rs. Millions)

Particulars Current year Previous year

Total Income 653.38 485.07

Profit before Depreciation & Tax 194.22 163.24

Less : Depreciation 43.95 41.23

Profit Before Tax 150.27 122.01

Less: Provision for Tax 1.51 (0.98)

Current Tax 51.83 45.00

Income tax of earlier year 0.03 0.08

Fringe Benefit Tax - -

Net Profit After Tax 96.90 77.91

Balance of Profit & Loss Account 148.72 117.40

Profit available for appropriation 245.62 195.31

Dividend on equity shares 17.01 5.67

Dividend Tax 2.89 0.92

General Reserve 25.00 40.00

Balance carried to Balance sheet 200.72 148.72

Earnings per share (Basic/Diluted) 13.44 13.74

FINANCIAL HIGHLIGHTS

Sales

Your company posted a turnover of Rs. 651.04 million in the financial year ended on 31.3.2013, as compared to Rs. 482.64 million in the previous year.

Profitability

Your company''s PBT for the year ended 31.3.2013 was recorded at Rs. 150.27 million, as compared to Rs. 122.03 million in the previous year.

Earnings Per Share

EPS was at Rs.13.44 as on 31.3.2013 (on the enhanced post bonus equity) as against Rs. 13.74 as on 31.3.2012.

Net Worth

The company''s net worth as on 31.3.2013 was at Rs. 678.75 million as compared to Rs. 600.50 million as on 31.3.2012.

Issue of Bonus Shares

The Board of Directors of your Company have issued Bonus Equity Shares, to its existing members, by capitalizing a sum of Rs. 28,356,000 (Rupees Twenty Eight Million, Three Hundred and Fifty Six Thousand Only) from the Securities Premium Account and other reserves, in the ratio of 1:2, i.e., One new equity share for every Two existing equity shares held. The Bonus Shares were allotted on 01.10.2012. The said shares are listed and traded on The Bombay Stock Exchange.

Dividend

Your Directors have recommended a dividend payment of Rs. 2 per equity share of Rs. 10 each for the financial year 2012-13, as compared to the last year''s dividend of Re.1 per equity share. This dividend is subject to approval by the shareholders at the ensuing AGM. This year, the dividend is on the enhanced share capital after giving bonus shares in a ratio of 1 new equity share for every 2 existing equity shares held.

REVIEW OF OPERATIONS AND FUTURE PROSPECTS

The last financial year saw a leap in the sales. We started off the year with 2 clear objectives - To gain a higher market share in India and to increase the product range. Our strategy paid off. Besides making a sizable growth in the revenues from poultry vaccines, the top line further grew due to the increased product range of poultry and other animal health products.

The acquisition of the business of INNOVES through a BTA in October 2012, provided the company a marketing and a distribution platform in the non-poultry segment of the Indian veterinary market, besides increasing our top line marginally. The Innoves range of products include growth promoters, vitamin premixes, antibiotics and disinfectants mainly for the cattle and sheep.

During the year, the company embarked on many projects which would ensure a fast growth in the coming years, as well as establish Hester as a truly global animal health company.

Through collaborative efforts, we embarked on the development of the bivalent Marek''s Disease Live vaccine for the poultry, containing HVT & SB1 strains. Currently trials are being conducted and we hope to launch the product in October 2012. The market for this vaccine is approximately INR 300 million. At present, nearly 50% of this vaccine requirement is imported. Hester''s local production of this vaccine will be an import replacement, besides providing a cost advantage to the Indian poultry farmers.

In collaboration with IVRI (Indian Veterinary Research Institute), we are currently developing 5 types of cattle vaccines. Of these, the PPR vaccine for sheep and goat and Brucella vaccine for cattle would contribute towards the disease eradication programs of the Government of India. The total addressable market in these 5 vaccines would be INR 2.5 billion

In December 2012, Hester formed a subsidiary in the name of DIAVETRA LIFESCIENCES PRIVATE LIMITED with an objective to manufacture veterinary diagnostics. The veterinary diagnostics business is a very fast growing segment with a worldwide market of over USD 1 billion. With the cost advantages within India, Hester is confident of making a dent in this segment during this current financial year. The technologies would be developed in-house as well as acquired from Indian and international sources. Diavetra would have a focus towards the international market.

During the year, CRISIL upgraded our credit ratings as follows:

MLong Term rating from ''BBB-'' to ''BBB ''

-Short Term rating from ''A3'' to ''A3 ''

We were successful in getting the WHO-GMP certification in February 2013. This certification would help Hester in hastening the registration process in many countries, as well as in opening the registration doors in the regulated markets.

In December 2012, we have made an application for Recognition of In-House R&D unit with the Department of Scientific & Industrial Research (DSIR), Ministry of Science & Technology, Government of India. We hope to get this recognition shortly.

ENERGY CONSERVATION

(Information under section 217(1 )(e) of the Companies Act, 1956.)

The company has a continuous focus on energy conservation. Regular studies are conducted to analyse quantitative energy conservation patterns. Variances are rigorously scrutinised. The company regularly benchmarks its energy conservation levels and consistently works towards improving efficiencies, towards getting the cost of energy down for every unit produced.

FOREIGN EXCHANGE EARNINGS & OUTFLOW

Foreign exchange earnings during the year towards sale of goods were Rs. 43.82 million as compared to Rs. 29.21 million during the previous year. Total outflow of foreign exchange during the year towards purchase of materials, trading goods, travelling expenses and purchase of capital items was Rs. 74.79 million as compared to Rs. 56.70 million during the previous year.

DIRECTORS

In accordance with the provisions of the Articles of Association and of the Companies Act 1956, Dr. Bhupendra Gandhi and Mr. Ravin Gandhi, Directors of the Company, retiring by rotation at the ensuring Annual General Meeting and being eligible, offer themselves for re-appointment.

The brief particulars of all directors, for which approval of members for their appointments or re-appointments are sought, have been provided in the Notice of The Annual General Meeting pursuant to Clause 49 of the Listing Agreement relating to Corporate Governance.

PUBLIC DEPOSITS

The company has not invited or accepted any deposits under Section 58A of the Companies Act, 1956, from the public, during the year.

FINANCE

The working capital requirement was funded through enhanced bank limits. The capital expenditures were funded through the additional working capital & term loans from the bank as well as through internal accruals.

SUBSIDIARY COMPANY

Your Company has three subsidiary Companies namely Hester Biosciences (Mauritius) Limited (Wholly Owned Subsidiary), Diavetra Lifesciences Private Limited (Subsidiary) and Hester Biosciences Nepal Private Limited (Step down subsidiary), Details of all the subsidiaries are as under:

Hester Biosciences (Mauritius) Limited (HBML)

This Company has been incorporated in the Month of February 2011, as a wholly (100%) owned subsidiary of Hester Biosciences Limited. The Company has not yet started its activities and hence only administrative expensed are incurred.

Diavetra Lifesciences Private Limited

On 26.12.2012, the company has formed a subsidiary namely Diavetra Lifesciences Private Limited with an objective to develop and market Veterinary Diagnostics Kits.

Hester Biosciences Nepal Private Limited (HBNPL)

HBNPL is a subsidiary of HBML. HBML holds 65% stake in HBNPL, hence becoming an indirect subsidiary of Hester Biosciences Limited. HBNPL will be in the business of manufacturing large animal vaccines in Nepal.

COMPLIANCE OF SECTION 212 OF THE COMPANIES ACT, 1956

In terms of general exemption granted by Ministry of Corporate Affairs vide General Circular No. 2/2011 dated 8.2.2011, under section 212(8) of the Companies Act, 1956, the Audited Balance Sheet, Profit and Loss Account, Report of the Board of Directors and Auditors of our subsidiaries need not to be attached with the Balance Sheet of the Company subject to complying with the certain conditions. These documents will be made available upon request by any member of the Company interested in obtaining the same. However, the brief financial details of the subsidiaries have been furnished under "Financial details of Subsidiary Company", forming part of the Annual Report. Further, pursuant to Accounting Standard AS- 21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company includes financial information of its subsidiaries. These documents will also be available for inspection during business hours at our registered office. The details of the accounts of individual subsidiary companies are available on the website of the Company.

CORPORATE GOVERNANCE

Pursuant to clause 49 of the Listing Agreement with the Stock Exchange, a separate section on Corporate Governance and certificate obtained from practicing Company Secretary confirming its compliance, is provided separately and forming part of this Report. The Board of Directors support the basic principles of corporate governance. In addition to this, the board lays strong emphasis on transparency, accountability and integrity.

Report on Management Discussion and Analysis is provided in separate section, forming part of this report.

FORMATION OF VARIOUS COMMITTEES

Details of various committees constituted by the Board of Directors are given in the annexed Corporate Governance Report which forms part of this report.

PARTICULARS OF EMPLOYEES

The information required under section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of employees is not applicable to the Company, as no employees drawing remuneration of Rs. 6,000,000 or more per annum employed throughout the year or Rs. 500,000 or more per month employed for a part of the year.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956 I would like to state the following:

In the preparation of the Annual Accounts, the applicable accounting standards have been followed.

The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company, at the end of the financial year ended on 31st March 2013.

The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

The Directors have prepared the attached statements of accounts for the year ended 31st March, 2013 on a going concern basis.

AUDITORS & AUDITORS REPORT

M/s. Shah Narielwala & Co.; Chartered Accountants, retire at the forthcoming Annual General Meeting and have confirmed their eligibility and willingness to accept the office, if re-appointed.

Notes forming part of the accounts are self explanatory and therefore, do not require any further comments.

ACKNOWLEDGEMENT

Your Directors express their appreciation for the assistance and cooperation received from Bank of India, various government authorities, customers, vendors and members during the year under review. Your directors also wish to place on record their deep sense of appreciation for the committed services by the executives, staff and workers of the company.

By order of the Board

30 May, 2013 Rajiv Gandhi

Ahmedabad CEO & Managing Director


Mar 31, 2012

The Directors are pleased to present the 25th Annual Report with the Audited Accounts of the Company for the year ended 31.3.2012.

Financial Results: (Rs. In Millions)

Particulars Current Year Previous Year

Total Income 485.07 421.03

Profit before Depreciation & Tax 163.24 156.62

Less: Depreciation 41.23 44.78

Profit Before Tax 122.01 111.84

Less: Provision for Tax

Deferred Tax (0.98) (1.09)

Current Tax 45.00 40.00

Income tax of earlier year 0.08 (3.03)

Fringe Benefit Tax

Net Profit After Tax 77.91 75.96

Balance of Profit & Loss Account 117.40 82.62

Profit available for appropriation 195.31 158.58

Dividend on equity shares 5.67 18.17

Dividend Tax 0.92 3.02

General Reserve 40.00 20.00

Balance carried to Balance sheet 148.72 117.39

Earnings per share (Basic/Diluted) 13.74 14.63

Financial Highlights

Sales

Your company posted a turnover of Rs. 482.63 million in the financial year ended on 31.3.2012, as compared to Rs. 419.71 million in the previous year.

Profitability

Your company's PBT for the year ended 31.3.2012 was recorded at Rs. 122.02 million, a compared to Rs. 111.84 million in the previous year.

Earnings Per Share

EPS was at Rs. 13.74 as on 31.3.2012 as against Rs. 14.63 as on 31.3.2011.

Net Worth

The Company's net worth as on 31.3.2012 was at Rs. 600.50 million as compared to Rs. 479.85 million as on 31.3.2011.

Preferential Allotment of Shares

Your company has converted 480,000 Equity Warrants into Equity Shares by making an allotment of Equity Shares. These shares were allotted on 11 February 2012 at a price of Rs. 137 per share (including a share premium of Rs. 127 per share). The said shares are listed at The Bombay Stock Exchange. With this allotment, the Paid-up share capital of the Company stands enhanced to Rs. 56.71 Million

Dividend

Your Directors have recommended a dividend payment of Re. 1 per equity share of Rs. 10 each for the financial year 2011-12. This dividend is subject to approval by the shareholders at the ensuing AGM. Historically, we have been declaring higher dividends. This year, though our profits do substantiate giving as much dividend as last year, the board has proposed to conserve the internal accruals for the upcoming capital expenditure towards constructing a new QC laboratory. With the completion of this QC laboratory, Hester would qualify to get international accreditions, which would help towards registering its products in the regulated markets in Europe and in Asia.

Issue of Bonus Shares

The Board of Directors of your Company have proposed the issue of Bonus Equity Shares, to its existing members, by capitalising a sum of Rs. 28,356,000 (Rupees Twenty Eight Million, Three Hundred and Fifty Six Thousand Only) from the credit of Securities Premium Account and/or any other reserves, by way of issue of 1 (One) new equity share for every 2 (Two) existing equity shares held.

Review of Operations

The last financial year saw a steady growth in the sales. The sales area coverage within India remained the same, thereby giving an indication of growth in terms of market share.

CRISIL upgraded our credit rating on various banking facilities from 'BBB-' to 'BB '.

A major breakthrough for us this year has been that we have developed a thermo-stable New Castle Disease live vaccine for poultry. Till date, we have been manufacturing the conventional Newcastle Disease live vaccine which requires a cold chain during transportation and during storage. Unlike the conventional vaccine, our thermo-stable vaccine would be able to withstand temperatures up to 35 degrees Celsius. Rural India as well as Rural Africa (our target markets) both have limitations in maintaining a cold chain. Due to this limitation, backyard poultry farmers are unable to have access to this vaccine. Backyard poultry farms have a very high mortality rate due to Newcastle Disease. Newcastle disease is a disease of great economic importance. An outbreak of Newcastle disease deprives the farmer from his livelihood. The use of this thermo- stable vaccine would change the economics of backyard farmers. The vaccine is currently under registration and we hope to start commercial sales by January 2013.

Certifications

We continue to be a GMP and an ISO 9001-2008 certified company. Besides, we have now been granted additional certifications: GLP (Good Laboratory Practices), Environmental Management Systems (EMS) ISO 14001:2004 and Occupational Health and Safety (OHSAS) 18001:2007 certifications.

Future Prospects

Our company is poised for a upward spiral growth in the coming years. Beginning this financial year, Hester has launched 3 additional divisions - Large Animal Biologicals, Large Animal healthcare and Poultry healthcare, besides its existing Poultry Biologicals division. The products in the new division would be launched in phases beginning from October 2012. With the launch of these divisions, Hester expects a better penetration in the domestic as well as in the international veterinary market.

Energy Conservation

(Information under section 217(1)(e) of the Companies Act, 1956.)

The Company has a continuous focus on energy conservation. Regular studies are conducted to analyses quantitative energy conservation patterns, and variances are rigorously scrutinised. The Company regularly benchmarks its energy conservation levels and consistently works towards improving efficiencies, towards getting the cost of energy down for every unit produced.

Total energy consumption and energy consumption per unit of production:

Particulars 31.03.2012 31.03.2011

(A) Power & Fuel Consumption:

Electricity:

(a) Purchased Units Kwh 3497955.00 3059660.00

Total Amount Rs. 22380361.00 18222772.59

Rate/Unit Rs. 6.40 5.96

(b) Own Generation through Diesel Genset

Units Kwh 60466.00 56925.00

Units per Litre of Diesel Oil Kwh 3.05 3.09

Cost/Unit Rs. 14.98 14.06

(B) Consumption per Unit of production:

Electricity consumed per vial (in units) 1.61 2.35

Foreign Exchange Earnings & Outflow

Foreign exchange earnings during the year towards sale of goods were Rs. 29.21 million as compared to Rs. 32.98 million during the previous year. Total outflow of foreign exchange during the year towards purchase of materials, trading goods, travelling expenses and purchase of capital items was Rs. 56.70 million as compared to Rs. 47.81 million during the previous year.

Directors:

In accordance with the provisions of the Articles of Association and of the Companies Act 1956, Mr. Sanjiv Gandhi and Mr. Darayus Lakdawalla, Directors of the Company, retiring by rotation at the ensuring Annual General Meeting and being eligible, offer themselves for re-appointment.

Mr. Rajiv Gandhi, CEO and Managing Director of the Company, whose term expired on 31 December, 2011, was re-appointed for further period of 3 years, with effect from 1 January, 2012.

The brief particulars of all directors, for which approval of members for their appointments or re-appointments are sought, have been provided in the Notice of The Annual General Meeting pursuant to Clause 49 of the Listing Agreement relating to Corporate Governance.

Public Deposits:

The Company has not invited or accepted any deposits under Section 58A of the Companies Act, 1956, from the public, during the year.

Finance:

The working capital requirement was funded through enhanced bank limits. The capital expenditures were funded through the additional working capital & term loans from the bankers as well as through internal accruals.

"Group" For Inter Se Transfer Of Shares

As required under Clause 10(1) (a) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations 2011, persons constituting "Group" (within the meaning as defined in the Monopolies and Restrictive Trade Practice Act, 1969) for the purpose of availing exemption from applicability of the provisions of Regulations 3 & 4 of the aforesaid SEBI Regulations are given as under:

List of Persons

1. Rajiv Gandhi 11. Darayus Lakdawalla

2. Nina Gandhi 12. Zubin Lakdawalla

3. Ravin Gandhi 13. Kanti Gandhi

4. Bela Gandhi 14. Dinesh Gandhi

5. Bhupendra Gandhi 15. Urmilaben Gandhi

6. Shaila Gandhi 16. Yash Gandhi

7. Sanjiv Gandhi 17. Priya Gandhi

8. Hetal Gandhi 18. Biolink Healthcare Limited

9. Madhuri Kapadia 19. Hester Diagnostics Private Limited

10. Anup kapadia 20. Hester Coatings Private Limited

Subsidiary Company

Your Company has two subsidiary Companies namely Hester Biosciences (Mauritius) Limited and Hester Biosciences Nepal Private Limited. The former is Wholly Owned Subsidiary Company and later is Step down subsidiary, wherein Hester Biosciences (Mauritius) Limited is holding 65 % stake in Hester Biosciences Nepal Private Limited. Details for both the subsidiaries are as under:

Hester Biosciences (Mauritius) Limited (HBML)

This Company has been incorporated in the Month of February 2011, as a wholly (100%) owned subsidiary of Hester Biosciences Limited. The Company has not yet started its activities and hence only administrative expensed are incurred.

Hester Biosciences Nepal Private Limited (HBNPL)

HBNPL is a subsidiary of HBML. HBML holds 65% stake in HBNPL, hence becoming an indirect subsidiary of Hester Biosciences Limited. HBNPL will be in the business of manufacturing large animal vaccines in Nepal.

Compliance of Section 212 of the Companies Act, 1956

In terms of general exemption granted by Ministry of Corporate Affairs vide General Circular No. 2/2011 dated 8.2.2011, under section 212(8) of the Companies Act, 1956, the Audited Balance Sheet, Profit and Loss Account, Report of the Board of Directors and Auditors of our subsidiaries need not to be attached with the Balance Sheet of the Company subject to complying with the certain conditions. These documents will be made available upon request by any member of the Company interested in obtaining the same. However, the brief financial details of the subsidiaries have been furnished under "Financial details of Subsidiary Company", forming part of the Annual Report. Further, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company includes financial information of its subsidiaries. These documents will also be available for inspection during business hours at our registered office. The details of the accounts of individual subsidiary companies are available on the website of the Company.

Corporate Governance:

Pursuant to clause 49 of the Listing Agreement with the Stock Exchange, a separate section on Corporate Governance and certificate obtained from practicing Company Secretary confirming its compliance, is provided separately and forming part of this Report. The Board of Directors supports the basic principles of corporate governance. In addition to this, the board lays strong emphasis on transparency, accountability and integrity.

Report on Management Discussion and Analysis is provided in separate section and forming part of this report.

Formation of Various Committees:

Details of various committees constituted by the Board of Directors are given in the Corporate Governance Report annexed which forms part of this report.

Particulars of Employees:

The information required under section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of employees is not applicable to the Company, as no employees drawing remuneration of Rs. 6,000,000 or more per annum employed throughout the year or Rs. 500,000 or more per month employed for a part of the year.

Directors' Responsibility Statement:

Pursuant to Section 217 (2AA) of the Companies Act, 1956 I would like to state the following:

In the preparation of the Annual Accounts, the applicable accounting standards have been followed.

The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company, at the end of the financial year ended on 31 March, 2012.

The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

The Directors have prepared the attached statements of accounts for the year ended 31 March, 2012 on a going concern basis.

Auditors & Auditors Report:

M/s. Shah Narielwala & Co.; Chartered Accountants, retire at the forthcoming Annual General Meeting and have confirmed their eligibility and willingness to accept the office, if re- appointed.

Notes forming part of the accounts are self explanatory and therefore, do not require any further comments.

Acknowledgement:

Your Directors express their appreciation for the assistance and cooperation received from Bank of India, various government authorities, customers, vendors and members during the year under review. Your directors also wish to place on record their deep sense of appreciation for the committed services by the executives, staff and workers of the Company.

By order of the Board

14 August, 2012 Rajiv Gandhi

Ahmedabad CEO & Managing Director

 
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