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Directors Report of SMS Pharmaceuticals Ltd.

Mar 31, 2016

Dear Shareholders,

The Directors have pleasure in presenting before you the 28th Annual Report of the Company together with Audited Statement of Accounts for the year ended 31st March, 2016.

A. FINANCIAL SUMMERY: (INR In lakh)

Standalone

Particulars

2015-16 2014-15 (INR in Lakhs) (INR in Lakhs)

Gross Sales 58,246.88 55,764.66

Net Sales 55,607.10 53,604.12

Other Operating Income 4,712.23 4,324.46

Net Revenue from 60,3|9.33 57,928.58

Operations

Other Income 360.80 1,632.00

EBIDTA 9,280.35 10,258.05

Finance Charges 1,709.81 1,793.09

Depreciation 1,943.30 1,716.61

Profit Before Tax 5,627.24 6,748.35

Taxation 1,463.32 3,223.89

Profit After Tax 4,163.92 3,524.46

Balance brought forward 8,369.01 6,073,30 from previous year

Less : Adjustment of - 24.98 depreciation reserve as per Schedule II of Companies Act, 201 3

Balance available for 12,532.93 9,572.78

Appropriations.

Appropriations:

Proposed Dividend 169.30 169.30

Dividend Tax 34.47 34.47

General Reserve 1,000.00 1,000.00

Profit carried to Balance

Sheet

Earnings per share 4.92 4.16

- Basic/Diluted

B. STATE OF Company AFFAIR''S

B.I) In Financial & Production terms

During the year 2015-16 the Company had achieved production of 2,375 M.T of APIs and their Intermediates in comparison with 2,026 M.T of FY 2014-15 and registered a growth of 17.22% The net sales of the Company has reached to Rs, 55,607.10 lakhs as against Rs,53,604.12 lakhs registering a growth of 3.74% and the net revenue from operations have increased by 4.12%. With this EPS has increased to Rs, 4.92 as against Rs, 4.16 during the year 2014-15. The management believes that the profitability margins from the operations are sustainable and it will continue to strengthen its leadership position.

B.2) Awards and Approval

Your Company had won first "India Pharma Award, 2015" in the following two categories:

1. INDIA PHARMA BULK DRUG Company OF THE YEAR AWARD.

2. INDIA PHARMA BULK DRUG EXPORT Company OF THE YEAR AWARD.

During the year under review, the facility located at kandivalasa has completed USFDA Inspection and there were no observations in this regard. Apart from this our facility at bachupally, also had the USFDA approval.

B.3) Subsidiaries and Associates:

Your Company is having one associate Company. The said associate Company viz. "VKT Pharma Private Limited" is under the same management. Your Company is holding 34.33% equity shares in the said associate Company and the share of loss for your Company for financial year 2015-16 was Rs, 74,71,033/-. SMS Life sciences India Limited has become the wholly owned subsidiary of your Company during the Financial Year 2016-17.

The consolidated financial statements had been prepared as per Accounting Standard (AS) 23 - "Accounting for Investment in Associates in Consolidated Financial Statements" specified under Section 133 of Companies Act, 201 3 for considering the financials of Associate Company. The required form, as per the provisions of the Sec. 129(3) read with rule 5 of Companies (Accounts) Rules, 2014 viz. AOC-1'' is form part of this report as Annexure -'' I''

B.4) Change in Nature of Business

There is no change in Nature of Business. A detailed report on the same viz. ''Management Analysis and Discussion Report'' is form part of this report as Annexure - ''2''

B.5) Share Capital

During the year under review the Company had neither issued fresh equity/sweat equity shares nor any debentures, Employees Stock Option Scheme or any share based employee benefits. The Company had sub divided the face value of share of Rs, 10/- each into face value of Rs, I/- of each with record date of 18th December, 2015. A report on the same viz. ''Equity Buildup Report'' is form part of this report as Annexure - ''3''

C. TRANSFER TO RESERVES:

Your Company has transferred an amount Rs, 1,000 Lakhs (previous year Rs, 1000 Lakhs) to General Reserve out of the amount available for appropriations.

D. DIVIDEND:

Your Directors have pleasure in recommending the dividend of Rs, 0.20/- (i.e. 20%) per equity share of Rs, I/-face value, aggregating toRs, 1,69,30,406/-which shall be paid within 30 days after the conclusion of the Annual General meeting, subject to the approval of the shareholders of the Company. The total cash outflow on account of dividend including dividend distribution tax is Rs, 203.77 lakhs.

E. PROPOSAL FOR DE-MERGER OF SEMI REGULATED UNITS:

The Board has approved the "Draft Scheme of Arrangement for Demerger of Semi Regulated Units (Unit - I, IV & V) along with other Assets to transfer the same to SMS Life sciences India Limited (Resulting Company), with an object to reduce the impact of Semi Regulated Units on Regulated Units, achieving operational efficiencies, site synergies and streamlining its current structure. The Draft Scheme of Arrangement is subject to the Approvals of Stock Exchanges, Securities Board of India Limited, Reserve

Bank of India and other regulatory authorities and also Hon''ble High Court of Judicature at Hyderabad for the State of Telangana and Andhra Pradesh.

E DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to the provisions of Section I 34(3)(c) of the Companies Act, 2013 as amended, the Board of Directors confirm that:

1. In preparation of the Financial Statements for the year ended 31st March, 2016 the applicable accounting standards had been followed along with proper explanation relating to material departures, if any.

2. They had selected such accounting policies as notified & modified by ICAI 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 and loss of the Company for that period;

3. They had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 as amended form time to time for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. The Annual Accounts had been prepared on going concern basis.

5. The Company has developed an effective mechanism for internal financial controls, it has been followed by the Company consistently; such internal financial controls are adequate and operating effectively.

6. They had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

G. LOANS, GUARANTEES AND INVESTMENTS:

Your Company had made investment in its associate Company viz. M/s. VKT Pharma Private Limited for its business purpose. During the year under review,

your Company had acquired 5,1 1,400 equity shares of face value of Rs, 10/- each in the said associate at an average price of Rs, 157.21. Further, your Company had also made an investment in 1000 equity shares of Sireen Drugs Private Limited of Rs, 10/- each.

The Particulars of loans/advances given are provided in the Standalone Financial Statements. Please refer (Note no. 16.1) of the Standalone Financial Statements.

The Company is maintaining the details of investments made during the year in Statutory Form MBP - 2. The details of loans / advances given and investments made during the financial year ended on 31st March, 2016 are furnished as Annexure -''4''.

H. RELATED PARTY TRANSACTIONS

All contracts/arrangements/transactions entered by the Company during the financial year 2015-16 with related parties were in the ordinary course of business and at an arm''s length basis and are in compliance with the provisions of the Companies Act and the SEBI (Listing Obligation & Disclosure Requirement) Regulation, 2015. There are no materially significant related party transactions made by the Company with Promoters, Directors and Key Managerial Personnel etc. which may have potential conflict with the interest of the Company. All related party transactions are presented to the Audit Committee and to the Board on quarterly basis.

A statement of all Related Party Transactions is being presented before the Audit Committee on Quarterly basis specifying the nature, value and terms and conditions of the transactions. A Policy on Related Party Transactions approved by the Board on 14th May, 2016 is uploaded on the Company''s website at the web link http://www.smspharma.com/investors/ down loads/policy-on-related-party-transactions. pdf. The particulars of contracts or arrangements entered into by the Company with related parties referred to in Section 188(1) are kept by the Company in Statutory Form AOC-2. Further details required to disclose as per Accounting Standard-18 (as issued & modified by ICAI) form part of the notes to the financial statements provided in the annual report. The required form viz. AOC-2'' is form part of this report as Annexure -''5''

I. STATE OF BOARD AFFAIRS

1.1) Board of Directors and Key Managerial Personnel:

Your Company is maintaining an optimum combination of Independent and Executive directors in the Board, who have vast experience in pharma and other relevant fields. During the year under review following changes occurred in the position of Independent directors:

a) Sri A. R Rao resigned from the Board on 9th October, 2015.

b) The Board had appointed Sri Potluri Venkata Subba Rao (PS. Rao) as an additional Independent Director on Board w.e.f. 7th November, 2015.

c) Sri K.S. Rao having a long association with the Company had demised on 29th November, 2015 due to illness.

Further, in accordance with the provisions of Section I52(6)(a) of the Companies Act, 2013 and revised Articles of Association as approved by the shareholders at their meeting held on 29th September, 2015. All the Executive Directors are compulsorily liable to retire by rotation. Accordingly Sri Ramesh Babu Potluri and Sri TWSN Murthy, whole time directors, are liable to retire by rotation at the forthcoming/ensuing Annual General Meeting scheduled on 30th September, 2016 and being eligible, seeks reappointment. A brief profile of directors and managers seeking re-appointment are given along with the AGM Notice for the reference of the shareholders.

The board had been appointed Sri Saurav Roy in place of Sri R Prabhakar Rao on 4th August, 2015 and designated him as Company Secretary of the Company pursuant to provisions of Section 203 of the Companies Act, 2013. Sri R Prabhakar Rao resigned from the Company w.e.f. 31st July, 2015. Further the Board has affirmed the Compliance of the Code of Conduct as applicable on the Directors & Senior Management Personnel.

1.2) Independent Directors:

In accordance with the provisions of the Section 149 (7) of the Companies Act, 201 3, each independent director had confirmed to the Company that he/ she meets the criteria of Independence laid down in the Section 149 (6) of the Companies Act, 201 3 and Regulation 25(1) of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015.

All the independent Directors of the Company have given declarations under sub-section (6) of Section 149 of the Act, and the same had been considered and taken on record by the Board.

1.3) Annual Evaluation:

Your Company had conducted a separate Meeting of Independent Directors on 9th February, 2015 in which they had evaluated the performance of Executive directors and Non- Executive/Nominee Director''s. Further, in the Board Meeting held on 14th May, 2016 the Board had evaluated the performance of Independent Directors and their contribution in the Board. The evaluation had been made on specified standards.

1.4) Risk Management Policy

In accordance with the provisions of the Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 your Company is not required to form the separate Risk Management Committee and accordingly Risk Management Policy is also not applicable to the Company.

The Company has adequate internal control systems and procedures to mitigate the financial risk (if any), arise in near future. The Risk Management procedure will be reviewed by the Audit Committee and the Board of Directors on a Quarterly basis.

1.5) KMP Appointment and Remuneration Policy

During the year under review your Company had adopted a ''Nomination and Remuneration Committee Charter'' in its Board meeting held on 5th December, 2015. The Nomination and Remuneration Committee abide by the said Charter for appointing any Key Managerial Persons (KMP). During the year under review, the Committee had recommended for appointment of Company Secretary and one Independent Director. The appointment made by the Company for the position of Independent Director in compliance with the relevant provisions of Companies Act, 2013, its allied rules and other applicable norms of the SEBI.

Appointment of any KMP is made by the Nomination and Remuneration Committee in com menstruation of the requirement of the position and experience of the candidate. The Committee has not formulated any formal policy for appointment of KMP it is more as and when basis.

1.6) Composition and Number of Meetings of the Board and Audit Committee:

During the year under review the Board of directors met seven times. The dates on which the Board Meetings were held on 30th May 2015, 8th August 2015, 9th October 2015, 7th November 2015, 5th December 2015, Nth February 2016, 30th March

2016. A detailed report on the above mentioned along with reporting required under Sec. 177(8) and 177(10) of the Companies Act, 2013 and composition of various committees formed part of the report viz. ''Corporate Governance Report'' is form part of this report as Annexure - ''6 ''

1.7) Extract of Annual Return:

In accordance with the provisions of the Companies Act, 201 3 and Rule 12 of Companies (Management and Administration) Rules, 2014 the extract of Annual Return is prepared in prescribed form i.e. ''Form MGT-9''. The said form part of this report as Annexure -''7''

j. DEPOSITS

Your Company had not accepted/invited any deposits from the public during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

K. CORPORATE SOCIAL RESPONSIBILITY

As per the provisions of Section 135 and Schedule- VII of the Companies Act, 2013, and Companies (Corporate Social Responsibility Policy) Rules, 2014 your Company had formulated a Corporate Social Responsibility Policy (CSR Policy). The said policy contains the scope of CSR Expenditure and provides guidance for way forward for expending the same. The composition of CSR committee and other details mentioned under ''Corporate Governance Report'' is form part of this report as Annexure - ''6''

As per the provisions of the Section I 35 of the Act, the average net profits of the Company during the preceding three years stands as Rs, 923.75 lakhs hence the Company is required to spend a sum of Rs, 18.47 lakhs towards CSR Expenditure in FY 2015-16. The details of it are mentioned under ''CSR Expenditure'' in statutory format is form part of this report as Annexure-''8''.

L. PARTICULARS OF EMPLOYEES:

Disclosures pertaining to remuneration and other details as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 (I) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is mentioned under ''Employees Remuneration Report'' is form part of this report as Annexure - ''9''. None of the employees is receiving salary of more than Rs, 5 Lakh per month.

M. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information required under Section 134(3)(m) of the Companies Act, 201 3 read with the applicable Rules is form part of this report as Annexure- '' 10''.

N. AUDITORS:

N. I) Statutory Auditors

The shareholders at their 27th Annual General Meeting (AGM) held on 29-09-2015, approved the reappointment of M/s. Rambabu& Co., Chartered Accountants (ICAI Firm Registration No. 002976S), as Statutory Auditors of the Company, to hold the office till the conclusion of the 28th Annual General Meeting. M/s. Rambabu & Co., Chartered Accountants, are eligible for reappointment and have confirmed their eligibility under Section 141 of the Companies Act, 2013, read with Rule 4 of the Companies (Audit and Auditors) Rules, 2014. They have consented to the said appointment. They have further confirmed that they are not disqualified to be appointed as statutory auditor.

The Audit Committee of the Board of Directors recommended the appointment of M/s. Rambabu & Co., Chartered Accountants, as Statutory Auditors of the Company from the conclusion of 28th Annual General Meeting till the conclusion of the 29th Annual General Meeting.

N.2) Secretarial Auditor

Pursuant to Section 204 of the Companies Act, 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. SWS & Associates Company Secretaries LLP were appointed to conduct Secretarial Audit of the Company for the Financial Year ended on 31st March, 2016. Secretarial Audit Report for the financial year 2015-16 is form part of this report as Annexure-'' I I''

N.3) Cost Auditor

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, and the Companies (Cost Records & Audit) Amendment Rules, 2014, the Company maintains Cost Records Your Board has on the recommendations of the Audit Committee, appointed Sri K.S.N. Sarma having Registration No.- 102145 and Membership No.-6875 as Cost Auditor of the Company for the financial year 2016-1 7. The provisions also require the remuneration of the Cost Auditor to be approved by the shareholders, as mentioned under AGM Notice under item no. 12. As a matter of record, the Cost Audit Report for the year 2014-15 was filed with the Central Government within the prescribed time limit and for the year 2015-16 will be filed within the stipulated time.

O. INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company has laid down set of standards which enables to implement internal financial control across the organization and ensure that the same are adequate and operating effectively (I) To provide reasonable assurance that: transactions are executed in conformity with generally accepted accounting principles/standards or any other criteria applicable to such statements, (2) to maintain accountability for assets; access to assets is permitted only in accordance with management''s general or specific authorization and the maintenance of the records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets that could have a material effect on the Financial Statements.

P. WHISTEL BLOWER POLICY/VIGIL MECHANISM

The Company has established a mechanism trough which all the stakeholders can report the suspected frauds and genuine grievances to the appropriate authority. The whistle Blower Policy which has been approved by the Board of Directors of the Company has been uploaded on the Company''s website of the Company (http://www.smspharma.com/investors/ downloads/whist le-blower-protection-policy.pdf). During the year under review the Company has not received any complaint(s) under this policy.

Q. BOARD''S RESPONSE ON AUDITORS QUALIFICATION, RESERVATION OR

ADVERSE REMARK OR DISCLAIMER MADE:

There are no qualifications, reservations or adverse remarks made by the Statutory Auditor, Secretarial Auditor and Cost Auditor in their report.

R. REPORTING ON SEXUAL HARRASEMENT:

The Company has zero tolerance for sexual harassment at workplace and has adopted a "Policy on Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace" in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under for prevention and redressal of complaints of sexual harassment at workplace.

The Company is committed to providing equal opportunities without regard to their race, caste, sex, religion, colour, nationality, disability, etc. All women associates (permanent, temporary, contractual and trainees) as well as any women visiting the Company''s office premises or women service providers are covered under this policy. All employees are treated with dignity with a view to maintain a work environment free of sexual harassment whether physical, verbal or psychological.

During the year under review, the Company has not received any complaints on sexual harassments. No workshops were carried out against sexual harassment, but awareness programms were carried out at each manufacturing unit and corporate office for women employees'' regarding this policy and the said policy is also displayed on the website of the Company.

S. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND Company''s OPERATIONS IN FUTURE:

No significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future. Further, No material Changes and commitments which affecting the financial position of the Company.

Acknowledgements:

Your Directors place on record their sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitments. Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities, customers and also shareholders of the Company, for their continued support and confidence reposed in the Company.

By the order of the Board

Ramesh Babu Potluri

Chairman and Managing Director

(DIN:00I6638I)

Place: Hyderabad

Date: 10-08-2016


Mar 31, 2015

Dear Shareholders,

The Directors have pleasure in presenting before you the 27th Annual Report of the Company together with Audited Statement of Accounts for the year ended 31st March, 2015.

Financial Results

(Amount : Rs. In Lakhs)

Particulars 2014-15 2013-14

Gross Sales 55,764.66 50,098.33

Net Sales 53,604.12 48,197.76

Other Operating 4,324.46 3,606.04 Income

Net Revenue from 57,928.58 51,803.80 Operations

Other Income 1,632.00 152.41

EBIDTA 10,258.05 5,869.15

Finance Charges 1,793.09 1,381.88

Depreciation 1,716.61 1,285.46

Profit Before Tax 6,748.35 3,201.81

Taxation 3,223.89 1,163.36

Profit After Tax 3,524.46 2,038.45

B/f from previous year 6,073.30 4,651.87

Less: Adj. of dep. reserve as per Sch. II of 24.98 - Companies Act, 2013

Balance available for 9,572.78 6,690.32 Appropriations.

Appropriations:

Transfer to Capital - 155.00 Redemption Reserve

Proposed Dividend 169.30 169.30

Dividend Tax 34.47 28.77

Dividend of previous year - (36.06) including Tax

General Reserve 1,000.00 300.00

Profit carried to 8,369.01 6,073.31 Balance Sheet

Earnings per share

- Basic/Diluted 41.63 23.06

Review of Operations

During the period under review the company has posted very good results. During the year 2014-15 the Company has achieved production of 2,026 M.T. of APIs and their Intermediates as against 1,791 M.T. during the corresponding year and registered a growth of 13%. The net sales of the company has reached to Rs. 53,604 Lakhs as against Rs. 48,198 Lakhs during the previous year registering growth of 11%. The EBITDA stood at Rs. 10,258 Lakhs for the year 2014-15 compared to Rs. 5,869 Lakhs for the year 2013-14, registering a growth of 75%. The profit after Tax for FY 2014-15 stood at Rs. 3,524 Lakhs, compared to Rs. 2,038 Lakhs for FY 2013-14, registering a growth of 73% With this EPS has increased to Rs. 41.63 as against Rs. 23.06 during the year 2013-14.

The Company has improved its economy of scale by increasing utilization of production facility at Kandivalasa and Bachupally units. The management believes that the profitability margins from the operations are sustainable and it will continue to strengthen its leadership position through dedicated research and introduction of new products. During the year the company has re-enforced its fundamental strength of FDA compliant facilities by successfully completing the US FDA audits at Kandivalasa and Bachupally facilities. Apart from the above, we are having PMDA (Japan) approval on accreditation basis for all the four facilities. KFDA (Korea) approval was obtained for Bachupally and Kandivalasa facilities. TGA (Australia) and EUGMP (E.U.) approval was obtained for Bachupally facility. COFEPRIS (Mexico) approval was obtained for Kazipally facility. During the year the company has filed 9 Drug Master Files and total DMFs filed up to 31.03.2015 are 24. The management believes that the profitability margins from the operations are sustainable and it will continue to strengthen its leadership position through dedicated research and introduction of new products. The company will continue to strengthen its model and build systems that are sustainable as it continues to scale-up.

Transfer to Reserves:

Your Company has transferred an amount Rs. 1,000 Lakhs (previous year Rs. 300 Lakhs) to General Reserve out of the amount available for appropriations.

Dividend:

Your Directors are pleased to recommend the dividend of Rs. 2-00 per equity share of Rs. 10/- each (Previous year Rs. 2/- per Equity Share).

Subsidiaries, Associates and Joint Ventures:

During the year the Company acquired 12,25,900 equity shares of Rs. 10/- each in M/s. VKT Pharma Private Limited. With this the said company has become an associate company. The project of the said associate company is in final stage and at the verge of completion and operations are yet to be commenced. The Company has not having any subsidiaries. Hence, as per the Notification GSR 723 (E) dated 14th October, 2014 issued by the Ministry of Corporate Affairs, the company need not give consolidated accounts for the year 2014-15. The required form, as per the provisions of Companies (Accounts) Rules, 2014 viz. AOC-1 is attached as Annexure –'A' to the Board report.

Loans, Guarantees and Investments:

During the year under review your Company had made investment in an associate company for its business purposes. The Company has not given any loans or extended any guaranty to other Company's, firms or other parties covered in the register maintained under section 189 of the companies Act, 2013.

In compliance with the provisions of section 186 of the Companies Act, 2013 read with Companies (Meetings of Board and its Powers) Rules, 2014, the details of investments made during the year are given in Annexure-'B'.

Board of Directors and Key Managerial Personnel:

As per the provisions of Section149 and 152 of the Companies Act, 2013, the shareholders at their 26th Annual General Meeting held on 30th September, 2014, had approved the appointment of all the existing independent directors of the Company for tenure of up to five consecutive years. None of the independent directors are liable to retire by rotation.

In accordance with the provisions of the Section 149 (7) of the Companies Act, 2013, each independent director had confirmed to the Company that he/ she meets the criteria of Independence laid down in the Section 149 (6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Further in accordance with the provisions of Section 152 of the Companies Act, 2013, the shareholders also approved the terms of appointment of Sri Ramesh Babu Potluri and Sri T V V S N Murthy, whole time directors, making them liable to retire by rotation. Accordingly Sri Ramesh Babu Potluri, Managing Director, retires by rotation at the forthcoming Annual General Meeting scheduled on 29th September, 2015 and being eligible, seeks reappointment.

All the independent Directors of the Company have given declarations under sub-section (6) of Section 149 of the Act, and the same have been considered and taken on record by the Board.

Sri N. Rajendra Prasad has been designated as Chief Financial Officer and Sri P. Prabhakar Rao, has been designated as Company Secretary of the Company pursuant to provisions of Section 203 of the Companies Act, 2013.

Mechanism for Evaluation of Board:

As per provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the evaluation of the performance of the Board and the members of the Board was under taken. The contribution and impact of the individual directors and the Board as a whole were reviewed through a peer evaluation on the following parameters:

A) Criteria for evaluation of Board of Directors as a whole.

i. The frequency of meetings;

ii. The length of meetings;

iii. The administration of meeting.

iv. The number of committees and their roles.

v. The flow of information to board members and between board members;

vi. The quality and quantity of information; and

vii. The Disclosure of Information to the stakeholders.

B) Criteria for evaluation of the Individual Directors.

i. Ability to contribute and monitor corporate governance practices;

ii. Ability to contribute by introducing best practices to address top management issues.

iii. Participation in long term strategic planning.

iv. Commitment to the fulfillment of director obligations and fiduciary responsibilities;

v. Guiding strategy;

vi. Monitoring management performance and development;

vii. Statutory compliance & Corporate Governance;

viii. Attendance and contribution at Board/ Committee Meetings;

ix. Independence of judgment, conflict resolution and contribution in the enhancement of the Board's overall effectiveness.

x. Time spent by each of the member; and

xi. Core competencies. A 360 degree feedback-cum-assessment of individual directors, the Board as a whole and its committees was conducted.

Number of Meetings of the Board of Directors:

The Board of directors met five times during the year. The dates on which the Board Meetings were held are 30th May, 2014, 12th August, 2014, 26th August, 2014, 11th November, 2014 and 6th February, 2015.

Nomination and Remuneration Committee:

The terms of reference for the committee includes:-

1. Identifying persons who are qualified to become Directors, Key Managerial Persons and who may be appointed in Senior Management in accordance with the criteria laid down and recommend to the Board for their appointment and removal;

2. Carry on the evaluation of every director's performance;

3. Formulation of the criteria for determining qualifications, positive attributes and independence of a director;

4. Recommend to the Board a policy relating to the remuneration of the directors, key managerial personnel and other employees;

5. Formulation of criteria for evaluation of independent directors and the Board;

6. Devising a policy on Board diversity; and

7. Any other matter as the Board may decide from time to time.

Nomination and Remuneration policy:

In accordance to Section 178 (3) of the Companies Act, 2013, Clause 49 (IV) (B) of the Listing Agreement and on the recommendations of Nomination and Remuneration Committee, the Board adopted the remuneration policy for the Directors, Key Managerial Personnel (KMPs) and Senior Management. The Objectives of the Policy are as under:

1. To lay down criteria and terms and conditions with regard to identifying persons who are qualified to become Directors (Executive and Non-Executive) and persons who may be appointed in Senior Management and Key Managerial positions and to determine their remuneration.

2. To determine remuneration based on the Company's size and financial position and trends and practices on remuneration prevailing in peer companies.

3. To carry out evaluation of the performance of Directors.

4. To provide them reward linked directly to their effort, performance, dedication and achievement relating to the Company's operations.

5. To retain, motivate and promote talent and to ensure long term sustainability of talented managerial persons and create competitive advantage.

Audit Committee:

The Audit Committee of the Board of Directors consists entirely of Independent Directors. Presently the Committee comprises of Sri K.S. Rao, (Chairman), Sri A.P. Rao and Sri P. Sarath Kumar.

The Board has accepted all the recommendations made by the Audit Committee during the year.

Risk Management Policy:

The Audit Committee had formulated a Risk Management Policy for dealing with different kinds of risks which it faces in day to day operations of the Company. Risk Management Policy of the Company outlines different kinds of risk and risk mitigating measures to be adopted by the Board. The Company has adequate internal control systems and procedures to combat the risk. The Risk Management procedure will be reviewed by the Audit Committee and the Board of Directors on a Quarterly basis at the time of review of Quarterly Financial Results of the Company.

Internal Financial Control Systems and Their Adequacy:

Your company has laid down set of statements which enables to implement internal financial control across the organization and ensure that the same are adequate and operating effectively

1. To prove reasonable assurances that transactions are executed in conformity with generally accepted accounting principles, standards or any other criteria applicable to such statements,

2. To maintain accountability for assets, access to assets is permitted only in accordance with management's general or specific authorization and the maintenance of records accurately with required details and fairly reflect the transactions and dispositions of the assets of the company; and

3. Provide reasonable assurance regarding prevention or timely detection of frauds and errors and unauthorized acquisition, use or disposition of the assets that could have a material effect on the financial statements.

4. The company ensures the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

5. The company has a comprehensive budget control system to monitor revenue and expenditure against approved budget on an ongoing basis.

Directors' Responsibility Statement:

Pursuant to the provisions of Section 134 (3) (c) of the Companies Act, 2013 as amended, the Board of Directors confirm that in the preparation of the Financial Statements for the year ended 31st March, 2015:

1. The applicable accounting standards have been followed in the preparation of the Annual Accounts.

2. Such Accounting policies as notified by ICAI have been selected and applied consistently and judgments and estimates made when required 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 of the company for that period.

3. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. The Annual Accounts have been prepared on going concern basis.

5. Proper internal financial controls were in place and were following by the Company and that the financial controls were adequate and operating effectively.

6. Proper systems have been devised to ensure compliance with the provisions of all the applicable laws and these systems are adequate and operating effectively.

The Board, further confirm that, during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Related Party Transactions:

All contracts/arrangements/transactions entered by the Company during the financial year 2014-15 with related parties were in the ordinary course of business and on an arm's length basis and are in compliance with the provisions of the Companies Act and the Listing Agreement. There are no materially significant related party transactions made by the company with Promoters, Directors are Key Managerial Personnel etc. which may have potential conflict with the interest of the Company. However, to have more transparency in related parties' transactions the Board is seeking shareholders' approval for the said transactions.

All related party transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseeable and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on quarterly basis pacifying the nature, value and terms and conditions of the transactions The Related Party Transactions Policy as approved by the Board is uploaded on the Company's website at the web link http://www. smspharma.com. In accordance with Section 134 (3) (h) of the Companies Act, 2013, and Rule 8 (2) of the Companies (Accounts ) Rules, 2014, the particulars of contracts or arrangements entered into by the Company with related parties referred to in Section 188 (1) in Form AOC-2 is attached as Annexure-'C'

The details of related party disclosures form part of the notes to the financial statements provided in the annual report.

With regard to the observation made by the Secretarial Auditor for the appointment of Sri P. Vamshi Krishna and Sri T. V. Praveen, the related parties for place of profit at a monthly remuneration in aggregate exceeding two and half Lakhs Rupees.

Your Directors wish to place on record that Sri T. V. Praveen and Sri P. Vamsi Krishna were appointed has officer holding a place under the erstwhile Section 314(1B) of the Companies Act, 1956 at a monthly remuneration of Rs. 3.00 lakh and Rs. 1.50 lakh per month respectively and a resolution to this effect was passed by the shareholders in the 25th Annual General Meeting held on 30th September, 2013, subject to the approval Central Government. The approval of the Central Government was obtained vide approval letter No. SRNB86666047/3/2013-CL-VII dated 24th January, 2014 for the payment of monthly remuneration of two and half Lakhs Rupees to Sri T. V. Praveen.

Section 188 of the Companies Act, 2013 has come into force with effect from 01-04-2014 and accordingly, Rule 15 (3) (ii) (b) of Companies (Meetings of Board and its Powers) Rules, 2014 prescribes the prior approval of the Company by an Ordinary Resolution for the appointment of a related parties to any office or place of profit in the Company at a monthly remuneration exceeding two and half Lakhs Rupees. Since the said appointments were approved by the shareholders on 30th September, 2013 and no fresh appointments were made under the Section 188 of the Companies Act, 2013 after its implementation. The total remuneration paid to the related parties was put for ratification of the Members once again at the ensuing Annual General Meeting.

Vigil Mechanism:

The Board of Directors has adopted Whistle Blower Policy. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairman of the Audit Committee in exceptional cases.

Auditors:

Statutory Auditors

The shareholders at their 26th Annual General Meeting (AGM) held on 30-09-2014, approved the reappointment of M/s. Rambabu & Co., Chartered Accountants, as Statutory Auditors of the Company, to hold the office till the conclusion of the 27th Annual General Meeting. M/s. Rambabu & Co., Chartered Accountants, are eligible for reappointment and have confirmed their eligibility under Section 141 of the Companies Act, 2013, read with Rule 4 of the Companies (Audit & Auditors) Rules, 2014 and Clause 41(1) (h) of the Listing Agreement.

The Audit Committee of the Board of Directors recommended the appointment of M/s. Rambabu & Co., Chartered Accountants, as Statutory Auditors of the Company from the conclusion of 27th Annual General Meeting till the conclusion of the 28th Annual General Meeting.

Secretarial Auditor

Pursuant to Section 204 of the Companies Act, 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Sri C Sudhir Babu, Practicing Company Secretary (C.P. No.7666) was appointed to conduct Secretarial Audit of the Company for the Financial Year ended on 31st March, 2015. Secretarial Audit Report for the financial year 2014-15 is attached as Annexure-'D' to this Report.

Cost Auditor

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, and the Companies (Cost Records & Audit) Amendment Rules, 2014, the Company maintains Cost Records. Your Board has on the recommendations of the Audit Committee, appointed Sri K.S.N. Sarma as Cost Auditor of the Company for the financial year 2015-16. The provisions also require the remuneration of the Cost Auditor to be approved by the shareholders.

The Cost Audit Report for the year 2013-14 was filed with the Central Government within the prescribed time limit and for the year 2014-15 will be filed within the stipulated time.

Board's Response on Auditors qualification, reservation or adverse remark or disclaimer made:

There are no qualifications, reservations or adverse remarks made by the Statutory Auditor and Cost Auditor in their report. Reply on one qualification made by secretarial auditor already form part of this report under head "Related Party Transactions".

Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future:

NO SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE.

Corporate Social Responsibility:

The company recognizes that business enterprises are economic organs of society and part of society and draw on social resources for their growth. The company has duty towards society and the communities and neighborhoods in whose vicinity the company operates.

The Company has constituted Corporate Social Responsibility Committee consisting of the Board of Directors Sri Ramesh Babu Potluri (Chairman & Managing Director), Sri K.S. Rao, an Independent Director and Sri P. Sarath Kumar an Independent Director as Chairman and as members of the committee respectively. The Board approved the CSR Policy as recommended by the CSR Committee with various CSR initiatives falling within the purview of Schedule VII of the Act.

The company would undertake CSR initiatives in compliance with schedule VII of the Companies Act, 2013 The CSR Policy may be accessed on the company's website: www.smspharma.com

As per the provisions of the Section 135 of the Act, the average net profit of the company during the preceding three years was negative. In computing the Net Profits in accordance with Sec. 198 of the Companies Act, 2013 for the purpose of CSR as specified under section 135; your company had earned a profit of Rs. 41.75 Lakhs in the financial year 2011-12 and Rs. 3,250.82 lakhs in the financial year 2013-14 and incurred a loss of Rs. 7,230.04 Lakhs in the financial year 2012-13 after adjusting the capital gains from sale of an unit. Hence, the average net profit of the company for preceding three financial years stands negative i.e. Rs. (1,279.16). spending provisions of CSR are not applicable for the year under review. However an amount of Rs. 1,80,000/- was spent during the year 2014-15 for providing purified drinking water in a village in whose vicinity the company operates.

Transfer of unpaid and unclaimed amounts to IEPF:

Pursuant to the provisions of Section 125 of the Companies Act, 2013, the declared dividends, which remained unpaid or unclaimed for a period of 7 years, have been transferred by the company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to the Section 125 of the said Act.

Employees Stock Option Schemes:

The Company has not implemented any Stock Option Schemes to the Employees.

Particulars of Employees:

Disclosures pertaining to remuneration and other details as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure-'E'

Conservation of Energy, Research and Development, Technology Absorption, Foreign Exchange Earnings and Outgo:

The information required under Section 134 (3) (m) of the Companies Act, 2013 read with the Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is enclosed as Annexure- 'F' to this Report.

Research and Development (R & D):

The company is committed to building a sound base for sustained growth in API and key starting Materials business through the development of new products, innovative technology, process improvement, cost optimization and strengthening the compliance standards leveraging our collective R&D experience resulting enhancement in value of all stakeholders.

The company's R&D delivers on both fronts of profitability and growth giving us a head start in the competitive industry, developing cost effective process for new genetic APIs, meticulously documenting and testing new and improved processes to manufacture quality drug substances and drug intermediates.

The company continues to make fairly significant investments for generic-related pharmaceutical research and technology. This research supports generic business across all the markets and ensures to have a healthy pipeline for future growth. Strong new product capability is key part of strategy of the R&D.

The Department of Scientific and Industrial Research, Ministry of Science and Technology of Government of India has granted approval to the in house research and development facility of Company under the provisions of the Income Tax Act, 1961.

Fixed Deposits:

Your Company has not accepted/ invited any deposits from the public during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

Contribution to the ex-chequer:

Your Company has contributed Rs. 4,077.25 Lakhs to the ex-chequer (Previous year Rs. 2,306.28 Lakhs) by way of taxes.

Extract of Annual Return:

The Extract of Annual Return is prepared in Form MGT-9 as per the provisions of the Companies Act, 2013 and Rule 12 of Companies (Management and Administration) Rules, 2014 and the same is enclosed as Annexure-'G' to this Report.

Management's Discussion and Analysis:

Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the listing agreement is presented in a separate section forming part of the Annual Report.

Corporate Governance:

A detailed Report on Corporate Governance practices followed by your company, in terms of clause 49 of the Listing Agreement with Stock Exchanges, is provided separately in this Annual Report.

Listing of Equity Shares:

The Company's Equity Shares are listed at the following Stock Exchanges:

(i) BSE Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai-400 001 and

(ii) National Stock Exchange of India Limited, Exchange Plaza, Floor 5, Plot No. C/1, G Block Bandra-Kurla Complex, Bandra (East), Mumbai-400 051.

The Company has paid the Annual Listing Fees to the said Stock Exchanges for the financial year 2014-15.

Material changes and commitments:

There are no Material changes and commitments in the business operations of the Company from the financial year ended 31st March, 2015 to the date of signing of the Directors' Report.

Environment:

The Company has taken initiatives to reduce the pollution. Anti-pollution measures taken by the Company will help to minimize the impact of industrial process on the environment and local are nearby.

Acknowledgements:

Your Directors place on record sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitments. Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, for their continued support and confidence reposed in the Company.

for and on behalf of the Board

Ramesh Babu Potluri

Chairman and Managing Director

DIN:00166381

Place : Hyderabad

Date : 08.08.2015


Mar 31, 2014

Dear Shareholders,

The Directors have pleasure in presenting the 26th Annual Report and Audited Accounts of your company for the year ended 3lst March, 20l4.

Financial Results:

(Amount : Rs. In Lakhs)

Particulars 2013-14 20l2-l3

Gross Sales 50,098.33 25,402.97

Net Sales 48,197.76 23,993.38

Other Operating 3,606.04 526.0l Income

Other Income 152.41 l6l.90

Total Net Income 51,956.21 24,68l.29

PBIDT 5,869.15 (3,446.46)

Finance Charges 1,381.88 2,426.34

Depreciation 1,285.46 l,372.l6

Profit before Extra- 3,201.81 (7,244.96) Ordinary Items

Extra-Ordinary Items - l0,2ll.36

Profit before Tax 3,201.81 2,966.40

Taxation 1,163.36 433.9l

Profit After Tax 2,038.45 2,532.49

Profit brought forward 4,651.87 2,653.72

Total available for 6,690.32 5,l86.2l Appropriations.

Appropriations:

Transfer to Capital 155.00 - Redemption Reserve

Proposed Dividend 169.30 200.30

Dividend Tax 28.77 34.04

General Reserve 300.00 300.00

Profit carried to 6,073.31 4,65l.87 Balance Sheet Earning per share Basic/Diluted

Before Extra- 23.06 (76.67) Ordinary items

After Extra- 23.06 25.29 Ordinary items

Operational performance:

During the year 2013-14 your company has produced l,79l M.T of APIs and their intermediates as against l ,439 M.T during the corresponding year. The net sales of the company has reached to Rs. 48,197.76 Lakhs as against Rs. 23,993.38 Lakhs during the previous year. Apart from this, Other Operating Income has reached to Rs. 3,606.04 Lakhs as against Rs. 526.0l Lakhs during the previous year. With this, your company has earned net profit of Rs. 2,038.45 Lakhs as against Rs. 2,532.49 Lakhs during the previous year. The main reason for increase in tax expenditure is increase in difered tax liability.

Dividend:

Your Directors are pleased to recommend the dividend of 20% i.e. Rs. 2-00 per equity share of Rs. 10/- each for the year ended 31 -03-2014. The Dividend, if approved by the shareholders at the AGM, will be paid to the equity shareholders whose names appear in the Register of Members as on 30-09-20l4. Expenditure on the proposed dividend will be Rs. l98.07 lakhs, inclusive of taxes.

Share Capital:

The Authorised Share Capital of the Company is Rs. 12,00,00,000 (Rupees Twelve Crores only) divided into l,20,00,000 (One Crore Twenty Lakhs only) equity shares of Rs. l0/- each. The paid up share capital of the Company has decreased to Rs. 8,46,52,030 (Rupees Eight Crore Forty Six Lakhs Fifty Two Thousand and Thirty only) divided into 84,65,203 (Eighty Four Lakhs Sixty Five Thousand Two Hundred and Three only) equity shares of Rs. l0/- each from Rs. l0,0l,52,030 Lakhs (Rupees Ten Crore One Lakh Fifty Two Thousand and Thirty only) divided into l,00,l5,203 (One Crore Fifteen Thousand Two Hundred and Three only) equity shares of Rs. l0/- each. During the financial year under review the company has bought back of l5,50,000 (Fifteen Lakhs Fifty Thousand only) equity shares of Rs. l0/- each.

Transfer to Reserves:

Your Company has transferred an amount of Rs. 155.00 Lakhs (Previous year Nil) to Capital Redemption Reserve and Rs. 300.00 lakhs (previous year Rs. 300.00 lakhs) to General Reserve out of the amount available for appropriations.

Auditors:

(a) Statutory Auditors

The Statutory Auditors of the Company M/s. Rambabu & Co., Chartered Accountants and M/s. P Murali & Co., Chartered Accountants as Joint Auditors of the Company, retired at the ensuing Annual General Meeting. The Audit Committee and the Board of Directors recommend the appointment of M/s. Rambabu & Co., Chartered Accountants as Statutory Auditors of the Company from the conclusion of the forthcoming Annual General Meeting of the Company till the conclusion of the 27th Annual General Meeting to be held in the year 2015.

(b) Cost Auditors:

Sri K.S.N. Sarma, Cost Accountant has been reappointed as Cost Auditor of the Company with the consent of the Central Government of India to conduct Cost Audit of the Company for the year 2013-14. The due date for filing of the cost audit report of the company in XBRL format for the year 2012-13 was 30th September, 2013 and the same was filed with the Ministry of Corporate Affairs.

Based on the recommendations of the Audit Committee the Board of Directors appointed Sri K.S.N. Sarma as Cost Auditor of the Company for the year 2014-15. As per the provisions of the Companies Act, 2013 the remuneration of the Cost Auditor as approved by the Board is to be ratified by the Members.

Fixed Deposits:

Your Company has not accepted/invited any deposits from the public during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

Contribution to the ex-chequer:

Your Company has contributed Rs. 2,306.28 lakhs to the ex-chequer (Previous year Rs. 2,748.18 lakhs) by way of taxes.

Directors:

During the year 2013-14, Dr. B.M. Choudary has resigned as Director from the Board of your Company due to his pre-occupied business activities. The Board places on record its deep appreciation to Dr. B.M. Choudary for the excellent contributions made by him as Director.

Dr. (Mrs.) Thummala Neelaveni and Sri P Sharath Kumar have joined on the Board as Additional Directors with effect from 12th August, 2014.

Dr. Ayman Sahli and Sri T.V.V.S.N. Murthy retire by rotation at the ensuing Annual General Meeting and being eligible, offers themselves for re-appointment.

As per Section 149 (4) of the Companies Act, 2013, Sri A. P Rao, Dr. Mihir K. Choudhari, Sri K. S. Rao, Sri P Sharath Kumar and Dr. (Mrs.) Thummala Neelaveni are being appointed as independent directors to hold office for a period of five years with effect from 30th September. 2014. Brief particulars and expertise of these directors and their other directorships and committee memberships have been given in the annexure to the Notice of the Annual General Meeting in accordance with the requirements of listing agreement with Stock Exchanges.

Directors'' Responsibility Statement:

Pursuant to the provisions of Section 134 (3) (c) of the Companies Act, 2013, with reference to Directors'' Responsibility Statement, it is hereby confirmed:

1. That the applicable accounting standards have been followed in the preparation of the Annual Accounts.

2. That the selected accounting policies were applied consistently and judgments and estimates made are reasonable and prudent were made 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 of the Company for that year.

3. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, l956 for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. That the Annual Accounts have been prepared on going concern basis.

Research and Development (R&D):

Your Company is committed to building a sound base for sustained growth in API and Key starting materials business through the development of new products, innovative technology, process improvement, cost optimization and strengthening the compliance standards leveraging our collective R&D expertise resulting in value of all stakeholders.

SMS Pharma''s R&D delivers on both fronts of profitability and growth giving us a head start in the competitive industry. Scientists at your research laboratories are hard at work developing cost effective process for new generic APIs, meticulously documenting and testing new and improved processes to manufacture quality drug substances and drug intermediates.

Management''s Discussion and Analysis:

Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the listing agreement is presented in a separate section forming part of the Annual Report.

As required by the Listing Agreement, a Certificate on Corporate Governance by a Practicing Company Secretary and a declaration by the Chairman & Managing Director with regard to Code of Conduct are attached to the report on Corporate Governance.

Corporate Governance:

A detailed Report on Corporate Governance practices followed by your company, in terms of clause 49 of the Listing Agreement with Stock Exchanges, is provided separately in this Annual Report.

Human Resources:

During the year, Industrial relations continued to be cordial throughout the year. Your Company firmly believes that a dedicated workforce constitute the primary source of sustainable competitive advantage. Accordingly, human resource development continues to receive focused attention. Your Directors wish to place on record their appreciation of the dedicated and commendable services rendered by the staff and workforce of the company, without whose efforts, such an impressive performance may not have been possible.

Particulars of Employees:

Statement of particulars of employees pursuant to the provisions of Section 2l7 (2A) of the Companies Act, l956 read with the Companies (Particulars of employees) Rules, l975 as amended.

Notes:

i) Remuneration includes salary, allowances, company contribution to provident fund and commission on profits.

ii) The above appointments are contractual.

iii) None of the above employees are relatives to any director of the Company.

Corporate Social Responsibility:

In terms of Section l35 of the Companies Act, 20l3, the company is required to constitute Corporate Social Responsibility Committee to monitor the CSR activities. The Company has formed CSR Committee out of its Board of Directors to recommend (a) the policy on Corporate Social Responsibility (CSR) and

(b) implementation of the CSR Projects or Programs

to be undertaken by the Company as per CSR Policy for consideration and approval by the Board of Directors.

Conservation of Energy, Technology Absorption and Foregin Exchange Earnings/outgo:

The information required under Section 2l7(l)(e) of the Companies Act, l956 read with the Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, l988 is enclosed herewith and forms part of this report.

Dematerialization:

Your Company''s shares are under compulsory Dematerialization mode and all the physical shareholders are hereby recommended to opt for this facility for prompt services.

Vigil Mechanism:

In pursuant to the provisions of section l 77 (9) & (10) of the Companies Act, 2013, a vigil mechanism for directors and employees to report genuine concerns has been established. A dedicated Email ID: whistleblowing@smspharma.com was established for this purpose and Phone number 040-66288888 Extn: 902 was alloted for this purpose.

Environment:

The Company has taken initiatives to reduce the pollution, Anti-pollution measures taken by the Company help to minimize the impact of industrial process on the environment.

Related party transactions:

As a matter of policy, your company carried out transactions with related parties on an arms-length basis. Statement of these transactions is given in Notes on Accounts in compliance with accounting standards issued by ICAI.

CEO/CFO Certification:

As required by the Clause 49 of the Listing Agreement, a certificate on the financial statements and cash flow statement of the Company for the year ended 31st March, 2014 duly signed by the Chairman and Managing Director and Chief Financial Officer was submitted to the Board of Directors.

Acknowledgements:

Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, dealers and trade, employees and workers for their continued support and confidence reposed in the company.

for and on behalf of the Board Ramesh Babu Potluri

Chairman and Managing Director

Place : Hyderabad Date : 26.08.2014


Mar 31, 2013

Dear Shareholders,

The Directors have pleasure in presenting the 25th Annual Report and Audited Accounts of your company for the year ended 31st March, 2013.

Financial Results

(Rs. In Lakhs)

Particulars 2012-13 2011-12

Gross Sales 25,402.97 22,630.57

Net Sales 23,993.38 20,692.30

Other Operating Income 239.28 717.44

Other Income 161.89 56.41

Total Net Income 24,394.55 21,466.15

PBIDT (3,446.48) 3,818.05

Finance Charges 2,426.34 2,412.34

Depreciation 1,372.15 1,263.97

Profit before

Extraordinary Items (7,244.97) 141.75

Extraordinary Items 10,211.37 -

Profit Before Tax 2,966.40 141.75

Taxation 433.91 28.00

Profit After Tax 2,532.49 113.75

Profit brought forward 2,653.72 2,539.98

Total available for Appropriations 5,186.21 2,653.73

Appropriations:

Proposed Dividend 200.30 -

Dividend Tax 34.04 -

General Reserve 300.00 -

Profit carried to Balance Sheet 4,651.87 2,653.73

Earning per share

Basic/Diluted

Before Extraordinary Items (72.34) 1.14

After Extraordinary Items 25.29 1.14



Transfer of Undertaking

During the year under review the company has transferred one of its manufacturing facilities situated in Jawaharlal Nehru Pharma City Parawada as a going concern under slump sale basis for a total consideration of Rs. 17,300.00 lakhs and earned profit of Rs. 10,351.37 lakhs. The said profit was reflected in Extrordinary items in Statement of Profit & loss.

Operational performance

During the year 2012-13 your company has produced 9,72,158 M.T. of APIs as against 9,16,922 M T. during the corresponding year. The net sales of the company has reached to Rs. 23,993.38 lakhs as against Rs. 20,692.30 lakhs during the previous year. Your company has earned net profit of Rs. 2,532.49 lakhs as against Rs. 113.75 lakhs during the year 2011-12.

Buy back of Shares of the Company.

Your company has bought back 15,50,000 Equity shares of Rs. 10/- each with an average price of Rs. 261.80 per share with a total outlay of Rs. 4,650.00 lakhs apart from brokerage and other expenses and the same was reflected in reduction of share capital and Securities Premium account.

The present paid up capital of the Company has declined to Rs. 8,46,52,030/- from Rs. 10,01,52,030/-. The buyback is undertaken mainly to enhance the shareholders'' value and confidence.

Dividend

Your Directors are pleased to recommend the dividend of Rs. 2.00 per equity share of Rs. 10/- each (Previous year Nil).

Transfer to General Reserve:

Your Company has transferred an amount of Rs. 300.00 lakhs (previous year Nil) to General Reserve out of the amount available for appropriations.

Auditors

The Statutory Auditors of the Company, M/s. Rambabu & Co., Chartered Accountants and M/s. P. Murali & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and being eligible for re-appointment have confirmed their eligibility and willingness to accept office for the financial year ended 31st March, 2014.

The Company has received confirmation from both the firms that their appointment will be within the limits prescribed under Section 224 (1) of the Companies Act, 1956. The Audit Committee of the board has recommended the re-appointment of joint auditors.

Cost Auditors

Sri K. S. N Sarma, Cost Accountant, Hyderabad has been reappointed as Cost Auditor of the Company to conduct cost audit of the Company for the year 2013-14. The due date for filing of Cost Audit Report of the Company in XBRL format for the year 2011-12 was 28th February, 2013 and the same was filed with the Ministry of Corporate affairs on 16th January, 2013.

Fixed Deposits

Your Company has not accepted/ invited any deposits from the public during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

Directors

In accordance with the provisions of the Companies Act, 1956 read with the Articles of Association of the Company, Dr. Mihir K. Chaudhuri and Sri K.S. Rao, will retire by rotation at the ensuing Annual General Meeting and being eligible offers themselves for re-appointment as Directors. Your Board of Directors recommends their re- appointment.

The brief profile of the respective Directors are provided in the Report on Corporate Governance forming part of the Annual report.

Contribution to the ex-chequer.

Your Company has contributed Rs. 2,754.61 lakhs to the ex-chequer (Previous year Rs. 2,215.10) by way of taxes.

Directors'' Responsibility Statement

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirm that in the preparation of the Statement of Profit and Loss for the year ended 31st March, 2013 and the Balance Sheet an on that date:

i. The applicable accounting standards have been followed in the preparation of the Annual Accounts.

ii. The accounting policies as mentioned in the schedule 29 of the notes to the financial statement have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2013 and its profit for the year ended on that date.

iii. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv. The Annual Accounts have been prepared on a going concern basis.

Research and Development (R & D).

Research and Development is the backbone of a Company in Pharma Industry. The R & D activity of your company focusing mainly on development of new chemical entities apart from cost cutting of the existing products and also for development of cost effective non-infringing routes for the products whose patents are due for expiry in the coming years. The major therapeutic focus of the R & D is Retro Viral and anti-Hypertensive.

Management''s Discussion and Analysis

Manage''s Discussion and Analysis Report for the year under review, as stipulated under clause 49 of the Listing Agreement is presented in a separate section forming part of the Annual Report.

Corporate Governance

A detailed Report on Corporate Governance practices followed by your Company, in terms of clause 49 of the listing agreement with Stock Exchanges, is provided separately in this Annual Report.

Particulars of Employees

During the year under review, there was no employee drawing salary in excess of the prescribed limit and whose particulars are required to be given under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Amendment Rules, 1975 as amended.

Conservation of Energy, Technology Absorption

The information required under Section 217 (1) (e) of the Companies Act, 1956 read with the Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is enclosed herewith and forms part of this report.

Corporate Social Responsibility

Corporate Social Responsibility is commitment of the Company to improve the quality of life of the

workforce and their families and also the community and society at large. The Company believes in undertaking business in such a way that it leads to overall development of all stake holders and society.

Environment

The Company has taken initiatives to reduce the pollution. Anti-pollution measures taken by the Company are helpfull to minimize the impact of industrial process on the environment.

Dematerialization

Your Company''s shares are under compulsory DEMAT mode and all the physical shareholders are hereby recommended to opt for this facility for prompt services.

Related party transactions.

As a matter of policy, your company carried out transactions with related parties on an arms-length basis. Statement of these transactions is given in Notes on Accounts in compliance with accounting standards issued by ICAI.

Acknowledgements

Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, dealers and trade, employees and workers for their continued support and confidence reposed in the company.

for and on behalf of the Board

P. Ramesh Babu

Chairman & Managing Director

Place : Hyderabad

Date : 13.08.2013


Mar 31, 2012

The Directors have pleasure in presenting the 24th Annual Report and Audited Accounts of your company for the year ended 31 st March, 2012.

Financial Results (Rs. In Lakhs)

Particulars 2011-12 2010-11

Gross Sales 22,630.57 24,911.60

Net Sales 20,692.30 22,427.43

Other Operating Income 717.44 166.69

Other Income 42.95 219.08

Total Net Income 21,452.69 22,813.20

PBIDT 3,818.06 4,099.83

Finance Charges 2,412.34 1,787.17

Depreciation 1,263.97 1,264.29

Profit before Tax 141.75 1,048.37

Taxation 28.00 209.10

Profit After Tax 113.75 839.27

Profit brought forward 2,539.98 1,975.31

Total available for Appropriations. 2,653.73 2,814.58

Appropriations:

Proposed Dividend - 150.23

Dividend Tax - 24.37

General Reserve - 100.00

Profit carried to Balance Sheet 2,653.73 2,539.98

Earning per share

- Basic/Diluted 1.14 8.38

Operational performance

During the year 201 1-12 your company has produced 1945 M.T. of APIs and their intermediates as against 2948 MT. during the corresponding year. The net sales of the company has reached to Rs.206.92 crores as against Rs.224.27 crores during the previous year. Your company has earned net profit of Rs.1.14 crores as against Rs.8.39 crores during the year 2010-1 1.

Dividend

Your Directors have not recommended the dividend for the year 2011-12 to the Shareholders keeping in view of the conservation of resources (Previous year Rs. 1.50 per equity share of Rs. 10/-).

Auditors

The Statutory Auditors of the Company, M/s. Rambabu & Co., Chartered Accountants and M/s. P. Murali & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and being eligible for re-appointment have confirmed their eligibility and willingness to accept office for the financial year ended 31st March, 2013.

The Company has received confirmation from both the firms that their appointment will be within the limits prescribed under Section 224(1) of the Companies Act, 1956. The Audit Committee of the board has recommended the re-appointment of joint auditors.

Cost Auditors

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed Cost Audit for the Company. Based on recommendations of the Audit Committee and with the approval of the Central Government, Sri K. S. N Sarma, Cost Accountant, Hyderabad was appointed as Cost Auditor of the Company for the year 2012-13.

The relevant cost audit report for the financial year 2010-1 1 was already filed. The cost audit report for the financial year 2011-12 shall be submitted to the Central Government within the stipulated period.

Fixed Deposits

The company has not accepted / invited any deposits from the public in terms of Section 58A and 58AA of the Companies Act, 1956.

Directors

Pursuant to Article 110 of the Articles of Association of the Company Dr. B.M. Choudary and Mr. A.P Rao, will retire by rotation at the ensuing Annual General Meeting and being eligible offers themselves for re- appointment as Directors. Your Board of Directors recommends their re-appointment.

The profiles of the respective Directors are included in the Report on Corporate Governance annexure.

Contribution to the ex-chequer.

Your Company has contributed Rs 2,215.10 lakhs to the ex-chequer (Previous year Rs.3,040.68 lakhs) by way of taxes.

Directors' Responsibility Statement

As required under Section 217(2AA) of the Companies Act, 1956, Directors of your company hereby state and confirm that:

1. The applicable accounting standards have been followed in the preparation of the Annual Accounts.

2. The accounting policies as mentioned in the schedule 27 of the notes to the financial statement have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31 st March, 2012 and its profit for the year ended on that date.

3. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. The Annual Accounts have been prepared on going concern basis.

Research and Development (R & D)

Research and Development is the backbone of a Company in Pharma Industry. The R & D activity of your company focusing mainly on development of new chemical entities apart from cost cutting of the existing products and also for development of cost effective non-infringing routes for the products whose patents are due for expiry in the coming years. The major therapeutic focus of the R & D is Oncolgoy, Retro Viral and anti-Hypertensive.

Management's Discussion and Analysis

A detailed Management Discussion and Analysis is provided in the Annual Report.

Corporate Governance

A detailed Report on Corporate Governance as required under the Listing Agreement forms part of this Annual Report.

Rarticulars of Employees

During the year under review, there was no employee drawing salary in excess of the prescribed limit and whose particulars are required to be given under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Amendment Rules, 1975 as amended.

Conservation of Energy, Technology Absorption

The information required under Section 217 (1) (e) of the Companies Act, 1956 read with the Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is enclosed herewith and forms part of this report.

Corporate Social Responsibility

Corporate Social Responsibility is commitment of the Company to improve the quality of life of the workforce and their families and also the community and society at large. The Company believes in undertaking business in such a way that it leads to overall development of all stake holders and society.

Environment

The Company has taken initiatives to reduce the pollution, Anti-pollution measures taken by the Company help minimize the impact of industrial process on the environment.

Dematerialization

Your Company's shares are under compulsory DEMAT mode and all the physical shareholders are hereby recommended to opt for this facility for prompt services.

Related party transactions.

As a matter of policy, your company carried out transactions with related parties on an arms-length basis. Statement of these transactions is given in Notes on Accounts in compliance with accounting standards issued by ICAI.

Acknowledgements

Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, dealers and trade, employees and workers for their continued support and confidence reposed in the company.

for and on behalf of the Board

P. Ramesh Babu

Chairman & Managing Director

Place : Hyderabad

Date : 10.08.2012


Mar 31, 2011

Dear Shareholders,

The Directors have pleasure in presenting the 23rd Annual Report and Audited Accounts of your company for the year ended 31st March, 2011.

Financial Results

(Rs. In Lakhs)

Particulars 2010-11 2009-10

Gross Sales 24,911.60 23,876.77

Net Sales 22,427.43 21,975.51

Other Income 360.10 243.61

Total Net Income 22,787.53 22,219.12

PBIDT 4,074.16 2,480.42

Financial Charges 1,761.50 1,355.85

Depreciation 1,264.29 836.48

Profit before Tax 1,048.37 288.09

Taxation 209.10 48.55

Profit After Tax 839.27 239.54

Profit brought forward 1,975.31 1,952.55

Available for

Appropriations. 2,814.58 2,192.09

Appropriations:

Transfer to General Reserve 100.00 100.00

Proposed Dividend 150.23 100.15

Dividend Tax 24.37 16.63

Profit carried to

Balance Sheet 2,539.98 1,975.31

Earning per share

- Basic/Diluted 8.38 2.39

Operational performance

During the year 2010-11 your company has produced 2948 M T. of APIs and their intermediates as against 2442 M T. during the corresponding year. The net sales of the company has reached to Rs.224.27 crores as against Rs.219.76 crores during the previous year. You company has earned net profit of Rs.8.39 crores as against Rs.2.4 crores during the year 2009-10.

Dividend

Your Board of Directors have recommended the dividend of Rs.1.50 per equity share on par value of Rs.10/- each (Previous year Rs.1/- per equity share) absorbing an amount of Rs.174.60 lakhs.

Transfer to Reserves:

An amount of Rs.1,00,00,000/- (previous year Rs.1,00,000/-) was transferred to the General Reserve out of the amount available for appropriations.

Auditors

The Statutory Auditors of the Company, M/s. Rambabu & Co., Chartered Accountants and M/s. P. Murali & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and being eligible for re-appointment have confirmed their eligibility and willingness to accept office for the financial year ended 31st March, 2012.

The Company has received confirmation from both the firms that their appointment will be within the limits prescribed under Section 224 (1) of the Companies Act, 1956. The Audit Committee of the board has recommended the re-appointment of joint auditors.

Cost Auditors

Sri KSN Sarma, Cost Accountant was appointed as Cost Auditor of the Company subject to the consent of the Government of India to conduct cost audit of the Company for the year 2010-11.

Fixed Deposits

The company has not accepted/invited any public deposits from the public in terms of Section 58 A and 58 AA of the Companies Act, 1956.

Directors

Pursuant to Article 110 of the Articles of Association of the Company Dr. Mihir K. Chaudhuri and Dr. Ayman Sahli, will retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment as Directors. Your Board of Directors recommend their re-appointment.

The profiles of the respective Directors are included in the Report on Corporate Governance annexure.

Contribution to the ex-chequer

Your Company has contributed Rs.2,790.25 lakhs to the ex-chequer (Previous year Rs.2,165.05 lakhs) by way of taxes.

Directors' Responsibility Statement

As required under Section 217 (2AA) of the Companies Act, 1956, Directors of your company hereby state and confirm that:

1. The applicable accounting standards have been followed in the preparation of the Annual accounts.

2. The accounting policies as mentioned in the schedule 22 of the notes to the financial statement have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 20011 and its profit for the year ended on that date.

3. Proper and sufficient care has been taken for the maintaince of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. The Annual Accounts have been prepared on going concern basis.

Research and Development (R & D)

Your Company has given utmost importance for Research and Development. The R & D centers of the company having 10 labs including dedicated oncology laboratory. This center was equipped with dedicated analytical development block in 22,000 Sft area, kilo lab and cGMP Pilot Plant.

The R & D activity of your company mainly focusing relentlessly on development of new chemical entities apart from cost cutting of the existing products and also for development of cost effective non-infringing routes for the products whose patents are due for expiry in the forthcoming years. The major therapeutic focus of the R&D is Oncology, Retro Viral, and anti Hypertensive.

Management's Discussion and Analysis

A report on Management Discussion and Analysis is provided as part of this Annual Report.

Corporate Governance

A detailed Report on Corporate Governance as required under the Listing Agreement forms part of this Annual Report.

Particulars of Employees

During the year under review, there was no employee drawing salary in excess of the prescribed limit and whose particulars are required to be given under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Amendment Rules, 1975 as amended.

Conservation of Energy, Technology Absorption

The information required under Section 217 (1) ( e) of the Companies Act, 1956 read with the Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is enclosed herewith and forms part of this report.

Dematerialization

Your Company's shares are under compulsory DEMAT mode and all the physical shareholders are hereby recommended to opt for this facility for prompt services.

Related party transactions

As a matter of policy, your company carried out transactions with related parties on an arms-length basis. Statement of these transactions is given in Notes on Accounts in compliance with accounting standards issued by ICAI.

Acknowledgements

Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, dealers and employees for their continued support and confidence reposed in the company.

for and on behalf of the Board

P. Ramesh Babu

Chairman & Managing Director

Place: Hyderabad

Date : 05.08.2011








Mar 31, 2010

The Directors have pleasure in presenting the 22nd Annual Report and Audited Accounts of your company for the year ended 31st March, 2010.

Financial Results

(Rs. In Lakhs)

Particulars 2009-10 2008-09

Gross Sales 23,876.77 27,406.95

Net Sales 21,975.51 24,478.67

Other Income 243.61 40.52

Total Net Income 22,219.12 24,519.19

PBIDT 2,480.42 2,381.52

Finance Charges 1,355.85 959.04

Depreciation 836.48 627.91

Profit before Tax 288.09 794.57

Taxation 48.55 164.72

Profit After Tax 239.54 629.85

Profit brought forward 1,952.55 1,657.05

Available for

Appropriations 2,192.09 2,286.90

Appropriations:

Proposed Dividend 100.15 200.31

Dividend Tax 16.63 34.04

Transfer to General Reserve 100.00 100.00

Profit carried to

Balance Sheet 1,975.31 1,952.55

Earning per share 2.39 6.29

Managements Discussion and Analysis

A detailed Management Discussion and Analysis is provided in the Annual Report.

Dividend

Your Board of Directors have recommended the dividend of Re.1.00 per Equity Share of Rs. 10/-

each (previous year Rs. 2/- per Equity Share) considering the financial commitments of the Company.

Transfer to General Reserve:

The Company proposes to transfer Rs.1,00,00,000/- to the General Reserve out of the amount available for appropriations.

Auditors

The Statutory Auditors of the Company, M/s. Rambabu & Co., Chartered Accountants and M/s. P. Murali & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and are eligible for re-appointment have confirmed their eligibility and willingness to accept office for the financial year ended 31st March, 2011.

The Company has received confirmation from both the firms that their appointment will be within the limits prescribed under Section 224 (1B) of the Companies Act, 1956. The Audit Committee of the board has recommended the re-appointment of joint auditors.

Cost Auditor

Sri KSN Sarma, Cost Accountant was appointed as Cost Auditor of the Company subject to the consent of the Government of India to conduct cost audit of the Company for the year 2009-10.

Fixed Deposits

The company has not accepted/ invited any deposits from the public in terms of Section 58 A and 58 AA of the Companies Act, 1956.

Directors

Pursuant to Article 110 of the Articles of Association of the Company Sri K.S. Rao and Sri A.P. Rao, will retire by rotation at the ensuing Annual General Meeting and are being eligible offers themselves for re-appointment as Directors. Your Board of Directors recommends their re-appointment.

The profiles of the respective Directors are included in the Report on Corporate Governance annexed.

Corporate Governance

A detailed Report on Corporate Governance along- with the Certificate issued by M/s CSB Associates, Company Secretaries confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement, forms part of this Annual Report.

The Ministry of Corporate Affairs, Government of India has issued a set of voluntary guidelines on Corporate Governance in December, 2009. These guidelines provide for good governance practices which may be adopted by the corporate voluntarily. The Board of Directors would examine and comply the guidelines with the extent possible.

Contribution to the ex-chequer.

Your Company has contributed Rs.2,165.05.lakhs to the ex-chequer (Previous year Rs.3,152.02 lakhs) by way of taxes.

Directors Responsibility Statement

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 on the Directors Responsibility Statement, it is hereby confirmed:

1. That in the preparation of the Annual Accounts for the year ended 31st March, 2010, applicable, accounting standards were followed along with proper explanations relating to material departures.

2. That your Directors selected such accounting policies and applied them consistently and made judgments and estimates were 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 31st March, 2010 and of the profit of the company for that period.

3. That your Directors took proper and sufficient care to maintain adequate accounting records in accordance with the provisions of this act to safe guard the assets of the Company and to prevent and detect fraud and other irregularities.

4. That your Directors prepared the Annual Accounts for the year ended 31st March, 2010 on a going concern basis.

Research and Development (R & D).

Your company places significant emphasis on research and development with a dual focus on non infringing and cost effective processes. The company has two R & D Centers with the first one working on new products and process development, custom synthesis and contract research for customers. This center has 10 labs including a dedicated oncology lab in 40,000 Sft area. It has infrastructure right from product conception to DMF filing. The center is capable of developing 20 products per annum. The center is also equipped with dedicated analytical development block in 22,000 sft area, kilo lab, and cGMP pilot plant.

The company has developed non infringing process in anti cancer, anti migraine and other highly potential therapeutic categories which will enable us to have early entry opportunities in different markets

The second R & D center in 3750 sft area is dedicated for continuous process improvement of existing products which enables us to maintain our leadership position in cost competitive generic industry. Both R & D Centers are recognized by the Department of Scientific and Industrial Research.

Due to ongoing cost reduction efforts from this R&D center, the company has been able to maintain leadership in extremely competitive API like Ranitidine, Sildenafil, Sumatriptan, Pantoprazole etc

Particulars of Employees

The particulars of employees required under the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended to date were not applicable to your Company as none of the employees were in receipt of remuneration which in aggregate is Rs.24,00,000/- or more per year or Rs.2,00,000/- or more per month..

Disclosure of Particulars

As required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the relevant information and data is attached as an Annexure to this report.

Dematerialization

Your Companys shares are under compulsory DEMAT mode and all the physical shareholders are hereby recommended to opt for this facility for prompt services.

Related party transactions.

As a matter of policy, your company carried out transactions with related parties on an arms-length basis. Statement of these transactions is given in Notes on Accounts in compliance with accounting standards issued by ICAI.

Transfer of unpaid/unclaimed dividend to Investor Education and Protection Fund (IEPF)

The dividend declared for the year 2002-03 has been fully claimed and paid by the Company.

Acknowledgements

Your Directors gratefully acknowledge and appreciate the support extended by the Banks, Financial Institutions, various government authorities and also customers, dealers and trade, employees and workers for their continued support and confidence reposed in the company.

for and on behalf of the Board

P. Ramesh Babu

Chairman & Managing Director

Place: Hyderabad

Date : 27.08.2010



 
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